updated 7/2/2007 10:59:59 AM ET 2007-07-02T14:59:59

Guests: Mark Green, Michelle Bernard, Lisa Comoso Miller, Karen Finney, Dewayne Wickham, Eugene Robinson, Jill Zuckman

CHRIS MATTHEWS, HOST:  London police defuse two car bombs that could have killed hundreds.  Security‘s raised in New York, and President Bush‘s cabinet is meeting at the White House.

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews.  Welcome to HARDBALL.

A terror plot was stopped today in London when police defused two car bombs packed with nails and gasoline.  U.S. officials tell MSNBC (SIC) News that British authorities are looking for three men now believed to be from the Birmingham area of London (SIC), a center of radical Islamic unrest in Britain.  U.S. officials told NBC that the devices appeared designed to create a highly explosive bomb of the type that had been used and seen in Iraq, but until now not in the West.

Late this afternoon, White House spokesman Tony Snow announced that a cabinet-level meeting is happening at the White House tonight, with homeland security adviser Fran Townsend leading it.  We‘ll have the latest on what‘s happening in a moment.

Also tonight, a bad week in Bush world.  We‘ll have more on that with our HARDBALL panel.

But first, we have the latest on the London terror plot from NBC‘s Stephanie Gosk in London.  Stephanie, what‘s the latest on these two car bombs?

STEPHANIE GOSK, NBC CORRESPONDENT:  Well, Chris, you know, the first car bomb was found in the early hours this morning in this area of London, the Piccadilly Circus area.  Thursday night is typically a club night.  People like to go out.  There was a call.  Someone was concerned about a vehicle in this area .  A bomb expert squad came in.  They defused the first bomb.  As you said, it was filled with gasoline and propane tanks.  There were nails on the floor of that bomb. (SIC)  They cordoned off this area, shutting down a vital artery of London.

Hours later, they found a second suspect vehicle, very close to where I am right now, about a mile away, in an area called Park Lane, near Hyde Park.  They actually evacuated parts of that park, created a 200-meter cordon around that area.  We‘re now being told that was the location of the second bomb.  And now it appears this evening that this city has averted a potentially devastating coordinated terrorist attack—Chris.

MATTHEWS:  Stephanie, these are areas—I was just over there with my

daughter few weeks ago.  These are areas where everyone gathers.  These are

You could kill hundreds of people, couldn‘t you, with a bomb that went off in one of those two spots.

GOSK:  You know, on a day that wasn‘t busy in this city, you could kill that many people in these areas.  But today, Friday before a very busy weekend in London, Chris—you have Wimbledon being played nearby.  You also have the Concert for Diana on Sunday.  This city is teeming with tourists.  But not only tourists, you also have common Londoners that frequent these parts of town.  So really what you‘re talking about is highly populated, popular places.  The attack would have been devastating.

MATTHEWS:  Are the British police—Scotland Yard—are they looking for other car bombs in the area right now?

GOSK:  Well, you know, there was a third location in the city that was actually shut down earlier today, in Fleet Street, which is a business center of London.  They soon reopened that afterwards.

You know, certainly, the city is skittish right now.  The police are being very cautious.  No doubt, should they get another phone call or another suspicious vehicle, they will shut down the city.  But right now, you have security officials, police fanning out across this city, trying to find, and hopefully, avert, a disaster here—Chris.

MATTHEWS:  Stephanie, tell us how the phone system was used to potentially detonate these car bomb.

GOSK:  What we‘re being told is that the cell phone was—was to be used to coordinate the explosions, to detonate these car bombs, one would imagine, around the same period of time, you know?  And what we‘ve heard people say all along today is that the sophistication of the detonation device is one of the best indicators of who might be behind this bomb plot.  So certainly, the cell phone gives investigators a better look at who these people were and how they were planning this attack.

MATTHEWS:  Do we have any hard indication that these were Islamic radicals, that this is part of the Islamist movement, the very militant people we‘re fighting over now in Iraq and had to deal with on 9/11?

GOSK:  Well, nobody is making that direct link publicly right now, Chris.  But the fact that they‘ve identified three people from the Birmingham area—Birmingham has a history of arrests and raids.  Very recently, just this year, in the first couple months of this year, a number of people arrested and suspected for terrorist activities.  They were Islamic militants.  So certainly, that is the suspicion right now here in London—Chris.

MATTHEWS:  Thank you very much for that report, Stephanie Gosk, who‘s in London, right on Piccadilly Circus right now.

President Bush is in Kennebunkport, at their family estate up there, but at the White House, his cabinet is meeting at this very hour about the London terror plot.  NBC News White House correspondent Kelly O‘Donnell is traveling with the president up in Maine.  Kelly, what‘s the president doing right now?

KELLY O‘DONNELL, NBC CORRESPONDENT:  Well, Chris, we understand that the president, from here in this idyllic setting, has been able to be briefed on the situation in London.  And as you indicated, he‘s called for a cabinet-level meeting of principals.  That would mean those members of the cabinet who have bus that would directly to these sorts of events—so Department of Justice, Homeland, Security, the CIA.  They‘re meeting at the White House, led by Fran Townsend, who is the president‘s homeland security adviser.

At about 2:00 o‘clock this afternoon, she made a call to the president here in Kennebunkport, gave him the latest update on what the U.S. knows and what they‘re learning from British officials about this situation.  She‘s repeating that session with those cabinet-level officials.  There will also be a connection, I‘m told, with some members of the president‘s party who are here in Kennebunkport by secure video teleconference.  So there‘ll be a connection between Maine and the White House to discuss this issue.

