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updated 9/10/2010 1:23:29 PM ET 2010-09-10T17:23:29

Guests: Savannah Guthrie, Lawrence O‘Donnell, Eugene Robinson, Amanda Drury, Ryan Grim, Steve McMahon, Leslie Sanchez

CHRIS MATTHEWS, HOST:  The firestarter.

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews in Washington. 

Leading off tonight: Who‘ll stop the fire?  What can the president do to stop the minister, the pastor down in Georgia—or actually, Florida—from burning Korans on worldwide television?  How do you stop the wildfire that this could ignite globally? 

Prime Minister Maliki of Iraq says there must be an intervention, that the burning of the Islamic religious book will, quote, “cause damage” in relations between East and West.  So what are they doing in the White House?  Aren‘t there ways to reach this pastor down in Florida and stop what the president says will be a recruitment bonanza for al Qaeda?

Well, moments ago, the pastor said that he‘s calling the whole thing off.  We‘ll have to find out the facts.  But that‘s our top story tonight.

Plus, they‘re ahead in the polls, so what will Republicans do if they take control of the government, of the U.S. Congress?  Here‘s what they‘re talking about doing—killing Obama health care, canceling what‘s left of the stimulus, and using subpoena power to investigate the White House.  One GOP lobbyist states it plainly.  Quote, “The goal, obviously, would be to make it a one-term presidency.”

Well, the leader of the campaign against President Obama would be the new Speaker, if he took office, John Boehner.  The president went directly after him yesterday.  We‘re going to ask the HARDBALL strategists whether it‘s good politics for the president to make Boehner the name and face of the Republican Party.  Do enough people even know who this guy is?

Also, remember this moment from Arizona governor Jan Brewer‘s debate last week?

Well, we don‘t quite have that.  Tonight—there was actually a brain freeze in that debate.  We‘ll show you later.  Tonight we‘re going to talk to the Democrat who hopes to unseat Governor Brewer, Arizona attorney general Terry Goddard.

And “Let Me Finish” tonight with a salute to President Obama‘s new political strategy.

Let‘s start with whether President Obama needs to get involved and stop the pastor from what he‘s up to down in Florida.  Lawrence O‘Donnell‘s the host of “THE LAST WORD,” which will debut later this month here on MSNBC.  And Savannah Guthrie covers the White House for NBC News and is the co-host of “THE DAILY RUNDOWN” on MSNBC.

First of all, Lawrence and Savannah, I want to give you some facts on this that I‘ve got, and that is that I‘ve interviewed that minister down there, Terry Jones.  I‘ve interviewed his colleague.  And never in all the conversations did they link their decision to burn the Koran on international television this Saturday, to honor, if you will, 9/11, with anything to do, really, with the mosque that‘s going to be a couple blocks away from 9/11, from the World Trade Center at Ground Zero.  No discussion as to whether that would be a negotiating point.

I asked the minister, Terry Jones, Is there anyone who could ask you not to do this?  He said, no, he‘s going to go ahead.  All of a sudden, they‘ve come up with this linkage here, maybe courtesy of some of the right-wing politicians in this country who have done a delightful job, I must say, of linking the two things very neatly for the handiwork of Terry Jones, who can now say, I‘m stopping the burning of the books because I‘ve a commitment now from the imam in New York, whether it‘s true or not, to stop the construction of the mosque.  Your thoughts, Lawrence, and then Savannah.

LAWRENCE O‘DONNELL, HOST, “THE LAST WORD”:  Well, you know, that‘s

just an attempt to turn it into some sort of blackmail exchange, Chris.  It

takes an ugly story and makes it uglier.  But you know, what—what he‘s -

what this guy‘s really going to do is—who knows.  I mean, it has that feeling of, you know, watching somebody on top of a building, you know, deciding, you know, is he going to jump, is he not going to jump?  And it looks like he‘s probably backing off now after his visit from the FBI today and whatever else is coming down on him.

But I think the big question for the White House is, what are you going to do on the next one of these things?  They were clearly not prepared to deal with this thing.  They‘ve been making it up a day at a time as they go along, just trying to get through the day.  This is going to happen again.  What is the White House strategic reaction to this happening again?

Is it good for General Petraeus to raise the visibility of this thing?  Is it good for Hillary Clinton to help raise the visibility of this thing, and the president to raise the visibility of it?  And Chris, I don‘t know the answer.  I think this is a difficult call, but I think they‘ve got to figure out going forward what is their strategy on handling these kinds of situations.

MATTHEWS:  Savannah, what were the tools were available to the president under the law?  It seems to me you‘re allowed to have an awful lot of free speech in our country, thank God.  But you also are limited.  You can‘t yell fire in a theater.

SAVANNAH GUTHRIE, NBC CORRESPONDENT:  Right.

MATTHEWS:  You can‘t incite immediate violence.  Isn‘t there evidence, based upon the fact that we‘ve got a travel advisory all over the world right now because of this, we‘ve gotten a warning from General Petraeus about this, we‘ve heard from Maliki about this, it‘s going to cause violence.  How much more evidence does the law need to hear that an act will incite violence?

GUTHRIE:  Well, I think those are the arguments that the government would make, should it be seeking to suppress this speech, to stop the burning of the Koran.  But there‘s no evidence the government is, in fact, trying to do that.  You‘d make those arguments, but as you pointed out, Chris, you have to show this very close causal link, that this was—this speech, in this case, the burning of the Koran, was likely to incite immediate harm.  It can‘t be some attenuated link.  It can‘t be something that seems speculative in nature.

MATTHEWS:  Right.

GUTHRIE:  So I think if the government sought to ban this speech, the arguments you lay out would be the ones they would make.  But you know, there was a Supreme Court case directly on point back in 2003 on the issue of cross burning.  And what the Court found—

MATTHEWS:  OK.  Let‘s go.

GUTHRIE:  -- there was—yes, you can—you can burn a cross. 

