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CNN NEWSROOM

Stock Market on Track for Worst December Since Great Depression; Travel Ban Blocks Mother from Seeing Dying Son; GOP Members Say They are in the Dark on Trump's Plan to Avert a Government Shutdown; U.S. Futures Up After Falling 508 Points Monday; Former National Security Adviser Flynn to Be Sentenced; Michael Flynn to be Sentenced for Lying to FBI; Aired 9-9:30a ET

Aired December 18, 2018 - 09:00   ET

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


[09:00:00] BERMAN: -- like bridal dresses.

CAMEROTA: I love this couple. They are so wonderful. They're so much better than we are.

BERMAN: It's going to work out for them. I have a feeling.

CAMEROTA: It really is. That was fantastic.

All right. Back to the news, Michael Flynn will be sentenced in about two hours and "CNN NEWSROOM" picks up our coverage right now.

JIM SCIUTTO, CNN ANCHOR: Very good Tuesday morning to you. One week to Christmas. Right?

POPPY HARLOW, CNN ANCHOR: It's only Tuesday. It's only Tuesday.

SCIUTTO: That's one week to --

HARLOW: One week until Christmas.

SCIUTTO: I'm Jim Sciutto in New York.

HARLOW: And I'm Poppy Harlow. We're glad you're with us this morning.

He has had a long wait but the highest official caught up in the Russia probe so far is finally about to learn his sentence for lying to the FBI. Michael Flynn is due in federal court in Washington two hours from right now and President Trump is wishing his former campaign surrogate and national security adviser, quote, "good luck." The president says it, quote, "will be interesting to see what Flynn has to say despite tremendous pressure being put on him."

SCIUTTO: In fact the special counsel says that Flynn's cooperation over the past year has been so extensive that he should not spend a day in prison. Under sentencing guidelines he could get up to six months just for lying about his conversations with the Russian ambassador during the transition, as well as illegal lobbying for Turkey that two of his colleagues have now been indicted for. CNN's Shimon Prokupecz is at the D.C. courthouse.

Shimon, there is a lot getting thrown at us this week.

HARLOW: Yes.

SCIUTTO: But let's focus for a moment as we wait for Flynn's sentencing on what we learned about Flynn's lies. Two big lies he told to FBI investigators. Not that he was tricked into, but he seemed to tell willfully. What did we learn?

SHIMON PROKUPECZ, CNN CRIME AND JUSTICE REPORTER: Right. And it's his lawyers who are arguing that he was tricked. But what we learned from the memos that were released, the FBI memos that were released last night is that the FBI gave Flynn opportunities to correct himself, to explain himself. But yet even though with those opportunities he still continued to lie to FBI agents who were interviewing him at the White House. And here is some of what they asked, Jim.

One of the agents, as we may recall now, was Peter Strzok. He asked Flynn if he had recalled any conversation that he had with the former Russian ambassador Sergey Kislyak about the expulsion of Russians by the Obama administration following the 2016 accusation of Russians hacking the election. And the FBI agent specifically asked them if he told the Russian ambassador not to engage in any tit-for-tat.

That is, don't throw out any Americans out of Russia in response to what the Obama administration has done. And essentially what Flynn says is that first he tells the FBI agents, not really. I don't remember having this conversation. But then he says it wasn't "don't do anything." Clearly different from what the FBI agents and what the intelligence community had captured on the communications transcript that they had of communications between the Russian ambassador and Michael Flynn.

And then the other thing they asked about, which was also, they say, is a lie, was whether or not he had conversations with the former Russian ambassador about U.N. resolution. Also Michael Flynn denying any of those conversations. Clearly this undercuts any kind of argument that his attorneys are trying to say, that he was tricked into lying or not telling the truth or whatever argument they may try to make here before the judge.

The big issue here now with this out here is how will the judge respond to this being out here. And as you said, all are expecting really Michael Flynn to walk out of here, not face any kind of jail time because really the special counsel here is supporting that move, calling him a substantial cooperator and that all the information that he has provided has been crucial and essential to their investigation.

SCIUTTO: Shimon, at the courthouse, thanks very much.

So two big lies there. He lied about conversations with the Russian ambassador during the transition.

HARLOW: Yes. Yes.

SCIUTTO: About encouraging the ambassador not to retaliate, Russia rather, for U.S. sanctions imposed at the time for Russian interference, and trying to get a vote against this U.N. Security Council resolution.

