updated 11/21/2007 9:01:14 AM ET 2007-11-21T14:01:14

Guests: Dan Balz, David Yepsen, Gov. Mike Huckabee, Doris Kearns Goodwin, Jonathan Capehart, Julie Mason

CHRIS MATTHEWS, HOST:  Was Bush himself part of the CIA leak cover-up?

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews.  What did he know and when did he know it?  That‘s the question tonight for the president of the United States.  When did he know that his people, Karl Rove and Scooter Libby, had been involved in leaking to reporters the identity of a CIA agent?

Here‘s an excerpt from former White House spokesman Scott McClellan‘s upcoming book.  Quote, “The most powerful leader in the world had called upon me to speak on his behalf and help restore credibility he lost amid the failure to find weapons of mass destruction in Iraq.  So I stood at the White house briefing room podium in front of the glare of the klieg lights for the better part of two weeks and publicly exonerated two of the senior-most aides in the White House, Karl Rove and Scooter Libby.

“There was a problem.  It was not true.  I had unknowingly passed along false information.  And five of the highest-ranking officials in the administration were involved in my doing so—Rove, Libby, the vice president, the president‘s chief of staff, and the president himself.”

Tonight, we‘ll ask all our guests about this news.  How will it play in the 2008 presidential race?  And how will it affect the remainder of Bush‘s presidency?

                We start with HARDBALL correspondent David Shuster.  David, you and

I have been           covering this story for a number of years now, going back

to 2004, trying to figure it out -- 2003, actually—trying to figure it out, trying to figure out what role the leadership of this administration played in the decision to leak the reporters the identity of Joseph Wilson and his wife, the CIA agent, Valerie Wilson.  What do we know tonight?

DAVID SHUSTER, HARDBALL CORRESPONDENT:  Chris, this is a blockbuster development because—and here‘s why.  The period that Scott McClellan is talking about, September 2003, that‘s when reporters were already pressing the White House about a CIA referral to the Justice Department for a criminal investigation.  By then, Valerie Wilson‘s cover had been—had already been leaked.  And the question was, Well, who was involved?

There were questions about Karl Rove and Scooter Libby.  Scott McClellan said, I spoke to Karl Rove, I spoke to Scooter Libby, they denied that they were involved.  Well, Scooter Libby‘s trail revealed that Vice President actually wrote out talking points for Scott McClellan to specifically clear his chief of staff, Scooter Libby.

For the first time, McClellan is now saying that also President Bush wittingly or unwittingly helped convince McClellan that McClellan needed to go forward and do as the vice president wanted, and that is, say that Scooter Libby was not involved, even though the evidence shows that Vice President Cheney knew at the time that Scooter Libby was involved, and that Karl Rove was involved.  So it puts President Bush directly in this, as far as Scott McClellan lying to the American public.

MATTHEWS:  But that also shows—fairly or not, it does displays a couple of truths.  One is that when Scooter Libby denied all this under oath, and in fact, became guilty of perjury by a jury and guilty of obstruction of justice by a jury, that he was basically making the same public line, giving the same case that the president was telling his spokesman to make to the public in the press room.

This story in the courtroom that we were getting from Scooter is the story that the president told Scott to tell in the press room, the same line—The White House was not leaking.

SHUSTER:  Yes, that‘s right.  And it came out that Vice President Cheney, of course, was putting pressure on Scott McClellan to go ahead and repeat this lie.  There was testimony from the trial itself where Scooter Libby can be heard testifying to the grand jury.  And Scooter Libby mentions that just before the criminal investigation began, just before Scooter Libby was going to talk to the FBI, he started to talk to Vice President Cheney about this.  And Cheney essentially said, No, no, no, we can‘t—I don‘t want you to sort of talk about this.

But on the tape, you hear Scooter Libby essentially telling Vice President Cheney, I‘m going to stick with what is out there.  In other words, that Libby was going to the FBI and was going to say, I was not involved and I must have learned this from reporters.

At that time, Vice President Cheney knew that what Scooter Libby was doing was Scooter Libby was heading to the FBI and was about to tell a falsehood.  Now we learn that Scott McClellan helped perpetrate that falsehood on the American people around the same time because President Bush encouraged Scott McClellan to do so.

Now, it could have been that the president said, Hey, the vice president wants you to do this.  I want you to listen to the vice president.  Or it could have been, Andy Card, the chief of staff, wants you to do this, and I want you to do what the chief of staff says.  And maybe the president didn‘t know the details.  But the fact that Scott McClellan is pinning this now not just on Vice President Cheney but also on President Bush—that is new, and that is a big deal.

MATTHEWS:  Can you imagine back four years ago, if in the midst of all this, before the trial of Scooter Libby, before the investigation ended of Karl Rove, that the president of the United States‘ spokesman had come out and said the president, the vice president, Andy Card, the chief of staff, Karl Rove, and Scooter all told me to cover this thing up, basically, that I was doing the wrong thing, I was unknowingly telling an untruth.

And now to have it come outs—what gets to me is how I put this together now.  It seems to me that Fitzgerald, Patrick Fitzgerald, said that indicting Scooter Libby, the vice president‘s chief of staff, for perjury and obstruction of justice—he said, You were the guy in the baseball diamond who kicked dirt in face of the umpire so he couldn‘t see what happened here.  You were the one that put a cloud over the vice president himself.  And now we have a cloud put over the vice president and the president by the president‘s spokesman...

SHUSTER:  And Chris...

MATTHEWS:  ... who said that he was misled by these people, whether knowingly or not—and I‘ll tell you, in the case of the president, maybe there‘s a question mark.  It‘s hard to believe that the vice president did not know that his chief of staff was doing what he told his chief of staff to do, isn‘t it?

