updated 6/28/2006 12:29:04 PM ET 2006-06-28T16:29:04

Guests: Peter King, Ed Markey, Ken Auletta, Ray Kelly, John Fund, Margaret Carlson

CHRIS MATTHEWS, HOST:  Bush to the “New York Times,” drop dead.  It‘s the president versus the press.  Is this about politics or national peril?  Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews.  Welcome to HARDBALL, from New York. 

Tonight, who do you trust, the press or the president?  Monday the Bush administration declared war on the “New York Times” for publishing a story about the administration‘s secret program to track banking records of suspected terrorists. 

The “New York Times” says printing the story was in the public‘s interest, and noted that the framers of the Constitution intended to have us learn from an independent press as a check on government abuse of power. 

The president, President Bush, called the report “disgraceful,” and Vice President Cheney went further.  He called it disgraceful that the “New York Times” was awarded the Pulitzer Prize for outstanding journalism for an earlier report on the NSA surveillance program. 

New York Congressman Peter King joined in calling on the Justice Department to prosecute the newspaper for what he calls “treasonous acts.”  We‘ll talk to that Congressman, Peter King, in just a minute. 

But does the disclosure of this secret program hurt America‘s fight against terrorism, or is this just part of a political strategy to demonize the media in an election year, or could it be both?  Will this have a chilling effect and intimidate the press?  It boils down to who do you trust?  The government or the press? 

HARDBALL‘s David Shuster has this report. 

(BEGIN VIDEOTAPE)

DAVID SHUSTER, HARDBALL CORRESPONDENT (voice-over):  Today, President Bush and his staff got the headlines they wanted: “Bush Condemns Report on Sifting of Bank Records,”  “Surveillance Disclosure Denounced.”  The stories were not about whether the administration acted lawfully in monitoring international financial transactions.  Instead, the reports raised the issue of whether the media was irresponsible. 

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES:  The disclosure of this program is disgraceful.  We‘re at war with a bunch of people who want to hurt the United States of America, and for people to leak that program and for a newspaper to publish it does great harm to the United States of America. 

RICHARD CHENEY, VICE PRESIDENT OF THE UNITED STATES:  The “New York Times” has now made it more difficult for us to prevent attacks in the future. 

SHUSTER:  Cheney singled out the “New York Times” both for its reporting on the financial data program, and for being the first to disclose the National Security Agency domestic wiretap program that bypasses the courts. 

CHENEY:  What is doubly disturbing for me is that not only have they gone forward with these stories, but they‘ve been rewarded for it, for example, in the case of the terrorist surveillance program, by being awarded the Pulitzer Prize for outstanding journalism.  I think that is a disgrace. 

SHUSTER:  Bill Keller, the executive editor of the “New York Times,” said the paper engaged in lengthy discussions with the administration, and that the decision to publish was a “hard call.” 

But he added that since 9/11, the administration has “embarked on a number of broad secret programs, often without seeking new legal authority or submitting to the usual oversight.”  And he said publishing this program‘s reach was “in the public interest.”  President Bush disagreed. 

BUSH:  The fact that a newspaper disclosed it makes it harder to win this war on terror. 

SHUSTER:  But national security experts disagree with the president.  They say al Qaeda and other terror organizations stopped moving money through banks several years ago.  Why?  Because shortly after 9/11, the president himself revealed ...

BUSH:  We‘ve established a foreign terrorist asset tracking center at the Department of the Treasury to identify and investigate the financial infrastructure of the international terrorist networks. 

SHUSTER:  And two months later, the president appeared at a tracking center in Virginia, where Treasury Secretary Paul O‘Neill trumpeted new programs involving intelligence agencies, financial networks and law enforcement. 

PAUL O‘NEILL, SECRETARY OF THE TREASURY:  We have begun to act, to block assets, to seize books, records, and evidence, and to follow audit trails to track terrorist cells poised to do violence to our common interest. 

SHUSTER:  Political analysts believe the Bush administration‘s latest war with the media is motivated in part by the coming midterm elections. 

CHARLIE COOK, NBC POLITICAL ANALYST:  They‘ve got to motivate their base and conservatives, Republicans, tend to distrust the media, so any time you can play off and use the media as a foil, it‘s probably a good thing. 

SHUSTER:  It could be especially helpful in a political environment dominated by Iraq.  The situation there continues to appear horrific, and the administration has long sought to portray these images as misleading. 

The Bush administration is also facing criticism on how it has handled North Korea‘s threats to launch a long range missile and Iran‘s efforts to continue developing a nuclear program. 

And just today, there was a tough, investigative report about the widows of soldiers killed in Iraq.  The “New York Times” reported that the Pentagon‘s massive bureaucracy has made it impossible for some widows to collect all the benefits they are entitled to. 

(on camera):  None of those stories, of course, add up to good news for this administration.  But bad news is blunted when the messenger is scapegoated or becomes the focus of debate, and to keep the focus on the “New York Times” and away from surveillance programs or even government disclosures, administration officials are considering a Justice Department investigation. 

I‘m David Shuster for HARDBALL, in Washington. 

(END VIDEOTAPE)

MATTHEWS:  Thank you, David Shuster.  Republican Congressman Peter King, chairman of the House Homeland Security Committee is asking that the Bush administration investigate the matter and even charged the “New York Times” with treason.  He joins us this evening along with Democratic Congressman Edward Markey, who defends reporting of the “New York Times.” 

Before we begin, HARDBALL put in requests today for editors and reporters at the “New York Times” to come on this show tonight, but the paper declined our request.  We also called the “Wall Street Journal” and the “L.A. Times,” the two other papers that wrote about the banking story, and neither paper accepted our invitation.   

