updated 5/9/2006 11:43:10 AM ET 2006-05-09T15:43:10

Guests: Dianne Feinstein, Jim Bamford, Gary Berntsen, Richard Cheney, Jim VandeHei, Stan Brand, John Fund, David Ignatius

CHRIS MATTHEWS, HOST:  The Gallup poll now has President Bush down to 31 percent in job approval, below freezing.  Can he reheat himself with a fight over NSA spying? 

Also this week, can Karl Rove escape the special prosecutor?  Let‘s play HARDBALL. 

Good evening.  I‘m Chris Matthews.  And welcome to HARDBALL.

Tonight, musical chairs meets Russian roulette.  After five years of finger pointing and hand wringing over who let 9-11 happen, after three years of finger pointing and hand wringing over the bad intel that sold us into the Iraq war, President Bush is still flipping personnel and shoving chairs around like a Baghdad fire drill. 

Today, President Bush picked Air Force General Michael Hayden, the former head of the National Security Agency, to be his next CIA director, and if the president is looking to pick a fight in Congress over the legality of his domestic spy program, he‘s going to get one, from both sides of the aisle.

But this is one fight the president believes he can win, and polls show the American people could well back him.  Although a new “USA Today” Gallup poll shows President Bush‘s overall job approval rating at 31 percent, the lowest level of his presidency, in a March “Wall Street Journal” NBC poll, 52 percent said—that‘s a majority—they supported the NSA wiretaps without a warrant. 

We‘ll talk to Senator Dianne Feinstein about the Hayden nomination to head the CIA in a moment. 

And later, Karl Rove‘s legal over his role in the CIA leak case could be coming to a climax, as special prosecutor Patrick Fitzgerald wraps up his investigation.  HARDBALL‘S David Shuster has the latest on the CIA events today. 

(BEGIN VIDEOTAPE)        

DAVID SHUSTER, MSNBC CORRESPONDENT (voice over):  Ripping a scab off of a fight over his domestic wiretap program, today President Bush announced his intention to promote the former head of the National Security Agency.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES:  Today I‘m pleased to nominate General Mike Hayden as the next director of the Central Intelligence Agency. 

SHUSTER:  It was Hayden after 9/11 who first proposed the NSA conduct domestic surveillance without court approval.  Hayden, who remains an Air Force general, ran the National Security Agency for six years. 

BUSH:  He has demonstrated an ability to adapt our intelligence services to the new challenges of the war on terror.  He‘s the right man to lead the CIA at this critical moment in our nation‘s history. 

SHUSTER:  The Air Force general, who was close to Vice President Cheney was gracious. 

GEN. MICHAEL HAYDEN, NOMINATED AS CIA DIRECTOR:  There‘s probably no post more important in preserving our security and our values as a people than the head of the Central Intelligence Agency. 

SHUSTER:  But even before the nomination today, Republican Senator Arlen Specter questioned the pick and said he would use Hayden‘s nomination to explore unanswered questions about the domestic wiretap program. 

Other Republicans criticized having a military commander run a civilian spy agency. 

REP. PETER HOEKSTRA ®, CHAIR, HOUSE INTELLIGENCE CMTE.:  I think putting a military person in charge of the CIA, our premiere civilian intelligence gathering agency, is exactly the wrong signal to send today. 

SEN. SAXBY CHAMBLISS ®, GEORGIA:  I think the fact that he is a part of the military today would be the major problem. 

SHUSTER:  Another problem could involve some controversial remarks General Hayden made this winter at the National Press Club.  During a discussion about government surveillance, a reporter asked about the constitution‘s fourth amendment. 

UNIDENTIFIED MALE:  But does it not say...

HAYDEN:  No.  The amendment says unreasonable search and seizure. 

UNIDENTIFIED MALE:  The legal standard is probable cause. 

HAYDEN:  Just to be very clear, OK—and believe me, if there‘s any amendment to the constitution that employees of the National Security Agency are familiar with, it‘s the fourth, all right?  And it is a reasonable standard in the fourth amendment. 

SHUSTER:  Here is what the fourth amendment says, “The right of the people to be secure in their persons, papers and effects against unreasonable searches and seizures, shall not be violated, and no warrants issue, but upon probable cause, supported by oath or affirmation.”

While probable cause is understood to be a higher standard than reasonableness, White House officials said Hayden misunderstood the question and will have no problem explaining himself at Senate confirmation hearings. 

The Central Intelligence Agency has been in disarray for much of the Bush presidency.  The CIA was unable to string together intelligence that might have prevented the 9-11 attacks, and much of the agency‘s pre-war intelligence on Iraq was wrong. 

Over the last 18 months under Porter Goss, there was an exodus of top analysts and officials and plummeting morale.  Just today, Goss‘s No. 3 at the CIA, Dusty Foggo, announced his resignation.  Foggo is the subject of a federal corruption investigation. 

Michael Hayden‘s expertise is in the technical world of communication intercepts and satellite imagery.  Even some Democrats have praised his skills and talent handling a complicated government bureaucracy. 

