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Federal Reserve Leaves Rates Unchanged; U.S. Stocks Surge After Fed Decision; Clinton: We Must Build an "Inclusive Economy"; New Scandal Over Trump Foundation; Mylan CEO Slammed on Capitol Hill. Aired 4-5p ET

Aired September 21, 2016 - 16:00:00   ET


[16:00:00] ISA SOARES, CNN ANCHOR: Closing bell there. We have seen new reports and a late rally on Wall Street as the markets celebrate the Fed

holding steady on interest rates. You can see that is Wednesday, September 21st.

Tonight, wait and see the Fed says no rate rise just yet.

Donald Trump faces claims he misused his own charity money. And Congress has a new chief executive to tackle on Capitol Hill. The makers of EpiPen

are currently facing the music. I'm Isa Soares and this is, of course, QUEST MEANS BUSINESS.

A very good evening to you. The U.S. economy is picking up. The labor market it seems is strengthening. But rates, well, they're not budging.

Those are the seeming lit contradictory statements from the Federal Reserve. It's the sixth straight Fed meeting without a change in rates.

Janet Yellen did signal rates would likely rise perhaps even by the end of the year. But why wait? Well, Janet Yellen explained the decision does

not reflect a lack of confidence in the U.S. economy. Take a listen.


JANET YELLEN, FEDERAL RESERVE CHAIR: With labor market slack being taken up, at a somewhat slower paced than in previous years. Scope for some

further improvement in the labor market remaining, and inflation continuing to run below our 2 percent target. We chose to wait for further evidence

of continued progress toward our objectives.


Let's get Diane Swonk's view. She's a well-known face here on the show. She is the CEO of DS Economics joins me now. Diane, always great to have

you on the show. Looking at that Fed statement and what we just heard from Janet Yellen, she has given the strongest hint yet that they will raise

interest rates very soon. What did you make what have you heard of what she called her cautious approach?

DIANE SWONK, FOUNDER & CEO, DS ECONOMICS: You know, I think what we're hearing is something very consistent from Janet Yellen, and she's always

been willing to overshoot a bit on the downside on unemployment, if it reengages those workers who are still on the sideline. And she sees an

opportunity to do that at this stage of the game. We also saw those three dissents. Not all for the same reasons, but it really reveals how deeply

divided, when she said in the press conference, we don't suffer from group think at the Fed. That was a gross understatement. There was heated

debate at this particular meeting. And there really is a sort of itchy trigger finger among the president versus Janet Yellen's inner circle

excluding Vice Chair Fisher. But her inner circle, the board members likely Lael Brainard, Tarullo, and Powell, all of her other board members

are willing to take a slower pace.

So what they did is, they punted. She did say November is still a live meeting. I don't buy that. And I don't think she's going to raise a few

days before the elections. And I think what they will do is now set the stage that will get a couple more month of data and hoping that'll be

enough to lift rates in December. The challenge will be, is will she get a dissent on the other side when she does that?

SOARES: Of course, Diane, and I don't know if you heard the press conference, but I think she spoke for almost an hour or so. She took

questions for an hour or so, and there were several critics. Maybe people saying the Fed pretty much looking for any excuse not to hike and those

goal posts are constantly moving. And I suppose you can always find weak data to point to. Does this hurt public confidence in the Fed?

SWONK: Well, there's no question that their communication strategy has really taken a credibility blow. We have watched the sausage being made

and we're sick of it. We're tired of it, and it's not working. Their communications are not working. That said, I think there really is -- and

it's two issues, one is there's debate within the Fed about what data dependence and the decision role means. Some people see it as checklists

on a threshold. We've met the checklist, it's time to go.

Where other people see the data as indicative of what may be coming forward. I think the other important point here is data dependence and all

those dot plots and what they did, originally they were designed to say hey, we're not going to raise rates any time soon. It was very effective

in doing that. It's very ineffective in trying to display to the public and to the financial markets to communicate with them when they will raise

rates again.

SOARES: Yes, and I'm guessing many people will no doubt be circling December 14th in our diaries, Diane. But one thing struck me and having

listening to several of these press conferences, that politics involves several questions thrown at the Fed Chair, Janet Yellen, regarding this.

And she said the Fed Reserve is not politically compromised. And she denied any political motivation in this decision. What did you make of the

accusations thrown at the Fed given the timing of the U.S. election?

[16:05:01] SWONK: It's always expected. This year has been an emotionally charged election anyways. There have been a lot of issues. The Fed has

been a political pinata on both sides of the aisle over the last couple of years. And so, it's not surprising, and she was well prepared for it.

That said, I also think that there's this undercurrent that people really do think the Fed makes these political decisions. And I think what's

really interesting is the Fed doesn't even have different scenarios should one person get elected with one set of policies, versus another, which is

one of the starkest differences of this election versus any election in recent memory. Are the economic implications of it, which widespread

agreements that economists see differences between the candidates and how Congress comes out in terms of policy? Yet the Fed does not run those

scenarios. They do not run those scenarios, because that's how far they want to run from being accused of being political.

