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QUEST MEANS BUSINESS

Congress Brings Obamacare Repeal Process; J.P. Morgan CEO Optimistic on U.S. Economy; Trump Promises Russian Hacking Report in 90 Days; Renault Faces French Probe over Diesel Emissions; U.S. Military Transfer Cyber Warfare; Nintendo Reveals New Game Counsel and Stocks Drop; U.K. Officials to Visit New Zealand for Trade Talks

Aired January 13, 2017 - 16:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


[16:00:00] POPPY HARLOW, CNN ANCHOR: HARLOW: Good evening trading has come to a close on Wall Street. The Dow is down very slightly. It is

Friday, the 13th, and Donald Trump's influence looms large. In Congress, the House leads the groundwork for a repeal of Obamacare. On Wall Street,

JPMorgan's chief executive says he is hopeful about the Trump economy. And in cyberspace, the President-elect promises his own report on Russian

hacking, within with 90 days. I'm Poppy Harlow, this is QUEST MEANS BUSINESS.

Good evening and welcome to the program. I'm Poppy Harlow in for Richard Quest. Tonight, it is the beginning of the end for one of President

Obama's signature achievements in office. Republicans have moved to dismantle Obamacare, just one week before Donald Trump moves into the White

House. In this last few minutes, House lawmakers have voted in favor of a bill that will lead to the repeal of the Affordable Care Act that has

become known as Obamacare. It is the healthcare plan which gives coverage to almost 20 million Americans.

Today's vote marks a major milestone in what will be a massive and potentially very expensive undertaking. And it kick starts a furious

debate over what will replace it and when Obamacare is not going to just disappear overnight with this vote. Republicans want to repeal it, without

Democrats getting in the way, so they're wrapping up their plans in a major, major budget bill, instead. That's a lot easier to pass. Once that

budget plan goes through Congress, Republicans are free to draw up their own plans to repeal and then replace Obamacare.

And this is where things start moving very quickly, because there's a deadline of January the 27th. That is just two weeks away, that the new

plan has to get in place. Now, even some Republicans are nervous about how fast all of this is moving. This is a decision that Congress literally

cannot afford to mess up. According to a bipartisan study, a full repeal of Obamacare would cost $350 billion over the next ten years. Republicans

has not put forth a plan yet to replace it.

Phil Mattingly joins us on Capitol Hill. This is where the rubber meets the road. And this is where, you know, even president Obama, this week,

Phil, said, if you can come up with something better and more affordable that covers this many Americans, I will support it. So, now, what for the

Republicans?

PHIL MATTINGLY, CNN CORRESPONDENT: Yes, look, and the current president knew very well what he was doing when he made that comment, because he went

through this process. He knows how difficult it is to push through a major kind of earth-rattling piece of legislation like this. One sixth of the

economy is occupied by the healthcare system. That's what we're dealing with here. What happened here, as you noted, Poppy, is a bizarrely

beautiful complex Congressional procedure, but it kept the process moving forward.

The big question, though, isn't about repeal. That's what today was about. Keeping the process of actually removing the core tenants of Obamacare

going. The big questions about replace. And as you said with, the President-elect and really the Speaker of the House as well, have said they

want to do these things concurrently. They want them to happen at the same time.

Here's the reality, that's not possible. And Poppy, I've talked to Senators repeatedly over the course of the last couple of days here on

capitol hill, and they're kind of taking a rational approach to this, which is, the replace process is going to take time. The transition is going to

take time. This is very complex. They're not going to line up. That's not what we're hearing in the House. So even though both -- the Republican

party controls both chambers, we are far from consensus here, Poppy.

HARLOW: I mean, but the House Speaker all but assured the American people last night on CNN in that town hall with Jake Tapper, that the people that

rely on it, that it is literally life saving for, that would not be without.

MATTINGLY: I think there's a difference between when the replace plan is going to be finalized and trying to do a kind of ease transition into

whatever that replace plan looks like. And I think Republicans are in agreement. Two or three years would be the transition, if you have a plan

currently, you're not going to lose it. That transition process will carry over. But even that is up for debate right now. Even Republicans are not

comfortable with those timelines, as well. Poppy, down to kind of the most basic details. There are major disagreements, not between Republicans and

Democrats, but between Republicans and Republicans. And that underscores the huge problem they have right now.

HARLOW: Right. When you look at Senator Rand Paul or others. And also, some in the House Freedom Caucus, small but powerful. Right? The concern

that this is a lot of government money and perhaps this is not where taxpayer dollars should go at all.

MATTINGLY: Yes. Look, I think when you have, Poppy, there are a couple major -- sorry, I lost you there, Poppy, what were you saying?

[16:05:00] HARLOW: Phil Mattingly, I was just saying that there's concern at this point between, amongst Republicans about, you know, how much money

should go towards this and in what form?

MATTINGLY: Yes, and I think the major questions right now, when you talk to the different Republicans, and you kind of laid out the splits inside

the party right now is, everybody has different views on how this is supposed to go.

Here are the views that matter, right now. The President-elect, who has said what he said publicly, and the Speaker of the House, and the Senate

Majority Leader. But as we move forward in this process, all of these individual lawmakers, what they think, particularly, as Democrats are not

willing to come across and help on this, those matter, as well. And I think that complicates the process and makes it a lot more difficult.

HARLOW: It absolutely does. Phil Mattingly live for us on Capitol Hill, thank you very much for the reporting.