So let‘s go to Congressman Peter King.  What should be done to the “New York Times”?

REP. PETER KING ®, NEW YORK:  They should be investigated and prosecuted for violating the Espionage Act.  This was a program that was working, it was an effective weapon in the war against terrorism, it was entirely illegal and there was absolutely no public purpose at all in revealing it.  They might have as well have taken confidential information and handed it to Osama bin Laden. 

MATTHEWS:  Edward Markey, your response? 

REP. ED MARKEY (D), MASSACHUSETTS:  The “New York Times” has provided an enormous public service.  It has revealed that the Department of Treasury, the Bush administration, when confronted with internal criticism, inside its own administration that this program may be illegal, rather than in fact getting a court order, or going to Congress, instead they hired an auditing firm, Booz Allen, in order to determine whether or not constitutional rights were violated. 

That in and of itself is a violation of the Constitution, and I think that as the story unfolds and people understand it more, that the “New York Times,” rather than going to jail, will be put up once again for another Pulitzer Prize. 

MATTHEWS:  So you‘re saying, Mr. Markey, it‘s illegal for the government to have done what it‘s done in terms of tracking banking information? 

MARKEY:  It has a responsibility to obtain a federal court order under the Fourth Amendment of the United States Constitution.  It also, under the Financial Privacy Act of 1978, has a responsibility to protect this information. 

Their argument is that SWIFT is not covered by the law, but the law clearly says that if an agent of a bank is in possession of the information, it too is covered by the 1978 Financial Privacy Law, so as a result, there are two violations, which in my opinion, are quite clear, that the administration has been engaging in. 

MATTHEWS:  So you‘re saying it requires probable cause for the federal government to investigate these banking records? 

MARKEY:  That is correct.  Under the law, or under the Fourth Amendment, in order to engage in a search of a person‘s papers or person, there must be a probable cause which is established before a federal court.  Here they have not done it. 

Instead, they have gone to Booz Allen, an auditing firm, in order to make that determination.  We‘re going to celebrate on the Fourth Amendment our Constitution.  Booz Allen is not in the Constitution, but our federal courts and the United States Congress are, and the Bush administration has ignored both in putting this program on the books. 

MATTHEWS:  Congressman King, answer that question.  Is this an illegal program or not?  The surveillance of our banking records around the world? 

KING:  No it‘s not.  In 1976, the Supreme Court ruled in the Miller case that bank records are not protected by the Fourth Amendment because they‘re held by a third party.  Subsequent legislation that went into effect did authorize the use of administrative subpoenas, which was what was done here.  This is entirely legal. 

The use of Booz Allen was to put an extra layer of protection which was not required by the law, so here you‘re actually penalizing the government for doing something it wasn‘t even required to do.  Even the “New York Times” in this story last Friday has never suggested this was illegal anyway.  This was entirely legal. 

MATTHEWS:  So you go by the “New York Times” on this? 

KING:  Listen, if anyone was going to be critical of the “New York Times”—I don‘t believe the “New York Times” very often, but in this case, they are the ones who are the critics of the Bush administration, and even they are acknowledging it is legal. 

MATTHEWS:  How many years in prison do you get for espionage or treason?  And what is the charge you believe that should be leveled or investigated against the “New York Times”? 

KING:  A violation of the Espionage Act and also the violation of the Comment Act of 1950, because these were government secrets, government confidential, classified information, revealed in a time of war. 

MATTHEWS:  Do you want to see Bill Keller in jail? 

KING:  If he‘s found guilty, that‘s up to the judge.  But, certainly

(CROSSTALK)

MATTHEWS:  You say they‘re guilty. 

KING:  Yes.  You‘re asking me, yes, he should go to jail. 

MATTHEWS:  And how long should he serve? 

KING:  That‘s up to the judge.  You have to see what the mitigating facts are. 

MATTHEWS:  But spying against the United State government, it seems to me ...

KING:  No, that‘s fine.  Disclosing government secrets, that‘s not spying.  Disclosing government secrets.

MATTHEWS:  But you‘re saying he‘s guilty of espionage.  Just to get into the lingo here, you‘re saying he‘s guilty of espionage.

KING:  He‘s guilty of violating the Espionage Act, yes.

MATTHEWS:  So he‘s guilty of espionage.

KING:  Yes, spying ...

MATTHEWS:  The “New York Times”?

KING:  Yes—spying is—yes, who‘s the “New York Times?”  You make it sound like because they‘re the “New York Times,” they can‘t violate the law.  The “New York Times” violated the law.  They should be penalized.  I don‘t put them up on this statue like you do.  I‘ve lived with the “New York Times” my whole life.  There‘s nothing sacred about the “New York Times” to me.  They should be held to the same law as everybody else is.

MATTHEWS:  So if somebody is a communist, like Alger, who sneaks a secret out of the country and sends it to Moscow, secretly, he‘s guilty of espionage.  The “New York Times” puts something on the front page, is that spying, is that espionage?

KING:  I would call it espionage and it‘s a violation of the law.  Whether it‘s Alger Hiss or whether it‘s the “New York Times” is a difference of degree.  Alger Hiss did it surreptitiously, the “New York Times” did it openly.  But they violated the Espionage Act.  By the way, Alger Hiss was not convicted of espionage, he was convicted of perjury.

MATTHEWS:  Well because there was a statute of limitations on it.  He was guilty as hell.  Let me go to Congressman Markey.  What if Congressman King is right?  I mean, you make the case about the law and the Fourth Amendment protecting us from unreasonable search without probable cause.  Those are legal arguments, fair enough.

