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'1600 Pennsylvania Avenue with David Gregory' for **December 4, 2008**


December 4, 2008


Guests: Robert Reich, Jonathan Weisman

DAVID GREGORY, HOST: Tonight, desperation and deadlock. Detroit's big three headed back to Capitol Hill today with some urgent pleas for some seriously big bucks. Will lawmakers put their differences aside and show them the money, or will they have to go directly to 1600 PENNSYLVANIA AVENUE for a handout?

Forty-seven days until the inauguration of President-elect Obama.

Welcome to the program. I'm David Gregory.

The headline tonight, "High Stakes."

Today, the big three CEOs of the automotive industry may have taken their toughest driving test yet, spending the day before some skeptical Senate Banking Committee members as they try to pave a road to recovery, a road they now desperately ends with $34 billion in government loans. Today's hard sell came two weeks after a botched attempt for assistance.

GM's chief executive, Rick Wagoner, conceding, "We made mistakes which we are learning from," arguing that if aid does not come to them soon, the company faces total collapse. Also helping to make the case was United Auto Workers Union president Ron Gettelfinger, who pledged that labor is prepared to do their part to avoid the demise of GM.

Although lawmakers now face a deadlock on whether and how to provide Detroit with assistance, there was recognition from Senate Banking Committee chairman Chris Dodd that indecision and inaction could carry with it a broad and heavy consequence.


SEN. CHRISTOPHER DODD (D), BANKING COMMITTEE CHAIRMAN: In my view, we need to act, not for the purpose of protecting a handful of companies. If that were the extent of the issue, I would let them fail. My concern with such an approach is that it plays Russian roulette with the entire economy of the United States.


GREGORY: Signaling just how steep a challenge the auto executives were facing, the senior Republican on the committee, Senator Richard Shelby, voiced outright opposition to a bailout before any of the big three even made their plea.


SEN. RICHARD SHELBY ®, ALABAMA: I intend to oppose bailing out the big three auto manufacturers. Industry analysts contend that the firms continue to trail their major competitors in almost every category necessary to compete and to make a profit.


GREGORY: Although there were a few moments of levity during the six-hour hearing, there were a fair amount of tense moments as well, including this exchange between industry critic Senator Bob Corker of Tennessee and Chrysler CEO Robert Nardelli after Senator Corker suggested that an infusion of cash would only serve to make Chrysler more attractive to potential buyers.


ROBERT NARDELLI, CEO, CHRYSLER: We're busting our guts, and the people that are left are busting their guts to make this thing work.

SEN. BOB CORKER ®, TENNESSEE: But there's no future for the company as a standalone. Is that correct?

NARDELLI: I don't agree with that, sir, or I wouldn't have been here.


GREGORY: The heat will likely stay on, as tomorrow the big three face the House Financial Services Committee.

So joining me now, Phil LeBeau, CNBC's auto industry reporter, and Erin Burnett, anchor of CNBC's "Street Signs" and "Squawk on the Street."

Phil, let me start with you. Nuts and bolts time. What did they come away with today?

PHIL LEBEAU, AUTO INDUSTRY REPORTER, CNBC: I think they came away with at least making sure that the senators realize bankruptcy is not an option, which means something will have to be approved. I suspect from listening to the testimony today and talking with a few of the people at the auto companies, as well as with a few of the senators, my suspicion is that what we will ultimately see is some type of stopgap measure, at least some emergency loan, because GM and Chrysler, they need it by the end of the year.


LEBEAU: At least some kind of a stopgap measure. And then, sometime after the new administration and the new Congress come in, in January, then they will try to get down to the real details of how to fix these companies without letting them go into bankruptcy.

GREGORY: The question is, why is it that bankruptcy is not an option?

LEBEAU: A couple of reasons. First of all, if an automaker goes into bankruptcy, theoretically it's going to pull down other automakers and the suppliers. And look at the ripple effects that you'll see.

If you have GM going bankrupt, its cars, the value of those cars, they drop considerably. Then you have dealerships who are collateralizing their new cars to get loans. They start to see sales drop. Then they file for bankruptcy. Now your transport companies no longer have business and they file for bankruptcy.

So the fear is, if you let one of the big three go, it brings the entire industry down. And this economy could not handle that type of a shock.

GREGORY: There just seems, Erin, to be a fair amount of politics in all of this and populism, which is, hey, this isn't Wall Street. You bailed out Wall Street. What about the little guys working on the cars in Detroit, when the reality is that the big three automakers have done horribly, but other auto companies in the work, or even operating in the country, are not having such a difficult time.

