updated 12/28/2007 10:25:14 AM ET 2007-12-28T15:25:14

Guests: Lally Weymouth, Joe Biden, Roger Simon

CHRIS MATTHEWS, HOST:  Assassination, and the hell it will raise. 

Let‘s play HARDBALL. 

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

Well, the repercussions—repercussions from today‘s assassination of Pakistan‘s Benazir Bhutto will be felt, obviously, around the world and around the campaign trail here in the U.S.

Some 20 people were killed when an attacker in the city of Rawalpindi shot Bhutto and then blew himself up.  Bhutto‘s supporters took to the streets immediately, setting fire in several cities. 

Tonight, we will hear what all the major presidential candidates had to say about today‘s horror.  Who sounded like a real leader today, if anyone?  Who sounded like a cynical pol, and will voters decide experience really does matter in these times? 

We will talk live to Senator Joe Biden in just a minute. 

Also, what does the tragedy in Pakistan today mean for U.S. interests and the terrorist threat? 

We will hear some remarkable insights from Bhutto in an interview I did with her on the eve of the war in Iraq.  And, of course, we will hear how the politics of our own country is affected.  The sharpest roundtable around of experts will be joining us at the end of the program for the last part of HARDBALL tonight to talk about what the implications are in the presidential election, which is coming so quickly now. 

But, first, presidential candidate Senator Joe Biden. 

Senator, you have said for months that this was the most important country in the world for us to keep an eye on.  Where do we go now?

SEN. JOSEPH BIDEN (D-DE), PRESIDENTIAL CANDIDATE:  Well, I think we better go clear and steady, Chris. 

Look, the most important thing that has to happen now is, they have got to hold these fair and free elections.  You know, Bhutto, I‘m convinced, would have won a significant majority.  I spoke to her several times, like you did.  My staff is over there with her—was over there talking to her. 

I had written two detailed letters to Musharraf laying out the kind of security needs that she needed and types of vehicles, the protection she—and she didn‘t get that protection.  This was foreseeable.  And it was—I will argue it was avoidable.  But no one seemed to want to listen. 

MATTHEWS:  You know, a—a good leader is dead.  And they‘re very hard to find, Senator. 

You‘re a politician.  As much as people are tough on politicians, I keep reminding myself how much we need them.  We need democratic leaders in this world, because, without democratic leaders, we‘re stuck with the choice between dictators and terrorists.  The only good leaders are the elected ones.  She‘s an elected leader. 

How are we going to find another Benazir Bhutto in that part of the world? 

BIDEN:  Well, I think you have to start off with the basic, I think, truth of the—of Pakistan.  And that is the vast majority of Pakistan is secular and moderate.  That‘s why she would have won. 

That‘s why you cannot begin to get things in order in Pakistan until you end this tyranny of a single man being able to run the country.  That‘s why we need elections, as imperfect as they are.  There is no obvious leader.  The leader who was part of her party who is the leader of the lawyers now, who is a really talented guy, he may very well emerge as an alternative within her party.

But you have got to have these elections, and you have to have them relatively soon, Chris.  Otherwise, you justify a continuation of martial law.  You continue to drive underground what I would argue would be 65 percent to 70 percent of the population of Pakistan, which, again, is secular and moderate. 

So, as imperfect as it is, I think you have to move forward with free elections.  And we should be putting extreme—I have spoken to him twice and been very blunt with him—extreme pressure on Musharraf to hold transparently fair elections. 

MATTHEWS:  Connect these dots, if you can, Senator.  And you have been foresightful in this case.  Connect these dots. 

Bin Laden is somewhere in the hills, in the mountains, somewhere on that border, perhaps in the country itself of Pakistan.  That country of Pakistan, an Islamic republic, controls a lot of nuclear weapons and has an unelected government, or really an unelected—an unpopular government, if you will.  Put all that together. 

BIDEN:  Well, here‘s two things, Chris. 

Number one, if we do not have full and free elections, you‘re going to drive underground that moderate majority.  You‘re going to see Musharraf continuing to make his deal with the very people who are hiding and supporting bin Laden, the Taliban and al Qaeda.  You are going to see the rest of that area deteriorate in a way that is very, very dangerous for us. 

I remind people, Pakistan is larger than Russia.  There are more Pakistanis than Russians, number one.  Number two, they‘re bristling with nuclear weapons.  They have delivery systems, that is, missiles that can deliver those weapons. 

You must begin to establish some stability by giving that large majority of secular, moderate Pakistanis a voice in the parliament.  That‘s the beginning.  It won‘t be perfect, but I know what will happen absent that.  Absent that, you will see a deterioration, and you will see a further deterioration of the Indian and Pakistani relationship. 

You will see Afghanistan begin to falter beyond what it is now...

MATTHEWS:  Yes. 

BIDEN:  ... because of what is going on in Pakistan. 

This is all connected, as you well know.  The key, to me, is giving an outlet for that vast middle secular Pakistani population to be represented in an electoral process in Pakistan. 

MATTHEWS:  Does President Bush trust democracy in Pakistan? 

BIDEN:  I hope to God he does, instead of trusting Musharraf.  He keeps talking about Musharraf being a democrat, with a small D.  I have seen very little evidence of that. 

My last conversation with Musharraf was about a week ago.  And I wanted to make it clear to him, as the chairman of the Foreign Relations Committee and a prospective possible president, that there would be consequences for failure to have transparent elections. 

