updated 1/23/2009 4:48:22 PM ET 2009-01-23T21:48:22

Guest: Sen. Kit Bond, Sen. Jay Rockefeller, Dominic Carter, Steve McMahon, Todd Harris, Lynn Sweet, Chris Cillizza

CHRIS MATTHEWS, HOST:  President Obama says to close Gitmo and end the torture.

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews.  Leading off tonight: Good-bye Gitmo.  He‘s done it.  He said he‘d do it and he‘s done it.  You think elections don‘t matter?  President Barack Obama said today he‘s closing and shuttering that detention camp down at Guantanamo.  He‘s doing it this year.  He‘s banning the use of torture and shutting down those secret CIA detention camps in other countries.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  We intend to win this fight, and we‘re going to win it on our terms.

(END VIDEO CLIP)

MATTHEWS:  So what do we do with the bad guys?  Guantanamo and prisons right now, some of the most dangerous terrorists in the world, like 9/11 mastermind Khalid Sheikh Mohammed.  I‘m putting that question tonight to two U.S. senators who sit on the Intelligence Committee.

Plus, we learned late last night that Caroline Kennedy was dropping her bid to replace Hillary Clinton in the U.S. Senate.  Now the question is, did she jump or was she pushed?  Was it her decision alone, or did she get a heads-up from Albany?  Was it something that showed up on the Governor Paterson‘s vetting process?  Was it a failure to pay taxes, hiring an illegal worker, a personal matter?  What‘s the story here?  We‘ll get to that right after the torture story tonight.

Plus: Hillary, oh Hillary.  President Obama joined Hillary Clinton today at the State Department on this, her first full day as secretary of state.  Hillary Clinton has always been a lightning rod and fund-raising poster girl for Republicans.  Will they now use her to score points against a very popular President Obama?  We‘ll ask a Republican and a Democrat to predict the heat level ahead on that front.  I‘m talking, of course, to the two HARDBALL strategists tonight.

In the “Politics Fix” tonight, we‘re going to take a closer look at the closing of Gitmo.  Are we making a choice here between our constitutional values and our safety?  President Obama says we can have both.  Let‘s check it out.

And finally, former vice president Dick Cheney—do you like the sound of that, “former”? -- spoke out one day after leaving office and publicly disagreed with his former boss, President Bush, about a pardon never given.  Who does Dick Cheney think deserves a break?  The answer in the HARDBALL “Sideshow.”  By the way, it‘s Scooter Libby.

But we begin with Senator Bond.  Senator Kit Bond joins us from Capitol Hill.  Senator Bond, what was your thinking when you heard that Barack Obama‘s going to close Gitmo?

SEN. KIT BOND (R-MO), INTELLIGENCE COMMITTEE CO-CHAIR:  Well, I think it‘s irresponsible to say you close Gitmo without having a plan.  What are you going to do with the hardened terrorists that are there?  I can‘t think of any town or city in Missouri who wants to have hardened criminals, illegal combatants like Khalid Sheikh Mohammed or Abu Zubayda coming into their community.

Now, if you don‘t bring them back to the United States, if you release them, we know already that more than 60 of the people who have been released have been killing our troops, our Americans and civilians on the battlefield.  If you really want to bring them back to the United States—people in Missouri and Kansas believe Gitmo is just fine.  Folks in San Francisco want it closed.  I‘d suggest you put them in Alcatraz.

MATTHEWS:  Well, why wouldn‘t you imprison somebody after holding a trial, or execute them?  Why don‘t we do it by law?  What‘s the problem with doing it the usual way?

BOND:  Well, first of all, they are—they should have military commissions to determine whether they should be incarcerated.  When in the past have we ever said that an illegal combatant outside the United States has access to our court systems?  We have not a—we have a moral obligation to give them some kind of hearing to make sure that they—that we have evidence to show that they deserve to be incarcerated.

In the past, whenever you have captured enemy soldiers on the battlefield, you‘ve kept them in camps until the war is over.  And I simply suggest that these people have plotted against and killed American citizens, and we do not need to bring them back into our country and give them the full rights, put them in prisons where, if they escape, they will be able to conduct their terrorist activities from American soil.

MATTHEWS:  Well, we‘ve got Sirhan Sirhan in jail.  We‘ve got some pretty bad murderers in this country who are in federal prison.  Are you saying we can‘t hold people who are guilty of crimes in our prisons, we‘re not competent to do that?

BOND:  If you have—you have several hundred people that you would be bringing back that would flood the system.  Sure, we have—we have a murderer here, a murderer there.  We have people who were engaged in a massive effort, al Qaeda and perhaps others, who have worked to provide terrorist training and direction, command and control.  We don‘t want them operating out of a U.S. prison or going after recruits in our prison system in America for people who may be released there.

MATTHEWS:  Well, you paint a sad picture because I know we have, what, 10,000 to 20,000 murderers in this country every year.  We put people in prison all the time for first-degree murder, or we execute them, and you make it sound like we don‘t have the competence to keep those people from causing trouble here.

Let me ask you about this question of torture.  Barack Obama said today, No more torture.  Are you with that?

BOND:  I agree with that.  I‘ve introduced a bill that says—that not only says, No more torture, it outlines the things, including waterboarding, that we would ban permanently by law.  I agree with that.

MATTHEWS:  Well, what about this Khalid Sheikh Mohammed?  People like Dick Cheney are quite happy with the fact that he was submitted to waterboarding.  You with him?