SEN. DIANNE FEINSTEIN (D), SENATE INTELLIGENCE CMTE.:  I don‘t have any reservations about him.  I think he‘s a very good leader.  He‘s run an agency twice the size of the CIA, and he‘s run it very well. 

SHUSTER (on-camera):  Still, even General Hayden today acknowledged the concerns that many lawmakers have about his nomination, and Hayden says he looks forward to talk with members of the Senate during his confirmation process, a process it seems destined to turn into a showdown over domestic surveillance and the Bush administration‘s tactics. 

I‘m David Shuster for HARDBALL at the White House. 

(END VIDEOTAPE)            

MATTHEWS: Thank you, David Shuster. 

As you just heard in David‘s report, Senator Dianne Feinstein of the Senate Intelligence Committee thinks General Hayden is a good leader, but how many of her fellow Democrats will share that view?

Senator Feinstein, thank you for joining us.

FEINSTEIN:  You are welcome.

MATTHEWS:  Let me ask you about that constitutional point that David raised in his, I think, fine report.  There you have General Hayden saying all you need is a reasonable case to start checking on people‘s data transfers overseas, and it was pointed out by David in that piece, the constitution says there has to be probable cause.

FEINSTEIN:  That‘s correct.

MATTHEWS:  It can‘t just be that it‘s reasonable to assume the guy is breaking the law or doing something illegal.  You have to have a probable cause.  Where do you stand? 

FEINSTEIN:  Well, it‘s protection against unreasonable search and seizure, and the standard is clearly probable cause.  I think there‘s no question about that. 

MATTHEWS:  But there was a question from the general.  He didn‘t agree in that instance. 

FEINSTEIN:  No, I heard what he said. 

MATTHEWS:  And? 

FEINSTEIN:  And I heard what he said.  I disagree with that. 

MATTHEWS:  Oh, you don‘t agree with what he said? 

FEINSTEIN:  That‘s right. 

MATTHEWS: So are you going to grill him on that when you get him on the stand? 

FEINSTEIN:  Probably will ask the question, yes. 

MATTHEWS:  OK.  Is it important that he give the right answer, that he say probable cause as is written under the constitution of the fourth amendment? 

FEINSTEIN:  Yes, I think it‘s important that he understands the fourth amendment. 

MATTHEWS:  Let me ask you a political question, senator.  You know, it‘s amazing sometimes polling does surprise us sometimes, as you know.  And are you impressed that the American people by a majority vote—we mentioned it earlier in the program, 52 percent of the people, a real majority believe the president is right in this kind of electronic surveillance even without a search warrant? 

FEINSTEIN:  No, I‘m not surprised by it.  People are afraid.  They‘re frightened.  They see what‘s happening.  They see bombs going off. They see terror.  That‘s not our way of life.  That‘s not how we are.  It‘s very difficult for Americans to learn to cope with this and live with it over a period of time. 

And this isn‘t a business as usual period.  I mean, in some ways, I‘m really surprised because I think the press is driving this showdown kind of thing.  I mean, there‘s a very real reason to get a qualified intelligence professional in place as quickly as possible, because there is threat against our country and it is real.  And we have people who would do us harm if they have an opportunity. 

And the one thing that stops them is having good intelligence.  Now this is different than it was against the Soviet Union.  It‘s different than KGB.  This is shadowy.  It is non-state.  It‘s hidden.  It‘s cowardly, and we‘re not like that, so it‘s a whole new dynamic.  And I think it is true, it‘s a difficult new challenge for the intelligence community. 

Now, the question is, who should it be?  And I would hazard a guess that virtually every member of the intelligence committee, if you ask them, give me three choices, Michael Hayden would be one of the three.  And the president has nominated him. 

Now that doesn‘t mean he‘s without some baggage.  I think electronic surveillance actually presents some baggage because it‘s done outside of the law.  And those of us that have looked at the program, at least I, do not believe it has to be outside of the law.  I believe that there are the amount of warrants that would be necessary that could well be handled by the FISA court, and now that‘s for another day. 

The point is what are we going to do about the CIA?  Who is going to lead it?  It‘s—this is an area of unprecedented growth for the CIA, and it‘s brought on a lot of problems.  Those problems need to be taken care of quickly.  And I think that this general, in particular, has a great deal of respect, and that will go a long way with the professionals. 

I believe he‘s going to bring in professionals around him and that will go a long way.  So hopefully we can move this agency much more rapidly into this asymmetric world. 

MATTHEWS:  Let me ask you about the big values judgment.  You know, you point out the need to have a specially vigilant intelligence community and apparatus ready to go because of the threat we face since 9-11, which has been apparent since 9-11.  And yet we have this tradition, especially in the Democratic Party all these years of people who have been very concerned about protecting civil rights against McCarthyism and all of the other attempts to try to undermine people‘s personal liberty in this country. 

There are people across the country who believe that the threat that comes from NSA spying is very dangerous itself.  You say...

FEINSTEIN:  I‘m one them. 

MATTHEWS:  Right.

FEINSTEIN:  I am one of them.  I believe all domestic surveillance should be done with a warrant.  And there is a special court set up.  It operates very well.  There are 11 judges.  They sit 24/7.  You can—probable cause is the standard.  We have had former FISA judges tell us it is more like reasonable suspicion.  But it is an independent court authority evaluating the request and saying yes or no. 