MATTHEWS:  So, we expect—you expect, Senator, there will be elections; those elections will be democratic; there will be an opposition from the people who supported Benazir Bhutto, even after her death; there will be a real winner who...

BIDEN:  Well...

MATTHEWS:  ... could actually take on—I‘m sorry—a real contender who could take on Musharraf and perhaps beat him in a—in a clear, clean election?

BIDEN:  The answer is yes. 

I was with a guy who has been campaigning for me, a guy you know, Ed

Joseph.  He and O‘Hanlon of the Brookings Institution wrote the report on -

on Iraq.  He left the campaign out here to go into Pakistan.  He sent me an extensive e-mail last night. 

He had spent an hour-and-a-half with Bhutto the night before.  And he told me, she was extremely optimistic.  He delivered a message from her to me and what he hoped that would—a message that would get to Bush. 

He—she believed, as I believe—she‘s convinced me.  I have known her since 1988.  This is a personal loss.  I mean, I don‘t want to exaggerate it.  She was a very good acquaintance.  This was an incredibly, incredibly brave woman. 

She was optimistic, if you just get the elections under way, have them transparent and basically free, not perfect, that you would see a turnout among this secular middle class that would begin to be an anchor for...

MATTHEWS:  OK. 

BIDEN:  ... the requirement to force Musharraf to make some of the changes that are necessary, because it would generate world support as well. 

Who that leader will emerge, who they elect, because they will win a majority if there is an election, who it will be, I don‘t know.  Will it be a Bhutto?  No.  One will have to be developed.  But it‘s the first step.  Absent that, Chris, I don‘t see anything good happening. 

MATTHEWS:  OK.  Thank you very much, Senator Joe Biden, candidate for the Democratic presidential nomination and chairman of the Senate Foreign Relations Committee, coming from Iowa. 

Andrea Mitchell is NBC‘s chief foreign affairs correspondent. 

Andrea, I want you to take a look at some of these comments made by other candidates. 

Here‘s Hillary Clinton with her reaction today. 

OK.  How about here‘s Senator McCain with his reaction today?

Oh, we‘re having problems. 

What did you make of that?  First of all, the question is, are you optimistic about a deal over there that will allow a real election to occur? 

ANDREA MITCHELL, NBC CHIEF FOREIGN AFFAIRS CORRESPONDENT:  I am not optimistic. 

There was pressure from the administration, polite pressure, in a 10-minute phone call from the president in Crawford to Musharraf today, to continue with the democratic process.  But one of the other leading opposition leaders, Nawaz Sharif, indicated that he may not run in the election.  If he doesn‘t run, they can‘t have the election. 

MATTHEWS:  It‘s a joke, then?

MITCHELL:  He‘s the major party.  And...

MATTHEWS:  That‘s what I heard.  And I was wondering, listening to Senator Biden, whether that was really credible, that we‘re going to have a real opposition candidate. 

If we don‘t get Sharif, if we don‘t have Bhutto, because she‘s been killed, what is left? 

MITCHELL:  Well, the question now is, who is going to emerge in Bhutto‘s party? 

And there are these lawyers who Biden was referring to, Senator Biden was referring to, who took on the government, who tried to protect the supreme court that was fired by Musharraf. 

MATTHEWS:  We saw that in the streets. 

MITCHELL:  And it was an amazing performance. 

MATTHEWS:  Andrea, let‘s look at Hillary Clinton today.  Here it is, the tape. 

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE:  The world, once again, is reminded of the dangers facing those who pursue democracy and free elections in Pakistan and elsewhere, in areas that are rife with conflict and violence and extremism and anti-democratic forces at work. 

I have known Benazir Bhutto for a dozen years, and I knew her as a leader.  I knew her as someone who was willing to take risks to pursue democracy on behalf of the people of Pakistan. 

(END VIDEO CLIP)

MATTHEWS:  What do you make of that very personal endorsement there? 

MITCHELL:  Well, it was—it is personal, because she did know her. 

You know, we have—you heard a lot about experience vs. change, but this is one case where Hillary Clinton, on her 82 trips as first lady, did go to Pakistan in March of 1995, did spend time with Bhutto when Bhutto was prime minister.  The children were there and Chelsea Clinton as well.  So, there was a personal relationship there.  And she was the first first lady to go to a Muslim country and try to talk about democracy in Pakistan. 

MATTHEWS:  You know what I think?  I think that the horrible death of this great leader—and nobody is perfect in politics, certainly no politician...

MITCHELL:  She was widely criticized also. 

MATTHEWS:  ... is going to give Hillary Clinton a leg up, because I think people are going to see a heroic woman out there leading a country, taking on the real bad guys over there, and they‘re going to say, wait a minute.  Maybe Hillary can do it. 

It is going to be interesting to see how this happens in the last—next—it‘s never predictable. 

Here‘s John McCain with his reaction.  He‘s another tough guy on

foreign policy.  We‘re—we‘re hearing now from the more—let‘s put this

more rightward-leaning of the candidates, on the Democratic side, Hillary Clinton. 

Here‘s John McCain, a real warrior. 

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE:  It seems to me that the winners are the radical Islamic extremists.  Benazir Bhutto had dedicated herself and had said on several occasions that she would fight a battle against jihadists and radical Islamic extremists.  And she promised the people of Pakistan that. 

