updated 5/15/2013 10:14:41 AM ET 2013-05-15T14:14:41

HARDBALL
May 14, 2013

Guests: Nia-Malika Henderson, Doug Brinkley

CHRIS MATTHEWS, MSNBC HOST: Storm front.

Let`s play HARDBALL.

Good evening. I`m Chris Matthews in Washington.

"Let Me Start" tonight with this. There`s a reason the president`s an easy
target tonight. He`s a ship with the engine off. He can go play golf,
take Marine One up to Manhattan, but none of that matters, none of it.

What matters is that he commands no big cause. There`s no thrust to his
presidency right now. As I said, the engine`s off. Oh, you can say he`s
concerned about gun violence, but the bill`s dead, dead as a doornail. Oh,
you can talk about immigration, but it`s out there on the horizon somewhere
where Rubio and Schumer and McCain live in legislation-land.

No, the engine`s dead, and that`s why this president is under fire. His
people are unexcited because they`ve not been called to be excited. The
middle is simply watching the fireworks right now. And the right? Well,
the right is throwing torches into the fire, of course.

So there`s now a challenge to be met. And I can tell you from experience
this is the time for professionals. Yes, professionals. I saw Ronald
Reagan in big historic trouble over Iran-contra. He`d been caught sending
missiles to the enemy in Iran. Nancy Reagan called in Bob Strauss from the
Democratic Party. He said to clean house and bring in the pros. Reagan
did and saved himself. Those pros were Howard Bacon (sic) and Ken
Duberstein, and they saved an important presidency.

President Obama`s got to stop taking advice from sycophants who keep
telling him that he`s right and only they can be trusted. He needs to act.
He needs to fire people. He needs to grab control of his presidency.

He needs to surround himself with people who are ready to fight on every
front because the three problems he faces now, Benghazi, the IRS and the
FBI, are less likely to be two problems by this time next week than they
are to be four and counting. Why? Because, as I said, it`s not just that
he`s under attack, it`s that he`s vulnerable. And that is obvious to
everyone this side of the White House gates.

Joining me right now is NBC News chief White House correspondent Chuck Todd
and Ron Fournier, editorial director at "The National Journal." He`s also
a former Washington national bureau chief for the much celebrated
Associated Press.

Let`s begin with the scandal du jour. The administration has been besieged
with criticism and questions about the DOJ`s -- that`s the Department of
Justice`s -- controversial and sweeping use of subpoenas to secretly
collect phone records from more than 100 journalists at the Associated
Press. Those records included two months` worth of outgoing calls from
work and personal phone numbers from more than 20 separate phone lines in
New York, Washington and Hartford.

What was DOJ looking for? Well, the AP was informed their phone records
had been seized by the U.S. attorney, Ronald Machin, who was leading an
investigation tied to an Associated Press story last year in which
administrative officials leaked sensitive information about a foiled terror
plot based in Yemen.

Attorney General Eric Holder told the members of the press today that he
recused himself from investigations into leaks, including that one. But he
still voiced strong support of his deputies who ordered the subpoenas.
Take a listen.

(BEGIN VIDEO CLIP)

ERIC HOLDER, ATTORNEY GENERAL OF THE UNITED STATES: I have to say that
this is among -- if not the most serious, it is in the top two or three
most serious leaks that I`ve ever seen, put the American people at risk.
And trying to determine who was responsible for that I think required very
aggressive action.

And as I said, I`m sure that the subpoena as formulated, based on people
that I know -- I don`t know about the facts, but based on people I know, I
think that that subpoena was done in conformance with DOJ regs.

(END VIDEO CLIP)

MATTHEWS: White House press secretary Jay Carney also fielded numerous
questions about the issue at today`s White House press briefing, including
those essentially accused the administration to resorting to bully tactics
and intimidation when it came to the 1st Amendment rights to freedom of the
press.

Here`s Carney.

(BEGIN VIDEO CLIP)

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: The president is a strong
defender of the 1st Amendment and a firm believer in the need for the press
to be unfettered in its ability to conduct investigative reporting and
facilitate a free flow of information.

He also, of course, recognizes the need for the Justice Department to
investigate alleged criminal activity without undue influence. And as I
said yesterday in my statement, other than press reports, we have no
knowledge of any attempt by the Justice Department to seek phone records of
the Associated Press.

(END VIDEO CLIP)

MATTHEWS: Let`s take a look at (INAUDIBLE) breaking story right now.
Chuck, the AP is putting out the word the inspector general`s report, which
is coming, cites ineffective management at IRS, which allowed the people in
the agency, in the Cincinnati office, which were tasked with doing this, to
go after Tea Party groups. Ineffective management. Does that add anything
to this discussion?

CHUCK TODD, NBC WHITE HOUSE CORRESPONDENT/POLITICAL DIR.: No!

MATTHEWS: We already know this?

TODD: Mistakes were made, apparently, as the guy wrote in the -- I`m
sorry, it`s, like, do any of these people -- they`ve all read the wrong
parts of history when it comes to, quote, unquote, "crisis management."

By the way, I`m still trying to figure out -- I`ve not gotten a very good
explanation as to why Eric Holder recused himself. If he believes he
cannot oversee this investigation, then how does he --

(CROSSTALK)

TODD: How does he -- how does he oversee any investigation?

RON FOURNIER, "NATIONAL JOURNAL": Including the IRS investigation.

(CROSSTALK)

MATTHEWS: You watched the press conference. He basically said it had
something to do with the administration. Therefore, any kind of
investigation of this administration --

(CROSSTALK)

TODD: The investigation of the IRS is the administration. I mean, that is
-- it is just like this sort of blanket attempt that the Obama
administration wanted to have, and frankly, other previous administrations,
on the journalism shield law, when they would say, we want to invoke some
national security privilege here every once in a while --

(CROSSTALK)

MATTHEWS: We`ve got this FBI story. They`re investigating the AP, your
former organization, going after 100 reporters, their phone records,
everything. The IRS, of course, we`ve got the question of why did they go
after the Tea Party groups and the right-wing groups? And we`ve got, of
course, this murky thing of Benghazi. I`m not sure what that`s worth.