That‘s—

MATTHEWS:  Savannah—

GUTHRIE:  -- protected speech, but if there‘s an attempt to intimidate, that—

MATTHEWS:  OK, we‘ve got—

GUTHRIE:  -- is not protected speech.

MATTHEWS:  -- tape right now from the site.  Here is the minister himself talking.

(BEGIN VIDEO CLIP)

PASTOR TERRY JONES, DOVE WORLD OUTREACH CENTER:  -- especially me, if during this announcement, I get a little bit emotional.  This has been, of course, for us a very, very difficult, trying time.  We have been in very much thought and prayer over this whole period.  A lot of times, we were asked, What would it take to call this thing off?  We have thought it over many times.  We felt very convinced that we should do this.  We thought about what would have to happen for us to call our event off.

As we prayed about that in the past, we did have one idea, did this idea we put out in prayer to God, that if he would want us to call this off, if we have accomplished our goal, then our thought was the American people do not, as a whole, want the mosque at the Ground Zero location, that if they were willing to either cancel or move the mosque at the Ground Zero location, or if they were willing to move that location, if they were willing to move it away from that location, we would consider that a sign from God.

We have—or he has—been in contact with the imam in New York City.  I—with the imam here, I will be flying up there on Saturday to meet with the imam at the Ground Zero mosque.  He has agreed to move the location.  That, of course, cannot happen overnight, but he has agreed to move that.

We felt that that would be a sign that God would want us to do it.  The American people do not want the mosque there.  And of course, Muslims do not want us to burn the Koran.  The imam has agreed to move the mosque.  We have agreed to cancel our event on Saturday.  And on Saturday, I will be flying up there to meet with him.

(END VIDEO CLIP)

MATTHEWS:  Savannah—well, I just don‘t know what to make of this fellow.  We‘re getting evidence as we go along.  Here‘s the imam, a local imam.  In all the conversation we‘ve had with these people in the last couple of weeks now, and all the conversations anyone in the media has covered, there‘s been no linkage.

What do you make?  Is this guy just living off the land, just taking advantage of anything he can?  I mean, God wouldn‘t speak—well, it‘s up to everyone‘s religion what God says.  But the fact is, here he is saying if he can blackmail the people putting up the mosque near the World Trade Center site, that‘s a message from God that he shouldn‘t do something which is probably going to cost the lives of many people around the world.  Interesting way of dealing with God or even seeking intercession, I would say.

Go ahead.  Your thoughts.

GUTHRIE:  Well, it‘s interesting.  He‘s now, I guess—I don‘t know that it started this way, but it‘s ended this way, as you say, totally linked with the mosque, the pastor contending that he‘s now talked to this imam in New York City and they‘ve essentially made some kind of deal, some kind of trade.

I can also tell you there were reports that Secretary Gates was going to call this pastor this afternoon and implore him not to go forward with his demonstration.  So I‘m trying to firm up if that call actually did occur.

But in any event, I mean, some people have made this connection, and I suppose if you‘re going to make any connection, it is an example of a couple of different acts that some people find offensive that the federal government really can‘t do anything about it.  It does fall under that protected free speech.  And yet in both of these cases, you‘ve got people on either side of it who find it to be terribly offensive and wish the government would do something about it.

MATTHEWS:  Well, I know two people, Lawrence, who‘ve connected.  That‘s Boehner and Palin today, have both managed to draw these links together.  They hadn‘t been drawn by this pastor or his colleague, Pastor Sapp who was on the program the other night.  Never came up in their minds, but today it did come up.  This linkage was established publicly in the media.  He‘s grabbed onto it.  He‘s got his lifeboat, perhaps, you might say, and he‘s heard from the Lord.  Your thoughts.

O‘DONNELL:  Well—

MATTHEWS:  But by the way, just—just to get the spirit of this occasion, I‘ve been watching the tapes down there.  There‘s truthers—

O‘DONNELL:  Right.

MATTHEWS:  -- some truther nut running behind them with his big sign.  So it is a real jamboree of the nut parade down there.  They‘re all getting together now.  You got truthers out there now, with his claim that the whole 9/11 was done by Washington and whoever, not by the Islamic people.  So they got their wires crossed down there as to who the bad guys are.

O‘DONNELL:  Yes, that‘s the controlled demolition school of thought about what happened on 9/11 that he‘s attracting down there.

There isn‘t a reason to believe a single word he said.  Do we really believe that we just heard that the New York Islamic community center is going to be moved, that that deal has been made and this is the guy who made that deal?  He may think he made that deal.  He seems to imagine all sorts of things.  But it—there‘s absolutely no evidence indicating that that center would be moved in a situation like this or was going to be moved under any kind of this type of pressure.

So now we‘re going to sit here and we‘re going to wait and there‘s going to be a statement from the Islamic center in New York saying, you know, No, we‘re not moving.  That should be coming out, oh, I don‘t know, within the next few minutes.  Or you know, shock us all and say, yes, that‘s the deal.  We‘re suddenly moving because a crazy man in Florida has convinced us that moving it is a good idea when no one else could.

MATTHEWS:  Yes, let me go back to Savannah.  As for the build-up today by the White House—they‘re trying to deal through the powers of our limited government, and we do have a limited government.  Every time somebody says we got a socialist dictatorship in this country, they ought to be reminded of how limited the power of our government is.  It cannot stop a person from doing something that could cause a worldwide calamity.  It cannot stop BP from doing what it‘s doing.  It cannot stop a mosque from -- there‘s not a whole lot of power in the hands of the federal government, when you think about it, in this very free society.

But what were they trying to do?  What was Gibbs up to today?  What was Axelrod—what are they all trying to do to stop this, I think, dangerous act by this minister?

GUTHRIE:  Yes, I think it started with General Petraeus and then went through Hillary Clinton, the president himself, Gibbs, Axe (ph), frankly, any of them who‘ve been asked, and that is—it‘s kind of performing a shaming function, trying to pressure this pastor because he‘s—as you point out, the federal government doesn‘t have the power to stop this free speech.  And so what‘s left but persuasion?

