The Rachel Maddow Show, Transcript 03/15/10

Guests:
Kent Jones, Sen. Sherrod Brown, J.D. Hayworth, Michael Lewis, Mark Mazzetti
Transcript:

RACHEL MADDOW, HOST:  Good evening, Lawrence.  Thank you.

LAWRENCE O‘DONNELL, MSNBC POLITICAL ANALYST:  Thanks.

MADDOW:  And thanks to you at home for tuning in tonight.

           

President Obama was in the battleground of Ohio today, sounding like he was running for president all over again.  Senator Sherrod Brown was there, too.  Senator Brown is with us tonight.

Senator John McCain has tacked way to the right lately, maybe because he was being primaried by J.D. Hayworth.  Mr. Hayworth joins us here tonight.  I am really looking forward to that.

The number one book at Amazon.com right now is Michael Lewis‘ new one about the financial meltdown.  Michael Lewis is here tonight.

And the most outrageous news of the day is “The New York Times” piece by Dexter Filkins and Mark Mazzetti on people you can‘t believe we were paying to do things you can‘t believe we were paying people to do.  Mark Mazzetti joins us as well.

We have a very, very big show this hour.  It‘s all coming up.

We begin with President Barack Obama.

If you closed your eyes or squinted at the TV just right, you would have been forgiven for thinking that it was campaign season again.  Mr.  Obama in campaign mode in Ohio, making an at times personal and at times shake the rafters case for health reform before what is described as a rowdy crowd—and I believe the people describing it as such.

Why did the president do this today in Ohio?  Here‘s why.

(BEGIN VIDEO CLIP)

OBAMA:  Last month, I got a letter from Connie‘s sister, Natoma. 

She‘s self-employed.  She‘s trying to make ends meet.

And for years, she‘s done the responsible thing, just like most of you have.  She bought insurance.  She didn‘t have a big employer who provided insurance, so she bought her health insurance through the individual market.

And it was important for her to have insurance, because 16 years ago, she was diagnosed with a treatable form of cancer.  And even though she had been cancer-free for more than a decade, the insurance companies kept on jacking up her rates, year after year.

So all together, this woman paid $10,000 – one year.  But because she never hit her deductible, her insurance company only spent $900 on her care.  Right?  So, the insurance company is making—getting $10,000, paying out $900.

Now, what comes in the mail at the end of last year?

AUDIENCE MEMBER:  A bill!

AUDIENCE MEMBER:  A rate hike!

OBAMA:  It‘s a letter telling Natoma that her premiums would go up again by more than 40 percent.

(CROWD BOOING)

OBAMA:  So here‘s what happens—she just couldn‘t afford it.  She didn‘t have the money.  She realized that if she paid those health insurance premiums that had been jacked up by 40 percent, she couldn‘t make her mortgage.

That was the letter that I read to the insurance companies, including the person responsible for raising her rates.

This was less than two weeks.  Unfortunately, Natoma‘s worst fears were realized.  And on Saturday, Natoma was diagnosed for leukemia.

Now, the reason Natoma is not here today is that she‘s lying on a hospital bed, suddenly faced with this emergency—suddenly faced with the fight of her life.  She expects to face more than a month of aggressive chemotherapy.  She is racked with worry not only about her illness, but about the costs of the tests and treatment that she‘s surely going to need to beat it.

So, you want to know why I‘m here, Ohio?  I‘m here because of Natoma.

(END VIDEO CLIP)

MADDOW:  For all the noise that has been generated in the health reform fight, for all the ways we have used the health reform fight to parse political skills and electoral prospects, for all the ways in which health reform has been used as a grandstanding platform for all sorts of related and unrelated political causes—President Obama today tried to bring the health care reform fight back to not political prospects, but to regular Americans‘ health prospects, the sometimes abusive relationships we suffer through with our health insurance companies.

The president also use that campaign-style rhetorical power today to pressure politicians whose very real votes he will need in order to make health reform happen.  Listen to this.

(BEGIN VIDEO CLIP)

OBAMA:  Your own Congressman, who is tireless on behalf of working people, Dennis Kucinich.

(CHEERING AND APPLAUSE)

AUDIENCE MEMBER:  Vote yes!

OBAMA:  Did you hear that, Dennis?  Go and say that again.

AUDIENCE MEMBER:  Vote yes!

(END VIDEO CLIP)

MADDOW:  “Vote yes” being yelled from the audience and getting an underscore from the president.

Ohio Congressman Dennis Kucinich is being lobbied like this, presumably in private as well as in public on stage in his district by the president of the United States, because at least as of it this morning, his spokesman said that Mr. Kucinich is a firm “no” on health reform.  Mr.  Kucinich is part of a group of progressive Democrats who pledged last year to vote no on any health reform plan that didn‘t contain a public option.  Mr. Kucinich voted even against the health bill in the House that did have a public option because he said that public option that passed the House was too weak, and the insurance regulation was not sufficient.

As for what will end up passing the Congress and what the president will end up signing—well, the House is working this week to pass both the bill that passed the Senate at Christmas, plus, they need to pass a final package of amendments.  The language of that final package of amendments hasn‘t been released yet, but House Speaker Nancy Pelosi has already said—publicly and definitively—to not expect that package of amendments to include a public option.

Nancy Pelosi, a supporter of the public option.  She says it‘s the Senate that can‘t get it done.

Joining us now is Senator Sherrod Brown, who was with the president today in his home state of Ohio.

