updated 1/14/2008 11:05:36 AM ET 2008-01-14T16:05:36

Guests: Gov. Bill Richardson, Jeff Zeleny, John O‘Connor, John Neffinger, Joan Walsh

CHRIS MATTHEWS, HOST:  Can John McCain win again in Michigan, or can Mitt Romney find his rhythm in Motown?  Can Barack change his luck in Vegas?  The beat goes on.

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews.  Welcome to HARDBALL.  Two contests out of the way, and if you want to look at the wild nature of the 2008 race for president, consider this: two states delivered four different winners, two on each side.  It‘s anybody‘s game as we look at the next contests in Michigan, South Carolina and Nevada.  Tonight, we‘ll take a hard look at where this race is going.

Plus: Last night, the Republicans debated in South Carolina.  Enough with all the words.  Later, we‘ll look at what their body language was saying.  I love to do this.

And it‘s the Friday‘s “Politics Fix” with HARDBALL‘s finest.

But we begin tonight with changes in the Democratic field.  Now that Bill Richardson is no longer a candidate for president, we‘ve given him a new job, helping us figure out what‘s going on in this race.

Governor Richardson, Governor Bill Richardson, out in Santa Fe, my friend, great gentleman that you are, you have gone to the showers.  You‘ve left the field.  You‘ve left the arena.  Explain your thinking and why it happened.

GOV. BILL RICHARDSON (D-NM), FORMER PRESIDENTIAL CANDIDATE:  I didn‘t do as well as I wanted to in Iowa and New Hampshire.  I came in fourth.  I was hoping for third.  And then, Chris, the resources dried up just as I was heading into my region, Nevada, Arizona, California, New Mexico, Colorado.

And so I felt that I didn‘t want to become an asterisk.  I‘d made my contribution.  I‘d moved all the candidates on the Iraq issue, get the troops out as quickly as possible, on education, on reforming education, No Child Left Behind, on clean energy.  I moved everybody my way.  I felt I‘d done my contribution.  Now I‘m going to focus on being governor of New Mexico.  But those were the reasons, votes and money.

MATTHEWS:  You know, Tim Russert about six months ago, I think it was, pointed out that his observation thought—he thought it was—just like Florida was so key in 2000 and Ohio in 2004, that come this year, at the end of this year in November, that the key part of the country to look at is going to be that group of states in the Southwest, including yours, New Mexico, Arizona, perhaps Nevada.  Is that the way you look at it?  In other words, the states that are going to be the most purple.  If this thing‘s going to be fought until the last dog dies, it‘s going to be out there.

RICHARDSON:  I would agree with that assessment.  In fact, that was one of the reasons I was trying to say that I was electable in the fall, that I could win states like Arizona, Colorado, New Mexico, Nevada.  Had John Kerry won any of those states, or three of them and lost Ohio, he‘d be president today.

This is virgin territory for the Democratic Party.  You know, seven out of the seven governors from that region four years ago used to be Republicans.  Now five out of the seven are Democrats.  So the West is turning Democratic, mainly because of the environmental and immigration issues.

MATTHEWS:  You know, it‘s hard to figure where a woman presidential candidate would stand the best chance.  Obviously, every region has its culture.  People have told me there‘s kind of a, I don‘t know, not Wild West, but a frontierswoman attitude towards women out West in your part of the country, that there‘s a lot more gender equality out there, that people look upon women as part of the people who settled the area.  They‘re tough enough to do it.  They‘re tough enough to lead.

Is it your sense that Hillary or Obama would be better suited to the top of the Democratic ticket in your region?  How‘s that for an open question?

RICHARDSON:  Right.  Women have a lot of elected positions in the West, so women do very well in politics here.  We‘ve had tens of women governors in the past.

You know, Chris, I think both are appealing candidates to the West—

I would say Senator Clinton not just with her base with women, but minorities.  Obama is a new face.  Unions, progressive issues like the environment are big, like being sensible on immigration are big, issues that relate to universal health care.

You know, I‘m staying out of this for now.  I‘ll make possibly an endorsement later, but at least until February 5, I‘m neutral here.  And I think we got a good bunch of candidates.  And I wouldn‘t count John Edwards out.

MATTHEWS:  When do you expect this thing to come to a conclusion?  You know, you and I have watched all these years, Democratic fights seem to end pretty early.  You know, pretty early, you knew it was Kerry.  Pretty early, you knew it was Gore.  Pretty early, you knew it was Clinton.  And this doesn‘t look pretty early.  When do you think we‘re going to know who the nominee will be?

RICHARDSON:  I believe by mid-February, with February 5 being an indicator.  There are over 20 states that day.  California is up that day, a lot of the West.  You‘ve covered all the regions by that time.  We‘ve had a primary in South Carolina.  We‘ve had a primary in Iowa, in the Midwest.  We‘ve had a primary in the Northeast, New Hampshire.  And then you‘ve got the Western primaries, and then a bunch of others like Tennessee also on February 5.  I think in the middle of February, we‘ll know the nominee.

MATTHEWS:  What do you make of Hillary Clinton‘s performance on Saturday night, right before the New Hampshire primary, this past Saturday night?  There‘s been a lot of talk about this, the role that we in the media, that I personally played.  There‘s all kind of discussion about the boys perhaps tackling the one woman candidate.  Did you feel that when John Edwards joined Obama in going after Hillary Clinton that he made her the object of some sympathy from women voters, especially older women voters?

RICHARDSON:  Yes, I do.  And I think the incident where she got a little broken up helped her a lot with women voters, and they flocked to her.  And that‘s the kind of person I know her.  She‘s—she‘s a regular person and she showed that emotion.  And obviously, I believe it helped her.  But yes, I think women are concerned with guys ganging up on them.  And what I try to do in all the debates, as you know, Chris, is say, Look, let‘s stay positive, both sides.  Don‘t throw negative stuff at each other, personal stuff.  Let‘s debate the issues.

