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Book: Bannon Calls Trump Tower Russia Meeting 'Treasonous'; Manafort Sues Mueller Over Russia Probe Authority; Fusion GPS Founders Slam GOP's 'Fake Investigations'. Aired 5-6p ET

Aired January 3, 2018 - 17:00   ET

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TAPPER: I turn you over to Wolf Blitzer in THE SITUATION ROOM. Thanks for watching.

[17:00:09] WOLF BLITZER, CNN ANCHOR: Happening now, breaking news. Bannon fire. In a new book, former White House chief strategist Steve Bannon unloads a cannon volley of vitriol on President Trump and his family, calling the Don -- Donald Trump Jr. meeting with Russians in Trump Tower treasonous and unpatriotic and saying that the Russia investigation is all about money laundering.

"Lost his mind." President Trump lets loose, saying when Bannon lost his job, quote, "He lost his mind." The president dismisses Bannon's role in the campaign and the White House, saying he only pretends to have had influence.

Suing Mueller. Former Trump campaign chairman Paul Manafort, indicted on money laundering charges, files a lawsuit challenging the authority of Special Counsel Robert Mueller, saying the charges have nothing to do with the 2016 campaign.

And size matters. As President Trump takes heat for tweeting that his nuclear button is bigger than Kim Jong-un's, the White House says Americans should be concerned with the North Korean leader's mental fitness, not the mental health of the president.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: Breaking news. President Trump is now at war with his former chief strategist and top adviser, Steve Bannon. Bannon sharply attacks the president and his family in passages from a new book.

In the most explosive portion, Bannon labels as treasonous the 2016 Trump Tower meeting with Donald Trump Jr., presidential son-in-law Jared Kushner, and campaign chairman Paul Manafort when they sat down with several Russians, ostensibly to get dirt on Hillary Clinton.

The book is called "Fire and Fury: Inside the Trump White House" by Michael Wolff. Excerpts released by "The Guardian" and "New York" magazine are full of insults and personal attacks on the president by those who have been close to him.

The White House is calling the book trashy tabloid fiction. And in an extraordinary blistering statement, the president says that when Bannon was fired last August, he not only lost his job, he lost his mind. The president goes on to methodically diminish and all but delete Bannon's role in the campaign and in the White House, saying he only pretends to have had influence.

Also breaking, former Trump campaign chairman Paul Manafort, indicted on money laundering charges, is suing special counsel Robert Mueller, saying the charges have nothing to do with the 2016 campaign, and alleging that the Justice Department violated the law by appointing Mueller.

I'll speak with Democratic Congressman Eric Swalwell of the House Intelligence and Judiciary Committees. And our correspondents, specialists and guests, they're standing by with full coverage.

Let's begin with the stunning battle between President Trump and his former chief strategist, Steve Bannon, touched off by an explosive new book about the Trump White House.

Let's go straight to our senior White House correspondent, Jim Acosta. Jim, by all accounts, the president right now is livid.

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: That's right, Wolf. The new year is starting off with a bang here at the White House, as in a new war of words between President Trump and his former chief strategist, Steve Bannon. Their disagreement could not be more critical to the future of this administration: whether the president's own son committed treason during the campaign.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): The gloves inside Trump world are off, and the fists are flying between the president and his former chief strategist, Steve Bannon. In excerpts from a new book, "Fire and Fury" by Michael Wolff, published by "New York" magazine and also obtained by "The Guardian," Bannon purportedly weighs in on Donald Trump Jr.'s meeting last year with Russians offering dirt on Hillary Clinton that included campaign chairman Paul Manafort and son-in-law Jared Kushner.

Bannon told the author, "Even if you thought that this was not treasonous or unpatriotic, or bad expletive -- and I happen to think it's all of that -- you should have called the FBI immediately."

Bannon speculates that the special counsel's office is focusing on money laundering, claiming that federal investigators have a path to Trump that goes right through Paul Manafort, Don Jr. and Jared Kushner. "It's as plain as a hair on your face," adding, "They're going to crack Don Jr. like an egg on national TV. That's a departure from what Bannon told "60 Minutes" months ago.

STEVE BANNON, FORMER WHITE HOUSE CHIEF STRATEGIST: It's a total and complete farce. Russia collusion is a farce.

ACOSTA: In a statement, the president questions Bannon's sanity, saying "Steve Bannon has nothing to do with me or my presidency. When he was fired, he not only lost his job, he lost his mind. Steve was rarely in a one-on-one meeting with me and only pretends to have had influence to fool a few people with no access and no clue whom he helped write phony books. Steve pretends to be at war with the media, which he calls the opposition party, yet he spent his time at the White House leaking false information to the media to make himself seem far more important than he was. It's the only thing he does well."

Press secretary Sarah Sanders piled on, offering the president's reaction.