MATTHEWS:  Well, General Hayden knew that court existed, the FISA court and he didn‘t use it, he went around it.  Are you concerned that that success in going around it, which is holding today, will lead him to perhaps try going around some of the precepts of the CIA, for example, you‘re not supposed to spy on Americans, it‘s supposed to be a foreign intelligence operation.  Do you have confidence he won‘t break the law again or avoid the law again?

FEINSTEIN:  First of all, I have to find out who made the decision not to go to the FISA court.  I don‘t know who made that decision and that‘s particularly pertinent now that I know that the FISA court could accommodate this program on a warrant by warrant basis.  And if we need to add additional judges, we can do that.  If we need to lengthen the emergency time we can do that.  Why we weren‘t asked to do that is what I want to know, and who made those decisions.

You can be sure that those questions will be asked of General Hayden, in committee, probably in a classified setting, but it‘s very important.  I happen to believe that the exclusive means of domestic surveillance of Americans with one end connected to a foreign terrorist entity should be the FISA court and all of this should be done with warrant, and I‘ve just got to say, I think it‘s outside of the law to proceed any other way. 

MATTHEWS:  Let me ask you about accountability, senator.  You‘ve had oversight responsibilities over the intelligence community.  If we have another disaster in this country where something goes wrong, we don‘t catch somebody most people figure we should have caught on the way to hurting us, whose fault is it, the national intelligence director or is it the CIA director? 

FEINSTEIN:  Well, I‘m not going to get in to whose fault it is. 

MATTHEWS:  In terms of the chain of command. 

There‘s been a question about accountability.  Don‘t you need one person responsible for intelligence to the country? 

FEINSTEIN:  Yes.  And this is another concern whether the national intelligence director is building up a staff of 1,000 people and whether that staff is necessary. 

The way we looked at this position, and I was one the first people who put forth a bill to create a national intelligence director, was that we have this unwieldy intelligence community of 16 different agencies, and you need somebody that can move the deck chairs on the Titanic.  You need somebody that says if necessary, I‘m going to take people from here and add to there.  I‘m going to oversee the budget.  There‘s going to be a strong unitary command. 

This really came from the point of view that the CIA in itself is a big agency and the person who runs the CIA can‘t really run all 16 agencies and I think that‘s logical and I think that‘s correct and that‘s the way it is now. 

We would—let me just say me.  I would like to see John Negroponte a very forceful figure.  I don‘t want to see him as a bureaucrat.  If it‘s Mike Hayden, if Mike Hayden is confirmed, he will run the CIA in my view. 

MATTHEWS:  So Negroponte will be the boss and all will report to him? 

FEINSTEIN:  Over all of it. 

MATTHEWS:  Thank you very much, Senator Feinstein, member of the Intelligence Committee.  Coming up, the fight over General Hayden will continue.  We‘ll hear from investigative reporter, James Bamford, he is the author of two books on the NSA.  Plus former CIA field officer Gary Berntsen.  This is HARDBALL only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  President Bush ousted Porter Goss on Friday as the CIA director and today nominated General Michael Hayden for the job.  To talk about the move, I‘m joined by Jim Bamford, investigative journalist, who‘s done extensive reporting on both the CIA and the National Security Agency for his books, “A Pretext for War” and “Body of Secrets.”  And Gary Berntsen, former CIA agent and author of “Jaw Breaker.”  Thank you, gentlemen, for joining us. 

Jim, we‘ve had two CIA directors quickly in a row, Porter Goss, before that, George Tenet.  Is Michael Hayden going to be an improvement? 

JIM BAMFORD, AUTHOR “A PRETEXT FOR WAR”:  I think there will be improvement in terms of morale, which is very important.  The question is whether he‘s going to get bombarded at the confirmation hearings because of his illegal warrantless wiretapping program and because he‘s still a general in the Air Force. 

MATTHEWS:  That sounds like you‘ve got two problems with him. 

BAMFORD:  Well, I do.  They haven‘t resolved the issue of whether that activity was illegal or not yet and I think before he goes over to the CIA, where he‘s running CIA agents, they ought to decide whether he conducted an illegal operation at the NSA.  The problem with the CIA is they have laws too and they have a law saying CIA agents aren‘t allowed to operate within the United States to spy domestically. 

Now if he can break NSA‘s rule, the Foreign Intelligence Surveillance Act and allow NSA people to bug American citizens in the United States, it worries me that he might do the same with a, you know, CIA personnel at Langley. 

MATTHEWS:  And for the uniform? 

BAMFORD:  Well, you know, the problem with the uniform is that his boss is Donald Rumsfeld, and the whole point here is to separate the CIA as much as possible from the Pentagon.   One the jobs mike Hayden might want to have of after this is chief of staff of the Air Force and among the people who make that decision would be Donald Rumsfeld. 

So you have somebody who may be beholden to Rumsfeld in some sense and I think it would be much easier, much clearer if you had an employee of the CIA rise to become director or somebody completely separated from the military. 