Senator, appreciate your time.  Thank you.

SEN. SHERROD BROWN (D), OHIO:  Glad to be back.  Thanks, Rachel.

MADDOW:  As someone who is strongly in favor of health reform, tell me

tell me how it helps get health reform, to have the president stumping for it the way he did today in Ohio.

           

BROWN:  The Republicans have—not even Republicans, conservatives for two or three generations have defeated things by appealing to fear, whether it‘s McCarthyism, or fear of immigration, race or crime, or the Russians, or—any of these issues, terrorism and this health care bill.  They tried it with Medicare in 1965, government takeover.  Then it was the John Birch Society.  Today, it‘s the tea parties.  It‘s the same thing.

And the best answer to that, the best antidote to fear I think, Rachel is human—stories about human beings.  Three hundred ninety Ohioans every day lose their health insurance.  I go to the floor day after day—particularly last fall leading up to the December 24th vote—reading letters from people who thought they had good insurance two years ago, and then they got sick or they had a child with a preexisting condition, or for some reason, they lost their insurance.  They needed it—they needed their insurance.  That‘s when they realize it wasn‘t adequate.

Those are the stories that appeal to people, and I think members of Congress understand that.  And I think the president is doing it exactly right.  He‘s not just, you know, pulling at heartstrings.  He‘s really telling how the health insurance system abuses—too often abuses people who get sick, and the—and the anxiety that people feel, and all of that, as we consider this bill.

MADDOW:  Assuming that the House does pass the Senate bill, and this package of fixes the Senate then will have to pass using reconciliation in order to get around the filibuster, Senate Republicans say they will offer tons and tons and tons of amendments to slow the process down at that point.  To not only delay it further, but to try to kill it through that delaying mechanism.

Do you know how you plan to get around that?

BROWN:  The Republicans are actually going to try to delay?  Is that right?  I mean, it‘s the same old story.

And I—you know, I think it‘s finally catching up with them.  I‘ve seen in the last two weeks, coming back with the president talking about this, I just feel something different now.  I‘m hearing more stories from people who used to kind of buy in to this scare tactics, the death panels and some of that.

I think people are more and more understanding that Republicans are all about obstructionism.  When they say, let‘s start again with a blank sheet of paper, a clean sheet of paper, people that‘s all basically a smokescreen to defeat the bill.  To slow—to slow something is the best way to defeat it.  And they know we won‘t start again, not for another decade.

So, I think the public‘s pretty much become on to this, they‘re now on to this.  And the Republicans doing all these amendments—we‘re going to just sit there and answer them and vote them down, because they‘ll all be message amendments.  They‘ll all just amendments to try to play to people‘s fears.

And we‘re going to pass this bill, as many overnights—I mean, I‘ll say until midnight, I‘ll stay until 3:00 a.m.  We‘ll do it the next night and the next night and the next night.  They‘re going to think they‘re going to inflict pain on Democrats by making us stay up, we‘ll stay up.

We‘ll do whatever we have to do.  This is too important.  A bunch of politicians are going to do—have to do what they have to do to make this happen.

And they can try to delay, but it‘s going to catch up with them in the public eye, I think.

MADDOW:  One issue that has been very, very popular among voters, even as it has been such a political football on Capitol Hill, is this issue of the public option.  It‘s part of the objection that Dennis Kucinich has to the bill is obviously being lobbied very hard by the president and others to get—to change his vote and vote yes.  People don‘t expect the public option to be in the final reconciliation package right now.

But does that mean that it‘s really and truly dead?  Should we not expect the public option anytime soon?

BROWN:  No.  Just—Rachel, you know history.  I‘ve seen your show enough to know that you understand sort of how progressive—the progressive movements worked.  When we passed, what, Social Security was passed in the ‘30s.  It wasn‘t all that great at the time.  When Medicare was passed, it was good, but not great.

When Medicaid passed—so much of what we‘ve done on abolishing child labor, on safe drinking water and clean air, and workers compensation, the minimum wage—we pass a decent bill and then improved on it year after year, decade after decade.  That‘s what happens here.  This—you can bet that a lot of us are going to introduce a public option bill.

As soon the president signs this, we‘ll start working towards it.  It may take a year.  It may take five years.  There are a lot of things we‘re going to do to continue to improve this system.

We obviously don‘t give up on it.  We don‘t get everything we want.  But we work—we look how this bill works, we look how this new law works, and we continue to try to improve it.

Others will try to improve it in different ways, including conservatives.  That‘s their right.  But that‘s what happens in the court of public opinion.  But the struggle never ends.

Ted Kennedy made a statement years ago that health care reform never really is completed, that you need to continue and work for improving the system.  That‘s what we‘ll do.

MADDOW:  Senator Sherrod Brown, Democrat of Ohio—

BROWN:  Thanks.

MADDOW:  – you‘ve had a wicked long day.  Thank you so much for your time tonight, sir.  Appreciate it.

BROWN:  Thanks.

MADDOW:  In about a year, Senator John McCain went from Republican Party standard bearer to fighting off primary challengers for his Senate seat, within his own party.  One of the Republicans who is challenging John McCain from the right is J.D. Hayworth.  And J.D. Hayworth will be my guest – next.

Plus, the great Michael Lewis, author of “Liar‘s Poker” and “Moneyball” and “The Blind Side” and now, the number one book in the country “The Big Short.”  Michael Lewis is here in studio.

It‘s a very big night here.  Stay with us.

