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Tuesday, April 20, 2010

Read the transcript to the Tuesday show

Guest: Chris Hayes, Paul Krugman

RACHEL MADDOW, HOST:  Good evening.  What do you think about the

phone?  Do you think it was a hoax or do you think it was a real deal?

And thanks to you at home for staying with us tonight.

Nobel Prize-winning economist Paul Krugman will join us for “The

Interview” at just the right time, given the state of the new rules for

Wall Street.

Senate John McCain is at odds again with Senator John McCain on an

immigration law that no one can quite believe might actually become law in


And the story of the day comes from the legislature of the great state

of Georgia—which has done something that cannot be adequately explained

in prose.  You must see it to believe it.  So, we will act it out.  I‘m

very much looking forward to that.

That is all ahead.

But, we begin tonight with the opposition to new rules for Wall Street

falling apart after starting out with a full-frontal assault on Wall Street

reform and a sustained public campaign against it, and a promise that every

single Republican would stand united to kill it—today, the top

Republican in the Senate, Mitch McConnell, climbed down.



financial regulation, it‘s pretty clear now and the majority leader has

indicated to me that serious discussions have resumed.  We are all

optimistic that this can be fixed.


MADDOW:  That is a far cry from the “we will kill it at any cost”

message that we were hearing from Senator McConnell before today.


MCCONNELL:  That is clearly not the direction the American people

would like for us to go and also not the direction Senate Republicans would

like to go.

Never again, never again should taxpayers be expected to bailout Wall

Street from its own mistakes.


MADDOW:  That was the top Republican in the Senate last week.

So, what explains why he has done a 180 now?  See if you can spot

Mitch McConnell‘s problem here.  The first man you‘ll see in this next clip

is Mitch McConnell.  The second man you will see is Bob Corker, another

Republican senator.  Watch.


MCCONNELL:  It will lead to endless taxpayer bailouts of Wall Street


SEN. BOB CORKER ®, TENNESSEE:  This fund that‘s been set up is

anything but a bailout.


MADDOW:  Hard to maintain the talking point that Wall Street reform is

a big bailout when your own party‘s point man on the issue keeps saying

that‘s not true.

Senator Corker today making it crystal clear, he told the newspaper

“Roll Call,” quote, “The things that we‘ve been saying on our side of the

aisle about bailouts and all that, they miss the point.”

So, Republicans in the Senate are trying to stop Wall Street reform

face planted on their own talking point there.  Bummer.

Over in the House, Republicans started off trying to make that talking

point work.  House Minority Leader John Boehner blasting an e-mail warning

that Wall Street reform would, quote, “empower the federal government to

provide Wall Street with permanent bailouts, courtesy of American


“The Huffington Post‘s” Sam Stein reporting today that even if

Democrats were to take out the part of the bill that some Republicans have

been saying what amount to a bailout, John Boehner admits he would still

call it a bailout anyway.

So, the bill outlaws bailouts.  It does not allow them.  And if it is

changed anyway to take out the part that some Republicans say it‘s a

bailout, even though it‘s not, they admit they would call it a bailout

anyway.  They admit this.

So, like, OK, here‘s a shark.  Here‘s John Boehner.  Right?  Jumping

the shark.  Also, here‘s a whale.  It has nothing to do with the metaphor,

but it is awesome.  Sorry.

OK.  Then there is Republican Senator Scott Brown of Massachusetts. 

You know, “Senator 41,” the senator who is going to save the day for


Republicans in the Senate lost their main talking point against Wall

Street reform.  Republicans in the House were caught bragging about not

meaning what they say about Wall Street reform.  But perhaps this new guy

will lead the way, put a telegenic, likable, credible Republican face on

this awkward “siding with the Wall Street banks” things.  That‘s not

working out either.

First, you will recall Senator Brown mystified everyone by asking a

reporter from “The Boston Globe” why he should oppose Wall Street reform. 

Quoting from “The Globe,” “When asked what areas he thought should be

fixed, Senator Brown replied, ‘Well, what areas do you think should be

fixed?  I mean, you know, tell me.  And then I‘ll get a team and go fix


A few days later, the senator made his Sunday show debut and explained

his opposition to Wall Street reform this way on camera.


SEN. SCOTT BROWN ®, MASSACHUSETTS:  The bill that is being proposed

by the banking chairman dramatically affects businesses, Mutual—for

example, Liberty Mutual, Mass Mutual, these folks are caught in that

regulation as well.  It‘s going to cost potentially 25,000 to 35,000 jobs. 


BOB SCHIEFFER, CBS HOST:  Well, wait a minute, Senator, how can you

say that?

BROWN:  Well, I can say it very clearly because the regulations they

are trying to reel in with some of the risky hedging that bets are doing

also affects companies like I just described in Massachusetts.  It‘s very



MADDOW:  It‘s very clear.  It‘s very clear that this bill will cost

25,000 to 35,000 jobs in Massachusetts.  Nearly 1/5 of all financial

industry related jobs in Massachusetts will go away if this bill passes. 