Well, obviously, when something like this happens, who is it that gains?  And that is the elements of unrest, disorder, and revolution. 

(END VIDEO CLIP)

MATTHEWS:  And the people who don‘t like those people the most tend to be the best regarded, like John McCain. 

MITCHELL:  Well, John McCain and Biden, Dodd, Chris Dodd, from the

Foreign Relations Committee, Hillary Clinton, actually have relationships -

had relationships with Benazir Bhutto. 

That said, you know, Barack Obama and his campaign are arguing today that he has been very forward-leaning on the question of Pakistan and what needs to be done, the pressure applied to Musharraf. 

Bill Richardson, with whom I went to Pakistan back in 1998, when he was U.N. ambassador, Bill Richardson today called Musharraf to step down.  He is the one—the one candidate who was actually calling for something that is...

MATTHEWS:  Right. 

MITCHELL:  ... quite outside the mainstream of what most people are arguing. 

MATTHEWS:  And he is particularly telling President Bush to send Vice President Cheney over to send the word to the guy to drop out of this race. 

MITCHELL:  But the Bush administration seems to be putting most of its reliance, not only on Musharraf, but on the new army chief of staff, who, in fact, met just earlier today with Arlen Specter...

MATTHEWS:  Right.  He‘s over there.

MITCHELL:  He met with Musharraf. 

MATTHEWS:  We almost had Senator Specter on.

Let‘s take a look at Rudy Giuliani, his reaction. 

(BEGIN VIDEO CLIP)

RUDOLPH GIULIANI ®, PRESIDENTIAL CANDIDATE:  The efforts of our military, your military, our military, in Afghanistan and Pakistan back in late 2001 and 2002 were nothing short of some of the most effective military action in our history, in toppling the Taliban, doing a very effective job at pushing back al Qaeda right after the attacks of September 11.

And, among other things, this reminds us of how we have to redouble our efforts in that area of the world, Pakistan, Afghanistan, and make sure that the successes that they brought about, our military brought about in 2001 and 2002, become permanent, and there isn‘t a slip back into terrorist control in that region. 

(END VIDEO CLIP)

MATTHEWS:  Isn‘t it amazing to watch how the cosmos changes, like a Norman Mailer novel, where, in peacetime, you put more attention to the Baptist minister?  You know, Huckabee looks good.  And, then, all of a sudden, we get back into a wartime situation, and you go, wait a minute.  We may—we may need somebody in there who knows what they‘re talking about in foreign policy. 

And, all of a sudden, you start listening to Rudy, perhaps, on the outside.  You certainly listen to McCain.  You certainly listen to Hillary.

MITCHELL:  Well, the—the conversation has changed.  The domestic issues...

MATTHEWS:  In one day? 

MITCHELL:  In one day, in one moment, in one flash of two shots and shrapnel from a bomb, a suicide bomber, the conversation is less about immigration and gasoline prices and foreclosed homes, right now at least...

MATTHEWS:  And pheasant hunting. 

MITCHELL:  ... and pheasant hunting...

MATTHEWS:  Right.   

MITCHELL:  ... and is more about the security of the United States. 

Now, that may still not resonate in Iowa as much as it does in New Hampshire, in South Carolina, and in later primaries, not only because of the timing, but because Iowa may be focused more on the economic domestic issues, given the situation economically in the Midwest.  But, still, it does change the dynamic of this campaign. 

MATTHEWS:  Isn‘t it amazing, in the heat of summer, especially here in Washington, you can‘t remember winter, and, when it gets really cold in winter, you can‘t remember summer, how we live until a world where there is peace and there is war?  And we have to live with both. 

(CROSSTALK)

MATTHEWS:  Thank you, Andrea Mitchell, an expert on both. 

Up next:  What effect will the Bhutto assassination have on the stability of the Middle East and on the U.S. presence over there? 

You‘re watching HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Coming up:  Bhutto is gone.  Can anyone bring stability to that dangerous area of the world?

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL and more on the assassination of former Pakistani Prime Minister Benazir Bhutto.

What does it mean for Pakistan?  But, more important to us, what does it mean to the U.S.? 

Just two weeks, “Newsweek”‘s Lally Weymouth interviewed Bhutto, the former prime minister, in Islamabad. 

Welcome to HARDBALL, a bad night to have you, but an important night. 

Lally, you know this person.  You knew her.  What‘s the significance, and where do we go from here in Pakistan? 

LALLY WEYMOUTH, SENIOR EDITOR & DIPLOMATIC CORRESPONDENT, “NEWSWEEK”: 

Well, it‘s hard to say, Chris, because I think that she was going to be elected the next prime minister of Pakistan in the upcoming elections. 

And, so, I was beyond—I was so shocked this morning.  And, when I last saw her, which was only two weeks ago today, she was so up, and she was so confident. 

MATTHEWS:  Yes. 

WEYMOUTH:  She had been out campaigning, and she—things were going so well for her. 

MATTHEWS:  What are we left with?  You said it before you came on, Lally, that, if we don‘t have really democratic-elected leaders, with all their flaws—and they all have them—you are stuck with either dictators or terrorists tearing apart a government.

Do we have any other democratic leaders, real generic leaders that come up from the people, like her, in that part of the world now? 

WEYMOUTH:  Well, not in Pakistan itself, because Nawaz Sharif, who has been prime minister, has been disqualified from running in this election. 