SOARES: Absolute political pinata. I do like that. Thanks very much, Diane Swonk, there of DS Economics. Thanks for joining us.

As you heard, Diane there saying investors pouring over so the-called dot plot. It's a forecast of where FOMC members think rates will go. Clare

Sebastian is digging into those numbers and she joins us now.

That's the plot we're talking about. And Clare, as Diane and I were just discussing, not just about when the Fed will raise rates next for how fast

it will continue to act, looking at those dots you've got there, tell us where the committee itself, where they stand. What's the level of


CLARE SEBASTIAN, CNN MONEY CORRESPONDENT: Right, Isa, well as you say, the dot, dot, one of the most closely watched parts of the FOMC area released

today. We only get these three months. Not at every meeting, and it's particularly important to people what when they don't move on rate. The

key headlines here, of course, just one rate rise is the median expectation. If you have three people vote, it would actually stay where

we are today, and just one person putting it at over 1 percent by the end of 2016.

Compare that to June and we saw the media and her expectation of two rate rises in 2016 and two people thought it would even go over 1 percent by the

end of the year. So coming back to their stock plot. And really this is the way to break it down. We've got one rate rising expected at the end of

2016. There's two is the median expectation at the end of 2017, and three by 2018. So this would make this the most gradual tightening cycle from

the Fed in living memory.

The last which began in 2004. They hiked rates at every meeting for two years. It was not just about these ones. We also need to look at the

longer term forecast. Because that was revised down very slightly today on the June meeting, to just under 3 percent. Now I want to compare that

again to the last tightening cycle when rates were over 5 percent and growth was over 6 percent. This really is monetary policy adapting to a

new normal in the economy, where growth may never get back, or at least for the foreseeable future to where it was at the last tightening cycle. But

the key takeaway, of course, pencil in a possible rate rise in December, Isa.

SOARES: and very quickly, Clare. Do we know what those three dissenters - - do we know what the cause of this agreement was among them?

SEBASTIAN: Well, I think it was as Diane Swonk was saying, when they look at the data, these of course will be -- the three dissenters will among

these who feel that rate rises should rise faster. It depends on the data. Janet Yellen saying that they do still have confidence in the economy, but

it is all about inflation that is still under shooting. And she did say there is still more room to improve in the labor market.

Some people feel that it would be a better decision to go quicker. That that would boost the economy. Some people field they could cause a serious

shock by doing that. These as she said in the press conference, is very complicated circumstances. It's not straightforward, and there is

definitely, as you see by all of these desperate shapes across the various years. There is not group think in the FOMC. They are very much

disagreeing on certain points at this stage, Isa.

SOARES: Yes, looking a bit more like the BOE, isn't it, Clare? Clare Sebastian there in New York, speaking out on this dot plot.

Now on Wall Street, stocks spiked as the decision was announced. Then rose again to a close. The Dow ended the day up more than 160 points. You can

see that the NASDAQ hit a record height. Paul La Monica is in New York for more. And Paul, the Fed pretty much, and correct me if I'm wrong,

delivered exactly what the market was expecting in those stocks really hitting session highs. What was the talk on the floor?

PAUL R. LA MONICA, CNNMONEY CORRESPONDENT: Yes, I think you are right. Everyone was pleasantly surprised by the lack of a surprise. The Fed is

not raising rates, maybe it will do so in December and those 3 descents that you and Clare just talking about, they were all descents people

thinking that rates should go higher now. So I think there's a good chance that we could get a rate hike, depending on the outcome of the presidential

election in the in December.

And I think the market might finally be ready for the Fed to boost rates, because you have the U.S. economy, while not in fantastic shape, at least

it's stable.

[16:10:00] It's steady as she goes and it's better than most of the rest of the world. So a lot of people are just scratching their heads and saying,

you know what Janet Yellen, what are you waiting for? You've got to raise rate more aggressively at some point. They're not going to do it that

aggressively. It's probably going to be, as Clare pointed out from the dot plot, a couple of rate hikes next year, a few more in 2018. Nothing

aggressive. This isn't Alan Greenspan or Paul Volker for crying out loud.

SOARES: Staying on this. I thought it was very interesting what he said. Janet Yellen basically said in the press conference, "They're struggling

with what a new normal is." What should we make of that, Paul?

LA MONICA: Yes, it is, I think to many investors a bit frustrating to still hear that eight years after the financial crisis we are not close to

getting back to what in pre-crises days would have been, normal interest rates. You would think that by now the Fed would have jacked up interest

rates to may be two, two and a half, 3 percent. They're stuck near zero and it could be the case that the Fed has to leave them below, I don't

know, 1 percent for several years because everything else is still fragile. A lot of people are disenchanted with the U.S. economy. And I think that's

being reflected in what's going on this election cycle. Europe, nowhere nearly close to being a continent that people would say is healthy. And

then China, concerns about a slowdown there. In Japan, doing everything they can try and get deflation to stop being a big problem. This is still

a global economy that has a lot of question marks.

