updated 10/5/2009 11:10:10 AM ET 2009-10-05T15:10:10

Guests: David Gregory, Bertha Coombs, Jeff Rossen, Ron Brownstein, Eric Lichtblau, Lisa Mascaro, Rep. Alan Grayson, George Rush

CHRIS MATTHEWS, HOST:  Blame it on Rio.

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews in Washington.  Leading off tonight...

(BEGIN VIDEO CLIP)

PETER ALLEN (singing):  When my baby, when my baby smiles at me, I go to Rio de Janeiro.

(END VIDEO CLIP)

MATTHEWS:  That‘s the late, great Peter Allen with “I Go to Rio,” and that‘s the hot news from Copenhagen.  The 2016 summer Olympics won‘t be played in the U.S.  Blame it on Rio.  The old-time capital of Brazil, crime-ridden but wildly exciting, has made Chicago once again the second city.

Plus, Florida congressman Alan Grayson, the guy who‘s caused all the noise by nailing the Republicans on the health care issue, starts us off tonight.  He‘s proving that his fellow Democrats, and that includes the president, have overlooked a key element in American politics: Make the other guy play defense.  Like Martin Luther, he stood up to the powers that be, and he‘s still standing.  What‘s that say about what works in this national debate over health care?  Congressman Alan Grayson will be here.

And has David Letterman taught us a lesson himself on how to dig yourself out of a tough situation?  Has he proven the basic truth of public relations: The person who tells you first about something is the one you tend to believe.  He just revealed that he is the target of a $2 million blackmail plot.  Could this be his greatest hit?

And what about some more hanky-panky?  We‘ve got more for you.  Senator John Ensign of Nevada, it turns out, did one hell of a job trying to find jobs and contracts for his former staffer—you know, the guy whose wife the senator was having the long affair with.  Well, “The New York Times” reports that Ensign, the senator, obtained a lobbying job and clients for his ex-lover‘s husband and then, in turn, was lobbied by him.  Isn‘t that a sweet little circle of love?  Do you think any laws were broken?

And let‘s to go Rio.  If you want to see the 2016 Olympics, as I said, you‘re going to have to.  President Obama traveled to Copenhagen to make the pitch for Chi-town, but no cigar.  The Windy City got blown out in the first round of voting.  Does the president get an “E” for effort or an “F” for a flop?  Or is this just a good example of a politician just having to do the best he can, no matter what anybody says, for his home town?  That‘s in the “Politics Fix.”

And John McCain‘s campaign manager, Steve Schmidt, smart, honest—now, there‘s a combination for you—he says nominating Sarah Palin in 2012 would be the dumbest thing the Republicans ever did.

(BEGIN VIDEO CLIP)

STEVE SCHMIDT, MCCAIN CAMPAIGN MANAGER:  My honest view is that she would not be a winning candidate for the Republican Party in 2012.  And in fact, were she to be the nominee, we could have a catastrophic election result.

(END VIDEO CLIP)

MATTHEWS:  Catastrophic election result.  I thought he was honest.  That‘s coming in the—well, it‘s coming on hard in the “Sideshow” tonight.  By the way, did you notice that Sarah Palin always shows up in the “Sideshow”?

Well, let‘s start tonight with Democratic congressman Alan Grayson of Florida.  Sir, I have to hand it to you.  I think you are a Martin Luther.  I remember being over there when the Berlin wall was coming down, and I was there with John McLaughlin, my colleague.  And he said, How did Luther know he could stand up against the church?  And this is an old Jesuit talking.

How did you know you could stand up to the Republicans, the real clowns out there?  Well, we can start with Limbaugh and the rest of them and you know the whole crowd, what‘s his name, Beck, the whole number of them.  How come you knew the way to beat these guys was to put them on defense?

REP. ALAN GRAYSON (D), FLORIDA:  Because they‘re bullies, and a bully always backs down.  Don‘t we know all that?  That‘s what happened here.

MATTHEWS:  Well, tell me about it.  What has happened to you?  Did Pelosi come along and tell to you cool it?  Did Steny Hoyer tell you to cool it?  Did you get any mean looks from the Republicans on the floor, like Boehner?  By the way, Boehner does look like, doesn‘t he—like a golfer who‘s just blown a putt all the time?

(LAUGHTER)

MATTHEWS:  Doesn‘t he always look like that to you?

GRAYSON:  Well, you would know better than me, I guess.

(CROSSTALK)

(LAUGHTER)

GRAYSON:  I can‘t really say.

MATTHEWS:  ... playing golf all the time.  He looks like (INAUDIBLE) he throws it down.  He‘s ticked off.  He takes the putt and he blows it.  He always looks like that.  What do you think of this?  What have you learned in these couple of days of being the hot shot?

GRAYSON:  Well, what I‘ve learned is that people want a congressman who has guts, who says it like it is.  And for God‘s sakes, for months, we‘ve been on the defensive.  Why?  We have a plan.  The other side doesn‘t.  They‘ve got nothing.  It‘s been 72 hours since I said this.  Where have we heard about the Republican plan?  Who has stepped forward to explain, No, Grayson was wrong, it‘s not true?  All they do is their personal attacks.  And it mean nothing because the American people deserve better than that, and they know it.

MATTHEWS:  Well, how come we‘ve spent now 50-some years, going back to Harry Truman, with nightclub comics, all the way back to Alan King talking about doctors, people talking about HMOs and the problems of getting any kind of payment when you have a problem and all these problems with health insurance—the status quo has never looked so sweet as when the Republicans start to attack the Democrats.

Why didn‘t the Democrats spend the last year attacking the way things are as a way of getting them fixed?  Isn‘t that how you get a tire fixed?  You say it‘s blown out...

(CROSSTALK)

MATTHEWS:  ... how great the tire‘s going to be when it gets fixed, you say the tire‘s a blow-out and you got to fix it.  Why don‘t the Democrats go after the problem and say they‘re going to fix it, than saying, Gee, whiz, I got this new idea?  The new idea thing hasn‘t worked.  It‘s the problem you got to focus on.

GRAYSON:  Well, you‘re absolutely right.  They bought into this storyline, the Democrats, that there was a need for bipartisanship.  The Republicans never intended anything resembling bipartisanship, not on this issue, not on any other issue.

