updated 12/18/2008 4:20:36 PM ET 2008-12-18T21:20:36

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

Guests: Christopher Hitchens, Michael Isikoff, Charles Mahtesian, Chris Cillizza, Stan Brand, John Harwood, Michael Duffy

CHRIS MATTHEWS, HOST: Will Barack Obama stop the torture?

Let's play HARDBALL.

Good evening. I'm Chris Matthews. Welcome to HARDBALL. Leading off tonight: Did Vice President Dick Cheney authorize torture? In an exclusive exit interview with ABC News, the vice president acknowledged that he personally approved the waterboarding of prisoners.

(BEGIN VIDEO CLIP)

RICHARD CHENEY, VICE PRESIDENT OF THE UNITED STATES: I was aware of the program, certainly, and involved in helping get the process cleared.

(END VIDEO CLIP)

MATTHEWS: After World War II, the U.S. determined that waterboarding by Japanese against American POWs was a war crime. So what does that say about Cheney's support of the tactic?

Also, the Blagojevich scandal. Vice (SIC) President-elect Barack Obama again declined to answer questions about the issue, citing the request of U.S. Attorney Fitzgerald. But today, Governor Blagojevich had something to say.

(BEGIN VIDEO CLIP)

GOV. ROD BLAGOJEVICH (D), ILLINOIS: I can't wait to begin to tell my side of the story and to-to address you guys, and most importantly, the people of Illinois. That's who I'm dying to talk to.

(END VIDEO CLIP)

MATTHEWS: Unfair or not, is the smell of the Blagojevich scandal beginning to hang over Obama's team? More of that in a moment.

Plus, if the Republicans are the party of family values, the Democrats sure seem to be the party of family ties. Since the election, we've seen a Kennedy angling for Hillary Clinton's Senate seat in New York, a Biden in line for Joe Biden's seat in Delaware, and now a Salazar, a brother, taking aim at his brother, Ken Salazar's, Senate seat in Colorado. Can't the Democrats find any non-relatives for these jobs?

And the Minnesota Senate recount. Is it possible that the Senate itself might wind up deciding who gets the seat? I doubt it. We'll have that in tonight's "Politics Fix."

And in tonight's HARDBALL "Sideshow," will someone please tell Ken Salazar there are times when even a cowboy takes off his hat?

But first, Vice President Cheney's acknowledgment that he approved the waterboarding of prisoners. Radio talk show host Michael Smerconish is an MSNBC political analyst, and "Vanity Fair's" Christopher Hitchens, who had himself waterboarded for an article, have thoughts on that subject.

Michael Smerconish, I want to read to you-or watch right now-here's Vice President Cheney being asked about waterboarding by ABC News's Jonathan Karl.

(BEGIN VIDEO CLIP)

JONATHAN KARL, ABC NEWS: Did you authorize the tactics that were used against Khalid Shaikh Mohammed?

CHENEY: I was aware of the program, certainly, and involved in helping get the process cleared as the agency, in effect, came in and wanted to know what they could and couldn't do. And they talked to me, as well as others, to explain what they wanted to do. And I supported it. There was a period of time there three or four years ago when about half of everything we knew about al Qaeda came from that one source. So it's been a remarkably successful effort. I think the results speak for themselves.

KARL: In hindsight, do you think any of those tactics that were used against Khalid Shaikh Mohammed and others went too far?

CHENEY: I don't.

KARL: And on KSM, one of those tactics, of course, widely reported, was waterboarding, and that seems to be a tactic we no longer use. Even that you think was appropriate?

CHENEY: I do.

(END VIDEO CLIP)

MATTHEWS: KSM is Khalid Shaikh Mohammed. He approved the waterboarding. He said it's fine. Michael Smerconish, you agree?

MICHAEL SMERCONISH, RADIO TALK SHOW HOST, MSNBC POLITICAL ANALYST: I

agree. And I think the fact that the vice president now acknowledges that he was involved in the decision-making process tells us how sparingly this technique has been used. Most published accounts say less than six members of al Qaeda have been subjected to waterboarding, and yet it's so dominant a headline.

I'll tell you something else, Chris. You've got to believe in the efficacy of water boarding because one has to suspect that the best of our interrogators would be assigned to KSM. And if that man or that women believed that these means were necessary, then obviously, they believe in the efficacy of waterboarding.

And frankly, there are no measures that I would be unwilling to say-or I would be willing to say are inappropriate for the likes of Khalid Shaikh Mohammed. Mine is a blanket endorsement...

MATTHEWS: So shoot his toes off one at a time.

SMERCONISH: ... of whatever is necessary.

MATTHEWS: No, no, no. Michael, shoot his toes off one at a time is fine with you. You just said that, right? Anything is OK with you?

SMERCONISH: Chris, listen, you can play whatever sound bite you'd like, I'll go along with it tonight.

MATTHEWS: No, I'm asking. I don't know...

(CROSSTALK)

MATTHEWS: Do you think it's OK to just do...

SMERCONISH: If you're talking...

MATTHEWS: ... any kind of torture?

SMERCONISH: Yes, Chris, I believe that if you're dealing with the operations planner of September 11 and if this individual has actionable intelligence, that there are no means that should not be employed. We're talking about individuals who fly airplanes into buildings to kill Americans, who will decapitate-remember, KSM talks with bravado about decapitating Mr. Pearl from "The Wall Street Journal." So keep in mind who you're dealing with. There's no tit for tat here. In other words, they're not going to tone it down if we tone it down. So do whatever is necessary...

MATTHEWS: OK. You're clear.

SMERCONISH: ... to protect American lives.

MATTHEWS: I just wanted to make sure-I wanted to be graphic about shooting the toes off because we've all seen that in movies and in film, where you see all kinds of torture used by the bad guys. I just wanted to know if you thought we could do the same. That's all.

SMERCONISH: Indeed. I do.