MATTHEWS:  OK.  Jim, thank you.  Let‘s go to Gary Berntsen down here with me this week.  Let me ask you the same question.  We‘ve had George Tenet, who was there all through the war in Iraq and all the questions about that and then we‘ve had Porter Goss, the vice-president‘s proposed candidate, he‘s been there a couple of years now, year and a half.  Is this new guy going to be better? 

GARY BERNTSEN, FMR. CIA OFFICER:  I think that it will work fine with Hayden there.  I don‘t think it matters that he‘s in uniform.  He understands intelligence and he also has experience leading a big bureaucracy.  The best part of all of this though is, you know, the naming of Steve Kappes as his ADDCI, or the assistant DCI.  Steve Kappes is probably the finest officer of his generation in CIA, as an operations officer, and he will bring that passion and the understanding and that protection of the clandestine service.

I think that having Kappes back in CIA is a superb move by the White House.

MATTHEWS:  What about the morale issue?  Do you believe Jim is right that the morale will go up at the CIA if they get this new director, Hayden? 

BERNTSEN:  I think that the morale will improve not just because of Hayden but because of Kappes clearly.  Kappes is the guy. 

MATTHEWS:  OK.  Let me go back to Jim.  It seems to me and most Americans watching this program right now have one interest, their own personal safety.  They don‘t care about boxes or turf or anything else.  They don‘t care how the job gets done, but damn it, they want to hear the next time before 9-11, there‘s going to be a 9-11, so we can stop it.  They want to know the next war we go in is well founded or not.  What will Hayden‘s appointment do to both those questions? 

BAMFORD:  Well, I think the first thing he‘s got to do is really focus on getting the CIA back in the business of infiltrating terrorist organizations, infiltrating spies in the hostile countries.  You know, the FBI did very well at infiltrating the Mafia.  The DEA has done very well at infiltrating Colombia drug cartels. 

The CIA never did very well at all at infiltrating terrorist organizations or hostile countries, like Iraq or Iran.  And I think that has got to be his key focus. 

MATTHEWS:  Isn‘t that the big push he‘s getting from Negroponte, that his job should be collecting Intel, not worrying about analyzing it or trying to be the Central Intelligence Agency, simply being a good intelligence gathering agency of the government overseas? 

BAMFORD:  Yes, before they can analyze it, they have got to collect it, so yes the first thing on the agenda is get better at collecting. 

MATTHEWS:  How do we get a guy inside al Qaeda who has to have all the religious code, he has to speak the lingo, have the culture, the background, the right relatives?  How do you find a person who can pass into that murky world? 

BAMFORD:  Well, you contact John Walker Lindh.  He was the...

MATTHEWS:  OK.  OK.  He was a freak.  OK, anyway, that was a freak. 

BAMFORD:  There were seven other Americans in there when he got in there... 

MATTHEWS:  But they went...

BAMFORD:  ...from Lackawanna. 

(CROSSTALK)

MATTHEWS:  ...this naive American adventurists perhaps who wanted to join a hot ticket organization.  They weren‘t agents going in there to try to try to bring down that organization. 

BAMFORD:  The point is they were Americans who got in there and had one-on-one meetings with bin Laden.  They were in bin Laden‘s training camp, seven Americans at the time, and not one them from the CIA.  So I mean, the first thing you‘ve got to do is be able to penetrate the organization.  Once you penetrate it, then maybe you can start doing some other things, but these people penetrated it and the CIA didn‘t. 

MATTHEWS:  Is that fair, Gary, that it‘s easy for joiners or recruits to join an organization, therefore, it must be easy for our guys to get in there and find out what‘s going on? 

BERNTSEN:  No, it‘s not fair.  And let me say this, we‘ve had success in penetrating terrorist groups over the years.  But you have to remember, we have a thing called duty to warn.  That means if a member of a—a penetration that we have of a terrorist organization gives us information on impending attack, we have to act to save people in that. 

If we allow them, you know, to complete these attacks, well, then they could continue serving in there.  So what happens is, as a result of duty to warn, frequently we wind up burning our sources or we have to pull them out.  If we know people are going to be killed, especially American citizens, we have a right, we have a responsibility to save those people.  So therefore terrorist cases don‘t last as long as normal F.I.  production cases. 

MATTHEWS:  I have got to ask a tough question before we quit, Jim.  If we have another 9-11 situation in this country, a terrible attack, that seems to get by our screen of intelligence, who is to blame, the CIA director or the director of national intelligence? 

BAMFORD:  Well, ultimately, it‘s the director of national intelligence.  He‘s the overall boss over the entire intelligence community, not just the CIA, but obviously if it‘s a human intelligence failure, it‘s going to be laid at the responsibility of the director of the CIA.

MATTHEWS:  Gary?

BERNTSEN:  An open society can‘t stop every single attack. 

MATTHEWS:  But who‘s the boss? Negroponte? 

BERNTSEN:  No, the boss—I would say on the budget and everything like that is Negroponte, but for stopping those things, for the tactical work, it‘s CIA‘s responsibility.

MATTHEWS:  If I were president, I wouldn‘t know who to call under this new system.  In the middle of the night, I‘m saying what‘s going on with bin Laden tonight, where do you think he is?  Who does he call, CIA or NIA? 