But what about the argument that Congressman King is making here, the larger argument, which is if you take away the American government‘s ability to fight terrorism by taking away one of the weapons we have, which is surveilling these bank records, you‘re endangering our citizens because you‘re letting the terrorists do what they do, which is terrorize America?

MARKEY:  There is it no American who wants to deny the Bush administration the right to tap the phones of al Qaeda, to read the e-mails of al Qaeda, to go through the financial records of al Qaeda.  That‘s not what we‘re debating right now. 

The question is whether or not in each one those instances the Bush administration has a responsibility to go to a federal court, to go to the Congress.  Instead, what they have done is outsourced the constitutional protections to Booz Allen.  Even this company Swift in Belgium had such serious legal concerns that they wanted extra lawyers on this issue, and they wanted the accounting firm.

So the issue is really not over whether or not we he want to protect against al Qaeda.  There‘s no question about that.  Mohammad Atta hijacked two planes from Logan Airport with my constituents on it.  We want to track down these killers. 

But at the same time, we don‘t want to shred the United States Constitution.  The Bush administration is arrogant in its avoidance of their constitutional responsibility to tell Congress about this program and to go to a federal court in order to get a legally obtained warrant.

MATTHEWS:  You heard the debate.  It‘s undergoing.  We‘re going to come right back, Congressman King.  You‘ve heard the debate tonight.  One congressman says it‘s a violation of the Constitution to check on these banking records.  The other congressman said the “New York Times” is guilty of espionage.  We‘ll have your reaction.  We‘ll be taking on the Bush administration in the flight with the media from NBC‘s Tom Brokaw.  He‘ll be joining us here.  And later New York City Police Commissioner Ray Kelly.  You‘re watching HARDBALL from New York, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  We‘re back with U.S. Congressman Peter King of New York and Congressman Ed Markey of Massachusetts.  Late today, I asked NBC‘s Tom Brokaw about the “New York Times” decision to report on the Bush administration‘s secret program to track banking records of suspected terrorists.

(BEGIN VIDEO CLIP)

TOM BROKAW, NBC NEWS:  My own judgment is that they did have the right to do it, and that they exercised what they thought was a responsible position after a very thorough review.  Obviously the administration is coming after them, and I think because it‘s heartfelt, they feel passionately that they have been betrayed, that the country has been betrayed in some fashion.  And in a Democratic republic, this is our we work things out, you have this debate in society. 

There have been some critics who have gone way too far on both sides, I think.  But I don‘t know enough about all the elements that were on Bill Keller‘s desk when he made that decision.  But based on what I‘ve read, I can see where they would have done that. 

MATTHEWS:  Are there any stories, conceptually, that you can imagine...

BROKAW:  ... Let me just say one other thing about that.  I don‘t know of anyone who believes that the terrorist network said, “Oh my god, they‘re tracing our financial transactions?  What a surprise.”  Of course they knew that they were doing that.

(END VIDEO CLIP)

MATTHEWS:  Let me ask you, Peter King, congressman, on both those points.  Do you accept the argument, Ron Suskind‘s got it in his book, the new book, “The One Percent Doctrine,” obviously published several weeks ago, that says the al Qaeda people, the bad guys have been on to the fact that we‘re checking the banking records?

KING:  First of all, I think it‘s a very unreliable, uninformed book, to start off with that.  But secondly, you wouldn‘t have Governor Kaine and Lee Hamilton and Jack Murtha all calling Bill Keller telling them not to go ahead with this if they thought it was unimportant.  I don‘t know who knows more about terrorism than Tom Kaine and Lee Hamilton.  And they called the editor of the “New York Times” and asked him not to do it because it would damage our national interests.

MATTHEWS:  Well on another count, let‘s take a look at Senator Arlen Specter, chairman of the Senate Judiciary Committee, a Republican, who‘s using this information he‘s gleaned from the “New York Times” in this story, to call for hearings about what the United States is doing with regard to checking banking records.

KING:  I disagree with Arlen Specter.  I will stand with Tom Kaine and Lee Hamilton in saying that it was wrong to do this and it damaged America‘s national interests.  I‘m certainly not going to be influenced by Ron Suskind.

MATTHEWS:  Let me ask you Congressman Markey, are there times that the press simply has to say, we‘d like to run this story but it endangers America?

MARKEY:  Oh, without question.  There is plenty of situations where that would be the case.  This is not one of those cases.  As you know, Chris...

MATTHEWS:  ... How‘d the—Congressman, how do you know sitting up there on Capitol Hill, that there aren‘t agents out there who are in danger, that there aren‘t terrorists out there right now who are ready to strike, that we could pick up with this kind of surveillance, but we won‘t be able to stop?

MARKEY:  This is not a situation where there‘s a phone which is being wiretapped and there may be an urgent threat to our country within the next 24 hours. 

This is a situation where the government, our government, gains access to this information weeks or months after the data has already been compiled.  So there‘s no urgency here.  There‘s no need to wall out the federal judiciary.  There‘s no threat to our country if the judiciary was able to be a part of the decision as to what the scope of the investigation would be.  No threat at all. 

It‘s only that this administration doesn‘t want the federal judiciary to be part of a wiretapping and e-mail, or a banking record investigation, and it has been consistent on that position, but I think that it‘s a constitutional question.

KING:  It‘s not a constitutional question.  The Supreme Court has said it‘s not a constitutional question.  In 1976, in the Miller case, they said there is no Fourth Amendment protection when it comes to banking records.

MARKEY:  Well again, the...

KING:  ... I don‘t know how much free you can get.