His party—he was working with Bhutto, and his party was running.  And she said to me, in this long run, this will have results for him, good results, but he himself was not running.  And, of course, he was shot at this morning, too, ironically enough. 

So, there really is no other—I know they‘re putting—and I agree with people who put a huge amount of emphasis on holding an election, but there really is no candidate, I mean, except that you hope that there can be decent people elected to the assembly from her party and other decent parties, and not from the extremist parties.

But there won‘t be a Benazir Bhutto.  There won‘t be a real leader...

MATTHEWS:  Yes. 

WEYMOUTH:  ... who can challenge Musharraf, the way she could have, unfortunately. 

MATTHEWS:  Well, let‘s talk—let‘s talk about what we got.  Politics often is playing it as it lays.  We‘re stuck with Musharraf.

Do you think he will ever have the power, the will, the ability to go into those territories and try to find bin Laden? 

WEYMOUTH:  I think—I think Musharraf has really changed drastically. 

I have interviewed him five times.  And I said to him during this interview, “You seem so angry.”  He was just furious.  He was blaming everything on the Western media.  He was blaming the rise of terrorism on the western Media.  I said, you know, It‘s not the Western media that has the Taliban and al Qaeda running all over your country.  You know, You‘re in control of your country.  And he said, You‘re right, I am angry.

And I think Musharraf has had it, really.  People don‘t like him.  They hate the army.  They‘re shooting at the army.  His time is over, I think.  He‘s had eight years, and the result has been, when the United States went into Afghanistan, the al Qaeda and the Taliban were...

MATTHEWS:  OK...

WEYMOUTH:  ... or at least Taliban were weakened, and now they‘re strong again in Pakistan.  And she said it could not have happened with the complicity of people around Musharraf.

MATTHEWS:  Oh, God.  Hey, Lally, thank you very much for joining us—

Lally Weymouth—for joining us tonight.

WEYMOUTH:  Nice talking to you, Chris.

MATTHEWS:  Pat Buchanan is an MSNBC political analyst.  Pat, you‘ve watched this country.  Pakistan‘s been our ally through the cold war.  It was our conduit to China during the opening of China.  It was our counterpoint to India, when India was being so chilly to us all those years.  Where does it stand?

PAT BUCHANAN, MSNBC POLITICAL ANALYST:  Well, that‘s why one reason they‘re so antagonistic to us as a people.  They feel that we jilted to them and moved to India after the cold war was over, after they‘d really gone to the wall for us during the Afghan war.

I would not agree with those who say we really ought to pull the rug from out from under Musharraf, like Bill Richardson.  I think that‘s a terrible mistake.  The key question, Chris, we got to look at is, first, American interests, control of those nuclear weapons, stability in the country...

MATTHEWS:  Who do you fear will grab them from Musharraf?

BUCHANAN:  Well, that‘s why I think...

MATTHEWS:  You think al Qaeda has a real shot at taking over the government and...

BUCHANAN:  No, no, no.  This is why I don‘t think you undercut Musharraf the way Bill Richardson says.  I think you got to stick with the horse you‘ve got.  He‘s the president now, even though it‘s a questionable election he won in.  But he‘s the president.  And the push for free elections—I tend to agree with Lally.  I wouldn‘t push too hard for that.  With Bhutto dead and Sharif out of the elections, you don‘t know what you‘re going to get over there.  So I think...

MATTHEWS:  What about Biden, Senator Biden, talking about—or Andrea Mitchell talking about the lawyers who are part of the party of Bhutto?  There‘s still that leader of the lawyers.

BUCHANAN:  I disagree with Senator Biden in, you know, this—we‘re going to go hammer Musharraf and demand these free elections.  You don‘t do these things until you‘ve got a pretty good idea of the outcome.  What we‘re concerned about there is stability, with the control of nuclear weapons, and hopefully, that they will stay or they will help out end the offensive on the Taliban and on al Qaeda, who have remade their sanctuary in Western Pakistan and Waziristan.  That‘s the key, and there‘s no doubt about it.

Musharraf has been back and forth on that issue.  He‘s not terribly reliable.  But before you get rid of him, find out who‘s going to replace him.

MATTHEWS:  So much of this resonates from our memory of Vietnam, and we didn‘t like Diem because he wasn‘t tough enough on the Viet Cong, and yet when we got rid of him, we were much worse off.

BUCHANAN:  Sure.  We went from one general to another to another to another.

MATTHEWS:  It‘s a joke, from big men to the little men to whatever.  And we lost the one guy who had some claim to legitimacy because he wasn‘t perfect enough.  Now, the same thing.  We stuck with a Vietnam leader in the south that wasn‘t willing to go fight the Vietcong.  Now we‘re stuck with a guy named Mubarak—or rather, Musharraf, who won‘t go after bin Laden, even though he‘s up there in the mountains somewhere.  What do you think about that?  Why can‘t he go up there and get the bad guy?

BUCHANAN:  He‘s got a real...

MATTHEWS:  We got all our money.

BUCHANAN:  He‘s got a real problem.  He‘s got sympathizers with the Taliban in his intelligence units, many of them who helped put the Taliban together.  They want a friendly—some of them want a friendly Taliban Afghanistan because they think the real enemy is India.  Some of the younger guys...

MATTHEWS:  So he‘s got termites, political termites...

BUCHANAN:  He‘s got termites...

MATTHEWS:  ... in his government.