Does it not speak to a management problem?

ERIN BURNETT, HOST, "STREET SIGNS": It does. I mean, there is no question there has been a management problem. I mean, Phil could talk about this as well.

And one thing that's interesting, though, the UAW took out an advertisement, a full-page ad in a lot of newspapers across the country, trying to say we're not bankers, you should try to help us. They are clearly trying to go to that populist theme. But two quick things on this.

One, you look at the number of workers-so not trying to say one type of worker is better than another-GM and Citigroup have the same number of workers. So that's one thing that a lot of people probably don't realize.

And the other is, to your point, yes, there is a management problem. But literally overnight you went to from 14 million cars being sold in one year to 10 million. And that was just overnight. We've never had a drop like that overnight.

So to that extent, that gap right there is something that's affecting automakers around the world. And governments in Europe and Asia are bailing their auto companies out.


Phil, the question is, if they get a bailout now, if GM gets the $4 billion before the end of the year, how do you answer the idea, the criticism that this is just kicking the can down the road? That ultimately, they're going to be in the same position a few months or six months from now?

LEBEAU: Well, and that's the concern that a lot of senators have. They want to make sure that the business plans these automakers have filed will truly be enforced.

It's one thing for General Motors to say, hey, yes, we're going to cut 31,000 jobs over the next three years, we're going to kick out 2,000 dealers, and we're going to restructure this company and become leaner and meaner. It's another thing to have somebody put their feet to the fire, if you will.

That's the advantage of bankruptcy. But the problem is these guys can't go into bankruptcy.

David, after your home, the biggest purchase you're going to make is a new car. And study after study shows nobody is going to put down $30,000 or $40,000 for a new car if they think that company is not going to be around in a few years.

GREGORY: Why do we think that it's going to stop at $34 billion?

LEBEAU: Well, in fact, today there was testimony saying that some believe they may need up to $125 billion.


LEBEAU: And that's the issue. They need to work out a concrete plan to say here's how much money you get, and we're going to put some rules in terms of, by this date you have to show us XYZ. And if you do show us that, then we'll give you more money. That is one way that you could force Detroit to truly live up to its obligations.

GREGORY: Erin, the president has spoken about this. And I want to get that sound bite ready. But as they do that, some of the history on this is interesting.

You had Obama, newly president-elect, going to meet with the president and saying you've got to do something about the automakers. It's got to be part of something that we do even before I take office. In an interview with White House Correspondent John Yang, the president said this today about a bailout.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: No matter how important the autos are to our economy, we don't want to have put good money after bad. In other words, we want to make sure that the plan they develop is one that ensures their long-term viability for the sake of the taxpayer.


GREGORY: Right. And so the question of viability is one that you have to ask. Has that been delivered on today, as they have come back here after failing the first time?

BURNETT: Well, they come in with these plans. And I have to say, General Motors' plan which I'm looking at here was much more in depth than either of the others. But for competitive reasons, they don't want to give too many specifics. So that puts you in sort of a catch-22.


BURNETT: That's part of the problem.

But I think Phil is right in that you're going to get a short-term stopgap. There's no question. People like Richard Shelby from Alabama are always going to go against this.


BURNETT: But he knows that this will probably happen. So he has the advantage of taking the ideological position without having to go through with it all the way. But Obama then is going to have to decide how big a stimulus package it's going to be and how much of it is going to be linked to dealing with the job loss that you're going to have out in Detroit, which is going to get bigger no matter what you do in the short term.

GREGORY: So, Phil, what is the plan? If they can get an infusion of cash to keep doing business, how do they help this business model evolve in a way that they can stand on their own?

LEBEAU: Well, they say that they are going to start making some of these cuts that they have announced and that they have been making these cuts. And to a certain extent that is true.

They will ultimately need to rework their contract with the UAW. The union has said it will modify its contract to help out the automakers, but the specifics have not yet been worked out.

The real concern is that if this economy stays as slow as it is right now, and if people stay away from big three show rooms because they're really not sure these guys are going to be in business for very long, then you've got sort of this vicious cycle that starts happening where people aren't buying, revenue drops, and any cuts these guys are making are really not going to be enough.

GREGORY: You know, that's one of my questions just as a consumer, Erin. If you worry that these companies are on the brink, even if they get a loan, are you going to buy a car wondering whether the servicing for that car is somehow going to dry up, you're not going to be able to take it any place to get serviced by GM?

BURNETT: Phil raised a great point. Studies have shown people won't. And then a lot of people say, oh, well, don't worry about it. The solution is have the government be the one who provides the warranty.