Who in the White House sitting there right now, man or woman, grown-up,
older guy, older woman -- who is personally responsible for helping this
president get his clarity out, his message out on all three fronts? Who`s
the PR expert in the White House --

(CROSSTALK)

TODD: I would say the three people that are --

MATTHEWS: Three people. OK, who --

(CROSSTALK)

TODD: -- are Denis McDonough, Dan Pfeiffer Jennifer Palmieri, that these
would be the sort of the troika of advisers. One thing you have to say
about Jennifer Palmieri, she went through Clinton and she went through John
Edwards.

MATTHEWS: Yes.

TODD: So somebody who`s been through --

MATTHEWS: Are they able to talk to the president --

TODD: -- the wringer. I think there`s --

MATTHEWS: -- there in strong terms, or they just are sycophants? What
are they?

TODD: Well, you -- you -- I think everything --

MATTHEWS: Do they challenge him?

TODD: -- you hear about -- everything you hear about -- about them is
that they do. But you know, you bring up a good point. You know, we don`t
know unless you`re in that room.

MATTHEWS: What`s your sense?

TODD: You don`t know for sure unless you`re in that room.

FOURNIER: My sense is they don`t. Or he`s not listening. Somebody needs
to tell him exactly, as you said at the opening, and he needs to hear the
fact that this train is coming. And the only way you get in front of it is
get all the information out, get it out in the time and the manner that you
want to. You don`t wait and let things leak out the way they`ve been. You
don`t let yourself be second-guessed. You don`t let yourself look like a
thug, which is what it`s looking like now.

TODD: Let`s talk about the Benghazi e-mails. OK, so they`ve been, you
know --

(CROSSTALK)

MATTHEWS: We`ll start with that. A lot of people think that`s not
properly called a scandal. What is it, though? What do you call that
thing?

TODD: Well, I --

(CROSSTALK)

TODD: It is sort of this -- this -- this -- well, I don`t know what to
call it. We`ll call it a controversy.

MATTHEWS: Well, the enemies of the president believe it`s --

(CROSSTALK)

TODD: He believes that -- he believes that it`s -- it is -- it is a witch
hunt by -- by Republicans.

MATTHEWS: He thinks that.

(CROSSTALK)

MATTHEWS: Do they think it`s a witch hunt?

TODD: That`s what the White House thinks. That`s what the president
thinks.

MATTHEWS: Do you think the right wing is just playing a game here? Do you
think Boehner`s just playing a game?

TODD: On Benghazi?

MATTHEWS: It`s just a game? Or is it something there that they have never
been clear about?

(CROSSTALK)

TODD: You know, our job`s to have a little more open -- open mind about
this, to see where the investigation -- the -- they have a perfectly legal
and legitimate right to investigate this. I don`t understand why the
investigation isn`t focused on both the CIA and State and security reasons.
It seems clear to me that the CIA is somehow --

MATTHEWS: OK.

TODD: They`re escaping this more than any other part. And that I don`t
understand --

MATTHEWS: They are --

(CROSSTALK)

MATTHEWS: They are arguing and have been arguing since before --

TODD: They`re arguing --

MATTHEWS: -- the debate with Mitt Romney we all watched on television
that this administration covered up an act of terrorism to get reelected.
That`s their main point. Did they or didn`t they?

FOURNIER: And that should be the focus. And my guess is we find out that
is not the case. The problem is, because the administration has mishandled
the talking points --

TODD: Correct.

FOURNIER: -- has mishandled the message, they have allowed the
Republicans to take advantage of that and shift the focus to --

(CROSSTALK)

TODD: And then define it and actually --

FOURNIER: Exactly.

MATTHEWS: So these people you mention --

(CROSSTALK)

MATTHEWS: -- Denis McDonough, the chief of staff to president, Dan
Pfeiffer and Jennifer Palmieri are sitting around, trying to figure out how
to get that thing him, that one issue behind him.

TODD: Well, I think that --

FOURNIER: Or they`re assuming it`s going to get behind them. Oh, this is
no big deal. This is just -- it`ll blow over. We`ve been through tough
things before. And I --

MATTHEWS: OK, let`s --

(CROSSTALK)

MATTHEWS: Let`s move on to something that has real pay dirt, the IRS. I`m
convinced, just studying politics, that people are more concerned about
their own lives than they are about something over in Libya and they`re
going remember it. Every time they get a tax form, every time they`ve got
to go (ph) FICA, every time they get their envelope where they see the IRS
there, they got to pay taxes -- which is a lot for a lot of people --
they`re going to think of this.

You know, it`s like the priesthood in my religion. Oh, yes, I got to go to
confession. Well, what about these guys? It always comes to mind. I
think it`s a slow burner. I think it`s around.

Is there any way the president can clearly bring this (INAUDIBLE) and say,
I will find a way to make sure nobody ever thinks that again, two weeks
from now or three weeks from now?

TODD: Oh, I think he`s got one more opportunity. Certainly, if you
listened to Carney very carefully today, I think he was telegraphing what
they`re going to do, which is, We haven`t read the report yet. We haven`t
read the report yet. We don`t know what actions to take. We haven`t read
-- they -- that that -- you would assume, unless they`re not listening to
the problems that they have, they`re going to look at the report and do
whatever they can to take -- to show that they`re taking action on --

(CROSSTALK)

MATTHEWS: Can`t they just say the next head of the IRS will fire anyone
involved in this, or we will not appoint them?

FOURNIER: That`s a good place to start. You also have to make sure they
have complete credibility around the most important fact at the end of the
day, which is how high up does this go? Did it stop at the IRS? Or did
it, God forbid, get to --

MATTHEWS: Well, how do you --

(CROSSTALK)

MATTHEWS: -- but what evidence to you have -- just to be tough here.
What evidence do you have it went beyond the IRS?

FOURNIER: I have none whatsoever.

MATTHEWS: Well, why do you think --

(CROSSTALK)

FOURNIER: I`m not saying that there is. I`m saying that is the obvious
question --

MATTHEWS: Well, here`s the question --

(CROSSTALK)

MATTHEWS: OK, let`s go to --

TODD: There are people out there alleging that this went farther than the
IRS. (INAUDIBLE) private citizens.