Paul Ryan, the Speaker of the House, told CNN in that town hall on Thursday night that he wants to see the repeal within the first one hundred days of

the Trump presidency. In the last few minutes, he released a statement. Here's part of it.

"By taking this first step towards repealing Obamacare, we're closer to giving Americans relief from the problems that this law has caused."

Let's debate it all. A fiery debate, this will be, I am sure. Robert Reich is with us, the former U.S. labor secretary and now professor at

Berkeley. Also with us, Jeffrey Lord, a CNN political commentator who served in the Reagan White House. Robert, let me begin with you. We heard

last night on CNN from some people in this town -- Republicans, who said, Obamacare literally saved my life.

There is also the argument about the cost. And the fact is that premiums for this year went up an average of 22 percent in all the U.S. states. In

some places, they went up a lot more, 116 percent in Arizona, 69 percent in Oklahoma, 63 percent in Tennessee, 59 percent in Minnesota. This is a

reason why so many conservatives are up in arms and saying, this is not affordable. What say you?

ROBERT REICH, FORMER U.S. LABOR SECRETARY: Poppy, there's no question that healthcare costs in the United States are going up very fast. It's not

Obamacare, it's not just Medicare, it's actually private premiums. And also, inside those private premiums, you have everything going up in terms

of medical costs, drug costs are going up, and we have to get control over this.

What we do know is that since Obamacare began, the healthcare cost curve, as it's called, has somewhat stopped rising, at least nearly as fast as it

was rising. We're now spending about 18 percent of our entire national product on healthcare and we're getting among the worst results. This is a

big problem. But it's a different problem than the problem of what do you do about the 20 million people who have come to rely on Obamacare, on the

affordable care act? Republicans don't have a replacement. And unless they have a replacement, they -- you know, these 20 million people are

simply going to have no care at all.

HARLOW: And Jeffrey Lord, what do you say to that, about where you're willing to -- I'm talking about conservatives, willing to repeal it without

a replacement. And you know the price tag of the repeal is up to $350 billion over the next decade. That's not my number. That's from a

bipartisan committee from the Responsible Federal Budget. Wouldn't this blow a hole in the budget, even before Republicans come up with a

replacement?

JEFFREY LORD, CNN POLITICAL COMMENTATOR: Well, I think the problem, Poppy, and I heard, as you did, Speaker Ryan last night, is that Obamacare is

collapsing of its own weight. And insurance companies are pulling out of these states. People are losing -- they're going to lose their health

insurance. And let's recall that when this began, Obamacare removed some 16 to 19 million people from their own plans, that they wanted. So,

there's no question this has to be solved --

HARLOW: But with all due respect, Jeffrey Lord, that's not my question. My question is, you know, you guys hold the power in the income

administration. So, what are you going to replace it with? And are you concerned about this price tag of repealing without a replacement?

LORD: The Speaker last night said not only that does he want to do it with a replacement at the same time, but he said it's going to be in some cases

in the same piece of legislation. So, I'll leave the intricacies of the legislation to the Speaker. But he was very forceful about this last

night.

REICH: You see, that's exactly the problem. The intricacies and the details are where the Republicans have not been able to come to any

agreement for six years. They've been trying to come up with a replacement plan. The problem for the Republicans is simply this. That every part of

the Affordable Care Act depends on every other part. If you do want to insure people with pre-existing health problems, and that's something even

Donald Trump has said he wants to do, then you're going to have a mandate on healthy young people in terms of them paying into the system.

[16:10:00] If you want to insure the 80 percent of Americans who, under the Affordable Care Act, are getting premium support, are getting subsidies,

because they otherwise cannot afford to get healthcare, then you're going to need to tax the very wealthy people who are now being taxed for

Obamacare. If you repeal those taxes, there's no way you're going to be able to afford those subsidies, to poor and moderate income people.

HARLOW: Robert, as someone who's been a big cheerleader for Obamacare, I think even you would admit that part of the problem here with the plan when

it was implemented is the fact you didn't have enough of the young, healthy people signing up for it, to buy into it, so that the math worked out

correctly, which is part of the rise in premiums.

But Jeffrey Lord, to you, as a conservative, I'm sure hearing the words from Donald Trump when he was a candidate on "60 minutes" about healthcare

did not sit well with you. When he said, this is an un-Republican thing for me to say, but everybody has to be covered. He went on to say, the

government's going to pay for it. Paul Ryan said last night, not so. I don't think that government should pay for it. How do you get the two on

the same page?

LORD: I don't think the government should pay for it, either. But I do think the President-elect is correct. You do want everybody to have what I

would call and I think what the speaker calls access to affordable healthcare. That is truly important. But you know, Poppy, this has become

a very unpopular program. I mean, there's no question in my mind that as these premiums skyrocketed, this helped carry Pennsylvania for Donald

Trump. I'm sure it helped in other states, as well. People are really upset about that. I get stopped all the time by people who give me their

horror tales of Obamacare and they're pretty mad about it. So, this has got to change.

HARLOW: Robert, to you, one final question -- Robert Reich, final question to you. In the spirit of congeniality and the spirit of unity as we are

one week away from inauguration, what would your advice be to Republicans and just to lawmakers in general, as they form whatever it is that will

ultimately replace Obamacare? What's a lesson learned that could be better this time around?

REICH: Well, I think, do no harm. We have at least 20 million people in America who do need health insurance. In fact, it's more like 40 million,

if you include all the people who really can't afford it and need to have a system in which they have access. Now, I would advise Donald Trump and I

would advise Republicans to do something that they probably don't want to do, but almost every other advanced country has done, and that is called a

single-payer system. It is efficient, it is comprehensive, it is the best way to insure a population. And if we don't get on that wagon, at least

soon, we are going to find ourselves facing with higher and higher medical costs that nobody can afford, higher co-payments, higher deductibles, and I

hope the Republicans see the light.

