updated 3/11/2008 11:50:20 AM ET 2008-03-11T15:50:20

Guests: Chris Smith, Susan Molinari, Gov. Jon Corzine, Chrystia Freeland, Linda Douglass, George Rush, Rick Hertzberg

CHRIS MATTHEWS, HOST:  Sex crimes and wiretaps.  The governor of New York caught in prostitution ring.  Can a client of the Emperors Club rule the Empire State?

Let‘s play HARDBALL.

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

bombshell today in New York state.  Just after 2:00 o‘clock today, the news

broke that New York governor Eliot Spitzer was linked—that was the word

to a prostitution ring.  According to the FBI, Spitzer was “client nine” of the ring.  A short time later, Governor Spitzer apologized in a brief appearance before cameras.

(BEGIN VIDEO CLIP)

GOV. ELIOT SPITZER (D), NEW YORK:  I apologize first and most importantly to my family.  I apologize to the public, whom I promised better.

(END VIDEO CLIP)

MATTHEWS:  Will Spitzer have to resign and have to do so quickly?  And who decides?  And will he be prosecuted as a criminal?  We‘ll cover all the angles of the breaking news story in just a moment.

And later: sheer audacity.  Over the past few days, the Clinton campaign has been pushing the idea of a dream ticket with Senator Barack Obama in second place as vice president.  There‘s only problem with that magnanimous gesture.  Obama is the frontrunner in this race, Hillary is the one over 100 delegates back, in second place.

Here‘s Senator Obama reminding her of that.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE:  I don‘t know how somebody who‘s in second place is offering the vice presidency to the person who‘s in first place.

(CHEERS AND APPLAUSE)

OBAMA:  I mean, I‘m just wondering.  I‘m just wondering because if I was in second place, I could understand it.  But I‘m in first place right now.

(END VIDEO CLIP)

MATTHEWS:  A lot of us have been waiting for the senator to clear that little matter up.  We‘re going to have more on that political sugarplum in a moment.

But we begin with the blockbuster political news, and it‘s bad, involving Governor Spitzer of New York and that prostitution racket.  Chris Smith is a contributing editor for “New York” magazine.  “Newsweek‘s” Howard Fineman is an MSNBC political analyst who has heavily covered Governor Spitzer.  And Susan Molinari is a former U.S. congresswoman from New York City.

Let me go to Chris.  It seems to me a couple of things are now on the record.  A wiretap picked this up, right?

CHRIS SMITH, “NEW YORK” MAGAZINE:  Correct, an FBI wiretap of the Emperors Club, a prostitution ring running in major cities, New York, Washington, Miami.  Apparently, Spitzer‘s voice is on the wiretap.  Whether he did anything illegal beyond that, we don‘t know at this point.

MATTHEWS:  He was checking out for—he was trying to arrange a meeting with a prostitute named Kristen?

SMITH:  Right and...

MATTHEWS:  Or at least went by the name of Kristen.  We can assume that there‘s another name for the person, her actual name.

SMITH:  Yes.  And apparently, the discussion revolved around a trip to D.C. that Spitzer took on February 24 and 25.  Last week, last Thursday, the directors, owners, men behind the prosecution ring...

MATTHEWS:  Right.

SMITH:  ... were indicted in New York City.  And the first tip, the first hint, was that the heads of the government corruption U.S. attorney‘s office division were at those hearings.  They don‘t normally show up unless there‘s a big deal involved.

MATTHEWS:  Well, Chris, according to the wiretap, there was a conversation between the governor and whoever he was talking through, the agent or whatever it was in this prostitution racket.  He‘s certainly doing what he can to help the economy.  These are, like, $3,500 as a base, and then another $1,500 can be negotiated for one hour or one evening or something.

SMITH:  Yes, my cab driver...

MATTHEWS:  That‘s a lot of money.  And he met her in Washington.

SMITH:  Yes.  You know, it‘s economic stimulus, among other things.

MATTHEWS:  Right.

SMITH:  But you know, my cab driver on the way to the press conference this afternoon said, They‘re making it look like he‘s running the ring, he was just, you know, involved in some way.  Obviously, this is a major political disaster for Spitzer.  You know, a guy‘s has built his career on moral rectitude, cleaning up Wall Street, cleaning up Albany, to have any dealings at any level with a prostitution ring is a disaster.

MATTHEWS:  Howard and Susan, I want you to watch.  Here‘s the full statement on camera from the governor today.

(BEGIN VIDEO CLIP)

SPITZER:  Good afternoon.  Over the past nine years, eight years as attorney general and one as governor, I‘ve tried to uphold a vision of progressive politics that would rebuild New York and create opportunity for all.  We sought to bring real change to New York, and that will continue.

Today, I want to briefly address a private matter.  I have acted in a way that violates my obligations to my family, that violates my or any sense of right and wrong.  I apologize first and most importantly to my family.  I apologize to the public, whom I promised better.

I do not believe that politics in the long run is about individuals.  It is about ideas, the public good, and doing what is best for the state of New York.  But I have disappointed and failed to live up to the standard I expected of myself.  I must now dedicate some time to regain the trust of my family.

I will not be taking questions.  Thank you very much.  I will report back to you in short order.  Thank you very much.

(END VIDEO CLIP)

MATTHEWS:  Howard Fineman, there‘s a bit of a dodge built in there.  Politics is not about individuals, except that this guy killed himself to get elected governor of New York and he‘s done pretty well as a politician until recently.  He‘s trying to dodge it, saying this is a private matter, a personal matter.  He‘s also saying it‘s not about individuals.  Is he trying to skip on this one politically?