MATTHEWS: Who are they?

TODD: They were Romney donors and Romney supporters who have --

MATTHEWS: Saying that it came from the White House.

TODD: -- been telling a lot of reporters that they have been -- they
have felt harassed by the government.

MATTHEWS: The government or --

TODD: Whether it`s the IRS, whether it`s the Labor Department, that they
have felt harassed in some way. And I think all of these people, after
watching what the IRS did --

(CROSSTALK)

MATTHEWS: Let`s go with what we know. Did you hear Carney today say, We
got the word at the White House counsel`s office a couple weeks ago that
this was coming? Now, he specifically identified this particular report,
not some IG report.

TODD: Right.

MATTHEWS: I was making the reading a day ago. They were just -- there was
an IG report. They didn`t know it was about this particular problem. Now
it`s pretty clear the White House knew about this particular problem two
weeks ago, in the counsel`s office.

TODD: Two or three weeks ago --

MATTHEWS: Well, why didn`t the counsel`s office --

TODD: -- on April 22nd.

MATTHEWS: -- tell the president? Why did they have to wait to read the
reports on Friday?

TODD: That is not a question they`ve answered in any --

MATTHEWS: Did anybody ask Carney --

TODD: Didn`t say --

(CROSSTALK)

MATTHEWS: -- why didn`t the White House counsel --

TODD: Yes.

MATTHEWS: -- tell the president what was going on here?

TODD: He said that not everything is told to the president.

MATTHEWS: Well, what`s the thinking behind that?

TODD: Well, this is -- if I was Denis McDonough, I would be asking that
question. Why didn`t this piece of information --

(CROSSTALK)

MATTHEWS: Is there some insulation around the president where they believe
the -- like see no evil, hear no evil?

FOURNIER: I don`t know if that`s it or it is just PR incompetence. I
mean, that question should have been answered.

MATTHEWS: You find out -- I don`t care what numbskull we`re talking about
--

FOURNIER: It`s not necessarily something nefarious --

(CROSSTALK)

MATTHEWS: -- not even a political pro. You know that the IRS is
checking on people`s political -- going particularly after right-wing
groups and you know the president has always been suspected of being a
liberal and out to get those people, then you find out there`s evidence
that his IRS is doing that. Don`t you tell him, Boss, we got a problem
here?

TODD: (INAUDIBLE) PR nightmare, right.

FOURNIER: And the boss --

TODD: At a minimum, it`s -- particularly, if you -- you know, obviously,
they believe and Carney said today -- he says we -- nobody at the White
House has any connection to this. So if they`re innocent -- if they have
that, they still should be outraged that this took place.

MATTHEWS: OK, let`s talk about us. I watched the press room today. I
watched you, as always, starring role. I look in that room. The president
needs not people on his side, but people to believe him -- not in him, but
him, the next couple years. He`s still got a couple years to get something
done.

These issues like immigration depend a lot on trust. Will you really
enforce it when you pass it? Not like Simpson-Mazzoli 20 years ago, some
joke without teeth in it.

You got to tell the conservatives and the middle-of-the-right people, not
far-right, We`re going to make this work. No more illegal immigration,
roughly speaking. It`s going to -- we`re going to clean it up.

He needs trust. That newsroom -- will they trust him again after going
after the AP?

TODD: I think there`s a lot -- trust -- it`s an issue. That -- to say, Do
you trust that this government is acting in a credible and honest --

MATTHEWS: A bullying way.

TODD: -- if -- what they did on AP feels like a bullying maneuver. And
I would say that --

MATTHEWS: To shut you guys down.

TODD: They have to -- and they`ve been doing this on national security
more than any other -- I think they do need to come out and restore some
trust.

(CROSSTALK)

MATTHEWS: Same question to you.

FOURNIER: -- start with the journalism shield --

MATTHEWS: -- same question to you. You said -- people that sit out
there every day and really are the first grabbers of the news. They grab
it -- not everybody watches those press conferences -- grabs it, and all of
a sudden, it`s on the wires.

FOURNIER: I have a slightly different take. If I`m sitting in the press
room like I used to do, what erodes my trust in the White House is when I`m
deceived, when I`m spun, when I don`t get all the facts. That`s the lack
of credibility. I think it`s hurting --

MATTHEWS: Rolling disclosure.

FOURNIER: It`s the rolling disclosure. The problem with the AP is what --
is this a signal they`re sending not to the press, the signal they`re
sending to good men and women --

TODD: To sources.

FOURNIER: -- who want to get information out that the public needs to
know, but their bosses don`t want out. This is a message to the sources
saying, You know what? Big Brother is watching you.

TODD: And that --

FOURNIER: That`s an intimidating --

TODD: I was just going to say --

FOURNIER: Not to us --

TODD: That`s right.

FOURNIER: -- but to our sources and to the people who are trying to
serve this country.

TODD: This was not an attack on the press. I`m with Ron on this. This
was an attack on leakers and whistleblowers. And I tell you, there are a
lot of people --

FOURNIER: Who cares about the press?

TODD: -- inside the government who are unhappy with some of the
wiretapping laws that are allowed to do this, who maybe think the drone
program is not something that --

MATTHEWS: Some of this leaking was on the side of the administration, like
the Yemen thing, what a great job they did. Isn`t that ironic? That`s the
one they`re going after?

FOURNIER: We love our leaks, but we don`t like the ones (INAUDIBLE)

TODD: By the way, the -- that`s why the hypocrisy of some of the criticism
coming from -- Oh, my -- please! You guys are the ones --

MATTHEWS: Because the guys on the right were saying, We want to know what
happened with those leaks. We`re now finding out through maybe the worst
way, but we`re finding out.

Thank you, gentlemen. This has been very interesting. Chuck Todd, thank
you, and Ron Fournier.

FOURNIER: Thank you.

MATTHEWS: We`ll be right back. We`ll have more on the big three
controversies threatening the administration. More coming, a lot more
tonight, the IRS, Benghazi and that secret subpoena by the Justice
Department of phone records at the Associated Press.

