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THE LEAD WITH JAKE TAPPER
Brexit Sends Economic Shockwaves Worldwide; Obama: "Special Relationship" with UK is "Enduring"; Jihadi Forums Praise UK Exit from EU. Aired 4-4:30p ET
Aired June 24, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALISON KOSIK, CNN MONEY CORRESPONDENT: There were even a couple of rallies because many investors who traded really thought that the British people would vote to stay in the European Union.
Well, guess what? They were wrong. And what you saw play out today was an unwinding of all those buys that happened during the week.
What you also play -- saw play out today was a lot of fear and uncertainty. You saw that in and the way that the trade happened. You saw the money move out of stocks, riskier assets, and move to safe havens like gold and U.S. government bonds.
You also heard it in the talk, because the IMF said now it looks like the U.K., it is predicting at least, the U.K. will go into a recession, and then, of course, come the worries about contagion. Well, if the U.K. could go into recession, what about the Eurozone? What about the United States?
So, it's those fears that really played out in the market today. So, many people want to know, was this a one-off or could this continue? Many traders that I talked to, they think that this was just a one-day event, but others say a lot of what you said, Jake. This was a divorce. Divorces aren't quick and they are not pretty and the prediction is that you're going to see a trend to the downside while you see stocks really repriced for the new landscape -- Jake.
JAKE TAPPER, CNN HOST: And, Alison, those Americans who are watching this, what should they do if they are worried about their investments or their retirement accounts?
KOSIK: Well, first of all, you may not want to look at your 401(k) today. You're not going to be happy about what you see. Don't get emotional about it.
And if you have a plan and you're diversified, many investment advisers say, stick with it. There's one thing that I like to keep in mind. Fidelity said that those who cashed out of the stock market during the financial crisis wound up on missing out one of the biggest bull markets that we have seen in many years.
And that brings me to what many other traders told me today, who see this as a big buying opportunity, that if you have got -- if you're diversified, you're not too far away from retirement -- and you are far away from retirement, actually, and you have got a strong stomach, many see this as a great buying opportunity -- Jake.
TAPPER: And there you see the Dow plunging more than 600 points today after the news of the U.K. leaving the E.U.
Let's bring in Rana Foroohar. Alison, stay with us. Rana is a CNN global economic analyst and the assistant managing editor at "TIME."
Rana, obviously, a very swift reaction by the markets to this news.
RANA FOROOHAR, CNN ANALYST: Yes.
TAPPER: Do you think this is a long-term drop or is it just temporary?
FOROOHAR: I think we're going to see this kind of volatility in the weeks and months ahead.
It's possible, since the Fed came in and said we're here, we're backing the U.S. markets, that you could actually see a little bit of a rebound next week. But make no mistake, this is a breakup that is going to play out over a couple of years, and, also, there may be other dominoes to fall in Europe.
You have got the Spanish taking a political vote on Sunday. They have got some of the same issues of nationalism that the U.K. today. You have got far-right-wing parties in France calling for an exit vote.
And there is definitely some chiming with the populism that we have seen here in the U.S. election cycle as well. All of this makes markets nervous. That's the reason that the markets have been so bad at predicting what is going to happen in politics. They don't understand populism. It's very emotional. Markets were pricing in only about a 25 percent chance of exit and they were very surprised.
TAPPER: What does that tell you, that the markets had only priced in, only baked in a little bit the idea that the U.K. might vote this way?
I think it reflects a trust gap. I think that there's a huge trust gap right now between the elites that are running countries and the people on Wall Street and the mass populations, not just in the U.K., but in the U.S. and many parts of the developed world.
I think that there is a group on the ground that simply does not trust the political establishment, the financial establishment. And I think that's what you're seeing in these results.
TAPPER: And vice versa.
TAPPER: The facts that the elites are completely out of touch with the people voting. Alison, let me bring you back in.
Immediately, as you note, there are some possible advantages. This could be great news for home buyers, for car buyers because of lower interest rates, right?
Yes. So, yes, we're talking specifically about mortgage rates. Actually, mortgage rates are at the lowest level that we have seen in three years. So what's been happening, as you see investors pour out of stocks, they are putting their money into other assets. So, a lot of investments today went into U.S. bonds.
And what that did is drive the yield lower and the mortgage rates that we all sign our papers to, they usually follow those interest rates. So you will not only see mortgage rates at some of the lowest levels right now, but you could see them go even lower as soon as next week.
