Now, what the administration argued was that in the aftermath of 9/11 when we believed there was an impending attack, another series of attacks coming, that it was their responsibility, based on what the Congress approved in terms of the president‘s ability to conduct the war against al Qaeda, to use other means and other steps to make sure there wasn‘t a presence inside the United States.

CRESSEY: Well, you have the foreign intelligence surveillance court, the FISA court, that the Justice Department would tee up these requests and then the FISA court would approve it. The FISA Act from 1978 says very explicitly, you need a court order if you‘re going to look at U.S. citizens.

In other words, the judicial oversight was there. Why did the NSA drop that judicial oversight or have it dropped?

MATTHEWS: Prior to 9/11, I understand, the law was that whenever the National Security Agency, which does electronic surveillance of people overseas and spies, of course, that is their job, had to get a warrant from a judge or from a secret panel actually. It was a secret foreign panel involved with this kind of investigation.

CRESSEY: A sleeper cell is a group of individuals in the United States, terrorist operatives, who are planning to conduct attacks, but are not known to law enforcement and not known to the intelligence community.

The second part of it, of course, is intelligence collection that we are doing overseas that leads us back to the United States. The great unknown what Bob Mueller, the director of the FBI, has said on a regular basis is that do we have sleeper cells inside the United States? And the objective of this type of operation...

CRESSEY: I think you see it from several areas. One, of course, is just the informant network that the FBI and other law enforcement has developed.

MATTHEWS: When did we first get the idea in the U.S. Government that these Islamic groups, the religious groups, social groups, political noise making groups, whatever you are going to call them, pressure groups were involved or potentially involved with a terrorist like al Qaeda?

They believe like Abu Zubaydah, who was captured overseas, he had telephone numbers and other information that the intelligence community wanted to pick up on based on what was in the United States. So from their perspective they are going to argue that getting information on individuals in the United States who might have been communicating with al Qaeda operatives was the objective here. Whether or not it was done properly, I think, is going to be the big issue.

CRESSEY: The administration is not going to say whether or not they have. What we have seen the news reporting today though is that they‘re referring to the Aiman Pharus (ph) operation that was partially disrupted due to this.

MATTHEWS: Did we catch anybody during the course of these eavesdropping, these wiretaps, et cetera? Checking in on email, did we catch any of these Islamic groups that are active with the regard to the whole political scene in terms of the east and west?

Well, in the aftermath of 9/11 one of the big issues was were we facing another attack, was there an impending attack. And so there was discussions about what do we do to try and track down if there was any al Qaeda presence in the United States or individuals in the United States communicating with al Qaeda operatives overseas.

MATTHEWS: Do you remember this decision by the president to allow National Security Agency electronic surveillance of American groups?

But first Roger Cressey was working in the White House in the months right after the 9/11 attacks. The same time that “The New York Times” reports President Bush authorized spying on American citizens. Roger Cressey is now an NBC News counter terrorism analyst.

And this afternoon in a defeat for the president, the Senate rejected reauthorization of the Patriot Act. We‘ll talk to two U.S. senators later in the show about these breaking stories.

Republican Senator Arlen Specter, the chairman of the Judiciary Committee, put the Bush administration on notice that his panel will hold oversight hearings into the matter.

Secret wiretaps. Today “The New York Times” reports that in the aftermath of September 11 th President Bush secretly authorized the National Security Agency to spy on American citizens in an effort to search for evidence of terrorist activity.

CHRIS MATTHEWS, MSNBC ANCHOR: Tonight triumph and trouble on the day after the huge Iraq vote. Word that the National Security Agency has been spying on Americans and that President Bush approved it.

MATTHEWS: But I understand these court orders were easy to get. All the National Security Agency or anyone else in the spook business had to do was go to this court say we think this person is involved with some international group or terrorist organization. Can we check their wires? Can we tap them?

And I understand that almost all the cases they got the OK from this group. Why did they circumvent it?

CRESSEY: I think, the issue that is going to be discussed by the Hill and by others is that was there proper authorization and then was there proper oversight?

I can make a very good policy case of the need to do this right after 9/11. The question is, Chris, once we got past that window of an impending attack, when we thought there was an attack, why didn‘t they go to Congress to seek a change to the FISA Act or put in place other oversight mechanisms, which, according to “The New York Times” report, didn‘t come into place until 2004.

MATTHEWS: So this is the way it works right now. We have the National Security Agency, which does wiretaps internationally, checks on people‘s emails internationally. The way it‘s working now they feel free, because the president approved it, to check on our emails, to check on our telephone lines.

CRESSEY: I think...

MATTHEWS: That‘s what‘s going on now, right, Roger?

CRESSEY: But there is greater oversight now is the difference compared to 2000.

MATTHEWS: Well we will know where there is any oversight because the chairman of the Judiciary Committee is going to find out if there is.

CRESSEY: That‘s right.

MATTHEWS: OK. Thank you very much, Roger Cressey. It‘s great having you.