MATTHEWS:  Let me ask you about what it was like behind the scenes.  I had never seen a back room.  I mean, I saw you prepping one night in a hotel lobby, trying to get your act together.  It must have been a sitting room.  You got there—I forget what town it was in.  You were trying to get your team together and get your head together about this.  What was it like being in, like, the Green Room with the other candidates before you came on, every one of these debate nights?

RICHARDSON:  Well, it‘s like a prizefight.  You‘re nervous.  You‘ve got all your handlers telling you, You‘ve got to do this, you‘ve got to have this moment.  And you just want your head to clear.  And you know, early on, I wasn‘t as good in the debates as I was until the end because I tried to cram too much data in early.  And so you really are like a prizefighter heading to the arena.

And one of the things that is good about all the candidates, especially the Democratic candidates, is we all respect each other because we‘ve been in the arena.  We‘ve been through this pressure.  We‘ve been through this intensity and scrutiny.  So that even though our staffs—by the way, they all hate each other...

(LAUGHTER)

RICHARDSON:  ... fight, that when you get the—you know, when you get the principals, it‘s civility.  And there is a genuine respect for each other.

MATTHEWS:  Well, you want your staff to hate the other staff, don‘t you?  You want a little scrum there, a little attitude, don‘t you?

RICHARDSON:  Well, sure.

MATTHEWS:  No?

RICHARDSON:  You want your staffers to defend you, and to, you know, talk to guys like you and to spin and—but again, Chris, I felt good.  I was proud to have made this race.  You know, I‘m not disappearing.  I‘m going to continue my international missions, being a governor, riding my horse.  I‘ll get involved a little later.  Don‘t count me out.

MATTHEWS:  OK, let me—I‘m not counting you out, I‘m counting you in.  Here I will now make the pitch.  It seems to me Hillary Clinton, if she wins this nomination, particularly her—we‘ll start with her—she has a leg up this week after winning in New Hampshire.  We don‘t know who‘s going to win it.  But you know, she needs some balance.  She needs a male, probably, on the ticket with her.  That‘s a safe assumption.  She needs somebody perhaps with a bit different geography behind him, perhaps a bit different ethnicity.  She needs—to me, I always like a big regular guy running with her, not some sort of—you know—well, I‘m not going to say—some other kind of guy, but a regular guy who seems like a guy who enjoys a good time, good personality, regular kind of personality, a guy like yourself, you know, Bill Richardson.

It seems to me that she‘s the policy wonk.  She‘s the serious student with all the A‘s in school.  You look like a guy probably got a few B‘s occasionally.  What do you think?

RICHARDSON:  Well, I just want to stay as governor.  You know, I never say never, but...

(CROSSTALK)

MATTHEWS:  Let me give you the list of things you‘re great on.  Foreign policy.  You‘re a Latino.  You‘re from the Southwest.  And you‘re an executive.  You got all four bases covered, including home run, the home plate.  Hard to beat you.

RICHARDSON:  Well, I think I agree—well, listen, I think I agree with you, but I just want to be a good governor, Chris.  How‘s that?

MATTHEWS:  Well, maybe you‘ll give the keynote speech at the convention, I don‘t know.  Although I think somebody else may give it.  Just being sarcastic.  Hey, governor, you‘re the greatest guy in politics.  I tell everybody, what a great guy.  Of course, it‘s often true in your case.

RICHARDSON:  Thank you, Chris.

MATTHEWS:  Thanks for coming on...

RICHARDSON:  Thanks for having me.

MATTHEWS:  (INAUDIBLE) this race.  We‘ll be calling you back to find out what you think.  Governor Bill Richardson of New Mexico.

Coming up: Two more crucial battleground states just days away now, Nevada and South Carolina.  It‘s pronounced Nevada.  We‘ll get the latest on the battle lines being drawn right now on both states.

And on “Meet the Press” this Sunday, Tim‘s got a hell of a guest this weekend.  Hillary Clinton‘s going to be on “Meet the Press” for the whole hour for an exclusive interview.  As I said, the whole hour with Tim Russert and Hillary Clinton.  That‘ll be so fascinating to watch the tough questions and the interesting answers.

You‘re watching HARDBALL, only on MSNBC.

(BEGIN VIDEO CLIP)

RUDOLPH GIULIANI ®, FMR NYC MAYOR, PRESIDENTIAL CANDIDATE:  And we want to make sure that Florida counts.  You can make sure Florida counts by voting in the primary.  And I think I know who you should vote for.

(LAUGHTER)

GIULIANI:  Me.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE:  It‘s almost like we‘re invisible, people told me.  Well, that is not the America that I grew up in.  That is not the America that I want to be there for our future.  So there will be no invisible Americans when I am president of the United States.

(END VIDEO CLIP)

MATTHEWS:  Welcome back to HARDBALL.  Well, the first two fights gave us four different winners in the primaries and the caucuses.  We‘ll see clear leaders after Nevada, Michigan, South Carolina, maybe, or will it just be more of the mess?

Jeff Zeleny covers the campaign for “The New York Times” and John O‘Connor for “The State,” the major newspaper in Columbia, South Carolina.

Let me start with Jeff.  Looking ahead to Nevada, as it‘s pronounced, this coming Saturday, this debate that we‘re going to hold this weekend on MSNBC—actually, it‘s going to be Brian Williams and Tim, and they‘re going to be asking the tough questions this weekend.  Is this race really wide open, or is it basically gone to Barack because of that big labor endorsement out there?

JEFF ZELENY, “THE NEW YORK TIMES”:  I think it‘s very much wide open.  And one example of that was just last night, you saw Senator Hillary Rodham Clinton walking around through some neighborhoods.  Who was following behind her?  Members of the exact same union who had only hours earlier had come out in support of Senator Obama.  So just because there‘s a union endorsement does not necessarily mean all the members are supportive, as you know, and that‘s particularly true in this union.

