updated 10/13/2008 12:26:22 PM ET 2008-10-13T16:26:22

Guest: Ed Rogers, Joan Walsh, Larry Persily, Todd Harris, Steve McMahon, James Grimaldi, Peter Beinart, Richard Wolffe

CHRIS MATTHEWS, HOST: He's the one. Why John McCain can't take his eyes off Barack Obama.

Let's play HARDBALL.

Good evening. I'm Chris Matthews. Leading off tonight, fear and loathing on Wall Street and on the campaign trail. It's been another wild day for stocks after foreign markets plunged overnight. The Dow dropped nearly 700 points at one point today before rebounding in the afternoon and closing just-oh, just down 128 points. These days, that's a good day. Still, this week's point drop is the largest in history.

The calamity on Wall Street did nothing to cool the rhetoric in the campaign. The McCain campaign released its harshest, some might say its nastiest ad yet, again linking Barack Obama to '60s radical Bill Ayers.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: When convenient, he worked with terrorist Bill Ayers. When discovered, he lied.

(END VIDEO CLIP)

MATTHEWS: When asked today by MSNBC's Norah O'Donnell about whether -

why neither McCain nor Sarah Palin released a comment on yesterday's historic decline on Wall Street, here's what McCain campaign manager Rick Davis said.

(BEGIN VIDEO CLIP)

RICK DAVIS, MCCAIN CAMPAIGN MANAGER: I don't know if you really want to turn a campaign into, you know, a CNBC news show on the stock market. I mean, it doesn't mean that we don't care and aren't trying to do something about it. It's just I'm not exactly sure what you say every day.

(END VIDEO CLIP)

MATTHEWS: Wow. Campaigning in Ohio, Senator Obama struck back.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: But here's the thing, Ohio. They can try to turn the page on the economy. They can try to deny the record of the last eight years. They can run misleading ads. They can pursue the politics of anything goes. It will not work.

(END VIDEO CLIP)

MATTHEWS: McCain and Obama did talk about the economy, and we'll have more on that in just a moment.

Also, while it's true voters say they hate negative campaigning, it usually works. But maybe not this time. We'll talk to our strategists about whether it's smart politically for McCain to stay on the attack this year when all that matters is the economy.

And the so-called "Troopergate" report is supposed to be released in Alaska sometime today, but even before that, the campaign, the McCain campaign, absolved Palin of any wrongdoing in advance. Will the report, as they say, tell a very different story? Also, will the McCain campaign succeed in portraying Barack Obama as some kind of un-American? We'll look at that in tonight's "Politics Fix."

And if ever we needed a laugh, it's this week. So here's a taste from last night's "Saturday Night Live" special making fun of McCain for referring to Obama as "that one" in Tuesday night's debate.

(BEGIN VIDEO CLIP)

DARRELL HAMMOND, "JOHN MCCAIN": I will continue what I've done for 25 years, which is to reach across party lines, something that pee pants over here would never even consider.

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS: More where that came from in tonight's HARDBALL "Sideshow," Darrell Hammond again.

Anyway, but first, Joan Walsh is with Salon and Republican strategist Ed Rogers was an aide to the first President Bush.

Let's take a look at some things here now. I want to take a look at -

here's John McCain speaking today. Let's catch up with the campaign today.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: He has even questioned my truthfulness. And let me reply in the plainest terms I know. I don't need lessons about telling the truth to the American people. And were I ever to need any improvement in that regard, I probably wouldn't seek advice from a Chicago politician.

(END VIDEO CLIP)

MATTHEWS: I'm not sure exactly what that means. Here's Barack Obama today on the anger of his opponent-that he's-the opponent, rather, is creating against him out there in the field.

(BEGIN VIDEO CLIP)

OBAMA: Nothing's easier than riling up a crowd by stoking anger and division. But that's not what we need right now in the United States. The times are too serious. The challenges are too great. The American people aren't looking for someone who can divide this country, they're looking for somebody who will lead this country.

(END VIDEO CLIP)

MATTHEWS: OK, that's the latest, Joan Walsh. You've been watching this all week. What do you make of this? He trashes him for being from Chicago, I guess is the point of that one. And then it continues, the thematic of this week, which is he's a bad guy, he's a strange character, we don't know who he is, he may be involved with terrorists. He may be involved with-well, he's got a middle name like Hussein.

JOAN WALSH, SALON.COM: Hussein.

MATTHEWS: That's who's been popping up on the road this week. And they're also going into his contributors' list, with John McCain himself saying, Hey, he got some money from the Palestinian territories. Let's look at this guy. What's it all about?

WALSH: They're really trying to link him to domestic terrorists, to foreign terrorists, to really make the terrorist connection, which is disgusting. There's no reason to think that those connections are really there. He's a mainstream Democrat. We know plenty about him.

But you know, I think the interesting thing, Chris, is that first of all, this is creating a climate of hate. And even today, once again today, someone yelled traitor. And leading Republicans and McCain supporters are starting to speak out, God bless them. The former governor of Michigan, William Milliken (ph), endorsed him and said, I'm not sure. I'm backing away from him a little bit. This isn't the John McCain I know. I want him to tone down these tactics. Frank Shaeffer (ph), who endorsed him in 2000, said he's creating a lynch mob mentality. So good Republicans are starting to speak up about this and say stop it.

But McCain, I really think, the next time somebody says "traitor," really needs to say, Excuse me, my friends, Barack Obama is a man I disagree with on taxes and on Iraq, but he's not a traitor and he's not a terrorist. I will not stand for these hateful remarks. I'm waiting for that, and I'm afraid I'm going to be waiting for a long time.

MATTHEWS: Ed Rogers, what do you think of the tenor of the campaign right now on the Republican side right now?

ED ROGERS, FORMER AIDE TO PRES. GEORGE H.W. BUSH: Both campaigns could run an apology a day. And the McCain campaign doesn't have to stress or strain, but the campaign does need to focus on Obama, who he is and what he believes.

MATTHEWS: What do you mean by who he is?

ROGERS: Who he is...

MATTHEWS: What do you mean by that?