And essentially, that‘s what you saw this administration trying to do.  Again, as I said, there was an expectation that Secretary Gates would be calling the pastor this afternoon, essentially calling the bluff, saying, All right, you said you wouldn‘t do it if you were asked.  Well, all right.  We‘ll ask.  So we‘ll see if we confirm that that conversation actually took place.

But I think that was the only tool left to the administration, was to try to convince this pastor not to do it.  At the same time, as you surely recognize, it‘s a real slippery slope because if any person that wants to threaten to burn a Koran or do any number of acts, things they can, by doing so, get the president on the phone or the secretary of defense or the secretary of state or anybody, you‘ve really opened the floodgates.  So it‘s not something that this administration would do lightly.

MATTHEWS:  Well, today I thought (INAUDIBLE) going to get—the guy was going to get the president on the phone, if the president was, I think, not smart enough to actually make the mistake of getting on the phone with this guy, he would begin exact demands.  And then the story would be the president could stop this burning if he met the following demands.  It‘s his fault.  He would have found himself an accomplice.  I think the White House was smart not getting on the phone with this customer.

Anyway, Lawrence O‘Donnell, Savannah Guthrie, stay with us.  This (INAUDIBLE) we‘re going—as Lawrence says, we‘re going to know in a few minutes whether reality bites.  We‘ll be right back with this pastor who was going to burn the bibles of the Islamic people.  Now he‘s not beginning to burn it.  He‘s going to New York.  He‘s got a ticket to New York.  He‘s going to go up there with his imam, trying to talk to the other imam, who he says a few minutes ago has agreed to move the mosque.

We‘ll be right back.

(COMMERCIAL BREAK)

MATTHEWS:  Well, finally, some positive news about the economy today.  The number of people signing up for unemployment benefits dropped down to the lowest in at least two months.  New claims plunged by 27,000.  Economists were predicting a much smaller drop of just 2,000.  Also, the trade deficit narrowed significantly this month as American exports did rise to their highest level in nearly two years.  American-made airplanes and other manufactured goods led the exports.  Imports actually declined.  Taken together, those headlines helped ease fears that the economy would slip into a second recession and could bolster Democratic hopes heading into the mid-terms.

HARDBALL back in a minute.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JONES:  The imam has agreed to move the mosque.  We have agreed to cancel our event on Saturday.  And on Saturday, I will be flying up there to meet with him.

(END VIDEO CLIP)

MATTHEWS:  We‘re back.  That was Pastor—that was the Pastor Terry Jones down in Florida, saying he has got the—he‘s called off the burning of his—of the Koran because he says the mosque will not be built.  He says that a deal has been struck with the imam up in New York to move the proposed mosque that was set—or is set to be built near Ground Zero.  Reuters, by the way, right now, in direct conflict to what the pastor just said on the air there, is reporting that sources close to the New York imam say there is no deal.

MSNBC‘s Lawrence O‘Donnell‘s with us.  He stayed with us, along with White House correspondent Savannah Guthrie.  Let me ask you—we‘re also joined right now by “The Washington Post‘s” Eugene Robinson, who‘s an MSNBC political analyst, and Ryan Grim of The Huffington Post.

You‘ve had a long history as an editor.

(LAUGHTER)

MATTHEWS:  No, I‘m dead—I‘m deadly serious about how news develops here.  This guy, if you listen to him closely—I don‘t want to speak disrespectfully of a man in the cloth, but there was a little bit of murkiness in what he said.  It‘s going to be difficult to move the location.

EUGENE ROBINSON, “WASHINGTON POST,” MSNBC POLITICAL ANALYST:  Yes.

MATTHEWS:  He may well have gotten the word from the imam, some perhaps dissembling, I‘ll be glad do meet with you on Saturday.  I‘m glad that you‘re open-hearted about this.  We‘re going to talk.  And now we‘re getting the word that there‘s no deal because it sounds like there isn‘t.

ROBINSON:  Well, you know, Reuters is reporting.  Reuters is a credible news source.  And the pastor, frankly, is not a credible news source.  I thought there was a bit of dissembling there, and I—

MATTHEWS:  OK, NBC—I‘m just getting through my ear, Gene, through the magic of television, now, NBC, my network, and Reuters are saying no deal. 

All we have on the other side is this minister who wanted to burn the Koran to cause a stink, and a war maybe.

(CROSSTALK)

MATTHEWS:  -- saying otherwise.

ROBINSON:  He actually has kind of a checkered past. 

He spent all those years in Germany and heading a flock over there in which he was—he seemed to have been more of a cult leader than a minister, as you and I would think of him.  He‘s not the most credible news source -- 

(CROSSTALK)

MATTHEWS:  Well, he‘s found a local imam to back up his story, Ryan.

How do we put all this together as it happens? 

GRIM:  Well, if you noticed, during his press conference, he said:  I didn‘t speak to the imam.  My friend—he pointed to somebody who was off camera. 

He pointed to somebody who was off camera.  So, he was even disavowing the conversation with the imam himself, just saying, well, I‘m traveling to New York. 

It sounds like your suspicion is the right one, that there probably will be some meeting in New York.  They might hash out some soft something.  But the idea that the imam over the phone committed to this guy is a pretty incredible one. 

MATTHEWS:  Lawrence, this seems like a feeble local attempt at shuttle diplomacy, if you will, without the help of George Mitchell or Henry Kissinger, where you have one imam talking to another imam, saying we‘re going to talk, but it may be a little difficult to move, but they have agreed to do it. 

It sounds like it‘s one of those things where different people are saying different things to different people.  But NBC is reporting at this moment, as is Reuters News Service, there is no deal to move the mosque. 

O‘DONNELL:  Chris, I have never had a HARDBALL prediction come true so fast. 

(LAUGHTER)

O‘DONNELL:  As soon as I heard what this guy said, I mean, as you—I didn‘t believe a word of it, said so, and that of course it would be disproven within minutes just by reporters making phone calls. 