MARKEY:  The 1978 Financial Privacy Protection Act of the United States of America has on the books a requirement that the financial information of Americans not be compromised unless there is a legally-obtained warrant from a federal judge and here they did not obtain it. 

(CROSSTALK)

KING:  It allows the administrative subpoena.  It allows an administrative subpoena in those cases, which is what was done. 

MARKEY:  The administrative subpoena under that law requires that the person whose information has been subpoenaed be given a notification in the mail that it has been obtained, and here they have not provided any information to the thousands or millions of Americans whose information has been compromised.  That‘s the law. 

KING:  First of all, it‘s very few Americans ...

MATTHEWS:  Let me ask you both, do you agree that this program ...

KING:  It‘s very few Americans.  It‘s almost all overseas people, very few Americans were involved in this. 

MARKEY:  No, but they‘re doing it here in America.

(CROSSTALK)

MATTHEWS:  OK, do both of you Congressman accept the fact that the administration has been successful in nabbing terrorists using this kind of bank surveillance?  Congressman King first.

KING:  Absolutely.  Major case, Hambali, who was the architect of the Bali massacre, he was captured through this.  That‘s clear.  It‘s cut and dry.  And because of that, thousands of—at least hundreds of lives have been saved if not thousands. 

MATTHEWS:  Congressman Markey, how do you respond to the success of the program?  People want terrorists nabbed. 

MARKEY:  We want the terrorists nabbed.  This program is a success, but we don‘t know whose constitutional rights have been violated in that.  In the pursuit of terrorists, we have to make sure that innocent Americans‘ constitutional rights are not violated, and the White House does not want that judicial oversight to be a part of this process, and that‘s where this whole issue goes to the core of what we fought for in 1776, and ...

KING:  No, it goes to protecting Americans, protecting Americans and doing it under the law which is what the Bush administration is doing.

MARKEY:  There‘s no debate over protecting Americans.

KING:  And we‘re doing it under the law.  We‘re doing it under the law.

MARKEY:  They are not. 

KING:  They certainly are.

MARKEY:  The president cannot do it alone.  He must do it in concert with the United States Congress and the judiciary.  He cannot usurp this power to himself exclusively.  It is a violation of the Constitution. 

KING:  That is Ed Markey, not the Supreme Court speaking.  Thank you, Chris.

MATTHEWS:  OK, thank you.  Congressman, thank you for coming on

HARDBALL.

MARKEY:  Thank you. 

MATTHEWS:  We have to run out of time here.  I wish we could keep you on for the hour.

KING:  Yes, so do I. 

MATTHEWS:  Congressman Ed Markey of Massachusetts, Congressman Peter King of New York. 

Up next, who wins in the fight between the president and the media?  We‘re having it here.  Is this being exploited, by the way, to motivate conservatives for the midterm election?  How much politics is here, as well as this legitimate debate over national peril? 

You‘re watching HARDBALL from New York only on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.

The Bush administration is going full throttle, as you know, against newspapers, particularly the “New York Times” right here in New York, for publishing a story about government efforts to track terrorist money.  So who is right, and who will the American people side with, the president or the press?

I‘m joined right now by a real heavyweight, Ken Auletta, who covers the media and the communications industries for “The New Yorker” magazine.  You‘re probably the best—I asked for you.  You‘re the best news critic around, OK?  Who‘s right? 

KEN AULETTA, “THE NEW YORKER”:  I mean, I think the “Times” is right, but there‘s some things we don‘t know.  We know the “Times” was judicious.  They didn‘t rush to print this, as they didn‘t rush to print last year‘s report on illegal wiretapping.  They waited two weeks at least to do this, but we don‘t know, was there any harm by their publication as the Bush administration claims. 

The Bush administration should come forth with some evidence in that regard, so I think it‘s helpful to have a debate, but if you ask me, does the public have a right to know this material, I think the answer is yes. 

MATTHEWS:  When the Pentagon papers were published, I always wondered why the Nixon crowd got all upset.  Kissinger was always, you know, crazy about keeping things secret.  But that was about the past, how we got in Vietnam.  This is about an ongoing operation.  What is the rule in the press about reporting information about our weaponry, what we‘re doing, our strategies, while we‘re in combat with the enemy? 

AULETTA:  Well, the rule in the press, certainly, is that you don‘t report troop movements.  If you know in advance where American troops are going to move, we don‘t report that.  If we know that helicopters are going to be flown to Iran to try and rescue American hostages in Iran in 1979, we don‘t report that. 

MATTHEWS:  What about in the kind of war where it‘s about surveillance and intel, this kind of a war?

AULETTA:  Well, I mean, you know, the “New York Times” waited a year to report on the wiretapping that the Bush administration had done last year, so the press tries to be responsible, although sometimes it‘s not, sometimes it makes mistakes.

But, you know, the Bush administration starts with an attitude, which partly fuels, I think, the press reporting stuff like this.  We were not told the truth about weapons of mass destruction.  We were not told the truth about the link between Iran and Iraq, and Osama bin Laden. 

MATTHEWS:  Which doesn‘t exist.

AULETTA:  And we weren‘t told all the truth about Hurricane Katrina and its aftermath, so there‘s a ...

MATTHEWS:  By the way, to add to your argument, the vice president, who has been leading this charge, is particularly secretive.  Remember, he went to court to defend the right to keep the names of his advisors on energy policy, which is so critical to gas prices and everything else, secret. 

AULETTA:  And this administration takes the view, which is beyond where the Nixon administration and the Clinton administration, a lot of other administrations who have been angry with the press corps in Washington as well—but they take the view that we are a special interest and therefore we don‘t have the same right to know as we claim to have. 