BOND:  I believe that the techniques that were used to get information from Khalid Sheikh Mohammed were approved at the time.  I think the time has come to say, No more waterboarding, but it depends on—you know, there are many things that we do to our volunteer Marines and pilots who go through series (ph) school that are very much like waterboarding.  I‘m not even going to talk about that.

But if you say, as—if you say, as the executive order does, that you will only use the Army Field Manual, there is a real problem with that.  The Army Field Manual works well for the 10,000, 20,000 soldiers who may be questioning battlefield combatants.  But for the CIA, when you capture a high-value target, every single one of them knows precisely what the Army Field Manual prescribes, and they won‘t talk.  They know how to resist it.

There are other techniques that have been approved in the past that have proven effective primarily because the terrorists don‘t know what is going to happen to them.  Now, the good news is that this is an executive order and a president can issue another executive order that applies to the CIA and define what techniques could be used.  That should be kept classified and not disclosed to anybody.  You can use techniques, as President Bush used, that were approved by the president, by executive order.  So President Obama keeps that...

MATTHEWS:  What do you make of...

BOND:  ... has that option, and if we capture another high-value detainee, if it‘s necessary, I hope that they will use the other techniques that have been described to us that are like but different from those in the Army Field Manual.

MATTHEWS:  What about investigating previous use of torture and possibly punishing that under this new administration?  Are you against that...

BOND:  I think...

MATTHEWS:  ... going back and seeing if somebody at a high level approved torture and whether they should be punished for that?

BOND:  I think if you go back and try to prosecute people who operated under opinions issued by the attorney general and directed by the president, you will absolutely destroy the morale in the CIA.  Nobody will want to work under a system in which you can follow lawful orders issued by the president, approved by the attorney general—if you do that, I will tell you further that you will start a political battle at the highest level.

President Obama said he doesn‘t want to look backward.  There are some people, very loudly on Capitol Hill, said they want to prosecute everybody.  Well, we don‘t go back and prosecute Bill Clinton for the really unwarrantless (ph) search of Aldrich Ames or other things that have gone on.  We don‘t go back and look at previous administrations and try to try them for crimes.  That is a—that is the ultimate in the Bush derangement syndrome, which I believe any person who thinks through it will recognize that it would be a total disaster.

MATTHEWS:  OK.  Thank you very much, Senator Kit Bond of Missouri.

With us now, Democratic senator Jay Rockefeller of West Virginia, who was chairman of the Intelligence Committee.  Senator Rockefeller, just to review some of those points we just did with Senator Bond, do you think that we should close Gitmo as a detention camp?

OK.  We‘re trying to get the technical—we‘re trying to get him (INAUDIBLE) The issues here, of course, between the two parties, largely along party lines, is the fact that whether we get rid of Gitmo, Guantanamo, as a detention camp, whether we definitely end torture—that‘s the—let‘s go in right now.  Here‘s the president, by the way, the new president, talking in his inaugural address about the conundrum we have sometimes between honoring our constitutional values, such as opposing torture, and protecting ourselves.  Some people think you can‘t do both.  The new president says you can.

(BEGIN VIDEO CLIP)

OBAMA:  As for our common defense, we reject as false the choice between our safety and our between our safety and our ideals.  Our Founding Fathers—our Founding Fathers, faced with perils that we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations.  Those ideals still light the world, and we will not give them up for expedience‘s sake.

(END VIDEO CLIP)

MATTHEWS:  Let‘s go to Senator Jay Rockefeller, Democrat on the Intelligence Committee.  Senator Rockefeller, we just went through a conversation with Kit Bond, the senator from Missouri.  He said he‘s—he think there‘s a problem with getting rid of Guantanamo as a detention camp because then you have to bring those detainees here, and you can‘t treat them the way he wants to treat them here.  What‘s your view?

SEN. JAY ROCKEFELLER (D-WV), INTELLIGENCE COMMITTEE:  I don‘t know how he wants to treat them, but I do know this, that the president, in what has been a remarkable two days—an extraordinary two days—and you‘ve said so many times yourself—has decided to close Guantanamo not rashly, not all of a sudden, but over a period of a year.  He would establish the top national security team, which is really, really good people, and they would go through all 254 people now at Guantanamo, figure out what kind of status they should have, where would it be convenient to take them?  Would the Europeans take them?  Might some other place take them?  Should they come to this country?  As you indicate, we have serial killers and murderers of all kinds.

And so it becomes a matter of, Are we making more enemies and creating more terrorist threat to the United States by keeping Guantanamo open?  And I‘ve always felt that that was true.  I will tell you that I held up—and you being an old Hill hand know what an authorization bill is.  For two years, I held up the intelligence authorization bill because I wanted the Army Field Manual used because it exclusively precluded, eliminated the use of waterboarding.  In both cases, that was defeated in the committee, which was controlled by the Republicans.

But it‘s—it‘s a battle which is worth knowing about.  It‘s a battle which we should take our time to understand.  We should not come to a judgment, you know, Should we go arrest So-and-So, prosecute So-and-So?  Let‘s keep our mind on what the larger questions that the president is looking at in the economy and national security and all the rest of it, get those things in place and then come back and take a close look at what has happened and decide what we want to do.  If we want to hold people accountable, then I think that‘s perfectly appropriate.  I think all of us need to be held accountable.

MATTHEWS:  What should we do with these people we pick up who say and do things that clearly indicate that they‘re enemies of the country?  What do we do with this them?

ROCKEFELLER:  You put them away.  I mean, you know, after your show goes off at night, they have many, many hours of what happens in some very, very tough places with a lot of concertina wire, with a lot of very unhappy people who are very, very carefully monitored, and that‘s true at Guantanamo.  That is at least as true as at some of our major federal facilities.

