updated 12/19/2014 11:52:39 AM ET 2014-12-19T16:52:39

Show: HARDBALL
Date: December 18, 2014

Guest: Ted Johnson, Chris Finan, Margaret Carlson, John Feehery>

CHRIS MATTHEWS, HOST: The pirates of Pyongyang.

Let`s play HARDBALL.

Good evening. I`m Chris Matthews in Washington.

Who stole my mail? Who killed my movie? Who is this country`s enemy,
and why are they doing these terrible things to us? Don`t you want to
know? Don`t you want to know who had a way to crash into the computers of
a major movie company, fished out all their records, everything anyone said
to anyone and throw it out for the public, did it with such panache that it
scared the death the distributors and the exhibitors who put movies on the
screen and sell us the popcorn to watch the movies with?

And who else is so scared that people seem to be shaking in their
boots that everybody`s going to read the secret messages they`ve been
sending on their laptops, their iPhones, their desktops at work? And by
the way, what are those secret little or big messages everyone`s trying to
hide now, that the North Koreans or whoever else is scaring them into
thinking will go public? What are we talking about here, corporate
strategies, financial reports, salaries, or love notes? What`s so secret
that the fear of it coming out causes big shots to knuckle under and bow
before the bad haircut boys over in Pyongyang? And is that what`s scaring
everybody from trying to retaliate right now?

Chris Finan was a cybersecurity adviser to the White House. He was
also an Air Force intelligence officer. And Ted Johnson -- he`s been here
before many times -- the senior editor at "Variety."

I want to start with Chris. Just look at this big picture now. Can
you figure out why everybody in the government was saying, Oh, it`s North
Koreans, last night, and they also did the warnings about something bad
happening at the movie theaters, and now they`ve gone quiet? What`s going
on in the government, the Obama administration right now? Can you tell?

CHRIS FINAN, CENTER FOR NATIONAL POLICY: Yes, well, Chris,
attribution is really hard in this space. It`s very easy to remain
anonymous. If you remember Plato`s Ring of Gyges, you can basically say
and do anything in this space, and it`s really hard to figure out exactly
who`s behind it.

So there are indications now to suggest that the North Koreans are,
indeed, involved somehow, but that could mean a number of things. And I
think the administration, rightly, is taking its time to figure out the
facts and collect the evidence, to make sure if, indeed, there is an
official public accusation or condemnation, that we know exactly what
happened, or at least with a high degree of confidence.

MATTHEWS: Why do you think they`re afraid to say on public television
or somewhere else, just put it out there as a statement, We think the North
Koreans did it?

FINAN: Well, you know, we want to make sure that whatever the
administration does is with an eye toward building constructive norms in
this space. So simply to accuse somebody without -- without plenty of
evidence won`t necessarily be constructive. However, if we could, say,
build a criminal case against these hackers and/or create, you know,
perhaps some regional partnerships for some sort of diplomatic demarche,
those sorts of responses would be quite constructive in this case and would
serve to tamp down and deescalate this -- this event.

MATTHEWS: Ted, I`m a movie nut, as many people know. I try to see
every good movie out there, and a few bad ones. And I have watched movies
that have driven me crazy because I think they`re damned inaccurate and I
think they`re insulting, to say that Lyndon Johnson had something to do
with killing Jack Kennedy -- put it up on the screen, Oliver North (sic)
gets -- fine, he`s a great filmmaker. It`s a free country -- Oliver Stone,
rather. It`s a -- it`s a free country. We accept that.

Along comes North Korea, one of the most primitive damned countries in
the world, have no right to say anything, and they`re shutting down our
movie history. That`s pretty scary.

TED JOHNSON, SR. EDITOR, "VARIETY": It sure is. Actually, I was
talking to Bill Richardson last week about this. He was really surprised
at the whole idea that North Korea could be involved because, as you said,
a primitive country -- how do they even have the capability?

I think people in Hollywood are shocked at this, that it`s come to
this. This is something unprecedented, that they`ve never really seen
before. And after Sony`s decision yesterday to pull the movie, there`s a
lot of angry people thinking that -- that, you know, does this set a
precedent? Can any other country kind of come along and essentially have a
veto power over what viewers see on TV or in the movie theaters?

MATTHEWS: And the stars of those movies have been all over the talk
shows. I`ve watched them. There`s some in the movie already. The money`s
in the movie, $40-some million, a lot more in promotion. We were all ready
to maybe see the movie. I don`t know. And then some guy with that weird
haircut -- I don`t think people are laughing at North Korea like they were.
They`re now a little afraid of them. These guys have some power we didn`t
know about.

Anyway, today, the White House was careful to the to get ahead of
themselves on this. My colleague, Andrea Mitchell, pressed Homeland
Security chief Jeh Johnson today on the subject of the U.S. response.
Let`s watch that back-and-forth.

(BEGIN VIDEO CLIP)

JEH JOHNSON, DHS SECRETARY: We`re not prepared to officially say who
we believe was behind this attack. And the U.S. government is actively
considering a range of options that we`ll take in response to this attack.

ANDREA MITCHELL, HOST, "THE MITCHELL REPORT": What kind of options?
This is not a military issue, or is it?

JOHNSON: Well, like I said, we`re considering a range of options. We
regard this as a very serious attack.

MITCHELL: Is it terrorists?

JOHNSON: I -- I hesitate to put...

MITCHELL: Is it terrorism, I should say?

JOHNSON: ... labels on what we believe occurred here.

(END VIDEO CLIP)

MATTHEWS: Well, behind the scenes, there appears to be little
agreement on the strategy to respond to North Korea. One U.S. official
told NBC News that the country, quote, "can`t let this go unanswered."
But, or yet, another official told "The Washington Post," quote, "We are
not willing to escalate." In that same story, the newspaper reported that,
quote, "Officials agree that there are no good options."

Chris, what are people afraid of? I mean, I know I`m naive, but I
guess my e-mail`s pretty boring, but what is everybody afraid of, that the
exhibiters, the distributors, other movie -- why are they all buckling to
this guy in Pyongyang, in North Korea, apparently?

