CHRIS MATTHEWS: We begin with former Illinois governor Rod Blagojevich. Governor Blagojevich, thank you for joining us.

ROD BLAGOJEVICH (D), FORMER ILLINOIS GOVERNOR: Hi, Chris. How are you?

MATTHEWS: You wrote in your new book something I found fascinating. I worked as administrative assistant to the Speaker for all those years, and I know a little bit about the House, as you do as a former member. You wrote in your book that Rahm Emanuel, the now top guy in the White House with the president, chief of staff to the president, told you that his lawyer thought there was a way where the governor, you, might be able to make an appointment to fill his seat. Explain.

BLAGOJEVICH: Well, Rahm and I had a conversation shortly after the election where we talked about whether I had the power to appoint a congressman, like I did a senator. I told him I didn‘t think I did, that I would talk to my lawyers. He felt that I did. He expressed an interest in having someone appointed by me. And then I was surprised he was even going to take the job as the president‘s chief of staff because I envisioned for Rahm one day becoming Speaker of the House.

And so I wrote about that conversation in the book and I wrote about the rest of the conversation, which dealt with some of the decisions and options I had when it came to picking a United States senator.

MATTHEWS: Well, this is what I find incredible, Governor. I find it incredible. And I mean that literally. That Rahm Emanuel, a leader in the House, would be so wrong about the American Constitution in a conversation with you that he would think that he could find some legal means by which an appointment could be made to the House of Representatives, when the Constitution is crystal clear, as I think you know, that everyone elected to the House must be elected. There‘s never, in the history of this country, since the republic was formed, anyone ever appointed to the House.

So why did you have a conversation about appointment to the House when you were a member of Congress, he was a member of Congress, and you both must have known there‘s no such thing as appointment to the House?

BLAGOJEVICH: Look...

MATTHEWS: What were you talking about? What kind of conversation was this?

BLAGOJEVICH: This was a good conversation, an appropriate conversation, and nothing appropriate about it. I think you‘re giving both Rahm and me too much credit. It‘s not like we know the constitution Backwards and forwards without talking to lawyers. I didn‘t think I had the power. He thought I might.

He also thought there could be a way where we can find, through legal ways, a creative approach to the issue. It turned out that it wasn‘t there. And there was nothing at all inappropriate with that conversation. And then we continued the conversation about some of the options I had and some of my thoughts about who would be a good senator for Illinois.

MATTHEWS: OK. You‘re going to swear under oath-you‘re going to swear under oath if this comes up when the U.S. attorney goes after you-you‘re going to swear under oath that Rahm Emanuel talked to you about having you find a place-saver for him by appointment. You‘re going to swear that under oath, that he had that proposal to make to you.

BLAGOJEVICH: This was a telephone conversation that he and I had had on my home telephone. Neither one of us knew that those telephones were tapped or bugged, and I‘m prevented, because there‘s a court order that prevents me from telling you what‘s on those taped conversations. I wish I could.

MATTHEWS: Yes.

BLAGOJEVICH: But no, that‘s a truthful story. And of course it is.

Why would I make something like that up?

MATTHEWS: So in your book-no, I‘m just going by your book, Governor. You say in the book, quote, "Rahm told me"-it isn‘t about the tapes. "Rahm told me that his lawyers thought there was a way where the governor might be able to make an appointment."

I found it astounding that you gentlemen thought-in this history of this country, nobody‘s ever been appointed to the House, and you‘re talking about dealing on a House seat that the public has a right to elect and you‘re talking about appointing it. Now, you-just the last time I‘m going to ask you this. Rahm Emanuel asked you to appoint somebody to this seat.

BLAGOJEVICH: Rahm Emanuel and I talked about...

MATTHEWS: Appoint somebody to your seat.

BLAGOJEVICH: We talked about...

MATTHEWS: To his seat.

BLAGOJEVICH: ... the possibility of whether or not I‘d be prepared to help him with a recommendation that he had. And yes, that is, in fact, true. I did not have the power, and therefore, we did not do it. And we also talked in detail about other potential candidates for the Senate seat. There was nothing inappropriate on my part, nor on his part. And it was a perfectly appropriate discussion to explore options, and we talked to our lawyers, which is what you‘re supposed to do when you do things like this.