The officials here are telling us there‘s no indication of any specific threat against the U.S., no indication of any need to raise the terror alert in the U.S.  But as the situation develops, the president is learning more about it.

He was also today out on the boat with his father, the former president, fishing for a while.  And Tony Snow, the press secretary, was asked, was there any consideration given to putting aside that trip, given the circumstances?  And Snow responded that, no, there wasn‘t because early in the day, the information was just fragmentary.  The president had been briefed.  And then Tony Snow said, What I don‘t want to see is president goes fishing while the nation worries about terror, because that‘s not the case, trying to reinforce that even though we‘re here in this coastline community where the Bush family has had a home for more than 100 years, they say the president is following these developments and will continue to get briefed as officials learn more.

The White House also says that U.S. assets, whether it‘s CIA, FBI, intelligence is being shared and will help the British government in any way possible.  The other notable event today is that the president and Gordon Brown, the new prime minister, have not spoken by phone.  Sometimes in events like this, the president would make such a call.  Tony Snow said at this point, Gordon Brown has his hands full with what‘s going on there and that it is not necessary, and a phone call is not anticipated, but that on a governmental level, there‘s a lot of cooperation.  So they‘re definitely trying to convey an image, the president paying close attention to this—Chris.

MATTHEWS:  OK.  Thank you, NBC‘s Kelly O‘Donnell up in Kennebunkport, Maine.

We‘re joined right now by two MSNBC terrorism experts, Evan Kohlmann and Steve Emerson.  Let me start with Steve.  This thing looks to me to be a local matter.  They said that the suspects are from Birmingham, a hotbed of sort of militancy of that area of London (SIC), and that these car bombs don‘t look like the sophisticated model we‘ve seen from al Qaeda.  Do they, Steve?

STEVE EMERSON, TERRORISM ANALYST:  No, they don‘t look like they‘re al Qaeda, per say.  But certainly, there‘s an al Qaeda-inspired direction to this, and it mimics the July ‘05 attacks.  The cell phone was really, as Evan said before, was a tell-tale sign that they were al Qaeda-oriented, same MO.  You can look it up on the Internet.

But I think this indicates that London, even the U.S., considering the Fort Dix and the JFK plot continue to be plagued by these self-organized and self-activated cells that are not tethered to an external direction or and external al Qaeda organization.

This is now going to increase, I believe—I was speaking to an FBI official before, and he believes—actually, he predicted there would be multiple bombs found in London, given the MO of the al Qaeda-oriented organizations.  But he believes we‘re going to start seeing a lot more of this in other countries, including the United States.

MATTHEWS:  What do you mean by al Qaeda-oriented or directed?

EMERSON:  Al Qaeda-directed would be somebody from an al Qaeda

organization that says, You are to do this, sort of the “Manchurian

Candidate”

MATTHEWS:  Right.

EMERSON:  ... orientation.  These are the people that are radicalized because of the imams that they hear, the mosque literature, the Internet, and they believe there‘s a campaign against Islam.  Therefore, they have to avenge it, and they take it upon themselves.  They self-finance, self-activated, self-radicalized.  Maybe—maybe—they go to Pakistan for a blessing from somebody, but certainly, the operation stems from internal type of dynamics, rather than external.

MATTHEWS:  What do you make of the crude nature of the bomb, where you have a car packed with gasoline and nails to be detonated by a liquid detonator over the cell phone?  Is that to the level we‘re used to getting from al Qaeda, which blew up the World Trade Center and the London bombings, et cetera, and the African bombings and the U.S. (SIC) Cole?  Is this on that level of sophistication?

EMERSON:  Well, the Cole bombing and 1993 bombing, for that matter, in the United States, in New York City were nitrates, were fertilizers.  And this could have been that, but they didn‘t use it.  They used regular petrol, or fuel oil they could have obtained anyplace.  The explosion would not have been as catastrophic had they used, let‘s say, RDX, a type of plastique explosive, which is very, very combustible and also causes great damage.

So it shows that it was constructed inside London, or inside Britain, rather, and it was used—and internal materials that were purchased at regular, everyday stores were used, similar to how the other bombs were constructed in ‘05.

Definitely, the Brits have a major problem on their hands.  They do not have the same ratio of agents to terrorists as we do in the United States.  They are undermanned by a factors of a hundred, and I think that‘s a real problem for them.

MATTHEWS:  How did they manage to capture—catch these two cars, which were ready to be detonated as bombs and killing hundreds of people, before they were used by the killers?

EMERSON:  Well, first of all, I believe the two cars were stolen, so in that case, they already had reports about the stolen license plate numbers...

MATTHEWS:  Right.

EMERSON:  ... so they were looking for the plate numbers.  The first one was actually stumbled across accidentally by somebody who saw smoke arising—a policeman who saw smoke arising from the car itself.  But they‘ve done a phenomenal job.  I would not be surprised, Chris, if they found a third and fourth bomb today because that is the type of multiple explosion MO that these types of groups use.

MATTHEWS:  You know, I was just over there, as I said, with my daughter for her graduation trip, and I have to say that that area of London, which is a lot of fun—it‘s got all the movie theaters, it‘s got the theaters, it‘s got the nightclubs, the restaurants, the bars.  It‘s packed with people.  I mean, like Broadway in the United States.  It is overwhelmed with young people, mainly in their teens or early 20s.  Is that what it‘s about?  That‘s what true terrorism is, isn‘t it. hitting people where there‘s so many people having fun?