HOWARD FINEMAN, “NEWSWEEK,” MSNBC POLITICAL ANALYST:  I think he‘s trying to, Chris.  This is a guy who knows how to negotiate, who‘s a very tough negotiator who made a lot of enemies on Wall Street and corporate America and in Albany because of his toughness as a negotiator.  What he‘s basically doing is conceding as little as possible there, with his wife crestfallen at his side.

MATTHEWS:  Oh!

FINEMAN:  I don‘t—it‘s just a horrible thing to see, especially if you looked at the earlier videos, Chris, that we‘ve been showing at MSNBC of the bright and bubbly and effervescent Silda Wall, and here she is, standing here by her man.

I don‘t know that he‘s going to be able to have this opening round of negotiations last very long.  He‘s basically saying it‘s a private matter, that he‘s going to take some time, that the fight will go on for changing New York.  He‘s not conceding anything there, even as rumors swirl that he‘s going to be out by tonight.  If he is, he certainly didn‘t sound that way in this opening bid in front of that brief press conference.

MATTHEWS:  Well, of course, Susan, every time a pol gets in trouble, they say it‘s a private matter, but if it were a private matter—and I‘m not being cynical—we wouldn‘t know about it.  If this were a private matter involving—it‘s involving a prostitute who was being wiretapped, a prostitution racket which was being wiretapped.  That ceases probably to be a private matter the minute you‘re picked up on a tap, isn‘t it?

SUSAN MOLINARI ®, FORMER NEW YORK CONGRESSWOMAN:  Well, and there‘s

yes.  And then there is also the issue of hypocrisy which has come out. 

You know, Governor Spitzer, when he was attorney general, was a successful prosecutor against prostitution rings and prosecuted at least on two different occasions, one time on Staten Island, my old district, where he spoke very dramatically about the impact of prostitution rings and ties to organized crime, et cetera.  So there is a history here of him fighting prostitution rings, so that‘s why I think New York is so stunned by what they‘re learning about their governor today.

MATTHEWS:  He‘s a big Senator Clinton backer, a colleague of hers in New York.  Fair enough.  She‘s not involved in this.  But he is one of these highly placed superdelegates whose judgment we‘re supposed to look up to and hold precious as somehow higher and mightier in its importance than the average voter who schleps to a primary or a caucus.  They‘re going to rule on how well we vote.  If we vote inappropriately, the superdelegates, this the oligarchy, will rule down and say, Sorry, you blew it.  Now, here‘s a fellow that‘s not showing the best of prudence or judgment, is he?  Am I stretching this point?  I hope so.

SMITH:  No, you certainly are no fool for the supremacy of any superdelegate or politician.

MATTHEWS:  Right.

SMITH:  You know, we have no shortage of dumb, particularly male behavior in public office.

MATTHEWS:  Yes.

SMITH:  And yes, it‘s going to look bad for Hillary indirectly.  It‘s going to look bad for the Democrats in the fall.  Spitzer was a major rising star in the Democratic Party.

MATTHEWS:  Well, this isn‘t—this doesn‘t involve Senator Clinton, obviously, at all.  But you know, he was something of an embarrassment to her before.

SMITH:  With the driver‘s licenses.

MATTHEWS:  Look at the debate in which Tim Russert of NBC asked Senator Clinton about whether she supported Spitzer‘s idea to give driver‘s licenses—in other words, documentation—to people in the country illegally.  It got her into so much political trouble.  Here‘s that moment, just to recall it.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE:  What Governor Spitzer is trying to do is fill the vacuum left by the failure of this administration to bring about comprehensive immigration reform.  We know in New York we have several million at any one time who are in New York illegally.  They are undocumented workers.  They are driving on our roads.  The possibility of them having an accident that harms themselves or others is just a matter of the odds.  It‘s probability.  So what Governor Spitzer is trying to do is to fill the vacuum.

(END VIDEO CLIP)

MATTHEWS:  Well, he didn‘t quite fill the vacuum, Howard, because eventually, he had to step aside and let her off the hook.  He also tried to get out of that mess with Joseph Bruno, the top Republican in the state, while he was putting him under some type of surveillance, apparently, got caught doing that, using state officials to do that.  Is this three strikes, you‘re out for the governor?

FINEMAN:  Well, here‘s what I see, Chris.  I see a guy who is suddenly trapped.  And it sounds paradoxical to say that the governor of New York is trapped.  But Eliot Spitzer has been a rocket on the rise ever since he went to Princeton.  He was going to be the first Jewish president.  He was Harvard law school.  He was the attorney general of the state for eight years who struck fear into the heart of the corporate miscreants and Wall Street, and so on.  Suddenly, he screws up with Hillary and she‘s got to defend him and then moves away from him.

Then suddenly, she‘s not doing all that well because this guy named Barack Obama comes along.  If Hillary doesn‘t win the nomination, she stays in the Senate and he‘s thwarted because there are two senators for life in New York.  He suddenly can‘t move from governor to senator.  Suddenly, this sort of rocket that‘s been rocketing to the sky has nowhere to go, especially because nobody in corporate New York can stand him.  The people in Albany can‘t stand him.  He‘s made enemies everywhere he‘s gone and he has no where to go.

And I don‘t know how that figures in the personal drama behind the scenes, but having seen this kind of thing before, I bet you it does.

MOLINARI:  Yes, Chris, I mean, the illegal driver‘s license not only put Senator Clinton in a bad place, but New York state Democrats, who had to answer the same question and wanted him to pull the bill much earlier.  And if you recall, he had a run-in with the Democrats in the assembly over who was going to appoint controllers (ph).  So there‘s really nobody in Albany who‘s going to be there, I think, necessarily, to support this man...