FINAN: Well, Chris, you have to think about the precedent for the
future. And you know, what I would say is, we don`t want to resort to
frontier justice by throwing rocks when our entire society and economy is
built of glass. So we have to be very careful how we proceed because this
is an entirely new space. It`s unchartered (sic) territory. And we don`t
want to establish unhelpful norms that will escalate and keep American
companies in the crossfire. So we want to...

MATTHEWS: What makes you -- you sound worried yourself. What is it,
the worst thing that a guy could do to us in terms of hacking into our --
anybody in this country`s information? What`s the scariest thing you can
imagine somebody doing?

FINAN: Well, the hackers in this case, the power is the information
that they hold. It`s not any threat, any credible threat, of actual
commitment of violence. So in this case, this is an extortion case. And
it just shows you how difficult it is to protect information in this day
and age.

Attackers in cyberspace have an incredible asymmetric advantage, and
it`s very difficult, even with proper defenses, to prevent people from
intruding into these systems. George Clooney put it best in his e-mail to
Sony when he said, I recognize that this e-mail is probably going to be
hacked some day. So that really sums it up.

MATTHEWS: Well, help me out here. Is GM afraid of what -- that their
competition in Germany or Japan or Korea, South Korea, will find out what
their new models look like? I mean, give me an example of somebody losing
big money over hacking, how it would work?

FINAN: That`s exactly right. The theft of intellectual property is a
huge problem right now. And it`s sort of death by a thousand cuts. So all
of those precious years and resources put into R&D can be gone in minutes,
if it`s not properly protected.

MATTHEWS: So you could get the formula to Coca-Cola? You could get
the formula to some medicines that are patented right now...

(CROSSTALK)

MATTHEWS: ... Viagra or something like that. Yes. Go ahead.

(LAUGHTER)

MATTHEWS: Yes, I`m serious.

FINAN: I wouldn`t know anything about that.

(LAUGHTER)

JOHNSON: If I could...

MATTHEWS: But the money that goes into these formulas -- go ahead,
Ted, your thoughts.

JOHNSON: I was just...

MATTHEWS: Your knowledge.

JOHNSON: ... going to say that, I mean, it`s not just trade secrets
that you look to in the future. I mean, it`s actually happening right now
with this hack. They hacked the script to the next James Bond movie. And
if it`s out there...

MATTHEWS: Oh!

JOHNSON: ... it`s not just fans who are going to get ahold of it and
see the plot points, it`s potential competitors who could put out kind of a
low-budget version with the same plot points and kind of diminish the film.
So a lot of producers are really worried about that who are connected to
that franchise.

MATTHEWS: Well, Hollywood`s furious about the decision to pull Sony`s
"The Interview," the movie. ABC`s Jimmy Kimmel used last night`s opening
monologue to rip into the studios that yanked the film. Here he is.

(BEGIN VIDEO CLIP)

JIMMY KIMMEL, COMEDIAN: The nation`s five biggest movie theater
chains announced they will not allow the movie to be shown. And
personally, I think those theater owners should be ashamed of themselves.
Personally, I think allowing a ruthless dictator of another country to
decide what American people can and cannot see in our own country is
against, like, everything we`re supposed to stand for, right? I mean,
people died for our...

(CHEERS AND APPLAUSE)

(END VIDEO CLIP)

MATTHEWS: Ted, is that -- is that applause real? Is that -- is that
Hollywood`s applause, as well?

JOHNSON: Yes, it`s kind of...

MATTHEWS: Don`t do this kind of thing?

JOHNSON: Quite a bit of people saying, Listen, how can a country
actually do this? I mean, we`re -- they`ve had situations where movies
have been controversial and other countries have condemned them. But we`re
talking about the screening of a movie within the United States. And I
wouldn`t be surprised if there`s some kind of counter-campaign to get this
movie out there, maybe not with Sony but some other type of distributor.

At the White House today, there was some question as to maybe the
White House should actually host a screening of this movie to kind of
really show them. So I think -- yes, Hollywood -- a lot of concern over
the precedent this sets. Right after Sony canceled the movie, actually,
there was another movie that was to star Steve Carell that was canceled...

MATTHEWS: Yes, I know.

JOHNSON: ... that had to do with North Korea.

MATTHEWS: Well, Ted, I think one of the prides of this country...

(CROSSTALK)

MATTHEWS: Let me go, Chris. I want to make my point here, is that --
you know, I said, there are some Oliver Stone movies that drive me crazy
because I don`t think the facts are right and they just stir people up.
But look, we had "The Passion" on, Mel Gibson`s movie. A lot of people,
not just in the Jewish community, were very offended by it. We`ve had
movies that people sort of put up with and say, yes, I don`t like it, I
don`t like the message sending here, but it is America and we`re just going
to put up with it for a greater good.

And then you see Hollywood just go to its knees, bowing to Pyongyang
and North Korea because, Oh, golly, they`ll do it again to one of our
exhibitors. I mean, does it -- I still don`t get it. Why were the
exhibitors so -- my -- somebody in my family called me the other day and
said, I`m worried about going to the movie, to see this movie because, you
know, it might be dangerous.

How did they get to the idea they could jump to actual physical
violence? How did that get started, Chris?

FINAN: Well, it actually started with this threat...

(CROSSTALK)

MATTHEWS: Chris first.

FINAN: Well, these are punks sitting behind a computer, OK? They`ve
got no actual ability to physically harm Americans on domestic soil. But
philosophically speaking, this is an ideological threat. They are
threatened by our free speech, and this is their response to it. And I
think you`re right, to cower is the wrong response. We don`t want to -- we
don`t want them to win in this case.

MATTHEWS: I agree. Thank you so much, Chris Finan. (INAUDIBLE)
crowd out there, the Kimmel show. Anyway, Ted Johnson, thank you for
talking for Hollywood.

JOHNSON: Thank you.

MATTHEWS: Coming up, President Obama`s proving he`s no lame duck. In
the last couple of weeks, look at it, he`s been doing some big, historic
things, as if he`s finally free to be the president he always wanted to be,
first immigration, then Cuba. What`s next on the list? You might call it
the bucket list. I call it the wish list. What`s Obama going to do next?
Looks like he`s got a whole line of things coming.