BUCHANAN:  Chris, he went through what is his Fort Bragg, and they tried to kill him twice, his own soldiers.  So he‘s got problems in his army.  He‘s got problems in the intelligence community.  You got a tough pro-American now running the army.  I‘d say don‘t make any rash moves right now.

MATTHEWS:  OK.  Thank you very much, Pat Buchanan.

Up next, my interview with Benazir Bhutto when she was alive.  We talked about the war that was coming at that point in Iraq, and always about the question of democracy.  Can it work in the Islamic world?  She was an optimist.

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back.  In February of 2003, I interviewed Benazir Bhutto right here on HARDBALL.  I asked her about President Bush‘s mission to spread democracy throughout the Middle East and what it meant for the region and what it meant for Pakistan.

(BEGIN VIDEOTAPE)

MATTHEWS:  Do you think the Islamic world wants democracy?

BENAZIR BHUTTO, FORMER PAKISTANI PRIME MINISTER:  Certainly not the rulers.  There‘s a very powerful elite that has come about which opposes democracy.  But within Islam itself, there are very important principles, such as the principle of consultation upon which the democratic principles can be built.  People in Muslim countries want democracy, but not the rulers.

MATTHEWS:  What happens if you have a situation like Iraq, where you have a large fundamentalist group of people, the Shia, for example, who—the Shiites—who would like to have control of their government but aren‘t interested in modern democracy?  They just simply want to get control and shut down the society along very fundamentalist lines.  Can‘t we expect that to happen?

BHUTTO:  Yes, there are groups that want to seize power for themselves, ethnic groups and religious groups.  But I believe that democracy is a process that empowers ordinary people.  And when I look at the history of the world, after the Second World War we‘ve seen that one democracy doesn‘t go to war against another democracy.  So I think the peace and stability of the world is based on democratic orders.  Taliban were not democratic.  They gave birth to terrorism, and to fight terrorism, it‘s important to promote democracy.

MATTHEWS:  Do you think bin Laden is in your country?

BHUTTO:  I hope he‘s not, but I think he‘s holed up in the mountains around that area.  It could be in that mountain in Afghanistan or Tajikistan or Turkmenistan, or maybe even a mountain near Pakistan.  But I certainly think that Osama bin Laden should be captured, and I‘d like to see Islamabad do more in that regard.

MATTHEWS:  Do you think there‘s a conflict between the United States call, the president‘s call last night for democracy in Iraq, and our support for a dictatorship in your country of Pakistan, Musharraf‘s dictatorship?

BHUTTO:  I certainly would like to see Washington start with democracy in Pakistan.  I mean, Pakistan is a very important country.  It‘s the second largest Muslim country, and what happens in Pakistan has an effect in the rest of the Muslim world.  And the Muslim people have to choose between Osama bin Laden‘s call for dictatorship and for violence as a tool to somehow empower ordinary Muslims, and the call of democrats, who feel that empowerment comes through a pluralistic society and the rule of law.

MATTHEWS:  OK.  Thank you very much.  It‘s an honor to have you on. 

Benazir Bhutto of Pakistan.

(END VIDEOTAPE)

MATTHEWS:  Well, it was an honor.

Anyway, coming up: NBC‘s Ann Curry interviewed Benazir Bhutto just a few months ago.  We‘ll ask her for her assessment of what‘s to come.

And later, the impact of Bhutto‘s assassination on American politics with just seven days to go until Iowa.

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MIKE HUCKMAN, CNBC MARKET WRAP:  I‘m Mike Huckman with your CNBC “Market Wrap.”  And stocks fell sharply Following the assassination of Pakistani opposition leader Benazir Bhutto.  The Dow-Jones Industrials plunged 192 points.  The S&P 500 lost 21 points.  And the NASDAQ dropped 47 points.

Also hurting stocks today, orders for costly manufactured goods rose only marginally in November.  So-called durable goods orders rose a much weaker than expected one tenth of a percent.  Meantime, jobless claims rose unexpectedly last week by 8,000.  That brought the number of people collecting unemployment benefits to the highest level in more than two years.

The assassination in Pakistan also helped push oil prices higher today.  There was also a bigger than expected drop in U.S. inventories.  Crude rose 55 cents in New York, closing at $96.62 a barrel.  That is the highest level in a month.

And CNBC‘s Charlie Gasparino reports that Merrill-Lynch plans to announce about 1,600 layoffs.  That‘s about 3 percent of its workforce.

That‘s it from CNBC, America‘s business channel.  Now back to

HARDBALL.

MATTHEWS:  Welcome back to HARDBALL.  Pakistan‘s Benazir Bhutto was assassinated today, a stark reminder of the dangerous world in which we live.  Was Bhutto‘s Pakistan‘s best hope?  And what impact will her assassination have on our politics here in America?

NBC‘s Ann Curry interviewed Bhutto right after an attempt was made on Bhutto‘s life back in October.  Ann, I was so taken with what you said this morning.  I just want you to talk about Benazir Bhutto and your experience with her overall as a person.

ANN CURRY, NBC CORRESPONDENT:  As a person?  Interesting question.  No one‘s asked me that, actually, before now, Chris.  I first met her in August of this year to interview her about her planned return back to Pakistan after eight years in exile.  And I met a woman who talked about being a multi-tasking mother of three children, with a husband who was a bit broken, she said, still after having been imprisoned on these charges of corruption back when she was prime minister, a woman who was checking to make sure she had the right make-up on and—but nevertheless, when the cameras turned on and she was asked questions about her wishes for the future of Pakistan, became very steely-eyed, Chris, talking about how she wanted democracy again for Pakistan, how she came to—she came to conclude that she was the best hope for Pakistan to have a return for democracy, and that she was going to go back even knowing that it risked her life.