SHUSTER:  Yes, that‘s absolutely right.  It‘s absolutely right.  Clearly, the vice president knew what Scooter Libby was going to do.  That came out at trial.

But what this also does, Chris, is it gets to the motive.  Why would the vice president send out Scooter Libby to lie to the FBI?  Why would they send out Scott McClellan to lie to the American public in September of 2003?  The prosecution theory has been that the White House wanted to push this off past the 2004 election, and they knew that it was going to take a while for a prosecutor, whether it was Fitzgerald or somebody else, because Fitzgerald hadn‘t been named at that time...

MATTHEWS:  Right.

SHUSTER:  They knew that the only way the story would come together would be if reporters testified, and it played out the way the White House wanted because it took Fitzgerald nearly two years before he could get the courts to agree to force reporters to testify and the truth started coming into play.  By then, the president, the vice president, they had already won re-election.

MATTHEWS:  Well, all we know now, on the record now, according to Public Affairs Publishing, which is going to publish this book by Scott McClellan this coming April, that they released those two paragraphs I read from at the beginning of the program—and I‘ll read them for the guests.

But clearly, this is the president‘s spokesman saying in a book, “What Happened”—is the name of the book—he‘s clearly going to come out and say that the president, the vice president, the president‘s chief of staff, Scooter Libby, the chief of staff to the vice president, all the—and Karl Rove, the president‘s chief political hand, all had a role in getting him to put out untruth, to deny the role played by Karl Rove and Scooter Libby in this whole leaking matter, which, of course, all had to do with defending the WMD case, the war with Iraq, which was, of course, at that point, after the invasion, and when we couldn‘t find any WMD, highly—and known to be—defective.

Thank you very much, David Shuster.

SHUSTER:  You‘re welcome.

MATTHEWS:  We‘ll be on this story throughout the show.

David Yepsen is a political columnist, of course, for “The Des Moines Register,” and Dan Balz is the national political correspondent for “The Washington Post.”

Dan, you‘re one of the top Washington reporters on the politics of this thing, the reverberations.  Will this be the time that the politicians running for president on the Republican line have to decide whether they‘re going to go down with this president on this particular point, the CIA leak case and the case for the war with Iraq, or they‘re going to cut their ties?

DAN BALZ, “WASHINGTON POST”:  Well, they‘re going to eventually cut their ties, Chris.  I think the real issue will be how artful they are in beginning to cut them over this issue without totally abandoning the president.  And I think there‘s probably some ways they‘ll be able to do that, which is simply to say they would never condone such a thing, they would not do it, but they don‘t know all the facts.  I mean, that‘s usually the kind of approach that a candidate takes when they want to stay away from an issue like this.

MATTHEWS:  Yes.  Well, let me—David Yepsen, let me lead you a bit as a witness here.  Scooter Libby has been commuted, his sentence of many, many months, of perhaps five or more years in prison, were commuted by the president.  It‘s all part of this thing.  Any voter out there can see the connection between the commutation of his sentence, the saving him from prison time, may well be connected to a decision in the beginning not to tell the whole truth in this matter, knowingly or not, by the president, the vice president, the chief of staff, Karl Rove, the whole bunch of them.

I notice in the polling out there, there‘s a lot of questioning about character and honesty.  Is this going to be an issue?

DAVID YEPSEN, “DES MOINES REGISTER”:  Chris, I think this has a profound impact on the campaign.  Democrats are going to look at this and say this whole story just confirms everything they thought about Bush.  It will place a new set of issues in front of the electorate.  It almost starts to feel like 1976, when a guy named Jimmy Carter came to the forefront promising to tell the truth, promising honesty.  I mean, we‘re almost, like, repeating the end of the Nixon era here, where one thing leaks out and then another.  And pretty soon, the whole thing starts to fall apart.

And I think it‘s going to have a big impact on the issues that are talked about.  It confirms for Democrats everything they talked about.  It discourages Republicans.  And I think you will see—as Dan said, I think you‘ll see Republicans really try to distance themselves.

And finally, I think this may help the non-Washington candidates, the Mike Huckabees of the world, the Barack Obamas, who are not considered to be Washington insiders.  This will help the outsider candidates.

MATTHEWS:  Let me go now to Dan on the larger question of this primary fight, this caucus fight coming up in Iowa.  Is it evident from the poll numbers that “The Washington Post” reports this morning that Obama is on the rise?

BALZ:  It certainly—it certainly would suggest that.  Everything we‘ve seen over the last, I would say, 30 to 60 days—and David would have a better sense of this even than I—but suggests that Barack Obama has become a better candidate in Iowa than he was previously, that he‘s speaking to voters out there in, I think, a more crisp way and in a more focused way than he had been.  So there have been signs, as you follow him around Iowa, of him becoming a better candidate, and therefore a more effective candidate.

I think all things being equal, though, what this poll confirms not only are some good approaches that Obama‘s following, but also the fact that this is still a real donnybrook out there.  You know, everything is within the margin of error.  There‘s some internals that are good for Obama.  But this is a battle royal out there.  It has been.  I think every one of the candidates knows that and has been operating under that assumption for some time.

MATTHEWS:  David, you‘ve seen the poll numbers that came out of “The Washington Post” this morning that the great bulk of the Democratic caucus attenders are concerned about change, rather than experience.  That seems to benefit Barack.  Will this latest bombshell out of Washington about the leak case help that case for change?

YEPSEN:  I think it does, Chris.  I think there‘s no doubt about that.  I mean, even before this story broke today, “The Washington Post” poll is showing statistically what we can sense on the ground here, and that is the argument between experience versus change, Clinton versus Obama, has started to shift in favor of change.  People—more Democrats want to see change than want to see a president with experience.