So when Senator Obama arrives in Nevada here tonight, it‘s his first appearance.  He‘s not exactly doing a very aggressive schedule.  He‘s here for a couple stops.  Tomorrow, he‘s flying home to go to Chicago for a little bit of a break.  So we‘ll see how much time these candidates actually spend here over the next week, but I would say that at this point, it‘s definitely a jump ball.

MATTHEWS:  You know, when you go to Iowa, we have a sense it‘s farm country.  It‘s the Middle West.  It‘s the classic Middle West heartland state.  Then you go to New England, it‘s the granite, sort of—you know, the austere, I don‘t know what the right—stoic sort of thing up there, very much enclosed (ph), cold weather.  People don‘t have a lot of evangelical religious experiences up there.

And yet you think of Nevada—the only thing I know about Nevada is Vegas.  Is that representative of the state?  Is that a big chunk of the Democratic vote?

ZELENY:  Well, certainly, that‘s where most of the people are.  The Democratic Party officials here are hoping that 60,000 people participate.  It may be even fewer than that.  So the majority of the people are in Nevada are actually are in Las Vegas and right here in the metropolitan area.  But you‘ll see some of the candidates driving and flying to other parts of the state, as well.  A big place to go is Elko, Nevada, not far from Reno.  People are trying to get out of Las Vegas a little bit.

But Senator Clinton was in California earlier today.  She‘s coming back here briefly tomorrow.  As I said, Senator Obama is not going to be here tomorrow.  So the candidates are not spending as much time as the party would have hoped here.  But again, Nevada is certainly up for play.  It‘s up for grabs.  It wouldn‘t have been had the contest in New Hampshire turned out a different way.

MATTHEWS:  Right.  Obviously, everything is tricky now.  Here‘s Hillary Clinton appealing to voters in Nevada.

(BEGIN VIDEO CLIP)

CLINTON:  But the bigger question is what‘s happening in the economy because, you know, we heard a lot of construction workers.  It‘s slowed down.  That‘s always the first indicator, isn‘t it, that something‘s not right.  Unemployment we saw went up last week.  You know (INAUDIBLE) 5 percent.  In Nevada, which has been the fastest-growing, you know, economy in the country, it‘s now 5 percent.

(END VIDEO CLIP)

MATTHEWS:  Let‘s jump down to South Carolina.  We‘ve got John O‘Connor here from “The State,” the big newspaper in Columbia.  Tell me about South Carolina.  Let‘s go on the Democratic side.  That election‘s going to be on the 26th, right?

JOHN O‘CONNOR, “THE STATES”:  Yes.

MATTHEWS:  John?  That election...

O‘CONNOR:  Yes.

MATTHEWS:  Most blacks in the South are Democrats.  Half the Democratic Party is African-American, is that correct?

O‘CONNOR:  Yes, about half the expected voters in the primary will be

will be African-American.

MATTHEWS:  And I heard another statistic that 30 percent of the voters are going to be African-American women.  A big chunk of the electorate‘s going to be African-American women, a huge chunk.

O‘CONNOR:  About, yes, about a third of expected voters will be African-American women.

MATTHEWS:  So what‘s that create as a situation for Hillary Clinton, who‘s going in there as the wife of the former popular president, and of course, John Edwards coming in there, who was born in South Carolina, and of course, Barack Obama?  How does that create—how does it change the politics down there, this interesting congestion of popular figures?

O‘CONNOR:  Well, what we‘ve seen since the spring is kind of an underlying current about who‘s supporting Senator Obama and who‘s supporting Senator Clinton and kind of vying for the African-American vote.  In the next two weeks, it‘s going to—it‘s going to get a louder conversation.  I mean, we‘re going to hear more about it.  As for Senator Edwards, you know, he‘s—he won here in 2004.  He‘s got a lot of the same people behind him this time.

MATTHEWS:  Yes.

O‘CONNOR:  He‘s, you know, a native son here, and so he‘s—he‘s run a steady campaign, and you know, tried to keep the support that he had.  But he has lost some ground here to Senator Obama and Senator Clinton.

MATTHEWS:  Let‘s talk about Jim Clyburn, the very senior congressman down there who‘s a member of the House leadership in Washington, African-American guy, very respected, a real hero for the Civil Rights movement years ago, sort of the grand man of the campaign down there.  Is he going to endorse Barack or—I‘m reading him in the paper today.  I wonder if he‘s going to endorse Barack, rather than Mrs. Clinton.

O‘CONNOR:  Well, what he has told us as recently as just before Christmas was part of the promise that he made to the national party to get South Carolina early in the calendar was that he would stay out of the race, although he did give us a caveat, saying, you know, unless there‘s some headlines out of Iowa or New Hampshire, by which he was referring to, I guess, attacks or dirty tricks, though he didn‘t specify against whom.  I expect that he‘s not going to endorse anyone, that he would keep his word, but it remains to be seen.

MATTHEWS:  OK, let me go back to—let me go back to Jeff Zeleny and talk about—these things (INAUDIBLE) murky right now.  I want to talk about something that‘s coming up this next Tuesday, the 15th of the month, which to me is a pretty clear-cut case where we‘re going to have a shortening of the list of Republican candidates, one way or the other.

John McCain, it seems to me, has to win in Michigan.  Mitt Romney has to win in Michigan.  Is that the way you see it, Jeff, or the way you‘ll report it?

ZELENY:  I think, absolutely.  I mean, certainly on—on Mitt Romney, I mean, on both of the early contests in Iowa or New Hampshire, he says, I have got a silver. 

Well, it wasn‘t exactly a silver.  He lost.  He was hoping to win both of those states.  If he doesn‘t win Michigan, his advisers, even he concedes that that‘s done for him. 