Right now, we are joined by NBC‘s Tom Brokaw. He has a special on Sunday night on a group of Iraq war veterans. Tom Brokaw reports “To War and Back” it‘s called. It airs this Sunday night at 8:00 p.m. on NBC.

Tom, thank you for joining us from New York.

TOM BROKAW, NBC NEWS: My pleasure, Chris.

MATTHEWS: Let me ask you about some of these big stories we‘re been covering right now.

First of all, the NSA story, the National Security Agency. How do you put that in perspective given what we‘ve been through with Nixon and other presidents?

BROKAW: Well, I think that probably we have to assess what the public reaction to this is going to be. And my guess is that they are sorting it out across the country.

And on the first pass I would think that a lot of people are saying well, of course we should have done that. We had just been attacked. We didn‘t know a lot about these groups, about the sleeper cells. We were told they were here. We needed to know what was going on, and we have this capacity.

Now what Roger talked about just a moment ago. That‘s the real $64,000 question. Once that window closed, why did it continue in an unmonitored fashion without any kind of real oversight and without going through the normal legal process? And that‘s what has to be sorted out here.

MATTHEWS: And we do know that they briefed at least the chairs of the intelligence committees on the Hill at the time they implemented this change.

BROKAW: Well, look, there is still a lot for us to find out about this. But we were at war against an unknown enemy that came as a surprise attack on us. Now, a lot of people will be saying, well, we should have known about that. Maybe if we had been doing that kind of monitoring beforehand we might have gotten a tip to that.

But the question is based on what we know already about what happened pre-9/11 even if we had gotten that tip, there is some question about whether the agencies would have acted on it. Because the FBI was throwing out warnings from Phoenix and from Minneapolis and other places. And people weren‘t responding to it.

I do think that this is the kind of process that this country has to go through, Chris, and the country will be paying very careful attention to what the procedures are on the hill.

Let me just also say something else that the administration can‘t win. They have, by, however you feel about the war, they have inarguably a very good day in Iraq yesterday. They wake up this morning thinking that they are going to be able to go on the morning talk shows and talk about millions of people voting, including the Sunnis in Iraq.

And the first thing they read is “The New York Times” disclosing that they had been using the NSA outside what we know to be the limits of the law to monitor telephone calls and other domestic enterprises, including email.

MATTHEWS: And they have to wonder, I guess, given the skepticism they have toward the media, why an enterprise piece like this would run on the very day of their greatest triumph?

BROKAW: Well, I think that they probably have come to some conclusions about that within the White House itself. On the other hand, “The New York Times” says that it sat on the story for a long time because national security was involved.

MATTHEWS: Let me ask you about a story that may be easier to put in perspective. That‘s the Lisa Myers report that came out the other day that not that they are spying on these Islamic groups that may or may not have probable cause to believe have something to do with terrorism, but also they are looking into peace groups like the Quaker religious groups, the Quaker meetings down in Florida.

What do you make of that effort by the administration to put those people under surveillance?

BROKAW: Well, I think that there is always a fair amount of tension during times like this. You can go back to Vietnam and remember all the surveillance that was conducted on organizations that were not worthy of that kind of surveillance.

What I think is important in the Democratic republic is that we are able to report on it, that Lisa did, to call the administration on it and find out what they were up to and hope that the Hill will respond in some fashion with hearings and to stay on the story.

Again, I don‘t know in that case how tightly woven the fabric of spying was, which I think is important. Was it an isolated case? Did they pick out just a couple of groups? Were there kind of overeager agents involved in making those decisions? That‘s often the case. You get kind of a rogue bureaucrat of some kind.

And in the case of the NSA that was not the decision that was being made. In the case of the NSA that was a deliberate administration policy involving the most sophisticated monitoring agency in the world, which is to direct its efforts at foreign governments and foreign espionage.

MATTHEWS: Well, we have the Pentagon looking at war protesters. But also the other perhaps more troubling issue of hiring people to ghost write articles. They are using people within the military to ghost write articles and then have Iraqi bylines attached to them and run in Arab newspapers in the Iraqi region. Do you think that‘s a bigger problem?

BROKAW: No. I don‘t think that‘s a bigger problem than the NSA monitoring domestic e-mails and domestic telephone calls. We‘ve got to get to the bottom of all this. Don Rumsfeld the other day was plainly frustrated when he complained that we haven‘t gotten to the bottom of those so-called planted stories yet.

When you‘re at war in areas like Iraq, kind of all barriers are dropped, Chris, and they‘re doing whatever they can to win the propaganda war. It cuts both ways over there. You know, there are a lot of newspapers that are now being published. Who is publishing them. What is their intent? What is the propaganda war that is being waged on their ground?

I don‘t think that it‘s appropriate for the Pentagon to be doing that kind of thing, but at the same time I think in the larger scheme of the war, it‘s not an issue that troubles me nearly as much as the idea of the NSA continuing beyond the immediate threat of a counterattack against this country or another attack against this country without appropriate monitoring or without members of Congress who had been briefed on that responding to it.

