Rahm Emanuel on being President Obama chief of staff; interview with ABC's George Stephanopoulos

WASHINGTON–With Barack Obama’s lead growing and John McCain’s path shrinking, speculation is growing about who will serve in an Obama White House. On Sunday, ABC’s George Stephanopoulos asked Rep. Rahm Emanuel (D-Ill.) whether he would be interested in serving as Obama’s chief of staff. Emanuel did not rule it out.

Former Clinton White House chief of staff John Podesta—a native of Chicago’s North Side–is quietly overseeing Obama’s transition operation, dealing with personnel, policy and process. The transition operation commissioned white papers on how to turn campaign promises into action; arranging security clearance for those involved in the handover; figuring decision time lines out how the executive office should be organized.

Obama has been pondering transition matters since at least last April, I have learned, with activity stepped up as it looked more likely he will win. The Obama team has been trying to keep all transition matters secret for fear of raising the hubris factor. But it is only prudent to plan and McCain is too.

When asked about serving as an Obama chief of staff, Emanuel said, “Three — six years ago, the people on the North Side of Chicago took a bet on a young kid.”

Mentioning men who held the seat before him, Emanuel said, “Members of Congress, representatives in that district were Dan Rostenkowski, Frank Annunzio, Rob Blagojevich, and they took a bet on a kid called Rahm Emanuel.” That I take, having covered his first House race, as a reference to his being Jewish running in a North Side district where ethnic politics where at play, especially at the end.

“Now I’ve got gray hair, and I started this at 6’2” and 250 pounds, and that’s all I got left. So I’m looking forward to representing the people of the North Side of the city of Chicago,” said Emanuel, who on Sunday was 5’8 and 147 pounds.

Other names being mentioned for Obama White House Chief of Staff are former Sen. Tom Daschle (D-S.D.), whose own team made up the core of the Obama operation; real estate executive Valerie Jarrett, the confidant of Michelle and Obama who has known them for years and banker William Daley, the former Commerce Secretary and Mayor Daley’s brother.

My handicapping:

Emanuel now is the number four leader in the House. He is his own man. He could be on a path to be Speaker someday. If Obama leaves him where he is, Obama will have a pair of powerful enforcers in Congress: Emanuel in the House and Sen. Dick Durbin (D-Ill.), the number two man in the Senate. Emanuel’s aleady done a White House staff stint, under President Clinton, where his office was next to the Oval Office.

Emanuel has his own operation and I don’t see him returning to the White House in another staff role. Anyway, he is more valuable to Obama on the outside.

Jarrett’s strength is her personal relationship to the Obamas. I see her in a White House role similiar to that of Bruce Lindsey, the Bill Clinton pal who served in both terms of Clinton White House as an advisor and who now helps run the Clinton Foundation. While at the White House, Lindsey helped handle Clinton patronage. A veteran of Mayor Daley’s City Hall, Jarrett would do well in a Lindsey role. With her background in housing, she also could be a HUD secretary–but others could do that; few could fill the role Jarrett is playing now.

As a former Commerce Secretary who ran Al Gores presidential campaign, Daley may not have the itch to return to Washington as a White House chief of staff. He’s a top executive at Chase, making a lot of money and mulling a run for governor of Illinois.

That leaves Daschle, who signed on the Obama presidential campaign from day one. The Obama political and senate operation contains key members of what had been Daschle’s team; Obama Senate chief of staff Pete Rouse for one. Daschle’s wife Linda is a top Washington lobbyist. Daschle, once the Senate leader only to loose re-election in 2004, would make a great comeback as Obama’s chief of staff.

For transcript of the Stephanopoulos show, click below…

FOR IMMEDIATE RELEASE ABC NEWS MEDIA RELATIONS

October 26, 2008

SEN. LINDSEY GRAHAM (R-SC) AND REP. RAHM EMANUEL (D-IL) ON ABC NEWS “THIS WEEK WITH GEORGE STEPHANOPOULOS,” SUNDAY, OCTOBER 26, 2008

When asked how the GOP brand can come back Sen. Graham said: “I think the independent voter will decide the election. … So we have to make our case to the independent voter that John McCain is truly an independent, stood up to his own party, will keep your taxes low, and rein Washington spending in, and I think that’s a winning message for us.”