And so I think you‘re right, Barack Obama has been doing better on the ground out here.  His organization is good, arguably the best.  He‘s better on the stump than he is in these debates, which is how most Americans see him, is in the debates.  He kind of fumbles around.  He‘s a lot better on the stump.

But yes, I think that this last development today is going to help Barack Obama.  And on the Republican side, Mike Huckabee too, as a candidate who says, I‘m different, I‘m fresh, I‘m honest, it‘s time to turn the page.

MATTHEWS:  You know, it seems to me, Dan—you work in Washington most of the time, but you‘re out there—that one thing that stirs the Democratic base is probably a contempt for the vice president of the United States.  And it seems to me there‘s only one way to read this story today.  Either the president knowingly participated in a cover-up, which is yet to be proven or even to be ascertained or claimed as you go through the careful reading, perhaps, of what Scott McClellan has written as part of this book he‘s coming out with—but clearly, the vice president—he‘s the one that‘s either got the president misinformed, or he‘s manipulating the president.  But he once again looks like the Darth Vader of this administration.  Is this going to drive Democratic activists?

BALZ:  Oh, Chris, certainly, it has and will continue to drive Democratic activists, as does the president.  I mean, I don‘t think there‘s any question about that.  I think the issue will be which of these candidates is best able to take advantage of that?  And as David suggested, perhaps it may be a Washington outsider.

I think one of the things you‘re seeing is Senator Clinton talking about the kinds of fights the Democrats have had against Republicans and the skill and the toughness with which Republicans have gone after Democrats in past campaigns, and that because of what she‘s been through, she‘s better able to deal with that, fend it off and ultimately defeat it.

The argument from Obama is that, Look, we‘ve just simply got to change the way we play the game.  She may be very skillful at that game, but it‘s a game that the American people are tired of.  And I think, increasingly, you are seeing that playing out, particularly in Iowa, in the dialogue back and forth between the two campaigns, which becomes sharper every day.

MATTHEWS:  All right.  Thank you very much, gentlemen.  David Yepsen, thank you, as always.  Dan Balz, one of the great reporters.

Anyway, when we return right now, we‘re going to come right back and talk about that with Mike Huckabee, who‘s rising very high in the polls out there in Iowa.  He could well be the upset man.  He could be the Cinderella man of this whole campaign.  We‘ll be right back with—by the way, here‘s an ad he‘s put out about him and Chuck Norris.

(BEGIN VIDEO CLIP)

CHUCK NORRIS, ACTOR:  Mike Huckabee‘s a life-long hunter who‘ll protect our 2nd Amendment rights.

MIKE HUCKABEE (R-AR), FMR GOVERNOR, PRESIDENTIAL CANDIDATE:  There‘s no chin behind Chuck Norris‘s beard, only another fist.

NORRIS:  Mike Huckabee wants to put the IRS out of business.

HUCKABEE:  When Chuck Norris does a push-up, he isn‘t lifting himself up, he‘s pushing the earth down.

(END VIDEO CLIP)

MATTHEWS:  Can Huckabee actually win in Iowa?  Can he defeat Mitt Romney?  We‘ll talk to him in a minute from Iowa.  He‘s coming up next on HARDBALL.  You‘re watching it, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Mike Huckabee is the former governor of Arkansas.  He‘s running second in the latest Iowa polls.  He‘s doing very well out there, according to that poll that went out from “The New York Times.”

Let me ask Governor Huckabee—thank you for joining us.  You‘re in Florida, sir, is that correct?

HUCKABEE:  That‘s correct.  Happy to be with you again, Chris.

MATTHEWS:  Did you get the latest news from the Public Affairs Publishing company that Scott McClellan, who was a long-time spokesman for the president, says that the president, the vice president, the chief of staff—well, let me read you his words.  “The most powerful leader in the world had called upon me to speak on his behalf and help restore credibility—the credibility he lost amid the failure to find weapons of mass destruction in Iraq.  So I stood at the White house briefing room podium in front of the glare of the klieg lights for the better part of two weeks and publicly exonerated two of the senior-most aides in the White House, Karl Rove and Scooter Libby.”

Quote, “There was a problem.  It was not true.  I had unknowingly passed along false information.  And five of the highest-ranking officials in the administration were involved in my doing so—Rove, Libby, the vice president, the president‘s chief of staff, and the president himself.”

What‘s your reaction to that statement?

HUCKABEE:  Well, I‘m just hearing it this afternoon for the first time.  It‘s stunning.  It‘s one of those moments where I‘m very glad that I‘m not a Washington insider.  It would not be a good time to have a Washington address.

MATTHEWS:  Do you think this smacks of the problem of cover-up and sleaze and underhanded behavior, when even the president is apparently, according to his spokesman, party to a cover-up, willingly or not, wittingly or not putting out false information and then commuting the sentence of the person who shared in that party line, which was to deny any criminality?

HUCKABEE:  Well, Chris...

MATTHEWS:  In other words, Scott...

(CROSSTALK)

HUCKABEE:  ... these are serious allegations...

MATTHEWS:  Scott was told to do something, Scooter did it.  I mean, it‘s fairly parallel here.

HUCKABEE:  Well, they‘re serious allegations, but we don‘t know yet whether they‘re true.  Scott‘s not saying this under oath.  It‘s not being denied under oath.  And I have a feeling that before it‘s all finished through the wash, that‘s what‘s going to happen.

But these are serious allegations.  They deserve to be thoroughly examined, investigated, and the truth brought to the American people. 

MATTHEWS:  Do you think the American people deserve a statement from the president in this regard, personally?

HUCKABEE:  Oh, I think he will have to respond to it, because the closeness and the fact that Scott McClellan was one of his most trusted aides and in the position of press secretary.