And now we understand, since I spoke out, that the cost of delay is death.  We have 44,789 Americans who die every year because they don‘t have health insurance.  This is a Harvard study.  You don‘t have to take my word for it, it‘s in a peer-reviewed journal.  A hundred and twenty-two Americans die every single day.  So now the storyline shouldn‘t be any longer, Which Republicans are going to join the bill?  The storyline should be, How can we save these American lives?  And how quickly can we do that?

MATTHEWS:  Let me—OK, you‘re a rarity, so let‘s talk about it.  I don‘t think you‘re worried about losing your seat, so let‘s talk about a congressman, you...

GRAYSON:  I‘ll be honest...

(CROSSTALK)

GRAYSON:  I don‘t think that‘s going to happen, Chris.  You would not believe the response we‘ve gotten so far.  We‘ve had over 5,000 people come to Graysonforcongress.com and make a contribution.  Our e-mails are running 4-to-1 in our favor.

MATTHEWS:  What‘s your district like?  Do you have a pro—I‘ve looked the numbers up.  It looks pretty close to me.  What kind of district have you got in Orlando?

GRAYSON:  Listen, I‘m the first Democrat to represent downtown Orlando in 34 years.  And that‘s OK because If I have to choose between my job and saving lives, I know how to make that choice.  Now...

MATTHEWS:  Well, let‘s talk...

GRAYSON:  ... the Republicans have said—the National Republican Congressional Committee executive director said, Grayson is our number one target for 2010.  And maybe I‘ll be drawing other people‘s fire.  I don‘t know.  But I do know that I‘m going to make the right choice.  And I do know that Democrats, Republicans, independents, they want somebody with guts.

MATTHEWS:  Are the Republicans on the floor circling for you?  I remember back in ‘93, when Marjorie Margolies, who had the guts to vote for the Clinton budget and the tax increase back—it wasn‘t a tax increase for regular people, by the way, it was for the rich.  They were all dancing and singing on the floor of the House that you‘re about to go, Good-bye, Marjorie.  Are they circling around you because you‘ve shown some cojones on this thing, they think they‘ve got you?

GRAYSON:  Well, we‘ll see.  You know, we‘ll see how it goes, but certainly...

MATTHEWS:  Are they saying things to you like...

GRAYSON:  ... if they don‘t feel that way already...

MATTHEWS:  ... like that?  Are they saying things...

GRAYSON:  ... they sure will because I‘m going to continue to speak out.

MATTHEWS:  Are they—I‘m looking for some insight here.  I‘m a reporter.  I‘m trying to find out what you know and I don‘t know.  When you walk around the floor, when you walk past the Republican cloakroom, when you get on the elevator, when you get on the subway over there in the Capitol building, do these Republicans come up to you and say, Your number‘s up, buddy?  What do they say to you?

GRAYSON:  Yes, I hear that all the time.  I get dirty looks from the Republicans all the time.  But I can‘t decide on my vote, I can‘t decide on health care, on energy independence, on jobs, on the economy, based upon dirty looks from people who throw hissy fits all the time and expect that we‘re supposed to decide American policy on that basis.  And that‘s what they‘ve been doing time after time, this feigned indignation time after time.  We can‘t let America be run that way.

MATTHEWS:  Well, you can‘t call these guys Neanderthals.  You know why?  They don‘t believe in Neanderthals.  They believe it‘s all about 3,000 or 4,000 years...

(LAUGHTER)

MATTHEWS:  ... all we‘ve got is about 3,000 or 4,000 -- they don‘t buy this thing of Lucy and way back, four or five million years.  They don‘t buy all that, by the way, so this—calling them Neanderthals doesn‘t hurt these guys.  You know that, don‘t you?

GRAYSON:  Well, actually, I said knuckle-dragging Neanderthals.  And one came up to me on the floor.  I won‘t tell you who.  He came up to me and he said to me, I don‘t like you talking about me that way.  And I said, I wasn‘t talking about you.  And he said, I think you were talking about me.  He was trying to prove to me that he was a knuckle-dragging Neanderthal.

(LAUGHTER)

GRAYSON:  And I said, No, no, no.  I‘m serious.  I wasn‘t talking about you.  Look at your knuckles.  There‘s no callouses.

MATTHEWS:  OK, well, let‘s talk about real people and real problems.  My thinking is that you want to make health insurance accessible, affordable.  Everybody‘s got to chip in to the ability they can.  Nobody‘s getting a free ride here.  Talk about why it matters to you.  I want some heart here.

GRAYSON:  Oh, listen, why it matters to me?  I was so sick when I was growing up as a child, I had to go to the hospital four times a week for treatment.  And when I was growing up, my parents had union benefits.  Both of them belonged to a union.  They both got union benefits.

And twice, when I was 7 and when I was 17, they went out on strike.  And I had—I wondered whether I would survive, whether our health benefits would remain in place and whether I‘d be able to continue my treatment.  And it‘s a hard thing.  It‘s a hard thing when you‘re a child to think about whether you‘re going to live or whether you‘re going to die.  And I don‘t want to see anyone in America go through that.

I was so happy to vote in favor of health insurance for children in my first week in Congress.  Four million children all across the country didn‘t have to worry about that anymore.  And why should the sins of the parents descend on the children?  Why should children ever have to worry about that.  Ten thousand right here in Orlando alone saved from ever having to worry about whether they would live or die.

MATTHEWS:  Well, you sound like a liberal.

(LAUGHTER)

GRAYSON:  Progressive.  Populist.

MATTHEWS:  Hey, look, don‘t hide from that word, liberal.  It sounds -

·         “progressive” sounds a little—well, I can‘t say it—pusillanimous? 

Liberal‘s a good word.  You got to make it sound good.  You just got to make it sound—yes, I‘m a liberal.  I believe in opportunity for everybody.  I believe in freedom for everybody.  I believe in liberty for everybody.  I‘m an American.  Of course I‘m a liberal.  People should assay that, be more fun.

GRAYSON:  You have to have...

(CROSSTALK)

MATTHEWS:  This “progressive” sounds like you‘re hiding from being who you are.  The conservatives don‘t come up with euphemisms.  They call themselves right-wingers.  They love it.