This is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Well, Minnesota`s about to become the 12th state in the country
to approve marriage equality. The state senate gave final approval to a
measure allowing same-sex couples to marry, and Minnesota`s Democratic
governor, Mark Dayton, will sign it into law this hour.

Minnesota will join Iowa as one of the two Midwestern states to allow
marriage equality. So in the past two weeks, three states have approved
it, and that`s moving forward in Illinois now, as well.

We`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. We`re learning more by the minute
about the IRS scandal. And as I mentioned earlier, a new headline out just
now from the Associated Press, quote, "Inspector general, ineffective
management at IRS allowed agents to target Tea Party groups." Wow.

Well, "The Washington Post" reported today -- early today that this case
was not confined to that office in Cincinnati, the office that had been
tasked with reviewing the non-profit groups. "The Post" reports additional
IRS employees in Washington, D.C., and out in California also looked at the
Tea Party groups to determine their eligibility for a tax exemption.

And the IRS says Steven Miller, who`s been serving as acting commissioner
since last fall, was told this has been happening -- well, was happening
back in May of 2012, about a year after Lois Lerner, who oversees that
division, was informed herself.

Well, Miller wrote today in "USA Today" in an op-ed piece, in part, quote,
"We should have done a better job of handling the influx of applications by
advocacy groups. Mistakes were made, but they were in no way due to any
political or partisan motivation." He also said, "There was a shortcut
taken in our processes to determine which groups needed additional review.
The mistakes we made were due to absence of sufficient process for working
the increase in cases and a lack of sensitivity to the implications of some
of the decisions that were made."

Senator Sherrod Brown is a Democrat from Ohio and a member of the Banking
and Finance Committees.

Senator Brown, does this cover it, lack of sensitivity when you see
"patriot" and Tea Party on the name of a group, and you don`t know it`s a
right-wing group? Is that conceivable, that a person wouldn`t know that?
And if they didn`t know it, why would they be looking for those words to
decide which groups to take a look at?

SEN. SHERROD BROWN (D), OHIO: Well, they should know it and they shouldn`t
do it. And it`s -- you know, people should lose jobs over things like
that.

But it`s -- you know, it`s bigger than that. It`s -- the IRS -- it`s wrong
what the IRS did if they singled out individual ideological -- people that
were in a certain place in the ideological spectrum. But it`s also wrong
that organizations posed as charitable organizations got this tax break,
got this tax exemption, and then obviously engaged in political activity.

And the IRS needs to -- regardless of whether they were on the left or
right, no matter whom or who they were advocating for or against, the IRS
should go after people that broke the law in that way and posed as
charitable organizations when they were spending millions of dollars on
political campaigns.

MATTHEWS: What would your -- I`m not asking you, because I trust you a
lot. I`m just thinking, what would be your emotional reaction, your gut
reaction if you heard that Dick Cheney, when he was still calling the shots
with George W. Bush, and you found out that they were investigating for IRS
purposes any group with the name progressive in their organization?

BROWN: Yes.

Of course, I would -- I would feel anger about that and a moral outrage
about that. I think this is the same thing. But I do say it`s bigger than
just what the IRS has done that`s being reported now. The bigger issue is,
is the IRS allowing groups that are engaging in political activity in a big
way, tens of millions of dollars, to pass them off -- themselves off as
charitable contributions?

That`s breaking the law, as the IRS apparently has done here by singling
out groups. So this needs to be an aggressive enforcement regardless of
your political stance, your political position, whether you`re liberal,
conservative, progressive or far right.

MATTHEWS: Yes.

BROWN: The IRS needs to look at the tax-exempt status of these groups that
are masquerading as charitable organizations.

MATTHEWS: OK. The president, I don`t know, sometimes, when he talks about
Gitmo and things like that, I get the sense he`s more of an op-ed writer
than president, that he doesn`t act like he has control over the United
States government.

Does he or does he not, as chief executive of the executive branch, control
the Treasury Department? Does he or does he not control the IRS, which is
part of the Treasury Department? Can he go over there and clean it up
himself? Can he make it happen?

BROWN: Well, I think he can.

I understand people are protected by civil service and all of that. But
the president needs to show leadership here, needs to make sure this gets
cleaned up. People need to lose -- people should lose jobs if they were
doing what the media think that they were doing.

At the same time, the president needs to be part of a broadening of this
enforcement, whether it`s Department of Justice or whether it`s an
aggressive -- whether it`s other aggressive federal agencies that say, no,
you`re breaking the law.

You don`t automatically get a tax-exempt status just because you say you
should.

MATTHEWS: I understand.

BROWN: You need to fill out forms. You need to prove it.

(CROSSTALK)

MATTHEWS: Yes, we had somebody on yesterday told me they were -- somebody
on the right yesterday was here and she was pointing out that they were
held to a standard. They could not get involved in elections. They
couldn`t put the name of candidates on their ballot, on their materials
they send out. They had to be -- there is some disciplining going on among
these groups.

You and I know that there`s a very vague difference between saying you`re a
policy organization and you hate Obamacare, but they were told they
couldn`t say the word Obamacare as they get closer to the election. So
somebody`s at least policing this correctly.

If you were holding a hearing right now on the next commissioner of the
IRS, what standard would you set? What actions would you demand of that
person, man or woman, who`s about to get the permanent job now, because
it`s open?

BROWN: Well, I would -- well, I would look at -- first of all, I would
look at what Senator Whitehouse shared with a group of us today, Senator
Whitehouse from Rhode Island.

And what these forms say that you fill out before you get this charitable
exemption, the social media organizations, so-called 501(c)(4)s. If you`re
going to make in millions of dollars and not spend it for charitable
purposes, then I think the IRS, whoever is head of the IRS, whoever is
doing the day-to-day work there, needs to begin to look more aggressively
and to look more thoroughly at what they`re doing that way, because, you
know, we -- whatever this right-winger said on your show, this conservative
said yesterday, I saw part of your show.