EMERSON:  Well, it would be several levels.  One, yes, it would be hitting people with a large concentration of civilians having fun.  So you would absolutely devastate the tourist economy there in London.

MATTHEWS:  Right.

EMERSON:  Number two, you would intimidate everybody because of the

nightmarish scenarios of all the carnage.  And number three, this would

send a message to Britain that they—that these al Qaeda-type terrorists

not necessarily owned by al Qaeda—but they could strike within any place they want within London.  And that‘s what they‘re trying to do.  London needs to strike back and get a big hit because they‘ve been on the losing end for the last two years.

MATTHEWS:  Well, how do they strike back at their own community, if it is, in fact, their own community in Birmingham, their Islamic community, which has put these bombs together and has attempted to kill all these people?

EMERSON:  Well, you know—you know, every single time there‘s a bombing that goes off, they always impose—it‘s the nature of society.  It imposes greater stringent security laws.

MATTHEWS:  Right.

EMERSON:  And in this case, Tony Blair had set in motion these commissions to study radicalism.  But unfortunately, the very commissions he set up consisted of people from the Muslim Brotherhood that dissed—and basically disrespected London as trying to engage in a war against Islam.  That‘s worst type of canard that can be used in radicalizing young Muslims.

I think they‘re going to have to change their approach to how they deal with the imams, the mosques and the Islamic centers.  It‘s not working the way they thought it would work.

MATTHEWS:  Wow.  Let‘s bring in Evan Kohlmann.  Stay with us, if you can, Steve.  Evan Kohlmann‘s joining us.  Evan, what is your thought about how—what this says to us about the threat to us here in America?  Is this a terrorist group with a global reach, to use a phrase used by President Bush back at 9/11, or is this a local situation involving militant Islam in London against its downtown center?

EVAN KOHLMANN, NBC TERRORISM ANALYST:  Well, I don‘t think there‘s any way of separating off North America from this.  I mean, just look at the organization that are in the U.K. that are responsible for radicalizing these people.  There‘s the al Muhajerin (ph) movement, which is now known as al Sunna al Jamaa (ph) and the Strangers.  And it‘s taken on a dozen different names.  There‘s Abu Hamza al Masri‘s old organization.  That‘s the guy with the hook, who was recently convicted in the U.K. of terrorism-related offenses, Supporters of Sharia.

These groups all have branches here inside the United States.  They all have supporters here inside the United States.  And what‘s scary is, is that these guys aren‘t just saying, Oh, yes, let‘s do this in the U.K.—I mean, you have people—there‘s one guy that chats on one of these forums who talks about how he‘s in Brooklyn and talks about how he runs a store and killing people that come into his store because they‘re Jewish or they‘re Christian or they‘re anything that is opposed to his viewpoint.

If you think about terrorism on that level, on the local level, that these guys are willing to commit acts in their own locality to represent their anger and try to gain publicity for al Qaeda, it‘s chilling.  And that‘s exactly what you see.  You see people with no connection whatsoever, wannabes who are willing to carry out what al Qaeda needs to stay alive.  And as long as these attacks are happening, whether they‘re being organized by bin Laden or whether they‘re simply being encouraged by bin Laden through video recordings, through audio recordings, it‘s irrelevant.

MATTHEWS:  Well, the fact they left these car bombs in place to be picked up and identified by the police, literally picked up and towed, the fact that they weren‘t willing to stay on site and accept suicide and martyrdom—what does that tell you?

KOHLMANN:  Well, it would tend to suggest that these guys are not being sent out by al Qaeda proper.  It is sort of an al Qaeda calling card.  They like using suicide operatives because it really shows the degree of complexity behind the plot...

MATTHEWS:  And it also gets the job done.

KOHLMANN:  We‘ll, it does, and there‘s no eyewitnesses—or rather, there‘s no evidence left.  There‘s no suspects.

MATTHEWS:  Right.

KOHLMANN:  And that has tremendously frustrated the 7/7 investigation in the United Kingdom.  Don‘t get me wrong.  But at the same time, we have to be careful what we say on this because it‘s not like al Qaeda only uses suicide operations.  You can just look at Iraq and you can see that...

MATTHEWS:  Sure.

KOHLMANN:  ... there are plenty of operations they engage in.  We also have at least al Qaeda—would-be al Qaeda cells like the Madrid cell that kill hundreds of innocent people, change the entire course of—the entire political course of a country, and they didn‘t use a single suicide operative.  They used backpacks with bombs in them, the same thing as what you see here.

So I mean, you—it would tend to indicate, if you have suicide operatives, it‘s probably al Qaeda, but just because there aren‘t suicide operatives, we don‘t really know.

MATTHEWS:  OK.  Well, let‘s—let‘s—as we sit here in America covering this story, thank God and thank the work of the Scotland Yard and the police for catching these two car bombs before they could be detonated and blown up hundreds of people killed, hundreds of people—it would be a far different story tonight.

Evan Kohlmann, stay with us.  Steve Emerson, stay with us.

Once more on this London bloom plot, which, thank God, has been unmasked by the Scotland Yard forces, and as a cabinet-level meeting goes on here at the White House.  We‘re reporting on HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL. 

We‘re back with terrorism analysts Evan Kohlmann and Steve Emerson.

Steve, when the United States government is—is faced with something that just happened in London like this, where you have two car bombs discovered in time to defuse them, what does that say, when they also warn us at the same time to be vigilant?  What—what is that admonition all ability, as you see it, as an expert? 

EMERSON:  Well, look, there‘s a perfunctory nature to that attitude of being vigilant, because not everybody can be actually attuned to what a terrorist attack is going to look like.