When asked about voter preference for a divided government Rep. Emanuel said: “This is a party that for six years ran up the largest national debt…When you had a Democratic president, we balanced the budget”. He added: “The warning is to make sure you stay to your knitting and focus on the challenges facing this country and the middle-class families. Reforming energy to make sure you have independence and alternatives.”

When asked if he would be interested in a White House Chief of Staff position Emanuel responded: “First of all, you’ve got a big if there. And second of all, let me say this, because we’ve got a lot of work to do in the next nine days as — communicating to the American people. … I’m looking forward to representing the people of the North Side of the city of Chicago.”

On their candidates’ VP choices:

When asked about recent polls and if Gov. Palin is a drag on the ticket Graham said: “Sarah has energized our base better than anybody we could have picked, and we needed that, that she’s been a reform-minded governor. And her resume, on paper, if she were a Democratic young governor, she would be the best thing since sliced bread. She is being treated, I think, very poorly and unfairly. Her accomplishments are real.”

Emanuel on recent Biden comments that Obama will be challenged in the first six months of his presidency: “You’re going to be challenged every day for four years, 24/7. In fact, you’re going to have multiple challenges in a single day. And what also Joe Biden said is that Barack Obama has a spine of steel.”

McCain supporter Sen. Lindsey Graham (R-SC) and Obama supporter Rep. Rahm Emanuel (D-IL) joined George Stephanopoulos exclusively this morning to discuss their candidates’ end-game strategies.

A rush transcript of the interview, which aired this morning, Sunday, October 26, 2008, on ABC News “This Week with George Stephanopoulos,” is below. All excerpts must be attributed to ABC News “This Week with George Stephanopoulos.”

The program also featured an exclusive interview with former CEO of General Electric Jack Welch. On our roundtable, the Wall Street Journal’s Peggy Noonan, and ABC News’ Cokie Roberts, Sam Donaldson, and George Will.

Visit the “This Week” website to read more about the show at: www.abcnews.com/thisweek

George Stephanopoulos is the anchor of “This Week.” The program airs Sundays on the ABC Television Network (check local listings).

-ABC-

[*]

STEPHANOPOULOS: Good morning and welcome to “This Week.”

On the ground…

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, D-ILL.: If you are willing to knock on doors

and make phone calls and organize…

(END VIDEO CLIP)

STEPHANOPOULOS: … and on the air…

(BEGIN VIDEO CLIP)

UNKNOWN: It doesn’t have to happen. Vote McCain.

(END VIDEO CLIP)

STEPHANOPOULOS: … fighting out the final days. Our debate

this morning with the candidates’ closest allies — Senator Lindsey

Graham for McCain and Congressman Rahm Emanuel for Obama.

Plus, as recession fears spread…

(BEGIN VIDEO CLIP)

UNKNOWN: Stabilization of (inaudible) prices is still many

months in the future.

(END VIDEO CLIP)

STEPHANOPOULOS: … stocks drop again. Have the markets hit

bottom? How much pain lies ahead? What will it take to get the

economy back on track? We’ll ask a man they call America’s CEO, Jack

Welch.

George Will, Sam Donaldson, Cokie Roberts and Peggy Noonan

analyze all the week’s politics on our roundtable. And, as always,

the Sunday Funnies.

(BEGIN VIDEO CLIP)

CRAIG FERGUSON, TALK SHOW HOST: Obama is so far ahead now, it

seems, the only way he can lose is if his supporters screw it up.

But, a-ha! Obama’s supporters have a secret weakness — they are

Democrats.

(END VIDEO CLIP)

STEPHANOPOULOS: Heading into this final full week of the

presidential campaign, Barack Obama is holding a steady lead. Our

latest ABC News tracking poll shows him with a 9-point advantage over

John McCain. One big reason — fewer Americans now call themselves

Republicans. Four years ago, the parties were even — 37 percent of

likely voters were Democrats; 37 Republicans. Today, Democrats are

still at 37 percent, but Republicans have dropped to 29, the biggest

gap in a generation.

With that, let me bring in our debaters this morning, two of the

candidates’ closest friends and advisers. Senator Lindsey Graham of

South Carolina. He’s actually in Iowa with John McCain today. And

joining us in the studio, Congressman Rahm Emanuel. Welcome to you

both.