I didn`t see that. I saw Congressman from Ohio Turner on yesterday. But
there clearly were tens of millions of dollars spent last year, Chris, as
you know, in races all over the country where these supposedly
nonpolitical, these supposedly charitable organizations were taking very
strong political stands for or against candidates.

MATTHEWS: Yes. Yes.

BROWN: And, you know, we should look, should they have gotten that tax
exemption?

I don`t know what the answer is. I think the answer is probably no in many
cases.

MATTHEWS: Yes.

BROWN: I think you look at the left and the right. It doesn`t matter. If
they broke the law, they broke the law.

MATTHEWS: By the way, Mr. Turner was on yesterday, Mike Turner. He`s
studied well at the school of not answering questions.

BROWN: Right.

(CROSSTALK)

MATTHEWS: Very good at that, six -- I think he was zero for six, by the
way.

Anyway, thank you so much, Senator Sherrod Brown, for coming on tonight.

BROWN: Sure. Thanks, Chris.

Jonathan Alter is MSNBC political analyst and of course author of the
upcoming book "The Center Holds: Obama and His Enemies." It`s a fantastic
book. I`m reading it already in galley. I won`t say a word about it.

Jonathan, let me --

JONATHAN ALTER, MSNBC POLITICAL ANALYST: Thanks, Chris.

MATTHEWS: Except it`s great. You`re a great writer. And there`s a hell
of a lot good stuff in there I didn`t know already, this stuff.

(CROSSTALK)

MATTHEWS: But let me ask you this about the situation here. If you were -
- this president, I think, is facing some historic notes in his biography
he may not want to see --

ALTER: Right.

MATTHEWS: -- like IRS, FBI, even Benghazi, although it`s unclear what
they will write next to it.

How does he get through this thing, just get this -- he`s up to his elbow
in alligators.

ALTER: He has to get on top of this story. You know, today was
disastrous.

I thought that Eric Holder`s briefing was disastrous. He tried to claim
that they had exhausted all other avenues before they surveilled 100 AP
reporters, which is completely untrue. They didn`t even tell the reporters
that this surveillance was going on. So that was one avenue they didn`t
exhaust.

And I thought Jay Carney`s briefing was also disastrous. It was kind of
like, reminded me of in the `50s when kids would get under their desks in
the Cold War for duck-and-cover exercises.

MATTHEWS: Yes.

ALTER: It was duck and cover day today in Washington.

So he needs some new political help inside the White House. He doesn`t
trust people very much, unless he`s comfortable with them over many years.

MATTHEWS: Yes.

ALTER: He has to get over that, bring in some new high-quality political
help, not to work the political angles, but to help him get on top of this
and save his presidency.

MATTHEWS: Yes.

ALTER: Otherwise, it`s going to be a long, hot summer of scandal.

(CROSSTALK)

MATTHEWS: OK.

Jon, you got to the heart of it. Sometimes, your best advisers are people
who are not invested in you.

ALTER: Right.

MATTHEWS: And that`s the hardest thing. You bring in a Gergen to help
Clinton.

ALTER: Right.

MATTHEWS: You bring in Howard Baker to help Reagan. Sometimes, the best
advisers are not sycophants.

ALTER: Exactly.

MATTHEWS: They don`t have to -- they don`t depend on you for emotional
response. They`re willing to come in and say, I`m only here for six
months. I`m here to clean up. I can help you. I`m a pro.

But sometimes a professional -- or an elected president says, wait a
minute, I got elected to this job, not you. I`m the boss.

ALTER: Yes. Right.

MATTHEWS: You know, it`s hard to get the boss to come down from his high
ladder and say, I need some help.

(CROSSTALK)

ALTER: Right. And he kind of in some ways infantilizes the people around
him. A lot of them are young. Some of them are very smart and talented.

MATTHEWS: Yes.

ALTER: But they`re all in awe of the president.

MATTHEWS: Yes.

ALTER: They have an unhealthy love for him. Yes, they do sometimes tell
him the bad news, which he says he wants.

They`re not all sycophants. But he has not figured out how to get some
other people in. And we could go over a list of names. I think there are
actually some very talented people around who could help him with more
creative ideas for getting on top of it. On the IRS, for instance, he
needs maybe former heads of the IRS to be a -- special term-limited
prosecutors who have to report back in six months, instead of six years,
the way it was in the 1990s.

MATTHEWS: Yes.

ALTER: And they need to make recommendations that include not just
possible prosecution, because it sounds pretty bad, what happened there,
but also to strengthen the law.

MATTHEWS: Yes.

ALTER: You have a situation, Chris, where Karl Rove -- just to go to
specifics on what Sherrod Brown was saying, Karl Rove in 2010 had a filing
to the IRS where he said that Crossroads GPS, his (c)(4) super PAC, was not
-- quote -- "predominantly a political organization."

Then they went out and spent $70 million in 2012 on attack ads. If that`s
not political, what is?

MATTHEWS: Yes.

ALTER: So, basically, in some ways, the IRS has not been aggressive
enough.

The same thing applies, by the way, to Bill Burton and the pro-Obama super
PACs. The law is not being enforced to prevent these organizations from
masquerading as social welfare groups.

MATTHEWS: Yes.

ALTER: They`re political groups and should be fined by the IRS if they
engage in this kind of political activity.

MATTHEWS: Yes. OK.

ALTER: That`s not happening.

MATTHEWS: I think actions speak louder than words. And I got to tell you
something. When Reagan broke the PATCO strike and fired them all for
breaking their oaths, everybody in the world, including the people in
Moscow, got the word.

(CROSSTALK)

ALTER: Right. He should do that.

(CROSSTALK)

MATTHEWS: It`s one of the reasons we ended the Cold War, because they knew
we had a strong president.

ALTER: Yes.

MATTHEWS: Talking ain`t going to do it. Henry Higgins. It doesn`t work.

ALTER: Right.

MATTHEWS: Anyway, thank you, Jonathan Alter.

ALTER: Thanks, Chris.

MATTHEWS: We will be right back.

(COMMERCIAL BREAK)

MATTHEWS: Back to HARDBALL. Now to the "Sideshow."