ROGERS: Oh, OK. OK, I'll answer the question. He is an unaccomplished state legislator that has written two books about himself, is a cliche, classic liberal on every matter that's ever come up. And so what about him? His associations are fair game. His record is fair game. And the notion that he can solve our problems based on his experience and his-and what we know about his character is ludicrous.

MATTHEWS: What's the message of it? There's a thematic this week.

What is it?

ROGERS: Every...

MATTHEWS: It's not just we don't know about him.

WALSH: Everything that...

MATTHEWS: What are they suggesting about him?

ROGERS: Everything that's easy to do in Washington has been done. We need somebody that's proven they can do hard things. Obama's never done one hard thing in his life.

MATTHEWS: That's a good argument. I don't hear that argument from them.

WALSH: But that's not what they're saying.

(CROSSTALK)

MATTHEWS: No, your party is doing-is very positively-well, let's...

(CROSSTALK)

ROGERS: ... people that show up at...

MATTHEWS: No, no, no, no, no! Let's take a look at these.

(CROSSTALK)

ROGERS: ... hurt Obama's feelings.

MATTHEWS: No, it's not about that. It may be suggestive of the kind of atmosphere that's being stirred up out there. When you have the vice presidential nominee going after this terrorist association, when you have the Republican...

(CROSSTALK)

ROGERS: It was a terrorist association.

MATTHEWS: What do you mean?

ROGERS: Ayers is a terrorist. He had an association with him and...

MATTHEWS: And what was his association with him?

ROGERS: The proximity of the man. The man supported him.

MATTHEWS: What was he supposed to...

ROGERS: They were on boards together.

MATTHEWS: He worked on...

(CROSSTALK)

WALSH: There were Republicans on that board.

MATTHEWS: ... twenty-six years later!

ROGERS: What defines an association? They had every single association there is, from professional to personal. It's fair game.

WALSH: That's not true. They're not friends.

ROGERS: It shouldn't be the only thing, and the McCain campaign can wear it out.

WALSH: They have worn it out.

ROGERS: But associations are fair game.

MATTHEWS: OK, why...

(CROSSTALK)

MATTHEWS: Ed, you know, as much about politics as I do. You see-and you don't see-well, let's-I want to ask you if you see any connection between the drumbeat on this connection with this guy, worked on school board issues, basically, back in the '90s, who had an involvement with terrorism or bombing back in the '60s...

ROGERS: Yes, that's the involvement.

MATTHEWS: OK, 30 years difference here.

ROGERS: And he refreshed it by saying he didn't do enough.

MATTHEWS: Right. Not he. Ayers did.

ROGERS: Yes.

MATTHEWS: OK. OK. That connection. And then we see this. Watch this. And you don't see a connection. Here are two moments this week where local officials on the platform introducing the running mates said the following.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: On November 4, let's leave Barack Hussein Obama wondering what happened.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Think about how you'll feel on November 5 if you wake up in the morning and you see the news that Barack Obama-that Barack Hussein Obama, is the president-elect of the United States of America.

(END VIDEO CLIP)

MATTHEWS: OK. Now, you don't see any connection between that and the fact that they're trying to prove a connection with overseas Arab money, that they're trying to prove a connection with, quote, "terrorists," which most people think of 9/11 terrorists, they don't think of Weathermen back in the '60s, OK-a clever use of the word "terrorist," a combination of this-and you don't see the fact that the-well, I wrote this in my little notebook I keep to myself last Saturday morning. When I read about what Palin was pushing, I said, the next step will be use of the term "Hussein." And what do you know, on Monday, they pushed Hussein. I could see it coming. You say that's an accident.

ROGERS: OK, McCain has spoken to that. That is a distraction for his campaign.

MATTHEWS: OK.

ROGERS: Everybody should behave and not use that, but it hurts McCain. It doesn't help him.

MATTHEWS: What about the use of the word "traitor"...

(CROSSTALK)

MATTHEWS: ... terrorist? They're screaming this out at rallies.

ROGERS: Everybody ought to have good manners at McCain rallies.

MATTHEWS: So you deny they're stirring it up.

ROGERS: It's a distraction...

MATTHEWS: They're not stirring it up.

ROGERS: It is a net minus.

WALSH: But Ed, why...

(CROSSTALK)

MATTHEWS: ... Republican candidates stirring up hatred to the point we're words like Joan just mentioned somebody yelling traitor. We're hearing people yell out socialism. The language is...

ROGERS: Heaven forbid.

MATTHEWS: No, but the language is pretty virulent out there, and it reminds me...

ROGERS: Oh, come on. It's catcalls.

MATTHEWS: ... of the '60s.

WALSH: It is virulent.

MATTHEWS: We'll see.

ROGERS: Some people with bad manners.

MATTHEWS: Let's take a-let's get more evidence here...

(CROSSTALK)

MATTHEWS: Ed, you're in the box tonight. Let's take a look at what McCain said on Monday and listen to the reaction from the crowd. Listen to the way he relates to the crowd, the way he stirs them up.

ROGERS: Play it again.

MATTHEWS: We haven't played it yet.

ROGERS: Oh. Well, play...

(CROSSTALK)

MCCAIN: What does he plan for America? In short, who is the real Barack Obama?

UNIDENTIFIED MALE: Terrorist!

(END VIDEO CLIP)

WALSH: Nice.

MATTHEWS: Here's Governor Palin. Throughout the week, same kind of insidious question. Who is this guy? Who is he?

ROGERS: Fair question.

MATTHEWS: What's it-OK.

ROGERS: Fair question.

MATTHEWS: It isn't about whether he's a liberal. It's not about that he comes from Chicago and he's involved in not a long political career. It suggests something. Here's what Governor Palin has been saying all week.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE: Wait a minute. He didn't know a few months ago that he had launched his political career in the living room of a domestic terrorist?

The question comes down to-he didn't know that he had launched his career in the living room of a domestic terrorist? He didn't know that until he did know, and then he continued to be in any way associated with that person? And this is all about patterns. And I'm going to talk about the patterns. And you know, I'm sure that some will say, Geez, they're getting kind of negative. No, it's not negativity, it's truthfulness.

(END VIDEO CLIP)

MATTHEWS: Well, he's involved on school board issues with a guy who has awarded the title of Chicagoan of the Year, a guy who's been very...

