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Senate Confirmation Hearing for Treasury Secretary Nominee Steve Mnuchin; Trump, Pence to Lay Wreathe at Arlington National Cemetery; Trump Cabinet Breakdown. Aired 1:30-2p ET

Aired January 19, 2017 - 13:30   ET

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

[13:30:00] STEVE MNUCHIN, TREASURY SECRETARY NOMINEE: But I'm also a strong believer in people need to understand the regulation. So, we need to be able to explain to banks what's proprietary trading and what's not proprietary trading. I think we would all agree, if we were all sitting in this room and just betting on things, that's proprietary trading.

What I referenced is that the Federal Reserve had their own independent report on a lack of liquidity in many of the important markets. So, what I'm in favor of is that we have clear definition around the Volcker rule and that the regulators come out with that and do it in a way, so that it doesn't eliminate liquidity in many of the important markets.

CANTWELL: So, you would basically just tighten what you think are the rules that are out there? So, you would lessen the rules that are already passed in Dodd-Frank?

MNUCHIN: No, that's not what I've said. I want to be very clear. What I've said is that I support the Volcker rule, but there needs to be proper definition around the Volcker rule, so that banks can understand exactly what they can do and what they can't do and that they can provide the necessary function of liquidity in customer markets. And again, I'm referencing a problem that the Federal Reserve has independently raised.

CANTWELL: Well, I think, to me, I think this election was a lot about the frustration of the American people on the implosion of our economy and the fact that they haven't recovered. And I think that the President-Elect, whether he directly or meant to or - I was pleased that his party adopted coming up with a very bright line of separating commercial from investment banking. So, now, I think where we are today, we're not sure. Hopefully, we'll get a chance to vote on this, all our colleagues. Now that our colleagues have to answer to platforms and committees, hopefully, we'll get an answer where our colleagues are on this. But I will tell you that not only is this an issue of people wanting to see a bright line and be protected from this ever happening again.

When it comes to the tax code and the tax policy, the American people have not recovered. So, lowering the corporate tax rate without giving a plan for the average American who lost pension, couldn't send their kids to school, maybe lost their home, what is the tax policy that the President-Elect and you are going to pursue that is going to help restore them from that major implosion and protect them from this ever happening again?

MNUCHIN: Well, let me just tell you. From having traveled with the President-Elect for the last year, I absolutely understand why he got elected. And that is because, as you point out, the average American worker has gone nowhere. The unemployment rate is not real. The average American worker has gone nowhere. And President-Elect is committed, as am I, as his economic advisor, to work for the American people and grow the American economy, so that the average American worker does better. And that's why I've been willing to sell all my investments, OK? I've been willing to give up my businesses. My desire is to work for the American people to create a better economy, and I understand that. I've traveled for the last year. I've seen this and the President-Elect understands that very clearly.

CANTWELL: And so, just one question on that. I know my time has expired. So, did you mention in your - what tax break policy you would give to that American worker?

MNUCHIN: Absolutely. We specifically said that the objective is to create a middle-income tax cut and to create business taxes that incent businesses to grow and make businesses more competitive and hire more people and create more jobs.

CANTWELL: So, not specific to education or pensions or anything - a broad tax break ...?

MNUCHIN: Well, as we've talked - as we've had a chance to talk about, I think pensions are a very important issue. And I'd be happy to work with your office another time, OK. I think that the people who have earned pensions absolutely deserve to have those pensions maintained and be safe. And I'm very concerned about the retiree issue in this country, and that's something that I look forward to working with you and others on.

CANTWELL: Thank you.

MNUCHIN: We need to protect the pension-holders in this country.

CANTWELL: Thank you. Thank you, Mr. Chairman.

[13:34:38] ORRIN HATCH, (D-), CHARIMAN, SENATE FINANCE COMMITTEE: We're going to take a 10-minute break here. My friends on the other side have requested a second round. And we're going to grant that. And so, let's just recess for about 10 minutes maybe or a little longer.

WOLF BLITZER: Orrin Hatch, the chairman of the Senate Finance Committee, ordering what he says will be a 10-minute break in this hearing. Steve Mnuchin has been nominated to become the next treasury secretary of the United States. We're going to continue our special coverage.

You know, it's just very, very interesting what we just heard, Christine, what he said about the unemployment rate --

[13:35:21] CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRSEPONDENT: Yeah. BLITZER: -- is not really real. We've heard that from Donald Trump all of the time. He's always saying the numbers, that the labor numbers coming out are really not realistic. They are way too low. The real numbers are way higher. But go ahead and explain.