MATTHEWS: OK. It makes Rahm Emanuel sound like a moron. I don‘t think he‘s a moron.

BLAGOJEVICH: No, I think he‘s a very impressive guy, and that‘s-that‘s...

MATTHEWS: Well, how could he think, as a leader of the House, you can make an appointment to the seat, when he knows it‘s an elective seat?

BLAGOJEVICH: You know, I‘m sure Franklin Roosevelt didn‘t know, Chris, that he had the ability to be able to go around the Congress and provide lend-lease. I‘m sure he had to problem have his lawyers help him work through something so he could actually do the right thing and protect Britain from the Nazis.

MATTHEWS: OK, let me just read the Constitution, since you didn‘t read it when you were a congressman. "When vacancies happen in the representation from any state, the executive authority therefore shall issue writs of election to fill such vacancies." It‘s called an election. Let me ask you about this...

BLAGOJEVICH: Well, my lawyer was right, and that‘s what I told him. I said I didn‘t think I had that power, and it turned out that my lawyer was right.

MATTHEWS: OK. Let me ask you about what you think is in and out in terms of the law here, not just the Constitution, because it seems like there was a confusion about the Constitution here. What do you think is a fair deal? Forget the tapes for a minute. What‘s a fair deal to basically trade the president‘s Senate seat? I mean, can you legally trade it, do you think, when you were governor, for a job somewhere for you out in the private sector? Do you think you could trade it for a cabinet post? What would be legal?

BLAGOJEVICH: Well, that‘s a very good question. And when you have conversations along those lines, if you did, I mean, those are the sorts of things you want to make sure you talk to your lawyers about. I will say that I explored a variety of different options. You know, of course, I could have made myself a United States senator. I saw you in LA at the Governor Schwarzenegger environmental...

MATTHEWS: Right.

BLAGOJEVICH: ... green program that I was very interested in working on. I teased you about moving to Illinois and becoming...

MATTHEWS: I know you did.

BLAGOJEVICH: ... a United States senator.

MATTHEWS: I thought that was quite comical. But go ahead.

BLAGOJEVICH: Yes. And there was discussions on my conversations-you know, some of them were serious, some of them were not so serious. And a lot of them explored a bunch of different ideas, and I wanted to have an open mind about all of the different options. I ended up with a decision, and I gave a direction to pick my political nemesis‘s daughter because in exchange for that, we could pass a public works bill that would put 500,000 people to work...

MATTHEWS: Right.

BLAGOJEVICH: ... expand health care to 50,000, 300,000 people who didn‘t have it. And I wanted a written guarantee. And I raised taxes on people...

MATTHEWS: OK. Well, you say that‘s legal.

BLAGOJEVICH: Yes.

MATTHEWS: OK, let me ask you this. Because what you said to me out there was-I said, Who are you going to pick for that Senate seat? And you said, Well, if you get some residence in Illinois, I‘ll make you the senator. Of course, that was a joke.

BLAGOJEVICH: Right.

MATTHEWS: But let me ask you about this. You were quoted-and you can‘t talk about the tapes...

BLAGOJEVICH: Right.

MATTHEWS: ... But when you were talking about these deals with your deputy there, you‘re talking about, you know, Can‘t put it in writing. If you know it‘s legal to trade this Senate seat that Barack Obama gave up to become president-if you know it‘s legal, why would you tell somebody not to put it in writing?

BLAGOJEVICH: I‘m not sure what-I‘m not sure that I know what you‘re referring to. Put what in writing?

MATTHEWS: Let‘s take a look at it now. Here‘s more from the criminal complaint. "On October-on November 4, 2008, deputy governor A suggested putting together a list of things that Rod Blagojevich would accept in exchange for Barack Obama‘s Senate seat. Rod Blagojevich responded that the list, quote, "Can‘t be in writing."

Now, why would you tell your deputy not to put a list in writing of possible deals you could make if you believed they were legal?

BLAGOJEVICH: Right.

MATTHEWS: In other words, if you could trade for a cabinet post, an ambassadorship or a job at the SEIU?

BLAGOJEVICH: No. Well, as you know, there was a deputy governor who suggested that. My concern was I didn‘t want anything leaking to the press. I didn‘t want anybody to think who the potential candidates were that we were privately discussing, what other considerations might be involved. I was working-ultimately had decided to make a decision...