BURNETT: I mean, do you really want the federal government providing your auto service? I mean, that's just not something they are going to be good at. So I think that's a key thing.


BURNETT: And one other point I wanted to make here, a lot of this is betting, putting all their eggs in one basket. And that is the green basket.

Why don't-you know, you guys missed the boat. You made these SUVs. You don't make electric cars, you don't make hybrid cars. And that's really what they are all trying to do right now.

And there are some serious questions. Before any of this crisis, GM had already gone to Washington and said give us a bailout-well, they didn't use that word "bailout." Give us some money to help us with this Volt, our electric vehicle. We need money to do that.

And there are some very smart people out there who say Toyota, which is seen as the preeminent brand in the business in terms of management, does not make money on the Prius, which is the most successful green vehicle out there. And they don't disclose whether that is actually true or not, but those are serious questions.

GREGORY: Phil, final word on this in terms of they've got another set of hearings tomorrow.

LEBEAU: Right.

GREGORY: They're going to leave Washington in a different position, you think, than after the first go-round?

LEBEAU: I think they leave with some optimism that something will be worked out. And let's be honest. At the end of the day, this is Detroit putting a gun to the head of Congress and saying, one way or the other, if something doesn't happen in three weeks, you're looking at a couple of these automakers going into bankruptcy court.

So what they are saying to Congress is, we're going to work with you, and we believe that we've pleaded our case and we've made our point, but something has to be done. At least that is the feeling from the people in Detroit.

GREGORY: All right. Phil LeBeau and Erin Burnett, both from CNBC, thank you both.

Appreciate it very much.

Coming next, can President-elect Obama make good on his promise to create more than two million new jobs in his first term? We're going to talk about that with former labor secretary Robert Reich when 1600 returns after this.


GREGORY: Back now at 1600.

As the big three automakers returned to the Hill today to plea for a bailout, the treasury secretary, Henry Paulson, suggests that he may now endorse a plan to ease mortgage rates. With the Dow down 35 percent this year and the unemployment rate at a 14-year high, is there help ahead for Main Street?

Joining me now, Robert Reich, secretary of labor under President Clinton and the author of "Supercapitalism: The Transformation of Business, Democracy and Everyday Life." Also an adviser to President-elect Obama.

Secretary Reich, welcome back to the program.


GREGORY: Let's talk about where we are with this bailout idea of the big three. And my question to you is, is Congress going to deal with this now, or ultimately will this be part of the stimulus that President Obama takes on?

REICH: Well, my reading is that if Congress really is worried that GM, for example, might go down over the next month before the inauguration of the president-elect, well, Congress may provide a little bit of a bridge loan. Nobody wants to see GM go down, or Ford or Chrysler. But I think the big question is, what is so wrong with Chapter 11 of the bankruptcy code?


REICH: Now, what you didn't talk about quite enough I think in the previous segment is there are really two fundamentally different forms of bankruptcy. One is Chapter 11. That's liquidation. Nobody wants that.

But then there is a reorganization under Chapter 11, which means that creditors and shareholders and executives and employees, everybody takes a hit in order to keep a firm going. And everybody knows that it's worth more alive than it is dead.

Now, Chapter 11 ought to be the starting place for whether we are talking about Citigroup or we're talking about General Motors, whatever company we are talking about. The question should be, what is wrong with Chapter 11? Are there public issues here, public costs and public benefits, that merit additional cash from taxpayers?

GREGORY: And that is the question. I mean, it's being raised by a lot of conservatives on the Hill. What is wrong with bankruptcy both from a market point of view, but also, if ultimately you are going to get to real financial health, and you've got a business model that has been reworked and is sustainable, it may have to come through that process of bankruptcy.

REICH: Yes. And I think what we are going to see, David, is sort of a hybrid. You talk about hybrid vehicles, this is going to be a hybrid financial vehicle of both a bailout and bankruptcy. That is, the taxpayers will be putting up some money, but for every dollar the taxpayers put up, there will probably be two dollars required of all of the stakeholders in these automobile manufactures, and probably some severe public oversight as we had with the Chrysler bailout in the early 1980s.

GREGORY: You talked on your blog recently about some of the elements in this debate that come to dictating how the industry ought to evolve. You write this, "Telling automakers to make more fuel-efficient cars as a condition of being bailed out is like telling Citigroup or any other big bank to issue offer more affordable loans to Main Street as a condition of being bailed out. It won't happen."

Why not?