Senator Graham, let me begin with you. As you saw in that poll

there, the GOP brand has really taken a beating. How can you get them

back in this final week without turning off moderates and

independents?

GRAHAM: Well, I think the independent voter will decide the

election, and Senator Obama doesn’t show much independence when it

comes to saying no to the Democratic leadership since he’s been in

Congress. His budgets increase spending, they increase taxes, and all

Americans — Republicans, Democrats and independents — generally

don’t like the idea of having taxes increased on anyone in a weak

economy or making Washington larger.

So we have to make our case to the independent voter that John

McCain is truly an independent, stood up to his own party, will keep

your taxes low, and rein Washington spending in, and I think that’s a

winning message for us. It’s not time to raise taxes or increase

spending.

STEPHANOPOULOS: Congressman Emanuel, he raises the issue of

taxes. Senator McCain and Governor Palin are also raising the

prospect of having Democrats in control of the entire government.

Take a look.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, R-ARIZ.: We can’t have Obama, Pelosi, Reid

running Washington and running our country.

GOV. SARAH PALIN, R-ALASKA: If big government spenders control

the House and the Senate, and heaven forbid, the White House too, they

will be unchecked.

(END VIDEO CLIP)

STEPHANOPOULOS: Independents in our poll do say they would

prefer to have Republicans in control of Congress and a divided

government.

EMANUEL: First of all, this is a party that for six years run up

the largest national debt, $4 trillion, under a Republican watch.

When you had a Democratic president, we balanced the budget. The

records are clear.

Second, there is a point here, and I think it’s a very, very

important point, which is, in 2004, when Republicans won the White

House, the House and the Senate, they went off and tried to prove

their ideology by trying to privatize Social Security, and thank God

Democrats stopped them. Second, they ran off on a tangent on Terry

Schiavo, which the nation rejected.

The warning is to make sure you stay to your knitting and focus

on the challenges facing this country and the middle-class families.

Reforming energy to make sure you have independence and alternatives.

Reforming health care to make sure you have cost control and expanded

coverage. Reforming taxes so it’s simple and fair. Reforming

regulatory oversight for the financial sector to make sure you have

transparency and accountability.

If the Congress is known as the reform Congress, which I think

the 111th will be known for, then we will have done our policy job and

our political job. And the main problem, and why the country has

rejected the Republicans and basically less people are identifying

themselves in your poll as Republicans, George, is because the

Republican Party has basically ran up a huge, $4 trillion nation debt;

they have seen jobs be shredded, and we will be — what the Republican

record will be known for is an endless occupation and a jobless

economy.

STEPHANOPOULOS: So Senator Graham, you hear it there. He said

the Democrats are going to be the reform party. They’re not going to

run wild.

GRAHAM: People hadn’t gotten that memo yet. The Congress is

below Bush, if you believe it or not.

GRAHAM: The Congress is broken, and everybody who watches

understand that it’s broken. And if you want to look at where our

Democratic friends will take the Congress, look at their budget.

They’ve passed two budgets with Democratic votes that spend more

than President Bush does, and would take the tax cuts that expire in

2011, take them off the table, and tax people who make $42,000.

If you want to know where this country is headed under Democratic

control, just look at the budgets they’ve already passed, and look at

the proposals of Senator Obama of $880 billion of new spending and

increasing taxes.

Yesterday there was an ad out that said, if you make $200,000,

you won’t see any tax increases. The week before, it was $250,000.

At the end of the day, the Democratic Congress is at 9 percent

for a reason. And the Republican Party is in the toilet for a reason.

None of us have done a very good job. John McCain is an antidote to a

broken Congress, Democrat and Republican. He stood up to both sides.

He will bring balance to Washington on taxes and spending that

you haven’t seen from either party. That’s why we need him.

EMANUEL: Lindsey — Lindsey, as you well know, the reason, in

fact, the American people have rejected the policies — and, right

now, basically rejecting the policies of the Republican Party and John

McCain is because you offer four more years of George Bush’s economic

policies. And there’s no safe quarter in the country for that

message.

Second is, the Democrats are very clear about actually balancing

our budget. Every budget submitted by President Bush has had a

deficit to it. It is $4 trillion…

STEPHANOPOULOS: But Democrats are not going to be able to

balance the budget in four years under President Obama, though?