To echo Mr. Schieffer here, “Wait a minute, Senator, how can you say that?” 

What is it based on?

When pressed by “The Boston Globe” to produce any basis for those

rather shocking numbers, Senator Brown manned up and said, “I stand by them

and there will be larger numbers nationally.”

His staffers then cited a study done by a group called the Business

Roundtable.  The problem, as “The Globe” points out, that Business

Roundtable study, quote, “did not provide any Massachusetts specific


So again, where‘s the basis for “the 25,000 to 35,000 jobs are going

to be lost in Massachusetts” claim?

Senator Brown then told “The Globe” that the number was based on,

quote, “my speaking with the industry leaders over the last month or so.”

His office elaborated that he got this estimate from the chief

executive of one of the companies he mentioned on TV, Mass Mutual, which is

headquartered in Springfield, Massachusetts.  Except that Mass Mutual told

“The Globe” that the company didn‘t give Senator Brown any projected job

losses associated with the bill.  What they gave him was their estimate of

how many jobs were lost in the Massachusetts financial sector to the

recession.  They told him that was about 33,000 jobs.

And even that totally unrelated number, it turns out was—again

quoting from “The Globe”—“dramatically inflated, the company

acknowledged.”  Nonetheless, Mass Mutual telling Scott Brown erroneously

that 33,000 jobs were lost to the recession somehow turned into this—


BROWN:  The bill that‘s being proposed by the banking chairman

dramatically affects businesses, Mutual—for example, Liberty Mutual,

Mass Mutual, these folks are caught in that regulation as well, and it‘s

going to cost potentially 25,000 to 35,000 jobs.


MADDOW:  Just out of thin air.  There‘s a number.  I heard that

number, once about something.  On national television—just thin air. 

Scott Brown declares that nearly 1/5 of Massachusetts bankers will lose

their jobs if Wall Street reform passes.

When we asked Mass Mutual for a clarification today, they sent us this

statement, which is classic.  Quote, “We are one of many financial

institutions that have discussed the proposed financial regulatory reform

bill with Senator Brown.”

We asked them to clarify and like add some detail.  That‘s it.  That‘s

all they‘d give us.  But at least they got back to us.

I cannot say the same thing for Senator Brown.  We also called his

office today for a clarification on his “1/5 of Massachusetts bankers will

lose their jobs” declaration.  And they asked what show we were calling

from, and then we told them, and then they never called us back.  It‘s not

really anything new with them.  They never, ever call us back about

anything even when they say they were going to.

Like a teenager in love, we shall wait by the phone patiently,

impatiently, whatever.  At this point, we‘re just excited to find out what

he is going to make up next.

Joining us now is Chris Hayes, Washington editor of “The Nation”


Chris, thank you so much for joining us tonight.  Good to see you.

CHRIS HAYES, THE NATION:  Good to see you, too, Rachel.

MADDOW:  So, what happened to the unified Republican opposition to

Wall Street reform?

HAYES:  Well, I‘m not quite sure it was ever quite as strong as they

projected.  But I basically think there‘s two things happening.  One is

that the politics just aren‘t very good.  I mean, Noam Scheiber in “The New

Republic” has a really good piece about how this reform is actually gotten

a little stronger recently.  And one of his sources says, compares it to

what happened to Sarbanes-Oxley back in the early part of the decade and

when WorldCom came out, it really strengthened the push behind Sarbanes-

Oxley because you couldn‘t say anymore it was one-off.

And they said it was the same with this Goldman Sachs SEC charge.  And

you‘re going to see more charges down the pike.  I mean, from everything we

know, it looks Countrywide might be next.  There are other firms that might

be in the crosshairs of regulators.  All of that is reminding people of

exactly who the villains are in this drama.  And I think that‘s making the

politics much more difficult for the GOP.

MADDOW:  But then, we did see in the Republicans initial pass at this,

we saw that their strategy against this was not to say we‘re siding with

the bad guys and hey, they‘re not that bad.  They said, this is a—what

it is, a bailout bill—yes, it‘s a bailout bill.

HAYES:  Right.

MADDOW:  Totally disassociated from the facts but they were willing to

go there anyway.  That talking point has fallen apart.

Do we yet know what the sort of next basis of opposition is going to

be or do you really think this means they‘re just not going to oppose it?

HAYES:  Well, it will be really interesting to see.  I mean, in that -

in that respect, what you just pointed out and the Corker clip you

played, Corker played a really interesting role here because, I think, you

know, Bob Corker and I have different views of the future of financial

regulatory reform.  But he did something that Chuck Grassley did not do

during health care reform.


Remember, Chuck Grassley was one of the main interlocutor of the

Democrats and at that same time, he was going back to his constituents and

essentially reaffirming the death panel lie.  What Corker did today was he

actually, I think, in good faith, said, no, that‘s not true.  That‘s not

the way the bill works.  In doing that, I think, is a fundamental signal of

a kind of good faith investment in the policy outcome which whether you

agree with him on policy or not, it‘s just the threshold needed to actually

legislate.  That being present, I think, actually makes a difference.