MATTHEWS:  Well...

MOLINARI:  ... and unfortunately, his family right now.

MATTHEWS:  ... listening to Howard‘s riff on the guy, it sounds like the only love for this guy was the kind we‘re talking about today.

SMITH:  Well, amazingly enough, this comes immediately on the heels of the momentum starting to change in Spitzer Albany a little bit.

MATTHEWS:  Right.

SMITH:  He won a special election in upstate New York.  He was on the verge of taking control of the state legislature, and he‘s...

MATTHEWS:  We‘re going to talking, by the way—in the next section, we‘re going to be talking about how much legal problem this guy faces as a major public figure because, apparently, those are the ones that do get prosecuted in these kinds of cases.

Anyway, Chris Smith, thank you, from “New York” magazine.  Howard, thanks for joining us.  And Susan Molinari, thank you.  Coming up, much more on the Spitzer bombshell.

And later: Hillary Clinton trails Barack Obama in the delegate count, but team Clinton keeps hinting that Obama might be able to find a place on Hillary‘s ticket.  Today, Obama reacts—strongly.

You‘re watching HARDBALL only on MSNBC.

(BEGIN VIDEO CLIP)

OBAMA:  I‘m not running for vice president.  I‘m running for president of the United States of America!

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SPITZER:  Today, I want to briefly address a private matter.  I have acted in a way that violates my obligations to my family, that violates my or any sense of right and wrong.

(END VIDEO CLIP)

MATTHEWS:  Welcome back to HARDBALL.  Joining me right now is New Jersey Governor Jon Corzine, who was originally scheduled to come on the show, and the only reason he‘s here, actually, is to talk about the Democratic race and the role of possibly calling a new Michigan and Florida primary.  We‘re going to get to that in a moment, really.

Governor, obviously, you‘re a governor.  Obviously, you‘re the next-door governor.  Your reaction to this bombshell that the FBI has picked up wiretaps on your colleague, the governor of New York, involved with a prostitution ring, and quite detailed information coming out about him and a liaison in Washington, crossing state lines, the whole routine.

GOV. JON CORZINE (D), NEW JERSEY:  Chris, I‘m like every other human being, stunned and shocked.  And the history of Eliot Spitzer and my relationship with him and what I know about him are completely at odds with what has been revealed today.  It‘s pretty shocking.  And you know, he‘s got a lot of—a lot of work to do to both get back in the right position with his family, and obviously, with the public.

MATTHEWS:  What‘s this going to do to New York state politics?  Can he save himself?  Can he stay in the job after this?

CORZINE:  It‘s a tough row ahead of him, but you know, he is a man who‘s dedicated his life to, I think, doing good things for the people of the state of New York.  He‘s made a big mistake.

MATTHEWS:  You know, here‘s what Senator Clinton said.  The senator from New York said she didn‘t want to comment right now, but her thoughts and prayers went out to him and his family.  Well, that was generous.  The question...

CORZINE:  I think that‘s right, though.  I mean, people go through these kinds of personal car crashes.  I think people have a lot of sympathy.  You know, when I look at Mrs. Spitzer standing beside the governor today, you can‘t have anything but compassion.

MATTHEWS:  Do you realize that this—well, you must because you became governor of New Jersey to sort of save the state from the embarrassment of the McGreevey administration, all that embarrassment, with him hiring a male lover and putting him in as head of security in New Jersey.  And now the adjoining state, two of these babies in a row?

CORZINE:  I think that there has been a lot of breakdown in public trust in general.  This is not unique.  We had a governor in Connecticut that went to jail.  There was a change of power in Ohio on a misdemeanor charge of a governor.  There are lots of things that have happened.  I think all of us in public life have to recognize that our own personal behavior ends up undermining the trust that people need to have in their political leaders.

MATTHEWS:  Let‘s talk about something you came here to talk about...

CORZINE:  Good.

MATTHEWS:  ... and that‘s whether the Democratic Party can come through this tremendous—we have an economy—look at the Wall Street—look at the numbers down, the market—you‘re the expert—down 150 points today.  We‘ve got a war going on in Iraq, maybe another war in Afghanistan, maybe another war in Iran someday soon.  We‘ve got everything going down.  Medicare, Medicaid, health care, everything‘s in real problems, and the subprime problem.

CORZINE:  People‘s home prices are going down.

MATTHEWS:  Foreclosures.

CORZINE:  Gasoline prices are going up.

MATTHEWS:  Is the Democratic Party going to get its act together and finish out its primary season, all 50 states, let everybody vote and do this thing right so that their candidate has a good chance to be the change agent?

CORZINE:  Chris, I believe that‘s the exact right answer.  We should get our act together.  All 50 states should participate in that process.  They should do it in a disciplined way, where all voters have a chance to participate.  It‘s what Governor Rendell mentioned on “Meet The Press,” Senator Daschle reinforced at that point in time as an Obama supporter.  I think we ought to have all votes, including Florida and Michigan, count.

MATTHEWS:  Governor Spitzer‘s a superdelegate.  He may not be one by Denver in August.  But it just shows that superdelegates are people, too.  The idea that superdelegates are mightier and smarter and more judicious than the rest of us has obviously been misproven again.  Let me ask you this...

CORZINE:  I don‘t think superdelegates are the way to decide this.  I think...

MATTHEWS:  OK, you don‘t...

(CROSSTALK)

MATTHEWS:  ... should be by the voters.