MATTHEWS: Well, thank you, Tom. When we come back, we want to talk about your special. It‘s a very—it sounds like a “Deer Hunter,” taking a group of guys from upstate New York and following them all the way to Iraq and back, looking at how they got into war, what they saw coming and what they faced when they came home. It‘s a great American story. We‘re going to have Tom lead us through it when we come back on HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: We‘re back with NBC‘s Tom Brokaw to talk about his special report, “To War and Back,” about a group of combat veterans in the Army National Guard Platoon. It airs this Sunday at 8:00 p.m. on NBC. Let‘s take a look at a clip from—where one of the men talks about how his comrades became his family.

(BEGIN VIDEO CLIP)

BROKAW: You know, everybody I‘ve ever talked to that has gone through combat talks about the importance of your buddies, about the personal relationships. They say, you know, you end up not fighting for your country. You end up fighting but for your best friend, you know? Try to keep them alive. Is that how you felt?

UNIDENTIFIED MALE: Yes, because when you get sent to a place like Iraq or Afghanistan and bullets start flying and things start blowing up all around you, then you realize that you are 25,000 miles away from, you know, any blood relative that you had. The closest family you have are your buddies within the platoon and the company.

(END VIDEO CLIP)

MATTHEWS: Tom, tell me, now you‘ve written about the greatest generation, you‘ve seen the Vietnam generation. Is there a similarity or is there a difference to note?

BROKAW: No, there is a similarity I think across the board with all three to one degree, and that is those men who go into combat and face hostile fire have a bond that can never be broken and they do fight to save each other. They often tell me I wasn‘t thinking about fighting to save my country. I was fighting to save my life or the life of my best friend.

These young men joined a National Guard outfit because they wanted to serve their country, but mostly because they needed money for college and the war came along. They came from a patriotic part of the country up north of Albany, Glens Falls, New York where Revolutionary War battles were fought.

Then went off to Iraq. They performed heroically. One did not come back in this platoon, and three were grievously wounded, and the other three are having trouble adjusting.

We took ten months with them, Chris, so that we could tell the country what it‘s like for young men not just to go to war and be seen on television screens in kind of the abstract, but what happens when they come home, what it‘s like to try to reenter the civilian society.

MATTHEWS: Well, again, we‘ve seen, you know, cinematic versions of what it‘s like to come back from different wars. “The Best years of our Lives” coming back from World War II. Of course, and “Coming Home,” the Jane Fonda movie, the John Voight movie. What is their coming home life? Are they accepted back with joy and welcome?

BROKAW: Well, in that particular area obviously they are. There was a welcome home ceremony when they got off the plane. I was just in Bozeman, Montana a couple of weeks ago, and the Guard unit from there was getting off the plane at the same time we were arriving. They had a large welcome home ceremony planned for them. It‘s what happens after that first day.

How do they fit back into a society that is not really being asked to make many sacrifices to this war, is going about its lives in other ways? And for those families who don‘t have somebody involved, it‘s kind of out of sight, out of mind because we have an all volunteer army.

These young men talk about how hard it is to go onto a college campus because they can‘t relate to people their own age because of what they have been through. And then too many people come up to them and say do you know Nathan Brown, who was the guy who was killed, or did you kill anybody when you were over there?

Those are not the kinds of questions that they want to revisit. So they‘re kind of in a limbo at a moment but I have absolute faith in these young men that they‘re going to work their way out of it and have productive lives. But their lives will be divided before Iraq and after Iraq.

MATTHEWS: Do they feel odd, because, you know, when you wrote about the greatest generation, that was a generational thing. So many people served. And then Vietnam was a draft war in many ways. Do they sort of see themselves as people who, oddly enough, chose to go into this war as guardsman because they joined the Guard?

BROKAW: No. I think they‘re very proud of what they did. We used to call the National Guard in this country weekend warriors, and that‘s kind of a derisive tone. That‘s not true anymore. More than 300 Guard members have been killed in Iraq because of the strain on manpower. Many Guard units have been activated around the country and some out there, and suffered casualties, including KIA. So I think that they‘re very proud of what they‘ve been through.

What troubles me a little bit in America is that because we do have an all voluntary army and so many of them come from the ranks of the working class and the middle class, that the elite in the board rooms and in the academies and in the privileged neighborhoods across this country don‘t feel a connection to our personnel who are in uniform, men and women, whatever the branch happens to be.

It‘s kind of, as I said a moment ago, out of sight, out of mind. I think that that‘s not only unacceptable, I don‘t think it‘s a good idea for democracy. We ought to be aware of what these young people are doing and I have said to the military as well, you can‘t just constantly be defensive about what you‘re doing and just close ranks and not—pretend that you don‘t have a connection to civilian society.

You‘ve got to have outreach programs. And they do at the Pentagon, and more corporations are reaching out so that they can learn what‘s going on in their name.