One other thing working in interest rate favor -- in the favor of interest rates going lower, the Fed. All talk about the Fed raising interest rates any time soon, that talk is off the table at this point. So the thinking is that the Federal Reserve is going to go ahead and keep rates lower for longer, making it easier and cheaper to continue borrowing money, especially when you see so much volatility going on in the global arena -- Jake.
TAPPER: All right, Alison Kosik, and with me here in studio Rana Foroohar, who is author of the excellent book "Makers and Takers," Rana and Alison Kosik, thanks to both of you.
The U.K.'s decision to leave the European Union will have deep implications around the world beyond the financial markets. As a result of the vote, British Prime Minister David Cameron says he will resign this fall. Other world leaders are weighing in.
And what are the implications for the U.S.? After all, many of the same political instincts and opinions that caused Brits to head to the Brexit are fueling politics here in the U.S., concerns about mass and uncontrolled immigration, concerns about globalism and trade deals that might sell out the middle class, concerns about an elite ruling party that is out of touch with the very people that they are supposed to be governing.
Let's go to London now and bring in CNN senior international correspondent Clarissa Ward.
Clarissa, how much were world leaders caught off guard by this vote?
CLARISSA WARD, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, Jake, this is what is so incredible. The polls were always very close.
Intellectually, people understood, world leaders knew that there was a very real chance that the United Kingdom would opt to leave the European Union. But at the same time, there was just this underlying assumption that somehow the establishment would prevail.
And when you walked around the streets of London today and talked to people, the words you heard over and over again, stunning, shocking, historic, momentous. This country and indeed everyone in the world woke up to the very profound revelation that Britain is a deeply divided country, and now everybody is asking themselves the same question, Jake, which is what comes next?
WARD (voice-over): It is the biggest shock in the history of modern British politics and possibly one of the greatest political miscalculations ever made.
Early on Friday morning, Britain voted to leave the E.U.
UNIDENTIFIED FEMALE: The total number of votes cast in favor of remain was 16,141,241. The total number of votes cast in favor of leave was 17,410,742. This means that the U.K. has voted to leave the European Union.
(CHEERING AND APPLAUSE)
WARD: Hours later, the prime minister announced he would resign.
DAVID CAMERON, BRITISH PRIME MINISTER: I think the country requires fresh leadership to take it in this direction.
WARD: The people who masterminded the leave campaign were quick to praise the prime minister, but are convinced that their approach is the correct one.
BORIS JOHNSON, FORMER MAYOR OF LONDON: There is certainly no need, in the 21st century, to be part of a federal system of government based in Brussels that is imitated nowhere else on Earth. It was a noble idea for its time. It is no longer right for this country.
WARD: Londoners did not appear to welcome Johnson's role in the campaign, yet there is much speculation that he will stand for prime minister.
While some celebrated the way the counts unfolded, the results provoked widespread concern about the state of the economy and general confusion about what the future holds.
President Obama, an early supporter of remaining in the E.U., said in a statement that the people have spoken.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: While the U.K.'s relationship with the E.U. will change, one thing that will not change is the special relationship that exists between our two nations. That will endure. The E.U. will remain one of our indispensable partners.
WARD: The vote divided Britain. People in Scotland, Northern Ireland and London wanted in. Everyone else wanted out. Immigration was the primary issue on the campaign. NIGEL FARAGE, EUROPEAN PARLIAMENT MEMBER: Let June 23 go down in
history as our independence day.
(CHEERING AND APPLAUSE)
WARD: How these differences are reconciled and what role Britain will now have on the world stage are issues that will likely take years to resolve.
WARD: Now, in terms of what comes next, Prime Minister David Cameron has id that he will not implement the article himself that would begin Britain from extricating itself from the E.U. That will fall to a new Brexit government that largely -- will largely be expected to be formed by the fall.
That could take months. And from there, it's at least another two years. So this is going to take some time, Jake, for the E.U. and Britain to hash out, but, of course, the concern for Europe is that the contagion will spread, that Pandora's box has now been open, and that other European countries will also look to leave the Union -- Jake.
TAPPER: All right, Clarissa Ward, thank you so much.
So, what were the driving factors behind the Brexit? Did British political leaders completely miss the warning signs and what does that mean for us here in the United States? We will discuss with our panel next.
TAPPER: Welcome back to THE LEAD. I'm Jake Tapper.
So, what happened? Why did our friends across the pond vote to leave the European Union? Is there anything in today's new that might be a precursor for what might happen this November in this country?
Let's bring in our panel of experts to discuss just what went on in the U.K. vote.