Of course there‘s no deal.  I mean, they—you know this—this has been well-thought-out, the community center in Lower Manhattan.  The op-ed piece that the imam wrote in “The New York Times” made it very clear that it wasn‘t going to be moved.

And the notion that the single-most ridiculous person to enter this dialogue would suddenly be the one who got this thing to move, who got the previously impossible to happen to happen, was absurd on its face. 

The guy wanted to get out of this.  He desperately came up with some words to get out of doing it on 9/11.  Now that we will be showing that there‘s absolutely no deal, that everything he just said is untrue, maybe it‘s back on.  Maybe he‘s going to hold the Koran hostage for a couple of more days on whether or not he burns it. 

But obviously there was no deal.  And no one should have thought there was a deal based on anything he said. 

MATTHEWS:  Savannah, let me get back into this story here as this developed today.  Those watching this story or listening on the radio today have heard throughout the day the White House trying to find a way to stop this. 

The minister obviously felt some pressure from the outside.  He‘s not going to tell us what it is.  He felt it.  Do you know what the role was of the FBI today or any federal officials in addressing this situation on the ground? 

GUTHRIE:  Well, the FBI of course put out one of its alerts that some say are somewhat pro forma, but alerts about danger if this were to go forward. 

We know the State Department has issued a travel alert.  So, the concern is real.  It‘s not hypothetical.  They‘re very concerned.  We all know what happened in Denmark with the publication of the cartoon depicting Mohammed disparagingly and what happened after that.

So, there‘s a very real concern here.  And I think that this—the government, the State Department here at the White House, they have really been struggling with what—what they can do within the bounds of the law and, frankly, the Constitution, but also not wanting to set a precedent where everybody who has got an axe to grind, everybody who is willing to do a publicity stunt somehow gets an audience either directly with the president or even just gets the president‘s attention. 

So, I think it‘s been a very difficult situation for this administration.  And, as I said, there was an expectation that Secretary Robert Gates from the Defense Department would be calling this pastor and asking him not to go forward with those protests.  If that call happened, we haven‘t been able to firm that up yet. 

And of course we just showed the tape with the pastor.  He certainly didn‘t mention that as the reason for calling off this protest. 

MATTHEWS:  Ryan, you‘re in the business.  Huffington is online.  We live in an online world.  It‘s like we‘re all in the same big swimming pool.  And somebody threatens to throw a dead rat or a live snake in the pool, we‘re all going to pay attention. 

(LAUGHTER)

GRIM:  Yes. 

MATTHEWS:  Right?  There‘s no way to get away from that snake or that live—that dead rat or that live snake.  And that‘s all you have to be, is somebody is standing by this global pool and say, I‘m going to throw this thing in, and everybody is going to feel it. 

GRIM:  Well, this loony is breaking all the rules, though.

The way that a crazy person is supposed to become famous nowadays is to do something nuts on YouTube, and then everybody forwards it around for a week or so.  Then it winds up on cable.  Then people start talking about it.

This guy just shot right up there, because I guess what he was saying was so nuts.  And it is August, September.  It‘s recess.

(CROSSTALK)

MATTHEWS:  Look at this guy.  He thinks he‘s John Brown.  In his head, in his head, this guy thinks—

(CROSSTALK)

MATTHEWS:  Lawrence, you‘re laughing.  Look at this guy.  He thinks he‘s John Brown.

ROBINSON:  No, this is not just some stupid guy who bumbled into this.

MATTHEWS:  No.

ROBINSON:  This is an intelligent, manipulative guy. 

MATTHEWS:  Right. 

ROBINSON:  You should read what the British papers and the German magazines—

MATTHEWS:  With a messianic streak.

ROBINSON:  -- have been writing about his time in Cologne, Germany, where he was—he has a megalomaniacal streak.  And I think he knew exactly what he‘s doing.  And I think he knows exactly what he‘s doing. 

(CROSSTALK)

MATTHEWS:  There goes—

(CROSSTALK)

MATTHEWS:  -- always puts the right taste on this. 

(CROSSTALK)

ROBINSON:  What‘s he trying to do is make a linkage between himself, equates himself—

(CROSSTALK)

MATTHEWS:  Boehner provided the linkage today.  Ms. Palin, the former governor, put it out.  They were happy to give this guy his handiwork today, which was, there‘s a connection. 

I want to tell you, we have got him on tape, if anybody questions this, long interviews with him and his partner down there, Reverend—or, rather, Pastor Sapp—no mention of the mosque, all about—I asked, who do you respect?  George W.  If George W. told you not to do it, would you do it?  I would still do it. 

These guys were all along the line—now they found their life preserver thrown to them by the people on the right. 

Your thoughts, Ryan? 

GRIM:  Well, it really shows how easy it is to manipulate the media at this point.

Because there are so many people covering—covering this pool, everybody wants to—everybody wants to jump in there.  And you have these actor who are newsmakers, like Sarah Palin, like John Boehner, who are willing to play along with this sort of thing.  

(CROSSTALK)

GRIM:  And that makes it news.

(CROSSTALK)

MATTHEWS:  Lawrence, last thought here. 

What public good did Boehner or Palin do by linking the mosque with this absurdity, this attempt to ruin everything in the world by saying to the Islamic world: “Yes,, we‘re over there feeding you guys, trying to get you an electric grid, trying to get you to the hospital, taking care of your wounded.  We really care about your country.  We‘re trying to protect you from terrorism.  Oh, by the way, we hate your God and we‘re going to burn the Bible on world television.  And we‘re going to give you just what the enemy wants”?

This could have been bin Laden‘s favorite weekend—second favorite. 

O‘DONNELL:  Yes, I mean, it seems like Boehner and Palin painted the imaginary route out of this situation for this guy. 

He heard them say that.  And then he said, OK, well, now that‘s my position.  I‘m going to trade my burning of the Koran for the moving of the mosque.  And he in his imagination has achieved that.  And so now he can call it off.