MATTHEWS:  Yes. 

HUCKABEE:  Had this been somebody very distant in the food chain, he could have ignored it.  But you can‘t ignore it when someone as close to the president as a press secretary makes that kind of allegation. 

MATTHEWS:  Let me ask you about your appeal.

You must know, when you travel around—I mean, when you come here, everybody seems to like you.  You seem to have an appeal to the American people right now, Governor, that wasn‘t expected when we first looked at the shape of this field.

Can you explain it? 

HUCKABEE:  Well, there‘s a big, long line of people who don‘t like me that much, too.  They‘re throwing all sorts of stuff.

But I—I think what people sense in me is that I‘m not a candidate who‘s the sort of culmination of a room full of consultants.  I pretty well say what‘s on my mind, and I‘m going to say it the same way tomorrow that I said it yesterday.  I think people find that refreshing.

I know what I believe.  I‘m comfortable in that.  If the people reject me in those beliefs, I can live with that.  I couldn‘t live with changing my view every day to come up with one other way to try to sell the voters on something that I don‘t even believe myself. 

And I think, if there‘s anything that the American people are looking for in leadership, it‘s not that they have to agree with me on every issue, because they won‘t, but they would like for me to agree with myself that I would approach this with convictions, with a sense of—of clarity. 

MATTHEWS:  Right. 

HUCKABEE:  And I do believe that, whether a person is a Republican or Democrat, they‘re looking for that.

MATTHEWS:  You seem to be a conservative fundamentalist.  I don‘t mean that in a religious sense, although I know you are, but a fundamentalist about the Constitution as written, the original intent on the Second Amendment.  You seem to be a person who‘s very comfortable with a hard-and-fast position on a lot of conservative truths.  Is that the best way to look at you?

HUCKABEE:  I would like to think that.  Of course, you know, then I would get attacked for being a pro-life liberal by one of the other candidates.

So, it‘s really one of those issues, Chris, where I think labels sometimes become so simplistic.  I‘m a conservative.  I think I‘m an independent conservative.  I‘m not a wholly-owned subsidiary of Wall Street. 

I challenge my own party to talk more about hunger and poverty and about the environment, because I think we ought to be giving leadership on issues like that, as well as education and health care reform. 

And I feel like we have allowed maybe the Democrats to own those issues, and they shouldn‘t.  Frankly, the American people ought to own those issues.  It shouldn‘t be left, right, liberal, conservative issues.  It ought to be vertical, up-down issues. 

And what I‘m sensing people are wanting more than anything else, more than a Democrat or Republican, they want someone who says, “If I‘m elected president, I will manage the crises.  I will manage the government.  And we will fix some of these problems by not trying to make it all a Republican solution.”

Now, I don‘t think that detracts from my being a conservative. 

MATTHEWS:  No.

HUCKABEE:  I think it perhaps means that I have been a governor, and I have had to actually balance a budget and make things work.

MATTHEWS:  You know, it sounds like—and I mean this with respect—it sounds like you‘re a bit of Martin Luther.  You‘re a “Here I stand” kind of guy.

HUCKABEE:  That‘s a compliment to me. 

MATTHEWS:  Oh, it sure is.  I—I mean it that way.

HUCKABEE:  Martin Luther is one of my theological heroes.

MATTHEWS:  And I mean it that way, but it seems like you‘re almost a...

(CROSSTALK)

HUCKABEE:  And, as a Baptist, you know, to give praise to Martin Luther, no, it‘s a...

MATTHEWS:  And you‘re leading a reform of the conservative movement, it seems to me.  It‘s a little deeper than just a personality change.  It looks to me like you want to reform the conservative movement, purify it. 

HUCKABEE:  I don‘t have any illusions that I‘m, you know, the great white hope of the conservative movement.

But I do think that, for example, true conservatives ought to be conservationists.  True conservatives ought to do that which will preserve and conserve the best of our children and the next generation.  We ought to bring the kind of reforms to health care that actually, in the long term, will cost less money than what we‘re doing now, which is intervening at the last moment of catastrophic disease. 

MATTHEWS:  Yes.

HUCKABEE:  There are some things that we can do that could radically change this country‘s future.  And, if we don‘t do it, Chris, and if all we do is just sit and argue about who‘s winning, Democrats or Republicans, it‘s our grandchildren that ultimately are going to pay the price for that. 

MATTHEWS:  OK, thank you very much, Governor Mike Huckabee, who‘s making a big challenge for that Iowa Caucus on January 3. 

Up next:  Barack Obama gets candid on the campaign trail, talking about experimenting with drugs.  He has done this before, but he did it again today, talking about how he experimented with drugs as a young man—or young boy, actually. 

And how did Rudy Giuliani react to that?  Interesting, how Rudy reacted to that bit of campaign noise.   

Anyway, back with HARDBALL in just a moment.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL. 

So, what else is new out there politically?  Well, Barack Obama is speaking out about his drug use as a youth.  Take a look at this candid admission today before some high school students in a study hall in Manchester, New Hampshire. 

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE:  You know, I made some bad decisions that I have actually written about.  There were times where I, you know, got into drinking, experimented with drugs.  You know, there was a whole stretch of time where I didn‘t really apply myself a lot.

And it wasn‘t until I got out of college—or got out of high school and went to college that I started realizing, man, I have wasted a lot of time. 

(END VIDEO CLIP)

MATTHEWS:  Well, it‘s not the first time Obama has made the admission about youthful drug use. 

In his celebrated memoir—and I mean good memoir—he recalls—quote—“Pot had helped, and booze, maybe a little blow when you could afford it, not smack, though.”

Rudy Giuliani reacted to Obama today.  Here he is reacting to what Obama said about his youthful drug use. 