And this is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Well, gasoline prices are falling across the country, and
that could start making people feel better about the economy. Take a look
at this. The average price of a gallon of gasoline is now $2.48. That`s
down 40 cents from just last month -- that`s regular gas, of course -- and
about 75 percent less than it was a year ago.

And those falling prices are having a real effect politically.
According to our new NBC/"Wall Street Journal" poll, half of all Americans
say declining gas prices are having a great deal or quite a bit of impact
on them. And that includes large majorities of rural Americans, as well as
lower income earners. Those falling gasoline prices could really jump
start the economy and the recovery in this country.

And we`ll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Today, the United
States of America is changing its relationship with the people of Cuba. In
the most significant changes in our policy in more than 50 years, we will
end an outdated approach that for decades has failed to advance our
interests, and instead, we will begin to normalize relations between our
two countries.

(END VIDEO CLIP)

MATTHEWS: Welcome back to HARDBALL. President Obama`s landmark move
on Cuba the other day reinforced that he will not behave like a lame duck
president for his final two years in the presidency. It comes just weeks
after, or very nearly after, Obama acted to give immigration relief via
executive action. Now he`s normalized U.S. ties to Cuba on his own.

So what else is on the president`s list? Is it to lift the embargo on
Cuba, close the prison at Guantanamo, Gitmo? On the environmental front,
will President Obama veto Keystone?

Michael Sher (ph) writes in "The New York Times," quote, "A president
unleashed from the hesitancy that characterized much of his first years in
office, Mr. Obama is now pushing forward aggressively on his promised
agenda and ignoring his most ardent critics."

Joining me right now is former White House press secretary Robert
Gibbs and former chairman of the Republican National Committee Michael
Steele. Both are MSNBC political analysts.

Robert, thank you for joining us on this great day. I never got the
sense the president had this, if you will, bucket list, that he was moving
along, step by step, incrementally, dealing with Boehner and the rest of
them. But he seems like he`s got something going here now. Do you sense
something new here?

ROBERT GIBBS, FMR. WHITE HOUSE PRESS SECRETARY, MSNBC POLITICAL
ANALYST: Well, I do think that the president made some fundamental
promises dating back to 2007 and 2008, and I think the biggest that one you
mentioned that`s on that list that he`d like to see some real progress on
is closing the prison at Guantanamo Bay.

I think you take that wish list, though, and you have to break it
apart, right? There`s half that list or part of that list that you can do
through your own executive action, like he did with immigration or in
foreign policy with Cuba, and then there`s another side of that list of
stuff that has to go through Congress.

Interestingly enough, some of those issues appear on both sides. You
can empty Guantanamo Bay by transferring those that have been cleared to
transfer. You can`t formally close it, though, until Congress authorizes
you...

MATTHEWS: But you can empty it?

GIBBS: You can. You can empty at least a significant amount of it.
I think there`s probably -- there`ll still be 30 or so that you have to do
something with because you can`t bring them to trial and you can`t turn
them loose or transfer them, but you certainly can transfer (sic) them.
And we know this, that the transfer process, the president wanting to speed
that up, most certainly played a part in Chuck Hagel`s exit because the
White House was definitely chafing at moving those transfers along.

MATTHEWS: Well, Greg Craig, too. I could never figure all that.
Anybody who got near Gitmo seemed to have problems because he wanted to get
it done and it couldn`t get done.

Do you think this is willful? Is this some sort of psychological, I`m
going down with my boots on, kind of thing? I may not be able to win them
all, but I`m going to on go down shooting?

MICHAEL STEELE, FMR. RNC CHAIR, MSNBC POLITICAL ANALYST: I think this
is the president is basically throwing the bird up in the air to pretty
much everybody in this town and saying, You know what...

MATTHEWS: Oh, my God. You mean you think this is offensive?

STEELE: No, I don`t think it`s -- no, I don`t think it`s offensive,
but...

(LAUGHTER)

MATTHEWS: When you put it that way, I mean...

(CROSSTALK)

MATTHEWS: I thought Rahm Emanuel was known for that pretty well when
he was chief of staff.

STEELE: No, but I think in his own way, in his very subtle, you know,
kind of educated, professorial way, he`s basically saying, I`m just going
to do this. I`m going to set out and do what I want to do. So you start
with the immigration piece. You come back with Cuba the following week,
which links into the immigration piece, ties into Gitmo and some other
things.

So I think the president is just finding a space where he`s
comfortable and has figured out that this town will never work with him, it
will never work for him, and therefore, he`s just going to do his thing and
let the chips fall where they may.

MATTHEWS: Well, I`ll tell you one thing...

STEELE: And I think there`s some fallout from that, and I hope he`s
prepared for that. But I think he`s got this comfort now of doing what he
wants to do.

MATTHEWS: Well, if I`m Jon Meacham or Walter Isaacson or somebody
writing the history of this guy, maybe me, I`ll be writing down the things
he`s done the last couple weeks because they belong in the Encyclopedia
Britannica or Wikipedia or wherever the hell you put it. Ending this thing
with Castro -- and he`s still there...

STEELE: Yes.

MATTHEWS: ... is big stuff. I was thinking, how much of this is
history because I`m thinking, he`s a young guy, he`s going to be around a
long time after the White House, and I wouldn`t be surprised if he`s
thinking now, I want to be known as the guy who did certain things, and
maybe for the left, maybe for everybody, maybe for certain groups like the
Hispanics, but I want to have stuff done.

STEELE: But there was a lot of folks...

(CROSSTALK)

MATTHEWS: Not just dick around -- or, as you put it, it isn`t to
screw his opponents or make fun of them.

STEELE: Well, no, no.

MATTHEWS: It`s to get something done positively, I think.

STEELE: But I think you have got to -- you have got to -- Chris, you
have got to be in a space where you can ignore those folks, those negative
energies that are around you, in order to do these types of things with
confidence.

And that`s, I think, something the president...

MATTHEWS: Is that what it was like running the RNC?

STEELE: Yes, quite a bit.

MATTHEWS: OK.

(LAUGHTER)

STEELE: Quite a bit.

GIBBS: I think you`re right.

Look, any president that is looking at this point of their second term
on the calendar understands, when I walk out of here, in 15 years, what are
people going to look back on as I have had a significant say in changing,
right?