Anyway, thank you.  You‘re on the right track.  And by the way, thanks for finally getting around to doing our show.  You‘ve done every other show in the world, by the way.

GRAYSON:  I thought you were going to beat me up...

MATTHEWS:  I think you finally got...

GRAYSON:  ... so badly...

MATTHEWS:  Yes, yes.  Right.

(LAUGHTER)

MATTHEWS:  You‘re really scared of me, I‘m sure.  If you‘re not scared of the Republicans, you‘re not scared of me.  Thank you, buddy.

GRAYSON:  Thank you.

MATTHEWS:  (INAUDIBLE) call you buddy.  I don‘t know you, but Adam (SIC) Grayson, I like your—like your style.

GRAYSON:  Thank you, Chris.

MATTHEWS:  Thanks for coming on HARDBALL.  Have a nice weekend.

GRAYSON:  Thank you very much.

MATTHEWS:  Up next: A target of extortion.  David Letterman was forced to admit that he had—well, he wasn‘t—well, yes, he was forced.  that was his strategy—that he had sex with his staff members.  He wasn‘t forced to have staff (SIC) with them, forced to admit it.  Forced to have sex with them?  No.  We‘ll get to the latest on the strange and curious case of a guy using as his monologue this incredible confession.

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Here‘s a story we didn‘t think we‘d be covering yesterday.  Last night on his show, David Letterman made an unusual—well, he took an unusual turn, describing an extortion racket against him, a blackmail plot that hit him for some relationships he had with some staffers.  Let‘s take a look.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, HOST, “LATE SHOW”:  I have had sex with women who work for me on this show.  Now, my response to that is, Yes, I have.

(LAUGHTER, APPLAUSE)

LETTERMAN:  I have had sex with women who worked on this show.  And would it be embarrassing if it were made public?  Perhaps it would.  Perhaps it would.  Especially for the women.

(LAUGHTER)

LETTERMAN:  But what you don‘t want is a guy saying, Oh, I know you had sex with women, so I would like $2 million or I‘m going to make trouble for you.

(END VIDEO CLIP)

MATTHEWS:  Joining me is NBC News‘s Jeff Rossen and “The New York Daily News‘s” George Rush.  Jeff, thank you for joining us.

JEFF ROSSEN, NBC NEWS:  Sure.

MATTHEWS:  This is a strange story, especially for us over at NBC that have been covering it.  We‘re talking about the competition.  But we have to.  It‘s a news story.  What do you make of this?  Did he just pull one of the great public relations moves in history, coming out first with the story, blowing the story in a way that would normally be considered embarrassing, but turning the tables on not just the blackmailer but the bad PR that‘s obviously—could be coming his way.

ROSSEN:  Right.  You know how it works, right?  I mean, if one of the women...

MATTHEWS:  First one out.

ROSSEN:  First one out.  You know, I mean, we‘re—you tend to believe the person who comes out with the story first because why else would you come out with the story unless you were telling the truth?  That‘s what the PR experts will tell you.

And you know, he probably felt like he was backed into a corner enough where this was going to get out.  And look, what would happen, Chris?  You‘d see the “New York Post” photographers chasing him down every single day, trying to get a comment from him, and you look guilty when that happens.

Now he‘s out.  He spent 10 minutes on it on his show last night.  He even laughed about it a little bit, said he was scared, played the role of the victim, and that‘s sort of the way this news cycle has been going right now, focusing on the—look at all the headlines today...

MATTHEWS:  Yes.

ROSSEN:  ... focusing on the extortion, not about the sexual relationships he‘s had.

MATTHEWS:  Yes, I think so.  Let me go to George.  It seems to me this fellow‘s not Bishop Sheen, either.  You know, his job description isn‘t morality, it‘s late night television.  How many divorces did Johnny Carson have?  How many times did he come on with Ed McMahon and call him “bar rag breath” and talk about their night out the night before?  It was part of the shtick.

Is this guy able to subsume a serious embarrassment, multiple relationships with staffers, as a PR plus?

GEORGE RUSH, “NEW YORK DAILY NEWS”:  So far.  I mean, he‘s done a masterful job of turning it into a bit of comedy that had everybody in the audience ready to hug him.  You know, the facts are, he was unmarried.  Yes, he was in a long-term relationship.  But so far, we have not heard that any of these inter-office relationships weren‘t consensual.  I mean, that‘s what we‘ll have to see, whether there‘s any sex harassment charges that bubble up.

But you look at the way he handled this, versus the way his notorious foe, Bill O‘Reilly, handled it...

MATTHEWS:  Yes.

RUSH:  ... six years ago.  And O‘Reilly‘s statement came off like Nixon‘s Checkers speech.  You know, his, like, lip was sweating.  So I think Dave is definitely taking this horny bull by the horns.

ROSSEN:  And by the way, Chris...

MATTHEWS:  Let‘s take...

ROSSEN:  ... you know, he was released within the past couple of hours, Robert Halderman, that CBS News producer.  He‘s—he‘s out of—he‘s out.  He‘s walking the streets right now.

MATTHEWS:  Well, let‘s not—let‘s not exonerate him yet.

ROSSEN:  No.

MATTHEWS:  Let me—let‘s go to the crime here.  It has all the look, without judging the case as a juror—Jeff, you first—of blackmail, a $2 million demand.  A check was passed over, a bogus check.  It was going to bounce immediately.  The guy went through the act.  I know what a commission of a crime is.  You go through the whole process.  They set him up, of course, to complete the action, but clearly, the intent was there to blackmail, it seems to me.  It was extortion.  It was big money.  And this guy was—there was a grand jury involved here.  Where does it stand legally right now, Jeff?

ROSSEN:  Where it stands legally is he has been indicted and the Manhattan prosecutor, the DA, Robert Morgenthau, announced today that he‘s been indicted on one count, a class C felony, of attempted grand larceny for that $2 million extortion plot—the alleged plot.  He went to be arraigned today.  The judge set bond at $200,000, and within the past couple of hours, he bonded out.  And those are the pictures you were just showing from the chopper, surrounded by the media frenzy of him getting out right now.  So he‘s been suspended by CBS.