(CROSSTALK)

MATTHEWS: OK, go ahead, Christopher. Your thought. You have been waterboarded. You know what that technique's like.

CHRISTOPHER HITCHENS, "VANITY FAIR": Well, I haven't been waterboarded in a way that I couldn't stop, but I can-I've been waterboarded enough to be able to tell you it certainly constitutes torture, as has always been the U.S. position until now. By the way, happy birthday.

MATTHEWS: Thank you. Let me ask you this...

HITCHENS: You don't look a day over 63.

MATTHEWS: No, thank you for that little note. Let me ask you this. Did you notice this, that-this is a document from the president of the United States dated February 7, wherein the president basically says when dealing with organizations like al Qaeda, the Geneva conventions do not apply. What's your view on that? I want to get Michael's view on that. No concern about treatment of prisoners.

HITCHENS: That's even cleaner than our enforced abstention from anything that reeks of torture. We are not just a signatory of the Geneva Convention, we are the reason why other people have signed it.

MATTHEWS: Right.

HITCHENS: The United States didn't just set up the United Nations, or help to do so. It said, If you wanted to join, you should also sign the U.N. Declaration on Human Rights. We're not just another signatory, we're the reason other people signed. We're the upholder of the standard. If we let that go, everything goes.

MATTHEWS: But al Qaeda obviously...

HITCHENS: As to...

MATTHEWS: But al Qaeda hasn't signed onto the Geneva Conventions, either.

HITCHENS: No, that's true. But then, the Nazi government of Germany withdrew from the League of Nations and from all of its instruments and treaties. And I can show you the book about the British interrogators who ran the prison especially for Nazi spies in West London all through the war, when London was being bombed every single night. And you were fired from-from the staff of that prison if you even raised your hand to a prisoner. It was a firing and a court-martialing offense.

You say, No, we will not resort to unprofessional methods. We will use all the patience at our command to interrogate them professionally, thoroughly, and we expect that some of them will join our side. We will be able to turn people and make them come over. Anything short of that is not just torture, it's-it's simply bureaucratic incompetence. It's saying, Let's use a rough, crude, cruel shortcut. That in the long run, even the short run...

MATTHEWS: Yes, well, let me ask you...

HITCHENS: ... sabotages the war on terror...

MATTHEWS: Michael...

HITCHENS: ... which is the point to begin with.

MATTHEWS: Michael, you're an attorney. What happens if it's determined by the courts at some point in the near future that we do have to apply the Geneva Conventions code with regard to torture or non-torture of prisoners, even when they're non-state detainees? What happens to the president in that regard? He found in his-in his document I've got in front of me in 2002 that we can torture, basically, we're not obliged to follow the Geneva Conventions.

Is the president legally culpable here under some future tribunal in this country for having decided that he can ignore the Geneva Conventions in this case?

SMERCONISH: I think not. Frankly-well, frankly, the law doesn't say much of anything in this regard. I mean, I think I know what went on here. They turned to John Yoo, who, frankly, was at a third level in the administration, and they asked him to create new law in this regard. Now, oddly enough, he's out at Berkeley.

The direct answer to your question is al Qaeda doesn't wear the uniform of any particular nation. They're not a signatory to the Geneva Convention. They're not going to play by those rules, so why should we? If they were playing by them, maybe I'd have a different posture in this regard.

MATTHEWS: So you're consistent...

HITCHENS: I don't believe you would, sir. I mean, what if some-the next conspirator is an identifiable member of the Pakistani armed forces? Are you going to tell me that what you just said, that all measures are allowable, doesn't apply because he's wearing a uniform, but he's the mastermind of what happened in Bombay, what might be going to happen in London tomorrow? You can't be serious.

(CROSSTALK)

MATTHEWS: Michael, would you apply the Geneva Conventions if one of the people...

SMERCONISH: Christopher...

MATTHEWS: ... who committed a horrible act against us was, in fact, a state official? Would you apply the Geneva Conventions there or not, or do whatever it takes?

SMERCONISH: Christopher is correct. I would not apply the Geneva Convention there, either. One of the individuals from the Mumbai attack, one of the terrorists survived and is in custody. And if that individual was believed to have actionable intelligence about a future attack, any means necessary to exact the information from him I would support.

Listen, the Indians apparently used truth serum, and I don't hear anybody beefing-I've read all about it in the U.K. press. They've detailed it. Nobody's beefing about the means that are being used in India about this...

HITCHENS: Well, what if they...

MATTHEWS: Well, let me-let me try to apply this...

(CROSSTALK)

HITCHENS: What if it was a blowtorch?

MATTHEWS: What about the Japanese soldiers, the generals or whatever, the officer corps who were convicted of war crimes for using waterboarding against some of the flyers who were part of the Doolittle raid over-you know, the "30 Seconds Over Tokyo" heroes? I mean, from their point of view, they were operating in self-defense. Would you say that they were operating morally by waterboarding one of our flyers? I'm just asking you tit for tat here, from their point of view, the Japanese point of view.

SMERCONISH: In that...

MATTHEWS: I don't defend the Japanese...

SMERCONISH: No...

MATTHEWS: ... empire in one instance, but where do you draw the line morally on what's in and what's out, or does it just depend whether you're American or not? Is that it, if you're American, anything goes?

SMERCONISH: Chris, I'm all about defending American interests.

(CROSSTALK)

MATTHEWS: In other words, your moral system is based on, if you're an American, anything goes. If you're in the other country, we try you for war crimes. You lose the war, we cut your head off, or whatever it takes, we execute you. In other words, your morality is entirely nationally based. I'm just asking.

SMERCONISH: And I'm going to answer, if you'll give me the chance. Yes, my moral code is dictated by the fact that I want our leaders to be guided to protect American lives first.

MATTHEWS: OK, so a Japanese colonel...

SMERCONISH: Chris...

MATTHEWS: ... or general...

SMERCONISH: Chris, we...