Obviously, there are a lot of things in the first couple years with
health care and things like that. There`s no doubt that Cuba is part of
that. I think the Cuba policy and the decision is helped by the fact that
we have tried something different for 50 years.

MATTHEWS: Yes.

GIBBS: And I think the president decided that we could give it
another 250 and see if Cuba changed, or we could do something different and
get rid of probably one of our most outdated aspects of our foreign policy,
and do something...

(CROSSTALK)

MATTHEWS: You know who did this? Bill Clinton did this when he gave
a visa to Gerry Adams of Sinn Fein. He said, I`m tired of this policy of
basically isolating Sinn Fein in Northern Ireland. It`s not working.
We`re going to try to -- and it worked, and it ended up bringing peace.

STEELE: But the difference was, Sinn Fein, Northern Ireland, the
Catholic Protestant wars there was in the news. It was still part of the
foreign policy of the United States. Who the heck is talking about Cuba?
No one.

This is completely outside of that particular mold. The president saw
the low-hanging fruit of the opportunity, and he took it.

MATTHEWS: Let`s talk about some other things.

(CROSSTALK)

MATTHEWS: I want to talk about other things.

I want to get some, because you know stuff we don`t know.

GIBBS: Yes.

MATTHEWS: Michael and I are looking at this from the outside in.

STEELE: Yes.

MATTHEWS: You have been in.

(LAUGHTER)

STEELE: Yes, you have been in.

(CROSSTALK)

MATTHEWS: Do you think he`s going to -- will he stick to his guns on
Keystone and say, I don`t believe it`s good for the environment, it`s good
for energy policy, I am going to veto that, and as long as I can veto, it
ain`t going to get done? Will he stick to that?

GIBBS: Where they come down on that is going to be a very good
question. I don`t know the answer to that and I don`t think many people
know the answer to that.

(CROSSTALK)

MATTHEWS: How about opening trade relations with Cuba, pushing for
that, ending the embargo with Congress, fighting for that?

GIBBS: I think he will -- I think he will want to appoint an
ambassador, to open an embassy, and to end the trade embargo.

That -- again, that`s another side of the list of things that have to
go through Congress. Normalizing relations is something -- is a step you
can take because you`re the commander in chief.

STEELE: But is he going to fight for those things that have to go
through Congress?

It`s a different thing for the president to act with executive
authority, but is he now going to fight for the very things that he`s now
jump-started?

GIBBS: I think there`s no doubt that, when he comes to Cuba, he`s
going to want to. I think -- again, I think he`s taken a significant step.

And, look, you mentioned that nobody`s talking about Cuba, one,
because it isn`t on a list of huge threats that we talk about anymore,
right? It`s not something like North Korea.

MATTHEWS: Because they`re defeated.

GIBBS: Right.

STEELE: Right.

GIBBS: It`s a whole new ball game.

Plus, the politics of this that scared so many people from making that
first step have begun to change. Right? In 2012 and in 2014, Democrats
that supported, whether it was President Obama or former Governor Crist
that supported changing the embargo, actually saw a generational split in
the Cuban community.

MATTHEWS: It`s about even now. Yes. It`s not a loss.

GIBBS: It`s not a loss.

(CROSSTALK)

MATTHEWS: It`s a 50/50. In other words, a wash.

Thank you, Robert. Good thinking.

By the way, does the president want Hillary Clinton to be the next
president?

GIBBS: I think he`s met with her a number of times, and I would be
surprised if she didn`t know that this was coming down.

MATTHEWS: He`s going to help her?

GIBBS: I -- there`s no doubt he wants a Democrat and I think...

MATTHEWS: A Democrat?

GIBBS: Well, any and all, but...

MATTHEWS: Who else is he thinking about?

GIBBS: I have got to assume that Hillary`s going to be the nominee.
And I think...

(CROSSTALK)

MATTHEWS: Does that make you happy personally?

GIBBS: I think that means that a lot of the things that he`s done,
whether it`s Cuba or health care, will stay in place for a long time.

MATTHEWS: Do you think she`s happy you`re lawyering this question,
that you can`t just answer it?

GIBBS: I would be more than happy to have Hillary Clinton, to call
her Madam President.

(LAUGHTER)

MATTHEWS: I just love the way you two guys get along. We`re always
looking for peace here.

Actually, I`m not.

Anyway, thank you, Rob Gibbs, a brilliant man here.

STEELE: I enjoyed the moment.

MATTHEWS: He`s a brilliant man.

Thank you, Michael Steele.

Up next, behind the scenes of what may be the biggest political
blunder in a presidential campaign ever. This is -- there it is -- this is
humorous, except we know what happened. This guy got killed for this
picture, probably, Mike Dukakis in that helmet, that Rocky the Squirrel
movie, riding around in that tank, way too fast, way too stupid-looking, a
devastating political ad that killed the chance of a very smart guy winning
the presidency.

(BEGIN VIDEO CLIP)

NARRATOR: Dukakis opposed the stealth bomber, a ground emergency
warning system against nuclear attack. He even criticized our rescue
mission to Grenada and our strike on Libya. And now he wants to be our
commander in chief. America can`t afford that risk.

(END VIDEO CLIP)

MATTHEWS: Anybody that thinks ads don`t matter, pay attention to that
baby.

And this is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL.

Well, there`s a new documentary debuting today on the HARDBALL Web
site. It`s called "Above the Fray: The Lessons of Dukakis `88."

The 1988 presidential race between Michael Dukakis and George Herbert
Walker Bush is considered among the most negative campaigns in American
history. And it rewrote the ground rules of political campaigning.

This film is the story of that election, told by Dukakis himself.
It`s about how an aggressive negative campaign can knock off a favorite for
president, how a candidate, a Democrat up by 17 points in July of election
year could lose by eight points in November, for a 25-point turnaround in
public thinking.

Of course, one of the most lasting images of that campaign was Michael
Dukakis donning a helmet here and riding around in a tank, an ill-advised
photo-op that the Bush campaign turned into an unforgettable campaign ad.

Dukakis talks about that in this new film.

(BEGIN VIDEO CLIP, "ABOVE THE FRAY: THE LESSONS OF DUKAKIS `88")

MICHAEL DUKAKIS (D), FORMER MASSACHUSETTS GOVERNOR: I was challenging
the administration`s defense policy on the grounds that it was putting much
too little into conventional warfare and much too much into high-tech stuff
that was very expensive and of questionable value.