[17:05:03] SARAH HUCKABEE SANDERS, WHITE HOUSE PRESS SECRETARY: I think furious, disgusted would probably certainly fit when you make such outrageous claims and completely false claims against the president, his administration and his family.

ACOSTA: Writing in "New York" magazine, Wolff explains Mr. Trump and his team were shocked they won on election night and that the candidate's wife, Melania, was distraught. "Don Jr. told a friend that his father, or DJT as he calls him, looked as if he had seen a ghost. Melania was in tears -- and not of joy."

The first lady's office slammed that account, saying in a statement, "The book is clearly going to be sold in the bargain fiction section."

The book about the Trump White House illustrates how the feud between the president and Bannon has escalated since the former chief strategist was fired last summer.

DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: I liked Mr. Bannon, he's a friend of mine, but Mr. Bannon came on very late. You know that. I went through 17 senators, governors, and I won all the primaries.

ACOSTA: Even Don Jr. is weighing in, tweeting, "Wow, just looked at the comments section on Breitbart. Wow, when Bannon has lost Breitbart, he's left with, um, nothing."

The drama detailed in the book has now overshadowed a stunning tweet from the president on North Korea, who said, "North Korean leader Kim Jong-un just stated that the nuclear button is on his desk at all times. Will someone from his depleted and food-starved regime please inform him that I, too, have a nuclear button, but it is much bigger and more powerful one than his, and my button works."

Former Vice President Joe Biden told CNN that kind of rhetoric is reckless.

JOE BIDEN, FORMER VICE PRESIDENT OF THE UNITED STATES: Look, the only war that's worse than one that's intended is one that's unintended. This is not a game. This is not about his, you know, can I puff my chest out?

(END VIDEOTAPE)

ACOSTA: Bow, as for North Korea, White House press secretary Sarah Sanders said it's a, quote, "fact" that the president's nuclear button is bigger than Kim Jong-un's, but the fact is U.S. officials have said for years there is no actual nuclear button. There is a system in place that launches the nation's nuclear arsenal.

Sanders made that comment shortly before she told reporters that people are entitled to their own opinions but not their own facts. Apparently, that doesn't always apply to the press secretary -- Wolf.

BLITZER: All right. Jim Acosta over at the White House. Thank you.

Also breaking tonight, an extraordinary new twist to the Russia investigation, as former Trump campaign chairman Paul Manafort, indicted on money laundering charges, sues the special counsel, Robert Mueller.

Let's bring in our justice correspondent, Evan Perez. Evan, Manafort says the charges have nothing to do with the 2016 campaign.

EVAN PEREZ, CNN JUSTICE CORRESPONDENT: Right. That's right, Wolf. And look, when Manafort was charged in federal court here in Washington back in November, we noticed that the charges had more to do or had everything to do with his work back more than ten years ago with the former Ukrainian regime. It had nothing to do with the 2016 election, with Russia, and that's what Manafort is now seizing on in this lawsuit that was filed in federal -- in federal court here in Washington.

He's taking -- taking aim at one part of Rod Rosenstein -- Rod Rosenstein's order to appoint Robert Mueller back in May. In that order, it says that Mueller not only has the authority to investigate alleged Russian meddling in the 2016 election. It also says that Mueller may investigate any matters that arose or may arise directly from the investigation.

Manafort says that that is unlawful, and that is an excessive authority that goes against what special counsels are supposed to do. You're supposed to have a discreet responsibility, authority to investigate whatever it is you're investigating and stay within those bounds.

So according to the lawsuit, he says that Rosenstein gave Mueller "carte blanche to investigate and pursue criminal charges in connection with anything he stumbles across while investigating, no matter how remote from the specific matter identified as the subject of the appointment order."

We talked to the Justice Department today. They said that this is a lawsuit that is frivolous.

Wolf, the bottom line here is that this is really part of a broader picture. We're seeing people close to the president, people who are supporters of the president really hitting back at Mueller, trying to challenge whether or not this investigation has gone on long enough. They believe that it has exceeded the scope of what it was intended to do. They'd like to shut down as soon as possible. It's very unlikely that this lawsuit really succeeds in anything, but

I think one of the things here, what's important here is it gives an airing to something that we've been hearing grumbling, really, from people close to the president for many weeks.

BLITZER: Very interesting. All right. Evan, thank you very much. Even Perez reporting.

There are also shockwaves tonight from a stunning "New York Times" op- ed by the co-founders of the research firm Fusion GPS, behind the dossier on President Trump's Russia ties. They -- they're basically calling on Congress to follow the money. Their comments are highlighting the divisions between Democrats and Republicans in the congressional Russia probes.

Let's go to our senior congressional correspondent, Manu Raju. He's up on Capitol Hill. So, Manu, what are you learning?