Remember, David Letterman owns his own company, Worldwide Pants.  And as the CEO of that company, David Letterman is not a CBS employee.  He works for Worldwide Pants.  They produce the David Letterman show, “The Late Show With David Letterman,” for CBS.  And so these staffers work for him, not necessarily for CBS.  Halderman, the alleged extortionist, he works for CBS.

MATTHEWS:  So what‘s that distinction mean to you legally?

ROSSEN:  The distinction means—and I‘ve actually spoken with several people about this today—is that depending on what kind of policy, what kind of sexual harassment policy there is at Worldwide Pants versus CBS, CBS is going to handle Halderman the way they want to handle him.  David Letterman and the staffers...

MATTHEWS:  Right.

ROSSEN:  ... even if it was consensual, it‘s still a boss having sex with employees.

MATTHEWS:  Yes.  We‘ll have to see.  The New York Department of Labor may get involved in these cases.  You never know.

Let me to go George on this. 

Just do the—do the politics, the—the media politics.  This is going to help his ratings, at least in the short run, obviously.  This is a a—cause for—this is going past—it is rubbernecking a traffic accident, at least for a while here. 

RUSH:  Oh, yes.  He‘s—he‘s—I think there is a curiosity about him.  I think people will be switching to other channels to see if Leno or any—or Jimmy Kimmel are making jokes about Letterman, but those will come—come up inevitably. 

MATTHEWS:  No, inevitably, I think Leno will have something fine to say about this.  He‘s been having fun with these talks about NBC maybe being for sale. 

I mean, he‘s—Leno talks about just anything.  I was on him last night.  I am a huge Leno booster.  So, I think he will be having some fun with this and all the other shows as well. 

ROSSEN:  Chris, can I just jump—can I jump in here real quick? 

MATTHEWS:  Yes.  Go ahead, yes.

(CROSSTALK)

ROSSEN:  The people from Worldwide Pants must watch this show, because, literally, as we were just talking, I got an e-mail. 

“We have a written policy in our employee manual that covers harassment.  It is circulated to every employee every year.  Dave is not in violation of our policy, and no one has ever raised a complaint against him.”

So, that can answer part of that question. 

MATTHEWS:  So, you keep—you keep your pants on at Worldwide Pants, I guess, anyway.  What the heck?  Who knows.

(LAUGHTER)

ROSSEN:  You went there.  You did it.

MATTHEWS:  I wish them well.  I wish them well.  I like all entertainers generally. 

(CROSSTALK)

MATTHEWS:  I like anybody that has to go on television and face the music. 

Thank you, Jeff Rossen.  And thank you—or my colleague. 

ROSSEN:  Thanks, Chris. 

MATTHEWS:  And, thank you, George Rossen of “The Daily News.” 

By the way, you‘re going to have color soon, right?  Big color on the front page of “The Daily News” coming soon.  I hope it helps you. 

We like—we like to save newspapers. 

Next:  Last night, I appeared on “The Jay Leno Show” and answered his 10 in 10 questions.  That‘s in the “Sideshow.”  It‘s coming up.  There I am. 

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

MATTHEWS:  Back to HARDBALL. 

Let‘s hit the “Sideshow.” 

By now, everyone know that Sarah Palin‘s book is a bestseller even before it hits the bookstores.  Today, we get to look at the cover.  It looks—good-looking cover there.  It‘s called “Going Rogue.”  There she is looking up at the sky. 

Sarah‘s the talk of the town.  And Senator John McCain‘s campaign manager, Steve Schmidt, was asked about Palin‘s book and her political future at the big “Atlantic” First Draft of History Conference here in Washington.

Here he is, Steve Schmidt.

(BEGIN VIDEO CLIP)

STEVE SCHMIDT, FORMER MCCAIN CAMPAIGN SENIOR ADVISER:  And, obviously, there is a lot of fascination about her out—out in the country, just looking at the—at the presales of the book. 

I don‘t think it is inconceivable that she could be the Republican nominee for—for president of the United States.  I do think it is fairly inconceivable that she would be elected president of the United States. 

My honest view is that she would not be a winning candidate for the Republican Party in 2012.  And, in fact, were she to be the nominee, we could have a catastrophic election result. 

(END VIDEO CLIP)

MATTHEWS:  Wow.  Catastrophic.  Schmidt is that rarity in the political business.  He says what he thinks and doesn‘t do air kisses to all the big shots just to cover his butt, as you just saw. 

Next:  Last night, David Letterman dropped a bombshell, as I said, last night, on his show.  I was on “Leno,” by the way, that night, last night, having some fun with his 10 questions. 

Here it goes. 

(BEGIN VIDEO CLIP, “THE JAY LENO SHOW”)

JAY LENO, HOST, “THE JAY LENO SHOW”:  Number one, worst job you have ever had.  Explain. 

MATTHEWS:  I was a singing waiter at Father‘s Mustache in Somers Point, New Jersey. 

LENO:  Have you ever seen a ghost? 

MATTHEWS:  Yes, Richard Nixon and Bill Clinton.  These guys, you think they‘re dead and they keep coming back. 

(LAUGHTER)

LENO:  Wow.

(LAUGHTER)

(APPLAUSE)

LENO:  In 15 seconds, recite the Declaration of Independence.  The clock starts now. 

MATTHEWS:  That‘s easy.  We hold these truths to be self-evident that men are—that all men are created equal, that they‘re endowed by certain inalienable rights—endowed by their creator with certain unalienable, among them, life, liberty, and the pursuit of happiness. 

LENO:  Well, very good, very good. 

(CHEERING AND APPLAUSE) 

LENO:  Give us your best impression.

MATTHEWS:  That‘s a good one. 

(LAUGHTER)

MATTHEWS:  Hillary, Hillary, you‘re doing one hell of a job over there at the State Department. 

(LAUGHTER)

LENO:  Oh, not bad. 

(APPLAUSE)

LENO:  All right. 

(END VIDEO CLIP)

MATTHEWS:  Actually, I‘m quite proud of my imitations.  You ought to hear my Arlen Specter.  That‘s a unique ability.

Now time for the “Big Number.” 