BERNTSEN:  Well, he is going to call the DNI, but CIA is where that information lies. 

MATTHEWS:  So he has one guy and he calls somebody and he says I will get back to you on that.

BERNTSEN:  That‘s right.

MATTHEWS:  What a system.  I don‘t think it works.  You need to have -

well, I think you need a unitary system, where the president calls the one person, the guy he knows that tells him what the hell is going on, instead of that guy having to call somebody else.  Let me get you on with a conference call here Mr. President. 

We will be right back.

Well, thank you very much, James Bamford, as always, and Gary Berntsen, as always.  Good luck with your books.

Up next, Vice President Cheney talks to the media.  You‘re watching HARDBALL on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.

Vice President Cheney says big changes are underway in the intelligence community.

NBC White House correspondent Kelly O‘Donnell sat down with the vice president, and he offered his views on the CIA, Iraq and his relationship with President Bush. 

(BEGIN VIDEOTAPE)        

KELLY O‘DONNELL, NBC WHITE HOUSE CORRESPONDENT:  Critics of outgoing CIA Director Porter Goss say that during his time, the agency was politicized, there were some good CIA people who were forced out and morale suffered.  How have you seen that damage the agency? 

RICHARD B. CHENEY, VICE PRESIDENT OF THE UNITED STATES:  Well, I, first of all, am a fan of Porter‘s.  I think he‘s a very able and talented public servant.  He didn‘t have to take the job.  He took it on at a very difficult time, and I think he has done a reasonably good job at it too. 

It‘s been a tough time for the agency.  You know, they came through the whole period before 9-11 and missed 9-11, and obviously were criticized for that.  The report about weapons of mass destruction in Iraq before the Gulf War, before the war in Iraq, was another instance where, you know, there was a breakdown in the system.  It didn‘t produce the quality intelligence that was needed.

So Porter took on the assignment at a very difficult time, and now he‘s leaving.  And I think he ought to leave with honor that he‘s owed and the respect that he‘s owed and the thanks for having done a very difficult job. 

O‘DONNELL:  I‘d like to ask you about two of the comments that you have made that have gotten a lot of attention with respect to Iraq.  Much has been made about what you said about being greeted as liberators, and about a year ago when you said the insurgency was in its last throes.  And more recently you defended that as , quote, “basically accurate.”  With all due real respect, sir, isn‘t that wrong? 

CHENEY:  No.  I think with respect to the question of the—were we greeted as liberators, I think we‘re clearly viewed as liberators by the vast majority of the Iraqi people.  No question we‘ve had problem with a group of terrorists, insurgents, but that‘s a very small minority. 

And I really believe that when the history books are written that what we‘ll find is that 2005 was the turning year, the water shed year for Iraq operations.  Why? 

Well, primarily because that‘s the year in which the Iraqis first had an election in January, when they elected an interim government.  That is the year in which they wrote a constitution, an up-to-date modern constitution for the Arab world.  And that is the year when they ratified that constitution and finally had national elections.  They had three national elections last year.  And the last national election they turned out by the millions to participate in that process.

O‘DONNELL:  The president‘s approval rating has been in the 30s.  Your‘s has slipped to the teens.  Do you think you need to do more to better serve the president to improve how Americans perceive you?

CHENEY:  Well, I do my job to the best of my ability.  I am there specifically to serve him and not to worry about my ratings in the polls.  I‘m not there, I‘m not running for anything.  I call them like I see them.  I give him the best advice I can.  He doesn‘t always agree.  Sometimes he does, sometimes he doesn‘t.  But we don‘t spend a lot of time looking at the polls.

O‘DONNELL:  You have said you will not seek the presidency.  You will complete your term.  When you consider what it might mean for the Republican Party, would there be any benefit if you were to retire to allow the president to choose someone else who might then have an advantage in 2008?

CHENEY:  Well, I‘m not sure it would be an advantage, but that‘s not my concern.  I in effect took on the obligation when I put my name on the ballot at the request of the president, both in 2000 and again in 2004, that if elected to serve out my term.  I feel I‘ve got a contract if you will with the American people, constitutionally-elected officer, and my term ends in January of 2009 and barring some unforeseen disaster, that‘s what I‘ll do.

(END VIDEOTAPE)

MATTHEWS:  Gallup in the teens.  Up next, special prosecutor Patrick Fitzgerald is reviewing Karl Rove‘s testimony in the CIA leak case.  Will Fitzgerald clear Rove or indict him?  You‘re watching HARDBALL on MSNBC.

(COMMERCIAL BREAK)

(STOCK MARKET REPORT)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  At the end of the day, it‘s of keen interest to me he to see whether or not we can get Karl Rove frog marched out of the White House in handcuffs.

(END VIDEO CLIP)

MATTHEWS:  Welcome back to HARDBALL.  That was Ambassador Joe Wilson back in September of 2003, almost three years ago, anticipating and heightening the tension here, it mounting now in fact on the CIA leak case this week.