MATTHEWS: You know, it‘s amazing when you hear, Tom, that so many elite campuses don‘t permits R.O.T.C. anymore.

BROKAW: I find that astonishing. The role of the military is honorable and crucial to the security of this country. And when the military goes somewhere, it‘s not a decision made by the unformed personnel, it‘s made by political figures. We don‘t bar politics from campuses. Why would we ban the idea of people coming on to recruit? A lot of campuses will say it‘s because of the don‘t ask, don‘t tell policy. But that is the official policy that was signed off on by the Clinton administration, as well as by the Pentagon. That exists, and we do have a need for unformed military services. The larger issue always is about the decisions that are made by political figures, about how you use that military. And we can‘t lose sight of that.

MATTHEWS: How do the young guys you were talking to at the table, how do folks like that that you talk to feel about the debate that goes on in this country, on our program here and elsewhere in the media, and in probably every kitchen in America, about this war?

BROKAW: They don‘t pay a lot of attention to it. They said, We‘re soldiers. We respond to commands. Three of them still do support the war. The wife of the young man who was killed was—pardon me—the mother of the young man who was killed was very upset that he didn‘t have appropriate armor protection. She was always opposed to the war, but she was not opposed to the war in histrionic fashion. She wrote to her Congressman, she mounted a crusade in her local area to make sure that there was more armor for the Humvees there. And she doesn‘t think it‘s going to bring back her son. She‘s proud of his service and she‘s still very well connected to these young men.

We were talking a few moments ago about stories being planted in the Iraqi press by the American military or by the NSA monitoring things. My guess without checking with them is they would say look, if that will bring the war to a close faster, we‘re for that. And there were things that they would not share with me that they said they don‘t want to tell anybody about what they had to do when they were in combat conditions. War is an ugly, violent enterprise and there is always the fog of war, not just in combat, but how it‘s conducted as well.

MATTHEWS: That harkens back to the way you reported the Greatest Generation. They didn‘t want to talk a lot about what they had to go through too.

BROKAW: No, they didn‘t. One time a prominent military historian was saying, When Americans would arrive in an area that had been occupied by the enemy, they were always welcome because the Americans would be seen only as liberators and they didn‘t engage in acts of brutality. I had to take him aside and say, Look, can‘t say that to military audiences, because they know what they did in some instances. I had one man tell me, from the Greatest Generation, when he heard that his brother had been killed by the Germans, he said I never took another German prisoner of war alive.

This is the very nature, it‘s the essence of war. And we need to confront that so that we understand what we‘re involved in when we send young people to war.

MATTHEWS: My Uncle George was a tank commander going into Auschwitz, and he didn‘t talk much about the war, like the fellows you‘ve talked about and written about. But he told his son—and I heard this a while ago—all we did was kill Germans. Nothing about POWs.

BROKAW: Right.

MATTHEWS: Thank you very much. Tom Brokaw.

Sunday night at 8:00, you can watch Tom Brokaw reports: To War and Back. That‘s Sunday 8:00 p.m. on NBC.

When we return, much more on the reports that President Bush authorized the National Security Agency to spy on American groups after 9/11. Why did the “New York Times” go with story now? That‘s a tricky question. And what is the political reaction inside the White House? I think you can guess.

You‘re watching HARDBALL on MSNBC.

(COMMERCIAL BREAK)

(BEGIN VIDEOCLIP)

CONDOLEEZZA RICE, SECRETARY OF STATE: He has always said he will do everything he can to protect the American people from the kind of attack that we experienced on September 11, but within the law and with due regard for the civil liberties of Americans, because he takes absolutely seriously his constitutional responsibility both to defend Americans and to do it within the law.

(END VIDEOCLIP)

MATTHEWS: Welcome back to HARDBALL. That was, of course, Secretary of State Condoleezza Rice on the TODAY SHOW this morning, reacting to that “New York Times” story this morning on the president giving the okay to spy on Americans without a warrant.

For the political implications, we turn to MSNBC political analyst and “Newsweek‘s” chief political correspondent, Howard Fineman, and the “New York Times‘” new genius, Anne Kornblut. Thank you.

So what do you think about your paper running that story the very day of the president‘s greatest victory? You guys are raining on his parade?

ANNE KORNBLUT, THE NEW YORK TIMES: If only we were that organized.

No, this is, I think, a really good story. I knew nothing about it.

MATTHEWS: Why today? Why did you break it today?

KORNBLUT: There was room in the paper. I honestly have no idea why.

I don‘t think there was any big calculation behind it, if I had to guess.

MATTHEWS: Has the “Times” taken any stink from the White House for having taken half the front page, instead of praising the fact that 11 million Iraqis voted yesterday in the Arab world?

KORNBLUT: Half of the front page?

HOWARD FINEMAN, NEWSWEEK: Let me—

MATTHEWS: Can I ask the questions, Howard?

FINEMAN: Sure; go ahead.

MATTHEWS: You‘ve gotten no criticism on this?

