RACHEL MADDOW: Joining us now is Congressman Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee.

Mr. Chairman, thank you very much for coming back on the show. Nice to have you.

REP. BARNEY FRANK (D), MASSACHUSETTS: Thank you, Rachel. Thank you.

MADDOW: At the time that Senator McCain called off his campaign in 2008, you called this campaign suspension the longest Hail Mary pass in the history of either football or Marys. Any comment on the idea it was President Bush who asked Senator McCain to suspend his campaign?

FRANK: I‘m-I‘ve gone beyond being disappointed for John McCain to feeling sorry for him. This is such a pathetically, obviously untrue statement. Those of us who were there know it.

He was in trouble on the campaign. He was trying to change it. In fact, there was a very tough bipartisan negotiation going on. And by the way, for him to blame Paulson or Bernanke is cowardly. This was Bush. Paul and Bernanke were acting for George Bush.

And we believed that we had to do something. Democrats were pushing to add some restrictions on compensation. We‘re adding to put in those provisions that ultimately led to the TARP being paid back with a profit, but we did agree something had to be done.

Everybody was trying to get a solution, from the president to the members of Congress who were trying to work on this were unpleasantly surprised by John McCain‘s announcement. As a matter of fact, if you read what Paulson says, at one point, he came to find there had been an agreement, he was unhappy, because he wanted to be the one who did it. I said he reminded me of kind of Andy Kaufman as Mighty Mouse. "Here I come to save the day."

So, no. John‘s recollection there-I mean, it‘s not his recollection. It‘s an invention. Look, he‘s got a very conservative primary opponent. He voted for the TARP money. He clearly supported it. And he‘s now just trying to reinvent history, but it‘s unseemly for a man like that to blame other people, because he changed his mind for political reasons.

MADDOW: We are seeing this pattern come up not just with John McCain but with a lot of-a lot of Republicans in office right now who are dealing with a very conservative base. Tim Pawlenty thought of as being a policy wonk, a thinker on some issues, now abandoning a lot of his old ideas-all of this on the stimulus, more than a hundred members of Congress found to be trashing the stimulus and saying it doesn‘t work while they‘re also saying that it does work in their home districts.

Well, everybody keeps telling me the hypocrisy doesn‘t matter as a charge in Washington, that everybody is too comfortable with hypocrisy for that to be embarrassing anymore. What do you think?

FRANK: I don‘t think that‘s true. And it goes beyond hypocrisy, Rachel. But you‘re right, it‘s hypocritical. Although let‘s put this way:

if I vote against a program and I think it‘s fraud, that doesn‘t mean the people I represent who have paid their share of tax money for it should be denied it. So, I‘m not objecting to someone who votes against a program and says, but you shouldn‘t exclude my district from it.

But there are two fundamental problems they‘re talking about. One is, when they try to take credit for something they tried to kill. And that‘s where the hypocrisy comes in. They go to the announcements. They go to the shovel-the breaking dirt. They‘re the ones who try to give that impression.

But even more profound is the way you put it. I‘m glad you‘ve done this. They are contradicting themselves. It‘s not just hypocrisy. It is blatant intellectual dishonesty.

What they are doing is going-taking credit for the creation of jobs which they claim were not created. They are acknowledging when they do this that the stimulus does create jobs and then they say that it doesn‘t. I mean, that‘s the fundamental issue.

Sure, you have a right if you vote-if you‘re a member of Congress and you vote against a program, that doesn‘t mean your particular area should be enfranchised. But denounce something as having no effect and then going-taking credit for that very effect whose existence you denied is a mistake.

And there is one other great inconsistency. You and I have talked about the need to reduce military spending. And I disagree with President Obama‘s exemption of the military. You know, as I‘ve noted the other day, we still have three ways to drop thermal nuclear weapons on the Soviet Union: intercontinental ballistic missiles, nuclear submarines and the strategic (INAUDIBLE). Given the fact that there is no more Soviet Union, I‘m going to be radical and say to the Pentagon, why don‘t you pick two of the three and save us billions of dollars?

But the problem is, when we talk about reducing unnecessary planes like the F-22, et cetera, guess what the conservatives say? It‘s jobs. So, apparently, when you spend money on weapons that the Pentagon doesn‘t want and take money from more important things for the soldiers in the field, that creates jobs.

So, the hypocrisy about when you do and don‘t create jobs is a central one. And you‘re exactly right. They say that the stimulus didn‘t create jobs and then they acknowledge that it does and want more trying to create more jobs.

MADDOW: And I‘m-I‘m very glad to hear you explicate essentially that important difference. I have never been complaining about and I think that people, by and large, aren‘t complaining about people taking money for their districts.

FRANK: Of course.

MADDOW: It is not they are making the claim for the money by saying -

by talking about how effective the stimulus is. And for me, the real conundrum this creates for Democrats is: how do you negotiate with these people? How do you negotiate with somebody who believes that the sky is both blue and green, about sky color? I mean, if you don‘t have any real beliefs about policies, then how can you negotiate on policy?

FRANK: Well, I want to go beyond that. You can‘t.

And here‘s the deal, and I don‘t usually make this accusation. I think it‘s very clear that the dominant people in the Republican Party-and you correctly noted this-not every Republican was very much on the right wing but they are now all afraid of them. The mass cowardice of what used to be moderate Republicans in the face of the conservative Republicans has caused a problem.

And here‘s the deal-they know very well that the stimulus creates jobs. And let me say this, that‘s one reason they‘re against it, because these are people who want Barack Obama to fail, who want the notion that we can come together in what we call government and respond to our common problems and improve the quality of our lives along with some of the things done in the private sector-they want to discredit that notion. They discredited it when they‘re in government by doing it so badly. Now, they want to prevent us from succeeding.

And I honestly believe-you know why they switched on the deficit reduction commission? They don‘t want the deficit reduced. They would rather blame Barack Obama for it. And they don‘t want jobs created.

So, the answer is, they know that jobs are being created as they acknowledge and if it‘s already been voted on, they‘ll try and take some credit for it. But, in fact, they really this-I hate to have to say this. I‘ve never said it before, but the dominant Republicans today do not want Barack Obama to succeed either in job creation or deficit reduction, and that‘s why you get this intellectual inconsistency. It‘s not intellectually inconsistent-it‘s dishonest.

MADDOW: Congressman Barney Frank, chairman of the House Financial Services Committee-it is a great pleasure to have you on the show as always. Thank you.

FRANK: Thank you, Rachel.