(COMMERCIAL BREAK)

MADDOW:  Senator John McCain‘s wicked hard turn toward the right of late is probably best explain by one man, J.D. Hayworth, a Republican who is challenging John McCain in the Republican primary for his Senate seat.  J.D. Hayworth of Arizona joins us next.

(COMMERCIAL BREAK)

MADDOW:  Not even a year and a half ago, John McCain was the leading Republican in the United States.  At the top of his party‘s presidential ticket, it‘s hope for the future.  Now, John McCain is not only not president, he‘s not only not the future of the Republican Party, he‘s fighting to hang onto his present job as a U.S. senator as he faces aggressive challengers for his Arizona Senate seat from within his own party.

One of those challengers is J.D. Hayworth, a six-term former congressman, who is swept into Washington along with the 1994 Republican revolution, and then swept out again in 2006.

Joining us now is former Arizona Congressman J.D. Hayworth.  He is running in the Republican Senate primary against McCain.

Congressman Hayworth, thank you so much for being here.  It‘s nice to have you on the show.

FMR. REP. J.D. HAYWORTH (R-AZ), RUNNING AGAINST SEN. MCCAIN:  Hey, Rachel, thanks for the invitation.  I‘m honored to be with you.

MADDOW:  OK.  You served six terms in Congress.  You were ousted by a Democrat in 2006.  And by that point, people who knew nothing about Arizona politics knew you for being one of the Congress‘ top recipient, if not the top recipient, of money from Jack Abramoff.  How do you ever recover from that politically?  What case do you make to the voters about being the top recipient of Abramoff money that makes them want to put you back in office?

HAYWORTH:  Well, first of all, Rachel, your information is incorrect.

MADDOW:  Oh.

HAYWORTH:  In fact—yes, I actually—I only received from Jack Abramoff $2,250.  The first contribution coming in 1996 of $2,000, the last contribution to my leadership PAC in the year 1999.

Now, what happened was—and it‘s a very clever idea, the so-called “do-gooders” said that, gee, because Abramoff was employed by a certain firm and had several Indian tribes as clients, then all that money was, quote-unquote, “Abramoff money.”  Well, that‘s not the case because that implies that sovereign tribes are incapable of making decisions on their own.  And many of the tribes said to me, hey, look, as chairman of the Native American Caucus or one of the bipartisan co-chairs, you continue to represent us.

Now, remember, Rachel, when I first went to Congress, one out of every four of my constituents was American-Indian.  And I worked to represent those whom I served, and had a very good relationship, but that‘s part and parcel of the political theater, and I‘m so glad to have a chance to correct it.

MADDOW:  Sure.

HAYWORTH:  But even if you accepted—even if you accepted the evaluation by, I believe, it was—I believe CREW was the group.  If you really go back and take a look at the numbers, I ranked ninth in overall contributions from those who might even have a tangential affiliation to Mr. Abramoff.  In fact, some other groups rated higher.  For example, the Democrat Congressional Campaign Committee, and the Democrat Senatorial Campaign Committee, I ranked ninth on that list.

So, I‘m glad to have a chance to correct the record.

(CROSSTALK)

MADDOW:  I—just to be clear—

HAYWORTH:  There was never a quid pro quo.  Mr. Abramoff never—Mr.

Abramoff never came to my office, never lobbied me directly on any issue. 

And so, I‘m very happy to point that out.

MADDOW:  Just to be clear, it‘s not just do-gooders.  It is the Department of Justice that put Jack Abramoff in prison.  I mean, one of the things he went to jail for was—

HAYWORTH:  Oh, yes—no.

MADDOW:  – fraud involving getting his lobbying clients—including tribes—to donate money to people to do the sorts of things that he got caught for doing.  But in terms of the number—

HAYWORTH:  Rachel—

MADDOW:  Wait.  Hold on, one second, you talked for long time, now, I‘ll talk for a little bit and then you get to talk again.

HAYWORTH:  OK.

MADDOW:  When in terms of you receiving money from Abramoff, your chief of staff in 2005 admitted that was over $150,000 of money linked to Abramoff.  “The Washington Post” listed you third.  The Center for Responsive Politics listed you first.  Others have listed you second.

So, somebody else might have listed you ninth, but you‘re known as an Abramoff guy.  And I just wonder, if in this campaign, if you‘re making a case to the voters of Arizona, that either you‘re different, or it wasn‘t that big a deal.  I mean, how do—how do you explain this away?

HAYWORTH:  Rachel, your researchers should have done a better job.  For had they checked, they would have seen corrections from “The New York Times” and other media organizations accepting and going back and taking a look at the evaluation, but enough of that.  I‘ll be very happy to point out how this may apply to the upcoming Republican primarily.  Senator McCain has joined the chorus of those attempting to link me with someone by the name of Jack Abramoff.

And please don‘t make the mistake of thinking in any way I‘m defending Mr. Abramoff.  That‘s not the case.  I‘m offering you a spirited defense of what I believe to be incorrect information that you have received.

But with reference to my immediate Republican opponent, Senator McCain

he chaired hearings, you may recall, of the Indian affairs committee, if memory serves, I believe in the spring and summer of 2006.  Never did my name come up in testimony, never was I mentioned, either during those hearings or in the committee‘s final report.

           

So, the bottom line is this: I did nothing wrong and the people of Arizona will have a chance a chance to decide that.