KORNBLUT: I work there, Chris, what are you talking about? Half the front page was devoted to the Iraqi elections. And honestly I was working on other things today, so I don‘t know.

MATTHEWS: Okay. You‘re not in management.

FINEMAN: Can I now, in gentlemanly fashion—

KORNBLUT: Thank you, Howard.

FINEMAN: -- defend her and the “New York Times?”

MATTHEWS: You can even be gross, if you want, at this point.

FINEMAN: Big picture, big headlines, lots and lots of stories about that marvelous story in Iraq. And my guess—strictly a guess—it didn‘t even occur to the editors of the “New York Times” as they sat there putting the paper together, that one would be necessarily be seen in the context of the other. I really don‘t think so. I think they gave great coverage to the Iraq and I think that the Iraq story out in the country is politically going to mean more than the one about the National Security Agency.

MATTHEWS: Because?

FINEMAN: Because the pictures are positive. They‘re inspirational. And most important, General Casey said, as a result of the success in Iraq, 12,000 troops are going to begin coming home immediately.

MATTHEWS: By the way, just to rain on THAT parade—I‘ll do it right now—didn‘t we know that they were going down to a complement of 138,000 after the election?

FINEMAN: Sure. But he also said that they‘re going to look to the rather rapid removal of additional troops after that. He‘s already talking about American troops coming home. And I do think the pictures, to any American, are inspirational, and a reminder to us of how lucky we are as a country. There is no gain say. It‘s the real deal over there.

MATTHEWS: I was hoping we could come on tonight with purple fingers.

FINEMAN: It‘s red this time.

MATTHEWS: Red, then.

KORNBLUT: Aren‘t you going to get a parade of members of Congress now for the next few days who‘ve all gone over and seen it? It strikes me that this is going to be a fairly huge story for days and days to come.

MATTHEWS: It‘s probably the greatest gamble since Roosevelt backed Britain before World War II. The president deserves credit, if this gamble comes through—and it‘s not clear yet. If his gamble that he can create a democracy in the middle of the Arab world and he does it, he belongs on Mount Rushmore.

We‘ll be back with Howard Fineman and Anne Kornblut.

(COMMERCIAL BREAK)

(STOCK MARKET REPORT)

MATTHEWS: Welcome back to HARDBALL. We‘re back with MSNBC‘s political analyst and “Newsweek‘s” chief political correspondent Howard Fineman. I feel like Darrell Hammond when I do that sometimes, on “Saturday Night Live”—and the “New York Times‘” Anne Kornblut. Is it Kornblut or Kornbluth?

KORNBLUT: Kornblut. You got it, finally.

MATTHEWS: Kornblut. Well, correct me if you will.

The day after the big successful election in Iraq the “New York Times” story dogged the president. Here‘s President Bush talking with PBS‘ Jim Lehrer.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We don‘t talk about sources and methods, don‘t talk about ongoing intelligence operations. I know there is speculation. But it‘s important for the American people to understand that we will do—or I will use my powers to protect us. And I will do so under the law. And that‘s important for our citizens to understand.

(END VIDEO CLIP)

MATTHEWS: Well, I think that‘s OK. He‘s defending himself and I think this is—he must be a little upset, as you were saying, Anne, to take, you know—when you go to Vegas and you bet the entire fortune you were born with and put everything you‘ve got on it, in this case real lives, a half trillion dollars in Federal Treasury, the hostility of the world—European world, Third World—and you‘re betting all that cost, which is real in short run on the long run, bet you can take a tyranny and convert it to a democracy right there in the middle of the Mideast, in the Arab world, and that will become sort of the standard, the gold standard, for that part of the world. And I want you to respond to the gravity of that, Howard.

FINEMAN: I think there couldn‘t be anything more grave or important in the world today. I wasn‘t there but I read avidly every word of coverage, a lot of it marvelous coverage in the “New York Times” by a lot of tough, skeptical, I think terrific reporters from around the world.

And I couldn‘t find a single one of them in any of the coverage I read in all the papers and all the Web that said anything other than this was a marvelous, fragile, and maybe temporary moment, almost a magical thing for one day.

Now, the Sunni warlords cut a deal to leave the thing alone for a day because temporarily they want to try to get some seats in the legislature. The hope is that they‘ll get sort of caught up in, trammelled, and the people—and the Sunnis will get trammelled up in the idea of continuing that ball rolling. But this was an amazing thing.

You can say the weapons of mass destruction weren‘t there, which the president now admits. You can still question some of the reasons why he claimed Saddam Hussein was an immediate threat. But what you can‘t argue with, I think, is the reality of that one day in Iraq. And I think it was pretty amazing. From everything I‘ve read and seen, you know, but now Bush has to follow it up with more.

MATTHEWS: What comes next, Anne?

KORNBLUT: Well, I mean, I think if—you know, I think if what you were getting at before is that there were moments of irritation from Bush in this interview or in this day that he‘s not, you know, getting his due, I think the administration has always taken a much longer view. This is not sort of a one day story.