MADDOW:  Do you think that means that Bob Corker ends up being a

Republican vote for financial reform?  Do you see anybody else out there

who‘s a likely pickup, as they say?

HAYES:  Well, look—I mean, it‘s the same group of people—it‘s

possible it gets enough.  I mean, the one thing I would say, just to sort

of balance out the good news of Bob Corker acting semi-responsibly is that

progressives should really scratch their heads and wonder: if you can pull

a bunch of GOP senators on to this bill, whether the bill is as good as

it‘s being billed.

I mean, that should really make you question the actual content of the

bill.  You wonder if the GOP is able to sort of come onboard this bill, if

it‘s going to offer the kind of fundamental change after the biggest crisis

in 80 years, that‘s really necessary.

MADDOW:  On the issue of Scott Brown, Chris.  He is turning to be a

hoot as a senator.

HAYES:  That was Palin-esque.  I mean, that was amazing.

MADDOW:  You just try—you try to diagram the sentence, and it‘s

like, wow, this is way above my pay grade.  But—I mean, he‘s been

interesting so far, mostly because he keeps getting caught cold making

stuff up and then refusing to take it back even when he gets really nailed

on it.  But I wonder if Scott Brown could be a constructively engaged

Republican on this.  I mean, there‘s a possibility that he really just

doesn‘t understand what he‘s voting on and what he‘s talking about, and so,

he‘s not going be constructive because he‘s not capable of it.

HAYES:  Right.

MADDOW:  But there‘s also the possibility that he just came across

poorly in his interviews and he might actually be interested in working

with Democrats.  Do you have a sense of which it is?

HAYES:  Well, look, the president and the White House clearly thinks

it‘s the latter, right?  Because the president is calling him from Air

Force One today.  And, you know, they got his vote on the jobs bill, which

is one of his first votes, which signaled, I think, to people that, yes,

you know, this is someone who might vote his state constituents desires

rather than, you know, the tea party sort, et cetera.

I mean, what‘s clear is that it‘s not just Scott Brown—a lot of

people in the United States Senate, I can tell you from doing some

reporting on this, have no clue about this bill.  They have no clue about

financial reform.  They have no clue about what‘s good and what‘s bad. 

They are getting their talking points from leadership.

If you grab any of them, and this is actually on both sides of the

aisle and ask them about the details of this bill, they wouldn‘t do a lot

better than Scott Brown.  So, I think it‘s going to be one of this

decisions that ultimately the leadership is going to be making at the top

that‘s going to filter down.

MADDOW:  That is so depressing—so depressing.  I will tell you, I

have found that—what you just described on the financial reform

legislation, when I have talked to senators, not staffers but actual

senators, off air, off-camera, off the record, about filibuster reform, I

have found the same thing.  A shocking level of just basic ignorance on

what it is that they do for their jobs.

HAYES:  Yes.

MADDOW:  It‘s sometimes amazing.

HAYES:  A lot of it is—there‘s a lot of specialization which takes

place.  So, if you‘re dealing with an issue with a sitting legislator and

it is not their committee, you know, they‘re not—that‘s not something

they‘re going to have a really deep command of, particularly when you‘re

dealing with something as complex as this.

MADDOW:  Good reminder, very depressing.

Chris Hayes, Washington editor of “The Nation”—thank you for your

time tonight and for using interlocutor in a sentence so well.  Appreciate


HAYES:  We always try to bring it.  Thank you, Rachel.

MADDOW:  Thank you.


MADDOW:  It was a great night to mark the return to this show of Nobel

Prize-winning economist Paul Krugman.  Given the new big fight on Capitol

Hill and Goldman Sachs and the economy, it feels like he is here in the

nick of time.

And what do you call an angry gathering of armed people spouting anti-

government rhetoric on the anniversary of the Oklahoma City bombing?  By

their account, it‘s called a lovefest.  And at this lovefest, one of them

talked about wanting to tar and feather me.

That‘s next.


MADDOW:  Washington, D.C. has by far the most interesting license

plate in the country.  See, it says there on the bottom, “taxation without

representation.”  That is not a salute to the Revolutionary War and the

colonist.  That is the current status of residents of Washington, D.C.,


Washingtonians pay federal taxes but they have no voting

representative in the federal government.  And their best chance in years

to rectify that injustice today went kaput.  D.C.‘s nonvoting delegate to

Congress, Eleanor Holmes Norton, pulled a bill that would have given D.C.

an actual vote in the House.

Even though Democrats thought they might have been able to pass that

bill this year, gun rights supporters had attached to it what they a poison

pill amendment.  The amendment would have gutted D.C.‘s locally passed gun

laws.  The amendment was drafted by the NRA.

Eleanor Holmes Norton describe what it would do as, quote, “a person

in the district would be able to walk on the streets carrying an assault

weapon slung over her shoulders or with concealed weapons.  D.C. might not

be able to ban guns at public and charter schools.”  She added, “These

provisions are so over the top, they are unworthy of serious


So, the majority—black majority, Democratic-leaning residents of

Washington will continue to be taxed by the federal government without

being allowed to elect a voting representative in that government.  And

it‘s because pro-gun politicians from other states think they should make

decisions for D.C. about public safety instead of letting D.C. decide for


And somehow, someone, somewhere will try to tell you those politicians

are acting in a way that should be called conservative.  If that‘s true,

then the word conservative has lost all meaning.