SOARES: Absolutely as we saw from the Bank of Japan with more unorthodox measures. Thanks very much there, Paul La Monica.

Now out on the campaign trail, Hillary Clinton is hard at work trying to make her economic plan stand out from Donald Trumps. Clinton's also

addressing a two recent shootings of unarmed black men by police in North Carolina and Oklahoma. In a speech in the last hour in Orlando Florida,

Clinton said the U.S. must have a policy of inclusion as well as equality, take a listen.


HILLARY CLINTON, U.S. DEMOCRATIC PRESIDENTIAL CANDIDATE: We've got to break down barriers of systemic racism. Including underinvestment that

have held communities of color back for generation. That's part of building an inclusive economy too.


SOARES: And Joe Johns is in Washington for us with more this hour. And Joe, Hillary Clinton obviously calling for more inclusive economy. But

talk us through if you can the economic initiatives that she's proposing here.

JOE JOHNS, SENIOR WASHINGTON CORRESPONDENT: A variety of them, Isa, that the Clinton campaign is really doing a lot with this speech. They're

reaching out to voters with disabilities. There are millions of Americans in that group of potentially potent force at the polls. She's making an

inclusiveness argument, as you said, pointing out that nearly one in five Americans live with a disability, and something like 60 percent of them are

not in the workforce. They're subject to stigma, she says, discrimination, and she's making the case, essentially for them to get jobs and pay and

benefits and retraining if necessary.

Now, at least part of this equation here is that the Clinton campaign sees a single Donald Trump moment when he was caught on camera purportedly

mocking a reporter with disabilities as one of his big vulnerabilities. Trump by the way says, he wasn't mocking the reporter, but I think some say

the video speaks for itself. It's been used by the Clinton campaign in attack ads. And frankly they're playing off of that. Published reports do

say that incident has gotten Trump some very negative comments in focus groups. It does not look presidential. So there's demographics in this

appeal. It's also an emotional appeal, a policy appeal the Clinton people think is so powerful. She really did not do the part of her speech that

focuses on Trump per se, at all in Orlando today, Isa.

SOARES: Yes, and by focusing on that clearly offering voters and implicit, let's just say contrast with Trump. But the event today, Joe, also brings

Clinton to a critical region of a major swing state. Is this part of the tactic?

JOHNS: Certainly part of the tactic. And we've seen her repeatedly going from Florida to Pennsylvania, to Ohio. Is going to make a stop soon in

Michigan. So she's hitting those critical states that they think will be so important. And interesting, of course you know, Orlando being one of

those places that's had a lot of violence in the news. In that speech she did talk about the shooting of the unarmed man by a police officer in

Tulsa. The shooting in charlotte that sparked unrest there. She called it unbearable. She said it needs to become intolerable, which is a word she's

used before to some controversy. And then again and again, as she has done in the past, she's balancing it out by talking about the targeting of

police officers including 12 officers injured last night in Charlotte. Talking about reform and buttoning it all up by talking about the need for

safety of the communities and the officers, Isa.

[16:15:00] SOARES: Joe Johns there for us in Washington. The time is about 4:14 in the afternoon. Thanks very much, Joe. Very good to see you.

Meanwhile, Donald Trump's campaign is trying to downplay a report that he used his charities money to settle lawsuits against his companies. "The

Washington Post" says Trump may have violated tax laws. Sara Murray is in Ohio where he's just held a rally. And Sara, I read the article in the

"Washington Post" and it says, "Trump is trying to use his charities to benefit his businesses," which then goes off to say, "is against the law."

Talk us through what else the "Washington Post" has to say and how much money we're talking about here, Sara.

SARA MURRAY, CNN POLITICS REPORTER: Well, the "Washington Post" has really dug into this with an investigation where they find that the Trump

Foundation seems to be making a lot of donations for not so charitable purposes. In the latest article shows that there were about $250,000 worth

of donations that were essentially made to help settle legal disputed related to Trumps businesses. Now, of course, if it is the how it looks,

that could potentially be a violation of tax laws. It's not what charities are set up for. What the foundations are set up.

There are also some other weird instances. Like using thousands of dollars of foundation money to place ads for Trump Hotels and using tens of

thousands of dollars of this foundation money for Trump to essentially purchase portraits of himself. So, some very bizarre ways to spent

foundation money and a little bit ironic considering how hard Donald Trump has hit the Clinton Foundation over the course of this campaign.

SOARES: He's held a rally in Ohio there today. Did he address this at all?

MURRAY: Donald Trump has made no mention of this. He did not talk about it here in Ohio. He did not speak to reporters and we didn't have an

opportunity to ask him questions about this. And his campaign has been very vague in their responses. They put out a statement last night

essentially attacking the reporter saying the reporter is biased. Saying the "Washington Post" got their facts wrong. That the article is filled

within accuracies. But I've pressed them a number of times on exactly what was inaccurate. I asked them for documentation, I've asked them to provide

any evidence to the contrary, and so far, the campaign has declined to do any of that.