So, I definitely think that what you saw in his press statement today was a road map laid out for him by John Boehner and Sarah Palin. 

MATTHEWS:  Well, we have the cotillion of the culture war all together here now. 

(LAUGHTER)

MATTHEWS:  Anyway, thank you, Gene Robinson. 

Thank you, Ryan Grim of Huffington Post.

We were trying to get Arianna on tonight, by the way.  She‘s so busy. 

(LAUGHTER)

MATTHEWS:  Anyway, Lawrence O‘Donnell, Savannah Guthrie.

Stay with us.  We will have much more on this decision by Pastor Terry Jones to cancel his Koran burning, under the premise that they‘re getting the mosque to move, although that‘s not what we‘re reporting.  The mosque is not moving.  But Pastor Terry Jones is going to New York this Saturday to preside over it not moving, apparently. 

You‘re watching HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

PASTOR TERRY JONES, DOVE WORLD OUTREACH CENTER:  The imam has agreed to move the mosque.  We have agreed to cancel our event on Saturday.  And, on Saturday, I will be flying up there to meet with him. 

(END VIDEO CLIP)

MATTHEWS:  Well, we‘re in the middle of a news rumble right now.  There‘s the—the guy speaking on camera there, Terry Jones, the pastor who has ignited this fury over his plan to burn copies of the Koran this coming Saturday to commemorate 9/11, saying that he‘s struck a deal with the builders of the mosque two blocks from Ground Zero in New York, saying that a deal has been struck. 

He‘s going up on Saturday to ratify it.  Well, it turns out that that deal has not been struck.  According to Reuters, according to NBC, according to local WNBC, there is no such deal.  Sources all around the imam in New York say this is totally untrue. 

So, we are going to find out, as the news develops here, whether this man is going to go back to his plan to burn the Koran or several Korans or whether he‘s going to get the truth pushed out of him by the media, because, certainly, we‘re going to do our best to keep the pressure and to find out what exactly is going on here. 

You will notice, as we showed those pictures, that there were truthers wandering behind the reverend down there, the most extreme viewers, by the way, who believe that the American government blew up the buildings on 9/11.  There they are, the controlled demolition theory.  We have dealt with them before. 

We will be right back with more HARDBALL in the middle of this, as I said, rumble over the facts.  We will be right back.

(COMMERCIAL BREAK)

AMANDA DRURY, CNBC CORRESPONDENT:  I‘m Amanda Drury with your CNBC “Market Wrap.”

Well, stocks extending Wednesday‘s rally, but finishing well off their highs for the day, the Dow adding 28 points, the S&P 500 tacking on five, and the Nasdaq climbing by seven. 

Stocks started off strong on a bigger-than-expected drop in new jobless claims last week.  That‘s three weeks in a row of better-than-expected numbers pushing new claims to a two-month low.

But banks of all shapes and sizes were in the spotlight starting around midday, Deutsche Bank, well, those shares tumbling as it tried to raise about $11.5 billion through a stock sale.  But a number of smaller banks surged after a key analyst published a list of possible big bank takeover targets.

McDonald‘s shares, meantime, skidded on soft sales numbers out of Europe.  But Adobe shares jumped more than 12 percent after Apple said developers could start using its flash software to build new apps for the iPhone. 

That‘s it from CNBC.  We are first in business worldwide.  Now it is back to HARDBALL. 

MATTHEWS:  Democratic strategist Steve McMahon joins us now, along with Republican strategist Leslie Sanchez.

You know, this is one of those moments where, OK, I‘m going to take you on, Leslie, here.  Ready?

LESLIE SANCHEZ, REPUBLICAN STRATEGIST:  All right. 

MATTHEWS:  I think that people like Boehner and Sarah Palin are the first people in the news cycle to put out the word there‘s some linkage between burning the Koran on national—international television and the mosque a couple blocks away from the World Trade Centers. 

And now these people down there, this minister, discovered, hey, this is handy.  I will trade one for the other.  It turns out the trade wasn‘t real, but at least he‘s pretending. 

Your thoughts about accomplices before—accessories before and after the fact here. 

SANCHEZ:  I think that‘s a stretch. 

(CROSSTALK)

MATTHEWS:  Why is that a stretch? 

SANCHEZ:  Because—

MATTHEWS:  Have you ever heard these ministers talk about a link with the mosque before Mr. Boehner or Sarah Palin mentioned it? 

SANCHEZ:  Well, I don‘t read everything with the mosque. 

But let‘s look at the realities. You have got 50 people in a garage that say these crazy things and, all of a sudden, we have all the networks, the president, and everybody responding to them. 

Look at it for what it really is. 

(CROSSTALK)

MATTHEWS:  So, is Sarah Palin one of the 50 crazy people in the mosque, or what?

SANCHEZ:  I think what is interesting is that Sarah Palin is brought up again.  She puts a tweet out there.  She starts talking about it, and everybody wants to say she has directed and shaped this debate.

MATTHEWS: “People have a constitutional right to burn a Koran if they want to, but doing so is insensitive”—I would say it‘s more than insensitive—“and an unnecessary provocation.” 

That‘s pretty soft language compared to the way she talked about the mosque. 

SANCHEZ:  They‘re—not judging her, it‘s the fact—

MATTHEWS:  It‘s insensitive?  We have a travel alert.

(CROSSTALK)

SANCHEZ:  But why pick out Sarah Palin?  I guess that‘s my point.

MATTHEWS:  Because I‘m looking at the news that came in this morning. 

And, all of a sudden, she‘s getting her fingers into this thing. 

Your thoughts, Steve. 

I think it‘s incredible that she would be so soft—taking such a soft line on this guy burning the Koran, because you never attack to the right when you‘re on the right.  That‘s what I think is going on here. 

SANCHEZ:  But for what political purpose?  That‘s what I‘m saying.