REICH: It won't happen because there are not consumers out there that have the-that create the demand for these businesses to do it. I mean, as oil prices have come down, what we're seeing, the relatively few people who are still buying cars are not buying fuel-efficient cars. Oil prices come down, gas prices come down, and unfortunately-I say unfortunately because I'm concerned about CO2 and the atmosphere and energy conservation -- unfortunately, a lot of people are reverting back to the gas-guzzlers, the SUVs, the trucks.

And so, what is an automobile company going to do? What is a big bank going to do when people don't have the money and they don't want to make bank loans and get bank loans because they are already deep in debt? These companies exist to make profits. They want to make money. To tell them to try to do something else is like pushing on a string.

GREGORY: Let me ask you about a particular area of expertise of yours in the government, and that's the jobs picture. More unsettling news today about job losses. The numbers so large, even if it was a little better than expected.

That particular area that the president-elect is taking on now, will take on as president, has got to be perhaps the most daunting. How does that become a priority for him in the first 100 days?

REICH: Well, again, I'm just speaking for myself, but it is clearly going to be a priority for the Obama administration. And it is going to be a priority that probably takes the form of a very, very large stimulus package designed to get people back to work.

Now, if consumers are not consuming and if investors are not investing, that leaves government to be the buyer of last resort. And that's what government has to be.

Now, the question is, how big a stimulus package, and is it going to aim for things that really will grow the economy over the future, like roads and bridges and mass transit? Well, the details are being worked out.

GREGORY: How much political good will do you expect he will have? Will he get more or less of a blank check from Congress, Republicans and Democrats alike, if he wants a $1 trillion stimulus, if he wants to go higher yet? Will he get anything he wants, more or less?

REICH: I don't think he will get anything he wants, because remember, a lot of the new members of Congress come from very conservative districts. Even if they are Democrats, they are blue dog Democrats. They are worried about fiscal responsibility.

So there is some limit to what Obama might be able to request and get from those Democrats. The talk now is in the range of $300 billion, $400 billion, $500 billion, maybe $600 billion. But I heard today some economists saying-and economists who I trust a great deal-saying we may need something in the order of $900 billion or a $1 trillion stimulus to get this economy really turned around.

Now, to talk about trillions of dollars, it's very hard to get your head around a trillion-dollar stimulus. But that is big.

GREGORY: All right. Robert Reich, as always, thank you for being on.

Appreciate your views.

REICH: Thanks, David.

GREGORY: Coming next, D.C. is prepping for the inauguration. And so is Oprah. New details on her plans for the week coming up in "The Briefing Room," after this.


GREGORY: Back now with a look at what's going on inside "The Briefing Room" tonight.

First up, an inauguration update. Construction is very much under way on the inaugural platform. It is built entirely from scratch for each inaugural ceremony.

This year's will be more than 10,000 square feet and will hold more than 1,600 people. The platform is constructed entirely of wood to protect the surfaces of the Capitol. Planning and design on the platform began more than a year ago.

And it's official, Oprah is going to Washington. She is taking her show to the Capitol the week of President-elect Obama's inauguration. The place? The Opera House at the Kennedy Center on January 19th. According to her production company, another show is scheduled for the 20th, but the details are still up in the air.

And for those of you willing to brave the crowds for a chance to get a glimpse of the president-elect on the big day, of course, for the first time ever the National Mall will be open to the public on the day of the inauguration. This is a response to indications that more Americans than usual, perhaps a lot more, will be traveling to Washington for the president-elect's swearing in.

And first it was the Capitol Christmas tree, then the Christmas tree at Rockefeller Center. Well, tonight it's the national Christmas tree. Just about an hour ago, President Bush and his family led the lighting of the White House tree.

And coming next, a new poll shows a majority of taxpayers don't want to save Detroit. Will President-elect Obama spend some of his political capital to sell the rescue to the American people?

When 1600 returns.


GREGORY: As lawmakers weigh another bailout there is a conflict when the current and future administrations about how the money is being utilized.

Joining me now is the "Wall Street Journal's" Jonathan Weisman. He wrote about these building tension between these two camps today.

Jonathan, good to see you.


GREGORY: How do you describe what is happening between these two camps?

WEISMAN: Frustration. The Bush administration's Treasury Department is pushing hard to get the Obama transition people to really focus in on what they are going to do with the next $350 billion. The first $250 billion for the Wall Street bailout is just about gone. Hank Paulson has to decide how to use the next installment. But to ask for it, he has to go to Congress and say how he is going to use it. He can't spend $350 billion in the next month. He needs the Obama people to say what their plan is going to be.