SOARES: Yes, and so far, they also haven't released any tax returns. So we'll wait, we'll keep pushing, thanks very much. Sara Murray there for us

in Toledo, Ohio.

Next on the hot seat, Mylan's CEO, Heather Bresch is grilled by American lawmakers on the skyrocketing prices of EpiPen. We'll bring that story for

you after a very short break.


SOARES: Right now the CEO of Mylan is facing the wrath of members of the U.S. Congress as she testifies about the skyrocketing costs of EpiPens.

These are the live pictures you're seeing right now. These are from Washington. Heather Bresch, as you can see there, is speaking before the

House Oversight and Government Reform Committee, and the price of the life- saving allergy device has risen more than 400 percent this decade, to $600 for two EpiPens.

[16:20:02] House members accuse Mylan of a cash grab. But Bresch said, the company's not making that much money, take a listen.


ELIJAH CUMMINGS, U.S. HOUSE DEMOCRAT: Yet, another drug company, Mylan, has jacked up the price of a life-saving product, for no discernible

reason. And I did read your testimony, Ms. Bresch, and I was not impressed. And they raise the prices, the reason being, I believe, to get

filthy rich at the expense of our constituents. At the expense of our constituents.

HEATHER BRESCH, CEO, MYLAN: It's the annual increase to Mylan for the last two years was approximately 8 percent per year, or 16.6 percent

cumulatively during this period. From that, you must subtract our cost of goods which is $69. This leaves a balance of $205. After subtracting

EpiPen related costs, our cost is 100 or $50 per pen.


SOARES: As you heard there, she's getting quite a grilling. CNN's Rene Marsh Is in Washington. And I know Rene, she's been talking for roughly 45

minutes or so. Tell us what she had to say. Because this is a story that's really gotten emotions running high in the U.S.

RENE MARSH, CNN GOVERNMENT REGULATION CORRESPONDENT: It absolutely does. I want to put this all in context. This is a life-saving medication.

Without it, the individual, the patient, the child, could essentially die if they do not get it. That's why emotions are so high. The medicine

itself costs about a dollar, but EpiPen is on the market for $600 plus. We've seen that price increase, some 400 percent over the last seven years.

Worth noting, she is the daughter of Democratic Senator, Joe Manchin from west Virginia.

But it was very clear at this whole hearing moved on that there was bipartisan outrage on the sides. At one point, the CEO, Heather Bresch,

when she was asked point-blank, you know, will the price of EpiPen be reduced? And what she said was, they've introduced a generic brand, which

is about $300 to the market. And she also talked about how they've expanded rebates for people who need this medication.

So now no sign of any budging on the actual price of the EpiPen, other than that generic drug that was introduced to the market that drug now at $300.

But again, you heard them say there, they are pushing back, the CEO of Mylan pushing back saying they only make some $50 per pen as far as a

profit goes. But again, lots of frustration, and lots of downright anger from Congress, Members of Congress on both sides, because they just don't

buy it. When they look at the profits that this company has made. When they look at how much money the CEO herself has made. They just don't buy

it that the company is not profiting from this product essentially going up some 400 percent over a seven-year span.

SOARES: Yes, and as we heard right there, she said there was some sort of misconception isn't it about those EpiPen profits. Did she offer any

apologies, at all, Rene?

MARSH: She did not. You know, from her stance, she says that EpiPen has essentially brought down health care costs for the country, because they

have this life-saving medication on the market, and it has saved many lives. That's the stance that she's taken. So we didn't hear an outright,

I'm sorry from the CEO of Mylan. But frankly, the lawmakers said they really don't want that because that won't hip the consumer. What they want

is for this company to bring down the price of this medication from that $600, which is really tough for people to stomach.

Essentially, the objective here is to understand the decision-making process from Mylan. How do they decide the pricing of their medication?

How do they decide to increase the price of their medication? That is the goal of this hearing. But I sense some frustration because they asked for

some documents and they did not get it today. So, it's still ongoing. We're continuing to monitor it all, Isa.

SOARES: As soon as you have more, do let us know. Rene Marsh there for us in Washington. Thanks very much, Rene.

Now one of Wall Street's top hedge fund managers has been charged with insider trading. Leon Cooperman is accused of trading on and profiting

from confidential information that was not available to the public. Cooperman is the founder of Omega Advisors, and is reported to be worth $3


[16:25:00] Last year, during an interview with CNN's Cristina Alesci, he got defensive over Hillary Clinton's criticism of the hedge fund industry.

Take a listen.