MATTHEWS:  You kept pressing her in that interview about why she didn‘t just lead if the good life.  She‘s kind of an aristocrat.  Why didn‘t she—and well read, well educated.  Why doesn‘t she just go—you kept asking her—go live the good life in the West?  Why do you keep going—plunging back into this hell of politics in Pakistan.  What did you make of her reaction to all of that?

CURRY:  Well, she really felt that it was her destiny, and she used that word when I asked her about this off-camera.  She was born, as you know, into a political dynasty in Pakistan.  Her father was prime minister.  He was the first popularly elected leader of Pakistan in its history.

She did not intend to go into politics.  She was educated at Harvard and Oxford, had other plans for her life, but felt, when she looked at her country and what was happening to it, that she needed step in.  She sort of felt called as a matter of destiny to do something about the future of Pakistan.

She also, you know, was very bold, I thought, in making these strong statements even before her return, naming three members, high-ranking members of the Pakistan government and saying that they were directly linked to the jihadists, these terrorists, sort of activists, these Islamists in the Waziristan area, naming them, not saying that she was blaming the government of President Musharraf but naming these three as being tainted, dirty, and saying that she feared for her own safety.  So I thought she was very bold, and it was concerning, actually, that she was that bold just on the eve of her return.

When we went into—after she did return, as you well know, she was attacked with a suicide bomber.  We looked at the latest numbers earlier.  We thought they were 140.  Well, actually, those numbers were updated to about 170 killed during that bombing.

We returned a few days later, not knowing whether she would interview with us again, but upon seeing me in the crowd as she was comforting the mourners, Chris, she said, Ann, Ann, I would love to speak to you.  She spoke to me after hours of consoling these widows who—of these men who had died coming to greet her upon her return.

Emotionally exhausted, she sat down to talk to us.  At that point, she didn‘t have any lipstick—and you know, as you can see in this video, she‘s never without her red lipstick—and so asked to borrow mine.  It was one of those girl moments, a woman moment.  And then again, when the cameras turned on, she turned into this steely-eyed leader who wanted so much passionately for the future of her country.

And I asked her the very direct questions about the risk she was taking.  And you know what?  We went back over the transcripts, Chris.  Our -- one of my producers, Rich Greenburg (ph), went back over all of that transcript.  She gave us more than an hour of an interview, even though she was exhausted.  And I asked her those questions about, What if she died?  And they have never been aired before, and we‘re going to air them tonight on “NBC NIGHTLY NEWS,” her taking on this question directly.

MATTHEWS:  You know, it so reminding me of—that‘s bad English.  It so much reminds me of Martin Luther King talking to people before he was assassinated and realizing that he had this destiny, to use her word, and yet also knowing that the people that were supposedly protecting him weren‘t really out there to protect him.  And I include our own country in that regard, unfortunately.

And in her country, having Musharraf in charge of her security is a scary prospect.  When you say she knew all the odds—she knew that the Taliban people, the bin Laden people were out to kill her.  She knew that she wasn‘t being adequately protected by the government of Musharraf.  She knew she could have stayed in the West and enjoyed the good life as an aristocrat and a celebrity, and yet she plunged back into that world.  And she just died for it.

CURRY:  You know, when I was watching her with these widows, there was a moment when I was taking—I still pictures, so I was taking still pictures of her.  There was a moment when I suddenly caught myself and—I mean, I say this guardedly, but there was a kind of Mahatma Gandhi moment when I realized that the chances of her surviving were slim, that these people loved her do desperately.

We must say that she was a very controversial figure.  She was charged and accused of corruption more than once.  And so not everyone perceived—saw her as the greatest thing for Pakistan.  But many people, especially the poor, specifically the women—the women in Pakistan, who this idea of what‘s happening with the Islamists, their—some of them are not allowed perhaps the freedoms that they would wish.  They specifically loved her. 

MATTHEWS:  Ann, I was so taken with your interview, and I‘m so taken with your work on this project right now.  Thank you very much, Ann Curry.  Great having you on HARDBALL.

Up next, the politics fix.  This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back.  Right on the phone we have presidential candidate John Edwards out in Iowa, who spoke with President Musharraf just today.  Senator, tell us about your conversation with the head of Pakistan. 

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE:  Well, I urged him to continue the process of democratization in Pakistan.  I also urged him to allow international—independent international investigators into Pakistan to determine the facts about what happened with Prime Minister Bhutto‘s death, so that it would have some credibility in the international community, and for it to be done transparently.  I also spoke to him about the scheduled upcoming elections. 

MATTHEWS:  Did you get an answer, first of all, to the international investigators checking out why this assassination occurred? 

EDWARDS:  No.  He told me he hadn‘t thought about it, but he would give it thought.  And as to the elections, I think it would be irresponsible for me to comment on that.  I‘m going to let him speak for himself.  He did say, on the issue of democratization, that he was fully committed to moving forward with democratization.  So we need to hold his feet to the fire on that. 