Scooter Libby, the vice president‘s former chief-of-staff had waged trial for perjury, of course, obstruction of justice and false statements.  Well will George Bush‘s right-hand man Karl Rove suffer the same fate, perhaps this week?  Will he be indicted for lying to a grand jury about a critical conversation with “Time” magazine reporter Matt Cooper? 

Here to dig into the CIA leak case is “Washington Post” reporter Jim VandeHei and Democratic attorney Stan Brand, former counsel to the House of Representatives. 

Jim, thank you.  I was struck by your excellent reporting again today in “The Washington Post.”  And the new nugget you brought forward to me at least was the fact that there was some kind of conversation between Karl Rove and the indicted Scooter Libby.  In which I believe, Rove, you reported gave Libby the heads up that Bob Novak, the prince of darkness he‘s nicknamed, was going to report on the identity of the CIA role played by Valerie Plame.

JIM VANDEHEI, REPORTER, THE WASHINGTON POST:  That was actually in the indictment that was filed against Libby sometime ago and then also mentioned in various aspects of court filings in the Libby case.

And what they‘re trying to figure out, what the prosecutor is trying to figure out right now, is it plausible, is it possible that Karl Rove could actually forget a conversation with “Time” magazine‘s Matthew Cooper about Wilson and about Valerie Plame in her role at the CIA, given how involved he was at the time in defending the president on prewar intelligence and rebutting Wilson.  And I think all the sources I‘m talking to, that‘s what‘s being waved right now as this thing wraps up.

MATTHEWS:  Well maybe I‘m in journalism, not in law, but it seems to me hard to believe, Jim, and Stan, that after somebody goes in “The New York Times,” in the main op/ed section of “The New York Times” and says the president of the United States fought a dishonest war, he knew there was no nuclear threat from Iraq and yet he claimed there was.

In fact, the guy who wrote it was the guy who proved there was no threat because he went down to Africa to prove there was no deal to buy uranium yellow cake.  And the White House wouldn‘t go into a frenzy over it.

We also know according to the reporting so far, that Novak talked to Karl Rove according to the indictment, that Libby talked to Tim Russert about something we said on this show.  They were in a frenzy clearly to try to shut this story down. 

Rove talked to Libby about Novak, about to break the story.  Rove talks to Matt Cooper, Libby talks to Cooper, all this happening in the space of a week, Stan Brand.  Isn‘t that at least a prima facie case that Karl Rove had this issue on his mind?

STAN BRAND, DEMOCRATIC ATTORNEY:  Well, and also...

MATTHEWS:  All this running around.

BRAND:  ... what he‘s also looking at is the fact that his friend, the lawyer‘s friend, Viveca Novak, tipped them off and said “You‘d better get your guy back down to the grand jury to explain himself, because everybody else is telling the grand jury that he spoke to them and he‘s testified that he did not.”  And yet after that, there was a gap of several months.  So what Fitzgerald is trying to say to himself is, what is the explanation for that?  Is there a plausible explanation or is that evidence of intent to deceive?

MATTHEWS:  Let me ask you, Jim, it seems to me from your reporting and other‘s reporting that Karl Rove was vastly involved in trying to defend the case for war after we got in there.

VANDEHEI:  Undoubtedly, everyone I‘ve talked to at the White House at the time said he was very involved.  Obviously he‘s very involved in every issue that‘s important to the White House.  Now what Karl Rove would argue or what his attorneys argued is that essentially there‘s a big difference between being involved in defending prewar intelligence and then taking it four steps further and being involved in rebutting Wilson or going after Valerie Plame.  And they‘re saying that yes, obviously Karl Rove was aware of this.  But it wasn‘t something that was front and center on his mind, and that therefore it‘s something that he could forget. 

What he‘s argued in the grand jury is listen, if I really wanted to go out and discredit Wilson or go after Plame, why wouldn‘t I seek out all the reporters who I know much better, trust more and talked to that week, instead of just talking to Novak and Cooper, both of whom called Rove. 

MATTHEWS:  I can think of why.  If he gave it to FOX, his fingerprints would be all over it. 

VANDEHEI:  That‘s what‘s happening right now, he‘s trying to weigh both sides. 

MATTHEWS:  Novak ends up getting it, it looks like the perfect possibility.  Although he doesn‘t like the war, being pro Republican.  Let‘s take a look at, by the way, just for old time‘s sake, this is what we had on this program, July 8, that week where everything seemed to be happening back in 2003.  Here I am talking about what Wilson reported in that column in The New York Times the previous Sunday.  This is Tuesday, two days later. 

(BEGIN VIDEO CLIP)

MATTHEWS:  Why would the vice president‘s office, Scooter Libby, whoever is running that office, why would they send a CIA effort to verify something, find out that there wasn‘t a uranium sale and then not follow up by putting that information or correcting that information in the president‘s State of the Union?   If they went to the trouble of sending Joe Wilson all the way to Africa to find out weather that country had ever sold uranium to Saddam Hussein, why wouldn‘t they follow up on that? 

(END VIDEO CLIP)

MATTHEWS:  God, I‘m getting older.  Anyway, that was what all the fight was about, Stan.  It seems to me we have an issue this week.  Everybody who has been following this case, wants to know whether Scooter Libby, he‘s already in trouble, he‘s facing six indictments, what about Karl Rove, is he going to get indicted this week?  Apparently the grand jury is meeting Wednesday and Friday this week. 