It‘s a big one, and a troubling one.  The Labor Department reported today that the unemployment rate in this country has risen to 9.8 percent in September, with employers cutting 263,000 jobs this month.  Today, President Obama addressed the job loss numbers. 

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  Today job report is a sobering reminder that progress come in fits and starts and that we‘re going to need to grind out this recovery step by step. 

(END VIDEO CLIP)

MATTHEWS:  Well, that‘s not happy news.  That‘s our “Big Number,” however, tonight, 15.1 million -- 15 million workers out of work, not funny at all. 

Up next: more fallout from Senator Ensign‘s love affair.  Did he break the law as part of his cover-up of this affair?  It is getting very messy. 

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

BERTHA COOMBS, CNBC CORRESPONDENT:  I‘m Bertha Coombs with your CNBC “Market Wrap.”

A dismal jobs report driving stocks lower today—the Dow Jones industrial losing 21 points, the S&P 500 down 4.5, and the Nasdaq finishing about nine points lower—all three indexes down about 2 percent on the week. 

Job growth continues to be the missing link in the recovery.  Employers cut a higher-than-expected 263,000 jobs in September.  That makes 21 consecutive months of losses—the unemployment rate now ticking up to 9.8 percent, the highest it has been in 26 years. 

A couple of factors kept stocks from falling even more than they did today, though.  One was strength in the financial sector, the other, the continued decline of the dollar.  It fell against most major currencies again today.  Economists expect it to continue to fall until the fed begins to lift interest rates. 

That‘s it from CNBC, first in business worldwide—now back to

MATTHEWS:  Well, let‘s get some reporting here.  Welcome back to

There‘s more fallout to report over Nevada Senator John Ensign‘s affair with the wife of a former aide, Doug Hampton.  “The New York Times” reports today that Ensign helped get a job and some clients for Hampton that may violate a ban on lobbying for a year for a staffer before they—after you leave the office of a senator, you‘re not supposed to work as a lobbyist for a year.  Apparently, the senator helped set him up to do just that. 

And the Senate Ethics Committee is investigating the Nevada senator now for allegations of improper conduct along those lines. 

Eric Lichtblau wrote—broke the story for “The New York Times” today. 

And, Lisa Mascaro, thank you, Lisa, for joining us.  She is the Washington correspondent for “The Las Vegas Sun.” 

You‘re up on the Hill.  Eric is with me. 

Let me go to Eric right now. 

What has he done wrong legally, the senator? 

ERIC LICHTBLAU, “THE NEW YORK TIMES”:  Well, what—what the Senate Ethics Committee and possibly the FBI will be looking at is whether or not this was, in effect, a—a concerted effort, a conspiracy, even, by the senator and by his former aide.

MATTHEWS:  Hush money. 

LICHTBLAU:  You could call it that—in order to—to conceal this affair by getting income into Doug Hampton‘s hands by creating lobbying jobs for him and Ensign then intervening on behalf of those clients. 

MATTHEWS:  Was—was he helping this guy out for goodwill or because he feared or felt that the guy could extort something from him? 

LICHTBLAU:  That‘s a good question.  And I think it might be a little bit of both.  When you say goodwill, these were guys who have been best friends, practically, for the better part of 20 years. 

There also, though, was certainly the threat of exposure, because he had been having an affair with—with Doug Hampton‘s wife.  Their wives were good friends.  And there was all—all sorts of bad blood.

MATTHEWS:  And all this went on for how long?  Not to get too much into the hanky-panky, but it is part of the story.  How long did the senator, Ensign, have the affair with Mrs. Hampton, and Mr. Hampton didn‘t know about it? 

LICHTBLAU:  Mr. Hampton found out about it pretty soon.  We believe it is within a month or two. 

MATTHEWS:  Of it starting? 

LICHTBLAU:  Maybe even less than that.  The affair..

MATTHEWS:  Of it starting? 

LICHTBLAU:  Yes.  But the problem was that—that it continued even after Senator Ensign said he was going to break it off.  He was confronted by—by...

MATTHEWS:  So, in the face of his staffer, he was having an affair with the guy‘s wife?

LICHTBLAU:  Yes.  Yes.  He was confronted by his colleagues, by Senator Coburn.

MATTHEWS:  And the guy‘s wife was living with him? 

LICHTBLAU:  Yes. 

MATTHEWS:  He was having an affair with the guy‘s wife while the guy and the wife were living together?

LICHTBLAU:  Yes. 

MATTHEWS:  Wow.

LICHTBLAU:  They were together.

MATTHEWS:  And—and...

LICHTBLAU:  And the affair—the affair went on for eight months. 

MATTHEWS:  Unbelievable. 

Can you add to this, Lisa, the whole story of the hanky-panky into the potential criminality of covering this up by using your office to get lobbying jobs, and then allowing the guy to lobby you, which, seems to me, a circle of love that might just be illegal. 

LISA MASCARO, “THE LAS VEGAS SUN”:  Yes. 

You know, Chris, it has really been interesting, because Senator Ensign really was on the way, I think, to trying to put this whole issue behind him.  He made this big tour of Nevada this summer during the congressional break. 

And he‘s been very active, you know, up on the Senate Finance Committee as they deal with health care.  And I think we were just starting to write stories that didn‘t have the words in it, you know, Senator Ensign, who earlier this year disclosed an affair. 

MATTHEWS:  Ah.

MASCARO:  You know, we—we were just sort of moving on from that. 

And then...

MATTHEWS:  You were almost dropping the boilerplate, yes.

MASCARO:  Exactly.  And then this—you know, I think—I think the

first story we wrote with that was last weekend.  And then—and then this

emerges with much more serious allegations than some—you know, than what

·         what we had seen earlier. 

           

I was talking to one ethics expert today, who said it just really confirms a lot of what, you know, if true, a lot of the allegations that they had been concerned about earlier, you know, but—but in a more serious nature because of the—you know, the one-year lobby ban.  So, you know, we will have to see where this goes for him. 

MATTHEWS:  Well, the old rule of journalism, Eric—and you write for the great “New York Times”—has been sex-plus.  There has got to be something besides just hanky-panky.  There has to be a—a staffer involved, somebody that works with you, a workplace issue.  There has to be perhaps lobbying going on that violates the public trust.