MATTHEWS: ... who operates under the same code and waterboards an American flyer, how would you judge him morally or legally? You, as an attorney.

SMERCONISH: That is not the current-that is-that is...

MATTHEWS: No, I'm asking you to judge...

SMERCONISH: ... not the current circumstance with al Qaeda.

MATTHEWS: No, I'm asking you, what would you do? You said anything goes in terms of defending this country. That's pure nationalism. I accept it. I'm close to you on that, except I think there are limits. I'm just asking if you have any.

SMERCONISH: I don't have any limits relative to al Qaeda. None.

Blowtorch? Look, Christopher wants to...

MATTHEWS: OK. OK.

SMERCONISH: ... reference a blowtorch. It's fine. Any example you want to come up with...

MATTHEWS: OK.

SMERCONISH: ... with al Qaeda, I'll go along with.

HITCHENS: There you are. You see, there are three things. One is a point made very well by Senator McCain, a torture victim himself. What becomes of our prisoners if we say that anything goes? It's a self-interested point, as well as principled one.

MATTHEWS: Do you think we're protected by that code when al Qaeda grabs...

HITCHENS: No.

MATTHEWS: ... one of our people.

HITCHENS: I really don't think so. And I think it could now be increasingly unpleasant to be an American POW, and you can see the justification they'd come up with. I thought McCain was right to point that out. Second...

MATTHEWS: Do you think the killers...

(CROSSTALK)

MATTHEWS: ... of Richard (SIC) Pearl needed any justification for cutting his head off?

HITCHENS: Danny. Danny Pearl.

MATTHEWS: Daniel Pearl. Do you think they had to read the papers to get, Oh, well, now we can cut his head off because...

HITCHENS: No...

MATTHEWS: ... look what the Americans are doing in Abu Ghraib?

HITCHENS: I agree they don't need an incentive to hate us...

MATTHEWS: Right.

HITCHENS: ... as foully as they-I'm not making-I wouldn't allow them that excuse. But once the United States has said anything goes to a prisoner of ours, you can see that it could make life uncomfortable for an American prisoner.

MATTHEWS: Yes. By the way...

HITCHENS: It could make a borderline difference.

MATTHEWS: ... I'd be just as concerned about the fate of Richard Perle as Daniel Pearl.

HITCHENS: Of course. Of course. So would I. Absolutely. Let's agree on that. And then the second point, obvious, is that those of us who criticize this are saying it opens the door to rougher stuff...

MATTHEWS: Yes.

HITCHENS: ... pincers, blowtorches.

MATTHEWS: Your reaction to that...

(CROSSTALK)

HITCHENS: ... just simply said, Yes, that's absolutely right.

MATTHEWS: The reason for the Geneva Accords, of course-you know this, Michael, as well. I'm not teaching you. I'm not patronizing you. You know all this-was so that we would have some sense of equality of treatment of prisoners. That's why there Geneva Accords.

SMERCONISH: Look, it's nice...

MATTHEWS: Not because they're humanitarian but because they were hoping that there could be a deal that once your captured and safely in custody, there's no reason to torture you, even for intelligence reasons.

SMERCONISH: Chris, David ben Gurion...

MATTHEWS: That's why we have the Geneva Conventions.

SMERCONISH: David ben Gurion said it far better than I will do justice right now about how it's wonderful to philosophize about a utopian society. I would just like to be around to enjoy it. And that's the issue. And the two of you are presupposing that what we do will dictate the path taken by al Qaeda. On September 11, they showed they're not playing by any set of rules but their own. And so whatever extraordinary measures are necessary-I couldn't be more clear. I might be wrong, but I couldn't be more clear in my view. Do it.

HITCHENS: All right. In fairness to my opponent, and also to the vice president, the Khalid Shaikh Mohammed case may be the closest we ever get to the famous ticking bomb.

MATTHEWS: Yes.

HITCHENS: I mean, that might be the nearest we got. We know this guy knows a hell of a lot. We know we're in something of a hurry. We could be impeached. After all, the 9/11 commission, celebrated by all, accepts testimony that was extorted by torture.

MATTHEWS: OK, let me ask you...

HITCHENS: So but you can't...

MATTHEWS: I want the ticking bomb answer...

HITCHENS: You can't make-if we forgave the people who did a shortcut that time, we said, All right, that one time, that one guy, maybe. But the difficulty is when emergency measures, as with wiretapping, become routine.

MATTHEWS: OK, let me ask you about the emergency measures...

HITCHENS: Some bureaucratically...

MATTHEWS: ... because I want to know where you stand on the Dershowitz-Alan Dershowitz is a famous civil libertarian lawyer, a liberal in many regards. But in the case of terrorism, he says when you have a ticking bomb situation-in other words you picked up somebody, an advance team, part of a terrorist operation. You got him a day ahead, an hour ahead. There's something big coming. What are your rules then?

HITCHENS: Well, you'll never get that case. The KSM case isn't that case.

MATTHEWS: No, but when you have something coming.

HITCHENS: That's-that's-to borrow a phrase...

MATTHEWS: How about the 20th...

(CROSSTALK)

MATTHEWS: How about the hijacker we had out here in Minnesota that was picked up that was trying to get flight lessons? Wouldn't it have been useful to get some information from him?

HITCHENS: Well, it would have been useful to look at his computer.

MATTHEWS: Yes.

HITCHENS: But our brilliant FBI and CIA couldn't coordinate on that point.

MATTHEWS: Right. But let me ask you...

(CROSSTALK)

MATTHEWS: ... a philosophical question. Are you against a ticking bomb torture, where somebody has something that's vital to stopping a holocaust-type situation...

HITCHENS: Yes.

MATTHEWS: ... of thousands getting killed? Would you torture that person?

HITCHENS: The more seductive the excuse, the more I'm opposed to it.

MATTHEWS: OK.