As for John McCain, a man who says he‘s a man of honor, I think quite frankly, he knows these charges to be incorrect.  And in desperation to keep his job, sadly, he is now proving himself unfit for service in the United States Senate.

MADDOW:  I‘m not carrying any water for John McCain.  I don‘t actually even know what he‘s been using against you.  But I have to ask about five different fundraisers that you held in Jack Abramoff‘s skyboxes starting in 1999.  You didn‘t report at the time that he did that for you.  You were just using the skyboxes and not reporting where those gifts in kind came from.  You later paid back the money back.

But what you were thinking at the time, that you‘d be able to use those skyboxes for free?  How—I mean, how does that—what was in your mind?

HAYWORTH:  No.  No.  Well, first of all, it didn‘t even come to mind, because—as you may be aware, Rachel, just as you have a very capable staff of producers that go through pre-interviews and help you with research, I had a staff, both a campaign staff and an official staff.  And as I understood it from them, they repeatedly asked Mr. Abramoff and the tribes involved for an accurate accounting.  When we failed to get that, when that was brought to our attention, Rachel, we actually went to the Federal Election Commission, and with their guidance, determined that we could make payments to the respective tribes who were hosting those events.

So, it was not a matter of trying to run away or be elusive, or in any way involve ourselves in nefarious schemes.  It was simply where we failed to get answers.  After a while, we apparently—those who were working for me—did not get those answers.  But once it was brought to my attention, we went to the FEC.  We cleared it up.

And, again, Rachel, you will note, as I‘m sure your producers have, that no charges were brought.  There were no infractions even cited by the Federal Election Commission.

So, again, I thank you for the chance to properly put this in perspective.

MADDOW:  I‘m glad to give you the chance to do it.

In terms of what‘s going on right now with this race against McCain, you are running as the consistent conservative.  That‘s the banner across at the top of your Web site.  In your announcement speech, you went after Mr. McCain for voting for the bailout bill in 2008.  I know you‘re strongly against the bailout.  You specifically went after him for voting for that bill in part because it had lots of earmarks.

Now, you voted for the Bush Transportation Bill in 2005, had a $138 million in earmarks just for Arizona.

Is there—are you worried about the hypocrisy in that charge, going after him for voting for bills with earmarks when you did the same thing?

HAYWORTH:  No, what I did with the transportation bill, and you mentioned the fact there were specific projects in Arizona.  Certainly, Rachel, you understand the tremendous growth that Arizona has undergone in the last decade, in particular, and the need for infrastructure in the state.  I appreciate you pointing that fact out.

No, the problem with the earmarks accompanying the $700 billion bank bailout of the investment banks was the fact that it basically was to grease the skids, a separate $150 billion set of earmarks.  Mr. McCain said it was bad.  Mr. McCain said it was an obscenity.

But in the final analysis, he voted for that particular collection of

earmarks.  And to my understanding, there weren‘t any definitive projects

in Arizona included in that bill.  Instead, it was simply to get the

necessary votes to pass the controversial bailout.  And, of course, later -

-

           

MADDOW:  So, his earmarks were bad, and your earmarks were good?

HAYWORTH:  I don‘t believe the earmarks in the 2008 bill were necessary in terms of what they were, was more than a spoonful of sugar to help Congress swallow an ill-advised bailout.  And I have a problem with that.  But as just as you made reference, Rachel, many of the dollars included in the transportation bill you discussed were dollars specifically for Arizona infrastructure.  I make no apologies when spending is necessary.

And, you know, of course, given your knowledge of history and government, that we don‘t have the luxury of a line item vote on appropriations bills, do we?  They come in one package.  And you have to decide if it is a vote you will make or a vote you will not make.  I‘ve made my votes and I‘m happy to stand by them and defend them.  And that‘s what I‘m doing here.

MADDOW:  Congressman, I know you made headlines nationwide yesterday when you gave an interview on a talk radio station in Florida.  And this is the comments you made about same-sex marriage.  I know you‘ve been asked about this a lot today.  Here they are.

(BEGIN AUDIO CLIP)

HAYWORTH:  You see, the Massachusetts Supreme Court, when it started this move toward same-sex marriage, actually defined marriage—now, get this—it defined marriage as simply, quote, “the establishment of intimacy.”  Now, how dangerous is that?  I mean, I don‘t mean to be absurd about it, but I guess I can make the point of absurdity with an absurd point.  I guess that would mean if you really have affection for your horse, I guess you could marry your horse.

(END AUDIO CLIP)

MADDOW:  So, here‘s my question about that.  Where is—does the establishment of intimacy thing come from?  Where in Massachusetts law or in the Supreme Court ruling does it say the establishment of intimacy?  I read—spent the whole afternoon sort of looking for that and couldn‘t find that anywhere.

HAYWORTH:  Well, as we went back and reviewed that document, back when the argument was made, the high court in Massachusetts defined marriage in a rather amorphous fashion, simply as, quote, “the establishment of intimacy.”  Now, I think we all agree there‘s much more to marriage than that.

MADDOW:  Sir, I‘m sorry, it didn‘t.

(CROSSTALK)

HAYWORTH:  And it is on that predicate that I preface my remarks.  OK. 

You and I have a disagreement.

MADDOW:  Well, I mean, I went OK, so, I‘ve gone through the Supreme Court ruling and I found all of the references to the word “intimacy,” which you can‘t get to your assertion without using the word “intimacy.”  And it‘s things like, “The United States Supreme Court affirmed that the core concept of common human dignity protected by the 14th Amendment precludes government intrusion into the deeply personal realms of consensual adopt expressions of intimacy and one‘s choice of an intimate partner.”