HARLOW: I'm not going to hold my breath for a single-payer system happening under the Trump administration, gentleman, but I do hope for all

American people that the two sides can come together on something that does help everyone who needs it. I appreciate your time, Jeffrey Lord and

Robert Reich, thank you.

LORD: Thanks, Poppy.

REICH: Thanks very much, Poppy.

HARLOW: A Republican lawmaker is attacking the U.S. government's top ethicist. Jason Chaffetz chairs the House oversight committee. He

summoned the director of the Office of Government Ethics to explain himself two days after the director blasted the President-elect's conflicts of

interest plan as quote, wholly inadequate. Listen.

(BEGIN VIDEO CLIP)

WALTER SCHAUB, DIRECTOR, U.S. OFFICE OF GOVERNMENT ETHICS: The plan the president has announced doesn't meet the standards that the best of his

nominees are meeting and that every president in the past four decades has met.

He's going to be asking our men and women in uniform to risk their lives in conflicts around the world. So, no, I don't think divestiture is too high

a price to pay to be the president of the United States of America.

(END VIDEO CLIP)

HARLOW: Cristina Alesci has been in Washington all week. She's been following this. She's with me now. Let's just begin with how Democrats

are responding to this.

CRISTINA ALESCI, CNNMONEY CORRESPONDENT: The fight between Democrats and Republicans is really a distraction from the bigger issue, which is Trump's

conflicts of interest. But given that, the Democrats are standing up for the chief ethics officer in this case. And they are reminding the American

public, these are the same guys who went after Hillary for her conflicts and now they're not doing the same for Donald Trump. And they're also

saying, these are the same Republicans who tried to gut the House -- the Congressional ethics infrastructure a week ago. They're reminding them,

look, these are guys who are not exactly doing things above board. That's the Democrat side of things.

HARLOW: Not all Republicans, by the way. There are a lot of Republicans who didn't like that move on the ethics.

ALESCI: Exactly. That's right.

And in terms of specific responses, we actually just spoke to Congressman Connelly of Virginia, who had some pretty sharp words for Chaffetz. Take a

listen.

(BEGIN VIDEO CLIP)

GERRY CONNOLLY, U.S. HOUSE DEMOCRAT: I think it's really taking a double standard to a new level. This is the same chairman who promised oversight,

no matter who occupied the White House.

[16:15:00] That it was our constitutional role on the oversight and government reform committee, to provide rigorous oversight. And here he

is, backtracking profoundly. And actually, now trying to make an example out of the head of the Office of Government Ethics for doing his job.

(END VIDEO CLIP)

ALESCI: Now, the problem is that most Americans, when they see lawmakers go back and forth like this, their eyes start to roll over and like, they

don't care what politicians have to say. And frankly, like I said at the very beginning of this, the problem is Trump's plan to deal with Congress.

HARLOW: So, let's dive into that, because that is your expertise and your absolute wheelhouse. I thought it was interesting, because this man who we

just showed you, who runs the ethics office, actually slammed Trump on his plan, but he praised Rex Tillerson, Trump's choice for Secretary of State,

calling his divestment from ExxonMobil, should he get confirmed, a sterling model.

ALESCI: It's remarkable, right?

HARLOW: Yes.

ALESCI: And this is because the way the rules are written in this country, right? The president technically does not have to abide by the same set of

standards that his administration does. But that's technical. What Schaub, the chief ethicist is saying is that Trump's plan breaks with

tradition. And that is the distinction.

Donald Trump is out there saying, I don't have conflicts. The president isn't subject to conflicts. That's not true. He is keeping an ownership

stake in his business. That means he knows what his assets are, he knows who his partners are, and it doesn't shield him --

HARLOW: And his sons are running it.

ALESCI: -- exactly. And, Poppy, at the end of the day, it doesn't shield him from criticism or questions about whether he's making policy decisions

to enrich himself, you know, or that he's making them in the best interest of the country.

HARLOW: And he did say no foreign deals would be done, like the $2 billion offer that came in last week from Dubai. He wanted no to that one.

HARLOW: He wanted some applause and credit for that.

HARLOW: What about the counterargument that his team made, that had he had a fire sale of all of these assets. And let's say that some entity or some

foreign government or whomever overpaid for them and said, actually, we'll pay you $3 billion for something the market values at a $1 billion, the

counterargument would be, you would then have undue influence on the president even after he was in office. Do they have a point?

ALESCI: And Walter Schaub actually addressed this, the chief ethicist actually addressed this. He said, we wish Trump's camp would have talked

to us about this before making those statements, because we've helped presidents for the last 40 years divest, quote/unquote, illiquid assets.

Assets that are not easily sellable in the market and we can do it in an orderly way to avoid conflicts. That was Walter Schaub's position and that

is, I mean -- from their standpoint, it can be done. Trump's lawyers disagree.

HARLOW: I feel like you're going to be dreaming about divestment and these -- and the emoluments clause --

ALESCI: The emoluments clause. Yes.

HARLOW: -- for the next 4 to 8 years. Thank you very much. We appreciate it.

One of Wall Street's most powerful CEOs is upbeat about the Trump economy. According to Jamie Dimon of JPMorgan, the outlook is looking rosy at least

for the first few months, so far, of the Trump presidency that are to come. More on what he said, when we come back.

