This is a rush transcript of "Special Report With Brit Hume" from December 10, 2008. This copy may not be in its final form and may be updated.


REP. JESSE JACKSON, JR., D-ILL.: I reject and denounce pay to play politics, and have no involvement whatsoever in any wrongdoing.

I did not initiate or authorize anyone at any time to promise anything to Governor Blagojevich on my behalf. I never sent a message or an emissary to the governor to make an offer, to plead my case, or to propose a deal about a U.S. Senate seat, period.


BRIT HUME, HOST: Congressman Jesse Jackson, son of the Reverend Jesse Jackson, saying today that, despite the fact that Patrick Fitzgerald, the prosecutor in the Blagojevich case, said that someone purporting to act on his behalf had offered a half million dollars in campaign contributions in exchange for Blagojevich's appointment of young Jackson to be the senator succeeding Barack Obama, he had nothing to do with any such effort and didn't authorize it in any way.

That was the latest in the saga of Rod Blagojevich and his case today.

Some thoughts on all this now from Jeff Birnbaum, managing editor at The Washington Times; Mara Liasson, national political correspondent of National Public Radio, and the syndicated columnist Charles Krauthammer — FOX News contributors all.

Well, that was a pretty comprehensive denial by young Jackson that he authorized no such contacts to be made. His lawyer said who knows might have done it acting on his behalf. Where are we are in all this, Jeff?

JEFF BIRNBAUM, COLUMNIST, THE WASHINGTON TIMES: Well, I think we're into the distraction mode. I think that President-elect Obama is learning the hard way and very early that even though he may not personally have been involved in a scandal, and I think we should believe the federal prosecutors about that, that if people he is associated —

HUME: All he said is he makes no such allegations. He didn't say that it didn't happen. I'm not saying it did. I'm just saying there has been no indication of that. But he has not simply exonerated him.

BIRNBAUM: No, he has not. But there is just a lot that someone in the position of president or president-elect has to deal with.

The term of art is "distraction." What it means is that almost anything that happens with people who are associated with him that raise the prospect of problems for him, that may actually lead to real problems, but even the prospect of problems makes his life much more difficult.

And that's what we're seeing here. We're likely to see days and days of this. Whether Barack Obama is part of Chicago politics, we'll see a lot. I think that notion will always be in voters' minds, whether he was separate from it, or a part of it and tainted by it.

I think that this is just a cold splash in the face to Obama on this issue, that he is going to have to deal with all sorts of things that happen that are often beyond his control.

HUME: Mara, Obama said yesterday that he wasn't going to say anything beyond the fact that he didn't know of any such efforts and that he had had no discussions with Blagojevich about this. But he would not say, and will not say, whether anyone representing him did.

Does that put him in a position where he has an unanswered question hanging out there that won't go away until it gets answered?


I mean, what we have learned certainly through all of the Clinton scandals is the first instinct of politicians is to separate themselves from the taint. But in doing that, sometimes they can raise more questions, and it has the exact opposite effect than the one they intended.

He said he never talked to Blagojevich about this. It turns out in pretty short order there was a November 23 tape of David Axelrod saying that he had.


LIASSON: And then Axelrod fell on the sword and said "I misspoke."

HUME: If anybody in the Obama entourage would be likely to know what went on with Blagojevich, it would be Axelrod, because, after all, he was the political consultant for both of them.

LIASSON: There is nothing wrong or surprising about the fact that somebody, either Obama himself or Axelrod, or Rahm Emanuel, might have talked with Rod Blagojevich, somebody who they have close tie with politically, about who might be the successor — not that they would be pushing anyone in particular, but certainly talked about it.

Not only is that not surprising, I would be shocked if it didn't happen. And there is nothing wrong with it if it did. It is just that when Obama said I didn't talk about it, they had to square the circle and get that messy, contradictory quote of Axelrod's expunged, which they have done now.

But there is more to come. Did Rahm Emanuel talk to him? Did someone else from the team talk to him? And, in and of itself, there is nothing wrong with that happening. It's just that every time you don't answer a question fully, it keeps the thing alive.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I would agree. If a governor is appointing a successor to a senator, any senator, you would expect he or his staff to discuss that with the governor. But, you're right, because of the fact that Axelrod, when he walked it back, specifically said there were no direct discussions between Obama and the governor, that implies that there were intermediaries, which you would expect and I'm sure we're going to hear about.

And, in fact, from the tapes, the governor is heard saying, complaining that Obama is not offering anything if he chooses the Obama favorite except appreciation.

HUME: He must have gotten that idea from somebody.

KRAUTHAMMER: From somebody, and the question will be who is it, and we'll learn that. But it appears innocent.

What we're getting here is a belated interest in the national press about the muck out of which Obama rose. Local press has always had an interest in Rezko, Jeremiah Wright, William Ayers. But in the national press, during the election of the anointed one, the national press was not interested or even declared a lot of these associations off limits.

It's not to say that you can't have a corrupt association or associations with others who are corrupt in the past. Truman was a member of the Pendergrass machine in Kansas City and ended up a great president. So it's not a forecast of what kind of President Obama will be.