Senator McCain certainly now is viewed as the national front-runner, if anyone is in this sort of chaotic Republican field.  If he wins in Michigan, he certainly goes on to challenge Rudy Giuliani very aggressively in the early states that he‘s competing against.  And then South Carolina, of course, is just the following week.  But Senator McCain, it seems to me, at this point is driving this Republican train. 

Back to South Carolina, on the Democrats‘ side for one second, if I

could, I think Congressman Clyburn‘s comments to “The New York Times” this

morning, a colleague of mine, are extraordinary and should be watched.  He

he really raised questions of what the Clintons are doing, in terms of talking about the civil rights movement.  So, that‘s the most interesting development, I think, in the race in the last 12 hours. 

MATTHEWS:  He—he took umbrage in the paper, in “The Times,” this morning about the comment by I think Hillary Clinton, Senator Clinton, that it took Lyndon Johnson to follow through and make good on the—the crusade, really, of—of Martin Luther King. 

ZELENY:  He did.  And I have been talking to Congressman Clyburn for a long time.  And he has said he will stay out of this race.

But this morning is the first time that he‘s indicated otherwise.  If he will endorse or not, who knows.  But he sent a very clear message this morning.  And you heard President Clinton responding to it all day long.  And he went on Al Sharpton‘s radio show, saying, oh, that‘s not what we meant, whatever.

But, if Congressman Clyburn is picking this up from his constituents in South Carolina, it‘s a potential problem for the Clinton supporters in South Carolina, if they don‘t rectify this.

MATTHEWS:  OK, gentlemen, starting this Tuesday, we have the possible further winnowing of this race.  It‘s almost like roller derby, with people getting knocked off the course. 

It looks like Romney could get knocked off the course.  If he is knocked out on Tuesday night, he is knocked out.  If he wins, John McCain is in trouble, but probably still in the race. 

With regard to the next Saturday in Vegas—again, I want to ask Jeff Zeleny—that race is between Hillary and Barack.  If Barack wins out there, he‘s back toe to toe with Hillary. 

Is that the way to look at it?  They are even—they are back even up again if he wins there?

ZELENY:  I think that‘s right.  You have to sort of look at every one of these contests as a win.  And whoever wins Nevada has one up over the other.  And then it‘s immediately on to South Carolina. 

Really, for the next week, we will kind of see a—a shuffle at 30,000 feet, if you will, people flying overnight back and forth from Nevada to South Carolina. 

MATTHEWS:  Yes. 

ZELENY:  But whoever wins in Nevada may have a leg up momentum-wise.

But, really, both candidates, both campaigns are looking ahead to February 5 states.  Twenty-two states will make decisions.  The campaigns aren‘t exactly sure where to spend money.  They have quite a bit of money to spend, but February 5 could end this, or it could not. 

MATTHEWS:  Right. 

Well, it‘s going to be the real tarmac campaign the closer we get to that, where they are only able to go, in each of these 20 states, from one media market to the other on airplanes as fast as they can to get the local interviews, and then off to the next spot. 

Anyway, thank you, Jeff Zeleny of “The New York Times.”  Great reporting by “The Times,” as always. 

John O‘Connor, thank you, sir.  We will be bothering you a lot in the next couple weeks—Mr. O‘Connor from the most important newspaper in the state of South Carolina, the Palmetto State.

Up next, it‘s miller time for John Edwards again. 

And what does Mike Huckabee have to do with tonight‘s “Big Number”? 

And a reminder:  MSNBC is the place for politics.  This Tuesday, I will be in Vegas for the Democratic debate.  What stays in Vegas—well, what happens in Vegas ain‘t going to stay there, because we are going to report what happens there.  This is the first one among the big three.  This debate is limited to Clinton, Obama, and Edwards. 

We‘re going to have full coverage of the Michigan primary results as well that night.  Tuesday night‘s a double-header for politics. 

You‘re watching HARDBALL, only on MSNBC.  

(BEGIN VIDEO CLIP)

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE:  You‘re looking at the candidate who can get Republican votes, including right here in South Carolina.

(CHEERING AND APPLAUSE) 

(END VIDEO CLIP)

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL. 

So, what else is new out there politically? 

Well, did you hear that John Edwards is the son of a millworker?  Of course you did, because he talks about it 24/7.  Not only is it part of his stump speech; he even spent primary night up in New Hampshire at a place called Tower Mills, once a working silk mill. 

Now he‘s up with a new TV ad about—you guessed it—millworkers. 

(BEGIN VIDEO CLIP, EDWARDS CAMPAIGN AD)

EDWARDS:  I have believed to my soul that the men and women who worked in that mill with my father were worth every bit as much as the man that owned that mill. 

(APPLAUSE)

(END VIDEO CLIP)

MATTHEWS:  But I wonder if you don‘t need some hope in this campaign to go along with the complaint—big question for him. 

Anyway, libertarian Ron Paul is taking heat for articles published under his name in his congressional newsletter in the late 1980s and 1990s, first reported by “The New Republic.” 

In talking about the L.A. riots, for example, in his newsletter back in ‘92, one piece said that—quote—“Order was only restored in L.A.  when it came time for the blacks to pick up their welfare checks”—nice writing there—“They were paid off, and the violence subsided.”

The articles offer general praise for KKK leader David Duke, while painting Martin Luther King Jr. as a—quote—“world-class adulterer” who—quote—“seduced underage girls and boys.”

Ron Paul‘s defense?  He told CNN he had never even read the articles that were in his newsletter, despite the fact that his name is stamped on those newsletters. 

And now it‘s time for the HARDBALL “Big Number” tonight. 

In the contest to see who can pound his chest the hardest, today, Mike Huckabee is the victor. 

Take a look. 