MADDOW:  It‘s Earth Week at MSNBC.  Saving our planet‘s future is up

to all of us.  For simple things that you can do live greener and help the

environment, go to  Green matters here.


UNIDENTIFIED SPEAKER:  This is not a hatefest.  It is a lovefest. 

It‘s a lovefest.

So, turn around, go to the person next to you and high-five them

because you are the Special Forces.  You are the elites of the American

guns right movement, which without the gun rights movement, there would be

no rights.

OK.  Now, there‘s a certain reporter made comments, Rachel Maddow—

and I have to say to her: it‘s a good thing that this is a lovefest,

otherwise, we‘d tar and feather you.


MADDOW:  There were two would be armed pro-gun rallies in and near

Washington coinciding yesterday with the 15th anniversary of the bombing of

the Alfred P. Murrah Federal Building in Oklahoma City.  That shout-out you

just heard to THE RACHEL MADDOW SHOW there came during the rally that was

in Washington, D.C.  That‘s the one where people weren‘t actually armed

because if they were armed, that would have been against the law in D.C.

But demonstrators in Virginia were very much armed.  They gathered

initially on national parkland were—thanks to a law signed by President

Obama earlier this year—expanding gun rights in national parks, it was

perfectly legal for them to carry weapons.  It must have been sort of

bamboozling and frustrating to the people who were there to complain about

their gun rights being impinged by President Obama that they were only able

to be there in that way because he expanded their gun rights.

That said, as you can see, there weren‘t actually all that many people

at either of this pro-gun rallies.  Several estimates put dozens at the

armed rally in Virginia and hundreds at the unarmed rally in Washington,


Those low numbers though didn‘t stop an actual member of Congress from

turning out to address this teeny tiny group of people with empty gun

holsters at the Washington rally.


REP. PAUL BROUN ®, GEORGIA:  Fellow patriots, we have a lot of

domestic enemies of the Constitution and they are right down the Mall, in

the Congress of the United States.  And right down Independence Avenue in

the White House, it belongs to us.  It‘s not about my ability to hunt,

which I love to do.  It‘s not about the ability for me to protect my family

and my property against criminals, which we have the right to do.  But it‘s

about—it‘s all about us protecting ourselves from a tyrannical

government of the United States.



MADDOW:  That‘s what we‘re going to use our guns for.

That wasn‘t just some random guy at the rally.  That was a congressman

Congressman Paul Broun of Georgia—his remarks on the occasion of the

15th anniversary of the bombing in Oklahoma City that killed 168 people

that was carried out by an anti-government extremist.


Leading up to that grim anniversary, President Clinton delivered a

speech in Washington reflecting on the response to the Oklahoma City

bombing at the time and what we can do as a nation to prevent such a thing

happening again.  To that end, the former president remarked on the

difference between criticizing the government and inciting violence against

the government and people who work for it.


WILLIAM J. CLINTON, FORMER U.S. PRESIDENT:  We can‘t let the debate

veer so far into hatred that we lose focus of our common humanity.  It‘s

really important.  We can‘t ever fudge the fact that there is a basic line

dividing criticism from violence or its advocacy.

What we learned from Oklahoma City is: not that we should gag each

other or that we should reduce our passion for the positions we hold, but

that the words we use really do matter because there are—there is this

vast echo chamber and they go across space and they fall on the serious and

the delirious alike.  They fall on the connected and the unhinged alike.


MADDOW:  Those remarks and President Clinton echoing them in a written

op-ed in the “New York Times” have proved to be upsetting for some

commentators on the political right.


SEAN HANNITY, FOX NEWS HOST:  So I guess, you can‘t be critical.  You

can‘t say socialism exists.  You can‘t be critical of government.

I thought this was the highest form of patriotism when the criticism

was aimed at George W. Bush.  Something‘s happened.  I must have missed it. 

What happened here?

REP. MICHELE BACHMANN ®, MINNESOTA:  Well, apparently, it‘s hate

speech when it‘s on the right and it‘s not hate speech when it‘s on the

left.  So, you know, go figure where that comes from.


MADDOW:  Rupert Murdoch‘s “New York Post” editorial board took this

line one step further, not just criticizing President Clinton for

cautioning against inciting language, but actually blaming the Clinton

administration for the Oklahoma City bombing, saying, quote, “McVeigh never

cited talk show hosts as inspiration.  Rather, he pointed a finger at

Clinton‘s own administration.  Oklahoma City ‘was a retaliatory strike,‘

McVeigh wrote in a letter to the media, ‘a counterattack from the

cumulative raids and subsequent violence and damage that federal agents had

participated in over the preceding years including, but not limited, to


It‘s “The New York Post” explaining how really, if you think about it,

the Oklahoma City bombing was the federal government‘s fault.