MANU RAJU, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Yes, the leaders of this group, Fusion GPS, writing this op-ed, defending their decision to hire that British agent, Christopher Steele, who investigated President Trump's record in Russia in particular and what Mr. Steele, according to this op-ed, was so concerned about what happened that he briefed the FBI about what he learned, which was an effort by the Kremlin to help President Trump's campaign.

[17:10:21] Now as part of Mr. Steele's investigation and Fusion GPS's investigation, they came across a number of issues regarding Mr. Trump's past that raised concerns about his business record, even raising concerns about potential money laundering and work with the -- what these leaders of Fusion GPS said was work with dubious Russian officials over the years.

And these are issues that the people who are charge of this group, Fusion GPS, raised to three congressional committees when they met behind closed doors. They said look into the Trump Organization's finances to determine whether or not there was any money laundering or any other illicit business activity that occurred with Russian officials.

Now earlier today, Wolf, I had a chance to talk to Mark Warner, the vice chairman of the committee, and I asked him, "Is this a matter for your committee to look at?" He suggested perhaps this is better suited for Special Counsel Robert Mueller. Here's what he said.

(BEGIN VIDEO CLIP)

RAJU: You saw the Fusion GPS op-ed. They're saying that these finances, the Trump Organization finances, should be investigated by the committee. Is that something that you think is worth exploring, and is it something that you plan to do?

SEN. MARK WARNER (D), VIRGINIA: There's been a number of members who've raised issues about the Trump Organization finances for some time. Senator Wyden, for example. And I think it is appropriate, whether it's in the purview of our investigation or Special Prosecutor Mueller, that's an open question, but it appears, at least, that the special prosecutor is definitely following that track.

(END VIDEO CLIP)

RAJU: Now, I asked him a couple of different follow-ups, whether or not the committee, in fact, was investigating it, and he suggested this is something for the special counsel to look at instead.

Now also, Wolf, the people in this firm, Fusion GPS, are under pressure from Republican leaders on the Senate Judiciary Committee and Senate Intelligence Committee to come and testify in a public session before their committees, both those Republican senators -- Chuck Grassley, Richard Burr -- saying that they should come forward. The committee -- Fusion GPS put out a statement saying that -- responding in particular to Chuck Grassley, saying that they appreciate his request, but they also said that perhaps he should also call on other people that the committee had once wanted to bring to a public session, including Donald Trump Jr.

So a fight over there between Republicans and this opposition research firm continues here on Capitol Hill, even as Democrats say a lot of the revelations and what is in the Steele dossier needs to be investigated further, Wolf.

BLITZER: All right, Manu, thank you. Manu Raju up on Capitol Hill.

By the way, Senator Warner will be joining me live here in THE SITUATION ROOM in just a little while.

But joining us right now, Democratic Congressman Eric Swalwell of California. He's a key member of both the Intelligence and Judiciary Committees.

Congressman, thanks for joining us.

REP. ERIC SWALWELL (D), CALIFORNIA: Good evening, Wolf. Happy new year.

BLITZER: Happy new year to you, as well. Let's begin with the explosive revelations in this new book by Michael Wolff, including this quote from Steve Bannon regarding that 2016 Trump Tower meeting in New York between Trump campaign officials and Russians. I'll put it up on the screen: "Even if you thought that this was not treasonous or unpatriotic or bad, expletive -- and I happen to think it's all of that -- you should have called the FBI immediately."

How stunning, Congressman, is it to hear that kind of language from the president's former chief strategist?

SWALWELL: Well, Wolf, it hopefully is a wake-up call for Republican leadership, because right now you have to be asking yourself, if you're a House Republican how far off course has your moral compass taken you if Steve Bannon, of all people, is plainly identifying the Trump/Russia relationship as one that was un-American, and you're arguing the other way? And that's where they have found themselves, in their efforts to obstruct the investigations we have in the House. So I hope it moves them to start taking our investigation seriously. But, Wolf, I hope one of the lessons learned out of this is that there should be a law that, if you are contacted by a foreign government or representatives from a foreign country, and they're offering illicitly sought information on your opponent, that you should -- you should be required to report that to the FBI.

We saw that back in 2000. The Gore team received the Bush team's debate playbook from a foreign national, and they went right to the FBI. That's what you're supposed to do. But that's not put in law today. And I think what we've taken away from this was that the Trump team was all too willing and eager to work with the Russians; and no one felt any duty to report the multiplicity of contacts to any federal authorities.

BLITZER: As you know, Congressman, the word "treason" and "treasonous" certainly has a strict legal definition. Even if taking that meeting was a bad idea, is it really fair to characterize it as treasonous?

[17:15:04] SWALWELL: At best for the Trump team, it's bad judgement. I think it's a betrayal. It's a betrayal of your country if you're sitting in your campaign headquarters just one floor below the candidate, and you're taking a meeting from a foreign adversary who's offering dirt on your opponent, and you don't think, you know, to pass that on to anyone.