(CROSSTALK)

MATTHEWS:  -- with as far out, with as far out with the fringe as she can, because that‘s her base. 

(CROSSTALK)

STEVE MCMAHON, DEMOCRATIC STRATEGIST:  That‘s right.  It‘s not just her base.  It‘s the people that are taking over the party.  It‘s the Glenn Beck, Rush Limbaugh -- 

MATTHEWS:  You can‘t hurt by being friendly with the right. 

MCMAHON:  --. base of the Republican Party.  

Exactly.  You cannot be too far right, because especially if you‘re thinking about running for president or if you want to have a controversial talk show on FOX, you need to do these things.  And they generate headlines.  They get people like us talking.  And it works for Sarah Palin, who wants to be an entertainer and a provocateur.

I‘m not sure it works very well if she wants to be the president of the United States. 

MATTHEWS:  Do you think that‘s a statement you could live with, Leslie, people have a constitutional right to burn a Koran if they want to?  Do you like the phraseology there?  People have a constitutional right to burn a Koran if they want to?  Do you like that—

(CROSSTALK)

SANCHEZ:  First off, I‘m not going to put Sarah Palin‘s words in my mouth.  Let‘s put it that way. 

MATTHEWS:  OK.  Good.

SANCHEZ:  I can speak for myself. 

But I will say this much.  I think you play too much into this game that Sarah Palin wants you to do, which is—talking from a conservative Republican perspective, I think we were very clear, both bipartisanly, from a bipartisan perspective, of how people felt about how ludicrous his statements were and his actions to be. 

MATTHEWS:  Whose were?

SANCHEZ:  The reverend in this case. 

MATTHEWS:  Sure.

SANCHEZ:  And I think why can‘t we talk in solidarity about that? 

It‘s all this—this ruse that it‘s Sarah Palin pulling the strings -

-

(CROSSTALK)

MATTHEWS:  I just want to know—I will go back to my question—why did she throw him the life jacket and say, put this on, tie it to the mosque?  Why did she do that?  Why did Boehner do that?

Nobody else was doing it in the media.  I wasn‘t drawing the connection. 

SANCHEZ:  She—

MATTHEWS:  These characters were sitting, were on the show right here, talking to me, both these pastors, Sapp and Jones—neither one of them mentioned the mosque.  Both long interviews.

I said, is there anyone who could appeal to, we could appeal to you to stop this?  Or any—nobody mentioned the mosque until today, after these stories moved by your—people on the far right.  Not on the right.  People like Boehner, just a Republican golfer.

(LAUGHTER)

SANCHEZ:  Well, the tan is important.  But to be fair to that point, I think a lot of people were talking about it.  If you want to see that‘s a lifeline, I think you‘re going to see it regardless of anything that I have to say.

MCMAHON:  It‘s interesting—it‘s interesting here, though, if people continue to draw a connection between the actions and the words of John Boehner and Sarah Palin and suggest that somehow the leaders of the Republican Party and the woman who is the frontrunner for the Republican nomination for president—I mean, that‘s why this makes so much news—if there‘s some suggestion that the Republican Party is sort of behind this guy, and manipulating this guy, I think it further alienates the Republican Party—

SANCHEZ:  Further.

MCMAHON:  -- from the majority of Americans who feel differently about this.

(CROSSTALK)

MATTHEWS:  There‘s a big difference between the difficult question of building a mosque a couple blocks from the World Trade Center, which I‘ve always said on this program is a difficult question.  I‘ve admired Michael Bloomberg for the courageous position he‘s taken given the fact of his job up there.  But I think there‘s two sides of that argument.

Can we agree there‘s no two sides to the argument about burning religious books on world television?  Can we agree on it?

MCMAHON:  Yes.  Yes, we can agree.

MATTHEWS:  OK.  We just got the word that Gates—Secretary Gates did make a call to the reverend to try to smooth this thing out or end this thing.  Maybe that was influential.

Here‘s John Boehner making the point I was trying to relate to here, conflating—there‘s a word I don‘t like, but it‘s big these days on the right—conflating Koran-burning with the Islamic center near Ground Zero.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), MINORITY LEADER:  To Pastor Jones and those who want to build the mosque, just because you have a right to do something in America, does not mean it is the right thing to do.

(END VIDEO CLIP)

MATTHEWS:  That was healthy.  We call that in the NBA, an assist.

(LAUGHTER)

MATTHEWS:  That‘s called an assist.

SANCHEZ:  No, I mean—

MATTHEWS:  Or an alley-hoop actually.

SANCHEZ:  Wow.

MATTHEWS:  Get it near the top of the rim so the other guy can put it in.

SANCHEZ:  Still, it‘s really hard to believe that Reverend Jones can come up with these ideas, these ludicrous statements.  All our national leaders are responding to and the media is giving the attention to him.  You can go back and say it‘s Sarah Palin on top of the ticket by history, not necessarily by polling and choice today.  I think we‘re going to see more, who‘s really going to be at the top of the ticket.

MCMAHON:  What we‘re seeing now is she‘s the front-runner.

SANCHEZ:  Sarah Palin has a very important role in the Republican Party.  She sheds light on important issue.

MATTHEWS:  You think she‘d be good on the ticket?

(CROSSTALK)

SANCHEZ:  I think if she prepares herself and chooses to go that direction, she‘s going to have to work harder to get there.

MCMAHON:  That‘s what they call a condition contrary to fact right there—if she prepares herself.  She‘s not—she hasn‘t shown any evidence that she‘s preparing herself for anything other than talk show.

SANCHEZ:  She‘s making an impact in the conservative movement.  She‘s making a lot of money.  She‘s taking care of her family.  She‘s going to do what she likes to do.

(CROSSTALK)

MATTHEWS:  Do you if elephants can fly, they‘ll be getting in the way of air traffic?

SANCHEZ:  I didn‘t—I didn‘t hear you.

MATTHEWS:  You said if Sarah Palin did her homework, she‘d be a good candidate.  I said if elephants can fly, will they get in the way of air traffic?  This is a reasonable question.  You know what I‘m—what do you call it, conditional?