To get to the heart of this potential criminality, if you get a job for somebody who is a lobbyist, certainly breaking the ethics laws is one thing, and maybe filing a false claim is one thing.  And maybe that is a potential conspiracy.  But, going further, if you then allow the guy, in this case, a male, to come in to your office as a lobbyist, paid for by an interest...

MASCARO:  Right. 

MATTHEWS:  ... that has—somebody that has an interest in your office...

LICHTBLAU:  Sure.

MATTHEWS:  ... and then you let them lobby for that person, you are giving away your service as a senator for pay. 

LICHTBLAU:  Well, it‘s what the Justice Department in past cases has called the—the denial of honest services, the idea that your—your constituency isn‘t the people of your state, but someone you have a financial relationship with. 

MATTHEWS:  And this may be the charge against Blago out there in Illinois, too, that—the denial of...

LICHTBLAU:  Services.

MATTHEWS:  Let me go to you on this.

Let me, first of all, read the senator‘s statement, in all fairness to him—quote—“I am confident we fully complied with the relevant laws and rules governing current and past employees.  I have worked on these Nevada issues with these Nevada companies for years, long before Doug Hampton left my office.”

The cover story there, true or not, Lisa, is that he allowed himself to be lobbied by these guys long before he got this guy a job working for them. 

MASCARO:  Right. 

You know, and I think, you know, as someone else told me today, this is a real tangled mess now that really would sort of need a lot of explaining to—you know, to sort out. 

And, you know, Eric mentioned the honest services fraud issue.  That is—you know, that is certainly is one...

MATTHEWS:  Yes. 

MASCARO:  ... you know, one thing that we have heard about.  And, then, of course, another criminal defense lawyer told me today that, you know, the—the one-year lobby ban, you know, it‘s—it is sitting right there.  You know, if a prosecutor wanted to sort of go the easy route, that would certainly be an easy route to go, you know, if—if this is true, you know. 

(CROSSTALK)

MATTHEWS:  Well, let‘s take a look.  Here is Doug Hampton. 

He said he and the senator, Ensign, chose to ignore the lobbying ban, which says you can‘t lobby your old boss for a year.  He said—quote—

“The only way the clients could get what John was essentially promising them, which was access, was if I still had a way to work with his office, and John knew that.”

How did that work? 

LICHTBLAU:  Well, this became an issue of concern within Ensign‘s office from the very start, after Hampton left Ensign‘s employment. 

Ensign‘s chief of staff went to him and said, we may have a problem here, in effect.  And, according to both Doug Hampton and the chief of staff, Ensign‘s directions were—were to have the chief of staff work directly with Ensign—I‘m sorry—work directly with Doug Hampton...

MATTHEWS:  What do you mean work directly with? 

LICHTBLAU:  ... as a conduit, which is an odd way of dealing with the problem.  Doug Hampton saw that as sort of his—his... 

(CROSSTALK)

MATTHEWS:  You mean let him lobby the senator through the chief of staff? 

LICHTBLAU:  Well, that‘s what—that‘s what investigators will have to look at.  Doug Hampton‘s interpretation is that this was the go-to guy.  This was the person he went to, yes.

MATTHEWS:  Well, let me tell  you something.  Anybody who knows a bit about the Hill knows, to lobby a chief of staff is to lobby a senator. 

LICHTBLAU:  Right. 

MATTHEWS:  And there‘s no way of saying you‘re skirting the law on that.  You certainly are violating it.  You just figure that the guy has a confidential relationship with you, and he won‘t tell the—the prosecutors. 

LICHTBLAU:  Right. 

You know, and we published all sorts of interesting e-mails between Doug Hampton and the senator, where Doug Hampton is getting increasingly restless about this—this situation, this odd relationship they had, and was saying:   You promised me clients.  You promised three clients.  I—I said I would leave your office to save your career.  Now I‘m looking at financial ruin.  You haven‘t lived up to your end of the bargain. 

I mean, it‘s really this—this fascinating relationship between these two guys who... 

MATTHEWS:  OK.  Why are people so unhirable? 

Now, look, this—this guy was cuckolded by his boss.  His—his boss had a relationship with his wife.  He has reason to be miserable about it and to be angry about it, both toward his wife and toward the boss, right?

Why doesn‘t he go away and get a real job in a real part of American enterprise?  Why does he have to be a barnacle on this guy‘s butt and run around after him trying to get a job as a lobbyist on him?  Explain. 

LICHTBLAU:  Well, that‘s a good question.  And my—my...

(CROSSTALK)

MATTHEWS:  Why doesn‘t he go away? 

LICHTBLAU:  We asked Doug Hampton that very question. 

His feeling was that he had put a lot of his time and—and life into

·         into John Ensign‘s career.  He had moved from Southern California at John Ensign‘s request, had joined his staff, had sort of hitched his—hitched his wagon to him, and that John Ensign owed him a debt of obligation.  He was giving up a career in the Senate basically because his wife was having an affair with the senator. 

MATTHEWS:  Why didn‘t he go work for another senator? 

LICHTBLAU:  He felt that John Ensign owed him restitution, in effect, and may even consider—

MATTHEWS:  So his moral way of looking at it is this guy had a relationship—a sexual relationship with my wife.  Therefore, he owes me and he will pay me out of the public till. 

LICHTBLAU:  I don‘t know if he would look at it quite that way.  But certainly that‘s how this all ended up, was that -- 

MATTHEWS:  This goes back—let me tell you, this goes back to the sense that people get elected to office—some of them look upon office as an opportunity to take, that they have possessions there, assets there sitting in the office, you know, and they want to sell them or use them. 

But thank you for this story.  It is not pretty, but it does help people decide who to vote for.  Thank you, Eric Lichtblau.  Lisa, thank you from the “Las Vegas Sun.”  I love Las Vegas. 

Up next, blame it on Rio, speaking of another exciting city.  Chicago fails in its attempt to host the 2016 Olympics.  There goes Peter Allen singing, “I Go To Rio,” which is the real problem here for Chicago.  That‘s the music.  They‘re going to Rio.  You want to see the 2016 Olympics?  Get on an airplane.  It is a long flight.  Could this be a big setback for President Obama or did he just do the right thing, trying to get his home town to get some jobs.  This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA:  Although I wish that we had come back with better news from Copenhagen, I could not be prouder of my home town of Chicago. 