BRAND:  Patrick Fitzgerald we know is a very thorough man and he is weighing whether he can prove a case beyond a reasonable doubt that Karl Rove consciously lied to the grand jury. 

MATTHEWS:  You‘ve worked many D.C. juries.  Can he pull some number, some old home thing to a bunch of women on the jury?  You have probably left something on the stove and forgotten about it.  Something hokey.  Would that work with a D.C. jury, (inaudible) like either one these guys? 

BRAND:  D.C. Juries are pretty smart, they‘ve been around as we‘ve discussed on this show.  They‘re pretty savvy.  They‘ve been around.  They read the newspapers, they understand how government works, living in the nation‘s Capitol.  And they don‘t believe people who aren‘t believable. 

MATTHEWS:  Well, if they‘re picking up The Washington Post every day, Jim VandeHei, you‘ve got a prima facie case that the jurors will know what‘s going on, because every day The Washington Post reported on this story, are they going to look for a jury that has no knowledge of the CIA leak case? 

VANDEHEI:  We have no idea.  I think the next step is these next couple of weeks.  Every indication of ours is that this thing is wrapped up.  Basically, every loose thread out there has now been pulled and if Fitzgerald can make his decision. 

I think we‘re either going to hear that he‘s indicted or if he‘s not, it‘s pretty clear now that he‘ll give some kind of signal to Robert Luskin, Rove‘s lawyer, to get the message out that he‘s been cleared.  For the White House,  they want this thing settled.  They want to know, obviously, they would like to have him cleared, they want to know what‘s happening. 

MATTHEWS:  Do you have a sense that the first sign will be a positive one, like when you get accepted to college, sometimes the big envelope comes with the acceptance and the small one comes a few days later that you‘re not getting in.  Is it more than likely the first sign we‘re going to see if he‘s off, is a call from the prosecutor to his attorney Luskin to say, your guy is free? 

VANDEHEI:  Oh, I think so.  I think that that‘s what everyone in the case is now anticipating and they don‘t see any reason for further delay.  I mean, it‘s very complicated, because almost every part of the Rove argument that we‘ve been told that he‘s maybe for the grand jury, a counter case can be made that that might not be true. 

When he talks about Viveca Novak in “Time Magazine” about being tipped off before he actually testified, so therefore he knew—they knew that “Time” was eventually going to report that. 

Viveca Novak says I‘m not sure when that happened.  It may have happened after the first time he testified. 

MATTHEWS:  Technical question, is it more likely to get an indictment on a Wednesday or a Friday from this grand jury? 

VANDEHEI:  The way it‘s been working so far would be a Friday and I would also caution that this grand jury is dealing with other cases and they meet every Wednesday and Friday.  So that fact doesn‘t mean anything about this case.

MATTHEWS:  Thank you very much.  Up next, big changes in the CIA.  How big a fight will it be on Capitol Hill to decide whether to put General Michael Hayden in as CIA director?  This is HARDBALL only on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  The president‘s poll numbers are at subfreezing levels, 31 percent.  The CIA leak continues to hover over the White House and Democrats and Republicans are both raising big concerns about Bush‘s pick to run the CIA.

Here to cut through it all is opinionjournal.com‘s John Fund and The Washington Post‘s David Ignatius. 

John Fund, you know something about Machiavelli and the way politics is played.  Could it be that the president is being very cagey here.  He‘s saying OK, I‘m down to 31 percent in the polls, I‘m going down.  Cheney is even further down, he‘s in the teens according to what Kelly O‘Donnell just said a moment ago.  Why don‘t I pick a fight where I might win.  Why don‘t I pick a fight over domestic security, because that‘s where I‘m still strong in the polls, to wit, the latest NBC poll has him at 52 percent on protecting the country at home.  Is that what he‘s up to, changing the fight to the turf where he can win? 

JOHN FUND, WWW.OPINIONJOURNAL.COM:  I think our intelligence agencies are in such bad shape, I don‘t think any president would really turn that into pure politics.  I think the president realizes that the frontal assault that he tried to make on the insubordinate CIA bureaucracy didn‘t work.  So he‘s trying a new approach.  He‘s going to try something kinder and gentler.  The reorganization of our intelligence agencies has been a manifest failure.  Even one the 9/11 commissioners who recommended it, John Lehman, says its just added another bureaucracy.

I think the president realizes that if we‘re going to end his administration without any more terrorism attacks, we need better intelligence.  It‘s a matter of literally life and death.

MATTHEWS:  David Ignatius, we had Senator Feinstein on and I thought she was fairly level-headed, to put it lightly, when she said, we do have to have a dichotomy between the overall boss of intelligence and the head of the CIA under him or her, but that creates the problem.  Who is in charge?  Do you have a resolution to that?

DAVID IGNATIUS, WASHINGTON POST:  Well I think clearly what we‘re seeing since Friday is that John Negroponte, the director of national intelligence is in charge.  Porter Goes really did make a mess of things at CIA.  The president finally did what he should have done a year ago, spared the CIA a lot of the damage that was caused during the Goss years and nominated a guy who clearly works well and easily with Negroponte, namely his deputy, General Hayden. 