OK.  We‘re going to try to get back to this thing.  We‘re watching the news tonight.  (AUDIO BREAK) the air.  We watched the Reverend Terry Jones along with an imam, a local imam apparently, announce that they‘ve struck a deal.  Within minutes, we get the word from “Reuters” and then from NBC News and then from local WNBC in New York that there‘s no such deal based upon the best sourcing anybody has gotten.

Is this media manipulation by this guy?  Is he just looking for a way out?  Has somebody got something on him and he‘s looking—let me go to you because you‘re in public relations.  Is this guy looking for a way out that‘s why he said there was a deal?

           

MCMAHON:  I think he was looking for a way out.  It‘s possible that he spoke to local leaders in Florida who suggested to him that a deal is possible and the deal is going to be done.

MATTHEWS:  So, go after—

MCMAHON:  And then he announced it and he linked it and he did everything that John Boehner and Sarah Palin suggested he should do.

SANCHEZ:  Oh, my -- 

(CROSSTALK)

MCMAHON:  I‘m kidding.

MATTHEWS:  They didn‘t suggest.  They didn‘t call him up and say here‘s a way out of your problem.

MCMAHON:  It‘s just a coincidence—

SANCHEZ:  I‘m sure we‘ll tap the phones and find out.  But no, that‘s not—

MCMAHON:  He was looking for a way out.  The president of the United States made an appeal to him.

(CROSSTALK)

SANCHEZ:  How can we pretend—how can we pretend that we know anything that he‘s going to do?  That‘s what‘s the logic—

MATTHEWS:  We‘re going to find out.  We‘re going to find out.

Let me tell you something about our country, which is difficult but wonderful.  We live in a free country.  You can be a fool in this country.  You can be dangerous in this country.  And it‘s very difficult to stop.

The president of the United States with a huge army, with huge police powers and everything else is limited in his powers.  It‘s a wonderful thing to watch.

Maliki can‘t understand it.  The prime minister of Iraq said today, “Why don‘t you stop this guy?”  He can‘t.  There are things the president can‘t do.  And all this talk on the right that he‘s some kind of dictator.  He‘s a big socialist ruling the world with giant government control in every part of our life, there‘s very little thing—few things that a president can do to go after somebody he doesn‘t like.  Not like doing something he doesn‘t like.

Isn‘t that wonderful in a weird way?

SANCHEZ:  No, but he doesn‘t—I agree with you completely here.  But he is engaging in this.  He is fuelling the fire.

MATTHEWS:  How so?

MCMAHON:  No, no, no.  He‘s engaging in—

(CROSSTALK)

SANCHEZ:  Engaging in this communication and this dialogue.  And the fact—I mean, nobody questions why this gentleman is commanding so much attention?  We know what he‘s doing.  We know it‘s foolish and we‘re still treating it as—

MATTHEWS:  Do you think—do you think that General Petraeus was wrong to issue the statement that this endangers his troops?

SANCHEZ:  I think the bigger issue is—

MATTHEWS:  No, answer that question.

SANCHEZ:  I think that—

MATTHEWS:  Because that‘s how this started.

(CROSSTALK)

SANCHEZ:  All of us have a responsibility.  People in the media—I

do.  I think a lot of people

MATTHEWS:  Was Petraeus wrong to make a statement—

SANCHEZ:  -- agree with that to—everybody has been ratcheting this up.  There‘s mud on everybody‘s boots.  I do—

(CROSSTALK)

MATTHEWS:  Do you think Petraeus was wrong to make this statement without clarifying—

MCMAHON:  No, I don‘t.  And I—

MATTHEWS:  He was right to say it‘s a danger to the troops.

MCMAHON:  Well, first of all, it‘s true.

MATTHEWS:  Yes.

MCMAHON:  There‘s every—there‘s every reason to believe it‘s true.  And I think the president of the United States was doing what we elected him to do.  He was being a leader.  And he was taking, in the case of the mosque, an unpopular political position, and in this case, I think a political position that is only unpopular among a very few on the right.

MATTHEWS:  OK.  Let‘s see what happens in the next couple of hours or maybe sooner, Leslie and Steve, when the minister down there, I have not said a word against him really, Terry Jones, finds out that there is no deal and that the public on this program and elsewhere announcing, NBC News is announcing, “Reuters” is announcing, there is no deal.  You were shown to be wrong, in the error.  Perhaps B.S.-ing us down there, and we‘ll see what he does about that.

Thank you, Steve McMahon.

Thank you, Leslie Sanchez.  You‘ve been very careful about General Petraeus.

Back with more on Pastor Jones in Florida who apparently canceled his Koran-burning on a promise that the mosque near Ground Zero, two blocks away in New York, will move.  However, we‘re yet to hear any confirmation of that from New York.

And here‘s the statement from the mosque.  There‘s been no personal interaction or conversation between the initiative and Florida pastor, Terry Jones.  That means no conversations about moving the mosque at all.  Not even talk.

HARDBALL returns after this.

(COMMERCIAL BREAK)

MATTHEWS:  We‘re in one of those strange moments in the news business when the news is conflicting.  We‘ve got Terry Jones down in Florida saying he has a deal to stop the building of the mosque near Ground Zero in exchange for him not burning those Korans, the religious holy book of the Islamic faith on international television this Saturday.  However, all the news coming out of New York is there has been in conversation between Terry Jones, the minister, and the people building the mosque.

So, we have a conflict in fact right now.  And we‘re going to follow it for the next couple of hours until we find out who‘s telling the truth.  I‘m betting on the fact that our news sources are accurate.  There is no deal.  We‘ll see how the reverend, Terry Jones, reacts to that news development.

Back in a minute with more HARDBALL as we follow this story.