Chief international correspondent Christiane Amanpour, Nile Gardiner, who was an aide to former British Prime Minister Margaret Thatcher and who supports Britain's withdraw from the E.U. Also with me in studio, Lord Mark Malloch Brown, the former U.K. minister of state, who supports Britain remaining in the E.U.
Thanks, one and all, for joining me.
Christiane, I will start with you.
A sense of shock today around the world. Put this in perspective. For Americans, what was the driving factor here? Immigration? CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: I think
it was immigration.
Basically, they were told that all of your problems are because of the European Union, these nameless, faceless bureaucrats who they bombarded the public with saying that's the problem to all what is going wrong in your country. And, by the way, the foreigners are the problem as well.
[16:15:13] So, on the next day, the morning after, we're being told that they are going to wake up to find that this wasn't a referendum on immigration policy and that may or may not change very much. It was a referendum on Britain's role in the world and the economy and other such things. So, I spoke to the foreign secretary today who said, yes, Britain will still be important, just not as important. Britain's voice will still be heard but just not as loudly. Our role will be diminished.
I spoke to the very senior German leader, member of Angela Merkel's party, who said, listen, you know, we want to be mature, we want to make sure this divorce happens quick and easy. We're not going to hang around while the Brexit has decided to, you know, ring out as much concessions from us as they can and take a long time to do this. We want it to be quick because we don't want it to spread.
And, of course, the young people are saying, what on earth went on? The overwhelming amount voted to stay in, they have, according to the polls, 69 years on average to live with this decision. The older people, 60 plus, voted to get on and they have, on average, 16 years to live with this decision.
So, there's a lot of division and shock, certainly amongst the remainers, and a lot of the certainty from the Brexiters. They are not telling us chapter and verse what the future looks like. And that's also causing a worry, as you've seen in the markets.
TAPPER: Nile, you support the leave movement. Britain lost more than $100 billion in wealth today. Did you expect this kind of reaction from the markets?
NILE GARDINER, FORMER AIDE TO MARGARET THATCHER: Yes, I think this reaction was expected because the markets to what they see as uncertainty. I think the markets will rise again and I think a Brexit is good for Britain for the European Union and for the United States as well.
This is all about sovereignty and self-determination for the British people and I believe that Great Britain, unfreed from the shackles of the European Union, will be a resurgent power on the world stage. And I think it's in the interest of, for example, the Germans and the French to negotiate a good agreement with the United Kingdom. I think there are a lot of common interests here at stake -- the interest of the United States to sign a U.K. free trade deal.
But this is all about British people retaking control here. Control of their borders, the right to negotiate free trade agreements, their right to decide 100 percent their own laws, their own legislation. It's all about the rights of British courts to have supremacy.
And I think for far long, Britain has been submerged this declining supranational European Union. The British people have had enough and they voted in massive numbers yesterday to leave the E.U. and that's a good thing.
TAPPER: Lord Malloch-Brown here in the studio with me.
You're on the other side of this. Do you think that your fellow members of the British elite, the ruling party, those who in the government took the threat of this, of Brexit, seriously enough?
LORD MARK MALLOCH-BROWN, FORMER U.K. MINISTER OF STATE: I think they took it seriously, but I think they misunderstood it. This really was a classic campaign where the emotional arguments were powerful and ran deep on the leave side, and the remainers fell back on a rather dry and economic argument which underestimated the level of rage among certain parts of the population.
I mean, the tragedy is, the victims of leaving, those who will suffer from the smaller economy, the pensioners, the workers, the groups who actually supported it and the cosmopolitan London community and Scotland and others who actually voted to remain by contrast probably will find a better way through this. They can go and work in province if their jobs go there, they're more mobile and more skilled. So, it's terrible own goal for those who voted to leave yesterday.
TAPPER: A little football or soccer reference there.
Christiane, what happens next?
AMANPOUR: Well, you see, this is the big question, Jake. This is why people on the remain side are pretty nervous. We know sort of that the next prime minister is going to have to invoke what they call Article 50 which starts the divorce. That could take about two years, but there's all sorts of, again, unknowns, how will these negotiations go.
And after that, it's difficult divorce and then, according to the Brexiters, they are going to be saved by this glorious set of renegotiation, they say, with all of the other countries in the European Union and all those beyond that E.U. have deals with it.
And that is going to be, according to the experts, according to those we are talking to in Europe, a lot more difficulty and lengthy than they expected. Plus, what we're probably going to see is Scotland spin off and then northern Ireland says it wants a vote in joining the Republic of Ireland. So, you've got a lot of moving parts still to come.