CORZINE:  I think there are two standards I‘ll look at as a superdelegate.  A, the popular vote, what‘s the...

MATTHEWS:  Total national popular vote.

CORZINE:  What‘s the cumulative vote at the end of the day?  I‘m obviously going to pay attention to how New Jersey turned out.  But I think then the cumulative delegate count is also another element that you have to take into account.  But I think we ought to do that with all states participating.

MATTHEWS:  OK.  If we have a vote at the end of it—you‘re a superdelegate just like all the others—if after the end of this whole rigmarole at the end of June, after a new vote for Florida, a new vote for Michigan, it‘s all done, Puerto Rico, D.C., Democrats abroad, everybody‘s had their say—should the candidate who got the most votes be the nominee?  The most votes.

CORZINE:  The popular vote would be a very, very powerful statement in support of a given candidate.

MATTHEWS:  So, if the popular vote differs in terms of who the winner is, if Hillary wins the popular vote, Obama wins the delegate count, who do you vote for?  Who should the delegates vote for? 

CORZINE:  I will vote more than likely—there always can be circumstances that intervene...

MATTHEWS:  Yes. 

CORZINE:  ... that nobody can anticipate.  We saw some things today that change the context of how you look at things. 

I think the popular vote is more important. 

MATTHEWS:  You know why?  Because the founder of the Democratic Party once said that his belief is that one—a one-vote majority is as sacred as a unanimous vote.  That‘s the fundamental belief of democracy. 

CORZINE:  Sounds like a Thomas Jefferson quote to me. 

MATTHEWS:  Well, it should.  And, by the way, he started your party. 

(LAUGHTER)

MATTHEWS:  Anyway, thank you. 

(CROSSTALK)

MATTHEWS:  Thanks for coming on, on a difficult night.  You didn‘t come on to talk about the problems of Eliot Spitzer, who has been caught in this racket, the prostitution racket.  He was wiretapped.  Apparently, they have his voice.  They have his text messages.  They have got a lot of evidence on him that they—he probably wishes they didn‘t. 

We are going to come back and talk to Dan Abrams, our legal colleague, about what kind of legal jeopardy the governor of New York faces, in addition to incredible pressure to quite. 

Political sex scandals, we are going to talk about the big one right now, when we come back, the one surrounding Eliot Spitzer of New York. 

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL. 

All eyes are on the governor of New York, Eliot Spitzer, in this prostitution scandal tonight.  The New York governor was picked up on a wiretap seeking the services of a prostitute named Kristen, according to court documents this afternoon.

Governor Spitzer apologized at a news conference, but where is this thing heading? 

Now for the legal side of the developing scandal, we bring in Dan Abrams, host of “VERDICT,” a new show that starts next week, “VERDICT WITH DAN ABRAMS.” 

Sir, it‘s a perfect time for you to launch a show.

DAN ABRAMS, MSNBC GENERAL MANAGER:  Exactly. 

MATTHEWS:  It‘s not a perfect time for Eliot Spitzer. 

(LAUGHTER)

MATTHEWS:  We were talking back in your office this afternoon about what happens to—they‘re called johns in the parlance, we all know, clients of prostitutions.  They get charged with pandering, solicitation.  What is the verb for taking advantage of a paid prostitute, a prostitute? 

ABRAMS:  Well, when you‘re talking about crossing state lines, as the allegation is here, that a prostitute was taken from New York to Washington, the verbs—the verbs include persuading, inducing, enticing, coercing, transporting.  Any of those could be potential crimes. 

And, look, most of the time, they don‘t charge the johns, be it in federal cases, be it whether they are transporting them, if it‘s just an individual person who went to a prostitute for services.  And that—that infuriates many women‘s groups, who say, wait a second.  Why are the prostitutes getting charged, and the johns aren‘t?

But when the john is the governor of the state of New York, and the case is being scrutinized the way this one is, I think that Eliot Spitzer could really be in some serious legal jeopardy, if all of these allegations are true. 

MATTHEWS:  The only time I hear about these—you don‘t really hear much at all about—at all about this up in Washington, where I live.  I know you hear about it in Hollywood in the scandal sheets, movie stars going to these high-paid prostitutes, these call girls, if you will.

But does the FBI normally investigate these—these companies, organizations? 

ABRAMS:  Look, not that often, in particular when you have got three prosecutors from the public corruption unit.  That‘s the unit that deals with the government. 

MATTHEWS:  Yes. 

ABRAMS:  So, you know, it seems to me—it seems pretty clear that, at some point, they decided there was some level of—quote—“public corruption‘ going on. 

But how did they start this investigation?  Was it an organized crime investigation?  Again, we don‘t know that yet.  Very often, these prostitution rings are discovered in the context of another investigation, be it money laundering, be it racketeering, be it a mob investigation, and then they find them and move forward against them in the context of that. 

MATTHEWS:  How do these checks get written?  I mean, we‘re talking about $5,000 for assignation here.  This isn‘t credit card business.  This is—maybe it is. 

I mean, how...

(CROSSTALK)

MATTHEWS:  What‘s the—as Bob Woodward would say, follow the paper, follow the money.  Is this how they do it?  Can they—can they catch these people through just wire transfers, through credit cards, through—through check-writing, or what? 

ABRAMS:  Well...

MATTHEWS:  How do they catch them? 

ABRAMS:  Well, look, Eliot Spitzer allegedly did a number of things to avoid getting caught, avoiding a wire transfer, making sure he left the door open, et cetera, trying to try to be sort of as anonymous as possible.