LEON COOPERMAN, CHAIRMAN AND CEO OF OMEGA ADVISORS: I don't need anybody crapping all over what I do for a living. Who particularly hangs out with

all of these people, in Martha's Vineyard and in the Hamptons, then the first thing she has to say is criticize hedge funds. OK. I've lived the

American dream. I have nothing to apologize for. I've made a lot of money. I'm giving it all back to the society. OK. I'm not looking for

praise. I'm doing what I think I should be doing, and as far as my brother's keeper, but I don't need somebody coming out and blankly crapping

on hedge fund. Most of the hedge funds, I know, these are extraordinarily generous people that work at what they do because they love what they do.

And they're taking their financial success and giving it back to the system. The notion of crapping all over hedge funds I think is so bogus,

it makes me nauseous.


SOARES: Leon Cooperman was speaking there to our Cristina Alesci. And Cristina Alesci joins us now from New York. And Cristina, before we get on

to what he's had today, the reaction, talk to us a bit about what he's being investigated by the FEC, what he's been charged with. Break it down

for us.

CRISTINA ALESCI, CNN MONEY CORRESPONDENT: The FEC is basically alleging that he invested in a company and he had series of meetings, one in

particular with a seven-minute meeting with a company executive. It's an energy company called Atlas. And during that meeting, this company

executive gave Leon Cooperman, allegedly some non-public information about a big sale of assets.

Now that sale of assets resulted in the company's stock surging after the company did sell those assets. But in the intervening period, Leon

Cooperman, it appears to be the case, based on what the FEC is saying, did buy stock in that company. And what the FEC is alleging is that that was

insider information. It was not publicly available to other investors, and that he essentially got a leg up on everyone else and did something that

was against the law.

SOARES: And I read what the FEC said, and it says here that, "He tried to cover his tracks by fabricating a story to tell if questioned about this

trading activity." These are pretty serious charges, Cristina. How much of a blow is this for him? You know, he's well known as one of the star

hedge fund managers. He runs at least, more than $5 billion fund. So what kind of impact does this leave?

ALESCI: Well, listen, at this point, it is a regulatory matter with the FEC. What the major concern here is that this becomes a criminal matter.

So, the big question for him is do the, does the U.S. Attorney's office come in and bring charges. And he put a letter to investors out today

which we obtained a copy of, that said, the federal prosecutors have said they will not bring charges just yet because they are awaiting the decision

on another un-related case that's at the Supreme Court right now. And that case could determine whether it's easy or difficult for prosecutors to go

ahead and charge Cooperman with a criminal act.

So that's what we're waiting for. But clearly, and he's in a lot of hot water just to put this into context. He's a very well respected investor

in the industry, and he is the American dream. He signifies the American dream. He's the son of a plumber. The first person in his family to go to

college. Now he's worth $3 billion. This guy is known throughout Wall Street, and this is a big blow to the industry and probably the biggest

insider trading matter that we've seen since SAC's, Stevie Cohen's former hedge fund.

SOARES: Yes, he's been fighting it all along, has and he, these charges. And I suspect he will continue to do so. Cristina Alesci there for us,

thanks very much, Christina.

As the race for the White House grows closer, the Mexican peso is in free fall. I'll talk Trump and trade with Mexico's economy secretary. That's

coming up right here on QUEST MEANS BUSINESS.


SOARES: Hello, I'm Isa Soares in London. Coming up on the next half hour of QUEST MEANS BUSINESS in just a moment. As Donald Trump star rises, the

Mexican peso is falling. I'll be joined by the Mexico's economic secretary.

And break-up that could break the bank. Angelina Jolie and Brad Pitt are heading for a very costly divorce. First, these are the top news headlines

we're following for you this hour.

The United Nations said it's ready to start sending aid convoys back into Syria. Convoys were halted after one was hit by an air strike earlier this

week. U.S. Secretary of State, John Kerry, has called for all planes in areas of Syria to be grounded.

Boat reportedly packed with 600 migrants have capsized off the coast of Egypt. So far 30 bodies have been recovered and 150 people rescued.

According to media reports, the boat was headed to Italy.

Violent protests broke out in Charlotte, North Carolina, on Tuesday night. Over the fatal police shooting of an African-American man. His family says

Keith Lamont Scott was reading a book in his car, but the police chief said Scott had a gun, not a book.

The FBI is asking the public to help them find two witnesses in connection to the bombing in New York City on Saturday. These two men were spotted on

surveillance video allegedly removing an explosive device from a piece of luggage. New York police say the men are simply witnesses and aren't a

risk of being arrested.

The Federal Reserve has left interest rates unchanged. Fed Chair, Janet Yellen, said policy makers are waiting for evidence of improvements on

inflation and jobs. Yellen did signal rates would likely rise by the end of the year.

Now the Mexican peso is touching an all-time low against the U.S. dollar. And Donald Trump is at least in part to blame. From advocating for a

border wall to proposing huge tariffs, and appending NAFTA, a Trump presidency wouldn't be good for the Mexican economy. And so in this

strange election season, as Trump goes so, unfortunately goes the Mexican peso in the opposite direction. Take a look at that this. So far in 2016,

the peso is down some 12 percent. We saw the first big dip back in May when Donald Trump became the presumptive Republican party nominee.