They weren‘t the only voice on the right to go there and to also lash

out at President Clinton.


RUSH LIMBAUGH, RADIO HOST:  Let me ask President Clinton what words

caused Timothy McVeigh to act?  Name one.  I want to know what words and

who spoke them.  All I‘ve ever heard is that Timothy McVeigh was outraged

over the government invasion led by Janet Reno of the Branch Davidian

compound in Waco, Texas, and the Murrah Building was blown up on that exact

date two years later.  McVeigh was inspired by anybody‘s words, he was

inspired by Mr. Clinton‘s deeds.


MADDOW:  If you want both violence-inciting language and the

sympathetic explanation of Timothy McVeigh‘s motivation to bomb a United

States federal building and kill people in it, look no further than the

Second Amendment March, the one held yesterday in Washington, D.C. on the

anniversary of that bombing.


LARRY PRATT, GUN OWNERS OF AMERICA:  I look around.  It is so good to

see all these terrorists out here.  Janet Napolitano, she figured as

governor of Arizona that we didn‘t have a border problem.  But she knows

who the real enemy is.

And Bill Clinton has been running cover for her, too.  Watch out how

you guys speak out there.  You know, words can have consequences.

Remember Oklahoma City?  Yes, I do.  And I also remember the Waco

barbecue that your attorney general gave us.  Thanks a lot.

We‘re in a war.  The other side knows they‘re at war because they

started it.  They‘re coming for our freedom, for our money, for our kids,

for our property.  They‘re coming for everything because they are a bunch

of socialists.


MADDOW:  It is strategically easier to complain about being accused of

inciting violence unfairly when you are not at the time speaking to a crowd

carrying signs threatening to shoot the president.

We‘ll be right back.


MADDOW:  The interview tonight is Paul Krugman, Nobel Prize-winning

economist and columnist with the “New York Times.”  Mr. Krugman you are the

person I most want to talk to right now about Wall Street and the economy. 

Thanks very much for your time. 


MADDOW:  So Goldman Sachs - huge earnings announced today right after

the SEC charged them with fraud.  We know that Goldman fraud case is sort

of maybe changing the politics a little bit around Wall Street reform.  How

important is what they are accused of? 

KRUGMAN:  Well, I mean, the specific thing is not that big and the

question - basically, they are accused of setting up things, you know,

investments that were designed to fail so that important clients who were

betting they would fail could make money. 

That sort of thing - we don‘t know how widespread it was.  We

don‘t know how big a deal.  It certainly didn‘t cause the crisis, but it

may have made things worse and mostly, it just, you know - it gives you a

picture of our really rotten financial system which is a critical part of

the whole story of financial reform. 

MADDOW:  Is there anything in the financial proposal - financial

reform proposal that‘s out there now that would prevent the kind of fraud

that Goldman Sachs is accused of? 

KRUGMAN:  It is not clear.  I have been actually having a hard time

figuring this out which probably means that the answer is no. 

I mean, the proposals that are out there would make it - would

require that derivatives - and I can‘t explain that because they are

complicated which is the point in a way - that they be traded a lot more

openly, more transparently on recognized exchanges, which would have made

this kind of thing more visible and possibly headed it off. 

But probably, it needs to be tightened up.  But I think, again,

the main thing is not so much would the reform specifically prevent this

thing as it is a reminder that Wall Street bankers are not your friends and

cannot be trusted to do the right thing. 

MADDOW:  You wrote recently that the financial sector has essentially

become a racket, that it‘s essentially predators and prey.  And you are

either one or the other right now. 

When you mention that derivatives are hard to explain and that is

the point - they are complicated and that is point - do you think that the

generation of complex financial instruments in the last generation in Wall

Street has in part been to stay ahead of regulation, to stay ahead of even

due diligence by the people involved at the sort of lower end of the food

chain in finance? 

KRUGMAN:  Yes.  I mean, it is starting to look - I mean, you know,

they were sold.  These complex things were supposed to diversify risk. 

They‘re supposed to make the system safer.  It has now been glaringly

obvious that they actually increased the risk, that they concentrated it,

that they created lots of promises that couldn‘t be honored in the clinch. 

So, yes.  I mean, it is kind of a running game we have here. 

Now, people talk about - well, we mustn‘t stop financial innovation.  And

then you say, well, name a financial innovation that has clearly been

beneficial and you are not allowed to use ATMs. 

And usually, that stops the conversation because nobody can come

up with anything that was clearly a good idea in all of this, you know,

vast proliferation of stuff. 

MADDOW:  Well, it has made a very small number of people dramatically,

dramatically wealthy in a short period of time.  The Wall Street

billionaires aren‘t just the firms.  They are the individuals, the hedge

fund managers and so on. 

KRUGMAN:  That‘s right. 

MADDOW:  And in terms of their efforts to stay unregulated, is it - I

mean, do you think it‘s really just to keep the con going so they can keep

essentially dupes out there that they can relieve of their money?  Or is it

because they do think that there is something that could be useful for the


KRUGMAN:  Well, you know, everybody - nobody thinks he is a villain. 