(BEGIN VIDEO CLIP)

MIKE HUCKABEE ®, PRESIDENTIAL CANDIDATE:  I think we need to make it very clear, not just to the Iranians, but to anybody, that, if you think you‘re going to engage the United States military, be prepared not simply to have a battle.  Be prepared, first, to put your sights on the American vessel, and then be prepared that the next thing you see will be the gates of hell, for that is exactly what you will see after that. 

(APPLAUSE)

(END VIDEO CLIP)

MATTHEWS:  So, let me get this straight.  A man with no foreign policy experience thinks the—the best way to engage the world is by threatening the potential enemy with the gates of hell. 

Are we all learning to talk like jihadists now?  On an irresponsibility scale from one to 10, Huckabee‘s threat is a 10, the height of irresponsibility, tonight‘s “Big Number.”  Well, that‘s what it is, tonight‘s “Big Number.” 

Up next:  The Republican presidential candidates debate in South Carolina.  And, this time, Thompson comes alive.  We will have some highlights, plus, what the candidates were saying with their body language.  I love this stuff.  It‘s not what they‘re saying.  It‘s what they‘re doing in those debates. 

You‘re watching HARDBALL, only on MSNBC, the place for politics. 

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE:  I‘m going to tell you things you want to hear, and I‘m going to tell you things you don‘t want to hear.  And that‘s what you should—what I have got to do for you, because these are tough times in America.  These are difficult times.  And we have lost the trust and confidence of the American people.  And I‘m going to get it back. 

(END VIDEO CLIP)

(COMMERCIAL BREAK)

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

And stocks plunging after American Express warned of mounting credit

card defaults.  And a profit warning by Tiffany‘s added to the unease today

the Dow industrials tumbling 247 points, the S&P falling 19 points, and the Nasdaq dropping 48 points. 

Bank of America is rescuing Countrywide Financial, buying the struggling mortgage lender for more than $4 billion in stock.  On the news, though, Countrywide shares fell 18 percent today, while Bank of America shares fell 2 percent. 

Meantime, CNBC‘s Charles Gasparino is reporting that savings and loan

Washington Mutual is in preliminary merger talks with J.P. Morgan Chase

And gold briefly hit an all-time high, above $900 an ounce today, before closing in New York at a record high of $897.70 an ounce.  That‘s up $4.10 on the day. 

And oil fell another $1.02, closing at $92.69 a barrel. 

That‘s it from CNBC, America‘s business channel—now back to MSNBC and HARDBALL. 

MATTHEWS:  Welcome back to HARDBALL. 

The Republican candidates debated last night again in South Carolina.  Sometimes, it‘s not what the candidates say, however, as we have noted before, but how they say it.  Their body language or tone of voice can tell us more than their words alone.                 

John Neffinger watched the debate last night, and will tell us what the candidates said with their bodies.  He makes a living coaching people on how to talk—talk—in front of groups and the importance of how to say what they have to say.  His clients are mostly business people, but he‘s also coached some Democratic candidates for office. 

So, we know your point of view. 

JOHN NEFFINGER, COMMUNICATIONS ANALYST:  That‘s true. 

MATTHEWS:  Let‘s take a look at this, John.  I want you to take a look at an interesting sort of flare-up involving the usually quiet Fred Thompson and Mike Huckabee.  They were in a scrape last night. 

Let‘s watch. 

(BEGIN VIDEO CLIP)

FRED THOMPSON, REPUBLICAN PRESIDENTIAL CANDIDATE:  He would be a Christian leader, but he would also bring about liberal economic policies, liberal foreign policies.  That‘s not the model of the Reagan coalition.  That‘s the model of the Democratic Party.

MIKE HUCKABEE ®, PRESIDENTIAL CANDIDATE: The Air Force has a saying that says that if you‘re not catching flak, you‘re not over the target.  I‘m catching the flak; I must be over the target.

You know, if Ronald Reagan were running tonight, there would be ads by the Club for Growth running against him because he raised taxes a billion dollars in his first year as governor of California.  It would be $10 billion today.

What I did was, I governed.  And the people of my state must have liked the way I did it, because they kept reelecting me.

BRIT HUME, MODERATOR:  Thank you, Governor.

HUCKABEE:  And that‘s greatest affirmation of all.

HUME:  Thank you, Governor.

HUCKABEE:  And I appreciate the opportunity to set that record straight, and hopefully, before the night‘s over, a few more things.

HUME:  All right. 

(END VIDEO CLIP)

MATTHEWS:  John?

NEFFINGER:  Yes. 

MATTHEWS:  What did you see there, besides what you heard? 

NEFFINGER:  First of all, Thompson had a great night last night.  And you can see that here in his body language.  What he‘s doing, he‘s very serious the whole time.  He‘s leveling these accusations.  It‘s not a joke.  And he‘s very forceful and direct. 

Now, he landed that punch on Huckabee.  Huckabee then has two choices as to how to handle that.  First of all, he can pretend that it—the charge sort of missed, that—that nobody saw that as a direct affront to him, and kind of laugh it off.  Or he can step up, recognize the affront, and bring back—basically come back at Thompson. 

Here, he—he tries to laugh it off, but it‘s not a good choice for him, because Thompson really did get him here.  He—he cast him very clearly in contrast to the Reagan tradition. 

And, so, when Huckabee tries the joke at the beginning, that‘s fine.  And then he—he cites some points, some arguments along the way, and then ends with this goofy grin and wink.  He did not do well defending himself against this charge, all in all.  So, points to Thompson here, definitely. 

MATTHEWS:  Let‘s talk about some of the jokes and the put-downs last night. 

Let‘s take a look at all of them together. 

Here they are, John, for you to review. 

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE:  I‘m not interested in trading with al Qaeda.  All they want to trade is burkas.  I don‘t want to travel with them.  They like one-way tickets.