ROMANS: So Donald Trump for many months now has said the unemployment rate is not reasonable 4.9 or 4.8 or 4.7 percent. He says it's anywhere from 25 to 42 percent. And he says there are 96 million people in America who want a job. That's just not true. That is -- there are people who are sidelined by the economy. And there are people who are no longer in the labor market. Some of those people are retiring. Some of those people are stay-at-home parents. Some of those people are not working because they just dropped out. But many of them are not working because they don't want to work. My grandmother is one of those 94 million people. She's not going to go out and get a job because she doesn't want a job.

You heard him say the unemployment rate is not real. What I think he's trying to highlight is that there are those whose wages have not grown. People who feel they're not moving up in the labor market and that's not fair. People are working part-time but would like to be working full time, or they're working full time but it's two part-time jobs. Those are real issues in the economy. But there's 300,000 manufacturing jobs open today. There are several million jobs that are open today that aren't matched with skills. There are bigger policy issues about fixing that sidelined in the economy.And, you know, I worry when you say the unemployment rate is not real when all these people in the Labor Department who work so hard to compile those numbers are about to work for thus administration, I worry that that dilutes their argument when they are using numbers that aren't quite precise.

NIA-MALIKA HENDERSON, CNN SENIOR POLITICAL REPORTER: And it raises the question, when Donald Trump becomes president, is that the kind of language he continues? When he gets numbers from the Bureau of Labor Statistics, maybe the unemployment rate goes up or down, does he question those metrics? If there's only 70,000 jobs created, does he start to question those metrics? When things looked bad for him, when things go wrong, does he then start attacking the source -

(CROSSTALK)

HENDERSON: -- which would be his administration?

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: I think you'd like the metrics when the rate is low.

(CROSSTALK)

ROMANS: He should be riding high on the economy that he has inherited here. In fact, since the election, CEOs tell us they think there will be pro-growth policies. They think there will be cuts in corporate taxes. And so, they are planning on hiring more this year. That's very good for President-elect Trump.

BLITZER: Christine, David Gergen makes a fair point, a lot of people have jobs but not the salaries they used to have and they aren't as satisfied. As a result, maybe that's what city of Mnuchin was referring to when he said the unemployment rate is not realistic. People are still very worried because they're not making what they used to be making before the Great Recession.

DAVID GERGEN, CNN SENIOR POLITICAL ANAYST: I was more impressed with Mnuchin than I thought I would be.

But let me go to the broader point, and that is, it is true, I think it's outlandish to 40 percent of the people are unemployed. But there's a widespread view that a lot of people have dropped out of the labor market and are not counted in these numbers because they can't find work or they can't find a job they really want to do. So, 4.7 percent, 4.8 percent does, for a lot of Americans does, understate the problem. It puts a rosier face on the problem.

ROMANS: There's a number for that called the under-employment rate. It's more like 9 percent, which is still too high, but it's been coming down dramatically.

GERGEN: It has been coming down, but 9 percent is a pretty darn high number and does reflect -- I think you have to give -- on this one, I think Trump makes a lot of wild assertions, but on this one, I don't think --

(CROSSTALK)

BLITZER: It's one of the reason's Kirsten, presumably, Donald Trump, tomorrow, will be sworn in as the next president of the United States. A lot of people agree those unemployment numbers are not realistic.

KIRSTEN POWER, CNN POLITICAL ANALYST: That's what Steve Mnuchin said, this is one of the reasons Donald Trump got elected. He understands there are a lot of people out there who feel left behind. To be fair, both parties kind of do this, depending on who is in office and who is out. If they want to downplay how well the president is doing in terms of the jobs numbers, they will always go to the fact that there are people who have dropped out. It's a game both sides play. It doesn't make it illegitimate. So, I think that is what he was talking about.

BORGER: But it does speak to the larger question of people feeling like they are treading water and they haven't -- their incomes haven't risen the way they should, and the notion that they believe their children --

(CROSSTALK)

BORGER: -- are going to be less well off than they were when they were their kids' age. And to your point, Wolf, that played very much into the election of Donald Trump. They say they are going to create a middle-income tax cut to help those -- to help those families. The question that I have is what are Republicans thinking about this? Because how are they going to -- how are they going to pay for all of this? [13:40:10] POWER: And one of the criticisms -- if you talk to

moderate Democrats -- will have of the Obama agenda, while moderate Democrats care a lot about economic inequality, there wasn't enough on economic growth. So, that is something that actually matters and matters to people who are looking for jobs.