Everybody imagines that they are doing something good.  So I would imagine

that most of these people sincerely believe that what they do is good for

the country even as they - some of them are quite deliberately duping

people, you know, a little bit of double think there. 

But the point is that they are - you know, they‘ve got this

incredibly lucrative business which is of questionable, arguably negative

value to the economy but absorbs a lot of resources and pays them a lot of

money.  So of course, they are trying really, really hard to defend it. 

MADDOW:  What is good, do you think, about the proposal for Wall

Street reform that‘s out there right now?  What is the most important thing

that the proposal that‘s out there now would do to protect us from a

financial crisis happening again? 

KRUGMAN:  OK.  Well, you know, there is actually - there are four

different things.  Probably, the most important is thing - resolution

authority.  You know, we had a stable financial system from the mid-1930s

to about 1980 based around the FDIC insuring deposits, but also regulating

banks and having the ability to seize a bank if it‘s basically going under,

protect the depositors and clean out the other guys. 

We did not have that in clear legal form.  So when we were having

debates about bank - nationalizing weak banks in early 2009 - you know, it

is a highly debated issue.  But one thing that was a real problem was, it

wasn‘t clear exactly where the authority was for something that was


You know, an ordinary, you know, Jimmy Stewart‘s bank you knew

how to seize.  But Citigroup - it wasn‘t quite clear what the legal

authority was.  So this would bring us back to - partly at least to this

kind of system that did so well for about 45 years.  That is the biggest

single thing. 

Regulation of derivatives, forcing them into the open and to

exchanges where you can see what is happening is a big thing.  Protecting

consumers is a big thing.  Requiring that banks have higher capital if they

basically have more stockholders‘ money at stake and not so much borrowed

money - that‘s a big thing.

All of those would - you know, are they enough to prevent another

financial crisis?  We don‘t know.  But they would certainly help.  They

would certainly make it less likely and less severe when it happens. 

MADDOW:   When the president who is not a president who is given to

threatening vetoes willy-nilly - when he recently threatened to veto

financial reform if it doesn‘t regulate derivatives, do you think that was

the right move? 

KRUGMAN:  Yes, it was, because, you know, this is - you don‘t want a

cosmetic reform.  You want something that‘s real.  And derivatives is now -

what I hear, is the sticking point.  They actually - you know, for what

it‘s worth, the administration people - they think that Republicans are

going to cave on consumer protection because they think it isn‘t going to

be that big of a deal. 

They will probably, in the end, cave on resolution authority. 

But they‘re going to try and hold out to keep those derivatives, basically

to keep the racket going.  So this is where the sticking point is and he is

prepared to hang tough or at least so he says. 

MADDOW:  We have been talking a lot about the politics, trying to

understand, not only the substance of the Republican opposition but also

its likelihood of successfully stopping (UNINTELLIGIBLE). 


KRUGMAN:  You are wasting your time on the substance thing.  There is

no substance.  I mean, it‘s entirely - you know, there is no coherent case

there.  But yes, the politics.  Sorry.  Go ahead. 

MADDOW:  No, that‘s exactly what I was going to ask you.  I mean, can

you help?  How has the Republican Party been making either criticisms on

the existing bill or proposals for what they would do instead that makes

sense to you as an economist? 

KRUGMAN:  No.  I mean, it is - well, first of all, it‘s obvious that

they are actually, you know, huddling with the bankers, huddling with Wall

Street to figure out ways to stop this thing and then proclaiming that what

they‘re doing is really preventing future bailouts of Wall Street. 

But no, there has been nothing there.  I mean, if there has been

no proposal - the only thing they have been doing is claiming that

resolution authority is just setting you up for future bailouts and we

should just promise not to have future bailouts. 

And as I‘ve written, it‘s just like saying that we have solved

the problem of fires by abolishing the Fire Department and then that people

will know that their buildings are burned down and so they won‘t let it

happen.  It just not - it is not coherent.  It is a dangerous idea, if


MADDOW:  Nobel Prize-winning economist and columnist with the “New

York Times,” Paul Krugman.  I always feel very lucky when we can get you to

be on the show.  Thank you for making time for us. 

KRUGMAN:  Thanks a lot. 

MADDOW:  Thanks.  So there is a love story to tell tonight.  It

matches the new very conservative Sen. John McCain of Arizona and what is

described as the country‘s most retrogressive, mean-spirited and useless

anti-immigrant law.  In politics, as in the 1970s, love the one you‘re

with.  Stay tuned.  We‘ll be right back. 


MADDOW:  So it‘s been a long time since the day‘s headlines demanded a

new installment of THE RACHEL MADDOW SHOW transcript-based, reenactment

theater.  But today is the day.  It takes place in the state legislature. 

It involves areas of human anatomy that I‘m very uncomfortable talking

about and it has a big surprise ending.  That is coming up.

But first, a couple of holy mackerel stories in today‘s news. 