(COMMERCIAL BREAK)

MATTHEWS:  Well, I‘ve got to try to clarify perhaps the politics of this.  It is tricky.  Here‘s John Boehner, the Republican leader in the House, saying, “To Pastor Jones and those who want to build the mosque, just because you have a right to do something doesn‘t mean it is the right thing today.”  Here he is today tying together these two questions.

And then you have Sarah Palin on her Facebook page this morning saying, “People have a constitutional right to burn a Koran if they want to, but doing so is insensitive and unnecessary provocation, much like building a mosque on Ground Zero.”

Certainly, we have two people on the right deciding to link these two issues publicly.  After the Reverend Terry Jones down in Florida today, just an hour or so ago, said he wasn‘t going to go ahead because he has some kind of agreement to stop the mosque construction, although that is really being challenged by the news we‘re getting, put out this on her tweet.  Is it twitter or tweet?  Just kidding.

“Book burner stands down.  Good, now followers of book who want to kill innocents because some people do things you don‘t agree with, stand down.”

Well, she‘s right in the middle of this thing.  Your thought, Ryan?

RYAN GRIM, THE HUFFINGTON POST:  Well, let‘s talk about how these things are not remotely similar.  Building and going to a mosque is a fundamental part of the Islamic religion.  It‘s part of it.  Without mosques, you don‘t have a place to worship.

Burning Korans is not part of the Christian religion.  You can be a Christian and not burn Korans.  You cannot be—or I suppose, I mean, you can be a Muslim without going to a mosque, but a mosque is an awfully important part of being Muslim.

So, to try to equate these two things as equally offensive to members of other religion is grotesque.

MATTHEWS:  Isn‘t the mosque—in all fairness, isn‘t the mosque construction two blocks from 9/11, Ground Zero, a bit murkier morally?

GRIM:  No, no, no.

MATTHEWS:  Is that a simple case of wanting to worship or wanting to worship at a particular site?

GRIM:  No, there‘s already a mosque somewhere near there.  There‘s nothing murky about this and they‘re also objecting to mosques in Tennessee and elsewhere.

MATTHEWS:  I know that part.

GRIM:  I mean, there—

MATTHEWS:  But there are a lot of people who are reasonable, that I think are reasonable, disagree with the—Gene, get in here.

(CROSSTALK)

MATTHEWS:  I‘ve always said of this mosque construction—I mean, I‘m with Mayor Bloomberg.  I think he‘s been right in terms of the position he‘s taken.  But in terms of the issue, I understand why people argue about this thing.

ROBINSON:  I‘ve had a hard time—I‘ve had a hard time understanding why, I respect the fact that some people of goodwill feel passionately about it, I‘ve had a hard time really understanding and internalizing that argument.  I don‘t see—I don‘t see it as offensive.  I don‘t see it as, you know, it‘s in the fabric of Manhattan, a block takes you into another city, another world.  I mean, and the idea that because something is two blocks away it‘s at Ground Zero is—

MATTHEWS:  I know that.

ROBINSON:  I mean, it‘s not true.

MATTHEWS:  Once it got joined, it began building a mosque on 9/11, building a mosque on Ground Zero.

(CROSSTALK)

ROBINSON:  Exactly, and it‘s just not.

MATTHEWS:  OK.  Let‘s talk about the other issue.

ROBINSON:  Yes.

MATTHEWS:  The issue on the table right now is right now—we‘re going to have to go to break.  We‘ll be right back.

(COMMERCIAL BREAK)

MATTHEWS:  Well, now, we have some clarity.  That imam standing next to Pastor Terry Jones down in Florida just about an hour ago that made this statement or seemed to be making a statement confirming what Pastor Terry Jones said, that there was an agreement not to build the mosque in exchange for him, Terry Jones, not burning those Korans on Saturday was not a deal.  It was simply a deal that he thinks he‘s got arranged for a meeting to occur between the minister there—you‘re looking at him right now—and the imam up in New York who‘s building the conference center.

Let me go right now to Savannah Guthrie on this.

It seems like we‘re getting clarity.  Let me read you the “AP” story.  “The Florida imam says that no deal has been reached to move the site of a mosque at the site of Ground Zero in exchange for a Florida minister to call off plans to burn Korans.  Imam Muhammad Musri tells the ‘Associated Press‘ that what he offered was a meeting among Terry Jones, the New York imam planning the Islamic center and himself to talk about the mosque location.”

So there, we‘re getting clarity.  It was not offered to us in that presser held by the minister.

GUTHRIE:  Yes.  So, it wasn‘t a quid pro quo.  I think this is the exact thing you thought might have happened.  And it appears that‘s exactly -- it was a little bit of a misunderstanding where this pastor thought he had some kind of deal, but in fact, all he‘s got is a deal to have a meeting with, it sounds like, this imam in New York city on Saturday.

And apparently, on the basis of thinking that the mosque was off entirely, this pastor was willing not to do the Koran-burning demonstration, you wonder what will happen now in light of these facts if he‘s going to come back out and say, well, I was wrong, and so, therefore, my demonstration goes forward.

I will say we were able to confirm that Defense Secretary Gates did call this pastor this afternoon.  I know this was a piece of tape we got of the pastor.  I‘d be curious to know the timing.  I‘m trying to figure that out because I thought it notable that as far as what we saw, the pastor didn‘t mention anything about getting a call from the secretary of defense for the United States, didn‘t say whether or not that had influenced his thinking at all.  He seemed to hang it on all this notion of, well, if they don‘t build a mosque, then we won‘t burn Korans.

MATTHEWS:  Right.  We‘ll have to put it all together as we go on tonight.

Thank you so much, Savannah Guthrie—

GUTHRIE:  Sure.

MATTHEWS:  -- NBC News correspondent at the White House, Eugene Robinson of “The Washington Post,” and Ryan Grim of the “Huffington Post.”

That‘s HARDBALL for now.  Thanks for being with us.  We‘ll be live at 7:00 tonight, 7:00 Eastern.  HARDBALL, the big edition, tonight.

Coming up right now: “THE ED SHOW” with Ed Schultz.

           

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