(BEGIN VIDEO CLIP)

RUDOLPH GIULIANI ®, PRESIDENTIAL CANDIDATE:  I respect his honesty in doing that. 

I think that one of the things that we need from our people that are running for office is not this pretense of perfection.  And the reality is, all of us that run for public office, whether it‘s governor, legislate—legislature, mayor, president, we‘re all human beings. 

If we haven‘t made mistakes, don‘t vote for us, because we got some big ones that are going to happen in the future...

(LAUGHTER)

GIULIANI:  ... and we won‘t know how to handle them. 

(END VIDEO CLIP)

MATTHEWS:  Well, that‘s Rudy at his best. 

Anyway, finally, John McCain was asked at a New Hampshire luncheon today if he would accept campaign help from Karl Rove if he knew it would help win him the election.  Remember Rove‘s critical role in defaming John McCain back in 2000. 

McCain‘s response, according to the Associated Press, is that he—quote—“doesn‘t hold grudges.”

(LAUGHTER)

MATTHEWS:  Come on.  You‘re Irish—and would indeed—quote—

“accept campaign help from Rove.”

Anyway, the question is whether McCain would still welcome Rove‘s help after today‘s revelation—bombshell, I think—from Scott McClellan that Karl Rove, along with President Bush and along with Vice President Dick Cheney, was personally responsible for that big cover-up in the CIA leak case. 

Up next, will the 2008 election be all about change?  And which candidate will be the biggest change agent?  Right now, it looks like Barack. 

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

MIKE HUCKMAN, CNBC CORRESPONDENT:  I am Mike Huckman with your CNBC “Market Wrap.”

And stocks closing higher after another volatile day.  The Dow Jones industrials gained 51 points.  The S&P 500 climbed six points.  And the Nasdaq added just three. 

Oil closed at a record high of $98.03 a barrel, after gaining $3.39.  The Federal Reserve says it expects slower economic growth and slightly higher unemployment next year due to the ongoing housing slump and the credit crunch.  Wall Street interpreted that as suggestive of more interest rate cuts ahead. 

Meantime, construction—construction of single-family homes fell last month to the lowest level in 16 years. 

Countrywide Financial, the nation‘s biggest mortgage lender, is denying rumors that it‘s about to declare bankruptcy.  Countrywide shares fell more than 7 percent today. 

And Freddie Mac, the nation‘s number-two buyer and guarantor of home loans, reported a third-quarter loss of $2 billion.  Freddie Mac shares fell more than 28 percent today. 

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

HARDBALL. 

MATTHEWS:  Welcome back to HARDBALL. 

Barack Obama and Hillary Clinton are ratcheting up their attacks on each other, as that new “Washington Post” poll out of Iowa shows Obama with a significant lead, if you don‘t count the margin of error.  He is up about four points. 

David Shuster has the latest on that race in Iowa, which is only one full month away, finally. 

(BEGIN VIDEOTAPE)

DAVID SHUSTER, NBC CORRESPONDENT (voice-over):  Today, in New Hampshire, as Barack Obama was speaking about education...

OBAMA:  Thank you.  It is time we treated teaching like the profession it is.  I don‘t...

(APPLAUSE)

SHUSTER:  ... his campaign team was celebrating a big breakthrough in first caucus state of Iowa.  Not only does a major poll there show Obama ahead of Hillary Clinton, if still within a statistical tie, but the numbers also reveal Democrats starting to embrace a crucial Obama theme. 

OBAMA:  The change that‘s possible in this election, that is the moment I want to seize as president. 

SHUSTER:  That theme is sticking and growing in importance, according to latest “Washington Post”/ABC News survey. 

Asked what is more important in a presidential candidate this election, 55 percent of Iowa Democrats said new direction and new ideas, compared to 33 percent who favored strength and experience.  The spread has doubled and is growing since the summer. 

For her part, Clinton is trying to reframe Obama‘s signature message to her advantage. 

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE:  But change is just a word without the strength and experience to make it happen. 

SHUSTER:  And Clinton is pointing out that, in this post-9/11 world, the U.S. faces huge foreign policy challenges, as well as budget and economic hurdles. 

CLINTON:  But there is one job we can‘t afford on-the-job training for.  That is the job of our next president.  That could be the costliest job training in history. 

SHUSTER:  Clinton may have a natural advantage on economic strength and experience, because the last Clinton administration produced the biggest economic boom in decades.  But Obama is trying to undercut Hillary Clinton‘s talking points. 

OBAMA:  My understanding was that she wasn‘t treasury secretary in the Clinton administration. 

SHUSTER:  And, for now, at least in Iowa, Obama‘s strategy of promoting change, while diminishing Clinton‘s experience, is working.  Obama‘s rise in Iowa also coincides with a growing intensity of his campaign, coupled with some significant stumbles by Clinton, starting last month. 

At the MSNBC debate three weeks ago, Clinton was evasive on at least five different issues.  And she got caught waffling on a controversial New York proposal to give driver‘s licenses to illegal immigrants. 

CLINTON:  This is where everybody plays gotcha. 

SEN. CHRISTOPHER DODD (D-CT), PRESIDENTIAL CANDIDATE:  No, no, no. 

You said—you said, yes...

(LAUGHTER)

CLINTON:  No.

DODD:  ... you thought it made sense to do it.

CLINTON:  No, I didn‘t, Chris. 

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE:  America is looking for a president who will say the same thing, who will be consistent, who will be straight with them. 

SHUSTER:  After the debate, Clinton‘s campaign staff said moderator Tim Russert had been unfair.  Then Clinton changed her position again on the driver‘s license issue.  Then Clinton‘s team said gender played a role in rivals‘ attacks on her. 