There's real questions, Wolf, about whether Don Jr. passed that information along to his father, if his father had noticed that the meeting was going to occur.

Of course, when we asked Don Jr. that at our House Intelligence Committee hearing, he asserted privilege, that conversations between himself and his father are presented, which is bogus and doesn't exist in the law. And we hope that Republicans on the committee will bring him back and compel him to tell us.

BLITZER: Your Democratic colleague in the House, Congressman Ted Lieu, he tweeted this in response to the story. He also told me the same thing. He said, "Based on the statements by Steve Bannon, congressional committees now need to subpoena him to testify on the Trump/Russia investigation." Do you agree?

SWALWELL: Yes. We would like to hear from Mr. Bannon. There's a host of other witnesses who have not come forward yet who we hope that our Republican colleagues will understand are relevant for our investigation. And so Mr. Bannon certainly was relevant before this statement was made.

BLITZER: There's another explosive charge that Bannon levels. He says the special counsel's investigation is ultimately, in his words, "all about money laundering" and that the path to Donald Trump goes through Paul Manafort, Donald Trump Jr. and Jared Kushner. Is he right?

SWALWELL: Yes. He's right that that is a critical part of the investigation. In fact, you know, two of the indictments involved money laundering from people affiliated with the Trump campaign.

But in our investigation, you know, we would like to understand who was financially backing the Trump Organization? And unfortunately, the Republicans on the committee who control the power of the subpoena, the only bank records that have been subpoenaed in this investigation have been who's behind the Fusion GPS funding? And that's unfortunate. You know, that's, I think, incuriosity at best.

But sadly, what that means is that we're not fully understanding who exactly was banking Donald Trump when Donald Trump Jr. himself was saying, in the mid- to late 2000s, that overwhelmingly their money was coming from Russians. And Eric Trump made a similar statement back in 2014.

BLITZER: The president insists, as you know, that he has no financial dealings with Russia. And he said last summer that probing his finances would, in his words, cross a red line. If the special counsel, Robert Mueller, is digging into money laundering, do you believe Donald Trump, the president of the United States, will use that as an excuse to try to end the overall Russia probe?

SWALWELL: I hope not, Wolf, and the best thing the president can do for the country and his presidency is to be truly cooperative. Bob Mueller has wide authority to pursue, you know, any crimes related to Russia collusion. Many witnesses have testified in open hearings where the public has been able to hear that a mechanism the Russians have used over the years has been financial entanglements.

And so understanding Donald Trump's financial entanglements or relationships with the Russians is important to understand, because it is not disputed that the Russians interfered in the election. What we're trying to figure out is whether there was a working relationship on the side of the Trump campaign.

BLITZER: Paul Manafort, who was the Trump campaign chairman, is now suing the special counsel, Robert Mueller, challenging his authority to conduct the Russia investigation, in large part because Mueller is charging Manafort over his financial dealings over several years, not anything directly related to the Russian election interference. Does that argument, from your perspective, hold water?

SWALWELL: No, Wolf. And if the indictments against Paul Manafort are true, that he was engaging in money laundering, he should probably save his money not on these legal filings and legal fees but he should save it for the taxes he's going to owe, because those may be coming, too. Tax evasions charges. Because that generally follows money laundering charges.

I think this is just singing off of the same sheet of music that we've seen Republicans on the Judiciary Committee and voices in conservative media, efforts to really undermine Bob Mueller's investigation.

BLITZER: Yes.

SWALWELL: And I don't think it's going to shake them one bit. BLITZER: Yes, Robert Mueller's mandate says he should investigate the

Russia probe and all of that, but then it says "and any matters that arose or may arise directly from the investigation, any other matters within the scope of various laws." So he does have a broad mandate.

Stand by, Congressman. We're going to continue this interview. There are other developments unfolding right now. It's been a very, very dramatic news day. We'll be right back.

(COMMERCIAL BREAK)

[17:23:43] BLITZER: Our breaking news. An extraordinary war of words between President Trump and his former chief strategist, Steve Bannon, who in a new book, is quoted as calling the 2016 Trump Tower Russia meeting as treasonous.

We're back with Democratic Congressman Eric Swalwell. He's a member of the Intelligence and Judiciary Committees.

We've also just learned, Congressman, that the deputy attorney general, Rod Rosenstein, is meeting right now with the House speaker Paul Ryan. We've got some video of him showing up on Capitol Hill. He's meeting -- he requested the meeting at the -- involving the committee's Russia investigation. The GOP leadership aide says Rosenstein requested the meeting.

Do you know why he wanted that meeting?

SWALWELL: I don't, Wolf. I hope he asked for the meeting because of the very, very destructive attacks on our independent judiciary, as well as law enforcement agencies that we've seen coming out of that committee. The attacks against the FBI and their agents, again, that have really been echoed by the White House and others in conservative media, I can't imagine what that's doing to the morale at the FBI. I hope he's asking those to cease, but I don't know, Wolf.