HITCHENS: The more tempting the alibi, the more I think it needs to be examined because what people are asking for is one excuse to allow for a general imposition of a policy that would be...

MATTHEWS: And on the other end...

HITCHENS: ... illegal under any law.

MATTHEWS: ... just to draw the lines, Michael, where do you draw the line? You say for al Qaeda. What other groups, Hamas, any terrorists, the IRA, the Basque terrorists? I mean, where do you draw the line on using torture to get information from terrorists, which groups?

SMERCONISH: The views I have articulated are really limited to al Qaeda in the present context. And by the way, I've spoken with Professor Dershowitz about this extensively, and I think he would argue that the Israelis were confronted with a ticking time bomb case at Yom Kippur 2007. He's written about it fairly extensively. But my comments are limited to al Qaeda...

MATTHEWS: How did they rule?

SMERCONISH: ... in the present sense.

MATTHEWS: How did they rule in the Israeli case?

SMERCONISH: What we don't know, Chris, is what means were utilized to get the information, but they got the information and they were successful in thwarting an attack.

MATTHEWS: OK. Thank you, gentlemen, Michael Smerconish, Christopher Hitchens.

Coming up: Illinois governor Blagojevich breaks his silence. But is Barack Obama making the Blagojevich corruption scandal worse for himself by obeying the orders of that U.S. attorney out there, Fitzgerald, and not answering the questions when people want the answers? We're getting rolling disclosure here. And who's fault is it? Maybe at some point, Barack Obama ought to say, I'm the president-elect. You're the U.S. attorney. I'll answer the questions because the American people want my answers and they want them now. How long is this going to hang over his head?

You're watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BLAGOJEVICH: I can't wait to begin to tell my side of the story and to-to address you guys, and most importantly, the people of Illinois. That's who I'm dying to talk to. There's a time and place for everything. That day will soon be here, and you might know more about that today, maybe no later than tomorrow.

(END VIDEO CLIP)

MATTHEWS: Well, welcome back to HARDBALL. That's Governor Blagojevich, obviously, but it's this morning in Chicago, and he's talking.

For more on the latest on that case, let's bring in "Newsweek"'s Michael Isikoff, the best investigative reporter around, and attorney Stan Brand, the former counsel to the U.S. House of Representatives, a great guy and in understanding how these guys defend themselves.

What is exactly the reason why governor-president-elect Barack Obama won't simply tell us right now, when everybody wants to hear it, what were the contacts made by his people with the Blagojevich people in filling his Senate seat out there in Illinois, Michael?

MICHAEL ISIKOFF, INVESTIGATIVE REPORTER, "NEWSWEEK": Well, the stated

the stated reason is that Patrick Fitzgerald has asked him to hold off for a week. Now, he doesn't have to-he doesn't have to honor that request by Fitzgerald.

But, given the overall context of a major criminal investigation, which is crucial, to which everybody wants resolved as quickly as possible, I can understand why the Obama people and his lawyers, you know, figure that it's best to defer, to let Fitzgerald complete his investigation as quickly as possible.

It's also, given Patrick Fitzgerald's track record, probably not a good idea to tick off to tick off-and tick him off and get crosswise with him in any way.

MATTHEWS: Well, we don't have many important historic presidential elections. You just wonder why this president-elect is allowing this to distract from his coming into office.

STAN BRAND, FORMER COUNSEL TO HOUSE OF REPRESENTATIVES: This is a problem of Patrick Fitzgerald's making. He jumped the gun before he had his ducks in a row.

He created this morass of a case, instead of winnowing down to a few simple provable felonies. And now he's had to ask the president's team to defer issuing this report, so that he can do what he should have done three weeks ago or three months ago.

MATTHEWS: Here's the president-elect talking in that regard. Here he is, Barack Obama, out there in Illinois.

(BEGIN VIDEO CLIP)

QUESTION: How difficult is all this having to wait to release your inquiry business, when the American people expect transparency?

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: Well, it's a little bit frustrating. There's been a lot of speculation in the press that I would love to correct immediately.

We are abiding by the request of the U.S. attorney's office. But it's not going to be that long. By next week, you guys will have the answers to all of your questions.

(END VIDEO CLIP)

MATTHEWS: And here's David Axelrod on "MORNING JOE," on this network, this morning, explaining the same point. It is getting difficult to keep making this point. They have to get through the week with this defense, basically, on the fact they have been told not to talk.

(BEGIN VIDEO CLIP, "MORNING JOE")

DAVID AXELROD, CHIEF OBAMA CAMPAIGN STRATEGIST: I have no concerns about Rahm. He's an enormous asset to us and will be an enormous asset to the country, as he has been in the Congress.

MIKA BRZEZINSKI, MSNBC ANCHOR: And what do you make of-one last question-the-the disconnect that at least I see between Valerie Jarrett saying she doesn't want to replace Obama in the Senate and other members of the Obama team saying, no, no, no, she's going to be with us in the White House, and then her being, I believe, at the top of the list that Rahm Emanuel gave to Blagojevich?

AXELROD: Well, I can't-I would-I would-if I were you, Mika, before I drew any conclusions about who was on what list, I would wait for the release of that information.

And the good news is that, apparently, the federal government can-will-has, you know, the same information. So, everybody will be looking at all-looking at the same-the same set of facts.

(END VIDEO CLIP)

MATTHEWS: Michael, what's going on here? Rahm Emanuel apparently had some contact with the Blagojevich people, totally innocent, as far as we know.

(CROSSTALK)

MATTHEWS: Why doesn't that get-fact get brought out more clearly at this point?

ISIKOFF: Well, I mean, they-I mean, the Obama-Obama has said there was no inappropriate contact-contact. So, the question is...

MATTHEWS: So is the U.S. attorney.

(CROSSTALK)

ISIKOFF: So, the question is-yes. Well...

(CROSSTALK)

MATTHEWS: He said nothing illegal.