(CROSSTALK)

MATTHEWS: Well, the people of Chicago, I assume.

ROGERS: Oh, yes...

MATTHEWS: Well, let's take a look at...

(CROSSTALK)

MATTHEWS: Well, Richie Daley's one of the most conservative people I know. Cansome (ph) is a good citizen of that city.

Here's one of the questioners at Thursday's McCain-Palin event. This is what's coming out of the crowd now after this stimulus has been going on here. It's unbelievable. I haven't seen this since the '60s.

(BEGIN VIDEO CLIP)

UNIDENTIFIED: I'm mad! I'm really mad! (INAUDIBLE) it's not the economy. It's the socialist takeover (INAUDIBLE)

(INAUDIBLE) really missing (INAUDIBLE) going on. When you have Obama, Pelosi and the rest of the hooligans up there going to run this country, we got to (INAUDIBLE) (INAUDIBLE)

(END VIDEO CLIP)

MATTHEWS: This stuff is getting hot. It's getting hotter. I predict next week, it'll be even hotter. I believe that John McCain and Sarah Palin and the geniuses behind them, like Steve Schmidt, are turning on this crowd heat as loud as they can because they want cultural heat because they can't win the economic war.

ROGERS: Well, just for the record I...

MATTHEWS: You don't agree?

(CROSSTALK)

MATTHEWS: You're laughing.

ROGERS: But look, I...

MATTHEWS: Well, hooligan, socialism, everything else you can throw at them.

ROGERS: I am against offsides penalties at Redskins games, as well. And this happens in politics. So what? Hey, Obama hecklers show up at McCain rallies.

MATTHEWS: OK.

ROGERS: Come on~! So what? Does it hurt his feelings?

MATTHEWS: Ed, you love it.

ROGERS: Do we have to...

MATTHEWS: You love it~!

ROGERS: Do we have to cater to him?

(CROSSTALK)

MATTHEWS: I think it creates a dangerous environment in this country.

WALSH: I do, too.

(CROSSTALK)

ROGERS: It is not a net plus for McCain. It's not helping McCain.

(CROSSTALK)

WALSH: David Gergen said it last night.

(CROSSTALK)

ROGERS: Everybody should be quiet and let's put this focus on Obama.

MATTHEWS: ... and we'll see.

ROGERS: This is not helping-it doesn't help McCain.

WALSH: There's an anger and demonization-there's an anger and a demonization that leads to a climate of violence. And more people are saying it. Mainstream people...

ROGERS: Who said violence?

WALSH: ... and Republicans...

ROGERS: Who said violence? She said violence.

ROGERS: David Gergen said it last-David Gergen said it last night.

ROGERS: You said it tonight.

WALSH: Well...

MATTHEWS: I didn't say violence, I said virulence.

ROGERS: He said it?

ROGERS: No, she said it.

ROGERS: I said it...

MATTHEWS: Well, let me tell you...

ROGERS: ... and he said it last night.

(CROSSTALK)

ROGERS: More people are saying it.

(CROSSTALK)

ROGERS: You're quoting David Gergen?

WALSH: What, I'm not supposed to say-yes, I am, actually.

(CROSSTALK)

ROGERS: ... a McCain supporter?

WALSH: David Gergen...

MATTHEWS: Let's hope that we're not...

WALSH: ... is a mainstream figure...

MATTHEWS: ... stirring anything up...

WALSH: ... and he was brave enough...

MATTHEWS: ... on this conversation...

WALSH: ... to say that.

MATTHEWS: ... because I sense we are.

ROGERS: That's why the...

(CROSSTALK)

MATTHEWS: Joan, I completely agree with you.

(CROSSTALK)

MATTHEWS: Ed Rogers, you know better because, Ed, you know what's going on. They're raising the heat.

Coming up-and if you get too hot...

ROGERS: Raising the heat...

(CROSSTALK)

ROGERS: ... isn't bad. But they're not raising it the way you think.

(CROSSTALK)

MATTHEWS: ... the dangerous heat.

Coming up: Are Sarah and Todd Palin being straight with the American people about what they did or didn't do to try to get an Alaska state trooper fired? I'm not sure this is important, but they're investigating it up there. They got a big investigation going up in Alaska about how the governor got this guy head of security up there, fired over something to do with a brother-in-law. God, it sounds like a talk show.

You're watching HARDBALL-not this one-only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. In fact, lawmakers, as I just said, up in Alaska met secretly today on the Palin "Troopergate" investigation. Republicans have called this investigation politically motivated. Democrats say the scandal shows that Governor Palin abused the power of her office. So who's right? And just who is Sarah Palin in this regard?

Larry Persily was the associate director of Governor Palin's office down here in Washington. And James Grimaldo (SIC) has been covering the "Troopergate" investigation for "The Washington Post." Thank you, James. It's Grimaldi or Grimaldo?

JAMES GRIMALDI, "WASHINGTON POST": It's Grimaldi.

MATTHEWS: That's what I would have thought, but it was written up there "Grimaldo." I never heard of that name. Anyway, Grimaldi. Thank you, sir.

Let me ask you, Larry, what do you think of Governor Palin?

LARRY PERSILY, FORMER PALIN STAFFER: On what level?

MATTHEWS: Do you think she should be vice president?

PERSILY: No, I don't think she should be vice president. She's not qualified. She doesn't know what she thinks she knows. She's too immature politically and just doesn't bring anything to the ticket other than this cheerleader (INAUDIBLE)

MATTHEWS: Well, how did she get elected governor of your state?

PERSILY: Because the we had governor before her was so incredibly unpopular, she came in and said, I'm not Frank Murkowski. I'm going to undo every one of his policies. And she does connect with people. I don't think she brings enough to the job in terms of intellect or experience, but she does connect with the public.

MATTHEWS: What do you make-can you give me any evidence in regard to something that has bothered some people. She was asked two good questions by CBS's Katie Couric, and I thought there could have been two good answers to it. Assuming she's a conservative, which is what she calls herself-and we have to assume she is-she would have an attitude about the U.S. Supreme Court. Everybody who's a conservative in this country has a strong feeling about the Supreme Court, everybody. They got involved with prayer in school, outlawing prayer in public school. They got involved in all kinds of issues like abortion rights. They took a lot of liberal positions, as they see it. They could tell you chapter and verse why they don't like the Supreme Court. She couldn't mention anything.