BLITZER: Do you think it could be about requests for documents related to the dossier that were made by Chairman Nunes, the House Intelligence Committee chairman? Because there was a deadline to turn over those documents today.

[17:25:06] SWALWELL: Well, those are two very high-level individuals to go to the speaker, so I imagine it's about something pretty important for them to go to the Capitol.

But, again, you know, you've seen so many attacks against the FBI and the work that they do and the suggestion that there's a deep state over there by the president and, you know, Chairman Nunes himself, again, that's not helpful for the work that they have to do separate from the Russia investigation.

They need to have credibility. And I hope that we can get back to just understanding what the Russians did in the last election and keep the attacks on law enforcement out of this.

BLITZER: Yes, yesterday the president called the Justice Department "deep state Justice Department."

I quickly want to turn to a stunning new article, an opinion piece in "The New York Times" from the co-founders of Fusion GPS. That's the company behind the dossier detailing President Trump's alleged Russia connections. They pushed back very hard on conservative criticism of their firm and urged congressional leaders to release the full transcripts of their testimony before three different committees. Should those transcripts be made public?

SWALWELL: Yes. I do believe that the American people should hear what these individuals have said and what other individuals have said during the course of our investigation.

They also pointed out in their op-ed that that they first worked for a conservative outlet, and then they were hired by the Clinton campaign. And so, you know, they were looking to find the truth. They found pretty disturbing information about then-candidate Trump. And, again, the curiosity being shown by House Republicans has been who paid for this dossier, not what is alleged in the dossier.

BLITZER: The column by the founders of Fusion GPS claim that they laid out a clear picture of potential money laundering. Do you think making those transcripts public would change public perception of the overall Russia probe?

SWALWELL: Well, I think public perception right now, Wolf, is of great concern. I saw a CNN poll, I think in the last two months, that showed over 60 percent of the American people are concerned about the president's connections to Russia. So I think the American people are concerned.

I also believe that we should revisit having an independent commission. While we should doggedly pursue the truth on the House Intelligence Committee, I still think the best way to fully understand what happened would be to have a commission. Elijah Cummings and I wrote the legislation. It's bipartisan. But that's the best way to understand how we were so vulnerable, who attacked us, and what reforms are needed so that this never happens again.

BLITZER: The op-ed says they specifically told Congress that they found what they called widespread evidence that Donald Trump and his company worked with dubious Russians from Manhattan to Sunny Isles, a beach in Florida, from Toronto to Panama. Have you requested more information about President Trump's interests in those specific locations?

SWALWELL: Well, can't go into what they have told us. I hope that all becomes public soon. But, Wolf, I believe under Ranking Member Schiff, he has laid out a number of times in our public hearings our deep interests in understanding the financial transactions that Donald Trump had that were personal, political and through his businesses with the Russians, because I think it would be very illuminating about why he has drawn him and our White House so close to them and why he can't say a single bad thing when confronted about President Putin.

BLITZER: And it's fascinating that the Fusion GPS founders, as well as now Steve Bannon, they're all talking about money laundering that needs to be investigated right now. We'll stay on top of this story.

SWALWELL: Follow the money.

BLITZER: Yes. Congressman Swalwell, thanks so much for joining us.

SWALWELL: My pleasure.

BLITZER: Coming up, the president takes heat for tweeting that his nuclear button is bigger than Kim Jong-un's nuclear button. Could he provoke the North Korean leader into a nuclear war?

Stay with us. Lots going on right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

ANNOUNCER: This is CNN breaking news.

[17:33:05] BLITZER: We're following multiple breaking stories right now, including President Trump's ferocious attack on his former chief strategist, Steve Bannon.

Let's bring in our specialists. Phil Mudd, let me start with you. Steve Bannon in this new book by Michael Wolff, he called that 2016 Trump Tower meeting in New York City between members of the Trump campaign, including the president's son, son-in-law, Paul Manafort and Russians, according to Steve Bannon, it was treasonous and unpatriotic.

How much weight should Bannon's analysis hold?

PHIL MUDD, CNN COUNTERTERRORISM ANALYST: I would say about zero. First of all, let's look at the substance of this.

On the treasonous side, this word's been thrown around for months. This was stupid what some of the Trump people did, including Donald Trump's son. It appears what he did last summer when he met the Russians. Stupid, may be illegal.

Treasonous suggests to me or says to me that you're saying he purposefully sold out the United States. Give me evidence of this. I haven't seen it.

The second piece of this is funnier. I mean, these guys are involved -- that is Trump and his former adviser -- in kneecapping each other every day. Why do we believe that Steve Bannon is credible on this? The stories that are coming over the past day or two clearly are one side seeking to throw mud at the other side in a serious bout of mud wrestling. The other side, the White House, coming out today and attacking Bannon. I don't think either one of them is credible at this point.