MATTHEWS: OK.

BLAGOJEVICH: ... to pick a senator who would do the most good for the people of Illinois. I put aside personal aversion to the pick because I thought he could do the most good -- 500,000 jobs, health care, no taxes. I gave that direction, Chris, the morning before I was arrested. I did it over the telephone. And it‘s a peculiar coincidence that the next morning, I was taken away from my job and prevented from seeing that political-routine political deal come to fruition.

Rahm Emanuel was the person who had talked to us about working through this. He‘s a guy who knows how to get things done. He‘s somebody I wanted to help us execute that routine political deal for the best interests of the people. And there is a real divide here.

MATTHEWS: Yes. OK.

BLAGOJEVICH: The prosecutor said "crime spree before it happened." That‘s a mutilation of the truth. The truth is just the opposite. It was about jobs and health care and no taxes on people.

MATTHEWS: So basically, as your bottom line, it‘s OK to trade the president‘s Senate seat for a job for you in the private sector, a job for you in the cabinet. Is that your belief, that that‘s fair?

BLAGOJEVICH: I‘m not saying that at all. I‘m telling...

MATTHEWS: That it‘s legal.

BLAGOJEVICH: ... you that the decision I made...

MATTHEWS: Well, why don‘t you say it one way or the other?

BLAGOJEVICH: Well, you asked me...

MATTHEWS: You asked not to put it in writing. Is it honest or not, what you did?

BLAGOJEVICH: It‘s the sort of thing you‘d ask your lawyer about. And before I did anything along those lines or decided to do anything along those lines, it‘s the sort of thing you consult your lawyer about.

MATTHEWS: OK. I get you.

BLAGOJEVICH: OK.

MATTHEWS: So in other words, you were just sort of-you‘re just sort of gaming it with your AA or your top guy, saying, Do you think we could do this? Could we do this? In other words, a lot of people believe you shouldn‘t be prosecuting for simply, you know, blue-skying possibilities. Is that your-is that your defense, that you were just blue-skying possible deals you could get in exchange for giving out what you called a really expensive piece of property, this Senate seat?

BLAGOJEVICH: Chris, I think you‘ve got a lot of that right, actually. Yes, look, part of good government-and I strongly believe this. We did a lot of good things for people in Illinois because I was able to think outside the box and have encouraged staffers and others who are a lot smarter than me to give me options and consider different scenarios. Because you consider them, some of them might be smart, some may be stupid, some you can‘t do.

MATTHEWS: OK.

BLAGOJEVICH: But you don‘t even go to the next direction until you check with your lawyers and make sure you do it right.

MATTHEWS: OK. OK. It sounds like your defense. Let me ask you about...

(CROSSTALK)

MATTHEWS: I‘m going by your book because I read-in your book, you talk about Scooter Libby, who was, of course, chief of staff to Vice President Dick Cheney. And Scooter went away. He got five convictions on felonies for lying under oath and obstruction of justice. You say he was basically railroaded, right? That‘s your argument in the book.

BLAGOJEVICH: Well, no. My point is that he was-he was scrutinized for a long time on a lot of other things that ultimately nothing came of. And then they ultimately caught him. Unfortunately, he didn‘t tell the truth, and that‘s what he ultimately was prosecuted on...

MATTHEWS: Well, was he...

BLAGOJEVICH: ... and convicted on.

MATTHEWS: The president thought he had a fair trial, Governor, because the president wouldn‘t give him a pardon. The president commuted but he did not give him a pardon because he thought there was justice there. Is that your-you disagree with the president...

(CROSSTALK)

MATTHEWS: ... George Bush?

BLAGOJEVICH: No, no, no. No, the president commuted his sentence. The point I‘m making in the book is that there was a pursuit of him in the substance of the things that they were pursuing. He didn‘t do those things wrong, evidently. And what he was ultimately held culpable for was not telling the truth and preventing the truth from being heard.

MATTHEWS: OK, let me just read from your book. "For years, federal prosecutors targeted Scooter Libby. They pursued him and accused him of obstruction of justice and of making untrue statements to the FBI and of lying before a grand jury. Notwithstanding where their investigation led, they were determined to get him. It got to the point where it didn‘t matter what the truth was."