To Gloria's point, it does matter if your income is down, if you don't feel like you can grow and --

ROMANS: I think student loan debt is a big part of this.

POWER: yeah.

ROMANS: This is the biggest generation of student loan debt. They feel their kids aren't moving ahead. We have senior citizens who have Social Security payments garnished because they have unpaid student loan debt for them or their kids. That's a big part. I haven't heard the policies yet on how to fix that.

BLITZER: We'll get back to the hearings. They are about getting ready to resume this hearing before the Senate Finance Committee.

Let's take a quick break. We'll resume our special coverage right after this.

(COMMERCIAL BREAK)

[13:44:47] BLITZER: Welcome back. We're standing by to resume our special coverage, the Senate Finance Committee hearings, the confirmation hearings of the treasure secretary nominee, Steve Mnuchin. It's been more than three hours already. They're taking a quick break and will resume the hearing momentarily. We'll go back to it once it starts. He's been facing some very tough questions from a lot of the Democratic members of the committee.

In the meantime, just want to remind our viewers, later this afternoon, the president-elect and the vice president-elect, in about an hour or so, they'll go to Arlington National Cemetery. They'll lay a wreath at the Tomb of the Unknowns and, from there, go over to the Lincoln Memorial for what's called the "Make America Great Again Welcome Celebration," a concert with all sorts of entertainers, Toby Keith, Lee Greenwood, Three Doors Down. A lot of entertainers. We'll have live coverage of that. And later tonight, there's a candlelit dinner over at Union Station here in Washington. The president-elect, the vice president-elect, they'll be thanking their big donors. All that coverage coming up on this day before the inauguration.

David Gergen is with us.

If you take a look at the 15 sort of traditional cabinet positions -- and we've got some graphics we'll show our viewers -- Trump cabinet by the numbers. Gender, 13 men, two women. Political parties, no elected Democratic politicians among those 15. Cabinet members never elected to public office, 10 of them have never been elected to public office. Elected to public office, five. The racial makeup, ethnic makeup, 13 whites, one black, one Asian and zero Hispanic. It's a pretty white cabinet, if you will. And there's been some

criticism for that, the lack of diversity.

GERGEN: We've had two presidents in a row, actually three, Bill Clinton, George W. Bush and Barack Obama, who all believed in diversity and built cabinets in which white men were the minority. This is a break with that tradition. He is the disruptor. He's the one that's going to throw out a lot of the norms.

But I do think that it fuels the sense of being separated out, by the black community, for example. That's one of the reasons the John Lewis thing blew up so quickly. A lot of these African-American members of Congress are not coming because I think when you -- when they don't see themselves represented in the cabinet and they don't see more women there - you know, just next door, with the Trudeau government, more than half of Trudeau's cabinet, women. And to have so few, I think it creates some distance. If he can overcome it -- I think if there is -- if his team to get back and talk about the economy and jobs, creating more jobs, they can get themselves out of this hole. They have so many distractions and they don't pay attention --

BLITZER: Kirsten, how do you see it?

POWER: I think his cabinet looks a lot like the coalition that elected him. That's not a defense of it. I think he should make more of an effort to find more diverse people but these are the people willing to serve with him, because of the type of people who voted for him. Sean Spicer was arguing earlier, really pushing back against the idea that it's not that diverse. I wasn't really connecting with his argument but he was saying, let's wait, there will be thousands of other positions. But it's missing the point. These are the top positions. And they are very -- they send a very important message to the country.

BORGER: It's the first time since the Reagan era, where there wasn't a Latino in the cabinet. And also, we're used to having a member of the other party in the cabinet, at least one. And there were --

(CROSSTALK)

GERGEN: And never seen again.

(LAUGHTER)

BORGER: Donald Trump just elected -- he talked about Reagan Democrats who were voting for him. And we don't see a politician from the other party also in this cabinet. So, I think Trump believes in loyalty --

HENDERSON: Right.

-- more than anything else.

HENDERSON: Yeah.