We claim that we‘re representing the public, and the public has the right to know.  They claim that we‘re a special interest and we don‘t have the right to know and so, therefore, it springs from that attitude on the Bush administration‘s part that they say you are being inconvenient to us by publishing this.  Now it may well be that there‘s some harm caused and if there is, we should know it, but right now we don‘t know it. 

MATTHEWS:  You reference the fact that last year, the “New York Times” reported about National Security Agency spying, using electronic surveillance in terms of data transfers.  That story was held through an election.  It helped the administration to keep that story secret, so in that case, the “New York Times” was not wittingly, but on the side in effect, of helping this administration. 

AULETTA:  No, the “New York Times” is red meat to many elements of the Republican Party, and red state voters.  It is perceived as a liberal institution.  I don‘t believe it is.  Editorially it is, but not in its news coverage. 

Didn‘t they just blast the whole question on the front page, top of the fold, right near the banner of the Nixon—not the Nixon marriage—the Clinton marriage?  Didn‘t they break that whole story, Bill Keller approved that? 

AULETTA:  Well, how about Monica Lewinsky and a lot of other things?  The press—every president complains about the press.  It happens this one complains a little more than the others. 

MATTHEWS:  John Kennedy didn‘t like the “New York Herald Tribune,” so he killed the subscriptions at the White House.  What do you make of this discussion by, or proposal by “National Review”?  I‘ve always had a strong heart for “National Review,” because of Bill Buckley, and I grew up with it.  They‘re calling for the White House to pull the press passes of the “New York Times” reporters. 

AULETTA:  It‘s not going to happen.  And so—I mean, you can call for that just as Representative King can call for the “Times” to be prosecuted as traitors, or as guilty of espionage, but that‘s not going to happen either. 

MATTHEWS:  Tell me more about the inside thinking.  And we all know Dick Cheney is one tough customer, and that‘s good to have, I suppose, as a vice president.  You don‘t want a weakling, but he is particularly tough about the media. 

AULETTA:  He feels that—you know, so is Bush by the way.  I was down there doing a piece on Bush and the press two years ago for “The New Yorker,” and I was stunned ...

MATTHEWS:  “Fortress Bush.”

AULETTA:  “Fortress Bush” it was called in the “New Yorker” and I went to the chief of staff Andrew Card and I said, “Do you believe the press has a check and balance role?”  He said no.  I said, “You don‘t?  Tell me why.”  He said, “Because I think Congress has a check and balance role.  I think the courts have it, but you don‘t have it.”  You‘re just a special...

MATTHEWS:  ... He doesn‘t buy Jefferson‘s argument, that better to have a free press than a Democratic government.

AULETTA:  He did not buy it.

MATTHEWS:  He did.

AULETTA:  No, and I don‘t think Bush does either.

MATTHEWS:  How is this going to end up?  Will this be something we‘re talking about two weeks from now or is it just a blow up?

AULETTA:  No, I think Chris, actually this is a pattern going on across the country in terms of the press.  There are at least four cases where the Bush administration and the Justice Department is investigating reporters and their sources.  You have the Balco case in San Francisco, in the Barry Bonds case.  You‘ve got the case of the Pellicano, where they‘re investigating leaks to “The New York Times.”  You‘ve got the case of the “Washington Post” in terms of secret prisons in eastern Europe that they‘re investigating and you‘ve got “The New York Times” case on wiretapping.  So you‘ve got at least four cases.

MATTHEWS:  And there‘s one case they didn‘t care about.

AULETTA:  Which was?

MATTHEWS:  The leak of the identity of an undercover CIA agent.

AULETTA:  And of course it‘s OK when Bush leaks, but it‘s not OK when...

MATTHEWS:  ... Or with Karl Rove leaking, or with Scooter Libby leaking, the president let that go.

AULETTA:  He did.  So there is—we see as members of the press, we see a double standard here.

MATTHEWS:  Well there is.  Ken Auletta, the greatest, thanks for joining us.  I‘m glad we came to New York.  Up next, New York City Police Commissioner Ray Kelly himself talks about keeping our country‘s biggest city safe in the fight against terrorism.  That‘s going to be fascinating.  By the way, don‘t miss HARDBALL Wednesday night.  We‘ve got Mia Farrow coming on.  She has just been in Darfur.  rMD+IN_rMDNM_She‘ll tell us all about.  I love Mia Farrow, so did Frank Sinatra.  Also talk to a woman who supports the constitutional amendment to ban flag burning.  Military veteran Michael Campbell had the flag on his front porch torched by vandals.  You‘re watching HARDBALL on MSNBC.

(COMMERCIAL BREAK)

(MARKET REPORT)

MATTHEWS:  Welcome back to HARDBALL.  The Bush administration has declared war on “The New York Times” for reporting the administration‘s secret program to track bank records.  Late today, I asked New York City Police Commissioner Ray Kelly about the program and whether reporting on it compromises national security.

(BEGIN VIDEOTAPE)

MATTHEWS:  Commissioner Kelly, the “New York Times” has been being blasted the last by the president and the vice president for running that big story the other day about bank transfers around the world.  Does it endanger New York, does it endanger other cities?

RAY KELLY, NEW YORK CITY POLICE COMMISSIONER:  I think it‘s difficult to tell.  What I‘m surprised about is the lack of focus or attention on the people who are giving the “Times” this information.  It seems to be a whole new cavalier attitude out there, in terms of people who are required to keep secrets, who give secrets out apparently with impunity.

MATTHEWS:  So Treasury officials who were working there during this surveillance, you say they‘re the ones who are the real culprits here.