And Clinton herself said at her alma mater:

CLINTON:  In so many ways, this all-women‘s college prepared me to compete in the all-boys club of presidential politics. 

(CHEERING AND APPLAUSE) 

SHUSTER:  Clinton then pivoted away from playing the gender card.  And, in the last debate, Clinton neutralized her rivals from the start by accusing them of relying previously on dirty attacks. 

CLINTON:  And I don‘t mind taking hits on my record on issues, but when somebody starts throwing mud, at least we can hope that it‘s both accurate and right out of the Republican playbook.

SHUSTER:  Obama himself flubbed the driver‘s license issue in the debate.  But it is Clinton‘s defensive phraseology that is now getting hammered by her rivals, and even by Elizabeth Edwards. 

ELIZABETH EDWARDS, WIFE OF SENATOR JOHN EDWARDS:  I don‘t—I don‘t think there is any way to describe what John was doing as throwing mud.  Important distinctions need to be made in this—in this race.  And it‘s the obligation of the candidates to make the distinctions. 

SHUSTER:  And Hillary Clinton‘s verbal gymnastics may be hurting her on another important issue: character.  When Democrats were asked which candidate was the most honest and trustworthy, Clinton had 15 percent, Edwards 20, and Obama 31. 

(on camera):  It‘s often more difficult to project honesty when you‘re an established national politician than when you‘re a newcomer on the national political stage. 

Still, is Hillary Clinton betting her chips on the wrong issue of experience, when Iowa Democrats are indicating right now they want change?  Forty-four days until the Iowa caucuses, and Barack Obama is rising fast. 

I‘m David Shuster for HARDBALL in New York. 

(END VIDEOTAPE) 

MATTHEWS:  Thank you, David. 

Are Americans ready for change, and will they take the risk to get it? 

Anyway, Doris Kearns Goodwin is a presidential historian.  She‘s also a board member of the Ford‘s Theatre Society.  I guess that‘s relevant. 

(LAUGHTER)

MATTHEWS:  But, most importantly, you know about the—Roosevelt election of ‘32, the Kennedy election of ‘60. 

Is this one of those magic change elections, where people take a risk on youth, on philosophy, and say—or in the ‘80 election, when Reagan got elected?  Will they just say, damn it, what we got ain‘t good enough?

DORIS KEARNS GOODWIN, PRESIDENTIAL HISTORIAN:  I think what people are feeling is that, for the last many decades, America has not been what they wanted it to be. 

Our position in the world has lost honor, lost credibility.  Our position at home is such that economics are not working for a large number of the people.  There‘s this huge gap between the rich and the poor.

And in order to change those fundamental things about our situation abroad and what is happening at home, you are going to have to have change.  Yes, I think they are ready for a risk. 

MATTHEWS:  What about the jack-in-the-box story that popped on us this afternoon that Scott McClellan, the president‘s spokesman, who was up there at that lectern at the White House Press Room for months and years, now coming out and saying it was the president as well as the vice president, the rest of that crowd, that put him up to telling the lie basically that his people, Scooter Libby and Karl Rove, weren‘t involved in the leak of that CIA agent‘s identity? 

I mean, this is a story we plumbed here for four years, and now the guy comes out and says, oh by the way, I knew all along I was being—I was misleading you guys. 

GOODWIN:  One wishes.

MATTHEWS:  It is helpful, by the way, Scott, that we know it now. 

Very useful information. 

GOODWIN:  Yes, but I wish we had known it before.  I mean, I‘m certain we had the press secretaries in the past—terHorst who resigned because he didn‘t agree with the pardon of Nixon.  We had poor Ron Ziegler who had to say that his previous statements had “inoperative” about Watergate because he had been saying there was no involvement on the White House.  We had have Stephanopoulos who in his memoirs said how disgusted he was when he first learned about Gennifer Flowers having more to do with William Clinton than he thought.  It is helpful if you say it at the time and not come later.

MATTHEWS:  George could have had some suspicions. 

GOODWIN:  He could have had them.

MATTHEWS:  Ha!

GOODWIN:  No.  I mean.

MATTHEWS:  Ha! 

GOODWIN:  ... I don‘t know why. 

MATTHEWS:  Every cover-up isn‘t believable, but in this case, the president said—President Bush, we could show this tape a million times where he said, if I find out anybody has been involved in leaking the CIA agent‘s identity, I will take care of it.  Well, his way of taking care of Scooter Libby was to commute his sentence and save him from prison, that is how he took care of it. 

The memory of people is maddening.  Don‘t they remember what somebody says two months later after they say it?  Don‘t they remember that this guy, Scooter Libby, was convicted by a jury of his peers of obstruction of justice and perjury?  And if you bring up the issue of criminality in the White House, people say, what are you talking about?  This administration is selling amnesia every day. 

GOODWIN:  You know, I think what happens is there is something about that insulation of the White House that they really think what they say will be believed and the people around them are only pulling into that.  So they don‘t even look back.  I mean, it is like a trial lawyer could said to them, but you said this then, how can you say this now?  So they don‘t think in those terms. 

MATTHEWS:  Are we going to have a good historic look at this war in Iraq ever?  Is anybody ever going to find out, like the Pentagon Papers, who got into the president‘s head between September 11th, 2001, and some time later that year and said, Iraq?  Who is going to sell—who is going to explain to us how the president of the United States bought—either cherry-picked or bought the argument that Iraq was a strategic threat to the United States? 

GOODWIN:  What you are hoping, which may not happen, is that some of these characters around the president kept a diary, but that is less unlikely because they worry that their diary might be subpoenaed.  Where we know about things from the past are through diaries or letters.  They are not writing letters to their family at night.  Maybe there will be e-mails that people exchanged to one another that will come to the light of day.  But memories are going to be even scarier 30 years from now. 