MATTHEWS:  Well, you‘re talking about the “Lock-up” programming on this network later at night.  Let me ask about the problem of—I keep coming back to and not getting an answer.  What do you do with somebody who‘s picked up, who hasn‘t committed a clear-cut crime by the standards of what a crime is—you kill somebody, you do something that‘s wrong—but we know clearly that they‘re the enemy in terms of terrorist threat in the future?  What do you do with them?

ROCKEFELLER:  That—and I‘m not punting on this, but I have to be responsible.  That‘s the system the president has set up.  In other words, who are these people, what have they done, what treatment do they deserve?  Should they be prosecuted?  Should they be booted out of the country?  Should they be returned to their original place?  Should they be put in some place in the United States of America?

We cannot avoid our responsibilities if we‘re going to conduct a war on terror.  I mean, this is—this is not an easy matter.  I‘m extremely proud of what the president has done.  I think he took this on.  Some of us have been fighting this a long time, not just the ending of waterboarding but the closing of Gitmo.  We‘ve been fighting for that for a very, very long time.  And I think there‘s a great sense of satisfaction and progress not only in this country but most particularly around the rest of the world, which says, Finally, this country is coming to its senses.

MATTHEWS:  OK.  We‘re watching right now pictures of the president being received, and also Richard Holbrooke, a special envoy under this new administration, along with—and being hosted by, of course, the new secretary of state.

One last question of news value.  Russell Tice was an official with the National Security Agency.  He said that under the Bush administration, the NSA spied electronically on journalists.  Do you know about that?

ROCKEFELLER:  I watched it on your program, and I‘m quite prepared to believe it.  I mean, I think they went after anybody they could get, including me.

MATTHEWS:  OK.  They didn‘t eavesdrop on you, did they, Senator?

ROCKEFELLER:  No, and they sent me no letters.

MATTHEWS:  OK.  Thank you very much, Senator Jay Rockefeller of West Virginia.

ROCKEFELLER:  Thank you, Chris.

MATTHEWS:  Coming up: Caroline Kennedy the favorite to take over Hillary Clinton‘s Senate seat.  So what went wrong?  We‘re going to find that out based on some good reporting right now.  We‘ve got a day after that story broke late last night.  Let‘s find out what it was, personal, housekeeper, nanny problem, tax problem?  It may have been all of those.  We‘ll get “The New York Times”—we‘ll get all the reports here in just a moment about Caroline‘s withdrawal.  That‘s coming up right next on HARDBALL.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  After months of speculation and scrutiny, late last night, Caroline Kennedy released this statement.  Quote, “I informed Governor Paterson today that for personal reasons, I am withdrawing my name from consideration for the United States.”

So what happened?  Dominic Carter is the senior political reporter for New York One, who had the only television interview with Caroline Kennedy during her Senate speculation.  And Liz Benjamin‘s a political reporter for “The New York Daily News.”  Thank you, Liz, and thank you, Dominic.

First, Liz, the question is this.  Did she withdraw because of a personal problem perhaps involving her marriage to Ed Schlossberg, or did she withdraw because she got word from the vetters that she had a tax problem or a nanny problem?  Which was it of those two?

LIZ BENJAMIN, “NEW YORK DAILY NEWS”:  Well, there‘s a lot of subterfuge going on right now and a lot of spin on all sides of this story.  Coming out of the governor‘s office is the story regarding the nanny problem and perhaps the tax problem, which ironically, would have surfaced in a vetting situation in a questionnaire—I assume, but we‘ve never seen them publicly—that the governor had all these candidates fill out.

No one has confirmed and—not publicly, at least, the affair issue, but that certainly is out there.

MATTHEWS:  The what issue? 

BENJAMIN:  The affair question.  I believe that was the question. 

MATTHEWS:  What is the affair—well, you have just something I didn‘t know.  What is the affair question?

BENJAMIN:  There‘s some personal questions—there‘s some personal questions about relationships that are surfacing on blogs and on all sorts of things on the Internet, but nobody has talked about that. 

MATTHEWS:  Well, how about—let‘s stick to journalism.  Let‘s not—

I don‘t do that here, Liz.  Liz, if it‘s just—if it‘s just blogging, let‘s drop it.  OK? 

BENJAMIN:  Right. 

MATTHEWS:  If you have got anything to report that‘s hard, report it. 

Don‘t—don‘t give me blog stuff here. 

BENJAMIN:  Well, what‘s coming—what‘s coming out—what‘s coming

out of the governor‘s office is—or sources close to the governor, rather

is issues about perhaps the nanny question and perhaps the tax status. 

That is not what‘s coming out of the other side, of the Caroline Kennedy side. 

MATTHEWS:  OK.  OK.

BENJAMIN:  What‘s coming out there is personal issues, period.

MATTHEWS:  Well, let me give you something hard.  Let me—let me—

I mean, you have seen this.  Let‘s refer to this—let‘s go with what we have that is hard here. 

Responding to reports of varied reasons Kennedy‘s withdrawal, Stefan Friedman provided this statement: “Caroline Kennedy withdrew for name for consideration from the United States Senate for personal reasons.  Any statements to the contrary are false.  The governor set up a fair and deliberative selection process.  This kind of mud-slinging demeans that process and all those involved.”

So, who is—who‘s Stefan Friedman? 

BENJAMIN:  Stefan Friedman works for a firm called Knickerbocker SKD, which is a political consulting and communications firm...

MATTHEWS:  Oh.