ISIKOFF: Right. What the attorney general has said is that there are no allegations that relate to anybody working for Obama, which is actually just a statement of fact. There's-there's nothing in the criminal complaint that involves anybody...

MATTHEWS: Yes.

ISIKOFF: ... relating to Obama. But there's no indication that there is.

The-the only difference is, look, what the Obama people have is Rahm Emanuel's accounts of what conversations he had with the Obama team. What Fitzgerald has, presumably, is something a little stronger. He's got the tape of actually what was said.

So, you know, the-the-the important thing for when the Obama people do make this public release next week is that they not say anything that could later be contradicted by evidence brought out in a Blagojevich trial by the playing of the tapes.

MATTHEWS: OK. Can you win this case?

ISIKOFF: That's the most important thing for the Obama people.

MATTHEWS: Stan, I have a sense, listening to you, you could win this case.

Do you believe you could win the-not the case involving all the other murky stuff we don't know about, but the question of whether Blagojevich was-can be criminally charged with selling the seat of Barack Obama, I don't have-I wonder whether there's enough on that tape. What do you think?

BRAND: I think that is the least convictable part of this case.

That's where all the sizzle is, because that's Barack Obama's seat.

That case should have been cut out of this, and he should have concentrated on the shakedowns of lobbyists and others for state benefits. He could have brought a Hobbs Act case on that, based on just what's in the complaint, and that would have been the end of the governor, from a-from a credibility standpoint.

MATTHEWS: Do you think he was showboating here?

(CROSSTALK)

BRAND: No, I think he was not ready, and he was afraid that this guy was going to appoint somebody to the seat. And to stop him from doing that, he jumped ahead and went forward with this whole case.

ISIKOFF: A couple of significant developments today.

Chris Kelly, a top fund-raiser to Blagojevich, who had been under indictment on tax charges, pled guilty, a sure sign that he's now cooperating. And, also, Tony Rezko's sentencing, which had been scheduled for January 6, was put off, a sure sign that he is continuing...

(CROSSTALK)

MATTHEWS: They're going to squeeze Rezko to get Blagojevich, right?

(CROSSTALK)

ISIKOFF: ... continuing to squeeze Rezko.

BRAND: Yes.

MATTHEWS: OK.

(CROSSTALK)

ISIKOFF: ... continuing to squeeze Chris Kelly.

(CROSSTALK)

ISIKOFF: I think what we're going to see is an indictment against Blagojevich that is not going to rely so much on what's in that tape, but on his-the historical evidence Fitzgerald has already developed during the Rezko trial and other...

(CROSSTALK)

BRAND: And that's going to be run-of-the-mill graft stuff that we have seen before.

ISIKOFF: Right. It's going to be an elaboration of the charges that have already been brought.

MATTHEWS: Run-of-the-mill graft stuff.

(LAUGHTER)

MATTHEWS: You-you are so-you are...

(LAUGHTER)

MATTHEWS: Run-of-the-mill graft stuff, is that what we're into?

BRAND: Traditional-traditional public corruption charges.

(LAUGHTER)

MATTHEWS: You are so jaded. Run-of-the-mill graft stuff, that's the title of a book, I think, by Stan Brand, the defense attorney of run-of-the-mill graft stuff. But they're always innocent.

Anyway, thank you, Michael Isikoff.

(LAUGHTER)

MATTHEWS: Thank you, Stan Brand.

Up next: "TIME" magazine makes Barack Obama its person of the year. No surprise there. Was this "TIME"'s easiest call in history? The "Sideshow" is next.

You're watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Back to HARDBALL. Time for the "Sideshow."

First up, "TIME" magazine unveiled its person of the year today.

There it is. They picked president-elect Barack Obama. Big surprise. Check out some of those old college photos they dug up. "TIME" magazine said Obama-quote-"hit the American scene like a thunderclap, amended our politics, shattered decades of conventional wisdom, and overcame centuries of the social pecking order."

So, who were the runner-ups? Number five, Zhang Yimou-Zhang Yimou

the Chinese organizers behind the Beijing Olympics. Number four, Sarah Palin, the V.P. candidate who came to speak for the cultural right of the Republican Party. Number three, Nicolas Sarkozy, the new face of France, a country President Bush just loved to mock. And, number two, Hank Paulson, the bewildered brand name of Bush's economic policy-not the toughest competition for our American president-elect.

Now let's turn our attention to the sitting president, who has just over a month left in his term. That's right. It's time for "Final Daze."

Today, at the U.S. Army War College in Pennsylvania, there was one point that President Bush wanted to drive home.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: While there's room for honest and healthy debate about the decisions I have made-and there's plenty of debate-there can be no debate about the results in keeping America safe.

(APPLAUSE)

BUSH: Here at home, we prevented numerous terrorist attacks.

(END VIDEO CLIP)

MATTHEWS: True enough.

And, finally, from the "What Were You Thinking?" category, Obama's pick for interior secretary, Colorado Senator Ken Salazar showed up at this morning's press conference wearing a cowboy hat. At that same press conference, Obama named his pick for agriculture secretary, Tom Vilsack, a strong Hillary Clinton backer, and also a former rival of Obama's in his own right for the Democratic nomination, which brings us to tonight's interesting "Big Number."

All in all, how many one-time rivals for the 2008 Democratic presidential nomination has Obama brought onto his team? Four. First, there was Biden, then Hillary, Bill Richardson, and now Tom Vilsack. Four former Democratic presidential rivals have joined the Obama bandwagon. That's tonight's "Big Number."

Coming up: Caroline Kennedy may replace Hillary Clinton. Joe Biden's seat may eventually go to his son. Ken Salazar's brother may also get his seat in Colorado. Is nepotism alive and well in the U.S. Senate? Doesn't anybody know a non-relative to give their job to?

You're watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MARGARET BRENNAN, CNBC CORRESPONDENT: I'm Margaret Brennan, and this is your CNBC "Market Wrap."