But, ultimately, you know, you have got to take out money.  And, in fact, in the—in the charging document, it talked about the fact that this—this client number nine, who we now know to be Eliot Spitzer, was negotiating, in effect, saying, look, you know, I owe you some money.  I have got some credit here. 

And the person says, well, you‘re going to need some more cash.  He says, I‘m going to have to go to the bank machine, et cetera. 

So, there‘s no question that, at some point, his name in some form is down on their, you know, their—their list.  But there are ways to avoid paying with credit cards.  There are ways to try and pay in cash.  So, I think that that was the case here. 

MATTHEWS:  Well, it‘s so amazing.  I have never seen so much detail on a crime.  I mean, they have got conversations here between the governor and this prostitute all about details.  They have got discussions of their negotiations, as you say, over money.  They have the name of—the room number. 

ABRAMS:  How much she liked it or not?

MATTHEWS:  Yes. 

MATTHEWS:  But the room numbers, how do they have—why are we getting all this information?  Who is feeding this to the press? 

ABRAMS:  Well, look, it‘s coming from the indictment.

And part of the goal in the indictment is to talk about each and every act that was committed. 

MATTHEWS:  Yes. 

ABRAMS:  Again, this is not against Spitzer, this charging document. 

This is against the prostitution ring. 

MATTHEWS:  Yes. 

ABRAMS:  And, as a result, to prove each and every element of the crime, they go through and they say, here‘s what we know.  Here was the crime that was committed.  It was client A.  There was money transferred.  There was discussions about money.  The person had an account there, et cetera.  It is clear it was about sex. 

They have to prove all these things. 

MATTHEWS:  Yes.   

ABRAMS:  And, as a result, they get pretty detailed. 

MATTHEWS:  Well, they are proven enough for the public already, Mr.

Abrams. 

ABRAMS:  He‘s...

MATTHEWS:  And, luckily for you, sir, you begin this new program called “VERDICT.”  In fact, I just got it out of the movie store, by the way.  It was Paul Newman last time. 

ABRAMS:  Yes.  Well...

MATTHEWS:  This time, it‘s you, sir.  Congratulations...

ABRAMS:  Thank you. 

MATTHEWS:  ... on getting the Newman part. 

ABRAMS:  We‘re looking...

(LAUGHTER)

ABRAMS:  You know, we‘re looking forward to it. 

MATTHEWS:  Good.  It will be a great show.  “VERDICT WITH DAN ABRAMS” premieres next Monday night at 9:00 Eastern as part of our new lineup. 

Up next:  Some call it a dream ticket, but how will Hillary Clinton, trailing Barack Obama, get to put him on her ticket if she‘s coming in second?  Well, that‘s what—we‘re going to discover that when we come back.  We will have Obama‘s response to the proposal that he get second place on the ticket, when he‘s running first.

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

MARGARET BRENNAN, CNBC CORRESPONDENT:  I am Margaret Brennan with your CNBC “Market Wrap.”

Stocks falling for a fifth straight day, with the Dow Jones industrials tumbling 153 points, the S&P 500 falling 20, the Nasdaq dropping by 43. 

Stocks sinking as oil surged again—crude oil gaining $2.75 in New York‘s trading session, closing at another record high of $107.90 a barrel.  That‘s after trading at a new intraday high of $108.21. 

Meantime, the Energy Department reports that the national average price for regular unleaded gasoline rose six cents over the past week, to a record high of $3.23 a gallon. 

Among the few bright spots—and we will leave you with one today—

McDonald‘s reporting a 12 percent increase in same-store global sales last month.  That was helped out by sales of coffee and new breakfast items, along with strong growth in Europe.  Shares of the fast-food chain rose almost 3 percent. 

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

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE:  I think it‘s imperative that each of us be able to demonstrate we can cross the commander in chief threshold.  And I believe that I have done that.  Certainly, McCain has done that.  And—and you will have to ask Senator Obama with respect to his candidacy. 

(END VIDEO CLIP)

MATTHEWS:  Welcome back to HARDBALL. 

So, again, why is Senator Clinton talking about a joint ticket with Senator Obama as her vice president if she doesn‘t think he‘s qualified for the job of president? 

Chuck Todd is NBC‘s news political director.  NBC‘s Andrea Mitchell covers the Clinton campaign.  And Chrystia Freeland writes for “The Financial Times.” 

I don‘t know, Chuck, but let‘s take a look at this response from Senator Obama today to start this segment off, because it looks like he is finally coming back with something of a roundhouse punch at this—well, this presumption that Senator Clinton can dictate who will appear as number two on her ticket. 

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE:  As I understand it, both Senator Clinton and President Clinton repeatedly talked about how I would be a great vice president. 

(LAUGHTER)

(BOOING)

OBAMA:  I have won twice as many states as Senator Clinton. 

(CHEERING AND APPLAUSE) 

OBAMA:  I have won more of the popular vote than Senator Clinton. 

(CHEERING AND APPLAUSE) 

OBAMA:  I have more delegates than Senator Clinton. 

(CHEERING AND APPLAUSE) 

OBAMA:  So, I don‘t know how somebody who‘s in second place...

(CHEERING AND APPLAUSE) 

OBAMA:  ... is offering the vice presidency to the person who‘s in first place. 

(CHEERING AND APPLAUSE) 

(END VIDEO CLIP)

MATTHEWS:  Well, let‘s go to Andrea Mitchell, who has been covering the Clinton campaign. 

Where do you get the chutzpah to offer the V.P. job to the guy who‘s beating you? 