BLITZER: You know, Dana, Steve Bannon also said the special counsel, Robert Mueller's, probe, in his words, was all about money laundering. How extraordinary is it to hear the president's former senior -- his chief strategist talk about money laundering, which obviously is illegal? DANA BASH, CNN CHIEF POLITICAL CORRESPONDENT: Obviously. Look, I

think we should be clear, although I have not spoken to Steve Bannon to confirm this, but I think it is a pretty safe supposition that when he said that, he said it more as a pundit, more as an analyst. He does not know if there has been money laundering going on.

The last time I asked him, he hadn't even gotten a lawyer for this Russia probe. He hadn't gone before Congress. He hadn't gone before Mueller. Maybe that's going to change now.

[17:35:12] But he was more kind of -- kind of free-wheeling in his thoughts. You're absolutely right. To have somebody who was a counselor to the president, a senior person in the campaign and then at the White House, suggesting that there's money laundering going on is no small thing. But I do think that the point he was trying to make is that because of the people that Bob Mueller hired to work with him, especially Andrew Weinstein.

UNIDENTIFIED MALE: Weisman.

BASH: Weisman, thank you, who has a very successful history of money laundering, or at least financial prosecutions, as a prosecutor for the federal government, that's where that came from.

BLITZER: But it is truly extraordinary.

BASH: Yes.

BLITZER: You can hear it from Democrats, money laundering, money laundering money. But to hear Steve Bannon raise this issue of money laundering, that is pretty extraordinary.

BASH: Yes.

BLITZER: The president, he issued a formal statement, not a tweet, a formal statement, very carefully crafted, in which he opened with these words: "Steve Bannon has nothing to do with me or my presidency. When he was fired, he not only lost his job, he lost his mind." Then the president said, "Steve was rarely in on a one-on-one meeting with me and only pretends to have had influence to fool a few people with no access and no clue, whom he helped write phony books."

How surprised were you to hear that?

JACKIE KUCINICH, CNN POLITICAL ANALYST: Well, you know, so there's a couple of things here. Apparently, "The Daily Beast" reported today that Trump dictated that himself. It wasn't something that was crafted by advisers. This was Trump speaking to someone who was writing down what he was saying, which I mean, is not usually how presidents do it, but he clearly was exercised here.

Here's the thing. He's distancing himself from Steve Bannon, because if this is true, if what Steve Bannon said in this book is true, this is a very unflattering picture of the president. He looks like someone who is kind of fumbling, who everyone was calling -- calling him names behind his back and no one really thought that he was a serious person. If he doesn't distance himself from everything about this book, including Steve Bannon, who also led him astray, he says, on the Roy Moore race, it looks bad. The president looks bad.

BLITZER: You know, Ron -- Ron Brownstein is with us, as well.

RON BROWNSTEIN, CNN SENIOR POLITICAL ANALYST: Yes.

BLITZER: Listen to the president last summer, speaking about Steve Bannon. Listen to this.

(BEGIN VIDEO CLIP)

DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: Look, I like Mr. Bannon. He's a friend of mine. But Mr. Bannon came on very late. You know that. I went through 17 senators, governors and I won all the primaries. Mr. Bannon came on very much later than that.

And I like him. He's a good man. He is not a racist. I can tell you that. He's a good person. He actually gets a very unfair press in that regard. But we'll see what happens with Mr. Bannon. But he's a good person, and I think the press treats him, frankly, very unfairly.

(END VIDEO CLIP)

BLITZER: That's quite a contrast between what he said then about Steve Bannon.

BROWNSTEIN: Yes.

BLITZER: And what he said in his formal statement today: "He not only lost his job when he was fired; he also lost his mind." Go ahead.

BROWNSTEIN: Well, look, it's absurd to distance -- for President Trump to distance himself from Steve Bannon. I mean, yes, it's true he had won the primary by the time that he came in, but in the general election, he was drifting and losing when he brought in Steve Bannon and Kellyanne Conway. That's why he brought them in.

But even more important, Wolf. You can get overly caught around the axle about Steve Bannon, because the book itself, I think, is a cruise missile aimed directly at Donald Trump's greatest political vulnerability.

And the portrait is much more than Steve Bannon. And what I mean by that is that there are elements of the Trump agenda that have been controversial and unpopular, like repealing the ACA and the tax bill, but they're the core political challenge he has right from the beginning, has been somewhere between 55 and 60 percent of Americans are not convinced he is equipped to do this job. That he doesn't have the temperament, that he doesn't have the skills, the judgement, the values, the stability to be president.