Look at these passengers on the flight out of Minnesota, when they reported suspicious activity of the imams that were boarding the flight.  They ended up getting sued, and they have been vilified in the Islamic world. 

So, the fact is that there‘s an opportunity for people to play a role.  It‘s a minor opportunity.  In Israel, for example, 50 percent of all terrorist bombings are stopped or averted because of the civilian population observations and calls to the police.  That‘s an amazing statistic. 

We don‘t have that level yet here.  But, clearly, this was be—this was averted.  It wasn‘t foiled. 

MATTHEWS:  Right. 

EMERSON:  It was averted because of somebody who was seeing something that was suspicious.  On the other hand, one of the problems is, we don‘t know who‘s coming into the mosques in the United States. 

(CROSSTALK)

MATTHEWS:  Well, we have good—we have good samaritan laws in this country, Steve, to protect people who tried to aid a person in trouble and protect them from any kind of litigation afterwards for doing something perhaps wrong in their effort to save somebody. 

Why don‘t we have laws to protect people who think they see a problem? 

EMERSON:  Well, you know what?  It‘s interesting. 

When—right after the flying imam episode, there was a bill in Congress to actually execute a good samaritan law that would immunize a U.S. citizen from any type of legal prosecution. 

MATTHEWS:  Yes. 

EMERSON:  And you know what?  It was defeated, mostly by Democrats. 

And, unfortunately, I think there‘s a real problem here.  I don‘t think we are really cognizant of the nature of the radicalized problem we have on American soil. 

And I think that was demonstrated this past week by what I thought was an outrageous report issued by the Chicago Council on Foreign Relations that basically said it was Islamophobia, not Islamic terrorism, that was the problem. 

We have a real problem on American soil.  And it‘s only getting worse, given the fact that nine plots in the last three years have been self-activated, and not al Qaeda-related. 

MATTHEWS:  Let me go to—let me go to Evan Kohlmann for the same question. 

These plots were foiled.  These two car bombs were discovered in London by vigilant police work by Scotland Yard.  But, also, we also face what we‘re told now is a need for vigilance at home. 

If we‘re asked to be vigilant against—vigilant against suspicious objects or behavior, is that something that the government will back us up with, Evan?

(LAUGHTER)

KOHLMANN:  I wouldn‘t—I wouldn‘t bet anything on the U.S.  government, especially not politicians. 

I really—you know, I hate to say this, but there‘s only so many times you can say, be vigilant, watch out.  A lot of these guys are—they‘re not going to be captured, no matter how well we watch out.  I mean, if you look at what happened in London, if that car, if smoke hadn‘t been rising out of that car, it would have been found way, way too late, I mean, no matter how vigilant people are. 

And this is in London, where I think people generally are more aware of the threat than they are here, or more cognizant of its reality. 

I think, you know, it‘s—there‘s just so much you can do from a homeland security standpoint.  I understand, you know, when congressional Democrats are talking about diverting funds to Iraq and—and the—the lack of money spent on homeland security.  In some ways, I understand that.

But I think they have to also recognize there‘s a limited amount you can do.  Certainly, there‘s room for progress.  I mean, we haven‘t been scanning cargo going into airliners.  We haven‘t been scanning cargo coming into the United States off ships.  These are very basic things we could be doing that we‘re not doing, because they‘re not—you know, they‘re not politically advantageous. 

There‘s no red flag being—being, you know, waved around by anyone.  And there should be more attention paid to them.  But, again, we have to be a little bit realistic that the best place to stop these folks is, unfortunately, in combat zones abroad, and that, when we‘re talking about...

(CROSSTALK)

MATTHEWS:  Well, let‘s not jump to that conclusion, Evan, because we have this situation perhaps confronting us here in London where a militant Islamic group 100 miles away from London, in Birmingham, may have hatched this plot. 

That wouldn‘t have involved an overseas combat zone. 

KOHLMANN:   Well...

MATTHEWS:  It would be simply have been involving dealing with domestic security. 

KOHLMANN:  What I was going to say is that don‘t—don‘t underestimate the influence that foreign jihadists or foreign extremists of any kind may have had on these folks. 

MATTHEWS:  Sure.

KOHLMANN:  You know, we talk about the fact that they‘re—they probably built these bombs at home.  Where do you think they got these radical messages from?  Where do you think that they got these ideas from?

MATTHEWS:  Oh, yes, but how do you stop people from sending messages? 

EMERSON:  No, but, you know what, Chris?

(CROSSTALK)

MATTHEWS:  That‘s the problem.

Go ahead, Steve.

EMERSON:  The ideology here is global.  It‘s a global village right now.  It‘s not coming, necessarily, from Pakistan, Saudi Arabia.  It‘s all over right now. 

MATTHEWS:  Right. 

EMERSON:  The same type of radicalism exists in Los Angeles as exists in Birmingham. 

And the real problem really, and the challenge, is for Western societies to discredit the radicalism, while challenging and demanding Islamic mainstream leaders to disown them in their own communities, which is not being done.  That‘s the real problem. 

MATTHEWS:  And that‘s the whole question of, are we winning or losing the battle for the hearts and minds of these people throughout the world, including the non-organized people, the potentially organized people, the potentially militant people, because we‘re fighting in Iraq and Afghanistan?  And we don‘t know the answer to that one yet. 

Anyway, thank you, Evan Kohlmann.

Thank you, Steve Emerson.

Much more on the averted—thank God—London terror plot and the politics of terror here at home. 