This—sure, the pictures were lovely out of Iraq but, you know, they‘re looking way down the line. They‘re looking a year, five years. I mean, Bush himself always talks about this in the sweep of history. So I think, you know, in that sense I actually don‘t know that the White House is sweating about the one-day coverage of this, of the election.

FINEMAN: Yes, they still would have loved the heck out of it, I can tell you that.

MATTHEWS: You know, I felt sensitive. I was with him last night, the president. We all went to see the president. You were there—went to see the president for our Christmas. You get your picture taken with him. It‘s like Santa Claus and he‘s always very generous and friendly.

FINEMAN: You don‘t get to sit on his lap.

KORNBLUT: What did you ask him for?

MATTHEWS: And I was wearing a red scarf. And I wanted to look a little bit festive for the occasion, look a little preppy. And he came up to me and said Matthews, I didn‘t know you were that preppy. This is the president of the United States after his biggest victory, and he said I didn‘t know you were that preppy.

And I said, well, you know, I went to Holy Cross. But you guys started with all this stuff—the old guys started with all this stuff and then he started kidding around. I felt like I was too towel-snappy with him. I felt he deserves a little—I mean, he deserves a lot of respect for this bet he‘s making.

FINEMAN: Well, in those kind of social situations where you have your picture taken—I was there with your son—you don‘t really want to talk serious things. But I have to admit I was vaguely tempted right then, because it was a big day. It was a big day.

MATTHEWS: I forgot to do it. We shouldn‘t all said, Mr. President, you gambled everything and it looks pretty good right now for this.

FINEMAN: And as Anne said though, this is just—this is the long view here, because that moment, however magical it was, can disappear in a hail of gunfire.

(CROSSTALK)

MATTHEWS: For the purposes of this show it just did. Let‘s talk about Karl Rove. I‘m going to be gone for a little bit here now. Karl Rove—is he facing the gallows? Is he going to get indicted?

KORNBLUT: Howard—I mean, I would say, you know, he‘s bided his time so far. You know, who knows?

(CROSSTALK)

FINEMAN: As long as we‘re talking color let‘s talk the White House Christmas party last night. Karl Rove was there ...

MATTHEWS: He sure was.

FINEMAN: ... and I thought he was a little suspiciously jolly. Maybe it‘s just my skepticism.

MATTHEWS: Well, he was friendly with me which I thought was very suspicious. Just kidding, Karl. Anyway, this whole thing with Abramoff, a story we‘re probably going to cover a lot next year. It has the tentacles of an octopus. It reaches out to Congressman Ney, it reaches down to Tom DeLay. There‘s talk now that he‘s going to turn, that he‘s going to flip. What do you hear this? If Abramoff flips, there‘s only one reason. He‘s going to throw the big boy at them. I mean, Tom DeLay must be worried about this guy.

(CROSSTALK)

KORNBLUT: Well, I mean, or the big boys plural. I mean, this is a case—look, he was the pride of K Street, of the lobbying world for years. This is what Tom DeLay did, was to help Republicans get jobs in lobbying. And now to have it turn all around—I mean, look, he helped get tons of people elected. He donated to Democrats, had his clients donate to Democrats.

MATTHEWS: You know, this is one thing people ought to watch that don‘t really get it but they can imagine. You work on Capitol Hill for a couple of years, sometimes for six months. You mean to go downtown. You inflate the total you used on the Hill, which by the way grows every year you‘ve been gone, and you get bigger and bigger money. Then you come back in a nice suit and a tan and nice shoes shined up, and you walk up to see the Congressman you once worked for, and say how would you like to go on a golf trip?

You know, this is what is going on here, the sleaze. And this guy is the king of it, Abramoff.

FINEMAN: But the thing is that Abramoff knew virtually every deal for every piece of legislation and every triangular trade of money for legislation for golf trips and everything.

If Abramoff flips and tells all, the city is going to turn upside down. Especially, not exclusively, but especially the Republican leadership because that‘s where he came out of and those are most of the people, not only, but most of the people he dealt with.

MATTHEWS: That is like opening the sea hawks on a submarine.

FINEMAN: It really is.

MATTHEWS: Was that good?

FINEMAN: It was very nautical.

MATTHEWS: Howard Fineman thanks. Howard Fineman it is great to have you on. Anne Kornblut from “The New York Times.”

Up next, will the success of this week‘s elections, and they are a success, in Iraq bring U.S. troops home any faster? We‘ll talk to Senator Frank Lautenberg of New Jersey and Senator Saxby Chambliss of Georgia. He is just back from Iraq. We‘ll know more from him in a minute.

And a reminder, Hardblogger is the online place for political debate, and now you can watch my video blogs and download pod casts of HARDBALL. Just go to our web site hardball.MSNBC.com.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL for more on the NSA spy story and an update on the big election in Iraq yesterday, we turn to Republican Senator Saxby Chambliss from Georgia, who monitored the voting on Thursday over there in Iraq, himself.