EMANUEL: What they’re going to do, though, is do two things, is

what I said to you. We’re going to, first of all, start with the

principle of getting the economy moving again, by focusing on at tax

cut for the middle class.

What Lindsey doesn’t want to say, which is true, is that both

candidates have a tax cut. Barack Obama’s…

(CROSSTALK)

STEPHANOPOULOS: But just to be clear, neither party is going to

be able to balance the budget in four years.

EMANUEL: NO, George, but every proposal that Barack Obama and

the Democrats have is paid for with corresponding cuts.

What they did is $4 trillion of new debt. It’s the largest

expansion of America’s debt — doubled the size of it, in the shortest

period of time.

I’ve said this repeatedly. The only thing that George Bush will

be remembered for is we will forever be in his debt. And that is the

legacy…

STEPHANOPOULOS: Let Senator Graham answer that.

GRAHAM: Well, at the end of the day, this is about the next four

years. And if you want to know where Senator Obama’s going to take

the country on taxes, he’s going to impose new taxes on the job

creators, small business.

Fifty percent of small-business income that’s generated in

America today would be subject to a new tax. On health care, he’s

going to create a government mandate, one-size-fit-all program. And

if you don’t insure your kids within the mandate, or your employees,

you’re going to get a fine, but nobody will tell us that fine.

At the end of the day…

(CROSSTALK)

GRAHAM: … if I may, you’ve got two candidates. One candidate

is not going to raise anybody’s taxes; provide tax cuts and relief to

the middle class. The other candidate is dramatically going to

increase the size of spending. He’s going to increase taxes and

engage in protectionist tax policies like Herbert Hoover.

(CROSSTALK)

GRAHAM: … tax and spending policies of the 60s, energy

policies of the 70s, and protectionism policies of the 30s…

(CROSSTALK)

… your way under a Democratic Congress and president.

EMANUEL: Let’s be very clear about this. Barack Obama and the

Democrats have a plan for middle-class tax cuts, something you guys

oppose.

You have a tax cut for corporate America…

(CROSSTALK)

EMANUEL: … corporate America, which is exactly what George

Bush did, and the Republicans did, and gave us the economic policies

which has the worst job creation record of any president, for eight

years.

The Democrats have a tax cut. It is focused on strengthening the

middle class, who are working harder, paying less — paying more and

making less.

And the problem is, you guys have forgotten the middle class, and

they need a voice in Washington, just like the special interests, who

are more powerful than the special interests.

STEPHANOPOULOS: Senator Graham, let me move on to something

else. Our polls also shows that…

GRAHAM: Well, could I just add one point, quickly?

STEPHANOPOULOS: Real quickly.

GRAHAM: Middle-class tax people work for small-business people.

We have the second highest business tax in the world. John McCain

wants to lower it from 35 percent to 25 percent.

If you raise taxes now, in this critical economy, you’re going to

destroy the middle class because you’re going to destroy their ability

to have a job.

EMANUEL: You give tax cuts to big corporate America.

(CROSSTALK)

STEPHANOPOULOS: That’s the end of the tax debate, right now.

Let me move on.

(LAUGHTER)

STEPHANOPOULOS: Senator Graham, the polls are also showing that

Governor Palin has really become a drag on the ticket, more and more

Republicans saying she is the reason they won’t support John McCain,

from Colin Powell to Charles Fried, who was Ronald Reagan’s solicitor

general, to Ken Adelman, who worked for Ronald Reagan in arms control.

And even Senator McCain’s good friend, Tom Ridge, the former

governor of Pennsylvania, said the other day that McCain would be

doing better in Pennsylvania if he picked someone like Tom Ridge. He

said, it would be, quote, “foolish” not to admit it publicly.

What do you say to your friend Tom Ridge?

GRAHAM: Well, I would say to Tom that, quite frankly, Sarah has

energized our base better than anybody we could have picked, and we

needed that, that she’s been a reform-minded governor. And her

resume, on paper, if she were a Democratic young governor, she would

be the best thing since sliced bread.

She is being treated, I think, very poorly and unfairly. Her

accomplishments are real.

GRAHAM: But as to Colin Powell, I think one of the reasons he

didn’t want to support Senator McCain is he was worried about the

judges that would be picked, and he believes that Senator Obama has a

better plan.