PERSILY: Well, and...

(CROSSTALK)

MATTHEWS: Doesn't she have any-are you telling me, having worked with her, she's not intellectually engaged on the issues that matter to most conservatives?

PERSILY: Not intellectually curious, but also, the governor of Alaska of any Supreme Court should know the Exxon Valdez case, when the Supreme Court this year came down and said, Exxon, you have only got to pay 20 percent, 20 cents on the dollar, of what the lower court said.

MATTHEWS: Because of the...

(CROSSTALK)

MATTHEWS: She's also from the ninth circuit, which is definitely the most liberal court in the country. And she couldn't explain the attitude about the...

PERSILY: The governor of Alaska should have remembered the Exxon case.

MATTHEWS: More fundamental, she wouldn't say what she reads on a daily basis. Does she read the papers up there?

PERSILY: I don't know.

MATTHEWS: Why wouldn't she say she reads the papers? It's such a stupid thing.

PERSILY: She is big on talk radio. She really listens to it. But I guess the question is, even if you don't read the newspapers, remember the names of a couple and just say so, so you don't sit there looking like you don't read.

MATTHEWS: You say she's unqualified.

PERSILY: Oh, yes, no question about it.

MATTHEWS: Is she guilty of anything in this trooper-gate thing? Is there anything real there or just a muckety-muck, look for trouble kind of thing?

PERSILY: Criminal, no, but I think she's guilty of forgetting-when she became governor, her personal life had to get parked at the door. Personal scores, personal grudges, personal animosity have to stop. When she was governor, she and her family had to knock it off. And they didn't.

MATTHEWS: So, when her brother-in-law divorced her sister, she shouldn't have used the head of security up there to kick him off the force?

PERSILY: She should have just stopped it. When she won the election for governor, she should have stopped, said to the rest of the family, you want to pursue it, that's fine. I'm governor. I can't do this anymore. I shouldn't be doing it anymore.

MATTHEWS: James, is there any evidence of-and we don't have that report yet tonight, as we speak here...

JAMES GRIMALDI, "THE WASHINGTON POST": No.

MATTHEWS: ... late in the afternoon in Washington. We don't have a report from-it's Alaska time. Obviously, they have got a lot more time today to make a report.

GRIMALDI: Well, it's also that behind...

(CROSSTALK)

MATTHEWS: Based on your reporting, is-yes, go ahead. Go.

GRIMALDI: Behind closed doors, and I think the Republicans have an interest in trying to drag out the-the release of this report. So, they're going to ask a lot of questions, and it will be a while, I think.

MATTHEWS: Do you think they will stretch the report until-results until after the election in November?

GRIMALDI: No, no. I-I think they probably have the votes to release it. They just want it to be as late on Friday as possible.

MATTHEWS: Let me ask you, Larry, about her knowledge of the issue.

I believe-and I don't want to overstate this, because politics can get to be quibbling at times. But John McCain said she's one of the country's great experts. In fact, he actually said something more superlative than that about her ability in the energy field.

PERSILY: Right.

MATTHEWS: Is that accurate?

PERSILY: No.

MATTHEWS: Did Governor Palin know energy?

PERSILY: No, I don't think so.

She knows some about it, but she's no expert on it. When she ran for governor in 2006, she was off quite a bit when she was asked, what's the price of oil that day? She talked during a-I think it was during her Republican National Convention speech, or another one afterwards, and talked about Alaska supplying 20 percent of the nation's oil.

Actually, it was a speech afterwards. Alaska is about 12 percent, not 20 percent. She just yesterday, at a town hall meeting in Wisconsin, she got it all wrong about federal bans on the export of oil and gas.

She's not an expert on it. She just happens to be governor of Alaska, who has an interest in it.

MATTHEWS: Well, what is she, an actress, an actor? What do you say she is? How come-there's a real disconnect between your critique of this political figure, who seems to have turned on a lot of people on the right. They love her. I have seen these crowds. They love her.

Whatever that is, her quality of energy and enthusiasm, right-wing or conservative zeal, they seem to dig it. Look at her. She just basks in applause with these people.

GRIMALDI: Hey, Chris, if I could jump in here...

(CROSSTALK)

MATTHEWS: Yes, you go ahead. James, you are in. You're in.

Just give me a sense of it. Is there just a superficiality to her?

Or what is her appeal?

GRIMALDI: Well...

MATTHEWS: I mean, two years from now, are we going to be talking about her importance on the national scene, win or lose, here?

GRIMALDI: Look, I think she has a very red meat kind of populism that Larry is sort of missing here.

He knows maybe where she is on the facts and the circumstances, but I think she has a very gut instinct about the sort of populism, the reformist. That's why the issue of this report might be a little more important than you think, because it may actually hit her at her one Achilles' heel.

If she is actually shown to have violated state law, according to this investigative report, it may take away the one thing that really resonates. Look, even Republicans are unhappy with the country and the way it's going right now. So, they want to look to a conservative populist. And she embodies that in a way that we really haven't seen on the national stage.

We certainly really didn't see it too much even in the Republican primary.

MATTHEWS: So, she will look less like a little person against the system, and more like the power of the system?

GRIMALDI: Exactly.

I mean, look, this is how she beat an entrenched incumbent Republican governor, Frank Murkowski, who had that state wired. It was a machine. And she took that machine down and won. Then she went ahead-and that's not all-and beat Tony Knowles, who's no piker. He's an adept and talented Democratic politician in that state.

So, I really don't think you should underestimate her political skills. You could critique how she's been handled by the media.

And let me say, it's clear she reads "The Anchorage Daily News." If you go to the "ADN" Web site, you can hear her. After the trooper-gate story broke and one of the more damaging stories, they tape-recorded a call in which she calls the reporter who wrote it and said: "Hey, I read your story today, and this is not right. And this-I would have said it this way," spinning the guy.