HARLOW: Yes.

SCIUTTO: Two consequential issues he lied about and was given multiple opportunities to take those lies back. It's significant.

Let's bring in CNN legal analyst and former federal prosecutor Shan Wu.

Shan, thanks very much. So you look there as we were just discussing. He lied twice. Doesn't look like a perjury trap. Second of all, two partners of his were just indicted for illegal lobbying.

HARLOW: Yesterday, right.

SCIUTTO: Yesterday that Flynn was involve in. And yet it appears the special counsel will recommend no jail time. What does that tell you if he's not sentenced to jail today about cooperation that he's offered the special counsel?

[09:05:02] Because I presume that for him to get no jail time he would have had to provide significant assistance to the special counsel.

SHAN WU, CNN LEGAL ANALYST: Exactly, Jim. Flynn is Mueller's first man. He was their first cooperator. And it's a game of musical chairs. We've talked about that before with the cooperators and he was the first man to sit down. And the Mueller team is honoring that position that he gave and of course he had to do a good job and the actual cooperation. And you see that really -- his problem that he faced was he was locked in before those FBI agents had interviewed him.

He'd already been telling lies to the administration. He was probably motivated in part to cover up the Turkish deals. So he was already in trouble by the time the agents interviewed him, which puts a particular lie to his lawyers' argument -- understandable argument but nonetheless really undercuts his argument that he was somehow surprised or tricked by the FBI agents. So when he's in there trying to stay consistent with the falsehoods he's already taken, he really sets himself up for that perjury trap.

And Mueller's team, it's very interesting, they're like stern parents. When they try to make that argument that he was tricked, he was a little confused, like in mitigation, they firmly corrected him, but like a kind benevolent parent, they're not throwing the book at him. They just want to correct that record, but they are still giving him the honor of his position as first man in.

HARLOW: So, Shan, we know a lot about the lies, as Jim just laid out, importantly. What we don't know is the why. Why did Michael Flynn lie? And that's really important. Right? And it made even more important perhaps by the messages from the president this morning about him.

SCIUTTO: Yes.

HARLOW: Will we learn anything about the why today at 11:00 a.m.?

WU: I don't think you'll learn the true substance of that. As we were discussing, I think the substance is he was already locked in to those lies because of the course he'd mistakenly taken.

HARLOW: Yes.

WU: I think what you will hear from him this morning is contrition. His lawyers have done a good job of playing up the 50 letters of reference, as well as the Bronze Star. And he'll talk a little bit about the pressure he's been under, how he wants a fresh start. I don't think he's really going to get into the substance of what motivated him that way. I think the president's message to him this morning that we've all been talking about, too, is really one of suggesting hey, maybe you want to say something at sentencing like no collusion. I think that's kind of the message Trump is trying to pull here.

HARLOW: Interesting.

SCIUTTO: Interesting. And that tweet just another thought about it where the president talks about whether Flynn has supplied any information about possible collusion. Would that indicate to you that the president was given some information about what -- what Flynn, rather, said to the special counsel? Perhaps the president was given assurances that Flynn has not provided that information?

WU: He may have heard something like that from his lawyers. Honestly at the moment the president's behavior on this reflects a great lack of understanding of any substance that's happening in this investigation. I mean, he's gone kind of all over the place with, you know, calling Cohen a rat, saying that Flynn is being mistreated and wishing him good luck at the same time.

I think he's just worried and still trying to exert some control by saying, wink, wink, if you want to say something good at sentencing, there is still the possibility of a pardon.

HARLOW: Yes.

SCIUTTO: Interesting.

HARLOW: Shan Wu, thank you very much.

And by the way, just taking a step back, thinking about today and thinking about Flynn, let's recall that we may not have a special counsel today had the president, not allegedly, asked the former FBI director James Comey to let it go.

SCIUTTO: Right. Yes.

HARLOW: To see that it was let go with Flynn. Coming to the full circle.

SCIUTTO: And the other thing is that, it is not normal for a president or commander-in-chief to repeatedly and publicly intervene or inject his commentary into ongoing investigations.

HARLOW: Right.

SCIUTTO: To send messages, it seems public messages, to people under investigation or under indictment. That is something that we haven't seen before, and now we see it multiple times a day.

HARLOW: Right. You're right. Multiple times a day.