I don’t think you could really have ever been a Republican if you

believe raising taxes and increasing spending at this time in our

economy is a good idea. And when it comes to judges, they just

disagree. Alito and Roberts are the kind of judges that Senator

McCain will pick.

Governor Palin has helped this party energize, and at the end of

the day it’s about the independents, as you said, George. There is no

better story in America of independence and governing beyond party

principles than John McCain. That’s how we’re going to win this

election.

STEPHANOPOULOS: But you’ve said publicly, and it’s printed in

the New York Times today that you thought Joe Lieberman would be a

better pick. Do you still stand by that?

GRAHAM: I was pushing Joe because it would transcend politics as

we know it. Two people who put country ahead of party.

Governor Palin is what John McCain has been trying to do in

Washington, she has done in Alaska. She has — filing a complaint

against a sitting attorney general of your own party with a Democrat

takes a lot of guts. Taking on the oil interests, you know, cutting

taxes. She is — running against an incumbent governor. John sees in

her many of the qualities he sees in himself.

And if you want to straighten out this broken Congress that

people are sick of — the Congress is at 9 percent. We spend way too

much of your money. Bring somebody outside of town who’s got a fresh

look at government, who’s a true reformer, and shake the place up.

And Sarah Palin will do that.

STEPHANOPOULOS: Congressman Emanuel, I want to get to that as

well, but your own vice presidential candidate, Joe Biden, was in the

headlines again this week and became fodder for a Republican ad for

something he said at a campaign event. Take a look.

(BEGIN VIDEO CLIP)

UNKNOWN: Listen to Joe Biden talking about what electing Barack

Obama will mean.

SEN. JOSEPH R. BIDEN JR., D-DEL.: Mark my words, it will not be

six months before the world tests Barack Obama. I guarantee you it’s

going to happen.

UNKNOWN: It doesn’t have to happen. Vote McCain.

(END VIDEO CLIP)

STEPHANOPOULOS: Didn’t he play into the one issue that could

cost Obama this race?

EMANUEL: Let me say this — having been in the White House as an

adviser to a president — you’re going to be challenged every day for

four years, 24/7. In fact, you’re going to have multiple challenges

in a single day. And what also Joe Biden said is that Barack Obama

has a spine of steel. You’ve seen it through his campaign. You’ve

seen it in the way he handled the financial crisis, the way versus

what John McCain showed, an impulsive behavior.

It was also — it relates to the question you just asked of

Lindsey Graham. I don’t think this is a criticism of Sarah Palin.

It’s a criticism of John McCain. The American people have made a

judgment that he has shown basically an impulsive, erratic behavior

both in the financial crisis as well as in the selection of the vice

president. Barack Obama has shown the type of steady leadership the

American people are asking for in these challenging times.

And I would say that you look at what you need to do — for a

president, you look at the challenges you’re going to face for four

years, and in fact, Barack Obama has shown the qualities the American

people are responding to, with the selection of both the vice

president and the way John McCain handled the financial crisis, the

American people say we can’t afford that impulsive, erratic behavior.

STEPHANOPOULOS: Senator Graham, impulsive and erratic?

GRAHAM: Oh, spine of steel, that’s a new one. This is a man

who’s gone to Iraq after being absent for 900 days, sat down with

General Petraeus, comes back and says the surge still hasn’t worked.

Won’t admit it’s worked because he’s afraid of the left. He’s never

said anything that MoveOn.org doesn’t like…

EMANUEL: That’s not true.

GRAHAM: He’s never stood up for any member of his own party —

excuse me. He has not acknowledged the surge has worked. He’s

stubborn about it, and the only reason he can’t say it’s worked is

because he’s got MoveOn.org looking over his shoulder.

You don’t sit down with Iran. You don’t ask Georgia to show

restraint when they’re being run over by the Russians. When he asked

Georgia to show restraint and there was equal blame, they were dancing

in the Kremlin.

Senator Obama’s domestic and international policies are ill

suited to the times. You don’t raise taxes and increase spending when

we’re going into a recession, and you don’t send signals to the

world’s worst dictators let’s sit down and have a chat without

conditions.

Iran said they wouldn’t sit down with us until we withdrew from

the Mideast and withdrew our support from Israel. They’ve got

conditions.