MATTHEWS:  Where are you on the whole Bush policy of basically getting in bed with Musharraf and staying there.  With some exception, we have basically put all our money on this fellow.  Do you think that was a smart U.S. policy, going back to 2001? 

EDWARDS:  I think we have to change what we‘ve been doing.  We spent 10 billion dollars on Musharraf.  I think a great deal of that money, instead of going toward the Pakistani government and the Pakistani people, has gone to bolster Musharraf himself.  And I think that aid needs to be changed.  It needs to be reformed. 

And we need to do a couple of other things, Chris.  Instead of dealing with Pakistan in a unilateral way, we ought to be dealing with them multilaterally.  And we need intense diplomacy in Pakistan.  But at this moment what the United States of America and the president of the United States needs to do is to act with strength, with confidence, and we need to be a calming influence in a very—in a very erratic and dangerous situation. 

MATTHEWS:  If you get elected, you‘ll be taking the oath the 20th of January of 2009.  What will be your first campaign to catch bin Laden in the hills of Pakistan?  How will you go about doing that, catching the guy that killed so many of our people and probably had something to do with some situation today.  We can‘t be sure.  But he is certainly our enemy.  How would you capture bin Laden, senator? 

EDWARDS:  Bin Laden and al Qaeda, Chris, are public enemy number one to the United States of America.  As president of the United States, I would take that as the a number one priority in my presidency.  Now, precisely what I would do come January of 2009 is impossible to say at this moment, because it‘s impossible to know what the circumstances will be. 

What will be the situation with the Pakistani government?  Have they done what do they need to do to clean up the northwest provinces?  Have they, in fact, taken responsibility for providing security there and going after bin Laden?  What have we done to intensify pressure on the Pakistani government?  Is Musharraf still the president of Pakistan? 

There are a number of unknown circumstances that we can‘t possibly know in over a year in advance.  But I can tell I would take that responsibility very seriously. 

MATTHEWS:  OK, thank you very much, Senator John Edwards, calling us in from Iowa today.  He spoke with President Musharraf just a while ago. 

Now for our politics fix, our round table.  What a hot group we have

tonight, Roger Simon of “The Politico—he‘s been all over this campaign -

NBC chief foreign affairs correspondent Andrea Mitchell, who also knows a thing or two about politics, and MSNBC political analyst Pat Buchanan. 

Andrea, put it all together, is this going to be one of those election eve events—and I want to sit and feel more about this, just being a news person, because it means a lot.  This was a good person that was killed, with all her flaws, and she‘s gone.  Some other people were killed today.  But in this business, we check and see what it means.  What does it mean? 

ANDREA MITCHELL, NBC NEWS CHIEF FOREIGN AFFAIRS CORRESPONDENT:  It could be a game changer.  This could change the dialogue.  Already today we‘ve seen from the candidates that they realize they are auditioning for the role of commander in chief.  You can talk about immigration and we do.  You can talk about foreclosures, but when things happen, like 9/11, most dramatically and most tragically—but things happen on the other side of the world—Americans also think about their national security and personal security, and they have to evaluate these candidates within that content. 

MATTHEWS:  When the ship is in trouble, you want to know who is at the helm, Pat.  Is that the question? 

PAT BUCHANAN, MSNBC POLITICAL ANALYST:  Sure it is.  I think the

winner from this—if there is a winner from a tragedy, a thing like this

is Hillary Rodham Clinton, quite frankly, because she is running against a novice, a fellow two years out of the state legislature in Illinois, who has no foreign policy experience.  And I saw her statement that you played.  She was very calm.  It was very statesman-like.  It wasn‘t do this or get rid of Musharraf. 

She talked personally.  I thought she talked very effectively.  I agree with Andrea, I think it moves the camera, if you will, the search light to foreign policy, serious experience.  Republican Party, it‘s obviously a help to McCain. 

MATTHEWS:  So it‘s an even hand on the tiller for Hillary Clinton and what is it for McCain? 

BUCHANAN:  I think McCain is a guy that‘s been steeped in foreign policy and his two chief rivals, Huckabee and Romney, have not been.  McCain clearly seized up that today.  He was talking about that specifically, how he had known her, how he had been involved in this.  So, clearly, it helps him. 

MATTHEWS:  What do you think, Roger?  Same question.  I‘ll put it to both of you and then I‘ll go back to Andrea, the same question; does this help Hillary?  Does this help John McCain?  It‘s a terrible thing to do, but we‘re doing it.  Let‘s just say, we‘re doing it. 

ROGER SIMON, “THE POLITICO”:  Well, it‘s real life.  It doesn‘t matter whether 99 percent of Americans can find Pakistan on the map.  We all know how serious it is if radical extremists get their hand on nuclear weapons.   

MATTHEWS:  That‘s what I‘m worried about sometimes, because I‘ve seen some real nincompoops run for president, who couldn‘t be able to do it, no names mentioned here.   

SIMON:  That‘s why it helps McCain and Hillary.  I was with McCain this morning at a rally in Des Moines, and he was already positioning himself on it.  It wasn‘t just that he knows foreign policy and experience.  He said Rudy Giuliani has post-crisis experience.  He doesn‘t have the national security experience that John McCain has. 

So the leaders out here, even the second tier candidates out here, are already making their calculations on how this is going to boost them.  I think it is going to boost McCain. 

The Democratic side, it boosts Hillary Clinton.  In the second tier, it boosts a guy like Joe Biden, who has real foreign policy credentials, who says he is wonk, who stresses his knowledge of the world.  And that could boost him up to an unexpectedly high finish here. 