And Democratic Senator Frank Lautenberg of New Jersey, who sits on the committee on Homeland Security and governmental affairs.

Senator Saxby,give us the color of the game over there. The biggest bet the president ever made and it looks like it paid off this week.

SEN. SAXBY CHAMBLISS ® GEORGIA: Well, yesterday was a great day, a very historical day for the Iraqis, needless to say. And being on the ground with the Iraqi people like we were, Senator Biden, Senator Graham, Senator Cantwell, and myself, for the first time you had the opportunity to see the excitement in the eyes of people.

You had the opportunity to see their enthusiasm. They brought their children with them. They allowed their children to stick their finger in the ink just like they allowed us to do. It really was almost a festive feeling in some parts of Iraq yesterday.

MATTHEWS: How can you explain the participation by the minority Sunnis who know they are going to be outnumbered?

CHAMBLISS: Well, I think they learned their lesson. We asked that question over and over again. We had a meeting yesterday with the Iraqi Election Commission. There were eight Sunnis there. Every single one of them said we learned our lesson. We know now that we probably should have participated last time. We didn‘t. We aren‘t going to let that happen again.

Even some of the insurgents, who apparently are Sunnis, protected people at the polling places to make sure that the Sunnis could get out and vote.

So I think they understand that this is a bigger game than one election, one constitution. It is going to prevail now, and they want to be part of it.

MATTHEWS: Senator Lautenberg, will this relieve the pressure to bring back the troops for a while? Will the president get a little slack in this?

SEN. FRANK LAUTENBERG (D) NEW JERSEY: Listen, first of all, I congratulate the administration for having seen this election take place. But you have got to remember, this is maybe the fifth round in a 12 round fight. We have got a long way to go. We want it to succeed. Believe me we do.

But the fact of the matter is it cannot succeed and ignore the fact that there is a terrible penalty being paid by lots of families, lots of people across this country. And when we look at what the budget is going to be. It is going to be $300 billion before we know it probably headed toward a half trillion dollars. So there are questions to be asked.

And again we hope that success will come. Because we want our people back home safely, and if in the same time we can see a Democratic Iraq it would be great. But the principal thing for me is how do we get people home who have been away, some as many as three years.

MATTHEWS: Is the success of the electoral process so far over there a case for leaving our troops there at least another couple more years? Will we be yanking them this coming year?

LAUTENBERG: I think if there is a clear plan that says this is what we‘re going to do as they get themselves ready to take over. We are drawing down, and we expect that in the next 12 months or whatever it is that this is the level we might be at and then two years we‘ll be clear out of there.

But the president, himself, said just because this is taking place doesn‘t mean that there is an end to the violence that we can expect. And that, I think, is the thing that we have to be most wary of.

MATTHEWS: Let‘s go to the dark side. The National Security Agency story that ran in “The New York Times” today that said that the National Security Agency, which basically used electronic devices to monitor and to wiretap foreigners, has been used against American groups since 9/11 without any kind of court orders or warrants. They‘ve just gone ahead and done it. Is that OK?

CHAMBLISS: Well, you know, Chris, we‘re in very unusual circumstances in this country since September 11. We now know that there are people inside of America that want to kill and harm Americans. We know there are terrorists here.

Do we indiscriminately spy on these individuals? No, absolutely not. What that story said today and frankly I don‘t know whether the facts in the story, what they said are true or not.

But I know this. They said that where there are individuals outside the United States who are suspected terrorists, our contacting individuals inside the United States, that they have been monitoring some of their phone calls, some of their emails.

They also said that when there is a conversation between somebody inside the United States and somebody else inside the United States they are not using this particular authority to monitor any calls.

LAUTENBERG: And even in wartime and we certainly have those concerns, the fact is we should not be violating rights like that, peeking into people‘s homes, listening to their conversations without a court order, without some sense of what is...

MATTHEWS: Even the militant Islamic groups that have been espousing this kind of—festering or pushing this kind of festering anti-western attitude?

LAUTENBERG: Well, if there is reasonable belief that some terrorist activity is taking place, then go to the court, get a warrant and do it the old fashioned way which says protect our rights at home.

Listen, I fought in a war that took place a long time ago and we were all concerned about keeping a tight lip, but our rights were protected individually. And I think that has to happen. If you resort to just jumping on innocent people‘s privacy, I think that‘s a bad start and a bad direction.

MATTHEWS: Senator Saxby, what about going after these Quaker groups? The Pentagon, according to Lisa Myers‘ report, has been, you know, spying, basically, on these Quaker groups, the anti-war groups, American groups, homegrown groups.

CHAMBLISS: I don‘t know anything about that. Again, that‘s part of the facts in the story, whether true or not they have not been substantiated. But, you know, we do know that there has been surveillance of domestic groups for years. That‘s nothing new.

But let me tell you what the alternative to this story is, because this happened. We know that Osama bin Laden was communicating over the airways with his lieutenants and other people around the world. That came out in a story in a major United States magazine.