Quoting the U.S. Supreme Court, “Marriage bestows enormous private and social advantages on those who choose to marry.  Civil marriage is a deeply personal commitment to another human being and a highly public celebration of the ideals of mutuality, companionship and intimacy.”

I mean, those are the kinds of use of the word “intimacy,” the establishment as the definition of marriage—it‘s just not there.  I mean, let alone the horse thing, which I‘ll—I‘ll leave you to explain.

But what you said about the establishment of intimacy being the definition of marriage in Massachusetts, I don‘t think it‘s true, sir.

HAYWORTH:  Well, that‘s fine.  You and I can have a disagreement about that.

MADDOW:  Well, it either is true.  It isn‘t.  It‘s empirical.

HAYWORTH:  OK.  OK.

MADDOW:  All right.

HAYWORTH:  Well, I appreciate the fact that we have a disagreement on that.  I‘m sure one of many disagreements we would have.  And again, I thank you for the chance to join you.

MADDOW:  All right.  We‘ll post the—we‘ll post the ruling online. 

Maybe our viewers can help us go through it and resolve this matter.

Congressman J.D. Hayworth, former Arizona congressman, running the Republican Senate primary against John McCain.  I want to wish you good luck on your campaign, sir.  Thanks for being willing to come on the show tonight.  I appreciate it.

HAYWORTH:  Thank you, Rachel.

MADDOW:  OK.  So, the whole fair and balanced thing made so famous at another spot on your cable box has made it to schoolbooks in Texas.  Fair?  A little less Thomas Jefferson and separation of church and state. 

Balanced?  A little more Phyllis Schlafly and the moral majority.  Oh, yes

stand by.

           

(COMMERCIAL BREAK)

MADDOW:  The Texas State Board of Education has passed a slate of proposed amendments to the social studies curriculum that‘s to be taught to the millions of kids in Texas public schools. 

Even though some of the most hard-line conservative members of the board we are voted out in the Texas election earlier this month, the board is still really, really, really, really conservative.  And even the hard-liners who were voted out of office gets to stay in their seats for another 10 months or so.

And so, the nation is staring down the barrel of potentially 10 years of history books in Texas that require students to learn about, say, Phyllis Schlafly and the National Rifle Association, standards that put the inaugural address of the president of the Confederate States of America, Jefferson Davis, alongside the inaugural address of a commie socialist you probably have never heard of called Abraham Lincoln.

Standards also demote Thomas Jefferson out of a list of influential thinkers from the Enlightenment, because who knew - honestly, I had no idea - really hard-right conservatives hate Thomas Jefferson because he wrote about the separation of church and state? 

And that travesty overshadows that other little thing he wrote.  What was it?  Declaration of what and who now?  The whosy-whatsy(ph) of independence?  Some communist track that should be wiped from history no doubt, and Texas shall lead us? 

Just across the Red River border from Texas in the Great State of Oklahoma, there is also a dramatic stand being taken against stuff, although there, it‘s happening anonymously.  We tasked the only red-headed Welshman on our staff, Kent Jones, with sorting out what is going on out in Oklahoma.  Kent, thank you. 

KENT JONES, MSNBC CORRESPONDENT:  Logic is just tremendous. 

MADDOW:  See? 

JONES:  Yes.  Oklahoma can be so conservative that some people there don‘t even want to see a picture of President Obama, not even a picture.  Take a look. 

MADDOW:  All right.

(BEGIN VIDEOTAPE)

(voice-over):  According to Democratic Representative Mike Shelton, somebody, not wanting to be reminded that Barack Obama won the election, has moved the president‘s portrait from the back of the Oklahoma house chamber several times.  Because out of sight, out of their minds? 

Said Shelton, quote, “I think it‘s offensive.  In my six years of being in the legislature, it‘s the most childish thing I‘ve ever seen.” 

Shelton believes the culprit doesn‘t like Obama appearing in videos behind him.  It‘s like he‘s always there, watching us.  House Speaker and Republican Chris Benge said he planned to address the matter internally and not publicly rat out the evildoer. 

Benge also doesn‘t think the portrait prankster is all that wrong, saying, quote, “I think it has to do with the liberal nature of the Democratic leadership in Washington and that they are so not in line with the average Oklahoman,” because the average Oklahoman wants their elected officials to act like paste-eating eight-year-olds?  What‘s wrong with this picture?

(END VIDEOTAPE)

MADDOW:  Not in line with regular Oklahomans, and not in their line of sight either. 

JONES:  No.  No, no.  It‘s over there.  It‘s over there. 

MADDOW:  Amazing.  Thank you very much, Kent.  Appreciate you braving this story. 

JONES:  Sure. 

MADDOW:  If you don‘t go to school in Texas, someday, you will read about the meltdown of the American economy in 2008 and 2009.  Or you can read that history right now, as written by no less than Michael Lewis in “The Big Short,” his new book.  Or you can watch Michael Lewis explain it right here next, and then read the book after.  I recommend that last option.  It‘s the most thorough.  Please stay with us.

(COMMERCIAL BREAK)

MADDOW:  Health reform is going to happen.  It‘s happening.  It‘s going to be done and relatively soon.  Telltale signs include things like the bill language being finalized, votes being scheduled, the president working to persuade individual members of Congress to vote for it. 