She had read every paragraph of that story. I don't have any idea why she answered that Katie Couric question, but to suggest she doesn't read newspapers is silly.

MATTHEWS: You know, sometimes, Larry-I don't know this person at all, except from what we have all observed of her in a short period of time.

A lot of people got Ronald Reagan wrong. They thought, because they sat in rooms with him, and he didn't know his stuff. Tip O'Neill, my boss, didn't think he didn't knew anything. He say he had 3x5 cards.

And, yet, when you stood back, he could talk to the American people in a way nobody else could. He could connect on values, like big government and fighting communism, in a way that all the experts couldn't. Is it possible you're missing something about her?

(CROSSTALK)

PERSILY: No, I think she's not intellectually curious. She's not an expert, but she's a good politician. She can walk in a room. She can read that audience. She knows how to appeal to their emotions, how to strike them in the gut, how to get them behind her.

MATTHEWS: But lacking in intellectual curiosity?

PERSILY: Right, but that doesn't necessarily, to many voters, disqualify you from elected office.

MATTHEWS: It disqualifies it for me, because I think that's what-the biggest thing we need in politics, is people that understand things and care to understand them more deeply. We have a very complicated world out there. And if you're not curious about what is going on in this world economically right now, you're of no help to us, this country.

(CROSSTALK)

PERSILY: But, as she talked, she can really get people behind her without dealing with the facts.

MATTHEWS: You're talking about a demagogue?

PERSILY: Yes, maybe a small d on demagogue.

MATTHEWS: OK.

PERSILY: But there's a bit there.

MATTHEWS: OK.

Thank you, Larry Persily. Thank you very much for joining us.

James Grimaldi, thank you, from "The Washington Post," for joining us.

Up next: "Saturday Night Live" takes a whack at John McCain's dismissive "that one" line in Tuesday's debate this week.

(BEGIN VIDEO CLIP, "SATURDAY NIGHT LIVE")

DARRELL HAMMOND, ACTOR: We're going to have to put aside partisanship, something my opponent, this character here...

(LAUGHTER)

HAMMOND: ... isn't very good at, but I have-I have done my whole career.

(END VIDEO CLIP)

MATTHEWS: Much more of that show in the "Sideshow."

You're watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back, and time for the "Sideshow."

"Saturday Night Live" put on their first prime-time special for this election last night. Here they are skewering John McCain for his now-infamous moniker for Barack Obama, you know, "that one"?

(BEGIN VIDEO CLIP, "SATURDAY NIGHT LIVE")

HAMMOND: We're going to have to put aside partisanship, something my opponent, this character here...

(LAUGHTER)

HAMMOND: ... isn't very good at, but I have-I have done my whole career.

And I would continue what I have done for 25 years, which is to reach across party lines, something that pee pants over here...

(LAUGHTER)

HAMMOND: ... would never even consider.

Junior over there...

(LAUGHTER)

HAMMOND: ... he won't tell you that. I just did.

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS: Funny stuff. "SNL" is terrific this election, thanks in large part to Tina Fey's spot-on spoof of Governor Palin.

And, today, "New York Post" columnist Cindy Adams reports that Governor Palin herself will appear on "Saturday Night Live" later this month. That will be interesting.

Speaking of prime time, Barack Obama's campaign bought 30 minutes of prime time on CBS and NBC for the night of October 29, a week before the election. I think that's to prepare to clean up whatever's been thrown his way until then. He always does better on camera than he does courtesy of the Republican image-killers.

Moving on, autumn usually means at least two things in this country, campaigns and baseballs postseason.

Here is another moment from last night's "SNL" special where Bill Murray asked the candidates about his top concern.

(BEGIN VIDEO CLIP, "SATURDAY NIGHT LIVE")

BILL MURRAY, ACTOR: In game one, the Cubs lost 7-3. In game two, they lost 10-3, and, in game three, 3-1.

(LAUGHTER)

MURRAY: What, as president, would you do to guarantee this never happens again?

(LAUGHTER)

(APPLAUSE)

MURRAY: Senators, in your answer, please be specific.

(LAUGHTER)

FRED ARMISEN, ACTOR: We, as a nation, have got to wean Cubs fans away from supporting that team and retrain them to root for other teams...

(LAUGHTER)

ARMISEN: ... teams that will actually have a chance of winning.

HAMMOND: Here, I have to agree with my opponent.

(LAUGHTER)

HAMMOND: Let me give you some straight talk, my friends. The Cubs will never win the pennant, much less the World Series.

(END VIDEO CLIP)

(LAUGHTER)

MATTHEWS: By the way, Senator Obama told my friend Michael Smerconish yesterday who he's rooting for.

(BEGIN AUDIO CLIP, "THE MICHAEL SMERCONISH MORNING SHOW")

MICHAEL SMERCONISH, RADIO TALK SHOW HOST: Phillies or Dodgers?

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: Uh, I'm going to with the Phillies here, not just because I'm talking to you, but because my campaign manager, David Plouffe, he is a huge Phillies fan. And, since the White Sox are out of it by now, I have got to-I have got to go with my campaign manager's team."

(END AUDIO CLIP)

MATTHEWS: Well, I'm with the Phillies, of course, and have been with them since the days of Robin Roberts and Richie Ashburn.

Now it's time for the HARDBALL "Big Number."

It been a terrible week for the stock market, as everybody know. How bad has it been? Bad. In the last year, the Dow Jones industrial average has lost 500 -- five thousand, rather, five-hundred and sixty-five points. That's trillions of dollars in wealth gone. Tonight's HARDBALL "Big Number," 5,500 points.

Up next: our strategists, one Democrat, one Republican, on how they would advise the presidential candidates in the three-and-a-half weeks-it's getting close-left in this campaign.

You're watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

JULIA BOORSTIN, CNBC CORRESPONDENT: I'm Julia Boorstin with your CNBC "Market Wrap."

Another wild day on Wall Street to end a tumultuous. The Dow Jones industrials dropped another 128 points, but the Dow had been down almost 700 points. For the week, the Dow plunged more than 18 percent, its worst week ever. The S&P 500 fell 10 points. And the Nasdaq managed a four-point gain, after seven straight days of losses.