Some Republicans are tickled to see the White House caught in that trifecta
of stories this week, Benghazi, the IRS, and now the Associated Press
story. Steve Colbert focused on the IRS scandal and brought champagne.

(BEGIN VIDEO CLIP, "THE COLBERT REPORT")

UNIDENTIFIED MALE: This should send a chill up your spine.

UNIDENTIFIED FEMALE: It is absolutely chilling.

UNIDENTIFIED FEMALE: This is chilling.

STEPHEN COLBERT, HOST, "THE COLBERT REPORT": Cold, yes.

(LAUGHTER)

COLBERT: It`s chilling --

(LAUGHTER)

COLBERT: -- which also describes the champagne I have been waiting to
break out for just this scandal.

(CHEERING AND APPLAUSE)

COLBERT: Because -- mmm.

(CHEERING AND APPLAUSE)

COLBERT: Mmm, mmm, mmm, mmm, mmm.

(CHEERING AND APPLAUSE)

COLBERT: Mmm, mmm, mmm.

Folks, this proves that everything I have ever said about Obama is true.
So it`s official. He`s a secret Muslim, shape-shifting alien from Kenya
who is coming from our guns and Bo is a member of the illuminati.

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS: Next, Prince Harry was in New Jersey today visiting areas hit
hard by superstorm Sandy, meaning Governor Chris Christie had to follow
through on a promise.

Back when Christie found out about the royal visit, he assured everyone
that Harry`s stay would be far different from his scandal-plagued visit to
Las Vegas last year.

(BEGIN VIDEO CLIP)

GOV. CHRIS CHRISTIE (R), NEW JERSEY: I`m thrilled that he`s willing to
come. And he wants to come and see the destruction, himself, firsthand.
And he wants to be helpful. And I`m going to be spending the entire day
with Prince Harry.

And so, believe me, nobody`s going to get naked if I`m spending the entire
day.

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS: Well, the proof comes in the form of a tweet from Governor
Christie early today. "Greeting Prince Harry at the Jersey Shore the best
way I know how," with his own royal fleece.

In the aftermath of the storm, of course, it seemed like Christie didn`t go
anywhere without his fleece. There it is.

Up next: more details from the inspector general`s report on the scandal at
the IRS. That`s ahead.

You`re watching HARDBALL, the place for politics.

(COMMERCIAL BREAK)

HAMPTON PEARSON, CNBC CORRESPONDENT: I`m Hampton Pearson with your CNBC
"Market Wrap."

Another new high for the Dow and S&P. The Dow finishes up 123 points.
Driven by gains in financials, the S&P adds 16. The Nasdaq rises 23
points.

Citigroup shares rose more than 2 percent after hedge fund manager David
Tepper said the company was his biggest holding. And Morgan Stanley shares
rallied after it told investors it would hit 10 percent return on equity by
next year, subject to certain conditions.

That is it from CNBC, first in business worldwide -- now back to HARDBALL.

MATTHEWS: Welcome back to HARDBALL.

You don`t see many days like this. We just got ahold of the I.G. report on
the IRS scandal. It just came in. It says the IRS used inappropriate
tactics in reviewing conservative and Tea Party groups who were applying
for tax-exempt status. It also makes clear many organizations received
unnecessary burdensome questions, like give us the list of your donors.

It says the IRS got the idea for this whole program of going after these
groups from members of Congress. Now, that`s going to be fascinating.
They must have a letter from somebody. This is a fast-breaking story.

We`re joined right now by Michael Steele, of course, the former chair of
the RNC and MSNBC political analyst, and Ron Reagan is of course an MSNBC
political analyst.

I want to start with you, Ron. This -- we were going to talk about
Benghazi, but this is the hottest story.

Three points, clearly. I`m reading from the report. This is the actual
report. "Early in the calendar year 2010, the IRS began using
inappropriate criteria to identify organizations applying for tax-exempt
status to review for indications of significant political campaign
intervention."

So, what the IRS was doing is trying to find out if some of these groups
that are policy groups, right-wing, left-wing groups were actually campaign
groups, were actually out there politicking.

RON REAGAN, MSNBC CONTRIBUTOR: Right.

MATTHEWS: And then they say at the bottom -- here`s what they say that`s
really important. "The IRS used inappropriate criteria that identified for
review Tea Party and other organizations applying for tax-exempt status
based upon their names or policy positions, instead of indications of
potential political campaign intervention."

Instead of looking for do they have any signs that they`re playing
politics, like using names of candidates or even using the name Obamacare,
they went after them based on their right-wing nomenclature, Tea Party,
patriot, that sort of thing.

REAGAN: Right.

MATTHEWS: Your thoughts.

REAGAN: Yes.

Well, clearly, this is wrong. And, clearly, this is a problem. I would
like to know a little bit more. And I haven`t seen the report that you`re
referring to. This story broke while I was sitting here. So, I`m just
hearing this for the first time.

MATTHEWS: It broke while I was sitting here, too.

(LAUGHTER)

REAGAN: Yes, I know.

You have a bigger staff than I do, though.

(LAUGHTER)

MATTHEWS: Fair enough.

REAGAN: But, at any rate, clearly, there`s a problem here. Clearly, there
was mismanagement here.

The issue, it seems to me, is how high up does this mismanagement go? Who
knew what, when, how high up the food chain? If it`s restricted to the
office in Cincinnati, I don`t know that this has huge legs.

MATTHEWS: Well -- well, that was the office that was tasked with doing
this thing. It wasn`t just the office in Cincinnati.

REAGAN: Yes.

MATTHEWS: Let me go to this.

Here it says, "The T.I.G." -- that`s the inspector general -- "initiated
this audit based on concerns expressed by members of Congress."

So, I`m sorry. I misread. It`s not that they gave the IRS, Michael
Steele, the idea to do this.

MICHAEL STEELE, MSNBC POLITICAL ANALYST: Right.

MATTHEWS: They got the idea from members of Congress, probably
Republicans, that our people are getting attacked, or getting audited, or
whatever.

STEELE: People are getting under attack. And they`re getting
confirmations or concerned calls from folks out there who are under attack.
That`s a possibility.