BENJAMIN:  ... that Caroline Kennedy retained to assist her in her attempts to secure Hillary Clinton‘s seat.  It‘s a pretty prominent firm.  And clients include Mayor Bloomberg and also Senator Schumer, along with many other people. 

MATTHEWS:  Well, that makes sense.  That makes sense.  It now seems, the way—the way it‘s coming to you, is that there‘s a battle here of spinners.

The governor‘s office saying there‘s a tax or a nanny problem or both over—overlapping each other.  And, on the Kennedy side, they‘re putting out, through their paid P.R. person, their flack, the word that it‘s a personal issue. 

What do they mean by a personal issue, the Kennedy people? 

BENJAMIN:  Well, there—there hasn‘t actually been anything in terms of details from that side.  But, right now, what you are seeing is a finger-pointing game, because everybody looks a little embarrassed in this situation.  As you mentioned, the statement that came out last night, in which she finally confirmed that she indeed was pulling out of this non-race, because there‘s only person who makes the determination—and that‘s Governor Paterson—that came...

MATTHEWS:  Yes. 

BENJAMIN:  ... out after midnight, after hours of—of subterfuge and conflicting reports of sources close to the Kennedy family saying, in fact, it had been not true, of people at Knickerbocker and advisers to her saying nothing, of all sorts of different spin.

In fact, the Associated Press at one point reported citing someone close to the Kennedy family that she indeed was—reaffirmed her determination to seek the seat, in part due to her—her uncle Senator Ted Kennedy‘s seizure and health—failing health problems.

So, you‘re—you are having a lot of different spin on both sides, on all sides of this equation, and perhaps, I believe, because people don‘t want to take the blame for what really was a very badly managed rollout. 

MATTHEWS:  Well, that‘s fair to say.  Thank you.  Hold on there. 

Let me go Dominic Carter.    

Dominic, your sense of this rival—rivalry over what happened here. 

What is your reporting? 

DOMINIC CARTER, SENIOR POLITICAL REPORTER, NEW YORK 1:  Well, number one, Chris, this is all baffling, the way that it‘s gone down. 

Here‘s what I can tell you as fact that I know.  On Tuesday night, at the inauguration in Washington, at the Mid-Atlantic Ball, I ran into Governor Paterson.  We exchanged pleasantries and then had a private conversation. 

It appeared at that time all systems were go to name Caroline Kennedy to the Senate seat.  Then, all of a sudden, the governor is caught off guard.  And I have confirmed this with numerous people, that he was completely caught off guard by this.  Caroline Kennedy makes the call—it‘s in that statement you referred to from the governor—that she may be backing out for personal reasons, and then she issued the statement saying that she was indeed pulling out for personal reasons. 

We don‘t know exactly what—I do not want to speculate, because there are some serious issues out there.  We don‘t know what those personal reasons are. 

All I can tell you is that Caroline Kennedy has made—we don‘t even know if she is in New York City right now.  She has made several telephone calls to people that she considers close supporters. 

But I—I interviewed her, and I have not had a chance to talk to her since all of this broke.  But it‘s very baffling.  That‘s all we can tell you as of right now.  The governor was caught completely—that is Governor David Paterson—completely off guard, and he was going to name her. 

We have been told, Chris, that, tonight, the governor is going to make his final decision on the seat.  We are told that the leading front-runner, as of right now, is Upstate New York Congresswoman Kirsten Gillibrand.  But the governor, I have been told, could change his mind, and that the announcement could come as early as noon tomorrow.

MATTHEWS:  Your thoughts, Liz?  Can you report anything further on that, that that—that that looks like where the governor is headed right now, Governor Paterson?

BENJAMIN:  Yes, all—that‘s true, that all systems are pointing in that direction.

But, of course, you are talking about David Paterson, who has played his cards very close to vest.  He has a habit of making decisions at the last minute.  And it wouldn‘t be surprising to me—and I don‘t think anybody else in the New York political world—if he indeed decides to change his mind. 

Now, already, there‘s a very large pushback operation going on against Kirsten Gillibrand.  She represents a—a district that runs from about Poughkeepsie to Lake Placid.  It has an 80,000, plus or minus, Republican voter enrollment edge.  It might be difficult for the Democrats to hold that seat in a special election. 

She took it in a very dirty election two election cycles ago.  And she has a very—she‘s a Blue Dog.  She‘s conservative.  And the progressives are screaming bloody murder right now.  So, it depends on what kind of pressure the governor succumbs to. 

MATTHEWS:  Great.  Well-reported.

Thank you very much, Dominic Carter.

Thank you, Liz Benjamin.

Up next:  Dick Cheney says Scooter Libby should have gotten a pardon.  Big surprise there, just being sarcastic.  So, why didn‘t it happen?  The “Sideshow”—coming up next on HARDBALL. 

(COMMERCIAL BREAK)

MATTHEWS:  Back to HARDBALL.  Time for the “Sideshow.”

Just one day out of high office, Dick Cheney is doing something he couldn‘t do white sitting around the corner from the Oval Office, disagree with George W. Bush. 

Yesterday, Cheney told the pro-Iraq war, neoconservative “Weekly Standard,” a favorite magazine of his, that his former chief of staff and hard-line hawk Scooter Libby should have been pardoned—quote—“Scooter Libby is one of the most capable and honorable men I‘ve ever known.  He‘s been an outstanding public servant throughout his career.  He was the victim of a serious miscarriage of justice, and I strongly believe that he deserved a presidential pardon.”

