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OLBERMANN: Another Twitter joke, taking over the show. It was the fundament of the last six weeks of the 2008 Republican campaign: we have to bail out Wall Street because the banks are too-big-to- fail. Now, says the Republican leader in the Senate, he must oppose Democratic financial reform because it doesn`t kill off those banks that are too-big-to-fail. Seriously. Professor Paul Krugman next on COUNTDOWN.

OLBERMANN: This Nobel Prize-winning economist on the Republicans` flip-flop on bank bailouts while they try to reassure the banks that the GOP is the only friend the banks have. She ties the financial panic of `08 and the mining disaster in West Virginia last week into one neat deregulatory disaster. She ties up the fatigued Velcro in the batting glove of the new centerfielder of the New York Yankees. And this professional public speaker, who you may not remember once made a cameo as governor of Alaska, has made $12 million since she left the voters high and dry. If you`ve got the changy to pay her, she`s got the hopey. You are watching COUNTDOWN on MSNBC.

OLBERMANN: It may be the most counterintuitive anti-populist position since President Obama took office. But today, Republicans opened another front in their battle against financial reform. And among their arguments -- in our fourth story tonight -- government takeover. But, GOP leaders also continue to meet regularly with Wall Street executives to ask for campaign contributions to elect more Republicans, to keep the markets, you know, free. Paul Krugman joins me in a moment. Senate Minority Leader Mitch McConnell, today, is unveiling a piece of the GOP`s opposition to the financial reform bill, saying that it fails to end the phenomenon of banks too-big-to-fail.

(BEGIN VIDEO CLIP)

MCCONNELL: This bill not only allows for taxpayer-funded bailout to Wall Street banks, it institutionalizes them. The bill gives the Federal Reserve enhanced emergency lending authority that is far too open to abuse. It also gives the Federal Deposit Insurance Corporation and the treasury broad authority over troubled financial institutions without requiring them to assume real responsibility for their mistakes. In other words, it gives the government a backdoor mechanism for propping up failing or failed institutions.

(END VIDEO CLIP)

OLBERMANN: Just last week, Senator McConnell met with some of these financial monoliths he claims to show concern about. He and Senator Cornyn, the chair of the GOP senatorial committee, met with about 25 Wall Street executives, many of them hedge fund managers. McConnell and Cornyn made clear that they need Wall Street`s help to elect more Republicans. This is according to FOX Business. Likewise, House Republican Conference chair, Mike Pence, met with hedge fund managers this morning -- according to Politico.com -- telling them the Democrats` solution for financial reform consists of two words: "government control." House Minority Leader John Boehner met with an executive from JPMorgan back in February and you may also recall that Boehner recently told financial lobbyists not to let, quote, "punk staffers," unquote, take advantage of them. But Democrats have also cultivated corporate interests, and part of their challenge is to not allow the further weakening of financial reform. To that end, tomorrow, the president will meet with leaders of both parties to discuss financial reform. An unnamed White House official telling "Reuters" news service that the president will not allow a race to the bottom on regulations. Meantime, the DNC is airing a new TV ad that blasts Wall Street, calling for financial reform, framing the issue as a common sense approach that still allows banks to succeed while protecting the interests of families and consumers. Let`s bring in as promised, "The New York Times" Nobel Prize-winning columnist and Princeton University professor, Paul Krugman, also author of "Conscience of a Liberal." Good evening to you, sir.

PAUL KRUGMAN, THE NEW YORK TIMES: Good evening.

OLBERMANN: Is any part of Senator McConnell`s criticism valid?

KRUGMAN: No, it`s wonderful. It`s Orwellian. You know, the system -- what the Democrats are proposing -- we can talk about how good it is -- is, look, last time we had to step in and prevent the collapse of these financial institutions, and because we had no ground work, because we had no prevailing regulations and so on, it was a very badly-handled, maybe -- anyway -- badly-handled rescue which let the bank executive, the stockholders get away with a lot. It didn`t, it wasn`t a clean, you know, protection of the interest of the economy. So, the objective of financial reform is to set things up so that next time -- first of all, we try to make it less likely this will happen again -- and next time when it happens, we have the mechanisms in place. We have the authority to seize these institutions, you know, protect the assets that need to be protected. But otherwise shut down the profits of the stockholders. And what the Republicans are doing is turning around and saying, oh, well, to do that -- even to think about how we`re going to handle it next time is admitting that you`re going to do a bailout. And what we have to do is swear up and down, cross my heart, we will never bail out these institutions again. And then, of course, when the crisis comes, they`ll do it.

OLBERMANN: If the Democrats want both the good bill to pass and to keep the potential populism of this issue on their side in the midterms, what do they have to do in this scenario they face right now?

KRUGMAN: Well, they have to keep on hammering. I think it`s helpful that we actually have documented -- the documented fact that Republicans are there meeting with the bankers. So they`re claiming to be against the big banks. But in that case, why are they raising money from them, right? That makes it easier to explain. And then you try to go after the specifics. Unfortunately, it`s looking like the real place where the fight is going to be is over derivatives, over complicated financial instruments, which the White House wants to be traded in an open transparent fashion. The banking industry wants to keep on, you know, making the public doesn`t understand. And it`s going to be hard to explain that one. But you just keep it up and try and make sure that you get the message. Look, these people -- these people are campaigning against the bankers, but they`re actually the friends of the bankers.

OLBERMANN: Particularly in terms of these -- of these casino measures that have come to take over the investment industry in this country in the last 10 years. In your essay --

KRUGMAN: Yes, we --

OLBERMANN: -- in your essay from "The Times" magazine this past weekend, you wrote about the need for market incentives that would encourage people and businesses to do the right thing relative to polluting the environment. That same argument market incentive, can that be applied in regard to financial regulation? Is particularly this --

KRUGMAN: Not really, because the whole point, the financial crisis is a moment when the markets break down. It`s a moment when everything goes wrong. So, you can`t -- you know, who is going to be given an incentive to behave well in the event of a financial crisis. There`s nobody in control. So, it`s very different. We had a system -- you know, for 35 years after the Great Depression, we had a system that worked quite well, which was one of fairly highly regulated banks -- regulated in terms of capital, liquidity. There was deposit insurance to protect depositors. As long as those regulations were in place, we were free from major crises. What we need to do now is to recreate something like that system, but scaled up for the 21st century world.

OLBERMANN: Paul Krugman, columnist of "The New York Times," also, of course, at Princeton -- and as always, we thank you kindly for your time.

KRUGMAN: Thank you.

OLBERMANN: One part of the economy is looking up, earnings by ex- half-governors. Sarah Palin`s take since she took her walk and the perks she demands be written into the contracts for her speaking engagements: bendable straws at the lectern. I don`t know, maybe the unbendable ones are too dangerous for her or something.

Originally broadcast, 4.13.10