GREGORY: This is the classic problem of being in transition but not in being actual control yet. Is it fair for the Obama campaign, not the campaign anymore, but the transition team, the White House in waiting, to commit to the balance of that money? Because Secretary Paulson was saying just a few weeks ago, "I only want to use half. I want to give the next administration some flexibility?"

WEISMAN: In this case it doesn't seem like they have a lot of choice. Paulson, if he needs this money, can go up there and tell Congress, here is how I would use it. But Congress will say, wait a minute, you are not going to be there. If the Obama transition people can't commit to something, there's a good chance Paulson is not going to be able to get the money.

GREGORY: What kind of commitment could the President-elect make with this money?

WEISMAN: At least, he could put some meat on the bones that he's talked about with mortgages. Every time he opens his mouth on this Wall Street bailout fund, he saws, "We want more money to go directly to home owners who are facing foreclosure." We know the Treasury Department has been sitting down with Obama transition staff and saying, "All right, look, here are some options for doing that. What do you want to do?" From what we understand, they are getting a lot of blank stares. They-I know it's hard. They don't have a huge staff. They don't have a Treasury Department in place to do the research, to make these decisions. Unfortunately, they are in a bad position here and they are stuck. Somebody is going have to make some decisions here.

GREGORY: Is this a case of them being stuck in a campaign mode about the economy?

WEISMAN: They are in campaign mode. Every time Senator Obama-I'm sorry, President-elect Obama gives a press conference he talks a lot about the troubles that Americans are facing with this economy, how dramatic the downturn is looking and how he wants to intervene, but he hasn't strayed very far from his campaign rhetoric on this. He, unfortunately, way before he wants to, needs to transition to governing mode and talk specifics here.

GREGORY: One specific is the remainder of the TARP money, the original bailout money that was going to be used to buy distressed assets, distressed mortgages from the major banks, now being used simply to pump money, capital into major financial institutions.


GREGORY: The rest of this money, what is one specific thing it could be used for?

WEISMAN: Sheila Bair, who is head of the FDIC, is talking about whether this money can be used directly for homeowners, setting up federal mortgage assistance programs probably through Fannie Mae and Freddie Mac which are, of course, now owned by the taxpayers. It is hard to see exactly how it would be done. There are a whole lot of mortgages and people facing distress.

But the president-elect has talked about this as well. So they need to figure out, of this next installment, it's $350 billion, how much of that would be dedicated to mortgages and how exactly it would be shoveled out the door. Nobody is saying this is an easy decision. But it's certainly one that President-elect Obama has been signaling he's wanting to do for months.

GREOGRY: And the difficulty is, if you simply help people with their mortgages that they cannot afford, are you truly allowing the bottom to-are you allowing us to reach the bottom of the housing market that has to happen before a recovery can begin.

WEISMAN: That's right. Everybody is talking about restructuring these mortgages in some way that makes them long-term more sustainable for the home owners who can't face the current conditions of their mortgages. That is a very labor-intensive process to get all these people to come in and figure a way to make these mortgages more payable.

GREGORY: Jonathan Weisman with the "Wall Street Journal," thanks very much.

WEISMAN: Thank you, David.

GREGORY: I want to turn to the panel now and to the fight over the proposed automaker's bailout. Republican Senator Bob Corker offered a harsh reminder about the total values of these companies compared to the $34 billion they are asking for.


SEN. BOB CORKER, ® TENNESSEE: Ford's is $3.4 billion. G.M.'s is $1.8 billion. And I'll throw a little change on the table and say Chrysler is worth $500 million, and that's probably exaggerating. We are talking about $6 billion. Just to compare this to companies around the world. Toyota is worth $138 billion. I just want to put that in context of these large loan asks, if you will, that are underway.


GREGORY: Joining me now, Chrystia Freeland, managing editor for the "Financial Times; Joan Walsh, editor and chief of; Michelle Bernard, president of the Independent Women's Forum; and Lawrence O'Donnell, former chief of staff to the Senate Finance Committee. Michelle and Lawrence both MSNBC political analysts.

Welcome all of you.

Chrystia, the debate over the automakers, you and I have been talking about it. You were listening to Secretary Rice. The option of pushing them into bankruptcy is one you think as well has not been adequately explored?

CHRYSTIA FREELAND, MANAGING EDITOR, "FINANCIAL TIMES": Absolutely. if you take the politics out of it, and Michigan is a Democratic state and it is hard to disagree with the view that President-elect Obama owes a lot to Michigan and the unions, so that is an important political consideration.

But if you set that aside and look at it purely as a business case, it is hard to argue a prepackaged Chapter 11, as Robert Reich was describing it, wouldn't be the best solution for these car companies.