ANDREA MITCHELL, NBC CHIEF FOREIGN AFFAIRS CORRESPONDENT:  Is that Gaelic? 

(LAUGHTER)

(CROSSTALK)

MATTHEWS:  Not at all.  It‘s good old Yiddish.  And I do think it‘s only appropriate, particularly appropriate in this case. 

MITCHELL:  It is.  It is so astounding.

MATTHEWS:  Audacity is a good American word. 

MITCHELL:  The audacity of anything but hope. 

I will tell you, it‘s so striking, because it, first of all, is very offensive to a lot of Democrats.  A lot of Democrats view this as really a putdown, not so much a sly putdown, a real putdown, of the front-runner. 

Look, he‘s got—right now at least—more popular votes, as he put out—as he just stated, and he also has more delegates.  And, so, for her to suggest this at the same time—there‘s the internal inconsistency.  How can she suggest putting him on the ticket if the first threshold question of being on a ticket is being ready to step into the number-one job?  You have got to be ready to be commander in chief. 

And she has said that, while she has years of foreign policy experience, and so does John McCain, he‘s only given one speech.  That‘s her standard line. 

MATTHEWS:  This is, Chrystia, the Clinton specialty, redefining reality: “is is.”  “I won the New Hampshire primary, when I lost by eight points to Paul Tsongas.”  “I can declare reality.”

Can Senator Clinton declare the notion that she‘s somehow even-steven with Barack Obama in delegates right now, to the point where she can publicly discuss whether she might put him on her ticket or not?

CHRYSTIA FREELAND, “THE FINANCIAL TIMES”:  Well, I agree with Andrea that it is audacious and inconsistent.  But...

MATTHEWS:  Is anybody buying it? 

FREELAND:  But I think it‘s also quite brilliant, because, by doing this, what she does is, she holds out to a big part of the Democratic Party, which is really troubled by all this, which feels like, we have two fabulous candidates, why do we have to choose, and who are also really worried, if they choose Hillary Clinton, then they lose all of the Obama momentum, all of those young people who haven‘t voted before.

She‘s saying, look, guys, you don‘t have to choose.  You can pick both of us.  After all, it‘s my turn.  And this is going to help Senator Obama. 

MATTHEWS:  Right. 

FREELAND:  It will give him all the extra experience. 

MATTHEWS:  Meanwhile...

FREELAND:  I think it‘s a brilliant ploy. 

MATTHEWS:  But, meanwhile, Chuck, this scorched-earth policy continues.  Even as she is showing him this bouquet of possibility that he might be her running mate, the scorched earth goes on. 

And look at the numbers this weekend in the “Newsweek” poll.  For the first time, they are not—they are pretty much even, but, more importantly, John McCain has caught up to them, because her attacks on Barack have brought them both down, it seems, to McCain‘s level. 

CHUCK TODD, NBC NEWS POLITICAL DIRECTOR:  Well, it has. 

And this is—you know, this was always the danger of where this fight goes out.  I mean, you look at the history in drawn-out delegate fights in both the Democratic Party and the Republican Party, and recent history shows, it doesn‘t matter who ends up with the nomination.  It‘s a loser by the time the general comes around, because you are concentrating all this fire on each other. 

More importantly, you have got Obama making negative—the negative messaging against Clinton, which is what McCain would use against Clinton, and, then vice versa, Clinton testing out new McCain talking points, when she‘s running against Obama. 

So, they are both doing almost the experimental dirty work of the RNC against each other.  And obviously, you know, the best stuff that‘s left over that doesn‘t quite work for the losing candidate gets used by McCain. 

MATTHEWS:  You know, Andrea, you and I have big Pennsylvania connections.  And I‘m telling you, when I poll—I have been polling on e-mail the county shares around the state, all across the state.  And one thing you hear: “I hope this fight doesn‘t get so dirty in Pennsylvania that it brings them both down.”

MITCHELL:  Well, that‘s what Ed Rendell was hoping.  He did not want to have these two very popular and very attractive, to different audiences, candidates fighting it out for six weeks in his state.  And now that‘s exactly what he‘s inherited. 

He was really put on the spot by Tim Russert on “Meet the Press” yesterday when he tried to defend how you could be inexperienced as commander in chief and yet be a viable vice presidential candidate.  He didn‘t really have an answer. 

Howard Wolfson, the communications chief for the Clinton campaign, was asked that same question today on a conference call, and he said, he‘s still not qualified to be commander in chief.  Well, then, how could he be the nominee?  He said, well, there‘s time between now and Denver before the convention.  So somehow Barack Obama is going to gain all of this foreign policy experience. 

MATTHEWS:  He has to win Howard Wolfson‘s respect.  Whoa.  Well, chutzpah does seem appropriate here, that they got the staff guy deciding whether he passes the test or not.  Which is—is that brilliant again? 

FREELAND:  I think Wolfson has actually been really effective at pursuing the kitchen-sink strategy. 

MATTHEWS:  Throwing it. 

FREELAND:  At throwing it.  And this whole NAFTA thing, for example, calling it NAFTA-Gate.  If you look at the Canadian news reports about it, it all actually started in a parliamentary lockup in Ottawa with a Canadian political guy saying Hillary Clinton‘s people were the ones that got in touch with us. 

MATTHEWS:  One of the ironies is they were, first of all, looking at a possible Hillary wink up there, that she wasn‘t going to go as far as her populist rhetoric. 

Here‘s Senator Obama taking on that commander-in-chief question today. 

(BEGIN VIDEO CLIP)

OBAMA:  They have been spending the last two, three weeks—you remember, with that advertisement with the phone call, telling every—getting all the generals to say, well, we‘re not sure he‘s ready.  I‘m ready on day one.  He may not be ready yet. 