Another sign health reform is just about done is the swerving off into the breakdown lane desperation of the people who do not want it to happen.  The corporate-funded fake grassroots, Americans for Prosperity today announced their last-ditch plan to stop health reform. 

They are directing people to drive circles around the district offices of members of Congress while honking their horns a lot.  Seriously, that‘s the plan - honking.  If you‘re looking for a sign that health care reform is really going to happen, I don‘t really know a better one than that. 

What‘s going to happen in politics after health reform, after the sky falls, of course, is financial regulation, Wall Street reform. 

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY:  The big priorities for the president, after we get health care reform done, first, is financial reform. 

MADDOW:  We are a year and a half out from what Michael Lewis calls the most purely financial economic disaster in history.  And the American financial system is still scudding along under the same rules, the same disastrous lack of rules that pierced and bled out the U.S. economy at the end of Bush‘s second term and collapse so spectacular the graphs don‘t really need captions. 

We still haven‘t fixed the rules.  Sen. Chris Dodd today introduced proposed legislations for some new rules.  Republicans in the Senate have already said that even already though the Dodd bill incorporates many of those suggestions for softening the new rules, they still plan to vote en masse against the new rules anyway. 

Joining us now is Michael Lewis, who has written way too many of the best modern nonfiction books ever written including “Money Ball,” “Liar‘s Poker,” “The Blindside” and now, “The Big Short: Inside the Doomsday Machine,” which explains the financial crisis from the perspective of several men who got rich for seeing and then betting that it would happen.  Michael Lewis, thank you for coming in. 

MICHAEL LEWIS, AUTHOR, “THE BIG SHORT”:  Thanks for having me back. 

MADDOW:  I completely immersed myself in the book and I like it.

LEWIS:  You read it? 

MADDOW:  yes. 

LEWIS:  That‘s a new experience. 

MADDOW:  Have you seen my notes? 

LEWIS:  You got all the way to the end? 

MADDOW:  Oh, yes. 

LEWIS:  Oh, that‘s great. 

MADDOW:  Well, I mean, it‘s - can we start with something that‘s probably academic but I think hugely important? 

LEWIS:  Sure.

MADDOW:  This is not about the stock market.  This is about the bond market.  

LEWIS:  That‘s right.  The whole crisis is about the bond market. 

MADDOW:  Yes. 

LEWIS:  You got - you got -

MADDOW:  What‘s the difference? 

LEWIS:  Well, stock market is where the shares of companies are traded

-

MADDOW:  Yes.

LEWIS:  Where average Americans and middle-class Americans have been investing for a long time.  And it‘s a politicized market because the little guy is there.  And it is, compared to the bond market, heavily regulated. 

You wouldn‘t know that from the Madoff debacle.  But

nevertheless, it‘s much easier to rip people off in the bond market than

the stock market.  And that‘s because it‘s a larger and institutional

market regarding this (UNINTELLIGIBLE).  Everybody is a big boy.  And the -

MADDOW:  So stock market has real people in it and bond market - 

LEWIS:  It‘s a market -

MADDOW:  (UNINTELLIGIBLE) other institutional people. 

(CROSS TALK)

LEWIS:  You have some real people in it -

MADDOW:  Yes. 

LEWIS:  But generally, the market is an institution.

MADDOW:  Yes.

LEWIS:  It‘s big institution.  And generally, the behavior in the bond market is much, much worse.  It‘s much more wild - the Wild West than in the stock market. 

MADDOW:  Yes. 

LEWIS:  And it is sort of expected if you‘re a big institutional investor who is dealing with a Wall Street firm in the bond market.  They might be trying to do something bad to you. 

MADDOW:  Yes. 

LEWIS:  And the biggest bad thing they did was the subprime mortgage bond debacle. 

MADDOW:  And part of the reason that people are excited that you

personally have written this book is because of - I mean, credit default

swaps on mezzanine tranches of diversified asset-based securities.  I mean

-

LEWIS:  That‘s a problem.

MADDOW:  It‘s based on the problem. 

LEWIS:  Because there‘s a reason - there‘s a reason for that language. 

MADDOW:  Right. 

LEWIS:  And so you won‘t understand it. 

MADDOW:  Yes.  You think it‘s deliberately designed to be obtuse? 

LEWIS:  Oh, absolutely.  It‘s kind of - look, all trades have their professional jargon.  All occupations have their language.  You know, it‘s in part designed to keep outsiders out.

But there‘s nothing like Wall Street.  I mean, the blizzard of acronyms and the complicated words for things that don‘t need to be so complicated.  It is, in fact, a form of opacity. 

And listen, it is generally true that the Wall Street firms in

the middle of the bond market work very hard to make their market opaque to

customers -

MADDOW:  Right.

LEWIS:  To regulators, to everybody, because an opaque market is a much more profitable market.  And one of the big things that needs to happen is total transparency.  I mean, the bonds and the various derivatives should all be traded on screens and exchanges and everybody should all see the price. 

It would change the behavior in market, but they don‘t.  The biggest, most important transactions in the bond market are bilateral transactions in between people that you never see - no one ever sees what happens. 

MADDOW:  And there‘s no public access to what that trade is. 

LEWIS:  Right. 

MADDOW:  Or what it is that (UNINTELLIGIBLE). 

LEWIS:  Right.  And the prices in the bond market are all over the

map, because -

MADDOW:  Nobody knows what the price should be. 