You‘re watching HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL. 

Back with us right now, Michelle Bernard.  She‘s president of Independent Women‘s Forum.  And Mark Green, of course, is with Air America Radio. 

Mark, you‘re Mr. New Yorker, Mr. Knickerbocker, a political legend up there.  New York City is now on something called a ramped-up alert right now, compared to the rest of the country, which is still at yellow. 

New York City, does it feel a special pattern of parallel with London? 

When London gets hit, do you guys figure you are next?

MARK GREEN, PRESIDENT, AIR AMERICA RADIO:  No.  No.

When we were hit in ‘93 and ‘01, it was big and spectacular.  But car bombs, so far—and thank God—have never gone off here.  The Muslim community is both larger and more radical in London than in New York. 

And, in New York City, when you take a subway, there are signs and conductors who always say, if you see something, say something.  No one can be against that, but its‘ hard to know exactly how to react.  Who has the experience?

What London shows us is, thank God, that, ultimately, it‘s coordinated and shared intelligence-gathering, law enforcement, that can defeat local terrorists, instead of when Karl Rove, I remember, four years ago came to New York at a conservative party dinner.  He said, after 9/11, the Democrats cared about law enforcement—he said contemptuously—and we invaded Iraq and Afghanistan to go where the terrorists are.

Law enforcement shouldn‘t be belittled. 

MATTHEWS:  Yes. 

Let me go to Michelle on that point.

Michelle, it seems to me that, today, when you see a package left on a subway or at an airport, in a sitting area, it just creates an image in your mind now:  That damn thing is going to blow up. 

MICHELLE BERNARD, PRESIDENT & CEO, INDEPENDENT WOMEN‘S FORUM:  Yes. 

BERNARD:  Yes. 

MATTHEWS:  Whereas, 10, 20 years ago, we would just ignore that. 

Somebody went to get a coffee, and they left their bag there. 

Now you see a bag, and you go, wait a minute.  That‘s not supposed to look like that.  We‘re not supposed to see those things anymore. 

BERNARD:  Welcome to the post 9/11 world.  Everything is different.

I mean, when I heard about the London—or the foiled terrorist plots now, I thought about 9/11 again.  We thought—I thought about the Beslan school massacre in Russia a couple of years ago.  This is the world we live in, unfortunately. 

MATTHEWS:  So, how do we avoid being offensive to people who may have a Middle Eastern air or look to them, without jeopardizing ourselves?  This is the tricky question. 

BERNARD:  It‘s a—it‘s...

MATTHEWS:  Apparently, in that incident in the Midwest, people saw behavior on an airplane that scared the heck out of them.  They acted accordingly, and they created an incident.

And I—my judgment would be, always risk protecting yourself, if you have to make a risk.

(LAUGHTER)

BERNARD:  I agree with you.

You know, it‘s a close balancing test.  I don‘t want to say that we should be promoting racial profiling.  But we have got to be really careful, because what we know is, radical, you know, jihadism and radical Islam, it‘s a significant problem.  And you know what?  How do you fight people that want to kill us and who aren‘t scared to die? 

MATTHEWS:  Let me ask you, Mark, do you think the mayor of New York has been fair in his use of the code system?  Has he exploited these fears for political purposes?  Or do you think Mike Bloomberg has been sound in his decision-making? 

GREEN:  It‘s—first, I think he‘s been sound.  But it‘s impossible to second-guess people in law enforcement who have access to intelligence we don‘t. 

There was one well-known incident in New York when Mike Bloomberg was running for reelection in 2005, at a time when he was on the defensive on a certain local issue.  And they announced the FBI had thwarted a plot, and that news dominated.  And his opponent then criticized him—I‘m sorry—implied that he had done it for political reasons. 

Look, you asked the key question.  Ben Franklin, who has not yet been on HARDBALL, but, if he were, he would have said, those who surrender some freedom to assure security obtain neither. 

And, Chris, in our history, from the Alien and Sedition Acts, to the incarceration of the Japanese in World War II, to McCarthyism, historians have looked back and said that we surrendered freedom unnecessarily. 

Right after 9/11, 5,000 Muslim men were incarcerated—I‘m sorry—arrested and detained.  And they had to show that they were innocent.  Zero of the 5,000 later turned out to be terrorists. 

So, it‘s a case-by-case judgment, but you...

MATTHEWS:  Right. 

GREEN:  ... can‘t just—you can‘t just lasso entire ethnic communities. 

MATTHEWS:  No, but individuals have to make instinctive decisions based upon their own imminent fear. 

And you‘re not telling me that you think you shouldn‘t operate on the basis of instinct, are you? 

GREEN:  No. 

And, in fact, when I—once in the last three years, I left a package somewhere.  And then people ran after me and said, is that yours?  And everybody understood what was happening.  That‘s human impulse. 

MATTHEWS:  Yes. 

GREEN:  But let‘s be careful that law enforcement doesn‘t go the way of...

MATTHEWS:  No, I‘m worried about—I‘m...

(CROSSTALK)

GREEN:  ... stopping 5,000 Muslim men for no—it turns out, for no cause.

MATTHEWS:  No, I‘m following what Michael Chertoff, the head of Homeland Security, advises us to do, which is to be vigilant. 

If you see somebody doing suspicious activity, and you don‘t report it, you‘re wrong.  If you see people behaving in an unusual fashion that suggests trouble, you‘re wrong if you don‘t report that. 

I think people have to be citizen warriors at this time in our history.  They have got to use their common sense.  But they better damn well use their instincts as well...