KELLY:  Well, I think somebody is the culprit, and I think investigation should follow.  Newspapers are going to do what newspapers do.  They get information, they‘re going to print it.  No, I think, certainly, federal employees have an obligation to keep secrets under penalty of law, and you see it more and more.  And apparently if you get out of government, you even feel even more allowed to put this information out.  It‘s wrong.

MATTHEWS:  If this—you know, you worked with politicians for years.  They run the city.  You‘re in charge of law enforcement.  Can you imagine being called upon to arrest the editor of the “New York Times” and haul him in?

KELLY:  I‘d prefer not to do that.  It‘d be pretty difficult.

MATTHEWS:  Well, let me ask you about the legal question here.  Are you aware of any law that would have to be enforced or could be enforced against a newspaper for publishing what is apparently the truth?

KELLY:  I‘m not aware of any.  Obviously, I‘m not a federal legal scholar but, again, I think the federal government has to look at itself and look at where this information is coming from.  Even this book, “The One Percent Doctrine” ...

MATTHEWS:  Doctrine.

KELLY:  ...it appears to me to be a lot of information that‘s classified that‘s out there, and I think it doesn‘t take a brain surgeon to figure out where that information is coming from, and I think some investigation should be initiated in this regard.

MATTHEWS:  Let‘s talk about the good guys and the bad guys, the ones who are trying to defend the peace, and the ones who are trying to hurt us out there.  Is it a constant process of learning new technology?  In other words, we‘re out there using bank transfers as a way of catching bad guys.  They discover us arresting guys who are using bank transfers.  They start going to human carriers.  Is that the normal pattern of law enforcement, the bad guys catch on to what you‘re doing in catching them?

KELLY:  Absolutely, and we have to be very careful not fighting the last war.  We have to stay up on technology, and we‘re not dealing with stupid people by any means.  And we know that, obviously, cell phones are something that we‘ve been listening to for years.

So they‘re very, very cautious and very careful in that regard, either changing phones or, obviously, personal carriers are being used to carry messages.  That‘s just the way the world is.  You know, it‘s a game that every day we have to try to outthink them, and they‘re trying to outthink us.  

MATTHEWS:  Do you think the iconic targets are still the ones most in danger?  I mean, we‘re fighting over funding money.  New York wants its big share because it‘s been hit the worst.  Are they still looking at things like the Empire State Building, the Golden Gate Bridge?  These crazy guys down in Florida the other day were picked up talking about the Sears Tower.

KELLY:  Yes, I think it‘s part of it if they want to hit us economically, and part of that is icons.  And it could be all of these things that you mentioned, but somehow they want to hit us in the pocketbook, they want to kill people, no question about that.  But, you know, bin Laden has talked about 9/11 costing this country and the world almost a trillion dollars.

MATTHEWS:  And he‘s happy about that.

KELLY:  Absolutely, and this is what they want to do.  So it‘s all, I think, you know, mixed together.  You can‘t say it‘s icons.  You can‘t say it‘s population centers.  One thing that we know—and anybody in the intelligence game will tell you this—New York is still their No. 1 target.  They want to come back here.  We‘ve been attacked successfully twice here.  A third time would say hey, you can‘t stop us.

MATTHEWS:  Let me ask you about funding and the money argument.  Is New York short on this?  Are you getting shorted by the federal government in what you need?

KELLY:  Sure, we‘re definitely getting shorted.  Again, we‘re a city that‘s been attacked twice.  We spend a lot of our own money to protect this city.  We‘re protecting national assets here.  The Stock Exchange is here, iconic statues and buildings are here.  It‘s coming out of our own pockets, for the most part. 

It‘s an expensive proposition, no question about it.  In the New York City Police Department, we spend about $200 million a year on our counter-terrorism program.  And, obviously, we‘re not getting anything like that back, and when it comes back, it‘s tied to hardware, it‘s tied to specific programs.  We‘re not able to spend it in the way we think it should be spent, so ...

MATTHEWS:  What can‘t you do, that you‘d like to do?

KELLY:  One thing we wanted to do, is put in a Lower Manhattan Security Initiative.  We want to harden the target, so to speak, from Canal Street south in Manhattan.  Again, we‘ve had two successful attacks there; it‘s where the Freedom Tower will be constructed, the Goldman-Sachs Tower will be constructed, New York and American Stock Exchanges are there, world financial center is there, other major corporations are there—still the center of the financial community, probably for the world.  We want to harden that target, we want to put in cameras, license plate readers, physical barriers, a coordination center—we won‘t be able to do that—

MATTHEWS:  How do you make that case to Congress?  Is it because that

there‘s sort of a repeat offender mentality—I want to use the right word

a sense that al Qaeda loves to go back and hit the same place again, or what?

KELLY:  Well, I think all you have to do is talk to the intelligence professionals, and they‘ll tell you that.  You look at the stream of traffic that comes through, you look at the investigations that are being done by federal agencies, and so much of it centers around New York.

We prefer not to have this title, no question about it.  But we are at the top of the terrorist target list.

MATTHEWS:  Is that because, like they always say—on a much lighter note—if you play baseball for the Yankees, everybody knows who you are, because you have the New York media behind you, the national media.  What is it that makes New York the magnet for this kind of terrorist trouble?

KELLY:  I think if you look at New York from outside—look at the United States from outside our country, New York IS the United States.  They refer to, one of the investigations—again, Iyman Faris was arrested plotting to take down the Brooklyn Bridge.  They said, “The bridge in the Godzilla movie.”  It‘s focused on New York.  It is the financial communications capital of the world and they definitely want to come back here.

MATTHEWS:  Are we safer now than we were on 9/11?