LEWIS:  Nobody knows what the right price should be.  And that‘s not a

that‘s not a healthy, functioning market.  I mean, there are parts of the bond market this isn‘t true of market.  The U.S. treasury bonds isn‘t like this.  It‘s a very highly functioning market. 

But the market in more abstruse securities, like subprime mortgage bonds, is not a highly functioning market.  It‘s a market filled with inefficiency and with deceit. 

MADDOW:  Fraud. 

LEWIS:  Deceit. 

MADDOW:  Deceit, I guess, more specifically.   I just interviewed Harry Markopolos, the Madoff whistleblower.  LEWIS:  Yes. 

MADDOW:  And he says that it wasn‘t actually a secret that Bernie Madoff was a Ponzi scheme.  Some people knew - they were just too busy making money off part of that scheme themselves to take care to end it.  You document something of the same dynamic for the financial crisis. 

LEWIS:  It‘s very hard.  The financial crisis, as I describe it - I think it really is this period from kind of early - well, there‘s a prehistory.  But the interesting period is early 2005 to late 2007. 

By the end of 2007, there‘s nothing left to prevent.  All the bonds have been laid into place.  They were going to off - the crisis was going to happen, just a question of when.  But in that period, when essentially what happens is Wall Street firms create a way to lend money to people who shouldn‘t be lent the money.

But it‘s very profitable to lend these people the money.  And in order to do that, though, you‘ve got to disguise the risk involved.  And they developed elaborate ways to disguise the risk involved. 

And they got so good at it, oddly, they disguised the risk from themselves.  It‘s sort of like you tell a lie often enough, you believe in your own lie. 

MADDOW:  Especially if you get $100 million every time you tell it. 

LEWIS:  Yes, but this is the problem, you know.  When you ask even the people who are most cynical about what happened, were they crooks?  Or were they delusional?  Did they believe their lie, or did they not believe their lie, kind of thing.

Most of them will say that there were some crooks, but mainly, they were delusional.  I think people were - the story I‘ve written - I mean, what interested me about the story was that it was as much, in some weird way, about human perception as anything else, that you had this set of facts in the financial world about the relative soundness of all these loans that were being made. 

And the vast majority of the financial world took those facts and arranged it into a pretty picture, because it paid to do that, that a very small handful of people arranged it into a very ugly picture.  The question was kind of was, why?  Why did they do that? 

It turned out there were kind of deep character reasons for why they did it.  But for one reason or another they were incentivized slightly differently. 

MADDOW:  Yes. 

LEWIS:  And so when you go about reforming the system, you have to go about reforming the incentives of the people in it.  Because if you don‘t, people will see what they‘re paid to see.  And you‘ve got to pay people to see the truth. 

MADDOW:  In finding these fascinating people who bet successfully that the system was going to blow up - I mean, it‘s the one-eyed doctor with Asperger‘s Syndrome and a handsome guy who doesn‘t inspire confidence and says, “I‘m too much,” who works in a garage in Berkley. 

LEWIS:  You actually read it. 

MADDOW:  I‘ve actually read the book.  You make these guys almost

loveable, but -

LEWIS:  But it really bothers you, doesn‘t it? 

MADDOW:  No.  Instead of seeing the crash coming and warning the rest of us, they see the crash coming and think, “How am I going to get giantly rich off this?” 

LEWIS:  True, but only partly true, because they also went to the SEC. 

MADDOW:  Yes. 

LEWIS:  They went to the newspapers.  They screamed to high heaven about what‘s going - nobody wanted to hear it. 

MADDOW:  Once they knew they were going to make hundreds of millions of dollars off of it? 

LEWIS:  Yes, yes.  But you know what?  If everybody had thought the way they thought, none of this would have ever happened.  It‘s very hard to get upset with them for being smart when the real diabolical behavior was so stupid. 

MADDOW:  Yes. 

LEWIS:  And you know, the real problem with these big Wall Street

firms became the dumb money.  If everybody had sort of approached the

investment business the way these people did, we wouldn‘t have our

problems.  It‘s a little hard -

MADDOW:  If you read.  You know, if you‘re (UNINTELLIGIBLE) somebody

to read the book and it helps - if you‘re investing millions of other

people‘s money, millions of other people‘s dollars -

LEWIS:  To read the prospectus

MADDOW:  To read the prospectus. 

LEWIS:  Right. 

MADDOW:  Which only the guy with Asperger‘s did. 

LEWIS:  At least he said, I (UNINTELLIGIBLE) Asperger‘s to read this subprime mortgage problem prospectus. 

MADDOW:  Michael Lewis, author of “The Big Short,” right now, the number one book in the country, deservedly so.  I always feel really honored when you choose to come on this show, because I know you could go anywhere.  So thanks a lot.

LEWIS:  Well, thanks for having me. 

MADDOW:  Appreciate it.  OK.  Did you hear today the story about the private for-profit killer spy ring we have apparently have been paying for?  The story broke in today‘s “New York Times.”  Mark Mazzetti did the reporting on it.  Matt Damon will be in the movie.  Mark Mazzetti will be here next.  Don‘t miss this.

(COMMERCIAL BREAK)

MADDOW:  A worthy nominee for the most incredible story you will hear this month is up next.  A secret apparently illegal killer spy operation that you and I paid for that nobody officially admits to knowing about.  Stay with us.

(COMMERCIAL BREAK)

MADDOW:  OK, here‘s the story.  A civilian working for the Defense Department decides to set up an off-the-books spy ring.  The goal is to gather intelligence on specific targets, specific people so that the military can then track them down. 