Oil prices slid to their lowest levels in more than a year. Crude fell $8.01, closing at $78.61 a barrel.

General Motors says filing for bankruptcy protection is not an option, but there's word the automaker could announce production cuts and plant closing as early as next week.

And the finance managers of the world's seven largest industrial nations are meeting in Washington this weekend. They will meet with President Bush tomorrow at the White House. Wall Street is hoping for an announcement of coordinated action against the global financial crisis.

That's it from CNBC, first in business worldwide-now back to

HARDBALL.

MATTHEWS: Welcome back to HARDBALL.

Joining me now, two familiar faces now here, the strategists. Steve McMahon, he is a Democratic strategist who worked on Howard Dean's campaign. And Todd Harris is a Republican strategist and former spokesman for John McCain.

We can only get people here whose campaigns didn't make it, right? Is that deal?

TODD HARRIS, REPUBLICAN STRATEGIST: It's a lot of former.

STEVE MCMAHON, DEMOCRATIC STRATEGIST: You learn more-you learn more from campaigns...

(CROSSTALK)

MATTHEWS: Well, we do get independents right now.

Well, look at the latest. I want you guys to take a look at latest news here. "Newsweek" poll just out this weekend, this coming weekend, in fact, it's got Obama 52 percent to 41 percent over McCain. What a spread, 11 points. That's usually enough to guarantee victory here. But anything can happen.

By the way, the last "Newsweek" poll conducted one month ago had them tied at 46 percent. So, that's a big boost, obviously courtesy of economic conditions.

Before the release of the "Newsweek" poll, Pollster.com, which, by the

way, has all the polls averaged up-you can look it up on your-online

has up by seven-and-a-half. So, it's fairly consistent. These numbers are getting up to right around the double-digit level.

Steve, this is about what? Is it about a combination of the economy and his performance in the debates, or just the economy?

MCMAHON: It's the economy. It's his performance in the debates. And it's the facts-it's the fact that his party and his president has led this economy and this country for the last eight years. And John McCain has gone right along with every single policy.

Fifty-three percent of Americans believe that, if McCain is elected president, he will continue the Bush policies. But 80 percent of America wants a new direction. So, that's what he's running up against. It's a very, very difficult climb for him right now.

MATTHEWS: Is this a question of the "ins" being punished?

(LAUGHTER)

HARRIS: Well, a lot of people think the ins should be punished. And what's upsetting a lot of Republicans is that they're pointing at Nancy Pelosi and they're pointing at Harry Reid, and saying, well, those are the ins, too. And these are the people who were in charge of Congress during all of this meltdown. And, so, it's frustrating.

(CROSSTALK)

MATTHEWS: Well, no, just actually the last two years.

HARRIS: Well, that's when we had the meltdown.

MCMAHON: When the Republicans filibustered just about every single thing the Democrats tried to do.

I mean, I-listen, you can look at the polling data and you can see that no one is blaming Nancy Pelosi and the Democrats.

HARRIS: No. That's right.

MCMAHON: Everybody is saying, give Nancy Pelosi and the Democrats a veto-proof majority.

MATTHEWS: OK. You may be right, in terms of Democrats required. They should share the blame for some of this, because they do have a lot of oversight responsibility over the years over the regulatory agencies. And they have been very close to Fannie Mae and Freddie Mac. There's no doubt about it.

But, for whatever reason, the candidate for president-for president and vice president, have decided they don't want to talk about the economy.

HARRIS: Right.

MATTHEWS: They have another issue. Here it is.

Here are excerpts from this week from McCain/Palin rallies this week.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE: I'm afraid this is someone who sees America as imperfect enough to work with a former domestic terrorist who had targeted his own country.

MIKE SCOTT, LEE COUNTY, FLORIDA, SHERIFF: On November 4, let's leave Barack Hussein Obama wondering what happened.

(CHEERING AND APPLAUSE)

UNIDENTIFIED MALE: I'm mad.

(CHEERING AND APPLAUSE)

UNIDENTIFIED MALE: And I'm really mad.

(APPLAUSE)

UNIDENTIFIED MALE: And what's going to surprise you, it's not the economy. It's the socialists taking over our country.

(CHEERING AND APPLAUSE)

UNIDENTIFIED MALE: (INAUDIBLE) so important in today's country. What we're really missing though what's going on. When you have Obama, Pelosi, and the rest of the hooligans up there, going to run this country, we've got to have our head examined.

(END VIDEO CLIP)

MATTHEWS: Well, clearly the people are stirred to action. And one of the reasons I believe they're stirred-correct me on this, is that the Republican candidates for president and vice president are stirring them to action by saying things about the man's association with terrorists, by stirring up questions about where he's getting his money, suggesting-well, saying so, it's coming from Palestinian sources.

I think the Republican Party is building the case that Barack Obama is practically a member of a sleeper cell, that he somehow associates with terrorists, he somehow benefits from them politically and financially. And by the way, his name is Hussein. Don't forget it.

Why does your party continue to remind people of his middle name? This hasn't been mentioned. It's something he got at birth. It has been considered inconsequential since the beginning of his political career because everybody knows you get a middle name, whether it's Sidney, in the case of John McCain, or it's Hussein, neither had anything to do with naming themselves. Why is it an issue?

TODD HARRIS, FORMER MCCAIN SPOKESMAN: Well, it's not an issue. And every single time.

(CROSSTALK)

MATTHEWS: Why are these jabberwalls out there raising that issue now?

HARRIS: And they're all told not to, and every of time someone does, the McCain campaign immediately sends out a statement condemning it.

STEVE MCMAHON, DEMOCRATIC STRATEGIST: Unless it's the McCain campaign doing it. Unless it's Sarah Palin doing it.

HARRIS: No, no, no, look.

(CROSSTALK)

HARRIS: Look, it was five, six months ago there was a talk radio host who kept using his middle name and John McCain publicly repudiated the guy.

MATTHEWS: He isn't doing it anymore.

(CROSSTALK)

HARRIS: No, that's absolutely.

: . right now saying that he associates with terrorists. She's out there saying it right now. And so, you know, you could say, well, if somebody does the introduction, John McCain will say, don't do that anymore, but Sarah Palin is down in Florida saying, he hangs out with terrorists.