UNIDENTIFIED MALE: Don`t call Mike Dukakis soft on defense. Today,
he rolled across the plains of Michigan, like George Patton on his way to
Berlin.

DUKAKIS: I don`t know who at time thought it was a good idea for me
to show up in a tank factory -- at a tank factory and drive around in a
tank.

Bush was in a tank at least two or three times during the campaign as
well. But they used it in a commercial.

(END VIDEO CLIP)

MATTHEWS: The documentary, "Above the Fray," was produced for NBC.

Will, the question I have always wondered about is, Dukakis knew --
did he know -- he must not have -- how stupid he looked?

WILL RABBE, MSNBC PRODUCER: I mean, this was totally overshadowing a
major foreign policy speech he was giving that same day.

He wasn`t thinking about whether or not to wear a helmet. And as he
says in the film, George Bush had worn a helmet and ridden around in a tank
on camera before as well.

MATTHEWS: Yes.

RABBE: So they weren`t thinking in terms of optics. And, in general,
they were not thinking a lot about strategy.

MATTHEWS: They should have -- they should have thought about the fact
that George Bush Sr. had been shot down twice by the Japanese when he was
still a teenager fighting in World War II.

(CROSSTALK)

RABBE: Sure. Sure. But Dukakis served as well.

MATTHEWS: Let me get down to the bottom line.

I try to explain to people how negative campaigns get really, really
terrible.

RABBE: Sure.

MATTHEWS: Hillary Clinton is running. They`re going to be negative
as well against her to beat her. It`s the one way to beat her.

RABBE: Right.

MATTHEWS: Is it the negativity of the campaign or the failure of the
campaign to play defense? What is it that`s critical?

(CROSSTALK)

RABBE: Not responding to a charge or an attack against you opens up
the door for more attacks. Ultimately, the idea is to keep the focus on
the other guy, the opponent. And that`s what Dukakis failed to do.

MATTHEWS: Yes. And he taught a lesson, inadvertently, to Bill
Clinton, and he started a war room with people like...

RABBE: Rapid response.

We saw it in `92. Democrats were tired of losing elections.

MATTHEWS: And that war room by Carville and the rest of them worked
the -- worked the business for Clinton.

RABBE: Exactly.

MATTHEWS: And he won because of that.

You can watch worked the "Above the Fray: The Lessons of Dukakis `88"
at MSNBC.com/HARDBALL. It will also debut -- it`s going to debut on
MSNBC`s digital channel, Shift, tomorrow afternoon at 3:00.

And thank you, Will Rabbe.

Up next: How will America respond to that cyber-attack the federal
government says was from North Korea? We will get to that in the
roundtable.

Plus, a HARDBALL salute to the genius of Stephen Colbert, whose show
ends tonight.

You`re watching HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MILISSA REHBERGER, MSNBC CORRESPONDENT: I`m Milissa Rehberger.
Here`s what`s happening.

Senior defense officials confirm U.S. airstrikes in Iraq have killed
three ISIS leaders, including its top military commander and the head of
ISIS in Iraq.

President Obama will hold a news conference tomorrow at 1:30 p.m.
Eastern time, before heading to Hawaii for a two-week vacation. We will be
carrying that live here on MSNBC.

A review of the Secret Service finds the agency needs a change in its
culture following a series of embarrassing breaches.

And it was the second day of huge gains on Wall Street. The Dow
surged 421 points after a 288-point rally on Wednesday -- back to HARDBALL.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The cyber-attack is
very serious. We`re investigating it. We`re taking it seriously. We will
be vigilant. If we see something that we think is serious and credible,
then we will alert the public, but, for now, my recommendation would be
that people go to the movies.

(END VIDEO CLIP)

MATTHEWS: We`re back.

That was President Obama reiterating the lack of a credible and
serious threat of violence and urging the American people to keep to their
routines in the wake of the Sony hacking incident.

U.S. officials told NBC News yesterday that the administration`s
investigation has concluded that North Korea was responsible for the hack
on Sony. And the usual suspects on the hawkish right pounced on the news,
blaming, of course, Barack Obama and his administration and sounding a
drumbeat for stronger action.

Former Speaker of the House Newt Gingrich, of course, called it an act
of war, and tweeted: "No one should kid themselves. With the Sony
collapse, America has lost its first cyber-war."

TMZ caught up with the 2012 GOP presidential candidate, and here`s
what Newt had to say.

(BEGIN VIDEO CLIP)

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: I think we need to
recognize, this was an act of war. If you let this precedent stand and
people get to run around and do this kind of thing, we`re going to live in
a nightmare. The guys who did this, we should track down exactly as if it
was physical terrorism.

(END VIDEO CLIP)

MATTHEWS: Arizona Senator John McCain said that we are yielding to
aggressive acts of cyber-terrorism, following the decision by Sony to
cancel the release of the movie, and blamed the Obama administration.

Quote: "The need for Sony Pictures to make that decision ultimately
arose from the administration`s continuing failure to satisfactorily
address the use of cyber-weapons by our nation`s enemies" -- close quote.

Well, joining the roundtable right now, NBC senior political reporter
Perry Bacon, Bloomberg`s Margaret Carlson, and Republican strategist John
Feehery.

John, here`s what. First of all, the Obama administration had very
little to do with any of this. It`s Sony Pictures, the distributors just
exhibiters, the movie makers and the movie showers. They didn`t want to do
this. They didn`t want a fight. Why?

JOHN FEEHERY, REPUBLICAN STRATEGIST: That`s a great question.

I think they`re worried about other revelations coming out from the
hacks, maybe possible strategy on legislation, maybe other things. I think
that Newt and McCain are right, though. This is a very serious. And it is
cyber-terrorism. And we do need to have an effective response.

And there`s plenty of blame to go around. There`s been legislation
kind of kicking around in the House and Senate. There needs to be an
effective response, because this -- we cannot allow this kind of stuff to
stand. We got to be able to not be bullied by a small guy in North Korea.