MATTHEWS:  You know who I trust? 

GOODWIN:  Who.

MATTHEWS:  Who I would go to if I were you?  Richard Haas. 

GOODWIN:  Interesting.  You think he would tell the straight tale.

MATTHEWS:  The smart, middle-of-the-road guy who was—you know, he was assistant secretary of state for policy review.  He knew all of this stuff.  He was working with Colin Powell every day.  That is the guy.  He knows. 

GOODWIN:  And you have got to trust people who have their own sense of integrity.

MATTHEWS:  Yes.

GOODWIN:  . who feel that they were hurt by what went on, that they are going to come out with memoirs.  It will come out.  Invariably things come out. 

MATTHEWS:  The sooner the better.  And thank God that Scott McClellan is having this pang of conscience, in telling us that he was lied to by all of these top people, told mistruths, told to cover up for Scooter, told to make Scooter think that it was all right to cover up for himself. 

And I will say this again, what the president told Scott to say, Scooter said in the witness chair and got convicted for it. 

GOODWIN:  Don‘t you think lawyers are going get involved in this now?

MATTHEWS:  Well, I hope Fitzgerald is watching this whole thing develop because the fingernails are growing on this corpse.  Anyway, thank you, Doris Kearns Goodwin, author of one of the great political books of all times, “Team of Rivals.”

GOODWIN:  “Team of Rivals.”

(LAUGHTER)

MATTHEWS:  And by the way, this administration could have benefited from a little balance.  Anyway, the “Roundtable” is coming up next to talk about Scott McClellan‘s little discharge today.

Anyway, plus, we are going to tell you about how many Democrats say Hillary Clinton is their—has the best chance of winning the White House.  That is our magic number tonight.  It is very high for Hillary Clinton. 

This is HARDBALL only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Coming up, how will Scott McClellan‘s charge that the president, the vice president, other top aides were all involved in the CIA leak case cover-up play (ph) on the campaign trial?  HARDBALL returns after this.

(COMMERCIAL BREAK)

BRIAN WILLIAMS, NBC ANCHOR:  Coming up tonight on “Nightly News,” two major news stories.  The Supreme Court looks over the right to bear arms in this country.  And what looks to be a huge breakthrough in the area of stem cell research.  We will have that, the rest of the day‘s news, all of it on “Nightly News” on your local NBC station. 

MATTHEWS:  Time now for the HARDBALL “Big Number” tonight that tells a big story.  Tonight, our big number is 64, the old $64,000 question that comes to mind, that‘s the percentage of Democrats who think Hillary Clinton is the most electable candidate they could put in the field against the Republicans next year.  That‘s according to an AP poll and it has got to be a shocker for some people that it is so high. 

They think that Hillary is their best chance, this is after all of the troubles of the last couple of weeks, that almost two-thirds, 64 percent of Democrats think Hillary is their best bet to beat the Republican.  That is tonight‘s “Big Number.” 

Welcome back to HARDBALL.  Let‘s go right to the “Roundtable.”  David Gregory is the White House correspondent, of course, for NBC News.  Jonathan Capehart is with The Washington Post.  And Julie Mason is with The Houston Chronicle.

David, you are on the White House lawn, I know you have been trying to check up on this story.  Let‘s take a look at this statement again.  This is the statement that is—a tease from a book that‘s coming out in April by Public Affairs Publishing.  And it was teased today as a book that is coming out under the name of—under the signature of Scott McClellan, President Bush‘s former spokesperson. 

Quote: “The most powerful leader in the world had called upon me to speak on his behalf and help restore credibility he lost amid the failure to find weapons of mass destruction in Iraq.  So I stood at the White House Briefing Room podium in front of the glare of klieg lights for the better part of two weeks and publicly exonerated to of the senior-most aides in the White House: Karl Rove and Scooter Libby.

“There was a problem, it was not true.  I had unknowingly passed along false information and five of the highest ranking officials in the administration were involved in my doing so: Rove, Libby, the vice president, the president‘s chief of staff, and the president himself.”

MATTHEWS:  Now, how do you read that for a political consequence, David Gregory? 

DAVID GREGORY, NBC CHIEF WHITE HOUSE CORRESPONDENT:  The big headline here is the question we don‘t know the answer to, which is, what was the president‘s role in the dissemination of that information about who was and who was not involved in the leaking of Valerie Plame‘s identity? 

And what Scott McClellan says there is the president was involved, in:

“He was among those people who knew that I was putting this bad information.” Well, two White House officials—former White House officials have told me today that McClellan himself is pointing people to one of his previous statements which was that Bush was told the same thing that he was, that Bush the president was given the same assurances that he, Scott McClellan was from the people involved, from Rove and from Scooter Libby that they had not been involved. 

So there is an attempt to water some of this down, but at the same time, we don‘t have an answer to the bottom line question, which is, what the president knew, what he tried to find out about who was involved, and to what extent he wanted these two people exonerated from the White House podium, which is what Scott McClellan ultimately did. 

The question on my mind, Chris, is, why was this written in this way?  Why is it being promoted in this way if it is not completely accurate?  And what are we supposed to make about something that raises more questions than it answers? 

MATTHEWS:  Well, I guess the question, Jonathan Capehart of The Washington Post is, if Scott McClellan isn‘t happy with the way these paragraphs have been released today, he has had a couple of hours to fix them on the record. 

JONATHAN CAPEHART, THE WASHINGTON POST:  Right.

MATTHEWS:  And if he is not going to fix them on the record, they stand. 

CAPEHART:  Right.