The new immigration bill that has now passed both the House and Senate in

the State of Arizona has been described by its opponents as, quote, “harsh

and mean-spirited,” as “one of the harshest assaults on basic civil rights

in recent American history,” and as “the country‘s most retrogressive,

mean-spirited and useless anti-immigrant law.” 

All of that sounds like hyperbole.  It sounds a bit over-the-top,

a bit blustery until you read the actual bill and you realize, “Oh, my

stars, what country did this come out of?”  SB 1070 in Arizona makes it a

crime to not be carrying papers that document your citizenship or

immigration status. 

The bill directs police officers to arrest anyone on the, quote,

“reasonable suspicion that they are here in the U.S. illegally.” 

Reasonable suspicion - meaning, you know, they look jet-lagged or they are

suspiciously familiar with the metric system or maybe they prefer soccer to


If you don‘t look like what an Arizona police officer considers

American, that police officer can stop you on that suspicion alone and

arrest you if your papers are not in order.  Papers, please.  The bill has

all but been endorsed by Sen. John McCain of Arizona. 


SEN. JOHN MCCAIN (R-AZ):  There is a fear amongst some people,

particularly the further away you get from the border of the, quote,

“invasion” that they are experiencing. 

I am convinced and I believe with all my heart we need a

comprehensive approach to immigration reform.  That means securing our

borders but it also means a temporary worker program that works. 


MADDOW:  I‘m sorry.  Very embarrassing.  We seemed to have played the

wrong tape.  Yes.  Mislabeled.  I‘m sorry.  That was definitely

presidential candidate John McCain.  Here‘s the John McCain that is running

for re-election now in Arizona - totally different guy, it turns out. 


MCCAIN:  The state of Arizona is acting and doing what they feel they

need to do in light of the fact that the federal government is not

fulfilling its fundamental responsibility to secure our borders. 

It‘s the people whose homes and property are being violated.  It

is the drive by - the drivers of cars with illegals in it that are

intentionally causing accidents on the freeway. 


MADDOW:  You know that freeway?  The Republican governor of Arizona,

Jan Brewer, has five days to decide whether or not she is going to sign

this remarkable bill.  If she does, she will earn herself a place in the

history of civil liberties in America.  Her picture will be there under the

phrase, “Papers, please.” 

And finally, an update on the Icelandic volcano and its ash cloud

that has crippled global air travel and has created some of the most

beautifully stirring images of the year. 

First, the good news - British airports and air space reopened

today.  The very first plane to land at Heathrow in almost a week was a

British Airways flight from Vancouver.  Throughout Europe, about half of

today‘s scheduled departures will get off the ground. 

And as of this evening, in addition to Britain, at least some

airports have opened in France, Italy, Ireland, Germany, Austria, the Czech

Republic, Russia and the Netherlands. 

Planes are able to fly now because the ash cloud is lower,

allowing any high-altitude jet that can fly at least 20,000 feet to fly

above it.  So that is the good news. 

Now, for the bad news - the airline industry estimates the

volcano and its subsequent ash cloud of doom has cost more than $1 billion

because of 95,000 canceled flights.  Also, this volcano is not the only

volcano in town.  There is another much bigger volcano in Iceland that, if

you go by the historical pattern, may very well erupt in the next six


I know that is a weird thing to predict and there is no guarantee

here, but this other bigger volcano has done so every single time the

smaller volcano erupted in the last 2,000 years. 

Little volcano first - that‘s the one that‘s already erupting

now.  Second volcano within six months - every time for the last 2,000

years.  Invest in trains now and teleconferencing and “I hate Icelandic

volcanoes” t-shirts to be sold in airports. 


MADDOW:  Coming up on “COUNTDOWN,” Keith‘s special guest is Democratic

Congressman Raul Grijalva of Arizona.  He is now calling for a boycott of

his own state because of the new “papers, please” immigration legislation


And just a minute on this show, we have a new episode of THE

RACHEL MADDOW SHOW state legislature, transcript-based reenactment theater. 

Probably our best episode ever.  That‘s next.


MADDOW:  Georgia is on the cutting edge.  Don‘t let anybody tell you

differently.  Georgia, at least their state legislature, is way ahead of

the game.  Georgia state legislature is so completely done with addressing

problems that do exist.  They have moved on to preemptively addressing

problems that do not exist, namely the government implanting microchips

into people against their wills. 

Even though no one is actually being involuntary implanted with

microchips by the government, the Georgia state legislature is working

proactively to make sure that anyone who wants to do such a thing will know

it wouldn‘t be OK in Georgia. 

Georgia‘s Microchip Consent Act of 2010 is sponsored by two state

senators who are both named Chip.  No, I‘m not kidding - Chip Pearson of

Dawsonville and Chip Rogers of Woodstock, both Republicans.  So the two

Chips, microchip bill makes the implantation of a microchip into a human

being against his or her will a misdemeanor. 

The legislation has already passed the State Senate.  And just a

few days ago, it was brought before a key committee in the State House. 

And that‘s where lawmakers heard about six minutes of testimony

from a woman who, in the words of “Atlanta Journal-Constitution” columnist

Jim Galloway, quote, “began to lead the assembled lawmakers down a path

they didn‘t want to take.” 