(END VIDEO CLIP)

MATTHEWS:  What a Friday.  Time for the politics fix.  Joining me, the heavyweights, David Gregory, moderator of “Meet the Press,” and Ron Brownstein, who is “National Journal” columnist, and Atlanta Media political director. 

Let‘s take a look at the real trash talk that‘s coming on here, because I think this is going to be part of the weekend stories as you do “Meet the Press.”  Here‘s Rush Limbaugh doing his thing. 

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST:  The world has rejected Obama.  Chicago, the least number of votes.  First elimination in the round of voting for the Olympics in 2016.  Barack Hussein Obama, mmm, mmm, mmm.  Barack Hussein Obama, mmm, mmm, mmm—had been running around the world for nine months, telling everybody how much our country sucks.  Why would anybody award the Olympics to such a crappy place as the United States of America? 

(END VIDEO CLIP)

MATTHEWS:  How do people make up—whatever you think of Rush, he just makes—he never said America sucks.  This guy is the best reputation builder.  It is not even a partisan statement.  No one has made America more popular in the world than the election that the people did of Barack Obama.  You—

DAVID GREGORY, “MEET THE PRESS”:  The argument is not even logical, because this president going around saying the United States has erred in all these different ways would be very well received in the International Olympic Committee, which feels that way, and by the way, doesn‘t like the US, does not like the United States Olympic Committee, has not like them since Salt Lake City, was burn over the bribery scandal.  Said at the time, we don‘t want to come back for about 20 years. 

MATTHEWS:  So why did he take the risk?  Why did he stick his neck out and go over there to go Copenhagen?  Was it the home town booster? 

GREGORY:  Absolutely.  He‘s from Chicago.  He has a lot of pressure.  I think Brazil was making—they were going to the mat with their leader, getting over there as well.  If this was the result and he hadn‘t tried, we would be talking about that. 

MATTHEWS:  Yes.  I agree with that. 

RON BROWNSTEIN, ATLANTIC MEDIA:  Do you remember the huge uproar on talk radio and cable TV and the outrage among conservatives and liberals alike when New York City lost the summer Olympics in July 2005 under George W. Bush?  Do you remember that? 

It didn‘t happen.  Because—look, we are now in an era where everything is chewed over for at least 12 hours, which is probably about the lifetime of this. 

MATTHEWS:  Putin tried to sell the Russian Federation for one of these.  Tony Blair successfully did.  Isn‘t it become the norm that the head of government goes out and makes the pitch. 

BROWNSTEIN:  As recently as 2005, President Bush did a video presentation.  They had a—Hillary Clinton to give him the star powerful.  But now it has become more common.  Although, you do kind of question the staff work.  I guess you have to ask, would you put the president on the plane unless you had a strong indication that you were at least going to be in the finals? 

MATTHEWS:  Is this going to be like Jimmy Carter losing the Marine Marathon?  Is this going to become a metaphor for failure?  Do you remember that? 

GREGORY:  Look, I think it is combined with other things right now.  I

think on a Friday when he goes to Europe and he loses the games, and he has

to come home and deal with the fact that he has unemployment at 9,8

percent, this is a huge problem.  It‘s a huge test.  So all that narrative

--

MATTHEWS:  Will the right wing guys like Rushbo pay a price for really talking down the hopes of America?  Why would they cheer?  I think they missed the beat here.  Cheering the fact that we‘ve lost the Olympics, is that popular among the red blooded guys that watch the show?  Don‘t they root for America, those guys? 

BROWNSTEIN:  One of my colleagues today at “National Journal” was at an Americans for Prosperity meeting, which is a conservative group that has been active in opposing health care.  And cheers erupted in the room when it was announced that the U.S. lost, because it was seen as a blow to Obama.  That is kind of the combative nature of the politics we‘re in. 

This will be seen as a symbol of failure if Obama is seen as a failure.  But this is not going to decide whether or not he is seen as a failure.  What David talked about is more important.  If the events of the next year of unemployment, if the events on Capital Hill, health care, climate change, et cetera, cause him to be seen as a failure, people will look at this. 

But if, in fact, he—if the economy improves and he gets some of his legislative activities done, we will be done talking about this by this time tomorrow. 

MATTHEWS:  Isn‘t it common sense that the Third World, which has a lot of votes—Africa has a lot of votes—would be thinking, hey, we keep giving these events to the north.  Even Sydney is white guys in Australia.  It‘s basically they‘re living down there but they came from England and Ireland.  Isn‘t it time for the south, the southern hemisphere to have a shot at one of these things?  Wasn‘t that a big factor here?

GREGORY:  I think there is.  I think there‘s also a sense, in terms of all the revenue that the U.S. gets, USOC gets from, you know, from the games, from the TV portion of it, that it just seemed there was an imbalance.  Mitt Romney has made the point that this was a no brainer, that Obama should have done it.  He was disappointed that it didn‘t work out. 

MATTHEWS:  So he was for him going over there? 

GREGORY:  Absolutely, and said he did the right thing. 

BROWNSTEIN:  The irony is—and David probably experienced this in L.A. in 1984.  If, in fact, Chicago would have won, half the city would have visited their sister in Wisconsin that week.  It‘s kind of a mixed blessing in the modern area, with all the security and the costs.  When New York City was bidding, it was a very controversial idea, spending all the money they wanted to spend at that time on a new stadium and other things. 

I think Chicago is a little different for the reasons we talked about. 

It‘s a city—

(CROSS TALK)

MATTHEWS:  This is an unusual night for me, to have so much IQ.  Maybe 300 points here.  Let‘s get off the sports for a second.  Prep your brains for the big question when we come back from this break.  You have about three or four minutes.  Is there a battle within the Republican party that has started with Lindsey Graham‘s comments, with Steve Schmidt‘s comments, all this thing with the Atlantic, your organization, about the first draft of history, where the brain people, the people who are sane, who want to win the White House back as soon as next time, have really decided it‘s enough. 