Well, he didn‘t get one.  And, well, there is a case here, actually, for Bush and Cheney getting the guy a pardon.  That case is this.  This is so ironic, for me to say this.  He did what he did to sell and protect the WMD case for the Iraq war.  That case was Bush and Cheney‘s case, not just Scooter Libby‘s.  The guy not out there robbing gas stations at night.  He was doing the crass work of the Bush-Cheney war policy. 

He got caught.  They could have gone back and gotten him off.  They didn‘t.  But, just in crass political terms, you have got to wonder why they don‘t want this guy to get his law license back—Scooter Libby, I mean.  Would you rather he practice law for a living or how—to go out there and write a book about what really happened, all that stuff they did, all that skullduggery by Cheney and Bush and Scooter Libby, to get the American people to believe there was a mushroom cloud out there waiting for us, that Saddam Hussein was going to bomb America with a nuclear weapon, all that stuff that got us into this war. 

Do they want Scooter Libby to be a brilliant lawyer, which he can‘t be now, because he didn‘t have a pardon—he‘s a felon—or a frightened, desperate author?  This is what they have got to worry about; the guy is going to write a book. 

Next up, remember that word stumble—that word-stumble, those words spoken out of order the other day during Obama‘s oath of office on Tuesday?  Well, it turns out the president, our new president, decided to be sworn into office for a second time last night by Chief Justice John Roberts. 

It‘s only the third time in history this has happened, where a president has had to be sworn in twice because of technical problems. 

Here‘s Obama and Roberts finishing up the redo. 

(BEGIN AUDIO CLIP)

JOHN ROBERTS, CHIEF JUSTICE OF THE SUPREME COURT:  ... and will, to the best of my ability...

OBAMA:  ... and will, to the best of my ability...

ROBERTS:  ... preserve, protect, and defend the Constitution of the United States. 

OBAMA:  ... preserve, protect, and defend the Constitution of the United States. 

ROBERTS:  So help you God? 

OBAMA:  So help me God. 

ROBERTS:  Congratulations again. 

OBAMA:  Thank you, sir. 

(LAUGHTER)

(APPLAUSE)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY:  The bad news for the pool is, there‘s 12 more balls and...

(CROSSTALK)

(LAUGHTER)

(END AUDIO CLIP) 

MATTHEWS:  No, there are not.  That was Robert Gibbs, the press secretary.  They are not going to have another 10 or 12 balls tomorrow night, or tonight, because they had to do the swearing-in over again. 

Anyway, just for the record, Barack Obama was president from noon on Inaugural Day.  That‘s what it says in the Constitution.  You take office from noon on January 20.  That‘s the law.  It‘s not about the oath.  It‘s about the time.  He‘s our president as of noon on Tuesday. 

Counsel Greg—Greg Craig of the presidential office—he is the president‘s lawyer—he said they had to do the oath just because of an abundance of caution, just to make sure nobody would say he wasn‘t president. 

Up next:  Hillary Clinton has always been a lightning rod and fund-raising poster woman for Republicans.  Now that she‘s secretary of state, will Republicans use her to score points against President Obama?  The HARDBALL strategists debate that one—coming up next.

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

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

Job losses and a miss at Microsoft sent stocks sliding on Thursday, the Dow Jones industrials average lower by 105.  The S&P 500 lost 12, and the Nasdaq lower by 41 ½. 

After the close of the session, Google reported better-than-expected quarterly earnings.  Shares are trading higher after-hours. 

And that follows a string of negative tech news earlier today.  It includes Microsoft reporting quarterly earnings below analyst estimates and announcing it‘s going to cut 5,000 jobs over 18 months. 

Also, first-time jobless claims rose more than expected last week, matching the 26-year high reached a month ago. 

Meantime, housing starts tumbled to yet another record low in the month of December.  New building permits also dropped to a new record. 

And oil prices rising in a volatile session today.  Crude settled up 12 cents, closing at $43.67 a barrel. 

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

MATTHEWS:  Welcome back to HARDBALL. 

So, how will Republicans try to work their way back into the majority? 

Hmm.  Todd‘s looking at me. 

(LAUGHTER)

MATTHEWS:  Could Hillary Clinton be a fund-raising vehicle for the right wing?  That‘s a question for the strategists, Democratic strategist Steve McMahon and Republican strategist Todd Harris. 

Let‘s look at—let‘s take a look at some of the commentary by Republican Senators Lugar, Cornyn, DeMint about Hillary Clinton in the last couple of days. 

(BEGIN VIDEO CLIP)

SEN. RICHARD LUGAR ®, INDIANA:  The core of the problem is that foreign governments and entities may perceive the Clinton Foundation as a means to gain favor with the secretary of state. 

SEN. JOHN CORNYN ®, TEXAS:  I argued to Senator Clinton yesterday—or I didn‘t argue to her, but I explained to her my position, that I thought that greater transparency would make it better for her as she enters this new job as secretary of state.

SEN. JIM DEMINT ®, SOUTH CAROLINA:  If there‘s suspicion that certain nations or international players are gaining advantage by virtue of contributions to the Clinton Foundation or its initiatives, that will compromise our new secretary‘s effectiveness. 

(END VIDEO CLIP)

MATTHEWS:  Well, Hillary Clinton, as the new secretary of state, got a rousing welcome at the State Department today.  Let‘s watch. 

(BEGIN VIDEO CLIP)

HILLARY RODHAM CLINTON, U.S. SECRETARY OF STATE:  I don‘t get up in the morning just thinking about the threats and the dangers, as real as they are.  I also think about what we can do and who we are and what we represent. 

(END VIDEO CLIP)

MATTHEWS:  Well said. 