But he certainly arises out of a tainted environment. And now, all of a sudden, it's been discovered that's where he came from, while, I would add, promising the new, uncorrupt, and transcendent kind of policy.

HUME: One quick last question — does what has happened now eliminate Jackson as a potential senator appointment?

KRAUTHAMMER: Absolutely.

LIASSON: As an appointment, but maybe there will be a special election, which sounds like the more likely outcome.

BIRNBAUM: I think we're unlikely to have Senator Jackson.

HUME: Even if there is a special election?

BIRNBAUM: Even if there is a special election.

HUME: When we come back, President Bush certainly isn't acting like a lame duck. We'll talk about that next.



SEN. HARRY REID, D-NEV., SENATE MAJORITY LEADER: I haven't been a big fan of the White House, as everyone knows, for the last eight years. But they have, in good faith, worked with us trying to get a piece of legislation that we can bring before this body. And that's one reason it's taken so long.

But President Bush is still the president of the United States and he has tremendous power.


HUME: Huh? I thought he was a lame duck with no power. Well, live and learn, I guess, huh?

That's Harry Reid, of course, talking about — the Democratic leader in the Senate, talking about the bailout automobile bridge loan bailout bill that is in the process of passing the House of Representatives and faces an uncertain future in the Senate.

Charles, what about the president's role and what about the bill?

KRAUTHAMMER: Well, this is the most active and important lame duck presidency in American history. Huge interventions in the markets, the signing of an agreement with Iraq of tremendous importance, the status of forces agreement, and now the intervention on the issue of the bailout.

I mean, this is a duck that roared, that people will remember historically.

For all the ridicule that the president has incurred from Barney Frank and others about his lack of leadership, he's leading here. And what he's doing on the auto issue is he's trying to enforce, essentially, a bankruptcy procedure of sorts.

What he is trying to do is to get the czar to have the automatic obligation to recall the loans if it's determined that the stakeholders in the auto crisis, the unions, the management, the dealers, and the bond holders aren't really taking a cut, a haircut.

If so, the loans are recalled, the companies collapse, they end up in Chapter 11, and a judge will do it.

And that, I think, Democrats had attempted to weaken that power of recalling the loan. But now it appears in the bill. It remains automatic.

HUME: And the czar would be named by?

KRAUTHAMMER: Bush, and retained by Obama.

LIASSON: Look, I think the president — this is the most consequential transition, certainly. Look at what has happened since Election Day. It is extraordinary.

But I do think the real test of his ability to still quack like a duck is if he can get those Republican senators who are currently holding up this auto deal to come into line.

HUME: But if they fail, it wouldn't be the worst outcome from Bush's perspective?

LIASSON: No, it wouldn't. But that would be a real test. If he wants this to pass, the problem right now is Republican senators, and we will see if he has clout with them.

HUME: Republican senators, a handful of them, say four or five, are talking about a filibuster, which would mean it would take 60 votes to end the filibuster. Cloture, as it's called — that's the measure to end the filibuster—has already been filed, I believe, by Harry Reid.

Jeff, what is your sense of where the votes are?

BIRNBAUM: Senator Voinovich of Ohio, who is in favor of the bridge loan, said earlier today that he doesn't think that there are enough votes to pass the bailout bill in the Senate.

HUME: Over a filibuster?

BIRNBAUM: Over a filibuster.

I'm not sure if he's right though. President Bush, I think, is roaring like a duck, to use Charles' phrase here, because he not only has shaped the bailout bill, but sent his chief of staff and also Vice President Cheney to the Hill to talk to Republican to try to change their mind and persuade them that not passing this bill could lead to a catastrophe.

The only other time that a bailout was not offered, in the case of Lehman brothers very early in this, when money was denied to Lehman Brothers to keep it afloat, that's what led to the collapse. And he wants to avoid.

And he sees that as an important part of his legacy here. And so I think that he may actually get enough votes to get this thing to pass.

HUME: Let's assume for the sake of argument that he doesn't.

It wouldn't be all that different from the czar that he will be naming finding, after a matter of weeks, really, that Detroit has not lived up to what the Congress expected of them in terms of changing everything, in terms of the stakeholders, as Charles described, taking the necessary haircuts an major changes being made.

That would lead to the very kind of outcome we would have if the thing failed, wouldn't it?

LIASSON: The outcome would be very similar, but I think it would make a huge amount of difference politically.


BIRNBAUM: That's right. It would be a huge political difference. And, also, it would be blood on the president's hands, basically, here.

I do think that even if it does fail once, it will pass a second time if it's brought up on Capitol Hill.

HUME: Before the end of the Bush presidency?

BIRNBAUM: Yes, in the same way that it took two times before the big $700 billion bailout passed.

And I think the president will once again prove that he is a factor in this by making sure that even at an initial failure will be retried.

HUME: Do you think it will pass in the end, Mara?

LIASSON: Yes, I do.

KRAUTHAMMER: Ironically, the Democrats are short one seat, Obama's in Illinois — it's vacant — in trying get to 60 if they want cloture.

HUME: Wow.

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