(COMMERCIAL BREAK)

[16:20:00] HARLOW: The CEO of JPMorgan Chase says he is optimistic about the economy under President-elect Trump. The bank reported better than

expected earnings today. Jamie Dimon saying, "There is opportunity for good, rational, and thoughtful policy decisions to be implemented, which

would spur growth, create jobs, and help communities."

U.S. banks are continuing to really revel in the Trump bump. Boosted by hopes of less regulation and higher interest rates. JPMorgan reported a 24

percent increase in profits for the fourth quarter. Bank of America announced its biggest annual profit in a decade. And even Wells Fargo

stock is rallying, despite its fake account scandal and disappointing revenue. Paul La Monica is at the New York Stock Exchange, perhaps

waiting, waiting, waiting for a Dow 20,000 that is yet to show us that it is a reality.

PAUL R. LA MONICA, CNNMONEY CORRESPONDENT: The earliest it's going to happen is Tuesday now, because the market is closed Monday. I'm not going

to spend the whole weekend here.

HARLOW: Don't sleep there, but let's dive into these numbers. JPMorgan, really great numbers. Jamie Dimon, hopeful. All bank stocks are rallying.

JPMorgan shares up more than 20 percent since the election. What do you make from Dimon's comments?

LA MONICA: I think it is interesting that he is this optimistic, although he tempered that enthusiasm a little bit in a call with reporters, saying

that, you know, he is still expecting some favorable reform in Congress, maybe a rollback of some of the more onerous regulations on big banks, as

well as tax changes. But he's not going like overboard with his bullishness. But when I asked him during the call if he was worried at all

about Trump's protectionist talk, he backed off of that, too. He basically joked about Trump tweeting like he does, and he kind of writes that off.

And that he looked more at the fact that people like Steve Mnuchin and Wilbur Ross and Rex Tillerson, that these will be professional businessmen

that will advise Trump in a more rational way than one might seem to think when you read one of those Trump offhand tweets at 3:00 a.m. in the

morning.

HARLOW: It is interesting, though, for example, when it comes to Dodd/Frank and Wall Street reform, Carl Icahn, for example, does not think

it should be totally rolled back. He still does have some Wall Street heavyweights around him who perhaps aren't on the same page of him when it

comes to all of this regulation. Bank of America, Brian Moynihan, also strong numbers, but also hopeful about Trump.

LA MONICA: Yes, he said that there was palpable optimism among some of their consumers, both average, you know, bank holders, as well as corporate

customers. And I think, again, there is this genuine hope that Trump combined with the Republican Congress will lead to maybe a rollback of some

of the regulations that maybe were a little too strict in response to the financial crisis. Now, I don't think anyone suggests that they're going to

completely obliterate Dodd/Frank the way that Trump is threatening to do with Obamacare, but any changes that might, you know, get rid of some of

the restrictions could be good news for big banks. And with interest rates going higher because of the Fed, that helps, too.

HARLOW: Of course, I do want to hit on Wells Fargo. The stock rally, despite -- and some concerns, 400 branches closing. Also, a lot of news

this week when it comes to the fake account scandal and when they told regulators about it versus when they actually knew about it.

LA MONICA: Yes, that one was really odd, because I think Wells Fargo's take was that the amount of the fine, the $185 million, may not have been

material, which you could argue is true for a bank of their size. But what they were being fined for was clearly material. And we've seen the big

backlash. I think, though, that Wells, with their new CEO. He's still in a bit of a honeymoon period. So even though the results weren't great,

people are happy that at least Wells Fargo is acknowledging they have a big problem and taking actions to try to change some of the things that went

wrong and move forward.

HARLOW: Yes, but with all of those hundreds of branches closing, it shows you how the face of banking is changing. You know, branches to phones,

right?

LA MONICA: Exactly. So many people doing transactions online and don't need a teller holding their hand as much.

HARLOW: It's true. Paul La Monica, have a good weekend. Maybe you'll see Dow 20,000 next week. Thank you very much.

Prosecutors are opening an investigation into the car company Renault over its alleged use of software to cheat on diesel emissions tests. Now,

Renault insists it did nothing wrong. It did nothing illegal. That's what they say. Shares fell as much as 4 percent before bouncing back slightly

on the day. Renault is the largest automaker caught up in this diesel emissions probe right now.

[16:25:00] On Thursday, U.S. environmental regulators accused Fiat Chrysler of violating those pollution laws by cheating on diesel emissions tests.

Fiat strongly denying the accusations. Sergio Marchionne coming out yesterday, saying there is nothing to it. Let's put it all in perspective.

Automotive expert, Lauren Fix, of The Car Coach joins us from Buffalo, in New York. She's the author of "Lauren Fix's Guide to Loving Your Car."

Nice to have you on, Lauren.

LAUREN FIX, THE CAR COACH: Thank you for having me.

HARLOW: Let's begin with Renault. The company says, "Renault vehicles are not equipped with cheating software affecting anti-pollution systems."

they did confirm the probe. What do you see as the outcome here for Renault, and just the bigger picture of all the companies now, all the

automakers tied up in this probe?

FIX: Right. They make an eco-diesel product that's sold here in the United States on the Jeep and on the Ram half-ton truck. And they claim

that there were eight specifications on their software that may have not been disclosed, but they claim that it's not cheating devices. And

Marchionne did say yesterday that it's absolutely not. And they would have to fight it. Honestly, they cannot afford to have any cheating devices.