MATTHEWS: Well, speaking of bully, Margaret, it would bug me. A
member of my family -- I won`t say who -- was concerned about the safety of
going to one of these debuts, one of these premieres of this new movie, and
-- "The Interview," that`s causing all of this excitement.

And my thought was, how do you jump from knowing there`s been a cyber-
attack to fearing violence at the movie theater? They`re totally
unrelated, and yet people are so -- so nervous that they`re willing to
believe that North Koreans are going to invade their movie theater. Your
thought?

(LAUGHTER)

MARGARET CARLSON, COLUMNIST, BLOOMBERG NEWS: Well, you do have these
blustery -- this blustery tin pot dictator, who you shouldn`t believe.

MATTHEWS: But he doesn`t have peeps.

CARLSON: On the other hand, we know -- he doesn`t have peeps, he
doesn`t have a plane to crash into a theater.

But we found out, it doesn`t -- it only takes one crazy person to do
something. It doesn`t really take much organization to terrorize people.
But be that as it may..

(CROSSTALK)

MATTHEWS: Is he going to threaten to have your barber cut your hair
like his?

(LAUGHTER)

MATTHEWS: Is that going to be a threat to come out of...

(CROSSTALK)

CARLSON: Right. Right. Right. Like, straight up.

(CROSSTALK)

MATTHEWS: Come out of the barbershop and you look like -- oh, my God,
he got me.

(LAUGHTER)

CARLSON: Yes. He`s a cartoon character with that haircut.

But John McCain hasn`t met a war he doesn`t want to fight, and now he
wants to fight a cyber-war and escalate.

(CROSSTALK)

MATTHEWS: But Newt`s another -- is another -- Newt is another kettle
of fish. When Newt starts talking about we have got to track them down,
well, we know where they came from. It`s not track down.

PERRY BACON, NBC NEWS SENIOR POLITICAL CORRESPONDENT: Right.

MATTHEWS: And what are you going to do when you get there? Shoot the
guy, the president of Pyongyang?

CARLSON: Yes.

MATTHEWS: Shoot Kim Il-yun or whatever his name is, the Dear Leader?

BACON: But do I find it worrisome that North Korea, not the most
sophisticated country in terms of technology or...

(CROSSTALK)

MATTHEWS: We thought the dumbest country.

BACON: Yes, We thought the dumbest country -- is able to break
through Sony, one of our great companies like that.

It is worrisome. Cyber-security is an issue we have talked about a
long time. The president has talked about it. Maybe we should have more
discussion about, more plans to stop things like this from happening in the
future.

MATTHEWS: I agree with that.

But, Perry, if we look at it a second time, we say, I have an iPhone,
I don`t know how to build an iPhone, but I have one. Right? Can`t
somebody in North Korea have some money enough to go to the Chinese and
say, I know you guys are smart at this stuff? So it`s not like they know
how to do it. They just want to do it. Right?

There`s a market for this stuff.

(CROSSTALK)

CARLSON: Yes. But where did they get the money to hire the guy?

MATTHEWS: Well, that`s a question, the hard currency.

John, where did they get the hard money to pay enough money to get
somebody to hack into Sony?

FEEHERY: Probably...

(CROSSTALK)

MATTHEWS: By the way, to stick to the Japanese too, which is another
thing.

(CROSSTALK)

FEEHERY: Well, they have all kinds of slave labor camps in North
Korea and they have amassed all kinds of money.

Listen, the fact is, is that this is a two-way war. I`m sure that
we`re fighting the war on our own terms. We don`t talk about that. But
the Chinese and the North Koreans and the Russians, they are attacking the
American economy every day. And we don`t know...

(CROSSTALK)

MATTHEWS: How do they do it? Tell us what`s going on.

FEEHERY: Well, they are infiltrating all of our trade secrets.
They`re busting into all kinds of different -- like Target, for example,
stealing our identities.

And we have to fight back. And I don`t -- though I don`t know how you
fight back in an effective way because...

(CROSSTALK)

MATTHEWS: We`re not fighting back now.

FEEHERY: I don`t think we`re fighting back effectively.

(CROSSTALK)

MATTHEWS: We`re saying uncle.

(CROSSTALK)

CARLSON: There is...

FEEHERY: Maybe the best way to fight it is have an effective defense.
And we`re not, I don`t think we`re investing --

(CROSSTALK)

MATTHEWS: Supposed your James Franco or Seth Rogen, or any of the
people who made this movie. You`ve been out there selling it on Letterman
and shows like Fallon already, right, right out there selling it, and about
to go into the movie theaters at Christmastime, the big enchilada for
selling movies. They kill it. Why do they kill it? Because they`re
afraid.

MARGARET CARLSON, BLOOMBERG COLUMNIST: They are.

MATTHEWS: There`s no other statement here.

CARLSON: But there`s a great solution. Get Netflix to stream it,
charge $5. It`s viral, everybody watches it, and it`s just a slacker
movie. A Judd Apatow, slacker --

MATTHEWS: Maybe stars will buy it. Remember the Kennedys got mad at
them for making the movie about the Kennedys. The stars say, we`ll show it
and not the History Channel. We`ll do it.

PERRY BACON, NBC NEWS SR. POLITICAL REPORTER: Since there was no
credible threat, show the movie. Put it online, put it somewhere. We
don`t want to concede to the North Koreans.

MATTHEWS: I think we look weak. Anyway, let me ask you something
about in American society. John, again, Rand Paul, catch this. The
Republican from Kentucky is likely to run for president, we know that, in
2016. Well, he`s bucking his party once again, or bucking it. He`s
bucking his party once again. Paul`s supporting President Obama`s
announcement to normalize relations with Cuba, which puts him on the
opposite side of two potential 2016 rivals, Marco Rubio and Jeb Bush.

(BEGIN VIDEO CLIP)

SEN. RAND PAUL (R), KENTUCKY: The 50-year embargo with Cuba just
hasn`t worked. I mean, if the goal was regime change, it sure doesn`t seem
to be working. And probably, it punishes the people more than the regime,
because the regime can blame the embargo for hardship, and if there`s open
trade, I think that the people will see what it`s like to all of the things
that we produce under capitalism. So, in the end, I think probably opening
up Cuba is a good idea.

(END VIDEO CLIP)

MATTHEWS: In the game of hearts, this guy always shoots the moon. He
always waits for everybody to do their thing and he does his thing.