It‘s enough with the birthers.  It‘s enough with the Palins.  It‘s enough with the people in the fringe.  If you want to rule this country, you got to get to the center.  We‘ll be right back to ask the big question: has the center right gone to war with the right?  We‘ll be back with David Gregory and Ron Brownstein for the big question, Friday afternoon. 

By the way, Sunday‘s “Meet the Press,” US Ambassador to the United Nations Susan Rice.  And then on the panel this Sunday, our very own Rachel Maddow.  You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. LINDSEY GRAHAM ®, SOUTH CAROLINA:  I‘m here to tell you that those who think the president was born somewhere other than Hawaii are crazy.  He‘s not a Muslim. 

He‘s a good man.  Let‘s knock this crap off and talk about the real differences we have.   

(END VIDEO CLIP)

MATTHEWS:  I love the way he talks, knock this crap off.  That‘s Republican Senator Lindsey Graham.  We‘re back with David Gregory and Ron Brownstein.  Back to my point, with the politics fix.  Less talk it. 

Is there something going on—you first, Ron—in the Republican party, where all this craziness—we play the game here, building up Rush, building up Glenn Beck, Sarah Palin every night in the sideshow.  Are they saying enough sideshow; we have to get to the main event and win this thing next time. 

BROWNSTEIN:  There certainly is kind of a symbiotic relationship between the left and the right.  Any fight—

MATTHEWS:  Center left? 

BROWNSTEIN:  Yes.  Fights—you win if you‘re fighting, regardless of who lands the most blows.  If you‘re actually wondering about winning elections, this is a different calculus.  In 2010, the electorate is going to be older, whiter, and more conservative, because that‘s the way midterm elections look.  And a based mobilization strategy could be very effective for Republicans. 

MATTHEWS:  So go right or go center? 

BROWNSTEIN:  No.  For 2010, you can probably be pretty tough and pretty focused on mobilizing the base.  But what people like Lindsey Graham are focusing on is when you get back to 2012, it‘s likely that the non-white share of the vote will be close to 30 percent. 

MATTHEWS:  Young people, black people, Hispanic people will show up and vote? 

BROWNSTEIN:  Show up and big vote.  The track they‘re on now could produce a very good outcome for 2010, without solving any of their fundamental demographic challenges for 2012.  I think that‘s what people like Lindsey Graham are thinking about. 

MATTHEWS:  Are they afraid that what happened in Houston back ‘92, when Pat, our colleague Pat went on and gave his take back the cities block by block, and all that stuff about cross dressing—that was always waived as an example of a party going too far.  That‘s what they‘re afraid of?

GREGORY:  Yes.  I think Ron is right.  They‘re not afraid about it for the midterm as much as when they think for 2012, which, as Ron has written about, the upwardly mobile voter, who used to be reliably Republican, who now become a swing voter and voted for Obama in the exurbs and in some of the suburbs now.  Those are—

MATTHEWS:  The Northern Virginia voters. 

GREGORY:  Right.  Those are now voters who are up for grabs for a Democrat or a Republican.  One of the things that Republicans, for all—you talk Lindsey Graham or John McCain, they‘re going to stay on this buildings blueprint against Obama on the economy, on the deficit, on basically the overall direction of the country.  That‘s what they‘ll try to build on. 

MATTHEWS:  They‘re building a house with bricks.  Those are bricks, by the way.  Always useful because we‘ll have a big debt.  We know one thing for a fact, we‘ll have a big debt in four years. 

BROWNSTEIN:  To sharpen David‘s point, those voters he‘s talking about are not big-government voters.  They were Clinton voters, you know, kind of centrist Democrat on the economy, left of center on social and foreign policy issues.  Obama‘s agenda is cross-pressuring them and putting them back into play.  They will be tough for a Republican like Palin to bring is, as opposed to a different kind of appeal that meets them more where they live. 

Obama put them back in play for Republicans if Republicans can find a way to meet them. 

MATTHEWS:  Palin hurt the party in south Florida, southeastern Pennsylvania, probably all around the big cities, all the suburbs.  Are they afraid of that? 

GREGORY:  Absolutely.  It‘s just a basic threshold qualifications test for an independent voter. 

MATTHEWS:  -- says she‘s a catastrophe. 

GREGORY:  Absolutely.  And John McCain doesn‘t endorse her either.  I asked him this week, is she qualified.  He says, oh, sure.  But he‘s not prepared to endorse her. 

We‘re in a fight right now, a big, philosophical, ideological fight about whether government works, whether government is working for the people.  That‘s a challenge for the president.  Is he selling the idea of the government working as the solution as well as Reagan sold the idea of it not being the solution? 

MATTHEWS:  Clinton went along and said the era of big government is over.  He went with that direction.  But belief in government is something I thought the Democrats missed a step here.  We want to change channels here for a second.  If you believe in government and its potential to help people, then you have to believe in good government and serving well.  You have to pass bills.  You can‘t just yell and argue and say, we‘re going to get blow back to Rush Limbaugh every night. 

BROWNSTEIN:  On the other hand, Harry Reid says that they‘re going to bring a health care bill to the floor of the Senate on October 12th, perhaps vote for cloture as soon as October 19th.  This is the fundamental gamble of Democrats.  At a time when there is this anti-government feeling, is it more dangerous to bend to that feeling and pull back from moving forward on this bill, or are you better off going forward in the face of the headwind and trying to get something done? 

The latter, because they tried the first strategy in ‘94 when the bill collapsed.  Clinton‘s approval rating went down with it.  They lost control of the Congress for 12 years. 

MATTHEWS:  If you put up the white flag you lose. 

GREGORY:  Bill Clinton says, you pass health care reform, it gets more popular. 

MATTHEWS:  By the way, Bill Clinton is the best witness on this one.  He said the other day, talking to the Net Roots out there—he said, you lose, you lose.  There‘s no hiding from this.  It‘s great having you on.  I love Friday now.  This is great.  Thank you. 

David Gregory, “Meet the Press” this Sunday with Susan Rice and Rachel Maddow.  Join us again Monday.  Ron Brownstein, great week this week for you guys.  A lot of news there.  Join us again Monday night at 5:00 and 7:00 Eastern for more HARDBALL.  Right now it‘s time for “THE ED SHOW” with Ed Schultz.

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

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