Let's talk about the politics of this. CNN political analyst, legendary Watergate reporting Carl Bernstein.

Good morning, my friend. Let's begin with what you have said is a president that is increasingly boxed in by the special counsel. And I wonder, is that box smaller today?

CARL BERNSTEIN, CNN POLITICAL ANALYST: It's increasingly smaller from the special counsel. It's increasingly smaller by the Democrats who are going to control Congress. It's increasingly smaller because of his own behavior which seems to be self-convicting in what he is saying and the way he is acting.

SCIUTTO: That's a fair -- it's a fair point. I wonder, as we talk about the people involved and today the focus on Michael Flynn, focus of course on his lies about conversations with the Russian ambassador. I want to ask you about the president's exposure here because as Michael Flynn was having those conversations with the Russian ambassador, that he lied about repeatedly and apparently willfully, we also know that there were repeated calls back and forth to Mar-a-Lago, to the Trump's transition team and where President-elect Trump was then at the time.

[09:10:05] Do you find it plausible that Michael Flynn would have these conversations during transition without keeping the president and his team informed?

BERNSTEIN: It would seem unlikely, but I don't want to get out ahead of my skis or anyone else's. What's really important here is to understand that Michael Flynn went into the campaign in April of 2016 as a national security adviser to the campaign and was in a crucial position where he talked to Trump throughout the campaign. He talked to Paul Manafort, the campaign manager, all the time that Manafort was there and all the time that Manafort was apparently dealing with Russians.

So all this focus on the little period that he was talking to the Russian ambassador is very important. But what might be much more important and certainly lawyers for others involved in the whole Russian investigation believe is what did Michael Flynn and the president discuss in all those months? What did Michael Flynn tell the president about what was going on with Russians or what might the president disclose to Michael Flynn? We don't know what these things are, but it would seem to me, and to

the lawyers who have studied this, who are representing other defendants before Mueller, that the focus is on the president of the United States, his family, his campaign manager and those in the campaign and in the transition who might have acted in the interests of a foreign power, Russia.

HARLOW: Here is the thing. Jim and I are really interested in the polling on this and what it shows in terms of the American people standing by the president, there is this new NBC-"Wall Street Journal" poll out this morning. 46 percent of people say the guilty pleas are convictions of those around the president increasingly point to the president himself.

But at the same time, Carl, the number that strikes us is that 43 percent approval rating is the rating the president still maintains despite all of this. So as that box, the Mueller box, as you describe it, shrinks around the president, will his Republican allies as well? I mean, the numbers don't seem to say that.

BERNSTEIN: Well, first of all, his base has been constant in its support of Donald Trump no matter how outrageous his conduct, behavior or what he says. And that's not liable to change by too much. But what's really important here when you get back to the question of being boxed in is how most people in this country, how members of Congress, Republicans and Democrats, are going to respond to what they see as Trump's behavior, how they are going to respond to this report, this vast report, it would seem, that Mueller is going to produce.

It certainly will show evidence from all indications of obstruction of justice engineered by the president of the United States, as well as suggestions we don't know definitively yet of real collusion, whether witting, unwitting, half-witting by the president perhaps, by members of his family, certainly by one of his sons, at least, who invited the Russians to bring information about Hillary Clinton to the table in that Trump Tower meeting.

We also have Michael Cohen who we know has said that Donald Trump was told about that meeting before it happened, despite Donald Trump's denial of that. So he is boxed in. He's also boxed in by the way he has conducted himself. We've never seen a president of the United States who actually acts more in some ways like a common grifter, and I looked up the definition of grifter the other day in the dictionary. And it seems to suit Donald Trump perfectly in terms of the way he has conducted himself all his life, but including astonishingly enough in his presidency.

The idea of being a grifter while at the same time being president of the United States, a flimflam artist, a con man, someone who lies, somebody who uses instruments at his command to obtain and do things that are untoward and underhanded.

SCIUTTO: Well, the question is, what will be the consequences of those decisions?

Carl Bernstein, we know you are staying on top of it. Certainly a story we're going to stay on top of on this broadcast.

HARLOW: Yes.

SCIUTTO: Thanks very much.

It is four days now until the deadline and Republicans say they do not know what the president would sign to avoid a partial but significant government shutdown. Plus, what a difference a year makes. The stock market on track now for the worst December since the Great Depression. Just one year after the administration passed a major tax cut. What happened?