As a result of that story, all of a sudden bin Laden went underground.

We‘ve never picked up another communication of bin Laden‘s over the air. That was done secretly. This is being done secretly to a minimal number of persons who are known terrorists.

LAUTENBERG: Well, I think it‘s a terrible example because we said we know where bin Laden is very specifically and here we haven‘t touched him yet and it‘s all these years. We don‘t know whether he‘s alive or dead. The same thing is true of Zarqawi.

Listen, we have to protect ourselves. Nobody would sacrifice a danger to our families for some unreasonable restriction. But on the other hand, we are a nation of laws. And I think we have to start with that premise. If we‘re talking about creating a democracy there, is it a democracy that can spy on their neighbors or listen in on their telephone calls? I don‘t think so.

MATTHEWS: This just sounds like the Democratic party is concerned primarily about civil liberties in these kind of cases and you, Senator, are primarily concerned about the war effort and that it is almost like the end justifies the means. We can do things if we have to to win the war.

CHAMBLISS: Well, Frank said we haven‘t found bin Laden. Well, we haven‘t. But if we had been able to pick up his communications over the airways for the last three years, we would have found bin Laden by now.

MATTHEWS: We‘ll be right back with Senator Saxby Chambliss and Senator Frank Lautenberg. They have been held over by popular demand. You‘re watching HARDBALL only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: We‘re back with senator Saxby Chambliss of Georgia and Frank Lautenberg of New Jersey.

Is—the Patriot Act got held up today because you couldn‘t get the votes for cloture. Are you, as a senator, a Democrat from New Jersey, against continuing the Patriot Act? Where do you rMD+DN_rMDNM_stand?

LAUTENBERG: Well, I‘m against some parts of it. And when we see that they can go search in a library or other place that is a private area without having to get any kind of permission to do so, I think it‘s wrong. And we proposed an extension of the current act so it would give us the time to do this thing more thoughtfully instead of rushing into it under the guise of getting out of here and completing our work. It‘s not an honest approach in my view. It needs review.

MATTHEWS: Senator Chambliss?

CHAMBLISS: Well, there is no question we need to continue the Patriot Act, need to continue all the provisions of it. There are 16 provisions, two of them involved sunsets—that is where the real issues are. I meet with my joint terrorism task force in Georgia occasionally.

I have never met with those folks when FBI agents didn‘t tell me without the Patriot Act, we simply wouldn‘t be able to do our investigation and interrupt and disrupt terrorist activities like we‘ve been able to do. There‘s no question ...

MATTHEWS: 9/11, Senator, is going to haunt us for our lives. It‘s an iconic event, you know, all those people getting killed, more than Pearl Harbor or anything. Do you think we could have stopped it if we were doing what we were doing now. Would we have those guys off the plane?

Would we have caught them in the first place? Would we have caught Moussaoui? I mean, we did catch Moussaoui, we didn‘t know what he was up to. Do we have what it takes right now to save this country from another one?

CHAMBLISS: Under ideal conditions, Chris, I would say yes, we could. And by ideal conditions I mean that if we had had all of the watch lists in the right hands of folks on the airlines, folks at State Department who were issuing visas, if we had had it on the NCIC which the Patriot Act provides for where law enforcement officials been able to punch in the name of somebody after they stopped them for a traffic offense, you know, chances are pretty good we might have been able to do a better job of stopping them. Could we have stopped it totally? I don‘t know.

LAUTENBERG: But we had advance information. We had warnings that there was something afoot that was going to us bring disaster and we chose not to act on it—not chose not to act on it. We failed to act on it.

MATTHEWS: Well, because of the concerns you have about civil liberties, too.

LAUTENBERG: Well, I don‘t think that was the concern. I think the concern was the fact that it was just some information that just wasn‘t—it didn‘t get its proper place.

MATTHEWS: Weren‘t you all shocked when you look back on it, that 9/11, by that afternoon, we had a whole picture display of all the guys on the planes who did it, that we knew their names, we knew who they were, that we knew all this about the 19 killers of 9/11. They‘re all dead, it‘s too late, and all the people were dead but we knew everything about them.

We had pictures from the Wal-Mart, we had pictures from the check-in, of the ATM machine. We had pictures of Mohamed Atta‘s day, that amazing electronic ability to get stuff but it didn‘t do us any good.

CHAMBLISS: So we weren‘t prepared for an act of terrorism to occur

LAUTENBERG: But we weren‘t restricted in getting it.

CHAMBLISS: But we‘re better prepared today.

MATTHEWS: Happy holidays, gentlemen.

CHAMBLISS: Thank to you to, Chris.

MATTHEWS: Thank you so much for coming over. Thank you Senator Saxby Chambliss, Senator Frank Lautenberg.

Join us again—you people out there—Monday night at 5:00 and 7:00 Eastern. Secretary of State Condoleezza Rice is going to be on the show. Right now, it‘s time for the “ABRAMS REPORT” with Dan.

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