I'll give them the benefit of the doubt, but they're waiting for the next administration to come in, because the EPA and the National Highway Traffic

Safety Administration may have looked at it slightly differently.

HARLOW: It's interesting you bring that up. The EPA is set to review these fuel economy standards in 2018. And a lot of automakers have been

pushing Trump and the administration to say, to take a very close look at them, right? Because the more stringent they are, the harder they are, the

more miles per gallon these cars have to get overall, is obviously tougher and more expensive for these automakers. Are you saying, Lauren, that you

think the Justice Department, et cetera, would look at this differently under the Trump administration, when it comes to the existing cases?

FIX: It's highly likely. So, what the current administration has done is, they have decided through the EPA that they're going to push through the

54.5 corporate average fuel economy known as CAFE to hold until 2020. And the problem is, up to 2022. The fact is, the manufacturers can't make

those numbers. So, there are penalties which are enforced, which cost them money. Because the car can only get so light and technology can only

evolve so fast. So, with the new EPA person coming in, his name is Scott Pruitt, he may look at things differently, and he may have Congress help

him change that ruling. Because he's getting a lot of pressure from the National Auto Dealers Association, known as NADA, as well as car

manufactures. They want to look at this and revamp this, because the fact is, it's costing you and I dollars when we go to the dealer to buy a car.

HARLOW: And Pruitt's also on the record, you know, he's a climate change denier. He's also on the record, basically saying, he doesn't think that

human actions contribute to climate change. Before I let you go, I want to get your take on Takata. The federal grand jury today indicted three

former Takata executives for criminal wrongdoing. This has to do with the air bag recall that affected the 42 million vehicles. So far, they've paid

$1 billion fine. I mean, where does this ultimately land? You got at least 16 deaths tied to these faulty air bags.

FIX: I agree with you. And that's the same thing I've been saying all along. This is not enough. But the key thing is, when the federal

investigators go and look at their email servers and see that they intentionally deceived manufacturers about the test results and the Feds,

you know they're going to cop down on you with a load of bricks. And that's why there's been indictments. So far, we're $1 billion in fines. I

expect to see more.

Takata may have to sell or potentially change their name completely or go out of business. We don't know what the final ramifications will be, but

we really want, you and I, we want the air bags replaced. We want people to be safer on the roads, and I don't know how long that's going to take.

Because we're looking way out there. We're so far behind, and there's more and more vehicles every day adding to the recall list.

HARLOW: Just to put into perspective for people, VW was fined about $20 billion for emissions, which is a huge deal.

FIX: Yes.

HARLOW: This is a $1 billion fine for at least 16 deaths tied to it. We'll see if there's more to come, Lauren. Thank you very much.

It may be Friday the 13th, but the London Stock Market has been far from unlucky. In fact, it is on its longest winning streak in history. The

FTSE has risen for 14 days in a row and posted 11 record-closing highs in a row. The weak pound, of course driving a lot of those gains. Tonight, the

FTSE 100 closed up 0.6 percent. Other European markets also closed well, with Paris closing the week up 1.2 percent on Friday. And later this hour,

you will hear how the U.K. plans to boost trade after Brexit. Britain and New Zealand held talks today with an eye to a free trade deal in the near

future.

(BEGIN VIDEO CLIP)

BILL ENGLISH, NEW ZEALAND PRIME MINISTER: We are ready to negotiate a high-quality free trade agreement with the U.K., when it is in a position

to do so. We already have a strong and diversified trading relationship with the U.K. and a free trade agreement will build on that.

[16:30:00] HARLOW: That's straight ahead.

And just a week to go before he is sworn in as the 45th president. Donald Trump lets rip at the intelligence community again in his latest Twitter

tirade. That's next.

(COMMERCIAL BREAK)

HARLOW: Hello, I'm Poppy Harlow. There's more QUEST MEANS BUSINESS in just a moment. When Donald Trump vows to harden America's cyber defenses,

we meet America's newest cyber soldiers.

And buy the console, but maybe not the stock. Nintendo shares take damage as the company puts a price on its latest device.

First, though, the other news stories we're following this hour. The U.S. House has approved a budget resolution to begin the process of repealing

the Affordable Care Act, more commonly known as Obamacare. It became law in 2010 and allowed millions of Americans to get healthcare. It is unclear

how Republicans plan to replace it.

The U.S. Justice Department is looking into how FBI Director, James Comey, handled the investigation of Hillary Clinton's private email server. The

FBI did not recommend criminal charges, but the bureau revived the investigation just two weeks before the U.S. presidential election.

The United States has made one of its largest military deployments into Europe since the cold war, 4,000 American troops, tanks, and military

vehicles rolled into Poland this week. Moscow has denounced it as a threat to Russian security.

The U.S. Justice Department says the Chicago Police Department engages in a pattern of excessive force, a violation of the U.S. Constitution. This

announcement from Attorney General Loretta Lynch follows a 13-month investigation. Lynch says the pattern of excessive force is in part

related to poor training of officers.

Princess Margaret's former husband, photographer Lord Snowdon has died. Buckingham palace says that Snowdon, born Anthony Armstrong Jones, died

Friday at the age of 86. The late princess was the younger sister of Queen Elizabeth.

U.S. President-elect Donald Trump is promising a full report on hacking, alleged Russian hacking, by the end of April. In a series of tweets, Trump

also lashed out at an unverified document claiming that Russia holds incriminating material against him.