(LAUGHTER)

MITT ROMNEY ®, PRESIDENTIAL CANDIDATE:  I think Congressman Paul should not be reading as many of Ahmadinejad‘s press releases.  But let‘s...

(APPLAUSE)

THOMPSON:  In the first place, you can tell that the news is good coming out of Iraq because you read so little about it in “The New York Times.”

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS:  OK, John, let‘s go through this.  I don‘t know what John McCain, Senator McCain, meant when he talked about all they want to do is trade burkas. 

NEFFINGER:  Beats me.  It was not—it was certainly not a very effective joke. 

And he then tries to basically paste over the—or cover over the fact that there was dead in the hall silence afterwards with this kind of goofy grin. 

It‘s very interesting, because, in the beginning of the debate, he was actually doing very well.  He was confident.  He had a steely smile on his face.  He looked like he was really buoyed by the results in New Hampshire.  But then he gets a little carried away and starts with these goofy jokes and really undermined himself here. 

Romney, by contrast, has always been doing these kind of goofy one-liner things.  Here, this one falls flat.  He doesn‘t try and cover it up with his usual salesman smile, but, instead, you can see, if you watch closely, he—he gulps really hard, because he really does know that that one failed. 

Thompson here delivers this joke wonderfully.  He does—basically does everything right.  Number one, he picks a joke that‘s not just a total aside.  He‘s making a substantive point that “The Times” doesn‘t report good news from Iraq.  So, even if it wasn‘t funny, he would be fine.

Number two, he delivers it well, so it is funny.  So, he‘s fine.  And, number three, he doesn‘t laugh at his own joke afterwards.  In fact, through this whole debate, he‘s the one who remains serious.  This was mostly about national security, serious topics.  And he played the part, as he has before in the movies, of commander in chief, taking this all with the—the gravity that the subjects deserve. 

MATTHEWS:  Interesting. 

Let‘s take a look at Giuliani and McCain, as they disagreed on whether

the question of supporting the surge.  Let‘s listen to them both. 

(BEGIN VIDEO CLIP)

RUDOLPH GIULIANI ®, PRESIDENTIAL CANDIDATE:  John gets great credit for supporting the surge.

But, John, there were other people on this stage that also supported the surge.

MCCAIN:  Not at the time.

GIULIANI:  The night of the president‘s speech—yes, John.

The night of the president‘s speech, I was on television.  I supported the surge.  I have supported it throughout.

MCCAIN:  My point was that I condemned the Rumsfeld strategy and called for the change in strategy.  That‘s the difference.

HUME:  All right. 

(END VIDEO CLIP)

NEFFINGER:  Again, Chris, these are the most serious issues that our nation faces, military strategy, our troops‘ lives at risk. 

And what do you see here?  First of all, Rudy is not the same confident, forceful Rudy that we have seen in the past.

He says:  John, uh, you know, um, I—I—I supported the surge, too. 

And he is assertive here, but he‘s not strong.  He doesn‘t—he doesn‘t say things with the strength and force that we‘re used to seeing from him and that we want to see from our commander in chief. 

Meanwhile, John McCain, again, is smirking through this whole thing.  He finds this funny that Rudy is trying to step up and make a case for himself.  And so even as we‘re talking about, again, these very serious issues, he‘s smirking.  He‘s smiling.  He‘s scoffing, none of which is very becoming.  It‘s not respectful of Rudy.  But it‘s also not respectful of the topic and the troops whose fates are at stake. 

MATTHEWS:  Do you sense, looking at the debate last night, that Fred Thompson really did come alive and he‘s going to be a player down there in South Carolina on the 19th

NEFFINGER:  He certainly did better relatively than everybody else and better relatively than he‘s done in the past.  I think what you see here is Rudy is not as strong as he used to be.  Romney continues to kind of fall apart and undermine himself.  Huckabee here took some shots from Thompson and Thompson emerged as the winner here, basically just by being serious and doing not necessarily anything more dynamic than he‘s done in the past, but basically looking the part of commander in chief as this debate focused mostly on serious issues of foreign policy. 

MATTHEWS:  OK, thank you, John Neffinger. 

Up next, after a huge week, we‘ve got your Friday politics fix.  Lots to talk about this week, lots happening in New Hampshire, obviously.  Let‘s talk about the implications, the consequences of what happened Tuesday night with that surprise victory by Senator Clinton after all the polls, I mean all the polls, showed a victory by Barack Obama was coming.  This is HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MITT ROMNEY ®, PRESIDENTIAL CANDIDATE:  As president of the United States, I will not rest until I see Michigan come out of this one-state recession and once again become a powerhouse economically in America and the world. 

(END VIDEO CLIP)

MATTHEWS:  Welcome back to HARDBALL.  Time now for our politics fix.  It‘s Friday.  It should be fascinating to cap the week.  Our round table, NBC News political director Chuck Todd and Joan Walsh of “Salon.”  Lady and gentleman, thank you both for joining us. 

Let‘s look at a little squall, skirmish that started at the end of the week.  Here‘s is former President Bill Clinton calling into the Reverend Al Sharpton‘s radio show today, Friday, attempting to clarify his comment about the Barack Obama campaign being a fairy tale. 

(BEGIN VIDEO CLIP)

REV. AL SHARPTON, CIVIL RIGHTS ACTIVIST:  You had said that Senator Obama‘s campaign was a fairy tale.  How do you respond to that? 

WILLIAM JEFFERSON CLINTON, FORMER PRESIDENT OF THE UNITED STATES: 

First of all, it‘s not true.  I have given hundreds of speeches on Hillary‘s behalf in this campaign.  I don‘t believe I‘ve given a single one where I did not applaud Senator Obama and his candidacy.  It‘s not a fairy tale.  He might win. 