It is important to distinguish between a Chapter 7, which is liquidation, and Chapter 11, which is keeping it going. I think the car makers are playing chicken with the politicians. They are using a lot of scare tactics. We heard it from Phil LeBeau, actually saying, oh, nobody will buy cars from a company in bankruptcy. I don't think that is proven. People buy plane tickets from airline companies in bankruptcy. If you have the government's standing behind these companies, which you would in a prepackaged Chapter 11, you would have government money behind it, but you would have much more powerful tools to get rid of the legacy burdens, which are why the reason these companies are worth a fraction in market value than Toyota.

GREGORY: Lawrence, if you are the president-elect, you are on the sidelines, trying to influence this process, you have Congress acting and arguing, going over the politics and the populous pleas about a bailout for these companies. But ultimately it comes back to you. And to put these two together, the auto bailout, the balance of the bailout money committed so far, these are decisions that President Obama is going to face day one.

LAWRENCE O'DONNELL, MSNBC POLITICAL ANALYST: Well, the politics of it definitely go in the direction of the auto bailout. Not just for the domestic Michigan politics that Chrystia was just talking about, which are Obama re-election politics. Let's face it. That's very important.

The other piece of it is how much do you believe the preservation of these companies will help the economy overall and therefore help the Obama re-election overall and the politics for Democrats overall going into the midterm elections. It is extremely risky for politicians to bet that the economy can survive the collapse of one or two of these automakers. That is what you are asking Democrats to do. You are asking them to bet that the collapse of these companies will not hurt the economy in the worst case scenarios that are being presented out there. Even if you take half of the worst case scenarios that are being presented out there, it is a pretty bleak picture. That is what is driving the politics.

GREGORY: All right, but let's look at this. CNN opinion research had a poll out today, Joan, 61 percent saying they are not in favor of bailing out the automakers. It is hard to ask any taxpayer to shovel more money out to struggling industry.

JOAN WALSH, SALON.COM: Sometimes, David, politicians have to do what is less popular for the sake of the broader good and for the sake of the broader economy. It seems insane to sit here and talk about a stimulus package and talking about Obama trying to create two million jobs and being willing to let this many jobs go away. I also think there has been in the last few days a growing consensus around this idea of a structured Chapter 11 bankruptcy solution and this notion that the automakers have that people won't buy their cars, they are not buying them anyway. So with some government guarantees and protection for workers as well as taxpayers, you might forge some kind of-I don't want to say consensus because it is too fraught a situation for necessarily consensus-but more political bipartisan alignment around what that might look like.

GREGORY: Michelle, we face this as a policy matter, a matter of governance as well as an acute financial need, whether it is freeing up lending, clearing out some of the structural underbrush in the financial system that has been crippled by this credit crisis or, in this case, it's trying to assess the viability of the big three automakers in the country. You have to ask yourself a medium-term question, which is where are we going to be after we staunch the bleeding.

MICHELLE BERNARD, INDPENDENT WOMEN'S FORUM: Absolutely. This always leads to of what is the actual and proper role of government. Nancy Pelosi sent the three big automakers back and they were supposed to come back and give Congress a term for long-term viability. In the hearings, we didn't hear much about the generation of profits in the future. These companies are acting as if they are bankrupt. Their stocks are down. They have distressed value. They openly have told the American public and the world at large there is a good chance a lot of their debtors are not going to be paid in full. They are operating in bankruptcy already. The points that have been made already in the program about the fact that people are not buying their cars elicit from a policy perspective what exactly, if anything, should government be doing for these automakers.

Also, David, quite frankly, one of the things that people need to remember is that without a structured bankruptcy, what are the chances that these big three automakers are going to be able to get unions like the United Autoworkers Union to come in and change their practices? It is one thing for the car companies to pay for labor unions, to pay for non-working people to get 95 percent of their salary. It is another thing to ask the American public to pay for that.

GREGORY: And, Chrystia...

WALSH: Well, let's just say the unions have promised concessions. They promised, in particular, an end to that job banking idea, which I think is a sound bite that people are appalled by. So the unions have stepped up in the last few days as well.

GREGORY: Now the idea is essentially, you have a job, you get paid without doing work. You are kept sort of in abeyance until you get a job back.

WALSH: Right.

GREGORY: Chrystia, one of the things I think everyone is struggling with is it's a political matter, it's a matter for government, it's a matter of finding a place of America in a new world order and a new economy around the world, is we want to be able to produce things that people buy-in this country. And we want to be able to produce American-made cars that both are smart for the environment but are also enriching the companies that produce them and creating jobs for the economy. That seems to be some of the tension here, as well as how do we balance that desire with making the companies more competitive, dealing with health care demands, the union demands. All of these problems come together around the question of the big three automakers.