You know, Hillary Clinton, brilliant, hardworking, absolutely committed to this job, wants to be the best secretary of state in history.  That‘s one thing we can agree on, right? 

TODD HARRIS, REPUBLICAN STRATEGIST:  Absolutely. 

MATTHEWS:  Will the Republicans try the use her to get—get their—get their way?  Is she always going to be the opportunity, like Ted Kennedy‘s been over the years (INAUDIBLE) before that?  There‘s always somebody on your side of the aisle that makes the best punching bag. 

HARRIS:  I don‘t think so.  And—and there are a number of reasons, not the least of which she was confirmed—what was the final -- 94-2?

MATTHEWS:  Yes.  But the people that voted against her are interesting, DeMint, South Carolina, and... 

(CROSSTALK)

HARRIS:  It was DeMint and Vitter, yes.

(CROSSTALK)

HARRIS:  You know, Inhofe, who is no moderate...

(CROSSTALK)

MATTHEWS:  Well, Cornyn went after her, the head of the campaign committee...

(CROSSTALK)

HARRIS:  Yes, but Cornyn voted—yes, but he voted for her then. 

MATTHEWS:  Yes, after bashing her, after taking a shot, yes.

HARRIS:  Yes, but he voted to confirm her.  I think it would be very hard for the Republican Party—I mean, you talk about...

MATTHEWS:  OK. 

HARRIS:  ... people that we could raise money off of, I don‘t think it‘s going to be her.

MATTHEWS:  Lugar—Lugar is about as centrist and as establishment as they get. 

He said Bill Clinton should never take another dollar from overseas, because it‘s always going to look like baksheesh.  It‘s going to look like a payoff to the Third World, because, in overseas countries—not that we are pristine here—when you give somebody to somebody‘s brother, father, sister, nephew, you are buying them.

And he says, from now on, every time somebody kicks a buck into the Clinton Global Initiative, it‘s going to look like a backdoor payment to the secretary of state. 

HARRIS:  Well, Lugar is right about that, but that‘s a separate question as to, you know, are we going to use Hillary to—to try to raise money for Republicans.  I think it‘s far more likely that we will invent—shine a spotlight on new faces, people like Hilda Solis, who will be driving the train for Card Check in the administration.  Those are the kinds of—

MATTHEWS:  The secretary of Labor is a finer target for you guys? 

HARRIS:  I think so, yes. 

MCMAHON:  You know how trial lawyers try to get something entered into the evidence so they can have grounds for appeal later?  That‘s basically what these Republicans are doing.  They‘re trying to suggest that Bill Clinton‘s fund raising is somehow untoward.

MATTHEWS:  Is it?

MCMAHON:  No, it‘s not.  Of course not. 

MATTHEWS:  If a Democrat—a Republican had the same exact situation, if you had a new secretary of state from the other party and you found out that the spouse of that person was collecting zillions of dollars overseas, you wouldn‘t nail it?  You wouldn‘t nail it? 

MCMAHON:  He is collecting money that he is disclosing. 

MATTHEWS:  At the end of the year. 

HARRIS:  Yes. 

MATTHEWS:  Wouldn‘t you do the same thing? 

MCMAHON:  If I‘m going to make a big stink about it, I would have had the courage and the integrity to actually vote no.  I wouldn‘t just kick up dust about and say it‘s this great big problem, but I‘ll vote for her anyway.  It‘s ridiculous to me.  I think you may have a point, Chris. 

MATTHEWS:  I‘m asking. 

MCMAHON:  That they‘re trying to create a new person to raise money around.  But I think—

MATTHEWS:  You can actually show people raising these issues.  Four different senators raised the issue.  Yes, they voted for her, because she is brilliant and she is actually probably one of the smartest people we‘ll ever have as secretary of state.  And she‘ll work harder at it than anybody else in the world. 

We can argue about how well fine tuned she and Barack are going to be.  That‘s something we‘re all going to have to watch.  But as for her capability, it is there. 

HARRIS:  It‘s a totally legitimate issue to raise and it‘s a totally legitimate question in terms of whether it creates a conflict of interest for her. 

MATTHEWS:  Yes. 

HARRIS:  That‘s a separate question though as far as the politics of it.  Do I think that the Republican party, in direct mail and TV ads, will we be focused on her going forward to try to raise money, to try to gin up the base?  I don‘t think, as long as she‘s secretary of state, that we‘re going to be doing that. 

MATTHEWS:  They‘re all the people that want ambassadorships, applauding there.  Applauding the new boss.  Wouldn‘t you?  Even if you didn‘t like the person, you‘d probably applaud.  They do like her, obviously. 

MCMAHON:  It‘s legitimate commentary.  But that‘s all it is, commentary. 

MATTHEWS:  Can I get some commentary on you now that you‘re being above all this?  Let me start with you, Todd, did the Democrats blow it by not getting Caroline Kennedy as a senator from New York?  She‘s not going to take the job.  Something‘s murky back there, personal, tax, whatever.  It could be just she decided she doesn‘t want it.  It could be that her husband doesn‘t want to come down to Washington.  It could be all kinds of things. 

HARRIS:  I think she blew it big time.  And I think that Governor Paterson actually probably dodged a bullet here.  There were all these issues that are out there.  She‘s known about them all along. 

MATTHEWS:  What?  Nanny stuff? 

HARRIS:  Nanny stuff.  Whether they‘re talking about tax stuff.  She has known about all of this.  She bungled her roll out.  You know, if you compare her first trip upstate to what Hillary Clinton did during her listening tour, when she first started running for governor, night and day comparisons. 

MATTHEWS:  She couldn‘t answer the question with any kind of alacrity or crackle, why do you want this job? 