John McCain understands this world far better than Barack Obama

understood Iraq, Iran and Russia. Senator Obama would be a very

dangerous choice for president of the United States when it comes to

foreign policy.

EMANUEL: Very fundamental, that is which candidate represents

change and which candidate represents more of the same? And the

American people know that on a fundamental economic level, Barack

Obama and the Democrats represent change, to the Republicans and John

McCain, who have offered more of the same of what George Bush had.

Second, to the quality of the two individuals.

EMANUEL: They have shown over the arc of time that the voters

have looked at both of them, through the debates and through the

campaign, who has the steady leadership to meet the challenges and who

have shown an impulsive quality, exemplified in both the selection of

the vice president and how they handled the financial crisis.

STEPHANOPOULOS: OK, we’re out of time now. I just have a quick

question. You’ve already shown up on short lists, Congressman

Emanuel, for White House chief of staff if Barack Obama wins. Are you

interested?

EMANUEL: First of all, you’ve got a big if there. And second of

all, let me say this, because we’ve got a lot of work to do in the

next nine days as — communicating to the American people. George,

you know this. Three — six years ago, the people on the North Side

of Chicago took a bet on a young kid. Members of Congress,

representatives in that district were Dan Rostenkowski, Frank

Annunzio, Rob Blagojevich, and they took a bet on a kid called Rahm

Emanuel.

STEPHANOPOULOS: Now he’s got gray hair.

EMANUEL: Now I’ve got gray hair, and I started this at 6’2” and

250 pounds, and that’s all I got left.

So I’m looking forward to representing the people of the North

Side of the city of Chicago.

STEPHANOPOULOS: It’s about the answer I expected. Thank you

both very much.

Now we want to dig into the issue that has been defining this

race — the economy. Fears of a global recession set off another

selling spree in global markets this week. The Dow is down another 10

percent; European markets 9 percent; Japan’s Nikkei index 15 percent,

and all three are farther away than ever from recent highs. It’s just

been a crushing month in the markets.

And with that, let me bring in a man who has successfully

navigated one of America’s largest corporations through the global

economy, the former chairman and CEO of General Electric, Jack Welch.

Good morning, Mr. Welch.

WELCH: Good morning, George.

STEPHANOPOULOS: You know, in BusinessWeek this week, as the

markets were closing, you and your wife Suzy Welch wrote that we

believe the main thing to be pessimistic about today is pessimism

itself. So is that a sign to you that these markets, that this

selling is a sign of irrational panic?

WELCH: Well, there’s some of that in there, George. But we’ve

had a highly leveraged world that is now in the process of

deleveraging. First, we had the financial institutions around the

world way overleveraged with complex instruments, now deleveraging,

and we have at the other end the consumer, who has had a lot of credit

card debt that is coming back in the balance. So we are going to have

some very tough times.

The next three quarters will be extremely tough. The fourth

quarter of this year, we could have negative growth in the 3 to 4

percent range, unemployment growing. But what we try to write about

was this isn’t a ’29 period, this isn’t ’80, ’81. There’s light in

the tunnel, and we’ll be in the — late in the second half of ’09,

we’ll be coming through it.

STEPHANOPOULOS: What will be a sign to you that we are starting

to come through? What are you watching right now in both the markets

and the broader economy that would show that we’ve hit a bottom in the

markets and that we’re starting to see — to turn the corner, see that

light at the end of the tunnel in the economy?

WELCH: Well, we’re starting to see some of the bank actions

taken by the Fed unfreeze credit. We are in fact seeing LIBOR coming

down. We are seeing new home sales dropping still, but existing home

sales flattening out. People are starting to see buoyancy (ph). When

that, in fact, when the banks stop getting open with credit, and that

will come in ’09 and late this year, you will start to see people

putting their toe in the water and starting to invest in housing. And

when housing stabilizes — and don’t forget, we haven’t gotten into

the two big elements of the program that has been passed by Congress.

We’ve done the first thing, which is stabilize the banks, but we

haven’t stopped the foreclosures. That program is not in place. It

takes some time to get that organized. It takes some time to get the

auction process in place to deal with the waste that’s on balance

sheets.

So those programs are just going to be kicking in. Everybody

thought the day the Congress voted, OK, we’re all set now. But we’ve

only began to get these fixes, and that’s why it’s going to take us

several months to get through this deleveraging process.