FREELAND: I think that is absolutely right. It is a mistake to equate the big three automakers with all of America's manufacturing capacity. And there's a real-life counter example, which is the foreign automakers in the United States, who have managed to profitably build cars in America with American workers. An important reason why they are able to do that is because they aren't saddled with the legacy costs and these legacy burdens. One of them is the unions and the retirees.

Another one, which I think isn't mentioned often enough, is the dealerships. These dealerships are protected by state law. They are a huge burden on these companies. I think a prepackaged Chapter 11 is probably the only tool with sufficient power to cut through the political muscle of these dealerships and the only way to make these companies viable in the medium term.

GREGORY: OK, panel stick around. We're going to take a break, come back, talk about some political matters when we come back, including Republic Senator Saxby Chambliss crediting Governor Sarah Palin's star power for helping him with a tough runoff election this week. What is her role in the future of the GOP? We'll talk about that when "1600" comes right back.


GREGORY: Up next, Republican Senator Saxby Chambliss routed his Democratic rival in a run-off election this week. Are the results a warning sign for Democrats? We'll talk about that when we return.



SEN. SAXBY CHAMBLISS, ®, GEORGIA: Usually, you want to peak on the last day. We had John McCain and Mike Huckabee and Governor Romney and Rudy Giuliani. But Sarah Palin came in on the last day, did a fly around. And, man, she was dynamite. We packed the houses everywhere we went. And it really did allow us to peak and get our base fired up.


GREGORY: We are back on "1600." That was Republican Senator Saxby Chambliss on the impact Sarah Palin had in helping him win a tough runoff race in Georgia.

Back to talk with me about it, this and other political topics from the day, Chrystia Freeland, Joan Walsh, Michelle Bernard and Lawrence O'Donnell.

Lawrence, I want to start with you on the issue of Sarah Palin. I talked to a Republican in the last few days who said the reason she was so celebrated in the course of the campaign is, number one, she was essentially defending the party, defending the brand when it was under attack, indeed, in a way so severe that Obama won the election convincingly. She was also standing up and really reflecting conservative principles in a way that some feel not even John McCain did to some extent. How powerful is that for her in order to sort of keep that profile up between now and another potential run?

O'DONNELL: It is probably the only way for her to keep the profile up. What's its utility is to the party in a broader way is-it doesn't look like there is much use for it. Because for Sarah Palin to go into Georgia and claim some role in helping the Republican win a Senate seat in Georgia by 18 points that-what did she add, a half a point or anything? Let's see her come into New Jersey and help a Republican win a Senate seat in New Jersey, help a Republican win a governorship in Massachusetts. These are things Republicans can do and have done. But they are in moderate territories in this country. Let's see her help a Republican win statewide in California. Can she do that? It doesn't look like she can.

GREGORY: The question, Michelle, is whether or not the future of the Republican party is a return to conservative principles or is it a kind of reinvention along the lines that George Bush wanted to start with an issue like immigration and appeal to minorities. Those in the party like Ken Mehlman and President Bush and others who say, no, no, the party has to become different or it's going to become a small regional party that can only have real influence and a lock on victory in places like Georgia.

BERNARD: It is actually-David, I think it has to be a combination of the two. If you look at the outgoing Bush administration, it was not an administration that relied on economic, conservative values. It was an administration that really just kind of grew government amok.

But that being said, in addition to returning to typical fiscal Republican values, the Republican party in this country will not survive if it is not a party that reaches out to African-Americans, that reaches out to Hispanics and that reaches out to women. Those are core constituencies. The Republican party of while male America only is forever gone. We are a different nation today. And for that reason alone, the Republican Party is going to have to change the way it reaches out to all Americans.

GREGORY: Let me get a comment from others on the panel about this poor choice of words, at least, from Governor Rendell in Pennsylvania. He was caught on an open mike talking about the nominee for Homeland Security, Arizona Governor Janet Napolitano. Let's roll that and we'll react to it.


ED RENDELL, (D), GOVERNOR OF PENNSYLVANIA: Janet's perfect for that job because for that job, you have to have no life. Janet has no family. It's perfect. She can devote literally, 19, 20 hours a day to it.


GREGORY: Joan, is there a more benign way to explain that remark in terms of as being gender neutral in the sense that's a job that is so encompassing, so demanding that you can't have a life outside of it?