Stocks sank late in the session today, amid some profit-taking, after yesterdays' rally. The Dow Jones industrial average fell 99 points. The S&P 500 lost about eight, and the Nasdaq fell by nearly 11.

Oil prices tumbled, despite OPEC's announcement of a record production cut of 2.2 million barrels a day. Crude oil fell $3.54, closing at $40.06 a barrel.

And CNBC's Phil Lebeau reports that Chrysler will halt production at all 30 of its plants for one month starting December 19, instead of taking the usual two-week break. That's in order to save cash.

And Bernard Madoff made a surprise appearance at the federal courthouse in Manhattan, after the judge changed conditions for his bail in an alleged $50 billion Ponzi scheme. Madoff will now have to remain in his $7 million Manhattan apartment from 7:00 p.m. to 9:00 a.m. He will also have to wear a monitoring bracelet.

That's it from CNBC, first in business worldwide-now back to Chris and HARDBALL.

MATTHEWS: Welcome back to HARDBALL.

What's going on in the U.S. Senate? Is it turning into the House of Lords?

With us now, "Politico"'s Charles Mahtesian and thewashingtonpost.com's Chris Cillizza.

In New York, let's take a look at that now.

I'm sorry. I thought we were going to New York right now.

Let's take a-New York's Clinton seat is going to apparently be filled by perhaps-we know the story-Hillary Clinton is out. Governor Paterson makes the pick, of course. It might be Caroline Kennedy.

Gentlemen, in Illinois, Governor Blagojevich wants to make the pick to replace Barack Obama. Team Obama apparently wanted Valerie Jarrett. Who knows who the pick is going to be out there.

In Delaware, Governor Ruth Ann Minner picked Senator Biden's longtime friend and aide Ted Kaufman to fill the seat as a seat-warmer for two years. It's expected that Biden's son, Beau, who is now over in Afghanistan in the military service, will run in 2010.

And now, in Colorado, Ken Salazar is going to be interior secretary. Governor Bill Ritter is going to make the pick. It could be Salazar's brother, who is a U.S. congressman, John.

Well, that's the question, Chris Cillizza.

(LAUGHTER)

MATTHEWS: Is there a pattern here of famous relatives? Don't they have anybody who's not a relative of somebody in a royal family here? It's getting to be very royal here.

What do you think?

CHRIS CILLIZZA, "THE WASHINGTON POST": Well, you know, Chris, it's funny.

I think, we and American voters tend to have sort of a-they bristle at the idea, oh, that we're a dynastic culture politically. But, if you look at it-I did today-you know, there's between 12 and 15, including the ones you listed, either brothers or sons or daughters of politicians going to run for office in-in 2010.

So, I-look, I think it speaks for the fact that politics in this day in age is in some ways a family business, and it depends on people knowing your name. People don't pay that much attention to politics, the 2008 election aside. And, so, having a name like-I will give you an example-like Cuomo, for example, Andrew Cuomo, the state attorney general, mentioned still in the-as a possible appointment in New York, son of the former governor of the state.

And, of course, there's one other interesting thing about New York, Chris. David Paterson, the governor who is going to do the appointing, of course, is the son of Basil Paterson, former New York secretary of state and deputy mayor under Ed Koch.

MATTHEWS: I remember him.

(LAUGHTER)

MATTHEWS: I remember them.

Let me two to Charles, because I think there's something very interesting and primordial about why we like-I know, when you get older and you meet friends of-your friends' kids, you really have an affection for them. I mean, I have seen this as younger guy. As I get older, I realize when I meet the-the son or daughter of somebody I have known over 20 and 30 years, I have an affection for the younger generation.

I have a sense that carries into voting, that people have a strong affection for Caroline Kennedy. I see oftentimes people vote for people who are simply the son of or daughter of. And they sort of like it. They feel good about it. It makes them happy to pick heirs to people they used to respect or did respect.

CHARLES MAHTESIAN, "THE POLITICO": Yes, there's...

MATTHEWS: Your thoughts.

MAHTESIAN: There's no question there's-there's no question there's an affinity there for politicians' kids. I mean, you see that in lots of states. You see it in Pennsylvania with Bob Casey. You see it all over the place with the Kennedys and all.

But what is interesting, it's not just the-the families that are really popular where you see this happening. You see it happening in places like Iowa and Indiana, Chris, where you have got senators who were repudiated by the voters. And, then, all of a sudden, their-their sons come along, whether it's Chet Culver, who is the governor of Iowa, or Evan Bay in-as the senator from Indiana, who, all of a sudden, get elected and become much more popular than their fathers even were.

MATTHEWS: That's an interesting thing. I find that to be a fascinating nuance. Chris Dodd's father was censured by the U.S. Senate, Tom Dodd was. Pat Brown was kicked out of the governor's office in California by Ronald Reagan. His son came back, Jerry Brown came back and won a couple terms. What do you think that is, Chris, this sense of almost the opposite of buyer's remorse? It's like you want to console the family by putting back in the kid of the old man you knocked out. That seems to be a syndrome there.

CILLIZZA: I think it's partly that. I also think it's part-I think you saw this with George W. Bush. Let's not forget this legacy, George W. Bush-

MATTHEWS: He was-

CILLIZZA: -- and George H.W. Bush. George Bush, in many ways, the current, saw his campaign for president as a way to redeem his father's campaign, to redeem his father's loss to Bill Clinton. I do think you see the sons, as Charlie mentioned, Evan Bayh, Chet Culver, Judd Gregg in New Hampshire, maybe actually eclipsing their father in terms of political skills, because they saw what their fathers did that wound up getting them to lose, and maybe just went a different way. I don't think there's any question, Evan Bayh is probably the most popular politician in Indiana and his father was bounced out, never really serious when he ran for president.

So I do think it's a combination of buyer's remorse, but also that the sons and daughters learn the lessons from their parents and don't make the mistakes their parents made.