STEPHANOPOULOS: You’re a good free market guy. How comfortable

are you with this government program? Government buying interests in

the banks, the government now saying it’s going to be buying interest

in insurance companies. It’s already taken over the largest insurance

company in the world. How comfortable are you with this? And also

with the idea of the government starting to pick winners and losers.

Lehman is a loser, National City Bank is a loser. The other banks get

their investment. Is that the way we should be going?

WELCH: Well, I’m comfortable that the government has to step in

when the free market gets off the rails. It’s happened in this

country for over 100 years, George. We’ve nationalized railroads in

the war. We’ve bought banks in the ’20s.

The nice thing about our government, compared with France —

everyone says we’re going to be France. We’re not going to be France.

We go in and go out.

WELCH: In 1984, we were into Continental Bank, after they — in

Chicago — after they had made terrible loans to the oil industry. We

invested, the government did, took it over, and then sold it to Bank

of America quickly.

The same thing occurred with the RTC in the early 90s. Now,

every instrument that we have put in, in this troubled time, we have

put in onerous terms for banks if they don’t get out.

So they’re going to work like hell to get the — to get the

government out of there. Because, once the — the terms get by five

years, the loans becomes to the banks that they’re going to want to be

out.

STEPHANOPOULOS: Meanwhile…

(CROSSTALK)

WELCH: (inaudible) like France.

STEPHANOPOULOS: Meanwhile, the auto companies are coming in and

doing everything they can to get the government help, GM and Chrysler

saying they need some government loans to pull off their deal.

This will be another massive intervention.

WELCH: Well, the more you move into the industrial sector, the

more you pick and choose there, the more trouble you get.

STEPHANOPOULOS: And why?

WELCH: Because I don’t thing you can start to — the reason why

you have to fix the financial system — the financial system is

fundamental to the global economy.

Without it, the global system, you can’t borrow; you can’t build;

you can’t create jobs.

The whole game is about jobs. And, George, if I might just

digress a minute, you were talking taxes with Mr. Emanuel and Lindsey

Graham, a little while ago.

The New York Times, this morning, ran the greatest ad John McCain

could every have. It was the lead column in the righthand side. It

talked about the crisis that is coming, the unemployment that is

coming. But then it featured the state of Rhode Island. And it

talked about Rhode Island. They had a two-page article in the paper,

in, of all places, the Times.

Rhode Island is the most highly taxed state in the nation. It

talked about the fact that Rhode Island — 80 percent of Rhode

Island’s industries are small businesses, employing less than 20

percent.

Rhode Island has an enormous corporate tax rate of 9 percent. It

has the highest unemployment tax.

Small business is being murdered…

(CROSSTALK)

STEPHANOPOULOS: Since you raised that question and that article,

the article also points out how big, huge corporations like your

former company, General Electric, Xerox, Pratt & Whitney, Merck,

Yahoo, Whirlpool, Bank of America, Coca-Cola, all cutting jobs.

Is that necessary?

Should that be the first place to go when we face a downturn?

WELCH: Well, they’ve held on a long time, as (inaudible) volume

has stopped, but you’re going to have to cut jobs.

But we pulled out of Rhode Island 15 years ago because of the

crazy tax burden there. And that is something you can’t do in these

times.

So I’m a jobs voter. Everything I think about for this country

is about jobs. That’s why I support the financial system. That’s why

I support putting lower taxes at a time like this.

STEPHANOPOULOS: One final, quick question. Fortune Magazine has

an article out, this week, saying, G.E., General Electric, is under

siege.

Is it in any danger of going under?

WELCH: Oh, my God, no. It just happens to have a financial

component. Anything with the word “finance” in it, right now, is part

of this fear element.

This fear element will be taken out of the country as the country

sees all the actions that are going to be taken over the next nine

months, and have been taken.

We will have tough times. But we will see a sunny late ’09,

early ’10 period. We’ve been through this before. We’re getting the

actions that we need. And this country will come out as a better,

deleveraged society, with improved regulations, maybe a little slower

growth, but a much better foundation.

STEPHANOPOULOS: We will end on that note of optimism. Jack

Welch, thank you very much.

WELCH: Thank you very much, George.

END