WALSH: Sure. I'm going to cut Ed Rendell a little slack here. For one thing, he was on a mike he did not know was hot. He didn't come out on your show and say this. There is a slight distinction. It is also not a terribly nasty thing. He didn't call her a name and say she is a terrible person and blah, blah, blah. He said she'll do a good job.

Of course, people are reacting to the fact that she is a single woman and this notion that she might not have a rich family and friend and social life-even though she is not married, a lot of people are reacting to that. I personally didn't experience it as sexist. I just thought not the best choice of words said.

GREGORY: All right.

Chrystia, comment? Different view?

FREELAND: I'm afraid I totally disagree with Joan. I don't think Ed Rendell should be tarred and feathered. And clearly it was an accidental remark and he's a nice person. Clearly, he didn't mean Janet any ill will.

But it was clearly a sexist remark. You would never say that about a man. The thing about it is, it is a sexist remark which is offense both to women who are unmarried without children and women who are married with children. I think the offensiveness to an unmarried woman without children, as Joan was saying, that clearly, you can't have a life. How could you without a husband. Impossible.

But if you are a married woman with children, what it says to you is would you be up to doing a big job? Really, those kids. You probably have to be cooking supper for your husband.

So I do think that he didn't intend it to be public. But, yeah, I think we are right to give him a hard time for saying something like that.

GREGORY: We'll leave it there. Thanks, panel, very much.

Coming next, could we see President-elect Obama make a major speech in an Islamic capital in the first 100 days? We'll talk about that with our Washington bureau chief, Mark Whitaker. Up next, on "1600."


GREGORY: We're back. News today, a provocative report in the "New York Times" about an event the Obama team may be planning for early next year. President-elect Barack Obama's aides say he is considering " making a major speech from an Islamic capital during his first 100 days in office. So where would he do it? The list of Islamic world capitals is long. It includes the obvious-Riyadh, Kuwait City, Islamabad-and the not so obvious. The consensus, after an entire day or reporting, is Cairo."

How will Obama present himself to the world and what risks will he take at home?

Joining me is Mark Whitaker, out bureau chief down in Washington.

Hey, Mark.


GREGORY: Great. Good to see you... This is intriguing the president, when he's president, will go to Iraq early on in his presidency and now talk of a major diplomatic push by giving an important speech about American foreign policy under a new president in an Islamic capital. How do you think he will go about doing that? And where do you think he might go about doing it?

WHITAKER: It is an interesting idea. We'll see whether he does it. There are clearly diplomatic risks and security risks depending on where he does it. Here is the opportunity.

But here's the opportunity and why it's interesting. We have all been talking during this election season about what electing Barack Obama, the signal that would send to the rest of the world. It would be hard to demonize America in quite the same way with a president named Barack Hussein Obama. Here I think he would take it one step further and essential would be appealing over the heads of a lot of those leaders in that region, to the people, to the street where he has a lot of appeal right now. That could send a powerful message. And frankly, I think that could put some of those leaders on notice that they have to be very careful in how they deal with him.

GREGORY: It is especially interesting, the idea, can terrorist groups, for one thing, can they draw on the willing pool of people who support them in countries like Pakistan and other Islamic countries and the Middle East when you have an American president who may not be so easily defined or easily demonized.

WHITAKER: I think that is precisely the point. Obviously, he is committed to going after bin Laden, to going after al Qaeda. But at the end of the day, there's only so much we can do there. I think all students of terror will tell you that terrorists can only survive if they have support among the population that surrounds them.


WHITAKER: I think if he can help dry up some of that support, it would have a powerful effect.

GREGORY: Quickly, if we could take a step back, as I think it's useful to do in this transition process, what do you think we're learning about both his leadership style and substance from the way that he's conducting his transition?

WHITAKER: Well, clearly, he's been very good at listening, at reaching out, at making people feel respected. That is very important. It is important in diplomacy. It is important in politics.

You know, he clearly wants to be surrounded by strong people with strong opinions. I think the issue is going to be what kind of decision maker is he. When he gets all of that input, how crisp and decisive is he going to be? How good is he going to be at delegating after he's made those decisions?

GREGORY: We'll leave it there. Our bureau chief down in Washington, Mark Whitaker. Good to see you. Sorry we are not together in the same place tonight. Talk to you soon.


GREGORY: That is the program, the view from "1600 Pennsylvania Avenue." I'm David Gregory. Thanks for watching. We'll see you back here from D.C. tomorrow night at 6:00 p.m. eastern on MSNBC. "Hardball with Chris Matthews" coming your way next. Good night.



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