Well, are you sticking with that? Because the truth was, he lied under oath. He said he found out about Valerie Wilson from Tim Russert when he found out about it, obviously, from the vice president, his boss. Why do you say the truth didn‘t matter, when apparently, the truth is what brought him down?

BLAGOJEVICH: Well, my point is, and the point I‘m trying to make in the book, is that once there‘s a focus and there‘s a target on somebody, it‘s almost like a runaway train. And sooner or later, they‘re going to try to get you on something. And I can‘t speak to the details on what Scooter Libby...

MATTHEWS: OK.

BLAGOJEVICH: ... did or didn‘t say that was truthful or not. He‘s obviously been found culpable of that. My point is, that‘s not what began that investigation of him. They looked at other things, and ultimately, they rested on this. They got something. And the point I‘m making is whether it was Martha Stewart or Scooter Libby...

MATTHEWS: Yes.

BLAGOJEVICH: ... it wasn‘t the substance of what they initially were pursuing him on.

MATTHEWS: Are you an innocent man?

BLAGOJEVICH: Very much so, and I‘ve been a wronged man, Chris. I never, ever intended to sell a Senate seat for financial gain. When the prosecutor said he was stopping a crime spree before it happened, that prosecutor mutilated the truth. I was conducting politics to get the most done for the people of Illinois.

MATTHEWS: Yes, but...

BLAGOJEVICH: And the truth...

MATTHEWS: OK, that‘s the problem.

BLAGOJEVICH: And the truth is...

MATTHEWS: We‘re just going in a circle here, Governor.

BLAGOJEVICH: Go ahead.

MATTHEWS: You‘re just going in a circle.

BLAGOJEVICH: Why?

MATTHEWS: Because you said you did nothing wrong. But two minutes ago, you said you didn‘t know if it was wrong or not.

BLAGOJEVICH: No, no. I‘m not...

MATTHEWS: You said you didn‘t know whether it was wrong to trade the seat for a cabinet post. You didn‘t know whether it was wrong to trade it for an SEIU post with a labor union. You didn‘t know it was wrong before you did it. You said you were going to later check with your lawyers about whether you were going to do it or not. But on the tapes, you‘re heard talking about doing it. And now you‘re saying with absolute cocksuredness...

BLAGOJEVICH: No.

MATTHEWS: ... you didn‘t do anything wrong...

BLAGOJEVICH: You are missing...

MATTHEWS: ... and you told me a couple minutes ago you didn‘t know it was wrong or not.

BLAGOJEVICH: No, hold on a minute.

MATTHEWS: What is it?

BLAGOJEVICH: You didn‘t ask me whether or not a routine political deal that would invest in public works, expand health care and have a guarantee not to raise taxes through a legislative process, whether that was legal...

MATTHEWS: No, I‘m talking about the cabinet post.

(CROSSTALK)

BLAGOJEVICH: That‘s real and that‘s good government.

MATTHEWS: No, no. I‘m asking-OK...

BLAGOJEVICH: That is legal. And that‘s what I was doing.

MATTHEWS: Was it legal to trade for a cabinet post, legal to speculate about trading for a cabinet post, legal to speculate about getting an ambassadorship or a job with a labor union, SEIU? Was that legal?

BLAGOJEVICH: Again, if you‘re talking about ideas along those lines, it‘s the sort of thing you would check with your lawyer about before you took the next step and actually tried to do something about it.

MATTHEWS: So you don‘t know whether it was wrong or not.

BLAGOJEVICH: I never reached a decision to do anything along those lines. I told you what the decision was.

MATTHEWS: OK.

BLAGOJEVICH: The tapes will tell you what it is. I‘m going to be confirmed on what I‘m saying because there are taped conversations. I‘ve advocated they all be heard. My accuser, who took snippets of conversations out of context, has gone to court and is preventing me to tell you exactly what those tapes say in their full and proper context. The story is upside-down. You should hear the tapes. I should be allowed to tell you what‘s on those tapes. The tapes will tell you the full story.

MATTHEWS: OK. Well, let‘s see what the jury thinks. Thank you very much, Governor Blagojevich, for coming on HARDBALL. Good luck with your book.

BLAGOJEVICH: Yes. Right.