MATTHEWS: Let me give you a suggestion, guys, to think about, both of you. Could it be that there's a logic here, that one reason why we like people like Caroline Kennedy is not just affection for the lost father and the regard we give the whole family. But we've watched them. It's under the level of sort of inspection. From the time Caroline Kennedy was a kid, and we all watched her during the tragic-the funeral of her dad after he was killed as president, so much inspection, so much knowledge that you feel you know them. You have watched them grow up. You have watched their baby pictures. You have watched them as kids. You watched them graduate from school. You are like the uncle or the aunt. You know them.

In this country, where we're deeply suspicious of politicians, because a lot of them are crooked, or some of them are, and we meet strangers-we don't like to vote for people we've never heard of. There's a comfort in simply having the grown-up as kids into adulthood and not done anything wrong in many cases. Caroline Kennedy never did anything wrong. You know how we know that? We have been watching her, right, Chris? The paparazzi have been watching her with cameras since she was one.

CILLIZZA: Chris, just real quickly, I do think that's a reason why I don't believe that this attack that she's unqualified will ultimately work because of that. People feel as though they know her. They feel as though she has given a lot to public service, whether it's the death of her father, the death of her uncle, Robert F. Kennedy. They feel as though she has sacrificed. This idea that she's not prepared or not qualified I'm not sure gets people anywhere for the exact reason that you outlined.

MATTHEWS: Let's look at Caroline Kennedy today. Here she is. This woman never-hardly ever speaks in public. Let's be blunt about it. She's not a talk show host. She's not out there appearing on this program. We are not likely to book Caroline Kennedy any day soon. Let's take a look at her making an unusual statement here in upstate New York today.

(BEGIN VIDEO CLIP)

CAROLINE KENNEDY, DAUGHTER OF PRESIDENT JOHN F. KENNEDY: I just wanted to say that, as some of you may have heard, I told Governor Paterson that I would be honored to be considered for the position of United States senator. I wanted to come upstate and meet with Mayor Driscoll and others to-to tell them about my experience.

(END VIDEO CLIP)

MATTHEWS: That's Mayor Matt Driscoll. What do you make of this-well, she speaks. Charles, there you have the campaign message of Caroline Kennedy. It's not exactly a campaign barn-burner. It's just, I would like the job.

MAHTESIAN: I think what you're seeing, Chris, is a good idea about why there's so much resistance to her candidacy, not just among Republicans, but also among Democrats in New York, because she's very different than the kinds of other people that we are talking about. She's different than say John Salazar, who might get his brother's job in Colorado. She's different than say Jesse Jackson Jr or Lisa Madigan in Illinois. She's different than these other folks in that she hasn't run for office before. She hasn't toiled in the trenches. And many of these legacy candidates all have done that, whether you're talking about Andrew Cuomo, who worked at his father's side, who handled politics for him. Lots of these folks worked at their parents' side. They did work meeting with constituents. They ran meetings. They organized things. They understood politics or they ran for local office.

She hasn't done any of that and that makes he very different than anyone else.

MATTHEWS: I want you to answer my question here, Charles, is she the best bet to be the next senator from New York?

MAHTESIAN: I think the answer is yes. Who else is going to raise in the neighborhood of 70 million dollars?

MATTHEWS: Chris Cillizza, is she the best bet to be the next senator from New York?

CILLIZZA: Yes, but I wouldn't say sure bet, only because it's David Paterson's decision and people who know David Paterson well always say that this is an unpredictable guy, who does not like his hand forced. But it's hard to resist the Kennedy legacy on the Democratic side.

MATTHEWS: Probable in both cases. Thank you, Charles Mahtesian.

Thank you, Chris Cillizza.

Up next, we're nearing the finish line in that Senate race in Minnesota between Norm Coleman and Al Franken. We will give you the latest numbers. Again, it's very close about who is leading right now. We will tell you who might emerge victorious. We don't know yet. But I'm telling you, we don't know yet about this. This is very, very close. Either guy can win. This is HARDBALL, only on MSNBC. By the way, it's mid-December and this race is still going on.

(COMMERCIAL BREAK)

MATTHEWS: We're back. Right now the politics fix. The "New York Times" John Harwood is with us. He's also a cNBC's Washington bureau chief. He is the cNBC Washington bureau chief. And Michael Duffy is the assistant managing editor of "Time," which just this week just named Barack Obama person of the year. Tough one, huh? Nail-biter.

MICHAEL DUFFY, "TIME MAGAZINE": Right down to the wire.

MATTHEWS: It was either that or the guy who ran the Beijing Olympics, I see. Let me ask you about this New York-tell me, both of you gentlemen, each in your own turn, give me an update of where this fight-it's the last real Senate fight to be contested this year by the electors, by voters. Minnesota, Al Franken versus Norm Coleman, the incumbent Republican; 341 votes separating them as they proceed through this examination by challenge of the recounted vote.

DUFFY: They have three or four more days. I guess they're going until Friday. Mostly what's left to count, Chris, are the ballots that have been challenged by Franken, that he thinks are erroneously cast for Norm Coleman. He's hoping to collect-he's 200 or 300 votes behind. He needs some percentage of those in order to change the outcome. That's a long shot. For a while last week, he thought he was closer. It turns out, after they have gone through some of the recount, he is not.

MATTHEWS: There's more than a thousand that he is challenging. Most of those could be counted eventually for Coleman. So he could fall further behind.

JOHN HARWOOD, "THE NEW YORK TIMES": He could, but Democrats believe -

there are counts-prospective counts that were made before the final ruling by the canvassing board. So these-that represent the local official's initial inclination as to whether to count those votes. It is kind of like the equivalent of in football the call on the field while they review it in the instant replay booth. Democrats believe that once all of those votes are actually accounted for by the canvassing board, if they go the way they expect, Franken is going to dramatically narrow that margin. We'll see if he can do it. He hasn't done it so far.