GREEN:  By the way, Chris... 

MATTHEWS:  ... or else we‘re going to—by the way, it would have been better on 9/11 if those passengers knew what was coming, and had pulled their belts off their waists, and torn into those guys with the box cutters, and killed them all. 

GREEN:  Yes.  Who—who...

MATTHEWS:  That would have been better than what happened.

GREEN:  Who...

MATTHEWS:  And we know that.

GREEN:  Who can disagree with that?

MATTHEWS:  Right. 

GREEN:  Remember Admiral Poindexter, when he had what was then called a TIPS program to have postal and utility workers report if they saw something suspicious in homes?  That then tipped into the Big Brother area, and that was quickly ended, because that was seen as being a little too aggressive. 

MATTHEWS:  Well, you‘re more of a civil libertarian than I am. 

Anyway, thank you, Mark Green.

And, thank you, Michelle Bernard.

Up next: much more on the London terror plot.  We‘re covering the news, reporting it live as it‘s happening.  The Cabinet is meeting here in Washington.  People are watching.  Michael Chertoff, the homeland security secretary, is warning us to be vigilant. 

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

BERTHA COOMBS, CNBC CORRESPONDENT:  I‘m Bertha Coombs with your CNBC “Market Wrap.”

Stocks closed lower on the last day of trading of the second quarter, pulled down by the London bomb scare, higher oil prices, and concerns about risky mortgages.  The Dow Jones industrial averages were down as much as 100 points at one point, but ended the day down just 13 points.  The S&P lost two, while the Nasdaq fell five points. 

Consumers boosted their spending in May, according to the government, on solid income growth.  Spending rose a half-a-percent, the second monthly increase in a row.  Income rose fourth-tenths-of-a-percent. 

Oil prices rose $1.11 in New York.  Closing at $7.68 a barrel. 

And hundreds are lined up at stores across America to be the first buyers of Apple‘s new iPhone.  They go on sale at 6:00 p.m. local time across the country.  Apple has a target of selling 10 million iPhones worldwide by next year. 

They will sell a lot of them tonight. 

That‘s it from CNBC, America‘s business channel—now back to

HARDBALL. 

MATTHEWS:  Welcome back to HARDBALL.

Let‘s go back to London right now for the latest on that terror plot which was foiled. 

NBC‘s Stephanie Gosk is with us again.

Stephanie, as I was asking you before, the London police, Scotland Yard, are they still looking tonight, as you speak from there in Piccadilly, are they still looking for other, possibly, bomb—car bombs? 

GOSK:  Well, they‘re certainly out in the city of London right now, aware that there would be more car bombs in the city. 

You know, as you know, they shut down three parts of London today.  In two of those locations, they found two car bombs.  Just—one of them was found just down the road here in the early hours this morning. 

This area, actually, Chris, has just been opened up.  It had been cordoned off.  And you will see that there are people passing by, life kind of resuming, perhaps the testament to the elasticity of London life here. 

But quite a scare today.  British officials saying that had these two bombs been detonated, the affects would have been devastating.  They were large enough to cause wide scale damage, as well as loss of life.  What we now know is that NBC News has learned that there are three identified suspects and that those three identified suspects come from the city of Birmingham. 

Birmingham is about 100 miles north of London and has a history of raids and arrests, even within the last six months, where people have been arrested, suspected of terrorist activities.  Chris? 

MATTHEWS:  OK, thank you very much Stephanie Gosk.  It‘s near midnight in London.  Thanks for that report.  Today‘s terror plots are a reminder of the on-going threat of terrorist attacks here in the United States, and the politics of terror that comes with it, of course.  Joining me now is Karen Finney, communications director for the Democratic National Committee, and Lisa Comosa Miller, who is communications director for the Republican National Committee.

I have to go to the Republicans first on this.  You‘re the team that is running the country right now.  What‘s the political assessment here of this kind of situation in London, a foiled terrorist attack, two car bombs defused, basically, before they could be blown up? 

LISA COMOSO MILLER, REPUBLICAN NATIONAL COMMITTEE:  Chris, I think we should be proud of the program that we have in place.  This country has been led by a president who has taken an unpopular road from time to time on an issue that is an issue that everyone is concerned about.  We live in frightening times. 

MATTHEWS:  What is the unpopular road on terrorism?

MILLER:  Well, he has sometimes not followed the polls and not followed what political folks have said he ought to do, like the Democrats say that he should leave Iraq.  We‘re fighting Iraq—we‘re fighting al-Qaeda in Iraq today and in Afghanistan.  And the Democrats are saying we should pull out precipitously. 

KAREN FINNEY, DEMOCRATIC NATIONAL COMMITTEE:  Actually, Democrats are not saying that we should pull out precipitously.  But what we are saying, and this actually today proves our point, we need to do a much better job of proactively and effectively being in these other parts of the world where we know al-Qaeda—

Look at the resurgence of the al-Qaeda in Afghanistan.  We‘re not there?  Why?  Because our troops are bogged down in the middle of a civil war in Iraq.  

(CROSS TALK)

MATTHEWS:  9/11, the horror which will haunt us until we die, and maybe longer in the history of our country, was hatched basically in Hamburg, Germany.  Al-Qaeda is in all kinds of European countries.  It‘s probably around the United States in sleeper cells.  How can you target it?  That‘s a tough question.  How do you target and destroy an organization which is all around the world, which is a state of mind to some extent?  It‘s not necessarily a bunch of materiel or a cache of weapons somewhere. 