But I don‘t understand, if I‘m not ready, how is it that you think I should be such a great vice president?  Do you understand that?  I was trying to explain to somebody a while back the okey-doke.  You all know the okey-doke?  It‘s when somebody‘s trying to bamboozle you, when they‘re trying to hoodwink you.  You—They are trying to hoodwink you. 

(END VIDEO CLIP)

MATTHEWS:  Let me go back to the politics of this with Chuck.  Do you really believe that the Democratic party will hold makeup Michigan primaries and Florida primaries paid for by the big-money people in the Democratic National Committee, by the money raised by Corzine and Rendell? 

TODD:  What‘s interesting here is take a look at who is saying they are going to raise the money.  This is clearly a Clinton strategy now, which is to come out now and endorse the revote.  Which is interesting for a couple reasons; one, it‘s an acknowledgement that Florida and Michigan aren‘t ever going to count, and that those results should be thrown out, because you have Clinton surrogates out there calling for a revote, saying they would fund it. 

The question is, will the Obama people be OK with this idea that it will be sort of a Clinton plan of how to do a revote, both in Florida and in Michigan.  You have complicated internal politics in Michigan, which—you know, between the UAW and the governor who don‘t get along.  It‘s not clear if they‘ll ever figure it out how to do a revote.  Florida, it seems, you got Bill Nelson out there almost out by himself—not every Florida Democrat is behind this mail-in idea, but in talking to some Florida Democrats today, they seem to think they can pull this off, and they seem to think they have no choice but to figure out how to pull out the mail vote. 

The question is: what does Michigan do and does Obama get put in a box if the Florida things happens.  He can‘t ever say he‘s against a revote if it actually happens.  But he‘s going to need Michigan.  He has a better shot of winning Michigan than he does Florida.  So then he‘s going to have to suddenly get behind an effort in Michigan to get a revote.  And the irony to all of this, Chris, is that the whole reason why the Clintons want Florida and Michigan to count has nothing to do with pledged delegates and has everything to do with super delegates, because right now the Florida and Michigan super delegates are thrown of.  If they get included, she will net 25 to 30 super delegates out of Florida and Michigan alone.  They have 53 between the two of them, which will probably be twice what she would net in tiny victories in Florida and Michigan. 

MATTHEWS:  There‘s no beautiful solution to this.  Thank you very much, Chuck Todd, Andrea Mitchell and Chrystia Freeland. 

Up next, much more on the bombshell in New York state, where Governor Spitzer has been picked up on a wiretap making use of a prostitution ring.  It looks like he‘s caught.  Should he resign?  The politics fix when we come back.  The big story—the Emperor‘s Club is the name of the call ring.  Should he rule the Empire State if he‘s in that ring?  This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL and the politics fix.  The round table tonight, Linda Douglass of the “National Journal,” Rick Hertzberg of the “New Yorker” and the “New York Daily News” columnist George Rush. 

Let me start with Linda Douglass.  Thank you for coming on.  Thank you all for coming on tonight.  Linda, you start, just when we thought we had a really good political story, which is this incredible story of how the Democratic nomination fight is going to end with Barack way ahead in votes and popular votes and delegates and states, and yet Hillary with the inside game mastered better than anybody, along with her husband, the former president, along comes this big story.  Just so we can all get a fix on the prudence and good judgment of super delegates, we‘ve got one here, the governor of New York, Eliot Spitzer, super delegate. 

His judgment is somewhat impeached now.  Can he survive? 

LINDA DOUGLASS, “THE NATIONAL JOURNAL”:  I was wondering how you were going to work all this together.  That was very good. 

MATTHEWS:  He‘s also a big Clinton alley, but he‘s not fair to say she had anything to with it.  She didn‘t, as far as I know.  That‘s her phrase.  I shouldn‘t use that all the time, as far as I know.  Of course, she had nothing to do with it.  He is a big ally, a big ally of the senators, and he‘s a big New York politician.  He‘s the biggest she can get.  Is this going to have ramifications.  Can he stand another day of this attention he‘s getting? 

DOUGLASS:  It‘s interesting that he didn‘t resign.  He‘s got to be wondering—presumably, if one believes the reports that are coming out of New York, he is going to resign, but a couple of recent politicians have weathered storms like this.  You had Senator David Vitter, who got caught with a prostitute of Louisiana.  You had Larry Craig; he famously of the men‘s room encounter with a man who said he was trying to toe tap or whatever he was trying to do.  And both of them decided to hang on and both of them are still holding their seats.

And one has to wonder if Eliot Spitzer figures, I‘ve got three years.  I can turn this around.  I can‘t imagine how he could.  He‘s not popular in New York now.  But one wonders if that‘s what‘s on his mind. 

MATTHEWS:  Let me go to George Rush of the “Daily News.”  I guess it‘s really come down to the shame, your ability to take shame.  Larry Craig has proven his ability to come to work every day and not care what anybody thinks.  It‘s a solemn universe he lives in.  He lives in an envelope.  Can the governor of New York live in an envelope, say, I don‘t care what you say in the press, I‘m sticking?

GEORGE RUSH, “NEW YORK DAILY NEWS”:  I think he can tough it out.  I think he‘s seen the president of the United States live through Lewinsky-gate, an impeachment hearing, and the governor is a pretty tough customer in his own right.  I think part of it may depend on whether this lady who he paid 4,300 dollars to, as Client Number Nine, may come forth with a lot of intimate details about what that encounter was like. 