[16:35:00] He tweeted, "Totally made up facts by sleazebag political operatives, both Democrats and Republicans -- FAKE NEWS! Russia says

nothing exists. Probably revealed by "intelligence" even knowing there is no proof, and never will be. My people will have a full report on hacking

within 90 days."

I want to bring in Jeff Beatty. He is a former CIA Counter-Terrorism official, currently a professor of national security studies at the

University of New Haven. He joins us from beautiful Cape Cod, Massachusetts. Nice to have you on the program.

JEFF BEATTY, FORMER CIA COUNTER-TERRORISM OFFICER: Thank you, Poppy, good to be with you.

HARLOW: As someone who has served in the military, served in the CIA, served in the FBI. What do tweets like this, putting intelligence in

quotes, what do they do, not just to the relationship between the President-elect and those who served this country as intelligence officers,

but to having a material negative impact on the intelligence that they will bring to his desk once he is president in a week?

BEATTY: Well, with first, I don't think there'll be any degradation in the quality of the work that these people deliver. They are professionals.

They have taken an oath not to a president, but to uphold the Constitution. So, I am confident in the professionalism of my former colleagues in the

intelligence community to continue to do an outstanding job.

I think what you're seeing, Poppy, is really a function of two things. The first is, you know, historically, we've had politicians who have been

elected to president, and yet they've come from a background of being politicians. They've gotten intelligence briefings. They're very familiar

with the intelligence apparatus. So, I think part of the problem that we have right now is President-elect Trump doesn't have that level of

experience with our intelligence agencies.

And I think the other factor, quite frankly, is kind of the art of the deal, in marketing and in making deals, first you make them sick, then you

make them better. He said he was going to shake things up when he came to Washington, so maybe that's what he's doing. But I would say, Yes, it's

not where you wanted to be, that's for sure. But I think there's less reason to be concerned about the relationship today, but if it were the

same way three to six months from now, after he's worked with these folks for that amount of time, I think we would have real serious concern.

HARLOW: Let me get your take on how vulnerable you think the United States is when it comes to these hacks and cyber warfare, really. Because as you

know, less than a month ago, President Obama said, "Our economy is more digitized, more vulnerable, partly because we're a wealthier nation and

we're more wired than other nations." Talk to us about the risk that we all face as this next president take office.

BEATTY: Well, that's absolutely right. And that's one of the reasons why you have to be cautious. You know, I spoke a week or two ago with another

colleague on your network about the importance of looking at the cyber environment the way we used to look at, you know, those intercontinental

ballistic missiles. We had some, the Russians had some. There was a balance. Because there was a balance, we agreed not to use them. Same

with chemical and biological. They kind of balanced each other out. And we've had conventions and we've had treaties against the use of these

weapons.

I really believe that although there's been some look, not serious enough, at this type of bilateral or in fact, maybe even a Geneva Convention that

deals with cyber-type activities, this is really the time to do it. Because we are vulnerable. And as you point out and as President Obama

pointed out, we have a lot more to lose by a cyber-attack.

The Russian economy, Yes, it would be crippled, but the Russian people would probably not be as affected by such an attack as our people would.

So, there's big stakes there. And I think the time is now to move forward to get the willing cooperation of all nations, just as we did, to get 196

signatories on the Geneva Conventions, to get some sort of treaty and agreement in place, that helps guard against this type of activity.

HARLOW: Thank you very much. I wish we had more time. It's an important topic. We'll stay on it. Thank you.

BEATTY: Thank you, Poppy.

HARLOW: Russia's suspected hacking of the 2016 U.S. election has renewed calls for cyber defense to be at the forefront of national security, as we

were just discussing. As our Claire Sebastian reports, a 214-year-old institution is on the front lines, training U.S. Army cadets for cyber

warfare.

(BEGIN VIDEOTAPE)

MAJOR NATALIE VANATTA, DEP. CHIEF OF RESEARCH, U.S. ARMY CYBER INSTITUTE: So, if we talk about cryptography, it's been around for about 4,000 years.

CLAIRE SEBASTIAN, CNNMONEY CORRESPONDENT (voice-over): it's not even 9:00 a.m., and these cadets are already being drilled in applied algebra with

cryptology, the study of codes. It's just one of the disciplines in the West Point Military Academy's cyber curriculum.

VANATTA: That's what we call a brute force attack, when we look at doing cryptanalysis on ciphers, we just try every possible keyboard in the key

space.

SEBASTIAN: some of these young men and women will join the Army's less than three-year-old cyber branch when they graduate.

VANATTA: When A is not invertible. That's what I want.

SEBASTIAN: Their teacher, Major Natalie Vanatta is a cyber officer herself, currently on teaching assignment.

[16:40:00] VANATTA: We explore the mathematical ideas and foundations that make encryption systems work today.

If I use a bunch of them and interweave them, that's really important, because it really helps these cadets develop their critical and creative

thinking skills, when it comes to, well, what do we do next?

SEBASTIAN (on camera): Steeped in tradition, dating back centuries, West Point is now at the forefront of developing the Army's newest and most

technologically advanced career field, combatting the growing threat in cyberspace.

COL. ANDREW HALL, DIRECTOR, U.S. ARMY CYBER INSTITUTE: We need to have soldiers that are able to incorporate the fighting in the domain of cyber

into everything that we do in the Army. It's well beyond just the setting up of the networks or the intelligence that's being collected over

networks, to actually learn how to maneuver in cyberspace and to be a war- fighting element.

SEBASTIAN (voice-over): Colonel Andrew Hall leads the Army's Cyber Institute at West Point, which not only runs the education program here,

but also operates as an Army think tank on cyber warfare issues.