KELLY:  Yes.  We‘ve done a lot—the federal government‘s done a lot, we‘ve done a lot in the city, other cities have done a lot.  But we still have a long way to go.

MATTHEWS:  Thank you very much, Commissioner Kelly.

KELLY:  Thank you.

MATTHEWS:  Thanks for being on HARDBALL.

(END VIDEOTAPE)

MATTHEWS:  Up next, just a week after Congress shot down plans to get U.S. troops out of Iraq polls show that Americans agree with the Democrats.  Did Democrats drop the ball or did they fire up voters for the midterm election?  And a reminder, I‘m going on Steve Colbert‘s show tonight.  I‘m going to be the guest on “The Colbert Report.”  That‘s tonight at 11:30 Eastern on Comedy Central.  This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Were “The New York Times,” the “Los Angeles Times” and the “Wall Street Journal” wrong to run stories about a classified government program that tracks bank records of suspected terrorists? 

Margaret Carlson is a columnist for Bloomberg News and John Fund is a columnist for opinionjournal.com.  Are you conflicted here as a “Journal” person, John, to really have an opinion on this issue?

JOHN FUND, COLUMNIST, OPINIONJOURNAL.COM:  No, not at all.  I think the real perpetrators of this, the leakers are the ones that people should look at.  The Pentagon Papers case decided 30 years ago that the government cannot exercise prior restraint on things of this kind, unless there‘s something really specific like troop movements or something that directly endangers the national security.

MATTHEWS:  What about this espionage charge that Congressman Peter King has leveled?

FUND:  It‘s interesting, but the Supreme Court disagreed with him 30 years ago.

MATTHEWS:  He said that the only difference between Alger Hiss, the

known communist from the late ‘40s and early ‘50s who was put in jail for

lying under oath because they couldn‘t get him under the statute of

limitations—he was a spy for the Soviet Union during the ‘30s and ‘40s -

that the only difference between him and Bill Keller, who runs the “New York Times” is a matter of degree?

FUND:  Well, I know the Alger Hiss case and this is not the Alger Hiss case.  Having said that, there‘s an old line from the movies, Chris: just because you can do something doesn‘t mean you should do something. 

This program, as the “New York Times” original story said, was legal, it was effective and there was no evidence that it had violated civil liberties in an untoward fashion.  That begs the question then, what was the rush or the need to run this story?  That‘s a legitimate question, but the leakers—we have seen more national security leaks in this administration than we ever have. 

I think there is an internal war going on inside this government between people who basically believe the Bush administration is illegitimate and therefore they can say anything they want  and reveal they anything they want.

MATTHEWS:  And also the people leaking at the behest of the White House, as we saw with people leaking to Judy Miller.

FUND:  There are leaks all around.

MATTHEWS:  Right.  Let me go to Margaret Carlson.  Your view—so many things here.  Let me try to get to the accusations here.  Peter King, the congressman who was just on HARDBALL, said that the “Times” deserves to be prosecuted and he believes is guilty of espionage.

MARGARET CARLSON, COLUMNIST, BLOOMBERG NEWS:  Well I think of espionage is something you do in secret and that is not what the “New York Times” is doing by putting a story on the front page of the “Post.”  Congressman King was very excited.  I think he will regret the Alger Hiss comments, over the top. 

Listen, the only people who didn‘t know about this program are in Congress and the public.  Certainly the terrorists know that their phones are being tapped and their financial records are being tracked as well.  The question is whether the president ever bothers to follow the law or whether since 9/11, he can do anything he wants without consulting.

MATTHEWS:  So you argue with Congressman Markey that the president has done something illegal here in tracking financial records around the world?

CARLSON:  No, I don‘t.  I don‘t know whether he has.

FUND:  Margaret, the “New York Times” concluded that it‘s legal.

CARLSON:  I do know that you‘re supposed to ask—you‘re supposed to inform the Congress about such things, and on the—certainly on the wiretapping, there‘s a court set up to approve the wiretaps.  That takes no trouble for the president to do it, but this president actually prefers to do things on his own. 

MATTHEWS:  What would be wrong with tracking non-citizens in the third world who are moving money from Jeddah to somewhere, to the Emirates, or from Cairo to the Saudi Arabian capital.  What‘s wrong with checking out that stuff?  They‘re not Americans.

CARLSON:  I don‘t think there‘s anything wrong with it.  I think in both the wiretapping and the financial, however, that there‘s a much broader sweep, and for those domestic people and financial records that you‘re scooping up, you do need to either go to a court and you need to inform the Congress. 

MATTHEWS:  Would you run this story on Bloomberg if you got it? 

CARLSON:  You know, I find it a closer question than the one on wiretapping. 

MATTHEWS:  I do too.  I agree.  I think it‘s a hard call.  And by the way, Bill Keller said this was a hard call, and this is a good American debate. 

We‘ll be back with Margaret Carlson and John Fund for more on this argument between the White House and the media.  Both sides may be wrong.

The midterm elections coming up.  Let‘s talk about that one, and the debate that never ends and shouldn‘t about the Iraq war and the decision to go to war. 

You‘re watching HARDBALL from New York, only on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  From New York, a new poll by Gallup finds that 57 percent of the country thinks Congress should outline a plan for getting U.S. troops out of Iraq.  Just 39 percent think that decision should be left to President Bush and his advisers.  This comes less than a week after Congress shut down proposals by some Democrats to do what a majority is now saying the Democrats should have done.

Did the Democrats botch this debate, or did they rally the majority of the country to their side?  

We‘re back with Margaret Carlson, columnist for Bloomberg News, and John Fund, columnist for OpinionJournal.com.