Now after the convention, Hillary Clinton opened up a huge lead and the peso made a bit of a comeback. Now it's dropped 7 percent since Clinton

caught pneumonia and the race has drawn considerably tighter. I'm joined now in New York by Ildefonso Guajardo Villarreal. He's the Mexican economy

secretary. He joins me now. Mr. Villarreal, thank you very much for taking the time to speak to us here. Let me ask you first of what you make

of the correlation we just outlined. That Donald Trump's recent rise in polls appears to be a contributing factor to the depreciation of the peso

against the dollar?

ILDEFONSO GUAJARDO VILLARREAL, MEXICAN ECONOMY SECRETARY: Thank you for inviting me. There are many factors that really influence the currency

markets in the world. As a matter of fact, today the decision that the Fed have taken is going to favor the peso. Now obviously when you have in the

U.S. race, and you have to remember, our exports go through the U.S. is about 80 percent of our experts they go to the U.S. And that has a

tremendous influence.

[16:35:02] We have opened our economy and we depend two-thirds of the GDP is basically foreign trade. And therefore any comment that is made in the

U.S. political race is going to influence the Mexican economy because we are highly integrated. But they have too many factors you cannot

attributed just to one factor.

SOARES: Correct, we didn't just attribute just to one factor. We're saying it was just one element of a much more complicated picture. Do you

believe that U.S. political risk would you say is being passed on to Mexico?

VILLARREAL: What I can tell you is that every time in a political debate, there is talk about closing an economy and really breaking the ties of free

trade, there has been one in motors for growth world, is going to make the markets nervous everywhere. Because if you listen to some of the political

campaign messages, like for instance increasing a tariff to a 35 percent rate. That will break even your commitments with the World Trade

Organization. That would mean that the U.S. would have to leave the WTO, and that has a disastrous message for all the financial markets in the


SOARES: Let's stick with the politics and the implications here in the terms of the economic front, Senor Villarreal. Because Donald Trump has

said he would entirely renegotiate or even terminate NAFTA. For our international viewers that's the free trade deal between Canada and Mexico

and America. What would that do to American exports and to Mexican exports and Mexican businesses?

VILLARREAL: Well let me tell you first of all, that recently, the position has been changed drastically and the comment is modernizing NAFTA. And let

me also tell you that to modernize NAFTA, you need two. If we are going to modernize NAFTA, it has to be a win-win solution. Now going as far as

denouncing NAFTA, you will be affecting a lot of U.S. interest. Mexico buys more U.S. goods than all of the European Union today throughout the

United Kingdom. And therefore, we are extremely important to a lot of industries and producers in the U.S.

Therefore, it is not the same thing when you talk during an election the way you have the responsibility of being the president of the United

States. This is not the first time in our political debate where trade issues are going along with the debate. But remember, President Obama at

one point said that he was going to renovate NAFTA as a candidate. Rather than doing that, he proposed TPP, which is one of the most modern platforms

of trade. And through TPP we can modernize NAFTA.

SOARES: You were saying it's not just politics, there are other factors. We mentioned the peso is down 12 percent against the U.S. dollar. But the

Mexican economy has contracted in the second quarter for the first time, I believe, in three years and of course correct me if I'm wrong, what would

you say, Senor Villarreal, is hurting the economy? Is it oil prices or are there other aspects here that we should be considering?

VILLARREAL: I think you look at the factors, we have been growing for the last few years in a much better than the rest of Latin America. Our

average rate is about 2 percent. One of the elements that was pushing our economy is domestic consumption. Remember, our exports are very important.

And if the U.S. economy slows down, it has an impact in what is going on in Mexico. One of the problems with this rhetoric is that it will affect U.S.

growth and employment as much in the U.S. as it will in Mexico.

SOARES: Yes, and one upside was you talk about the risks, the one upside as you mention earlier in our interview was the Federal Reserve not raising

rates. Which I'm going to guess that you're happy with because obviously it would deter investment. What do you make of it?

VILLARREAL: Now definitely I think what the Fed has decided is very good for financial markets. And I'm sure that in Mexican the discussion in the

central bank will follow the same lines. The economy's today need these type of messages in order to keep stabilizing the financial markets.

SOARES: All right, we'll leave it there. Joined there by Ildefonso Guajardo Villarreal. He is the Mexican Economy Secretary. Sir, thank you

very much for joining us here on QUEST MEANS BUSINESS.

VILLARREAL: Thank you, Isa, for inviting me.

SOARES: Pleasure.

Now the economic phase of Donald Trump's core voter, the white working class. We'll take you to one struggling small town where residents told us

their votes for Trump will not change anything. That story just ahead.