(on camera): I suppose the danger is that you are teaching something that may be evolving faster than you can teach it.

HALL: We're trying to teach them and educate them, so they can solve problems we're not sure, yet, what they're going to have to solve.

SEBASTIAN (voice-over): for cadets like 22-year-old Diana Contreras, one of 15 cyber officers to be commissioned at West Point this year, it's a big

responsibility.

DIANA CONTRERAS, CYBER CADET: It's something that is so vital for our country as a whole. We can't function, we can't really survive as a nation

without having backup cyber support, offense, defense.

SEBASTIAN (on camera): What does it mean, the insignia?

CONTRERAS: The two lightning bolts represent the lightning god's who ascend communications from above. And the sword represents read readiness

in combat. So, communications and readiness in combat.

SEBASTIAN (voice-over): Old principles for a new and unpredictable kind of warfare. Claire Sebastian, CNN, West Point, New York.

(END VIDEOTAPE)

HARLOW: President-elect Trump has heaped praise on his cabinet picks, even though some of them disagree with him, quite a lot on some of he has key

policy issues. And he made that clear during Senate confirmation hearings which began this week. Trump tweeted, "All of my cabinet nominees are

looking good and doing a great job. I want them to be themselves and express their own thoughts, not mine!"

The Senate confirmation hearings have sparked an angry reaction by China's state media. That's after Secretary of State nominee Rex Tillerson

suggested that Beijing should be denied access to the artificial islands that he has built in the South China Sea. Steve Jiang has more now from

Beijing.

(BEGIN VIDEOTAPE)

STEVEN JIANG, CNN PRODUCER: In a stark contrast to the more muted official response, China's state media out Friday lashed out at Rex Tillerson,

Donald Trump's nominee for the U.S. Secretary of State, and one of potential wars after Tillerson suggested a more aggressive strategy towards

Beijing in the contested waters of the South China Sea.

In a Senate confirmation hearing on Wednesday, Tillerson said China should stop building artificial islands in the waters immediately, and its access

to these islands already built should be denied. On Friday, the "Global Times", a state-run newspaper known for its nationalistic stance, came out

to say that, "Unless Washington plans to wage a large-scale war in the South China Sea, any other approaches to prevent Chinese access to the

islands will be foolish." It added that, "Tillerson had better bone up on nuclear power strategy ifs he wants to force a big nuclear power to

withdraw from its own territories."

Other official media outlets waiting as well, with the "China Daily" newspaper calling Tillerson's remarks, naive, short-sighted, as well as

full of prejudices and fantasies. Now, in contrast, when I asked the Chinese foreign ministry about these comments on Thursday, a spokesman

simply said that things have been cooling down in the region and it hopes the U.S. will respect the consensus China has reached with other countries

on this issue.

But South China Sea is now the only hot button military issue between Washington and Beijing right now. On Thursday, China and Russia also came

out to say that they have agreed to take further counter measures in response to the U.S. South Korean decision to deploy the fab missile

defense system in South Korea. Now, Washington has insisted this is aimed at preventing North Korea from shooting missiles into South Korea, but both

Beijing and Moscow have long opposed this move, calling it a security threat to their own interests.

When I asked a foreign ministry about this announcement, a spokesman said, given the legitimate security concerns, China and other countries have, it

is entirely understandable for them to take further steps. So, a week before Donald Trump takes office, an increasingly uncertain and complicated

global security landscape, especially involving Beijing and Washington, seems to be awaiting the next U.S. president. Steven Jiang, CNN, Beijing.

(END VIDEOTAPE)

[16:45:05] HARLOW: Indeed, we'll watch. Coming up after the break, two islands, one deal. British Prime Minister Theresa May offers New Zealand a

hand in trade. Opening the door to a free trade agreement after Brexit. Our interview with the New Zealand Prime Minister comes next.

(COMMERCIAL BREAK)

HARLOW: The British Prime Minister says she is looking forward to, a "bold" trade deal with New Zealand after the U.K. leaves the European

Union. Under EU law, Britain is forbidden from signing any deals until after Brexit, which could still be several years away. Theresa May met

with the New Zealand Prime Minister, Bill English, who's also seeking a trade deal with the wider European Union. Ms. May says that it made sense

to build better ties. Listen.

(BEGIN VIDEO CLIP)

THERESA MAY, BRITISH PRIME MINISTER: Our two countries enjoy strong and growing trading relationship, with over 3 billion pounds last year. The

U.K. is New Zealand's fifth largest bilateral trading partner, and we're the second largest foreign investor there. As two island nations, we know

that trade is essential to the prosperity of our countries. And so, it's national that we share a firm, deep-rooted belief in the power of free

trade and open markets, to drive economic progress and the importance of ensuring the benefits of growth are shared wildly and fairly.

(END VIDEO CLIP)

HARLOW: Richard sat down with New Zealand Prime Minister, Bill English, in London. He asked if New Zealand was giving Britain an idea of what it is

like to be a small country trading in an independent world.

(BEGIN VIDEOTAPE)

ENGLISH: Well, we have a positive view of that role. You know, we're a tenth of the size of Britain, even less, we've had an open trade policy.

We're not part of any customs union. We are very integrated with the Australian economy, though, in a different way than the European Union

works. So, you know, if they want to do a free trade deal with a country that understands the benefits of it and continue to advocate it, then New

Zealand is the right place.

RICHARD QUEST, CNN CORRESPONDENT: Are you ready to do a deal? Are you ready to talk?