HARRIS:  Even Jon Stewart was making fun of Caroline Kennedy.  For Jon Stewart to do that, you know that she‘s—

MATTHEWS:  Why would that be the case? 

HARRIS:  Because she didn‘t know what she was talking about. 

MATTHEWS:  OK, because he is a liberal. 

HARRIS:  He‘s a huge liberal. 

MATTHEWS:  I always like to be clear here. 

MCMAHON:  Her only mistake was she listened to the political experts.  Governor Paterson called her in and basically said, if you want this job, you‘re going to have to go out there and prove it.  You‘re going to have to go out there and campaign for a position for which there‘s only one voter, me. 

And then she went out there and did that.  And the other people who made mistakes are her political advisers, who let her go out there without having something crisp and short, without letting her be sufficiently prepared.  They just sort of put her out there.  She didn‘t do anything except listen to the people. 

MATTHEWS:  A good couple of sentences would have gotten her the job. 

MCMAHON:  Right. 

MATTHEWS:  Do you agree?  A couple of sentences crisply stated would have made a case for her Senate seat.  

MCMAHON:  Think about Governor Paterson here for a second.  Here‘s a guy who is allegedly a brilliant politician.  He angers the Clintons by selecting her—

MATTHEWS:  Now he‘s going to anger the Cuomos. 

(CROSS TALK)

MCMAHON:  If it looks like Caroline Kennedy was mistreated, he‘s going to anger the Kennedys. 

MATTHEWS:  He better not anger the women, so he‘ll probably pick a woman.  Right?

MCMAHON:  I‘m thinking he probably better. 

HARRIS:  Looking at the name that‘s been floated—

MATTHEWS:  Are there more women or more Kennedys?  Just kidding. 

Steve McMahon—Do you have a thought? 

HARRIS:  Talking about this Congresswoman Gillbrand from upstate, that will drive liberals nuts.  They could challenge her in two years.  Big fight in the Democratic party. 

MATTHEWS:  She‘ll raise money though. 

MCMAHON:  She‘s going to raise money.  She can win. 

HARRIS:  Good for Republicans. 

MATTHEWS:  She‘ll be one of the most famous people in America in about three days.  Anyway, Steve McMahon, Todd Harris. 

Up next, with President Obama closing Guantanamo, closing the terrorist detention camp down there, is he now vulnerable to being called soft on terrorism if we‘re attacked again?  That is always going to be the question for him.  If you don‘t get really tough and dirty, you are charged with not being really tough and dirty.  And somebody says it‘s your fault.  We‘ll see when we debate this is the politics fix.  That‘s the question, the calculations.  How good are you, how tough are you, can you be good and tough?  That‘s a great American question these days.  This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Time now for the politics with Lynn Sweet, the Washington bureau chief of the “Chicago Sun Times” and Chris Cillizza of the “Washington Post.” 

I just have to do a little quick here.  We have a lot to talk about, and it‘s really political candy.  Do you know anything, Lynn Sweet, about why Caroline Kennedy pulled out or was pushed out of this competition to be the next senator of New York?  What happened? 

LYNN SWEET, “THE CHICAGO SUN TIMES”:  I don‘t know anything first hand.  But it seems in this vetting process that Governor Paterson had that she either had second thoughts, found out something about herself or other people did that knew it would be hard.  Remember, this wasn‘t just an appointment to fill a few years of the seat.  It was an appointment that the Democrats wanted to have somebody who could run for it.

So I think this whole transition that she was using to try and get herself in good stead was a combination of that she had trouble expressing herself as a candidate.  Maybe she didn‘t pass her own internal background checks.  Maybe Paterson imposed, you know, vetting, which he did not have to do, by the way.  I don‘t think the governor of Illinois put a vetting process on his appointment.  So it could have been a combination of all of them. 

MATTHEWS:  That‘s right.  He had his own problems with taxes. 

SWEET:  Yes. 

MATTHEWS:  Let me go to Chris Cillizza.  It seems to me that the people that she‘s hired as her PR people are putting out the word it was, quote, personal.  They‘re trying to dodge the issue of whether there was a tax or nanny problem.  But in focusing on the question of personal, it brings back the usual questions, well, what‘s personal mean here? 

CILLIZZA:  Absolutely.  Well, Chris, look, I think this gets back to the fundamental thing.  I remember being on and we talked about when she—

I never thought she would be interested.  When Hillary Clinton was nominated as secretary of state, people asked me what about Caroline Kennedy.  And I poo-pooed it, no, no, because she is notoriously private.  She is notoriously shy about being in the public eye, has been her whole life and, frankly, understandably so. 

That‘s why it seemed like such a huge departure for her to put herself out, to essentially campaign for an election of one person.  It seems to me now she‘s retreating back into the Caroline Kennedy that we knew, very intensely personal and intensely private.  The problem, there was a two-month period in there in which she was a public candidate for this office.  So I‘m not sure she‘s going to get the luxury of being able to go back to private citizen Kennedy. 

SWEET:  Here‘s why she needs to clean this up, though, because I can only guess that she would be up, if she wanted, for some appointment within the Obama administration.  They became very close during the campaign.  I would think that she needs to clear this up for her own future.  There are many years where she could take an appointment and many places she could be plugged in.  So I think the onus is on her.  It‘s her part to clear this up and make a clear statement of what she thinks is the reason that she didn‘t want to—

MATTHEWS:  Yes, by the way, just to clear this up, before we go to break, if she has a nanny problem or a tax problem, it could be relatively modest.  It would not stop her from being appointed to a significant position.  Look, we just wend through that—

SWEET:  She doesn‘t need confirmation.  It‘s an appointment. 