MATTHEWS: They were yelling "traitor" out.

(CROSSTALK)

MATTHEWS: Look, "traitor," these words are getting pretty loud. And that guy "hooligans," "traitors"? You don't think this is getting a little hot?

HARRIS: Well, look, I've been-in 2004 I went to some Democratic rallies and let me tell you the things that Democratic activists were saying about George W. Bush were.

MATTHEWS: Did they ever say he wasn't American?

(CROSSTALK)

MATTHEWS: There's bad (ph) symmetry here, has the Republican Party ever been victimized as being called-by being called "un-American" by suggesting-by your patriotism being challenged? It seems to be a unique charge of the Republicans against Democrats.

Michael Dukakis, he wouldn't salute the flag, he wouldn't do the Pledge of Allegiance. He was somehow un-American. He was a card-carrying member, there's a great phrase, of the American Civil Liberties Union. There's something furtive about this guy, something un-American, right?

OK. Then somehow John Kerry, whatever else you think of him, was somehow French. This whole thing they were pushing, your party, what is this? It's like-I said this last night, it's like a reverse Ellis Island. You come to this country three or four generations ago, you become an American, and then the Republican Party has this little program they carry out that de-Americanizes you.

What's this about? Is this the last refuge of a scoundrel?

(LAUGHTER)

MATTHEWS: No, is it?

HARRIS: Look, I think a lot.

MATTHEWS: You think it's not rotten?

HARRIS: I don't think it's going to work. I will say this, I think in this economic environment, I mean, the truth is, most working class voters right now think that the Weather Underground was a band from the '60s with Lou Reed in it. And so, you know, in this kind of environment.

MATTHEWS: But if you call them terrorists and spruce them up and make it sound like it was last week and he was loading the grenades for the guy when in fact he was on a school board with him 30 years later.

HARRIS: I think Senator McCain needs to be out talking about his economic message for the country. If they want the cultural war message, which is really what this is, let Sarah Palin go work the base. But Senator McCain-you know, and frankly, I think that these association are fair game.

MATTHEWS: They're not listening to you.

HARRIS: No, they're not. But hold on, hold on, hold on. But they're not going to win on that alone.

: This isn't the cultural war. What they're trying to do-and I hate to say this, and I never thought John McCain would do it, what they're trying to do now in this campaign is they're trying to make Barack Obama the risky, scary African-American guy. That's what they're trying to do.

MATTHEWS: Making him foreign.

: And they're trying to make him foreign and they're trying to make him culturally unacceptable. They do the cultural wars but typically they do it by saying, what a liberal someone is. They don't do it by saying that he's hanging out with terrorists, question the patriotism.

They don't do it by equating his name with the name of a well-known terrorist. And they certainly don't do it by doing things around where you go to church and who your pastor is, which I expect will come next. That's what they're trying to do, they're trying to make him risky and scary. And I think it's going to be interesting to see.

HARRIS: Well, I agree that they're painting him as risky and they're painting him as scary because the fact is he has no record and he's very inexperienced. I don't agree.

MATTHEWS: That's not a bad argument. That's not a bad argument. What you said is a great argument. Go after him on his immaturity. Go after him on he hasn't been around long enough.

But I'm afraid there are some people out there who are a little close to the instability level, let's put it lightly, because now they're not listening to me. I'm not going to use the magic words, but we know what we're talking about, who might be near the edge.

And this kind of lingo out there gets into their blood system. It gets scary. Thank you, Steve McMahon. Thank you, Todd Harris, for playing defense here.

(LAUGHTER)

MATTHEWS: Up next, Republicans made a big deal about-you're always in on this guy. Made a big deal about Bill Clinton traveling to the Soviet Union as a student and that John Kerry was an effete Frenchman. Now they seem to be trying to paint Barack Obama as a foreigner and worse. Will these tactics backfire on John McCain?

It's the whole theme of this week. And I have to talk about it. Much more on that in the "Politics Fix." Maybe next week they'll talk about something else. This week they're talking about, you know, Barack Obama, he's from somewhere. Who is this guy? Who is this-I love the way Sarah Palin does this. You know, who is this guy? This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Coming up, at a time of economic crisis, why does the McCain campaign think talking about the economy is too boring? Or would they just rather talk trash about Barack Obama? HARDBALL returns with the "Politics Fix."

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Could I just mention, everyone-there is someone here who keeps yelling ACORN, ACORN. Now let me just say to you there are serious allegations of voter fraud in the battleground states across America. They must be investigated and no one should corrupt the most precious right we have, and that is the right to vote.

(END VIDEO CLIP)

MATTHEWS: Welcome back to HARDBALL. That was, of course, John McCain talking about a group of welfare rights people basically who have been around for decades, as I recall. And there are allegations about whether they're doing some things in terms of registering voters that is not quite on the level.

Anyway, we're going to learn more about that in the weeks ahead.

Tonight's roundtable, Richard Wolffe of Newsweek; Peter Beinart of TIME. Boy, we have got Macy's talking to Gimbels here. We've got the story of Barack Obama in your piece. I loved your column this week. That's why I've been referring it.

"Is He American Enough?" was in your edition with that cover on it just came out this week. And by the way, you've got a hot new poll out in your magazine showing Barack Obama ahead 52 to 41. That's quite a spread.

Let me start with this question. How concerted is this effort to create the image in the minds of the people watching, especially on the-sort of not the ultra right but the penultimate right, the people open to voting for Barack but they don't want to vote Barack, suggesting that he is somehow involved with terrorism?

PETER BEINART, TIME: Well.

MATTHEWS: Using his middle name. Using his foreign contributors, trying to build the case that there are some secret people on those lists that are giving to him from abroad, that whole thing.

BEINART: The kind of stuff that you hear from the McCain campaign itself is a bit more subtle than that, but it does hinge on this word "American," which comes up a lot. You remember that ad, you know, McCain is the American president that American has been waiting for, country first, and you know, Palin saying he doesn't feel about America the way.

So that is not, of course, quite saying, he is a terrorist. But it does suggest that maybe he is not really an American. And if he is not really American, well, maybe he is loyal to something else. And I think it feeds that general idea.