FEEHERY: Paul`s not alone. Jeff Flake is a part of this. A lot of
the aggie Republicans have been part of this.

The thing is that, the closer you are to Florida and if you`re Cuban,
you feel very strongly about keeping the current policy. The further away
you are from Florida, the more you represent other interests that want to
do trade with Florida -- with Cuba, the more you`re more likely to take a
deeper look at this. And I think Rand Paul is right from the economic
perspective, but an emotional perspective, if you`re Marco Rubio and your
family has been abused by the Castro regime, you`re not going to react
kindly to what the president did.

MATTHEWS: I still don`t like Castro. I don`t like his brother. I
don`t like that regime. They promised to be Democratic liberals -- we all
rooted for them as kids and he turned out to be a commie. And he said he
was elected --

FEEHERY: And he`s still a commie.

MATTHEWS: Yes, he is a commie.

FEEHERY: Not a comic book notion of a commie. It`s a person who deep
down, deeply down in their soul, does not believe in the rights of the
individual, only in the power of the state. This is not a social Democrat
from Denmark. This is a communist. And there`s a big difference.

BACON: Rand Paul, primary -- the thing about the primary, I`m not
sure this is a great move for him. He`s now getting to the point where
Republicans don`t trust him on security issues. He may not be -- this
issue aside, he may not be in the mainstream on Republican -- on security
issues. You saw Ted Cruz, Marco Rubio, and Jeb Bush all on the other side.
Not a great -- I`m not sure this is a great look for Paul in terms of
winning --

MATTHEWS: You mean, he`s more favorable. They`re going to say he`s
more favorable to Cuba than Israel.

BACON: Precisely. More favorable to Obama than other people, right.

CARLSON: But he`s not worried about being coherent. Rand Paul just
finds unoccupied space and goes there.

(LAUGHTER)

MATTHEWS: I know.

FEEHERY: You would actually be surprised. Iowa, a lot of Aggies want
to export to Cuba. So, there might be some --

MATTHEWS: Keep thinking the good thoughts, John.

(LAUGHTER)

MATTHEWS: Anyway, the roundtable is staying with us. When we come
back, a little fun. Our HARDBALL tribute to the one and only Stephen
Colbert.

And this is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Well, radio listeners up in Boston got a surprise today,
during a live call-in show with outgoing Governor Deval Patrick on Boston
Public Radio, President Obama dialed in, and here`s what`s happened.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Hello?

RADIO HOST: Hello, you`re on, sir, yes, you`re on with Governor Deval
Patrick.

OBAMA: Governor, this is Barack Obama, formerly of Summerville.

RADIO HOST: Oh.

OBAMA: I`ve been --

GOV. DEVAL PATRICK (D), MASSACHUSETTS: Come on!

OBAMA: I`ve got a few complaints about service in and around the
neighborhood. But I`ve moved down south since that time.

RADIO HOST: You`re kidding, Mr. President. Who is this impersonator?

OBAMA: I want to check in to see the --

(CROSSTALK)

DEVAL: Who is this impersonator? Who is this impersonator? You`re
very good.

OBAMA: I want to find out how it is that you got Massachusetts so
strong and moving in the right direction.

PATRICK: Mr. President, you know I love you, but you still have
trouble saying Massachusetts, you know that, don`t you?

OBAMA: You know, I -- there`s --

PATRICK: Just say the commonwealth.

(CROSSTALK)

OBAMA: There`s a little (INAUDIBLE) develops when I say
"Massachusetts."

PATRICK: How are you?

OBAMA: I know how to spell it, though.

PATRICK: Indeed you do, indeed. And you know where it is. You`ve
been a great friend to all of us. Thank you.

OBAMA: Listen, I just wanted to call in. Jim and Margery, thank you
for letting me do this.

RADIO HOST: My pleasure.

OBAMA: I`ve always wanted to let my dear friend know how proud I am.
You know, look, you`ve got more people working than anytime in the last 25
years, balanced budget, students doing great in school, health care access
never been better, clean energy jobs, you know, Deval, you`ve done good,
man.

PATRICK: Thank you.

(END VIDEO CLIP)

MATTHEWS: Great thing about radio, you can have the talking points
right in front of you.

We`ll be right back after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

STEPHEN COLBERT, COMEDIAN: Tomorrow, I will conclude my final
broadcast, say my fun farewells, angry audioses, and my lukewarm laters,
and walk out. And then everything in here will be shredded and sold as
industrial meat filler to a national fast food chain. Now, I can`t say
which one, because they are sponsors. But let`s just say, thatba-ba-ba-ba,
it`s White Castle.

(END VIDEO CLIP)

MATTHEWS: Back to HARDBALL.

From his early days as a correspondent, if you will, on "The Daily
Show," to the launch of his own show in 2005, Stephen Colbert established a
truly original brand of political humor. And now, after nine years, "The
Colbert Report" is coming to an end tonight. That`s tonight, Thursday.

The key to his success was an on-screen character behind the man, a
fictionalize version of Colbert himself, in a role he once described as,
quote, "a well-intentioned, poorly-informed, high-status idiot." It was
that satire of a conservative commentator brimming with fake indignation
that made Colbert so assessable. His comedy wasn`t sharp or butting, it
was disarming, even endearing, I`d say. I was honor to be on that show a
half dozen times.

And I had the opportunity to test his mettle on my very first
appearance back in 2006. Here`s what happened after a spirited debate
about Iraq.

(BEGIN VIDEO CLIP)

COLBERT: This is a problem that the president`s had --

MATTHEWS: I think I`m winning this interview here. I think I`m
beating Steve Colbert. I think you are down now at numbers. I think if we
were taking a poll right now, you`d be losing at points.

COLBERT: Do you want to arm wrestle?

(LAUGHTER)

MATTHEWS: Let me show you something.

COLBERT: Break it. Break it. Break it.

(END VIDEO CLIP)

(LAUGHTER)

MATTHEWS: His show is going to be missed. I`m going to be missed on
there.

We`ll be back -- we`re back now with our roundtable, Perry and
Margaret and John.

Margaret, did you believe what I did there? I put him in a full
Nelson.

CARLSON: No.