DUFFY: It's Minnesota, don't forget. Almost 90 percent of the people voted. They're really good at voting. It is not like some of the other states, where there are a lot of first time voters, although there were a percentage in this case. If you ever had a perfect state where you're liable to have an almost perfect election, it is Minnesota.

MATTHEWS: Teddy White wrote that back in 1960, after the 1960 election. He said some elections, you never quite know what the count means. In those days, Texas and Illinois were two prime examples. You could guess within 100,000 votes. You didn't know where they were really coming out. He said in Minnesota-he may have mentioned Wisconsin as well. In those states, it's on the nail. You can assume that the vote is completely, utterly honest. That's a pretty nice thing to say about a state these days.

HARWOOD: It's definitely a good government state. One of the things that's going on in the legal jockeying right now is to try to see if you can be ahead when the board canvassing certifies, or the secretary of state certifies the vote at the end of the week. There may be legal challenges after that, but history shows that usually the person ahead in the count prevails in those legal challenges. So, for example, Republicans, Al Franken-Norm Coleman is trying to petition the Supreme Court to stop the counting of some of these absentee ballots, knowing they will probably be counted in the end, but they don't want them in the tally that is accounted at the end of the week.

MATTHEWS: Have I missed something? Neither of the candidates, Coleman who is pretty well known-wasn't his brother the sports guy on Imus for years? Norm Coleman, yes-cousin, I'm sorry. They're pretty well known. Neither one of them has made a national political appeal. They've sort of left this to the Minnesota process, very clean. It's an interesting decision on their parts.

DUFFY: They've raised a little money nationally to help pay for some of these legal bills.

MATTHEWS: They're not going on the tube and making their case on programs.

DUFFY: They've gotten along well. Their lawyers actually are talking. It has actually been a fairly collegial Minnesotan kind of recount. I think that's probably wise. At the end of this process-it has gone on for so long-I suspect a lot of Minnesota voters aren't going to want either of them to win. It is just-

HARWOOD: It's actually been more collegial than the campaign itself.

MATTHEWS: John, is there any chance that the U.S. Senate, which is dominated by Harry Reid and the Democrats, will interfere, will say, this is too close to call, so we're going to call it for Franken. Any chance that will happen?

HARWOOD: Well, it could eventually get to the Senate if the legal challenges drag on. But I don't think that the Senate would go against whatever the final certified tally is. That's why the certified tally at the end of this week is so important.

MATTHEWS: So it is going to be decided in the Minnesota.

We'll be back with John Harwood and Michael Duffy for more of the politics fix. We're going to talk about Caroline. This has become the story in every newspaper I read at dawn, Caroline. Of course, I read those stories first. You're watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: We're back with John Harwood and Michael Duffy. We're having the candy moment of the show, which is Caroline Kennedy. I don't know what it is, but it is the cotton candy of political discussion, Harwood. It is amazing. It's so easy to talk about. It requires no intellectual knowledge. Do you want Caroline Kennedy to be back in the Senate? That's all.

HARWOOD: Well, everybody remembers the magic of the Kennedys, especially Baby Boom Democrats, or really anybody in the Baby Boom generation. The idea that she would step up after having been out of the spotlight, there's such a sense of mystery about her. I have to say, I think today was not a good day for her. The idea that she would go out and make that trip upstate and be so short in front of cameras --

MATTHEWS: Let's take a look. Can we look at that again. Let's take a look again, if we can, because it wasn't strong. It wasn't like she apparently has that SKD guy helping her, that consultant. But I didn't sense any kind of punch. We're going to show this in a minute, but what do you think?

DUFFY: She looked like she arrived to get her coat.

MATTHEWS: What?

DUFFY: Just to pick up her coat.

MATTHEWS: Here's Caroline Kennedy, who is a proposed candidate, by herself actually, for Senate.

(BEGIN VIDEO CLIP)

KENNEDY: Well, I just wanted to say that, as some of you may have heard, I told Governor Paterson that I would be honored to be considered for the position of the United States senator. I wanted to come upstate and meet with Mayor Driscoll and others to tell them about my experience and also to learn more about how Washington can help.

UNIDENTIFIED MALE: But you've never held public office. What experience-

KENNEDY: There is a lot of good people-candidates that the governor is considering. He has laid out a process. And I'm proud to be in that process.

(END VIDEO CLIP)

MATTHEWS: Wow, you heard that tough guy asking that question, you never held office.

HARWOOD: She looked very uncomfortable, like she could not wait to get in the car and get out of there. And that is not a great sign if you're setting yourself in front of a bunch of experienced politicians and saying, I'm the guy to lead this-I'm the person to lead this ticket.

MATTHEWS: What would you ask her if you had her right now?

HARWOOD: I think would you try to find out what her political views are.

MATTHEWS: You go through the list, guns, abortion rights, things like that.

HARWOOD: You do that and you talk about the economy. You talk about things particular to New York state. And I would have thought that after several weeks of exploring this, talking to people about it, she would have been more prepared than she looked today.

DUFFY: A dirty little secret of this whole thing is that her chief qualification for office is the fact that she and very few others can raise 30 million dollars probably in two years.

MATTHEWS: She doesn't have to do it herself. It will be done for her.

DUFFY: She will generate checks. That's the qualification.

MATTHEWS: Why do they want that money?

DUFFY: Because they can win and hold the seat.

MATTHEWS: Does anybody doubt that any Democrat can hold a seat as senator from New York? Don't they automatically win that?

HARWOOD: That's the backstop for her, is the idea that they might have the most lame Republican opponent for her.

MATTHEWS: It might be Peter King, who will be feisty as hell. I think he is a real bridge and tunnel tough guy against the elite Manhattanite. It's a perfect race. I'm sorry, class war. Thank you, John Harwood. Thank you, Michael Duffy. Right now, it is time for "1600 PENNSYLVANIA AVENUE" with David Shuster.

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

END

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