ENGLISH: We're ready to talk, but of course, at the moment, we've got to focus on getting a free trade deal with the European Union. And we've been

impressed with the fact that they are enthusiastic about that, even when they have much larger, more challenging issues on their plate.

QUEST: So, if you have a choice between doing a trade deal with the EU and the U.K., because the two are like -- it's -- I realize you're scoping out

the EU already, but the two are like, can you negotiate both simultaneously?

ENGLISH: Not simultaneously. Clear priority here, we are working on the deal with the EU, as we speak. Serious negotiations will start this year.

And when Britain is ready, because we are still in the EU, we have to wait until they've left, we'll negotiate an agreement with them. Prime minister

May's has made that very clear today. It may be one of the simpler kind of transactions that they can do compared to the disentanglement from Europe,

so we're optimistic.

[16:50:00] We'll take whatever opportunities it present at the moment. We're getting the opportunity of a free trade agreement with the EU. The

opportunity will probably arise to get one with the U.K. We'll grab that opportunity.

QUEST: How concerned are you about a U.S. -- an America-first policy which can be disengagement by the United States in many parts of the world?

ENGLISH: Look, we'd be concerned if the U.S. completely disengaged from the Asia-Pacific. But, we think they can fulfill their political

objectives around America first, without taking too drastic a shift in their engagement in the Asia-Pacific, because it's so important for our

economic development and for the geopolitical balance that they are engaged significantly in the Asia-Pacific.

QUEST: To your knowledge, Prime Minister, have you or your government been hacked, by the Russians?

ENGLISH: Not to my knowledge. But like everybody else, we've been investing pretty heavily in technology in the people to upgrade our

cybersecurity. We think it's a major issue. Economic issue, as well as a security issue, you've got to protect your infrastructure, in a small

country, a lot of the businesses don't have the capacity or the expertise. So, we work with their businesses to protect their interests, as well as

government itself. Because government itself, the operations of it means we hold information about everyone in the country, a lot of which is

confidential, so we have to protect that.

(END VIDEOTAPE)

HARLOW: Coming up, buy the console, not the stock. Apparently, the message from investors today when it comes to Nintendo and their hopes of

their newest toy being the future of gaming. Investors seeming to need a little bit more persuading.

(COMMERCIAL BREAK)

HARLOW: Are you a gamer? I'm clearly not. But we're going to talk about this. Because apparently, everyone in this studio is. Nintendo has put a

price tag on its new games console. This is the so-called switch. It is one-part mobile, one-part home console. And it will set you back $300.

Investors were not exactly impressed today. Nintendo shares dropped about 6 percent in Tokyo. Frank Pallotta has had a chance to try it out and he

joins me now. He is -- are you a gamer?

FRANK PALLOTTA, CNNMONEY MEDIA REPORTER: I'm not a gamer, but I'm buying this thing.

HARLOW: All right, you're buying it. Why are you buying it? And no pun intended here, is this a game changer for Nintendo?

PALLOTTA: Well, I played it this morning in New York City, and it really is a game changer. It has, no pun intended, a link to the past, which is

something talking about Zelda, in that it felt nostalgic. When I was playing it, I felt like a kid who I was when I was playing N64 and Wii back

in my college days.

[16:55:00] HARLOW: Does it have "Duck Hunt"?

PALLOTTA: It does not have "Duck Hunt" or "Site Bikes" or the any of that stuff. Man, Poppy, you're aging yourself here with "Duck Hunt." no "Duck

Hunt." But what it does have, it has multiple forms. You can play it in the traditional TV sense, which is sitting on your couch and playing with a

controller, and then you can go seamless from playing it on your TV, to playing a handheld device. And if that wasn't enough, you can put it on

your tabletop and take the controllers off and play it with like a group of individuals. You can move around.

HARLOW: Literally, our children will be walking around, never not playing their game.

PALLOTTA: Not just children! 30-year-old men, as well.

HARLOW: I know we just learn this. So, why the negative stock reaction?

PALLOTTA: I think it's because they're not exactly sure how well it's going to be received. Nintendo, even though it helped usher in the age of

video gaming, as we know it, 30, 40 years ago, it has had a big-time struggle catching up to the Xboxes and PlayStations of the world. This

isn't necessarily for the hard-core gamer. It's for people like me, who are casual gamers, who don't want to be stuck at our couches for 12 hours a

day. We want to be able to move around.

HARLOW: And some of the criticism of the predecessor, Wii U, is that there weren't enough games. This has upwards of 80 games already, right?

PALLOTTA: Yes, it has a bunch of different games, it has "Legend of Zelda," which is an iconic franchise, has "Mario" card. It has "Super

Mario." That's what Nintendo has that Xbox and PlayStation necessarily does not have. It has great intellectual property.

HARLOW: Do they need it to be a hit?

PALLOTTA: I think so. It's a huge transitional time for video games right now. And Nintendo needs to find that niche between the casual gamer or the

person who never plays a game, you, and the hard-core gamers that give up their entire weekend. They need to find that niche right in the middle for

people like me that will spend $299 on it.

HARLOW: I just want to go home and play "Duck Hunt" tonight.

PALLOTTA: That's fine, invite me over. I will play "Duck Hunt".

HARLOW: All right, bring it on.

PALLOTTA: Any time.

HARLOW: Thank you, Frank. That's it for "QUEST MEANS BUSINESS on this Friday. I'm popping Harlow in New York. So, glad you're with us. The

news continues, as always, right here on CNN.

END