So, if it starts to heat up and become more and more embarrassing, he may not be able to withstand it. 

MATTHEWS:  Rick, I was amazed at the amount of information we got on the first crunch.  It just comes in, details about the meeting, about the train trip.  He paid for this; he paid for her mini bar.  Do we need to know all this?  Somebody in the FBI‘s giving us everything here. 

RICK HERTZBERG, “THE NEW YORKER”:  You can‘t say he‘s exploiting cheap labor. 

MATTHEWS:  No, he‘s helping the economy of Washington, because he took her down there for this meeting. 

HERTZBERG:  The Sullivan Law.  Yes, but I don‘t think he can get through this.  When I heard his statement earlier, I thought, he‘s simply paving the way for his resignation.  He just wants to talk to his family first.  He wants to settle a few things.  I don‘t see how he can survive this. 

I mean, it was a victimless crime.  It‘s—it‘s a very different kind of crime from the kind of crime he was prosecuting as Mr. Prosecutor.  And it‘s a less serious crime, in my book, than stealing public money or fixing contracts or anything like that.  But for him, this just won‘t do, and it‘s different for a governor, too.  It‘s different. 

MATTHEWS:  George, the governor in his very brief statement, when he said, well, we‘ll get back to us and wouldn‘t take questions.  He said it was a private matter.  In New York State, will it be seen that way? 

RUSH:  I don‘t think it ever can be private.  I mean, you look back on the Giulianis‘ divorce and, sooner or later, all their filings come out.  It‘s—you know, it‘s a rough-and-tumble political world, where I think it‘s just a matter of time before allies of Spitzer will start accusing his Republican foes of, you know, somehow abetting this, setting up a honey pot or a honey trap or something.  And it‘s—I think privacy is an impossibility here. 

MATTHEWS:  Would he have prosecuted a guy of his weight politically? 

RUSH:  Oh, yes. 

MATTHEWS:  Well, that‘s a quick answer, George. 

RUSH:  Yes, well I think it goes without saying, after looking at the way he seized on those plane trips last summer, that if it‘s something this good, he‘s not going to let it pass, if the shoe were on the other foot. 

MATTHEWS:  I have to tell you, most Americans who live from paycheck to paycheck, who can‘t pay their heating bills, can‘t pay their mortgages, are going to be stunned at the sheer volume of money involved in these transactions.  Just morality aside, sex aside, 5,000 dollars an hour beats out some of our bigger lawyers in Washington, I think.  Linda, isn‘t that right? 

DOUGLASS:  Well, it is.  But I mean, I think, you know—yes, it was definitely a lot of money involved.  There was a lot of insane risk involved.  Again, you have to wonder about these high-profile, public figures, such as former president Clinton, given what he did—we were just talking about earlier—what were they thinking?  This was such a high-risk behavior for somebody who is paying money to a stranger who can make a lot more money by selling her story. 

But I think the crime here that may be unforgivable, and the political crime, of course, is the crime of hypocrisy.  I mean, here is a politician, Eliot Spitzer, who holds himself up as a person of great rectitude and honor and ethics, above many, many others.  I think more than anything else that is what‘s going to get him. 

MATTHEWS:  Well, that‘s over with. 

Anyway, we‘ll back with the round table for more of the politics fix. 

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back with the politics fix here and the round table.  Joining us now, of course, again is Linda Douglass and George Rush of the Rush column of the “New York Daily News.”  We all read that, even though we shouldn‘t.  And Rick Hertzberg of “The New Yorker.”

Rick, you led your piece this week in comment in the “New Yorker” about the fact that Hillary Clinton is spending millions of dollars, as you put it, dismembering Barack Obama.  He‘s spending millions to keep his limbs attached.  Is this going to go now from now until Denver, the convention? 

HERTZBERG:  It certainly looks like that way.  I don‘t know that it can.  That‘s four or five months off.  Four or five months of this?  I don‘t know if the country can take it.  I don‘t know if the candidates can take it?  But there‘s really—there‘s no sign that it will ease off, none. 

MATTHEWS:  There‘s no reason for it to stop if the Clintons have to catch up. 

HERTZBERG:  Not as long as she views this as totally a zero-sum game. 

He‘s a little more reluctant to look at it that. 

MATTHEWS:  In other words, if he goes down, she goes up.  She looks at it that way?   

HERTZBERG:  If he goes down ten points, she goes down five points.

MATTHEWS:  I only have ten or 15 seconds.  Linda, do you think this will continue, this scorched earth policy, right through the convention? 

DOUGLASS:  I think it will only because it‘s been working.  We see that the negative campaign against him did its job, as she expected.  Now people are waiting to see if he‘s tough enough to fight back. 

MATTHEWS:  I‘m looking for that, too.  That is a good question.  Thank you, Linda Douglass.  Thank you, George Rush.  Thank you, Rick Hertzberg. 

It‘s my honor now to say something about our beloved colleague Jennifer McNamara.  All these nights we‘ve been on up here in New York with these historic primary results, almost every Tuesday now, Jennifer was a proud member of our MSNBC team.  In fact, she‘s been a wonderful colleague in all the work we‘ve done here, night after night. 

Everyone says she had a good soul, that she is a good soul, who has left us after being the victim of a terrible vehicle accident on leaving our studio at Rockefeller Center.  Jennifer, thank you from all of us who will miss your smile and the soul behind it. 

Join us again tomorrow night at 5:00 and 7:00 Eastern for more HARDBALL, and tomorrow at 10:00 Eastern, I‘ll have special coverage of the Mississippi primaries.  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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