But it also could be other members of Congress who also said in light of,
you know, Citizens United and the ascendancy of these conservative money
groups.

MATTHEWS: Yes.

STEELE: To let`s focus in on what these guys are doing. What is their
political agenda? All of that, I think Ron touched on it, all of that
really doesn`t bubble up too far if it`s just located in Cincinnati. From
what we know, this is bigger than that. This does have some legs to it.
And now, we need to see where it goes in light of this report.

This report, quite frankly, doesn`t add anything really new to the
conversation except --

MATTHEWS: Except this thing with the right wing. The conservatives
basically wanted this thing done I would say.

That fact, it said the overall objective of this audit was to determine
whether allegations were founded, I guess well-founded I meant to say the
IRS, one, targeted specific groups applying for tax-exempt status. Two,
delayed processing of the targeted groups allegations. And three,
requested unnecessary information.

So this apparently resulted, Ron, from a complaint from interested groups,
probably on the right, because they`re the ones who are the victim of this
focusing, saying, look out and see if anything happened here.

Well, I think this is a testament to the fact that the IRS, whatever it`s
up to, is independent politically of the president. That`s for sure. You
know what I mean?

RON REAGAN, MSNBC POLITICAL ANALYST: Yes.

MATTHEWS: The I.G. certainly is.

REAGAN: Yes. Chuck Todd raised a point earlier that this isn`t just a
story about the IRS overreaching. This is also a story, a larger story,
about money and politics. Since Citizens United, we`ve had a flood of
these groups coming in that the IRS has to vet. They have to, you know,
take a look at all of these things and you have hundreds of them pouring
in.

Now, you know, they obviously did a bad job of vetting and did it
improperly here, but this is a broader story ultimately, it seems to me.

MATTHEWS: Kelly O`Donnell is joining us right now. She, of course, is
correspondent for NBC News on Capitol Hill. Thank you for joining us.

You know, I just saw this little addenda here. The first time I`ve seen
this. That this whole audit was triggered by concerns from members of
Congress. Your beat.

KELLY O`DONNELL, NBC NEWS: Absolutely. For the last couple years, members
were telling us and telling officials at the IRS that their constituents
were having a problem. And one of the things that triggered this was
something this report which we obtained just a short time ago points out is
burdensome extra steps that would not be the normal part of how you would
get this special tax-exempt status, which is something you apply for and
not everyone gets.

So, by hearing from constituents, you had members of Congress, both Senate
and House, asking the IRS about this. And they kept getting back no,
nothing like this. No, it`s not happening.

And that`s where this gets very interesting and becomes sort of so
politically charged, because when you bring the acting director or the
director of the IRS or other officials before Congress, and they swear to
tell the truth or they provide answers in a letter that are either
nonresponsive, or factually inaccurate, that really gets people fired up.
So this report has been going on for quite a long time and it uncovers some
things that --

MATTHEWS: My favorite role is about to play devils advocate. Michael,
what`s wrong to ask if the Koch brothers gave to the organization? Because
that would be a pretty good leading contender of that campaign purpose.
They don`t like Democrats. They try to defeat them. They spend their
money to do that. Why not check and see if the Koch brothers were giving
to one of these groups to find out what the real purpose was?

STEELE: Well, you can`t single out the Koch brothers. You can`t single
them out just because you don`t like their politics, you don`t like their
expression under the First Amendment against the Obama administration. So
that`s the problem here -- when the government singularly targets the Koch
brothers and those who support the Koch brothers` efforts, that`s a
problem. And that`s where I think the administration has really dropped
the ball on this thing. You`re going back to --

MATTHEWS: OK. Let`s just get one thing straight. Suppose they did this
and looked under progressive as well as Tea Party. Suppose they looked
under words that sort of ring with liberalism.

O`DONNELL: It`s still problematic.

STEELE: It`s still problematic, Chris. It`s still problematic.

REAGAN: Still problematic.

MATTHEWS: Why?

STEELE: You cannot single somebody out because of their ideology, because
of their political expression or --

MATTHEWS: These groups are all either left, right or center.

STEELE: It doesn`t matter.

O`DONNELL: But, Chris, instead of taking them sort of one by one, they
grouped them, flagged them within based on their name.

MATTHEWS: So, the harassment, if you will, was focused on people with
names, not with their past histories, violations or interventions.

Go ahead, Ron. Your thought. They even say it here in the report. They
should have gone after where they had evidence of intervention and
politics, not evidence of bad names, if you will.

REAGAN: Well, exactly. I was trying to chip in the point everybody else
was making. There`s a difference between having a name, you know, having a
point of view and actually doing things, actually politicking. That was
they should have waited for and should have investigated. Not just the
name.

MATTHEWS: That`s what this whole thing is about.

Thank you all. Thank you, Ron. You`ve nailed it. Thank you, Kelli
O`Donnell, for the newest report. Thank you, Michael Steele.

Up next, the three controversies brewing in the Obama administration right
now has sparked talk of a second-term curse. Well, that`s an old phrase,
the second-term curse. Anyway, can President Obama make his second term
actually matter after all this stuff? That`s my question tonight.

And this is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Well, so far, Hillary Clinton`s poll ratings haven`t been
negatively affected by all this talk by Republicans, of course, about
Benghazi. A new PPP poll finds that Hillary`s at 52 percent favorable, 44
percent unfavorable. Virtually identical to where she was in late March
before this brouhaha started. And voters trust the former secretary of
state over congressional Republicans on the issue of Benghazi by a margin
of 49 percent to 39 percent.

We`ll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I sure want to do some
governing. I want to get some stuff done. I don`t have a lot of time.
I`ve got 3 1/2 years left and it goes by like that.

(END VIDEO CLIP)

MATTHEWS: That`s President Obama, of course, speaking at a fundraiser just
last night, shortly after news broke that the Justice Department had
secretly obtained two months worth of phone records from "The Associated
Press". It was the next blow in a cascade of stories, including IRS
misconduct and a muddy Benghazi explanation people have been talking about
all along.