But there are a couple logistical problems.  First, where do you find civilians available for hire who are qualified to do such difficult, dangerous work in a war zone? 

Secondly, is it legal?  And third, where do you get the money to hire these people?  Of course there‘s also a whole question of whether the secret inside the even - inside the government thing can ever be known about, let alone whether or not it‘s against the law. 

Some answers to some of these questions can be found in today‘s “New York Times.”  Reporters Dexter Filkins and Mark Mazzetti describe how the scenario played out, not in three day of the convoy, but in real life in our real war in Southwest Asia. 

According to their sources, Defense Department official Michael D. Furlong personally hired private contractors to carry out an intelligence-gathering operation in Afghanistan and Pakistan.  That information was turned over to the military and may have been used in targeted assassinations. 

Joining us now is Mark Mazzetti, national security correspondent for the “New York Times.”  He is part of the team that won the 2009 Pulitzer Price for international reporting.  Mr. Mazzetti, thanks very much for being here tonight. 

MARK MAZZETTI, REPORTER, “NEW YORK TIMES”:  Thank you for having me. 

MADDOW:  Give us the time frame of when this is said to have happened. 

MAZZETTI:  We - the operations, we believe, began sometime in 2008, but it last summer, the summer of 2009 where Mr. Furlong and his group of private contractors really accelerated their operations. 

So we think that from July of 2009 through the fall was when things were really going on.  And then, they were eventually shut down either late last year or early this year. 

MADDOW:  This is something that was happening within the Defense Department, but it wasn‘t known throughout the chain of command.  This may have been an action by Mr. Furlong alone as sort of a rogue operator? 

MAZZETTI:  Maybe - maybe not.  That‘s what we‘re still trying to figure out.  There‘s a lot of people who are not owning up to any of this at this point and saying, “We didn‘t know about it,” and this guy was off the reservation. 

We still need to find out exactly who was approving his operations and also who he was sending this intelligence to, right?  So clearly, there was probably a consumer for what he was doing, taking it and using it in some fashion.  So we need to figure out exactly what happened after the intelligence was collected. 

MADDOW:  And are we aware if the intelligence was used directly to order assassinations of specific targets? 

MAZZETTI:  Well, some people we talked to said that some of the information that was collected was used to do specific strikes. 

For instance, there was a group of militants crossing the border from Pakistan to Afghanistan on mule-carrying rockets.  And after that information was collected that they were crossing the border, they were hit shortly afterwards.

MADDOW:  Is this illegal? 

MAZZETTI:  Well, I think we still need to get more details about what happened.  We‘re in an area where there is sort of a gray area in legality, because the military can‘t just act as covert spies like the CIA can. 

There‘s rules that govern the military‘s behavior, in part because the military wants to be seen as different.  If a military person gets taken hostage, they want the U.S. government to own up to the fact that he‘s in the military and they want for him to be brought home. 

The Geneva Convention applies.  CIA - it doesn‘t apply.  So there are rules governing what the military can and can‘t do, what information they can and can‘t collect, and who they can uses as intelligence assets.  So we need - like you said, we need to get more details about how this operation went down to find out exactly where the legality - whether the rules were broken. 

MADDOW:  But it has been referred to criminal investigation? 

MAZZETTI:  Yes, there‘s a Defense Department criminal investigation going on into Mike Furlong.  There‘s a number of charges we understand.  Part of it is contract fraud, which is him taking money for a specific purpose.  We think it was about $22 million under a contract, and using it for something he was not authorized to use it for. 

MADDOW:  And what was - I mean, this is part of a fascinating part of this, because it brings in this whole other circle of people that you wouldn‘t expect to turn out in a movie plot like this - I mean, a new story like this.  What is that $22 million program that they may have raided in order to fund this program? 

MAZZETTI:  Well, at least part of that money was designed for a Web site that was for primarily the military to use.  It was started by two journalists, Eason Jordan, the former head of CNN, and Robert Young Pelton who is a writer, and he writes about dangerous places and travels around and documents war zones. 

Their idea - they had started - they‘ve done it in Iraq and they decided to try to do it again in (UNINTELLIGIBLE). 

MADDOW:  That was “Iraq Slogger.” 

MAZZETTI:  “Iraq Slogger” -

(CROSS TALK)

MADDOW:  I used to use it every day. 

MAZZETTI:  And their idea here was to do the same thing for Afghanistan and Pakistan, and have the government be the primary client.  It would be a public Web site that people could subscribe to, but they wanted the government to buy in because that‘s primarily where they could get their money. 

MADDOW:  And maybe that money didn‘t all go to that. 

MAZZETTI:  Maybe all that money didn‘t go to that. 

MADDOW:  Mike Mazzetti of the “New York Times,” incredible reporting, incredible (UNINTELLIGIBLE).  Thanks for joining us to explain it.  I really appreciate it.  Nice to see you.  Thanks. 

Mazzetti:  All right.  Thank you.  Good to see you. 

MADDOW:  Coming up on “COUNTDOWN” Michael Moore on the state of health care and the financial industry.  We will be right back.

(COMMERCIAL BREAK)

MADDOW:  Hey, so that Massachusetts court ruling that J.D. Hayworth and I were fighting about earlier on the show, it‘s on our Web site, not our blog, if you want to fact check us. 

That does it for tonight‘s show.  You can always E-mail, rachel@mnsbc.com.  “COUNTDOWN” starts right now.  Have a great night.

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