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WOLFFE: Yes. I`m not sure what the tactic is here. You know, I can understand Joe Biden doing that. Of course, Joe Biden has got his mind on the debate. He`s also, no doubt, his son who`s going to be deployed to Iraq very shortly. But John McCain, having seen Obama deliver a floor speech, it`s surprising that he`s not going in front of the cameras or, at least, going on to the Senate floor and trying to claim a piece of this for himself.

OLBERMANN: Richard Wolffe of MSNBC and "Newsweek," as always, Richard, great thanks.

WOLFFE: Thank you, Keith.

OLBERMANN: On Sunday, Minority Leader Boehner having referred to the bailout bill that Congress would be voting on Monday as a crap sandwich. So, what makes tonight`s version any less of a crap sandwich? Well, in short, there are corporate tax breaks and fewer regulations. Don`t you feel better already? The Senate decided to tack on a set of corporate tax breaks to the bailout package in order to make it more attractive to House Republicans. On the "TODAY" show this morning, House Minority Leader Blunt saying that two other changes might help garner more Republican votes. The increase in federal deposit insurance protection from $100,000 on an account to $250,000, and the relaxation of an accounting rule that was forcing financial institutions to acknowledge the losses on their mortgage assets before they could sell them. Let`s turn now to Paul Krugman, professor of economics at Princeton University and an op-ed columnist at the "New York Times." And once again, Dr. Krugman, thank you for your time tonight.

PAUL KRUGMAN, NEW YORK TIMES: Thanks for having me on.

OLBERMANN: Well, are those new Senate provisions good or bad and how is this bailout and/or rescue, we`ll use both terms, how is it compared to the last one in your assessment?

KRUGMAN: Yes. It was, you know, the history of this is that Secretary Paulson produced a really bad plan. Democrats took it and made it somewhat better, enough to be worth passing, though, not by a lot. But it didn`t pass. And now, in order to get it through, they`ve actually made it`s worse, but in ways that, you know, are sort of standard. They`ve basically loaded it up with a lot of pork. So, it`s a worse that it was than the one that was rejected earlier this week.

OLBERMANN: There`s something in there about rum dispensations, I believe, too.

KRUGMAN: Yes. And certain wooden arrows designed for use by children. I saw that. It`s, you know, it`s a classic. That`s a small change, but it is kind of funny.

OLBERMANN: But it does -- and also, it sort of reduces the level of crisis and urgency. Is that a good or a bad thing? You wrote today on your blog that you`d rather see this bill pass than nothing at all. But, is there a third alternative that is implied by that, you know, loading it up with pork that something could be done in the short term and not make the next administration`s decisions for it?

KRUGMAN: You know, I`m feeling a little bit like I`m suffering from a Stockholm Syndrome here. I mean, basically, you know, Paulson produced a really lousy plan and we try today fix it up a bit. And it`s better, but it`s still pretty bad. Better than nothing. And there isn`t, probably, a chance of getting something else together. This is a problem. Not before the election. Not for some time to come. So, I`m in the camp, I guess, I`m part of the "hold your nose" caucus. I`m still in favor of this, but, boy, I am not happy.

OLBERMANN: You`ve also written this week about how -- and I don`t know if this isn`t the first reference to the economic system of this nation being compared to this other nation, but how Iceland bailed out one of its banks in exchange for 3/4 equity in it. In Sweden, the government briefly nationalized the entire banking industry in 1992. Are either of those options being discussed in this country and will it be too late to discuss them if this current bailout passes as planned?

KRUGMAN: I think it`s actually what we are going to do in the end. What`s going to happen is that this thing is probably going to pass, though, heaven knows if they really will. It will pass tonight, but whether it passes at the House, I don`t know. And it will be relatively ineffective, although rejecting it would be actually caused a big run on the system. And then, we`ll come back and do it right probably in January or in February, because in the end, you know, partial ownership is the way to go. And that`s -- the trouble is that lots of economists are saying that, but not very many politicians.

OLBERMANN: You suggested a big run on the system, if this is not passed. I would gather that.

KRUGMAN: Yes.

OLBERMANN: Your answer to this question would be kind of small. Is there any likelihood that if we did nothing or nothing substantial at this point, everything would still somehow turn out OK?

KRUGMAN: Well, you know, that likelihood shrunk. One of the things that`s happened in the last couple days, while we`ve been (ph) going over this legislation is that the evidence is starting to come in, that the credit crunch is really starting to hit Main Street. You know, McDonalds is cutting off credit to some of its franchises. We`re hearing stories about people`s credit limits on their cards going down and their interest rates going up. So, I actually think the odds that we would get out of this unscathed, if we did nothing and spent the month thinking about it are worse than I thought they were a week ago.

OLBERMANN: As quickly as that has appeared and those stories are nationwide, how quickly would that crunch get unstuck with the passage of this?

KRUGMAN: Oh, I`m not sure if the crunch would. That`s the thing about this bill. It`s mostly an effort to stop things from getting worse too quickly. You know, I don`t think we`re going to see a wonderful -- you know, we still need recovery strategy. And this bill is not that. This bill is trying to plug some holes in the levee before the city floods. It`s not a system to, you know, actually stop the flooding entirely.

OLBERMANN: So, McDonalds, we`re advising them to switch the signs from billions served to dozens served. Paul Krugman of the "New York Times" and Princeton University, at Old Nassau tonight.

KRUGMAN: Thanks so much.

OLBERMANN: As always, with our great thanks, sir. The rest of the day originates from sundry date lines St. Louis, where Republicans are trying to pre-plan any debate disasters on something they claim they just found about, about the moderator of the debate that they should have known since July 23rd or earlier. Des Moines, Iowa, where Senator McCain, in short, melted down and started yelling at reporters. And New York, where the big answer or the big non-answer is finally public record tonight. What did Governor Palin say when asked to address any other Supreme Court ruling besides Roe v. Wade -- any other?

Originally broadcast, 10.1.08