Just one domino, many more to come. Christiane Amanpour, Nile Gardiner and Lord Mark Malloch-Brown, thank you so much. I appreciate all of you being here.
Brexit is causing volatility around the world but that's not the only destabilization from the U.K. and E.U. divorce. Why are terrorists celebrating the Brexit today? Literally.
And then, with the winds blowing across the hill at Donald Trump's resort in Scotland, he says the break will be good for his business. Stay with us.
[16:25:19] TAPPER: Welcome back to THE LEAD. I'm Jake Tapper.
The stunning news that the people of the U.K. have voted to leave the European Union surely came as something of a blow to President Obama. And after all, in an unusual political move, the president weeks ago in London spoke forcefully against Brexit.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITEDS STATES: There might be a U.K. /U.S. trade agreement but our focus is voting to get a trade agreement done and U.K. is going to be at the back of the cue.
(END VIDEO CLIP)
TAPPER: Now British Prime Minister David Cameron is on the way out. The leader of the Brexit movement, Nigel Farage could be named the next possible prime minister. Here's what he said in response to President Obama's original comment.
(BEGIN VIDEO CLIP)
NIGEL FARAGE, LEADER, UK INDEPENDENCE PARTY: Our friends in Washington do not want us to be an independent, self-governing democratic nation. We want us to be part of a political union in Europe. Well, who cares what they want?
(END VIDEO CLIP)
TAPPER: Let's bring in White House correspondent Michelle Kosinski.
Michelle, foreign leaders generally refrain from weighing in on other country's elections. President Obama, he chose to take a side here and his side lost.
MICHELLE KOSINSKI, CNN WHITE HOUSE CORRESPONDENT: Yes, not this time. I mean, this is globalization, right, why not weigh in when it's in your best interest? And, in fact, the White House said any other country with a stake in this and a big economic stake would feel the same way.
This is a disappointment. It's more volatility and uncertainty for U.S. markets and it comes at a time when people aren't feeling great about the economy and feeling even less great about it than they did a few months ago. But the president didn't want to come out and say, this is a blow, a disappointment. He wanted to be somewhat reassuring, at least.
He spoke to David Cameron. He spoke to Angela Merkel. He wanted to remind people that there are some elements of the status quo to be relied upon. Listen.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I do think that yesterday's vote speaks to the ongoing changes and challenges that are raised by globalization.
(END VIDEO CLIP)
KOSINSKI: He talked there of the forces involved that this is part of that globalization. But he also wanted to emphasize that the relationships, the strong ties with both the U.K. and E.U. firmly remain.
It was interesting to hear Vice President Biden today kind of broaden that out about the sentiments that went into this Brexit. I mean, he said this is related to challenges in the world that lead people toward fear and frustration and he called that fertile ground for reactionary politicians and demagogues pedaling xenophobia, nationalism, and isolationism. He went on to talk about building walls, another thinly veiled reference to Donald Trump, and some of his ideas there.
So, relating to what we're seeing in Europe to some of the groundswell that we're seeing in the U.S., Jake.
TAPPER: Michelle Kosinski, thanks so much.
The U.K. vote to leave the European Union is also raising questions about the potential impact on critical security cooperation in the war on terror. Britain, of course, is a major force in the anti-ISIS coalition. It's considered one of the nation's -- one of the U.S.' closest and most strategic allies.
Let's go right to CNN's Barbara Starr. She's live at the Pentagon.
Barbara, you're now learning that jihadists, Islamic extremists, are praising the Brexit. Why?
BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, they are, Jake. You know, I think it's probably not a surprise. It's sort of the typical ISIS video propaganda movement.
But from Washington to London, there are fundamental questions now. Everybody says the military relationships between the two countries will be fine. But real questions about what the next government in the way home may decide to do.
STARR (voice-over): Popular online jihadi forums are applauding the U.K. vote to leave the European Union, hoping to see more chaos in Europe. From the war on ISIS, to European terror threats and Russian aggression, the security implications are still uncertain.
The Pentagon clearly had not wanted it to happen. Days before the vote, Defense Secretary Ash Carter stood at NATO headquarters and called for the U.K. to stay put.
ASH CARTER, U.S. DEFENSE SECRETARY: We know the strategic value that unity and cohesion brings to our alliance.
STARR: But after the vote, the Pentagon struck a conciliatory note.
PETER COOK, PENTAGON PRESS SECRETARY: We feel confident that this special relationship including the special defense relationship we have will certainly continue. The optimism is not shared by all.