And if you kind of look at what has come out of the book already, the portrait of the president that is being painted, not only by Steve Bannon but by a wide array of sources, at least that Michael Wolff claims are involved in the decision-making, is reinforcing all of those doubts. And I think that is the real danger here, not the feud with Steve Bannon.

BLITZER: Yes, it's an extraordinary portrait in this new book.

Everybody stand by. There's more we need to discuss. Other developments unfolding even as we speak. We'll be right back.

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[17:43:23] BLITZER: We're back with our political specialists. You know, Phil Mudd, I want to read to you an excerpt from an article that was written in "The New York Times," an op-ed by the co-founders of Fusion GPS. That's the company that organized the Russian dossier. Let me read these sentences. "We told Congress that from Manhattan to Sunny Isles Beach, Florida, from Toronto to Panama we found wide evidence that Mr. Trump and his organization had worked with a wide array of dubious Russians in arrangements that often raised questions about money laundering. Likewise, those deals don't seem to interest Congress."

So they laid out specific locations, potential money laundering, which, of course, is illegal. What do you think of this, and what is happening in this investigation involving these allegations of money laundering?

MUDD: Forget about the Congress. I would not trust them for a heartbeat in this investigation. They've been partisan from day one. The question is what the FBI and the Mueller investigation is doing with this information.

The reason I think it's significant is this gives you a pointer. We have an organization that is the Fusion group that developed this information acquiring data that they can't fully analyze. They can't get the kind of financial records that the FBI gets. So they hand the pointers over from their investigation to the FBI.

What the FBI can do is say, "I'm going to subpoena a bunch of financial records to figure out this -- if this stuff is true." I'm going to predict that sometime this year we'll find out yes or no, Wolf. That is, the special counsel will come out and say yes or no there will be money laundering charges, based on allegations.

BLITZER: But you heard the president say last summer if they start subpoenaing his business dealings, that's a red line that they shouldn't cross.

MUDD: A red line for whom? For him or for the special counsel?

BLITZER: He says it's a red line. They could be -- they could be removed if they do that.

MUDD: It's not for the special counsel. I worked for Robert Mueller. I don't care what the president says. If he thinks he needs a document for the investigation, he's going to hunt it down. That's it.

BLITZER: What is going on in Congress as far as these allegations are concerned, because Democrats seem to think the Republicans don't really care?

BASH: Well, look, I think that Republicans have clearly felt a lot of pressure from their Trump White House and from Trump voters, many of whom make up their gerrymandered Republican House districts to, you know, kind of pushback, to go after the notion that this all is a witch-hunt against the President.

I think that is just what is happening in the House, and it's going to continue to happen. And you're going to hear more of the House Republicans who are in charge there say that Robert Mueller is the one who should be investigated, and we need to look into the -- more into the questions about the dossier, who put it together, so on and so forth.

The place to watch is the Senate. Up until now, they have been bipartisan. Not to say that there isn't -- there aren't partisan differences. There are.

But they have, I think, more than any other place in Congress on any other issue, worked in a bipartisan way to get to the bottom of a couple of things. One is just the -- where they started, which is, was there collusion between anybody in Russia and anybody in the Trump orbit?

But more importantly, we are in an election year. We're in 2018. And the Russians are not giving up. And so it is incumbent upon Congress to try to figure out what happened but for the purpose of trying to stop it this coming November from happening again.

BLITZER: You know, the Fusion GPS founders, Jackie, they say they want their transcripts of their testimony made public. Any chance that's going to happen?

JACKIE KUCINICH, WASHINGTON BUREAU CHIEF, THE DAILY BEAST: It's hard to say. It really is. But it does seem like the House -- or the Senate is starting to trend a little bit more towards the House in terms of the partisanship.

BASH: It is more.

KUCINICH: That is creeping -- and you're obviously right, but it is -- it seems to be creeping more into the Senate investigations which leaves Robert Mueller's.

BLITZER: Where do you see this going, Ron?

RONALD BROWNSTEIN, SENIOR EDITOR, THE ATLANTIC: Yes. I think the Senate Intelligence Committee is the last place that hasn't been completely submerged in either chamber by partisanship, and the House is, you know, entirely under water.

And I think the Republicans in the House are playing with fire in a way that more of them recognized at the beginning of the year. I mean, if you look at where we are in this election season, with Democrats now having this big lead in the generic ballot, that is driven mostly by voters who are uneasy about Trump and who want more of a check on him, more of an oversight of him.

And to the extent that House Republicans send the signal that they are unwilling to provide that check, I think they leave themselves open to what will probably be the most effective Democratic argument this fall that you need a Democratic Congress as a counterbalance to a President about which many Americans are at best ambivalent.

BASH: That's true of the generic ballot on the overall feeling, but when you're looking at and you're talking to the people who are in these districts which are ruby, ruby red for the most part --

BROWNSTEIN: Right.

BASH: -- you have a different kind of sensibility.