The woman told them - actually, you know what?  We debated sort

of all day about how to tell the story.  And I have to tell you, there are

details in this story that I am not capable of saying out loud even when

nobody is watching, because I get all blushy and -

So there‘s I think only one good way to tell the story in its

entirety - by acting it out, using people who look and sound nothing like

the real ones in a setting totally different from the one where it


So here with a cut-down version of arguably the most awesome six

minutes of Georgia House Judiciary Committee history of THE RACHEL MADDOW

SHOW players with the new episode of THE RACHEL MADDOW SHOW state

legislature transcript-based reenactment theater. 



“CHAIRMAN”:  Does anyone else wish to speak to the committee on this? 

UNIDENTIFIED MALE:  I‘m a resident of De Kalb County.  And I‘m also

one of the people in Georgia who has a microchip.  And I‘ve been talking to

the different legislators and trying to get help and trying to outlaw the

implants - microchips. 

They infringe on issues that are fundamental to our very

existence.  Our rights to privacy, our rights to body integrity, the right

to say no to foreign objects being put in our bodies, specifically the

right to refuse microchips being put into our body by the government. 

The right to work without being tortured by co-workers who are

activating these microchips by using their cell phones and other

electronics devices.  Microchips are just like little beepers. 

If you will, imagine having a beeper in your rectum or in your

genital area, in the most sensitive area of your body and beeper number

displayed on billboards throughout the city. 

KENT JONES, MSNBC:  Ma‘am, did you say you have a microchip? 

UNIDENTIFIED MALE:  Yes, I do.  This microchip was put in my vaginal-

rectum area. 

JONES:  And you‘re saying this was involuntary? 

UNIDENTIFIED MALE:  Involuntary - yes.  I‘m in a U.S. Appeals Court

right now.  This case has been going on for the last eight years. 

UNIDENTIFIED MALE:  Who implanted this in you? 

UNIDENTIFIED MALE:  I feel like mine is -

UNIDENTIFIED MALE:  You don‘t know who did it? 

UNIDENTIFIED MALE:  Yes, I‘m one of the federal government research

with this microchip. 

UNIDENTIFIED MALE:  And who in the federal government implanted it? 

UNIDENTIFIED MALE:  This - it‘s the Department of Defense, and this is

the court case that is coming before the U.S. Appeal court. 

UNIDENTIFIED MALE:  Thank you, ma‘am. 


MADDOW:  Ladies and gentlemen, THE RACHEL MADDOW SHOW players.  OK,

though, it‘s not over.  Do you want to know what happened after that?  The

committee voted to approve the bill.  Not kidding, they voted for the bill. 

Not kidding.  End scene.   


MADDOW:  Volcanoes, earthquakes, bizarre heat waves, windstorms,

killer ash clouds.  With the news of natural phenomena starting to read

like the plot of a bad science fiction, pestilence and plagues movie, we

need to turn to our post-rational science correspondent for a little

explanatory help.  Hi, Kent Jones. 

JONES:  Hi, Rachel.  There‘s been astonishing scientific breakthroughs

this week.

MADDOW:  Yes. 

JONES:  Thanks in part to noted geologist Rush Limbaugh. 

MADDOW:  Oh, no. 

JONES:  Yes, yes. 


(voice-over):  Scientists may think they know what caused the

Icelandic volcano eruption.  But clearly, they‘re not familiar with the new

Limbaugh theory. 


the health care bill had been signed into law, Obama ran around all over

the country and said, “Hey, I‘m looking around here.  It hadn‘t opened up. 

No Armageddon out there.  The birds are still chirping.”  I think the earth

has opened.  God may have replied -

UNIDENTIFIED MALE:  Health reform again brought to you by Nancy


LIMBAUGH:  Earth has opened up.  I don‘t know whether it‘s a rebirth

or Armageddon. 

JONES:  Fascinating.  When God wants to punish America for its

socialist excesses, he‘s unleashing hell in Iceland.  Meanwhile, in Iran, a

senior cleric has a bold new hypothesis about what causes earthquakes,

quote, “Many women who do not dress modestly lead young men astray and

spread adultery in society, which increases earthquakes.”  And all this

time we‘ve been chasing tectonic plates.  Hemlines, people, not fault


And finally, using the same thought processes Rush Limbaugh and

the cleric used upon their conclusion, scientists now believe that the

gradual warming of the earth and the flowering of dormant plants is not

caused by a seasonal tilt of our planet towards the sun.  The coming of

spring is actually caused by Mitt Romney.  Everything we know is wrong. 


MADDOW:  I love that God might strike us down and make British people

not able to fly anywhere, all for health reform. 

JONES:  Inconvenient. 

MADDOW:  Very focused. 

JONES:  Yes.

MADDOW:  Yes.  Thank you, Kent.  Appreciate that.  That does it for us

tonight.  We‘ll see you again tomorrow night.  “COUNTDOWN” with Keith

Olbermann starts right now.  Good night.




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