This kind of weapon we saw used in London could have been put together at a hardware store.  The idea that we have to go find weaponry or find bad guys, is it a Butch Cassidy type of situation?  You have to go find their hide outs like in Iraq?  Or is it an international threat we face, that is a political threat, and we‘ve got to deal with that somehow? 

FINNEY:  We‘ve got to deal with that somehow.  Part of the way you deal with that, there are a couple of things.  There are things that we can do right home, which is why Democrats passed the 9/11 Commission Recommendations to make sure that we close the gaps in our security right here at home. 

Then we‘ve got to actually look to restore our moral leadership in the world and restore our alliances around the world.  Because exactly what you said, Chris, this is a global problem, and that means we need global partners.  And given America‘s standing around the world right now, that doesn‘t help us work with our global partners and maintain the moral leadership that we need. 

It also means that we need to phase redeployment out of Iraq, so that we have more resources able to deploy in Afghanistan. 

MATTHEWS:  So you say getting out of Iraq helps us win the war on terrorism? 

FINNEY:  Absolutely. 

MATTHEWS:  How so?

FINNEY:  Well, let‘s start with the fact that the NIEs have said consistently that Bush‘s failed policies in Iraq is actually creating more terrorists than it‘s defeating. 

MATTHEWS:  OK, you respond to that, please? 

MILLER:  First of, we‘re saying the war on terror is take out of Iraq, get out of Iraq and come back home.  That‘s not the case, Chris.  Let‘s infuse more money into the intelligence program.  Let‘s find these folks where they are.  Let‘s be overseas.  Let‘s be in Iraq, where we have generals on the ground, who are there, who are active, who are taking—they‘re taking all kinds of intelligence and they‘re using it to our benefit. 

To come home and to say that we should retreat is absolutely the wrong way to go. 

FINNEY:  Which is obviously not what we‘re saying.  We‘re not saying retreat at all.  We‘re saying let‘s get smart about this.  We‘re say, let‘s have an effective, proactive strategy.  Let‘s not just—It‘s been ineffective, and you know it.  The policies in Iraq are not working.  They‘re creating more terrorists than they‘re actually defeating.  They‘re making the problem worse. 

What we‘re saying is it‘s also time—it‘s time to transition the mission.  The military mission—it‘s time to transition to a political solution.  When are the Iraqis going to stand up for themselves and take control of their country? 

MATTHEWS:  Who are these—let me ask you this, Lisa, when you think about terrorists, they all tend to be men in their early 20‘s.  That means five years from now, 16-year-olds and 15-year-olds will be terrorists.  The terrorists we confront in five years are teenagers now.  How do you stop those teenage boys generally, Arab kids, Islamic kids, from becoming terrorists? 

How do you do that?  How do you stop them from becoming the people who set car bombs in Picadilly Circus and maybe in New York someday. 

MILLER:  I don‘t consider myself to be an expert on security. 

MATTHEWS:  You said you‘re an expert on fighting terrorism.  How do you do it in that case?  How do you stop terrorists from becoming terrorists?  It‘s not a ethnic group.  These people choose to become terrorists.  How do you stop them from making that choice? 

MILLER:  Fundamentally, we go into their countries and we help them understand better ways to live and better ways to grow.  That‘s why we want to grow democracy over seas in countries like Iraq.  That‘s why want to help them get—

FINNEY:  Unfortunately in Iraq, that‘s not quite working, is it?  Because we know the surge isn‘t quite working, is it?  It‘s actually creating more terrorists. 

MILLER:  That report isn‘t due out until September. 

FINNEY:  We already know it‘s not working. 

MATTHEWS:  All right, thank you Karen, we must have you back for—we can talk about everything here.  In fact, you guys can do the show most nights.  Anyway, thank you Karen Finney.  Thank you Lisa Comoso Miller.  Up next, we‘ll bring in the HARDBALL panel for more analysis of the averted terror plot in London. 

Tonight, wee have good news, a terror plot that was averted.  This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Let‘s get right to it with tonight‘s panel.  Dewayne Wickham is a reporter for “USA Today,” who was one of the panelists, by the way, in last night‘s Democratic presidential debate at Howard University.  Eugene Robinson is a columnist for the “Washington Post.”  And Jill Zuckman is a reporter for the “Chicago Tribune.”

Let‘s talk about the London bomb plot.  London authorities were lucky to defuse two explosives today, two different car bombs that could have killed hundreds in the very crowded Picadilly area, the west end, as we call it.  Gene, you used to work over there.  You were there during previous terrorist eras, especially during the IRA‘s worst days.

EUGENE ROBINSON, “THE WASHINGTON POST”:  Right, I was there in the early 1990‘s, when you didn‘t worry about Islamic terrorists blowing anything up.  It was Irish terrorists that they were worried about.  You know, Londoners are fairly phlegmatic about this sort of thing, but not entirely.  My sense now is that people are really concerned. 

You find two cars full of—packed with explosives and nails and everything.  It‘s—I don‘t know how British society is really going to deal with this issue.  They don‘t do multiculturalism as well as we do.  They do it better than the rest of the Europeans, but they don‘t do it as well as we do. 

MATTHEWS:  So assimilation never quite happens? 

ROBINSON:  Not quite.  You get the sense that the Muslim community is a community apart and isn‘t fully integrated into British life.  And, you know, commentators have talked about that.  Scholars have written about it.  I think the British would like to do something about it.  They don‘t quite know what to do, I think. 