SOARES: We have news coming into CNN, ISIS is suspected of launching a mustard gas attack against American and Iraqi troops. That is according to

U.S. officials speaking to CNN. No U.S. troops were injured. A shell with a potential chemical agent landed on an air base near Mosul. You're

looking at there in your map. An initial test for chemical agents was positive. While a second test came back negative. Also we've known that

substance now being sent to a lab for further testing. U.S. troops involved went through decontamination showers as well as a precaution, but

no troops have shown any symptoms of exposure. Barbara Starr joins me now with more. And Barbara, what are we learning here?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Hello to you. What we do know is at this hour, this shell is essentially being tested by the U.S.

military for exactly what it does contain. It landed on Qayyara air base in northern Iraq on Tuesday. U.S. troops went out and looked at it and

apparently saw something that concerned them. They conducted an initial test in the field, and that initial test showed that it was mustard agent.

A chemical warfare agent that ISIS has used in the past. It's one of the big reasons they believe ISIS, which is very active up there, is

responsible for this.

They conducted a second test, it was negative. So now they have sent it off to the lab to figure out exactly what this shell contains. But as a

precaution, the U.S. troops, small number of them, were sent through decontamination process. Why is this location so significant? Well,

Qayyara air base, just south of Mosul, is a huge base where U.S. and Iraqi troops are operating. They are staging there to get ready for the Iraqi

led fight to retake Mosul from ISIS. This is an area that ISIS is pretty desperate, by all accounts, to hold onto. It's just the second largest

city in Iraq. It is the heart of their claim that they are a caliphate. That they are an Islamic state in their view, by having both Mosul and of

course Raqqa over in Syria.

This is something may prove to be a very nasty fight. The good news right now, no U.S. troops showing any signs of exposure, the blistering that

would come with exposure to mustard agent and U.S. troops have protective gear. They've had it for some time. And the U.S. air strikes do continue

as they have in the past to go after these mustard agent sites of ISIS when the U.S. planes can find them, Isa.

Barbara Starr there. Do keep us updated on this breaking news as soon as you have more. Thanks very much, Barbara.

STARR: Sure.

SOARES: Of course we'll be right back. First, there are highlights from "MAKE, CREATE, INNOVATE."


SOARES: Welcome back to QUEST MEANS BUSINESS. As you heard right here on the show, Federal Reserve Chair, Janet Yellen, says the U.S. economy

remains strong. Despite her optimism, white working class Americans are still very concerned about the country's economic future. A new CNN series

in conjunction with the Kaiser Family Foundation is focusing on those worries.

We asked white, black, and Hispanic working class Americans how they feel about the nation's economic situation. Few working class whites say they

are satisfied with it compared to their black and Hispanic counterparts. You see the breakdown right there. 78 percent of white workers say they

are dissatisfied, that figure was 74 percent for blacks and 54 percent as you can see on your screen, for Hispanic. White those working class, often

rule voters, make up the core of Donald Trump's supporters. Residents of one such area in McDowell County in West Virginia voted for Trump

overwhelmingly in the primaries. They will likely vote for him in November. But not because they think he will make America or their town

great again. They simply feel left behind and believe there's no help in sight.


UNIDENTIFIED MALE: It's depressing to watch the population disappear. Business disappear. And the activity to stop. Back in the `50s, `60s,

`70s, it was hard to walk up the sidewalk because there's so many people. Now you walk up the sidewalk, there's nobody.

UNIDENTIFIED FEMALE: Their main industry has been coal. So when you don't diversify and the coal miners are laid off, either they stay and they have

no money to spend or they eventually have to pack up and move.

UNIDENTIFIED MALE: Oh, it's been four or five years, I guess since I had any business.

TEXT: In the county where Donald Trump scored his most decisive primary victory, the white working-class voters who supported him are not angry.

UNIDENTIFIED FEMALE: We look different. We talk different. And people seem to think we don't exist. But if you're hungry, we'll split our last

meal with you. If you're cold, we'll get you something to stay warm. We give everything that we've got. And we get nothing back.

TEXT: McDowell County is one of the poorest in America.

UNIDENTIFIED FEMALE: I'm 69, and I don't see retirement. I hope to God I can live long enough to do better and help others. That's what we're here

for. Sometimes I come here at 8:00, I get out of here at 8:00 or 9:00 at night, and people say, well, that's good. No, you don't turn down and say

tomorrow, if you say tomorrow, tomorrow won't be here.

UNIDENTIFIED MALE: When we have a natural disaster in the country, everybody shows up.

[16:50:00] We're the same as a natural disaster here, without the effects, without the storm or without the flood. We're the same thing. At the end

of the day, Donald Trump will wake up a billionaire. His life will not be affected by this election. Hillary Clinton will wake up a millionaire.

Her life will not be affect by this election. There's a whole lot of just regular, common working class people that when we wake up the morning after

the election, our roads are going to be getting worse, our sewer, our water, our schools are failing. And they want us to keep paying more. And

we keep getting less.

TEXT: Trump 192 percent of the vote here in the Republican primary. In November, many voters won't just vote for the billionaire, they will vote

against Hillary Clinton.