BORGER: And he is rewarding the people who stuck with him. Whether it's giving Woody Johnson the ambassadorship to the court of St. James, fine, presidents do that, reward their friends. These are people he's known and he trusts. And has said, publicly, I believe in success, and these people are successful. And who better to put in cabinet positions than people who are wealthy, who have made a lot of money, and know how to succeed because now you're their client.

HENDERSON: And this was such an untraditional campaign. He alienated a lot of people. There's so many Never-Trumpers. Some of those Never-Trumpers came around. Nikki Haley was a Never-Trumper and will now serve in the cabinet at the U.N. post. There was that problem. And then there are people who, frankly, didn't want to join this cabinet for all sorts of reasons, join the administration or White House. I was just talking to a Republican about that just the difficulties that he might have, Donald Trump, in bringing people into this White House, bringing people into his cabinet. The Hispanic thing is glaring, but maybe not so surprising, given some of the rhetoric from Donald Trump during this campaign. So, you know, in some ways, it's not surprising.

[13:50:09] BLITZER: On the right part of your screen, you're seeing security at the Trump International Hotel in Washington, D.C. The president-elect getting ready to leave the hotel and head to Arlington National Cemetery, the wreath-laying ceremony at the Unknowns. That will be taking place very soon, before the "Make America Great Again Welcome Celebration," a concert there.

Christine Romans, there was a lot of conversation with the secretary of the treasury nominee, Steve Mnuchin, about the offshore deals, the Cayman Islands investments. There was a lot of exchange going on.

In fact, I think we have a clip of that. Let me play that.

Oh, we don't have a clip of it.

But he was given some grief by Democrats, why were you setting up these accounts. The accusation is to cheat the American government from taxes.

ROMANS: And then he said, no, I wasn't trying to cheat anyone. And by the way, if you guys don't like those, how about when we do tax reforms, let's get rid of them.

Look, he's not the first person to face grilling who has had offshore accounts. We had presidents who had offshore accounts. We've had people run for president who have off-shore accounts. So, this is something that's in the tax code that rich people do to either diversify their assets or shield their income, and it's legal.

BLITZER: Totally legal.

ROMANS: The point is that it's legal.

(CROSSTAKL)

BLITZER: Legal for a long time. And if members of Congress and the president of the United States wanted to change it, they could pass legislation to make it illegal.

ROMANS: They could.

BORGER: His point is he did it for pension funds --

ROMANS: That's right.

BORGER: -- that he did not do it for himself. But he said, by the way, in no way did I use them to avoid taxes. But as treasury secretary, we ought to look at this. And, hopefully, he will.

BLITZER: Let me play the clip.

ROMANS: OK.

BLITZER: I think we've got it right now. Watch this.

(BEGIN VIDEO CLIP)

MNUCHIN: I, like all other hedge funds and many, many private equity funds, set up offshore entities that are primarily intended to accommodate non-profits and pensions that want to invest through these off-shore entities.

As it relates to my own tax situation, these entities were either taxed as U.S. corporations or U.S. partnerships and, in no way, did I use them, whatsoever, to avoid any U.S. taxes.

(CROSSTALK)

MNUCHIN: I can assure you I paid all my taxes as was required.

(END VIDEO CLIP)

BLITZER: You see the motorcade on the right part of your screen leaving the Trump International Hotel on Pennsylvania Avenue. They'll be heading over to Arlington National Cemetery for wreath-laying ceremony at the Tomb of the Unknowns.

You understand, David Gergen, why it causes alarm with a lot of people, even though it's very, very legal.

GEREN: It should cause alarm. It is widening the gaps, the inequality in this country. And you know, I was glad that he came back and said listen, let's get rid of them. That was a good thing to say. I --

BLITZER: Hold that thought for a moment because the hearing has just resumed. Ron Wyden is questioning Steve Mnuchin.

[13:53:24]MNUCHIN: We want to work on partisan tax reform.

RON WYDON, (D), OREGON: That's very specific and I'm asking it for a reason. I don't want to have to repeat it. If you are a policy that cuts payroll for the top one or two percent for those low and middle income, doesn't that violate the Mnuchin Rule? (MNUCHIN HEARING FROM 13:53:41 TO 14:00:02)

[14:00:02] MNUCHIN: I'm not suggesting that. I was just saying I wasn't going into the specifics of every single tax item.

Thank you.

HATCH: Senator Crapo?

SEN. MIKE CRAPO, (R), IDAHO: Thank you, Senator Hatch.

Mr. Mnuchin, I want to try to cover three quick, maybe not so quick --