MATTHEWS:  And then clearly there is that open question about whether the president was perhaps used by the vice president.  But clearly, by putting the list of people here going all the way to the top, he is saying that he was told by these people all the way to the top, to the president, to go out and tell the press, tell David Gregory and the other White House correspondents and the world that Scooter Libby was clean, that Karl Rove was clean, and this seems to me the only way he could have said that to someone like Scott McClellan was, I know this to be the case, not, I was told by some people, not, I think it is a good bet that they are clean, they are clean. 

CAPEHART:  Mm-hmm.  Well, here is the situation, Chris.  I mean, as you said, Scott McClellan—this has been out for a couple of hours.  Last I saw, Scott McClellan hasn‘t said anything about this publicly.  He needs to—if these—if what he writes is not true, and you notice it is a very dramatic way that he.

MATTHEWS:  Oh, sure.

CAPEHART:  . writes that passage, the klieg lights and mentioning all of the people, and putting the president‘s name last.  It is certainly dramatic effect, but I think this story is not going to go away.  And actually, it going to build until Scott McClellan comes out and says, yes, this is exactly what I meant to write.  And if it‘s not, what did he really mean to write? 

And also, we can‘t—think about the timing here of this release.  We are talking about this on the Tuesday before Thanksgiving.  This will give the White House.

MATTHEWS:  Lots of time.

CAPEHART:  This will give—wait, this will give the White House a lot of discomfort that this information is out.  But I bet they are taking solace in the fact that this is coming over Thanksgiving week and hopefully... 

MATTHEWS:  Well, let me tell you, I don‘t know.

CAPEHART:  . people won‘t pay attention.

MATTHEWS:  . about your house, Jonathan, but let me go to Julie, because in my house this will be the topic of conversation over the turkey. 

(LAUGHTER)

MATTHEWS:  And we will hear—and my house includes right and left, I have got to tell you, and the argument will be, we now know that your guy was behind the leak, cover-up, your guy, the president—this will be the argument from the other side, your guy was involved in this whole Scooter Libby thing, he got Scooter Libby to fall on his sword like a good soldier, he leaked it, Karl leaked it, they all leaked it, Ari leaked it, Armitage leaked it. 

And when they got caught in a lie, in perjury, in obstruction of justice, the president said, oh, I will deal with this matter, I‘m commuting the sentence.  So the silence goes on.  The vice president didn‘t have to testify.  Scooter didn‘t have to testify under oath.  And they commute the sentence.  It looks to me like they closed the circle on the truth—Julie. 

JULIE MASON, THE HOUSTON CHRONICLE:  They absolutely did, Chris.  It was so frustrating to be at the White House during this time because Bush kept saying, you know, as soon as the investigation is over I‘m going to talk about it.  And then finally at the end he said, well, the investigation over, we need to move on. 

But what I‘m surprised about is all of this speculation about, is this really what Scott meant to say?  This is Scotty‘s revenge, this is exactly what he means to say.  He was so bitter when he left.  He felt so betrayed by the people he had trusted.  I‘m not surprised that he has come out with this.  I think we are going to hear more. 

(CROSSTALK)

MATTHEWS:  Do you know independently, Julie—I want Julie to finish what she knows.  You implied you know something.  Do you believe Scott walked out believing he was used by the president.

MASON:  Yes. 

MATTHEWS:  . and telling lies? 

MASON:  Yes, I do believe that. 

MATTHEWS:  You know that for a fact? 

MASON:  Well, I do believe that he felt that.  I don‘t know whether it is a fact or not. 

MATTHEWS:  OK.  David? 

GREGORY:  There are a few things to break down here.  I agree with Julie that I think Scott was bitter about the fact that he was put in this position.  I don‘t necessarily believe that this book is going to reveal more and that he has got more damaging information against the president. 

Again, based on my reporting, the fact that McClellan has told people that he had given an interview previously on CNN in which he said that the president was given the same assurances about these guys not being involved as he was, it was to sort of take the sting out of the language, the idea that Bush set him up to give false information. 

So McClellan may have been unhappy about this, but I have no reason to believe that McClellan is about to take a hatchet to the president on this matter.  Let‘s break down a few other facts here.  We know from the testimony and from also some of our other reporting, the vice president did in fact want Scooter Libby to be exonerated from the podium, that ultimately happened.  And Rove personally assured the president that he was not involved in the leak. 

MATTHEWS:  And who told the president that Scooter Libby wasn‘t involved? 

GREGORY:  I don‘t know the answer to that.  One could infer one possibility that the vice president did. 

MATTHEWS:  We will be right back with more with the “Roundtable” and more on this Scooter Libby bombshell.  You are watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Back with the “Roundtable.” Let me get back to David Gregory.  You are covering the White House, getting on top of this story.  Is there going to be a retraction or modification by Scott McClellan as to these words that carry such power here? 

GREGORY:  No, I don‘t think there is.  I think people I have talked to are familiar with this situation and also with the book that he is working on indicate that there is more to this story, that there is a back story to all of this that may not make the president‘s involvement any more conclusive.

MATTHEWS:  Right.

GREGORY:  . but that may provide some greater detail or context to what we‘re seeing here. 

MATTHEWS:  OK.  Let me go to Jonathan.  Jon, I just want to read this opening statement from Scott McClellan in the book that is going to come out:  The most powerful leader in the world has called me to restore his credibility.  And then he ends up  by saying, but it was the president himself who misled me. 

It looks to me like an indictment to past responsibility for his inaccurate statements to the press to the president. 

CAPEHART:  Well, yes, I mean, this is a—like I said before, is a very damaging allegation against the president. 

MATTHEWS:  OK.  Thank you very much.  David Gregory, as always.  Jonathan Capehart, as always.  Julie Mason, as always.  Right now it is time for “TUCKER.”

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

END   

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