MATTHEWS:  Dewayne, your thoughts on this.  It seems to me that this is always going to be a Saturday morning story tomorrow morning in all our newspapers.  It will probably be a weekend story, because London is an English-speaking capital, just like New York and the rest of this country.  And we do see—It is the mother country, I suppose, still.  Does this resonate here as a fear factor? 

DEWAYNE WICKHAM, “USA TODAY”:  Oh, I think certainly as a fear factor it resonates, but it also teaches us a lesson.  And that is that we have too many of our resources, military and intelligence, bogged down in Iraq, a country that‘s going to fall apart faster than Saigon whenever we leave, rather than focus on rooting out al-Qaeda, wherever it is, in Afghanistan and the mountains of Pakistan.  And I think most people in this country understand that. 

MATTHEWS:  Well, what do you do?  I want to ask you this, since you raised the question.  You‘ve got, what looks three suspects from the Birmingham area, an area of militant Islam in London.  They have their own local gripes about British society, Non-assimilation, resentment of whatever kind.  And then you have the inference that you‘ve got this propaganda being piped in from abroad from al-Qaeda to them.  They have been described by Steve Emerson on this program tonight as al-Qaeda directed, al-Qaeda guided. 

How do you deal with this sort of alley-oop play, as we say in the NBA, where one crowd outside the country says go get them, put some nails together with gasoline, put in the car, have a liquid detonator and use a cell phone?  Then you have the domestic guys that are angry with the society.  How do you stop that alley-oop? 

WICKHAM:  Well, I think a part of what you have to do is cut off the head of the leadership.  You know, Colin Powell thinks that famously in the first Gulf War, that they were going to go in, cut off their heads and kill them.  That‘s what we need to do with al-Qaeda.  We need to go after the leadership.  How many messages have we gotten this year from the second in command? 

MATTHEWS:  Where is the head of al-Qaeda? 

WICKHAM:  I don‘t know where he is, but I suspect, as most intelligence people do, that he‘s somewhere in Afghanistan or the mountains of Pakistan. 

MATTHEWS:  You‘re talking about bin Laden himself, yes. 

WICKHAM:  What they don‘t think is that he‘s in Iraq. 

JILL ZUCKMAN, “THE CHICAGO TRIBUNE”:  I‘m skeptical that there‘s somebody off in Afghanistan communicating to these people in England to go off and set off bombs.  It seemed, from what‘s happened in the past, that it‘s been young people who have kind of taken it upon themselves and go off and put together a plan.  And how do you stop that?  I don‘t know. 

ROBINSON:  I mean, this is the problem.  We‘re supposed to be competing for the hearts and minds of this community of adherence to this great world religion, and we‘re losing.  We are losing. 

MATTHEWS:  I can only imagine Islamic people around the world, whether in Cairo or in Chicago, are watching the war in Iraq.  They‘re not happy about it.  We‘ll be right back with our panel with more.  You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  We‘re back with the “Chicago Tribune‘s” Jill Zuckman, the “Washington Post‘s” Gene Robinson and “USA Today‘s” Dewayne Wickham.  Dewayne, you are first.  The week, the president lost on immigration big time.  It looks like it‘s gone fore his entire presidency.  Dick Lugar, the ranking Republican on Foreign Relations has turned against him on the war with others to follow, perhaps fairly soon.  Rate the week. 

WICKHAM:  He also lost McConell, the leader of the Republicans in the Senate, on immigration.  It‘s been a bad week. 

MATTHEWS:  And maybe on Iraq too.  You don‘t know. 

WICKHAM:  Yes, it has been a really bad week.  But not unlike previous weeks.  I mean, he has had a bad yea.  And, in fact, he has dug himself into a hole that‘s going to produce an awful legacy for this president.

MATTHEWS:  Gene?

ROBINSON:  Well, you know, it—

MATTHEWS:  Do you cut him some slack?  The courts seemed to do well this week for him.

ROBINSON:  The court did great for him.

MATTHEWS:  They got rid of civil rights.

ROBINSON:  Exactly, the court did what they put them there to do.  But, no, not a good week for the president overall.  You know, Lugar, that‘s an important defection, and the Republicans aren‘t going to—they are going to try not to stand for this forever. 

MATTHEWS:  Is this just a clock ticking, the calendar turning?  You are saying yes, Jill.  Eventually people, even his most loyal soldiers and generals, will say Americans will only fight a war for four years?  We‘re just not going to keep in a war situation.

ZUCKMAN:  I just think anybody who had any question about whether President Bush was a lame duck had it answered this week.  I don‘t think he‘s going to be able to accomplish anything he wants for the rest of his presidency.  You won‘t see any major—

MATTHEWS:  Let me offer another view.  Ike, when he was getting old and he had a couple heart attacks and he had Sputnik and he had the U-2 and he had Castro, he had a hell of a good close.  President Reagan had a hell of a good year and a half with Gorbie at the end, after everybody counted him out with Iran Contra.  Bill Clinton, after Monica, came back and did very well. 

Are you sure he‘s dead?  This guy could be Freddy Krueger here.  He could come back a number of times. 

(CROSS TALK)

ROBINSON:  It isn‘t happening. 

MATTHEWS:  Could he come back?

WICKHAM:  Chris, when you lose your party‘s leader in the Senate on your major domestic policy issue for the year, you go from being a lame duck to a dead duck president. 

MATTHEWS:  OK, I‘m left here as the last defender of George W. Bush.  Dewayne Wickham, Gene Robinson—I‘m sure he‘s glad to hear that—and Jill Zuckman.  Monday on HARDBALL, Democratic Party Chairman Howard Dean is coming here.  I‘ll see you then.

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

END   

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