MATTHEWS: As a retort, he put out a reward for me, somewhat
ethnically saying, $10 for anyone that gets a picture of Matthew eating
potatoes. It was so weird.

(LAUGHTER)

MATTHEWS: He`s such a good-hearted guy. He just is.

CARLSON: He is, and talented. You know, I went and looked up a few
things. He was once interviewing Harry Belafonte. They were both singing
"Day O".

MATTHEWS: Yes. He`s a singer.

CARLSON: And one time he was doing about -- he can do ballet. He
was doing jetes across the stage. Anyway, just pure talent.

MATTHEWS: What across the stage?

CARLSON: Jetes, that`s French for jumping.

MATTHEWS: Oh, good. I can deal with that.

CARLSON: No arm-wrestling.

MATTHEWS: You know, he`s not the guy. He`s not the guy. He`s not
that guy.

He`s a regular Catholic guy from South Carolina. He`s a singer, actor
playing this horse`s ass, right wing doofus. And he`s done it for nine
years.

FEEHERY: Can he take that character and translate it to somebody else
on a nightly show? I mean, that`s the big question. I don`t know --

MATTHEWS: It`s a toughie.

Do you know who couldn`t do that? Chevy Chase couldn`t do that.
Chevy Chase played that sort to wise guy, know-it-all, but also confused
guy in all these great movies. And then he had his own talk show. He was
Chevy Chase the guy. And he wasn`t that character.

BACON: He`s already said he`s not doing the character anymore, which
I`m sad about. The other thing is, that show is great is because he often
had authors on or writers or maybe non-famous politician. He had Jack
Kingston on the last couple of days on the show. He brought people on
other shows all the time. It wasn`t Angelina Jolie always. It was people
I might have learned something from.

MATTHEWS: You know what they tell you when you`re on the show? Act
like this is serious.

BACON: Right.

MATTHEWS: And that made you a fool. You weren`t supposed to be in on
the joke. You`re supposed to be like a Henry Kissinger. Like the great
question to Henry Kissinger when he wrote his book on China, he said,
what`s the book about? I don`t think Kissinger was ready for that. It`s
on China, you fool!

(LAUGHTER)

FEEHERY: The other guy who`s done it successfully is John Oliver on
HBO. He had his own character and now that show has been a big success.
You need to take those serious issues and make fun of them --

MATTHEWS: OK. How does it work, because if he goes -- I want to
quote this. George Kaufman (ph) the great writer (ph), has aid, satire
ends on Saturday night. Dies on Saturday night.

Because it`s very hard to do satire, because anybody that`s ever been
caught saying something sarcastically or satirically, they take it flat and
you get screwed for it, because nobody understands satire. Are you
kidding? No, never ask that.

CARLSON: No, if you ask are you kidding, you`re dead.

MATTHEWS: Yes, you`re right. So, satire is hard to explain to
people.

CARLSON: John Oliver is brilliant. It`s full of substance. But you
can`t go to "David Letterman" and do -- you`ve got to stay somehow in some
character on "David Letterman."

MATTHEWS: Yes, I think. It`s a mix.

(CROSSTALK)

CARLSON: Yes, no. I mean, who is -- who (ph) they are on TV.

FEEHERY: In many ways, Washington is a self parody. So, if you try
to explain Washington to people, you`ll get a lot of laughs because people
aren`t going to believe you.

(CROSSTALK)

MATTHEWS: P.J. O`Rourke got a whole book, "Parliament of Whores",
which is all about how the federal government works. And it was ludicrous.

(CROSSTALK)

FEEHERY: Except it`s true.

MATTHEWS: It`s true. All the stupidity of it.

FEEHERY: Right.

MATTHEWS: So, we`re going to watch.

Do you know who`s getting better? Kimmel is getting better. He is.
Jimmy Kimmel is getting better. And, of course, Jimmy Fallon is a hit.

BACON: He`s still good.

MATTHEWS: They are all the talent -- but I think satire, I think the
nice thing about him, he`s played somebody of your political cut, perhaps
to you`re right. But he played it in a way that was so goofy but --

FEEHERY: And likable.

MATTHEWS: And likeable. Like he always said things that just weren`t
true. So, even the conservatives would say, well, that`s not true, and I`m
a conservative. And people would say, you know, I like this guy.

CARLSON: Think of what "The Daily Show" has produced in terms of
talent. I mean, our whole late night.

MATTHEWS: It`s great writers. Let`s not kid yourself, I wish the guy
the best. Anyway, he`s ending his show tonight.

Perry Bacon, my friend, and, of course, Margaret Carlson, my very old
-- well, a young person.

(LAUGHTER)

CARLSON: Young old.

MATTHEWS: And John Feehery, who was at the house last night for our
HARDBALL party. Thank you, all.

We`ll be right back.

BACON: Thank you.

(COMMERCIAL BREAK)

MATTHEWS: Let me finish tonight with a very nice fellow who happens
to be an historic figure now in American culture, Stephen Colbert.

I was invited on "The Colbert Report" a half dozen times and learned
firsthand how funny this guy is, also what a gentleman and what a good guy
the real and the fictional Stephen Colbert is.

Hank Stuver of "The Washington Post" today put him up there with Mark
Twain and Will Rogers, I can do no better than that. Can anyone?

Satire, of course, is a tough stage, as John S. Kaufman said, it
closes Saturday night, meaning a good show on Broadway, a satirical show
lasts no more than a week. Well, Stephen Colbert lasted almost 500 weeks.
Nine years he`s been on the air playing that stubborn, uninformed right
winger who is so wrong that he helps the rest of us get it right.

And not once can I remember him being truly mean in a business where
killing audiences is a say of saying you had a good night in comedy. He
made us happy, always happy, always feeling just a tad elevated because the
dunce he was playing was so hilariously out of it, stubbornly hilariously
out of it.

I thank Mr. Colbert for being so good, so good to us, so good -- if
I`m not being too pompous here -- for our country. Soon, we will learn who
the real Stephen Colbert is. I`m talking about when he takes over for
David Letterman. I think we`re going to like this guy a lot.

That`s HARDBALL for now. Thanks for being with us tonight.

And "ALL IN WITH CHRIS HAYES" starts right now.

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

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