(END VIDEO CLIP)

MATTHEWS:  I don‘t know what we‘re making of this.  The definition of is comes into service again.  Bill Clinton said he didn‘t call it a fairy tale.  Everybody on planet Earth heard him call it that. 

CHUCK TODD, MSNBC POLITICAL DIRECTOR:  Look, they have some problems in the African American community.  I‘ve gotten a bunch of calls today.  It‘s shocking, of all—the Clintons have been—

MATTHEWS:  What was the remark that hurt the community, at least the way we‘re reading it right now? 

TODD:  It‘s the fairy tale remark that‘s really hurting.  Sharpton, he put out a press release to say, I‘m having have former President Clinton on, and I‘m going to ask him about the fairy tale comment.  You had Donna Brazile, unaffiliated in this right now, completely unaffiliated, so very much—

MATTHEWS:  A big DNC figure. 

TODD:  Exactly.  This is where it‘s having reverb, inside that DNC world.  It‘s sort of in Washington, sort of the insider African-American leadership class, very upset about this.  Jim Clyburn comes out in the “New York Times” and basically issues a warning shot, not only may I endorse Obama, but I‘m going to do it and take a shot at the Clintons at the same time. 

It‘s something that makes—it gives them an extra political headache. 

JOAN WALSH, SALON.COM:  We need to be fair to President Clinton.  I don‘t think it was a wise remark, but specifically the context of what he was saying was the notion that Obama had always been steadfastly opposed to the war was the fairy tale.  Not that his candidacy was a fairy tale.  And that‘s pretty clear in the longer clip of the Sharpton interview. 

So it still probably wasn‘t a wise thing to say.  We don‘t want to hear fairy tale about Obama, but it was about his war stance, not his candidacy.  So let‘s get it straight. 

MATTHEWS:  Joan, do you think we‘re in a time—we always wondered—of course, if we ever thought about anything well ahead of time, which I don‘t think we do—we‘re confronted with a campaign on the Democratic side which has narrowed down almost now to an African-American and a woman candidate.  This is strange.  It‘s terra incognito for most Americans.  It‘s certainly new historically. 

These sensitivities about ethnicity, race, if you will—I don‘t like the phrase, but ethnicity—and gender and gender equality, and is everybody getting treated fairly, and is there secret code.  I mean, if you said fairy tale about some other candidate, would that be anything more than the usual bad-mouth of campaign trail. 

WALSH:  I think it‘s very unchartered territory, Chris, and I think people will have to think about the words they use.  I know that Senator Clinton herself was criticized for saying LBJ got the credit for the Civil Rights Act, and seeming to not take Martin Luther King as seriously.  She‘s had to come back and clarify that.  So, you know, I think they‘ve got to go into South Carolina, where they‘re, you know—they face an uphill struggle with African-American voters—very respectfully, very carefully, ask for votes, talk about what they‘ve done. 

But they can‘t afford, you know, off-the-cuff remarks like that, and they have to treat Senator Obama with—with respect. 

MATTHEWS:  Are these all get-out of-jail passes?  Both candidates, to be blunt about it, both fashioned sort of an SDI, if you will, a Strategic Defense, any attack is viewed as personal, any attack on Mrs. Clinton, Senator Clinton is gender.  Every attack on Barack Obama is ethnic.  In other words, have they both set up these foul situations that have never been there before? 

TODD:  It‘s an interesting premise.  I do think it‘s led to what—everybody wants to talk about this has been a nasty campaign.  This has been one of the kindest campaigns. 

WALSH:  Absolutely. 

TODD:  If you think about what they are fighting for, this is to control the Democratic party.  For the Clintons, it‘s like they have controlled the party for 15 years.  This could be it for them.  For Obama, he‘s trying to take control.  All of the people are helping him—

MATTHEWS:  Do you think it‘s a question—do you think Hillary is the front-runner or Barack is? 

TODD:  I don‘t think—I think the two are front runners. 

(CROSS TALK)

MATTHEWS:  Joan, let me give you a shot.  It seems like she has some of the big-state advantages.  I think it‘s California.  I know I worked out there for the paper for all those years.  I just think California is going to be the big enchilada.  It is going to decide this thing, because there‘s no way to talk your way away for it. 

If California goes for Senator Clinton with Bill Clinton‘s enormous popularity out there, especially in southern California, I just don‘t see how they walk away from that and say that Hillary Clinton isn‘t the front-runner.  What do you think, Joan? 

WALSH:  I think that‘s true and I think she still has a sizable lead here, Chris, but I think anything can happen.  I‘m very wary after what we all we went through in New Hampshire—and we were all there—of looking at a big poll lead and saying she‘s got it.  I think Obama has a great organization here.  He‘s got great fund-raisers.  He‘s got Hollywood.  So he‘s very much in it. 

I agree with Chuck.  I don‘t think there‘s a front runner. 

MATTHEWS:  Let‘s talk about Nevada.  We‘re going to Nevada.  We‘ll have the MSNBC debate with Brian and Tim and Natalie Morales is going to be getting questions from regular people.  It will be a big night.  We‘ll be doing two shows before it, HARDBALL and another show afterwards, the usual wrap-around.  Big night, and also we‘re going to be announcing results of the Michigan primary, basically the Republican primary in Michigan. 

What‘s the big news coming out of that?  Is that the end of the Romney campaign potentially? 

TODD:  I think potentially.  And not only that, potentially the crowning of John McCain. 

MATTHEWS:  If he wins Michigan. 

TODD:  If he wins in Michigan.  First of all, anybody winning two in a row on the Republican side, I think all of a sudden everybody‘s going to be like, oh, wow, let‘s get behind him. 

MATTHEWS:  Two in a row is a streak here. 

TODD:  I‘m sensing an exhaustion among the Republican establishment,

where the minute they feel like OK, we have a front runner and it‘s McCain

--

MATTHEWS:  Republicans hate chaos. 