John Fund, let me ask you this finally about this whole question.  Do you think that people really mean a Republican Congress—are they aware it‘s a Republican-controlled Congress at least as pro-war as the president?  What difference does it make whether a Republican Congress or the Pentagon or the president dictate a plan for war here?

FUND:  Well, Congress does have the ultimate power of the purse over military action, but I think Congress is reluctant to set a timetable.  It‘s not only because they are not sure that perhaps the tide in Iraq might be turning with the new government and Zarqawi being killed, but also the fact that we have a campaign coming up, which is going to decide this. 

Campaigns move poll numbers, Chris.  You know that.

MATTHEWS:  Right.

FUND:  And campaigns also bring out who is actually going to vote.  If turnout is very low, who will actually vote?  Will it be people who say I‘m going to pick the coherence of the Republicans, even though they‘ve made mistakes in Iraq, versus the incoherence and the disunity of the Democrats?  Nancy Pelosi the other day said, I am proud of the fact that we are not united on this.   

Well, American voters may have a different idea.

MATTHEWS:  Well, that‘s making lemonade out of a lemon. 

Let me ask you, Margaret, can it just be—did the Democrats simply hope that a vote for the Republicans is a vote for more war, and a vote for the Democrats is a vote for ending it?  Isn‘t that the hope of the Democrats?  A simple vote of get rid of this war, I‘m voting Democrat.  

CARLSON:  That‘s the hope of the Democrats prior to this last debate, which I think did hurt Democrats, despite what Nancy Pelosi says.  Listen, if you are called a coward for a week, and Bill Frist comes up and saying Democrats want to surrender, they want to throw everything that we have done away, on and on, if you are willing to call names to people that are just across the aisle from you, cut and run, it has an impact.  Not one that is lasting, however...

MATTHEWS:  Margaret, I want to make an indecent proposal.  That is that I think it‘s like dating and marriage.  I think the Democrats are willing to date the idea of pulling out of Vietnam—or Iraq this time, and yet when you come down and ask them, will you really live with that position, will you live with a position that you say cut and run, they will say, oh, well, I didn‘t mean that.  They seem to have a hard problem, which is simply saying what they believe when it comes down to a vote.  Am I fair here? 

CARLSON:  Well, when you use language like cut and run, it stirs up... 

(CROSSTALK)

MATTHEWS:  ... let‘s get out? 

CARLSON:  Well, get out when? 

MATTHEWS:  Within a year.

CARLSON:  Within a year, you know, you‘re not going to get a vote on that in an election year when you‘re being called names about it and when it‘s treason and when you‘re (inaudible) and when you don‘t support the troops. 

MATTHEWS:  I want to destroy (ph) this issue a little bit.  John Fund, could it be that the big debate here at home is irrelevant, because in the end the president is the president, the majority—the Democrats are never going to cut off funding.  So the issue is really going to be in the White House.  The president, the vice president and Rumsfeld are going to decide this thing.  We‘re in there for a couple of years probably no matter who wins.  Is that fair or are we going to stay in there much longer if the Republicans manage to hold on in these elections?  

FUND:  I think there will be some troop withdrawals announced before the election, and I think there will be phased withdrawals beginning next year, as the Iraqi government stabilizes.  We have 250,000 Iraqis under arms.  But, Chris, you‘re exactly right...

MATTHEWS:  Well, are we going to gradually get out of there in the next couple of years?  Is there going to be a big force of Americans, over 50,000, when Bush leaves office? 

FUND:  There will be a substantially reduced force, and it will be much less than what we have now. 

But you are absolutely right about your point about the Democrats and dating and marriage.  The Democrats have a problem with commitment, and ultimately people want to be with a party that shows commitment regardless of what the issue is and what their stand is.   

MATTHEWS:  You‘ve enlarged on my metaphor, John. 

(CROSSTALK)

CARLSON:  Yes, drop it now...

MATTHEWS:  ... the liberals have a problem with commitment... 

CARLSON:  Listen, they are building permanent bases in Iraq, so there is going to be a permanent force there.  I mean, there are huge installations.  Listen, George Bush...

MATTHEWS:  Are you for that?

CARLSON:  ... and General Casey...

MATTHEWS:  Are you for that, a permanent U.S. presence in the Middle East and trying to be the dominant military power in the Middle East? 

CARLSON:  No, listen, it‘s the U.S. presence in the Middle East that‘s started the problem.  And I think we have to pull back.

FUND:  Chris, we have a permanent...

CARLSON:  General Casey has announced that there is going to be withdrawals. 

Bush‘s plan is a version of cut and run, which is when I say it‘s time.  He‘s giving himself ultimate flexibility.  We‘ll stand down when the Iraqis stand up.  That‘s completely open door for Bush to decide how and when. 

FUND:  Chris, there is no news in a permanent military presence in the Middle East.  We have had troops in Turkey for 60 years.  We‘ve had troops in Saudi Arabia for 20 almost. 

CARLSON:  And look where that got us.

MATTHEWS:  Well, I am not sure that‘s the American vote there.  We‘ll see if the American people want to be a permanent military presence in Iraq.

Thank you, Margaret Carlson, and thank you, John Fund. 

Play HARDBALL with us again tomorrow night when our guests will include a man who supports a constitutional amendment to ban flag burning.  Military veteran Michael Campbell had a flag on his porch torched by vandals. 

Plus, actress Mia Farrow, who‘s just back from Darfur.  And tonight at 11:30 Eastern, I‘ll be Stephen Colbert‘s guest—I think that‘s the right word—on “The Colbert Report” on Comedy Central.  Right now, it‘s time for “THE ABRAMS REPORT.”

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

END   

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