MATTHEWS:  Let‘s listen to John McCain.  Here he is. 

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN ®, PRESIDENTIAL CANDIDATE:  I have been to Waziristan.  I knew Benazir Bhutto.  I know Musharraf very well.  If I were president of the United States, I would be on the phone right now, and I would be meeting with the National Security Council and I would be seeing ways that we could maintain order or restore order, whichever is the case, in Pakistan. 

I know the players.  I know the individuals.  And I know how best way to address this situation. 

(END VIDEO CLIP)

MATTHEWS:  Hillary and McCain; everybody agrees they are looking good tonight.  We‘ll be right back with the round table.  You are watching HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back with our round table, “The Politico‘s” Roger Simon, NBC‘s Andrea Mitchell, of course, and MSNBC political analyst Pat Buchanan.  Let‘s take a look at what Barack Obama had to say today. 

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE:  We mourn her loss.  Our thoughts and prayers are with her family and her supporters.  And we want to make clear that we stand with the people of Pakistan in their quest for democracy and against the terrorists who threaten the common security of the world. 

(END VIDEO CLIP)

MATTHEWS:  That was kind of cold. 

MITCHELL:  Well, he has an interesting position because it was Barack Obama who argued that if we had information about al Qaeda, we should go in to those territories without any fair warning to Musharraf.  I mean, he has taken a pretty hedgy position. 

MATTHEWS:  That would be popular in this country. 

MITCHELL:  That would be popular, but—

BUCHANAN:  He seemed stiff, and she seemed natural. 

MATTHEWS:  Why do you think that is? 

BUCHANAN:  I don‘t know why he got up there and didn‘t handle that as well as he could have.  She was—you saw her at the microphone.  It was well thought, well spoken, very smooth.  She didn‘t make any rash statement of any kind.  But it sort of was more touching of the heart than this. 

MATTHEWS:  He seemed like he was primarily concerned with pronouncing the name of Pakistan correctly.  What did you make of that, Roger? 

SIMON:  I think both Obama and Edwards are off their game right now.  They are agents of change.  They have been arguing against the argument for experience.  When there‘s a world crisis, Americans want stability.  They want experience.  People rarely go out in times of crisis and look for change. 

This can really change the political climate here.  We got seven days to go, and anything could happen.  But you can understand why Hillary is much more smooth on this than her two top challengers are. 

MITCHELL:  And she‘s also talking about someone she knew.  And there is—you know, there‘s video.  There are pictures of Hillary Clinton in 1995 with Benazir Bhutto when she was prime minister, with Bhutto‘s two younger children and Chelsea Clinton on that trip.  And that was a fairly significant trip for the first lady. 

MATTHEWS:  And this is why Hillary Clinton always keeps one foot on that other bag, right?  She plays to the Democratic majority, right, but she always keeps one foot on that conservative bag, whether it‘s voting for the war resolution with Iraq, voting for the anti-terrorist resolution with regard to Iran and the Revolutionary Guard, always keeping one foot on that rightist bag in case something bad happens. 

BUCHANAN:  A country of 170 million people with nuclear weapons. 

They‘ve just assassinated their most popular leader.  What do you want?  Stability.  She speaks to stability.  You‘ve got two change agents out there. 

MITCHELL:  In the last 24 hours, they had reverted to their experience theme from their change theme, because they realized that that was their best calling card.  So she‘d already repositioned herself. 

MATTHEWS:  Let‘s give Governor Romney a shot.  Here he is today, Governor Romney, formerly governor of Massachusetts.   

(BEGIN VIDEO CLIP)

MITT ROMNEY ®, PRESIDENTIAL CANDIDATE:  This points out again the extraordinary reality of global, violent, radical jihadism.  We don‘t know who is responsible for this attack, but there‘s no question but that the violence that we see throughout the world is violence that‘s not limited to Iran—excuse me, Iraq and Afghanistan, but is more global in nature. 

And this type of loss of life points out again the need for our nation and other civilized nations of the West and of the Muslim world to come together to support moderate Islamic leaders, moderate Islamic people. 

(END VIDEO CLIP)

MATTHEWS:  You know, Roger, that sounded like blah, blah, blah.  I‘m sorry.  It just sounded like a bunch of words. 

SIMON:  It almost doesn‘t matter what prepared statements candidates are reading right now.  It matters how people feel about those candidates and whether over the past, you know, 12 months, these candidates have established foreign policy national security credentials.  Mitt Romney was a governor.  He was a businessman.  And he‘s running against some candidates who have a lot of foreign policy experience, mainly John McCain, but also Rudy Giuliani, who makes a case for national security. 

It is—when you get into the Iowa caucuses, you tend to vote on how you feel, where your gut is.  And this is not a gut issue for Mitt Romney. 

MATTHEWS:  You know, I want to say a final word here.  It seems to me that a lot of people make a living on this medium of television just making fun of politicians.  The fact is, we need them and we need people like Benazir Bhutto, with all her flaws.  In the end, if we get a world without them, we‘re going to be stuck with the bin Ladens and the Musharrafs. 

Any way, thank you, Roger Simon.  Thank you, Andrea Mitchell.  Thank you, Pat Buchanan.  Join us again tomorrow night at 5:00 and 7:00 Eastern for more HARDBALL.  Right now it‘s 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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