MATTHEWS:  I‘m talking about—no, we‘re already moving past that.  If she wants a job in the Obama administration, he can still appoint her if there‘s a small tax problem or a small nanny problem.  Look what just happened to Geithner.  Secretary of the treasury is going to skate by his problems. 

Number two, if it‘s a personal problem, involving her marriage, whatever it is on the personal front, that‘s not going to stop her from getting an appointment, because it‘s none of our business if it‘s a personal matter.  So I think she could still get a major appointment in this administration.  Maybe she‘ll run the Peace Corps.  I don‘t know what it will be.  There are all kinds of jobs she could have. 

We‘ll be right back with Lynn Sweet and Chris Cillizza for more of the politics fix.  Be right back.

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back with Lynn Sweet and, of course, Chris Cillizza.  Lynn, this question of torture and Guantanamo, perhaps it‘s a time bomb, but his decision to close Gitmo and stop torture, it seems to me, is basically starting the Republican clock.  They‘ll wait until there‘s a terrorist attack, at which point they‘ll say, it‘s because he‘s gone soft.  He‘s not as tough as we are. 

SWEET:  I don‘t think he‘ll let himself be boxed in like that, Chris.  I think he will show the world, not sure how, that whatever he does with these prisoners, that they are not going to be threats to the U.S.  I think closing Gitmo is not the same thing as saying, here‘s the key.  You‘re out.  Do what you want. 

And they know—since they know that trap is out there, they will address it.  One thing about the Obama team, if it‘s kind of obvious for us to talk about here, they will have thought of it.  They‘re going to be tripped up on stuff that no one even thought of yet. 

MATTHEWS:  Here‘s where I think they have a problem: what do you do with detainees that haven‘t committed crimes?  You can‘t try them but you know they‘re dangerous.  What do you do with them, Chris?  I still think that‘s the toughest question for any reasonable president of the United States. 

CILLIZZA:  I don‘t disagree, Chris.  But to a more broad political point, I do think that this is an issue of promises made, promises kept.  I don‘t think Barack Obama could have afforded to say, you know what, we‘re actually going to keep Guantanamo Bay open.  This was a fundamental promise he made during the campaign. 

The one thing, I think you‘re right, it is definitely a possible problem politically down the line for him.  But we know the one thing voters dislike more than anything else is hypocrisy.  You say one thing and you do another.  Barack Obama promising a different kind of politics.  If he broke this one on the second or third day of his presidency, I just don‘t think it was optional for him.  I think he recognizes the potential trouble spots there, but I don‘t think he could have not done this. 

SWEET:  One other thing this helps him, he has another issue called the accountability issue that‘s peculating within the Democratic base and that‘s the look back, are people going to be called to account for war crimes, et cetera. 

MATTHEWS:  Right. 

SWEET:  The Obama administration does not want to do that.  There are members in Congress, Democrats, who want to.  Within the blogosphere, a lot of support for this.  By at least moving quickly on the torture and Guantanamo issues, he is at least telling that base, wait, I did what I said I‘m going to do.  And it will at least help throw some of his critics off from being as strong against him as they might be if he had not done this.  But it also is a central promise, as Chris said. 

MATTHEWS:  I just want to ask you, Chris, if you can still prosecute some low level military person for torture or abusing prisoners, why can‘t you at some date in the future go after one of the biggies who authorized it?  If it‘s criminal, it‘s criminal.  If Dick Cheney or Rumsfeld authorized something that‘s criminal, shouldn‘t they be just as liable to prosecution as some lieutenant or some private in the army?  Because we all believe that if somebody gets caught doing something, if they‘re at the lowest level, they do get nailed, because we‘ve seen it. 

Are we going to say to ourselves, oh, you can put these people in jail and you can put them in for a year or two, if we catch them abusing prisoners.  But if it comes out Cheney or Rumsfeld says that was OK, we just let them go?  Is that what we‘re thinking about doing, just let them go if something comes up with these guys? 

CILLIZZA:  Chris, I agree 100 percent with Lynn on this.  Whether you agree or not, my strong sense is the Obama campaign, the Obama presidency is not at all interested in going back and relitigating these things or litigating them for the first time, frankly.  That is not something they‘re interested in doing.  I think Lynn is 100 percent right, that they view this as a sock to the left with Guantanamo, and they‘re not going to go back in and look at Cheney, Rumsfeld and President Bush.  They‘re not interested in doing it. 

MATTHEWS:  They should declare an amnesty for all lower level people that tortured.  They shouldn‘t let the big guys off if they‘re not going to get the little people off.  Thank you, Lynn Sweet.  I‘m just looking for blind justice for once.  Lynn Sweet, Chris Cillizza.  Join us again tomorrow night at 5:00 and 7:00 Eastern for more HARDBALL.  Right now, let‘s join “1600 PENNSYLVANIA AVENUE” with David Shuster.  David?

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

END   

Transcription Copyright 2009 CQ Transcriptions, LLC  ALL RIGHTS  RESERVED.

No license is granted to the user of this material other than for research.

User may not reproduce or redistribute the material except for user‘s

personal or internal use and, in such case, only one copy may be printed,

nor shall user use any material for commercial purposes or in any fashion

that may infringe upon MSNBC and CQ Transcriptions, LLC‘s copyright or

other proprietary rights or interests in the material. This is not a legal

transcript for purposes of litigation.>

Watch Hardball each weeknight at 5 & 7 p.m. ET

Discuss:

Discussion comments

,