BLITZER: All right. We're going to be speaking with Mark Warner. He's the top Democrat in the Senate Intelligence Committee. That's coming up very soon.

Everybody stand by. There's a lot of other developments unfolding, including involving North Korea. How will Kim Jong-un respond to President Trump's latest jab about the size of his nuclear button?

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[17:52:01] BLITZER: Our breaking news, the White House brushing aside concerns about President Trump's latest jab at North Korea's Kim Jong- un.

This afternoon, the White House Press Secretary, Sarah Sanders, defended the President's tweet about having a bigger nuclear button. Sanders added people should be, quote, concerned about the mental fitness of the leader of North Korea.

Let's bring in our Brian Todd. What's been the reaction, Brian, to the President's tweet?

BRIAN TODD, CNN CORRESPONDENT: Wolf, a lot of brushback today to the President's tweet from former security officials and from Democrats and Republicans in Washington.

John Cornyn, the number two Republican in the Senate, saying he doesn't know how anybody's interests are served by escalating this rhetoric.

White House Press Secretary Sarah Sanders has countered by saying President Trump's tweets shows that he won't cower down and won't be weak.

But tonight, there's real concern over how the President's tweet might provoke Kim Jong-un.

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TODD (voice-over): Tonight, fear and frustration from Seoul to Washington that a presidential Twitter taunt could lead to a real war, provoking an already unstable leader to act.

SUE MI TERRY, FORMER ANALYST, CENTRAL INTELLIGENCE AGENCY: I'm afraid that it's going to get Kim Jong-un more riled up.

TODD (voice-over): President Trump, responding to Kim's declaration that his nuclear button is always on his desk, tweeting: I, too, have a nuclear button, but it is a much bigger and more powerful one than his and my button works.

JAMES CLAPPER, FORMER DIRECTOR OF NATIONAL INTELLIGENCE: No one in the White House knows what is Kim Jong-un's ignition point where one of these tweets is going to set him off and he's going to hit that button.

TODD (voice-over): Experts say Kim Jong-U.N., who was raised inside a cutthroat dynasty where showing toughness is paramount, may feel there's only one way to counter Trump.

TERRY: I do think Kim Jong-un will feel that he has to personally respond because, culturally, he has to look tough. He shows his generals that he's a tough guy. Kim Jong-un can stand up to Trump and the United States.

TODD (voice-over): Analysts say to show that toughness, Kim could soon test another intercontinental ballistic missile to signal to Trump that the continental United States is within range of his missiles, or he could have his army of hackers launch another devastating cyber attack, like the one that crippled Sony Pictures.

But some current and former Trump advisers argue the President's tough talk is a refreshing change from diplomacy that, so far, hasn't worked with North Korea.

CHRISTIAN WHITON, FORMER SENIOR ADVISER, UNITED STATES DEPARTMENT OF STATE: Frankly, dispensing with some of the diplomatic niceties and also the double standard whereby foreign leaders can trash America and threaten us and we're not expected to respond, you know, I think it is a moment of clarity that will actually help both our friends and adversaries understand what the U.S. is thinking.

TODD (voice-over): The back and forth about button size comes tonight as Kim Jong-un reopened a telephone hotline with South Korea that's been dormant for two years.

The hotline, part of Kim's new overture for direct talks with South Korea, could ratchet down tensions on the Peninsula but could also ratchet things up with the U.S.

TERRY: I think North Korea, Kim Jong-un, is trying to play a pretty good hand with the very weak hand that he has. He tries really to put a wedge between Washington and Seoul, playing Washington against Seoul by making overture to South Korea while still saying they're not going to give up their nuclear weapons.

(END VIDEOTAPE) [17:55:03] TODD: And the analysts say by opening this hotline and making peaceful overtures to South Korea, Kim Jong-un may now be able to exact certain concessions from the South Koreans.

He could get money from them. He could persuade them to re-open a lucrative, industrial complex the two nations share, or he could talk South Korea into scaling back their military exercise with the U.S.

Experts say by making those moves and possibly capitalizing on President Trump's taunts, the North Korean dictator will have created advantages for himself that he didn't have just a few days ago, Wolf.

BLITZER: And, Brian, part of the President's tweet is raising concern that he could have inadvertently potentially given away some crucial intelligence information, right?

TODD: Right, Wolf. The President tweeted that his nuclear button works, of course suggesting that Kim Jong-un's nuclear button does not work.

Former CIA analyst Sue Terry says she believes Trump got that from an assessment from the intelligence community.

We contacted the CIA. They would not comment.

BLITZER: Brian Todd reporting for us. Thank you very much.

Coming up, there's breaking news. An extraordinary war of words between President Trump and his former chief strategist, Steve Bannon, who, in a new book, is quoted as calling the 2016 Trump Tower Russia meeting treasonous.

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