General Hayden is a man who does very well with the press, is a good briefer, generally liked by Congress.  I think as you were suggesting earlier, Bush thinks this is a fight he can win.  In truth, the Democrats are running for cover on the issue of warrantless wiretapping.  There have been no bills introduced, none, zero in the House or Senate that would actually curtail the presidential authority to do this. 

They would instead in effect rubber stamp what he‘s already doing or seek judicial review of it.  So I don‘t think he sees this as a loser.  My worry is that General Hayden, as nice a man as he is, as experienced as he is with the NSA and its intercept of communications, doesn‘t know anything about running CIA operations. 

Today the talk is that he‘s going to bring in a man named Steve Kappes, whose head was lopped off in really the most egregious of the Porter Goss purge moments.  He was the head of the CIA clandestine service, very popular, ex-Marine, tough guy, knows how to do it.  If he comes back, people who follow the CIA will think maybe they have a chance to put it back together.

MATTHEWS:  Yes, Gary Berntsen was on awhile ago tonight and he said this is the best guy you can find in the business.  He thinks he‘s really first rate, this guys, Steve Kappes.

IGNATIUS:  Kappes gets high marks from just about everybody.  At the time that he was canned by Goss and he was fired because refused to participate in the firing of his No. 2, Mike Sulick, whose crime was that he talked back to one of Porter Goss‘s congressional aides that he brought over.  But at the time that Kappes was chucked, he had a very clear and detailed plan for how to make the CIA operations directorate work better and do the job the country wants done.  So he‘s a really significant guy right now.

MATTHEWS:  Well maybe this is for the better.  We‘ll be right now with John Fund and David Ignatius on the question of the CIA leak case.  This could be the week for Karl Rove.  This is HARDBALL only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back with the “Wall Street Journal‘s” John Fund and “The Washington Post‘s” David Ignatius.  David, what are your ears telling you, or your sense of tickle, whatever I‘m going to call it, tell you about Karl Rove getting busted this week?  Getting indicted?

IGNATIUS:  You know, Chris, I wouldn‘t hazard a guess on that.  It has gone on so long that Fitzgerald obviously is seriously thinking about an indictment or we wouldn‘t still be here.  But beyond that, I‘d just be guessing.  Worse than guessing.

MATTHEWS:  John Fund?

FUND:  Chris, every administration has scandal.  Some serious and some not.  Ultimately, this will show to be not a serious scandal.  Karl Rove is not going to be indicted.  He may have been stupid but this will be—we will look back on this historically as a minor ripple.

MATTHEWS:  What is the minor ripple?  Define the minor ripple.

FUND:  There are lots of leaks in this administration.  Some were treated less seriously than others.  This was treated like the cause celeb because frankly Ambassador Wilson‘s credibility was attacked by some people in the administration. 

Frankly, the Senate Intelligence Committee found that he didn‘t have any credibility.  In the end, Joe Wilson is going to be found not to have any credibility.  The administration will have acted stupidly.  One person may have committed perjury.  Karl Rove will not be indicted.

MATTHEWS:  Let me ask you, let me go back.  Do you share that assessment, David?

IGNATIUS:  You know, I think John may be right.  This whole case, I think, is a little bit wobbly when you look at it.  And I honestly don‘t feel comfortable as a journalist slamming the table talking about leaks. 

I just think, we‘re facing all kinds of leak investigations on other fronts.  I think that the issue here is perjury and for Fitzgerald to bring a case, he would have to be convinced that Rove knowingly, willfully, lied about something important.  It is not the leak issue anymore.  It really is a case about perjury.

MATTHEWS:  Yes well I think it has a ramification.  I think the case was made for war.  I think that case was questioned by Joe Wilson.  Call him a whistle blower, call him a Democratic partisan, it doesn‘t matter.  And when he questioned the war and the case made for the war, especially WMD, and all of a sudden the administration seemed to go to general quarters over that and reacted in a way that they weren‘t so sure that the case they made for war was as sound as they made it. 

I think that‘s the story that has yet to be developed here, why I think people are most curious about it.  Let me ask but the president‘s role here.  Why did the president take away the policy role of Karl Rove?  John? 

FUND:  Very simply, his numbers are going down.  There is a general election in six months.  And Republicans in Congress were clamoring for some action.  We‘ve seen new staffers come in.  We‘ve seen some new people replaced and Karl Rove is not spending 100 percent of his time on get out the vote efforts trying to shore up a shaky Republican base.

IGNATIUS:  I agree, Chris.  I think that there is a chance that this November‘s election could be a real blowout for the Democrats.  I think the Republicans are really worried.  I was talking to a pollster today who said these numbers look eerily like ‘94.

MATTHEWS:  I think one of the reasons it might be a blow up is the CIA leak case and what it tells us about the WMD case made for the war that‘s cost the lives of 2,400 Americans.  Thank you John Fund and David Ignatius.  Right now it‘s time for “THE ABRAMS REPORT” with Dan.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

END   

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