TODD:  Yes. 

MATTHEWS:  Joan, jump in on this.  The culture of the Republican party is the opposite of Mark Twain saying the Democrats aren‘t an organized political party. 

WALSH:  They don‘t like it. 

MATTHEWS:  They don‘t like it.  They like to know who the leader is so they can follow them. 

WALSH:  And then—

MATTHEWS:  Don‘t they want—do you feel that—centrifugal or centripital?  Which one pulls you to the center?  Help me!  The one that pulls you to the center, that force, is that going on right now in the Republican party?  We‘ve got to have a leader and it‘s got be McCain. 

WALSH:  I think it is.  And also, I think Rudy Giuliani has made such big mistakes.  I mean, it‘s one thing to say that I‘m going to wait until Florida and California, but then save your money.  Don‘t run out of money before you get there.  He‘s got staff today saying that they‘re not going to get salaries for the month of January so they can go on the air in Florida.  So, he just looks like a disaster and it raises questions about his judgment, so—

MATTHEWS:  How would you like to be working for a zillionaire and not get paid? 

WALSH:  I wouldn‘t enjoy that at all, Chris.  It‘s not my idea of fun. 

MATTHEWS:  Chuck, let‘s start on Tuesday, the Republican fight.  This is like a kaleidoscope.  I‘m sorry if I‘m getting confusing.  But there‘s so much going on in the next two weeks.  First of all, next Tuesday, a fix on that, it‘s a Republican fight.  It‘s Romney.  That‘s his home town.  His father was governor.  His mother ran for Senate against Bill Hart.  Very popular, sort of the Kennedys of Michigan.  If he loses there, no explanation for it, except he doesn‘t work out.   

TODD:  Right, he‘s done.  It‘s like the NFL playoffs, win or go home. 

MATTHEWS:  Sudden death? 

TODD:  It‘s sudden death.  If McCain wins and it suddenly this guy is on a roll.  And you will see the way the establishment rallies around him.  He will start rolling out an endorsement every 12 hours. 

MATTHEWS:  Is it your sense, Joan, that McCain will win?  I have seen a poll—I dare to mention a poll.  It‘s like mentioning the devil in this business.  But I think he was up about nine points. 

WALSH:  I saw that.   

MATTHEWS:  OK, I‘m going to talk about Nevada when we‘re done, because the gamble out there is fascinating.  The big union, the Culinary Union has endorsed Barack.  Hillary is out there picking off members of that union.  It‘s fascinating to watch.  We‘ll be right back with the politics fix. 

You‘re watching HARDBALL on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back with the politics fix with Chuck Todd and Joan Walsh.  Let me talk about this with Joan.  You‘re from out west there.  Joan, it looks to me like we‘ve covered the Midwest now.  We‘ve been in Iowa.  We‘ve covered the northeast, the New England states, with New Hampshire. 

We‘re about to go rocketing out through Michigan to Nevada next Saturday for the Democrats and their caucuses.  So we‘re going to have a lot of Latino and Latina participants in that caucus, a lot of labor people, obviously since it‘s Vegas, a lot of restaurant workers, waitresses, all kinds of people who work in the gaming industry.  It‘s going to be quite vivid, I think, what we see Saturday night. 

We‘re going to be covering it here from 7:00 to 9:00 Eastern.  Up in New York, of course, our vantage point we‘ll be watching it from.  It seems to me it‘s a fascinating thing, because Hillary is scrappy.  She‘s going to try to take this away from Barack, even though he‘s got the big union endorsement out there. 

WALSH:  Yes, and I think she‘s doing exactly the right thing.  She‘s

going door to door in Latino neighbors.  She‘s going voter to voter, worker

to worker.  Look, one thing we didn‘t focus enough about on Tuesday night -

we talked about the women‘s vote, but in the end she won the working class vote.  She won the non-college educated vote.  So the Culinary Workers made the choice that they made, but she‘s very smart to go after their members, because they are very receptive to her point of view.  She‘s become the lunch bucket candidate, really.

MATTHEWS:  Is this a battle between the beer drinkers and the wine drinkers, as Karl Rove, the inimitable one, raised the issue the other day.  He said the beer drinkers are more numerous in the Democratic party. 

WALSH:  Absolutely, and the other thing is that union is 58 percent women.  So she‘s got a great shot with the union members.  She lost the union leadership, but she should be going after those members.  She‘s doing exactly what she needs to do.  She‘s humble.  She‘s listening.  Today, she‘s come out with an economic stimulus plan.  She‘s going to fight for those workers. 

MATTHEWS:  This is amazing, Chuck, because gender has never been that important in politics because we always had male candidates, basically, in the presidential elections.  Now you have a situation where the Democratic party is heavily tilted towards women, just by numbers, almost 60 percent, I believe, in California, high 50s in the turn out up in New Hampshire.  She has an advantage, even in a one-on-one, it seems to me, she has an advantage. 

TODD:  She does.  I think that particularly Nevada—of the next two, that‘s the winable one for her.  She gets that split decision with Obama, then I think she actually has a slight leg up going into February 5th.  She loses both, and I think he has the slight leg up.  So, Nevada, I think, really is going to tell us—

MATTHEWS:  Watch the African-American women, who are so dominant in South Carolina.  Those African-American women, 30 percent of the electorate. 

TODD:  Everyone seems to be ceding South Carolina to him.  So Nevada‘s next.

MATTHEWS:  Well, we have ceded one state to him already at our peril. 

Anyway, thank you Chuck Todd.  Have a nice weekend, Joan Walsh. 

WALSH:  Thank you. 

MATTHEWS:  Tuesday night, join us for the Democratic presidential candidates debate, only on MSNBC.  It‘s the big three now, Hillary, Obama and Edwards for the first time.  Plus, it‘s Michigan primary night.  Lots of news that night.  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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