Well, here on HARDBALL tonight, we`ll look at Obama`s stated goal right now
to, quote, "do some governing," get some stuff done in the face of stories
that Republicans are going to use like a hammer to stop this president in
his tracks.

Doug Brinkley is presidential historian and Nia-Malika Henderson covers
politics for "The Washington Post".

I want to give you both a lot of chance to think big now.

Let`s start with Nia. By the way, I missed you lately, but you`re doing
other shows. I want you back here again.

Seriously now, the president`s two goals: defense and offense. Does he go
on offense and start doing stuff and hope this other stuff will rattle away
from him because he`s a man in motion or does he have to put out all these
fires and maybe he does first before he gets to get any attention on
anything else? Does he have to deal with clarifying Benghazi, putting the
blame where it belongs if there`s blame on the IRS and dealing with this
whole question of the FBI going after a major news organization. Can he
deal with anything else, at least deal with all of them, or does he have to
do something else to put them in perspective?

Your answer?

NIA-MALIKA HENDERSON, THE WASHINGTON POST: Right. I think in many ways,
he`s got to do both. He`s got to get out in front of these scandals. Show
some leadership. Maybe have a sort of "buck stops here" moment with these
scandals, but he`s also got to do his day job.

We`ll see him this week. He`s got a meeting with the Turkish leader. He`s
going to go to Baltimore and talk jobs.

But I do think until he`s able to put a better framing around these
scandals that really threaten to engulf these next couple of weeks if not
months he`s going to have trouble sort of setting the agenda. That`s the
problem.

The president wants to be in a place where he is setting the agenda. You
saw last week, for instance --

MATTHEWS: Yes.

HENDERSON: -- he had a health care speech. That didn`t get much press
because everyone was talking about the IRS and Benghazi. He`s really got
to I think tamp down on these. It`s almost like he`s got not only call
Olivia Pope and figure out what she would do in a situation like this, some
sort of fixer, he`s really got to figure out how to have maybe a direct to
camera address about these issues.

MATTHEWS: Doug Brinkley, does he have to play offense or defense now to
get through to restore his second term prospects?

DOUG BRINKLEY, PRESIDENTIAL HISTORIAN: I think immediately he`s got to get
control over these three issues. I think he might have to look at
accepting a resignation from Eric Holder possibly. I think in Benghazi,
it`s dragged on long. He`d just come clean, talk straight about the
talking points, what happened, and move on.

Look, it`s the cover up that always gets you in problems, and you just
don`t need this. It`s not been a good season for Barack Obama. And I
think he has an opportunity to just -- I`m sure his poll numbers are going
to still stay high. People trust him.


But he can`t let his integrity get dented and then do some big things.
Don`t talk about it. If you`re going to close Guantanamo, close it. If
you want the Keystone pipeline to happen, and say it`s going to happen.
There have been too many trial balloons.

MATTHEWS: Yes, it`s a good point. There`s a lack of -- what a sense is a
lack of action. Talk. I mean, his words don`t -- Nia, you know this
covering him all the time. He`s good at words. And action, I go back to
Reagan and the PATCO strike, I go to all the history of Iran Contra.
Reagan didn`t put that behind him until Nancy, his wife, got him to admit
he did do it, he did trade arms for hostages. Until he did that, it wasn`t
over with.

BRINKLEY: Exactly.

MATTHEWS: What his name, Roosevelt tried to pack the court until he pulled
back on that. That was the only issue.

Your thoughts, Nia. I just don`t know whether you can get away from the
dealing with the issue that`s flown in his face right now. Your thoughts.

HENDERSON: That`s right. I think he`s always had a sort of above the fray
approach to politics in general. Part of his brand was that he was a break
very much from Bush.

Now, you have his supporters, the only sort of way they`re able to defend
him now is say Bush did the same thing. He`s really got to figure out a
way where he can get that brand back, protect that brand.

And, you know, his words in some ways seem divorced from feeling. It
doesn`t seem like there`s a lot of outrage there about these scandals. And
you have Jay Carney going out there looking a little, you know, sort of
waffly out there.

So I do think he`s got to get something done. But the problem is always
the same thing. I mean, he`s got the same problem now that he had before,
and that is a very poisonous atmosphere on the Hill. And this, I think, is
only going to embolden Republicans.

MATTHEWS: Last question to you, Doug. Is he in real trouble?

BRINKLEY: Not yet. But as you said, he`s got to talk directly to the
American people on all three of these. He`s got to push for immigration
reform. If he doesn`t get it, he`s going to have to cut out on his own,
use executive power and find ways to lead without worrying about Congress.

But I think the gun control failure really did some damage to him this
spring. If he had won that, this would seem much smaller right now.

MATTHEWS: Well said.

Thank you so much, historian Doug Brinkley and Nia-Malika Henderson.

Welcome back, Nia.

HENDERSON: Thank you.

MATTHEWS: When we return, let me finish with how the president needs a
mission, I believe, with how to get through this mess -- jobs.

You`re watching HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Let me finish tonight with this.

I said up front the president`s problems, the Benghazi talking points, the
IRS digging into the Tea Party, the FBI digging into reporters` phone
records are containable if the president takes two clear steps.

Step one, clear himself and those closest to him of any mischief. Step
two, fire anyone in the executive branch who was into the mischief.

Well, both are easily doable. The real problem is the nature of this
second term. There`s a strong sense that he, the president, lacks a hard
nosed agenda right now.

There`s nothing the president is fighting for, asking us to fight for.
There`s no cause. And without a cause, there`s no urgent need to be there
for him.

I think the best goal for this president is the one he inherited, is to
create jobs. No one will ever target a Democrat for trying to do what they
believe deeply in doing -- using the public sector to create jobs. It`s
been going on since the earliest days of the republic. It`s what made the
Democratic Party great in the 1930s.

Put men and women to work. Create big construction projects that demand
work and do it now, Mr. President.

Interest rates will never be this low ever. Money will never be this less
expensive. There will never be a better time to put money where it`s
needed, putting Americans to work. And it will give the president, you,
sir, something to do.

And that`s HARDBALL for now. Thanks for being with us.

"POLITICS NATION" with Al Sharpton starts right now.

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