UNIDENTIFIED FEMALE: I don't like Hillary. She has some issues with coal and issues with air state. I would prefer to see Trump, even though I have

some issues with some of the things he says. I don't agree with. When I see Trump as a businessman, I think he will help our county. Definitely,

but I think that he will help our country as a whole because he knows what he's doing.

UNIDENTIFIED FEMALE: At least he has enough guts and say I'm going to do this, that, and the other. At least he's thinking. She's thinking how can

I double cross you. Now, what am I going to do? I ain't going to vote for either damn one of them. There's not much difference. They're really not.

We're the forgotten tribe.

UNIDENTIFIED MALE: She wants to shut down the coal industry, that's going to put me out of a job. So when be very smart to vote for somebody that's

going to put you out of a job.

UNIDENTIFIED MALE: The average person thinks the coal business as people. It's just not so. Coal business now is machinery. You can't put workers

back to work. Coal mining was done by men, with their hands. That's all in the past. It's machines now.

UNIDENTIFIED FEMALE: You go over and bomb a country. You tear it all to hell. You build it all up and they tear it up again. And then if we just

had one tenth of that for our infrastructure. And coming down here and say, we're going to clean your waterways, were going to do that. Listen,

it's time to take care of home.


SOARES: It's not just residents of McDowell county who feel left behind. Many minorities and young workers feel exactly the same. They're "Fed up"

campaign is calling on the Federal Reserve to keep interest rates low, and to the financial recovery reaches everybody. It's director, Ady Barkan,

joins us now from Santa Barbara, California. And Ady, I'm not sure whether you're able to hear that report from McDowell County. What are the people

within your group, the "Fed up" community -- I see your T-shirt "Let Our Wages Grow" -- what are they saying? Is it the similar plight that you're


ADY BARKAN, DIRECTOR, "FED UP" CAMPAIGN: I think that's exactly right in cities around the country. People are not seeing their wages grow. Wages

have basically been flat for 15 years. Racial disparities are growing. The Economic Policy Institute just released a report showing that racial

wage gaps and gender wage gaps are growing and getting worse. This is not a healthy economy. Despite what Janet Yellen said today.

SOARES: And today she did say the economy is doing much better. It's growing no interest rate decision. I take it that you were pleased with

that. Let me get your take first on what you would like the Fed to be doing here.

BARKAN: Well I think for starters what they need to do is reshape the way they think about their objectives. Basically for the last two or three

years. They've always been itching to slow down the economy. Itching to raise interest rates. Because their ideology says that the interest rates

have been low for too long. What we're saying is they need to prioritize wage growth. Wage growth is a good thing, not a bad thing.

They're saying they're worried any signs of wage growth, they're going to intentionally slow down the economy. They don't use language that's as

clear is that, but that's what they're saying. In essence, they're saying if the economy recovers, we're going to punish it by raising interest

rates. We think that's a terrible idea. We also think there needs to be a lot more diversity in the leadership of the Fed. There's a new opening,

for example, at the Atlanta Federal Reserve. The president is coming up. There's never been a black Federal Reserve president. Never been a Latino

Federal Reserve president, and that is reflected in their policy decisions. The regional president's consistently vote for higher interest rates and a

slower economy. And we think it's because they failed to recognize the major racial disparities we have in America. We think they need better

governess and they need to commit to genuine full employment with rising wages for people all around the country including in West Virginia.

[16:55:00] SOARES: Yes, some may say perhaps you're asking for too much, Ady, because of course, the criticism is that the Fed is an institution

that's slow to change and perhaps a bit resistant to change. But I believe you met with Fed Chair, Janet Yellen. What did she have to say to your

cause? How much headway are you making following that meeting?

BARKAN: Well, look, they have met with us. It's been good and they've heard our arguments, and perspectives. I think they've committed to trying

to diversify the leadership of the institution. They've committed to evaluating the economy and understanding the different racial and gender

and ethnic disparities that exist. And so all of that is a good start. And I think our effort is going to be ongoing for many years to come,

because we think they need to hear the voices of people who are being left behind. Not just the voices of those corporate executives and banking

executives that make up so much of the Fed's leadership. And next year actually we're going to be going to Congress and trying to reform the

Federal Reserve Act to make it more accountable to the people, to make it a true people's Fed.

SOARES: Ady Barkan, I think it's fascinating take you are pursuing. And we wish you all the best of luck. Thank you very much, Ady Barkan, there.

BARKAN: Thanks.

SOARES: Now if you want a daily digest of the day's top business stories delivered straight to your inbox, why don't you subscribe to the QUEST

MEANS BUSINESS newsletter featuring Richard's Profitable Moment and all top headlines from the rest of the CNN money team. Just go to to subscribe. I get them every day.

And that is QUEST MEANS BUSINESS, thanks very much for watching, I'm Isa Soares in London, from myself and the whole team here in London, have a

very good night. Bye-bye.