MATTHEWS: Who came one this little specialty?

BEINART: Well, it's interesting. You know, we find out from the Clinton memos...

MATTHEWS: Is this Steve Schmidt? Did he say, this is the way to go after the guy, suggest he's not really one of us, like they did with Kerry, he is French?

BEINART: Yes. There is a long history with this. As you noted, with Michael Dukakis. Even going to back to Joseph McCarthy, this was a-kind of been a theme. But the Clinton campaign, we now know from the Mark Penn memos, that they actually were clearly finding something in their focus groups or polling...

(CROSSTALK)

MATTHEWS: But Hillary had the honor and the nobility not to do it.

BEINART: That's right. That's right. That's right. But I think they didn't do it. But they noticed that there was something to be tapped. And I think we have seen that the McCain campaign.

MATTHEWS: Big surprise. A guy is born with a Swahili name. Let's go to Richard here. This is really subtle politics. The guy is born as an American immigrant, which is what we like in this country. He comes to the country as an immigrant with an African father, raised in difficult circumstances. Fights his way to the Ivy League. Becomes head of the Harvard Law Review. Gets elected to the Senate. Does everything right by our value system in this country.

Hard work, student, how about this? Intellectual curiosity, which is nice to have at this time. Does everything right and they go back and hit him for the name he was born with.

RICHARD WOLFFE, NEWSWEEK: Well, just to be clear.

MATTHEWS: I mean, and hit him on the fact that his name was a certain way-go ahead.

WOLFFE: Just to be clear, he didn't come as an immigrant. I mean, he was born in America, that's-obviously. And his father's story, his story, his mother's story, you know...

MATTHEWS: It's an immigrant story, OK?

(CROSSTALK)

WOLFFE: As a family. Look, this was entirely predictable when Obama got the nomination, they were all expecting this to happen. It was just a question of when. Now the question is, is it smart politics? Because it is not subtle.

If you were to do this at the start, when he got the nomination or even before, then you would have the blank slate to operate on, to ask those questions, do we really know who he is? That's why Reverend Wright was so powerful, because it came early. At this stage, after three debates, the conventions, people have their own impressions of who he is.

MATTHEWS: They've watched this guy out there.

(CROSSTALK)

MATTHEWS: And I think-look, I think going after a guy because of what his birth name is the stupidest thing I've ever-and they're all doing it out there every night this week. That sheriff, that guy in Lehigh County, don't tell me it's an accident. It's in the air right now.

BEINART: But the interesting flip side of it is I think it's part of the reason that Obama is doing so much better amongst Hispanics than a lot of people predicted, remember, when he-after he lost them to Hillary Clinton, because the immigration thing, I think, is actually allowing him to connect with Americans in a-perhaps in a way that another African-American candidate might have more trouble doing.

MATTHEWS: Most voters come from immigrant families. We'll be right back with Peter Beinart and Richard Wolffe for more of the "Politics Fix."

(COMMERCIAL BREAK)

MATTHEWS: We're back with TIME's Peter Beinart, who is also on the Council of Foreign Relations, and Newsweek's Richard Wolffe, who is with the "Politics Fix"-both of you are in the "Politics Fix" tonight.

I see you all of the time, I read you all of the time, both of you guys. Let me ask about this summing up this campaign. We're almost-hardly three week out right now. Next Tuesday is three weeks. It is getting close. Is this thing just going to move? Is the big box this campaign came in, the economy, and no matter what these guys yell back and forth at each other, whatever their name are, the incumbents were probably going to have a hard time and that the challenging party, in this case, the Democrats, were probably going to have a better time? Is it all defined by economics?

BEINART: I think so. You know, it is not just a partisan problem, it is an ideological problem. The country is moving in favor of a larger government role in the economy. As a Republican, that's very difficult to handle. It would take an incredibly skilled Clinton-like triangulator to figure out how, when the ideological tide is going against you dramatically.

MATTHEWS: You'd have to tack into the wind.

BEINART: To tack into the wind. And Clinton was able to do it in the '90s because he was so-but McCain has no capacity to do this. So he looks-he is veering wildly from place to place.

MATTHEWS: So they're just being driven-they're driven by the trade winds here, right? That's just it. And this economy is so horrendous now we assume it's going to determinate.

WOLFFE: Well, look, every day the stock market loses another several hundred points and there is no end in sight to this. How do you get beyond that? You have got to address what 59 percent of the country wants to talk about, which is the economy.

And McCain, look what happened when the bailout package came up. He sided with the House Republicans or was he with the Senate Republicans? You know, the ideological split was right there.

MATTHEWS: And this just in. The old John McCain has reared his head, the one most people really do like. He apparently got into a situation late this afternoon with a town hall where they were getting out of hand in terms of their disrespect, maybe their virulence against the Democratic candidates for president and vice president.

"We want to fight and I want to fight. But we will be respectful. I want everyone to be respectful," he said. So "we can be respectful, we can also point out the facts." Maybe he feels he has to push back now. That would be interesting.

WOLFFE: You know, what inside pollsters are telling me are that the negatives are rising sharply for him. Remember, for a long time.

MATTHEWS: It usually happens when you attack.

WOLFFE: For a long time, McCain and Obama were both pretty popular politicians. Their numbers were roughly similar. Well, this last phase, people don't like seeing angry crowds out there. It didn't work for the Democrats before. Ronald Reagan, his big idol, never ran on an angry campaign.

So the question is, what is the impact here? And what I hear from the inside is that those numbers, those negatives are rising.

MATTHEWS: You know, I can't think of all the years of watching Ronald Reagan from-on both sides, and watching him as a journalist and watching him as a critic, he never seemed to raise his voice, except one time. Mr. Breen, I paid for that microphone." That was the only time. I guess that's one reason he was popular.

Anyway, gentleman, Peter Beinart, the man, Richard Wolffe, the man, join us again Monday at 5:00 and 7:00 Eastern for more HARDBALL. And then on Wednesday, here it comes, the third and final presidential debate, this one on the East Coast, up from Long Island.

Right now, it's time for "RACE FOR THE WHITE HOUSE WITH DAVID

GREGORY."

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

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