[09:15:00]

POPPY HARLOW, CO-HOST, NEWSROOM: And the White House travel ban keeps a mother from seeing her sick son. The two-year-old boy -- look at him there, life support in a San Francisco hospital. Will she see him one last time? We have a major update on that.

(COMMERCIAL BREAK)

HARLOW: Al right, we're now a day closer, unfortunately, to a partial government shutdown. Republican lawmakers say they're not any closer to a deal or necessarily on the same page as the White House on this one --

SCIUTTO: In fact, right now there is no plan, and that is not an attack line from Democrats, that is a reality, and this is coming from Republican senators who say they are still waiting for the president to lay out to members of his own party the next steps.

Cnn's senior congressional correspondent Manu Raju joins us now live from Capitol Hill. To you knowledge, Manu, are Republican leaders, Republican lawmakers communicating their concern to the president regarding the shutdown.

[09:20:00] MANU RAJU, CNN SENIOR CONGRESSIONAL CORRESPONDENT: They certainly are communicating to the White House, some are talking to the president. But the big question on Capitol Hill among Republican leaders including is, what will the president sign to keep the government open?

And Republican leaders in the Senate are weary of advancing anything, even a short term measure to keep the government open for another month, to keep key agencies open, to potentially push a longer term funding bill through the end of this current fiscal year.

Those, all those options are on the table, but none of them are yet to be advanced because they don't know what the president is going to sign. Yesterday, Senate Majority leader Mitch McConnell convened a meeting with his top leadership, and they emerged also at a loss.

John Cornyn; the number two Republican, I asked him directly what is the plan? He said I don't know of a specific plan yet, and some Republicans like John Kennedy of Louisiana said it's time for the White House to lay out a plan. (BEGIN VIDEO CLIP)

SEN. JOHN KENNEDY (R), LOUISIANA: If the White House has a plan, they're keeping it to themselves.

(END VIDEO CLIP)

RAJU: And the significant part about not laying that out now of course is because -- of course the time line is Friday, that's the deadline. But it takes time to go through all the procedural hurdles in the Senate, and that's why they need to have a sense of where to go in order to avoid that shutdown by Friday.

HARLOW: Manu, Senator John Cornyn, a Republican told the "Washington Post" and let me quote him here, "I don't think most people would see it or feel it regarding a shutdown because this is partial shutdown." But he did say, it would, quote, "hurt public safety". He's talking to hits -- talking about hits to DHS, et cetera.

Give us a reality check on what the actual impact of the shutdown would be for the average American because aren't we talking about hundreds of thousands of people's jobs being furloughed right around the holidays?

RAJU: Yes, well, this could affect roughly 420,000 workers, about 380,000 would be furloughed. There would be people who would have to work, who are considered quote, "essential employees". And those people would not get paid, their pay would be delayed until Congress would re-open the government and then, typically, they would retroactively pay those individuals.

But this would affect a whole wide range of other agencies, NASA, the National Park Services, Housing and Urban Development. So this will affect about roughly a quarter of the government. So not insignificant, which is why Republican leaders in particular are concerned about getting the blame if they don't have a plan to get this done with and dealt with by the end of the week. Jim and Poppy?

HARLOW: Right, let's hope they do. Everyone can go home for the holidays. Manu, thank you. The stock market, have you been watching it lately? On track for the worst December since the great depression. So far the Dow off more than 8 percent this month alone, down nearly 2,000 points, when you look at from the tax cuts, I think down a 1,000 points, right?

SCIUTTO: Yes, down for the year, that's a problem for this White House. The president looks to the stock market as sort of a measure of his administration's success. The economy -- the administration is often pointed to when other more negative headlines have dominated the news cycle.

Just last week, President Trump told "Reuters" the following, quote, "it's hard to impeach someone who hasn't done anything wrong and who has created the greatest economy in the history of our country."

HARLOW: One official tells Cnn that while the president is continuing to publicly insist the economy is strong, privately he is very anxious when he sees what's going on with the stock market. With us now, our chief business correspondent Christine Romans and Cnn business correspondent Alison Kosik down at the Stock Exchange.

Romans, let me just --

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Sure --

HARLOW: Begin with you about setting the table here for the American people about what's going on as they're watching this whiplash and the why?

ROMANS: So, it's your 401K, right?

HARLOW: Right --

ROMANS: After ten years basically of the stock market going up, after seven of the past nine years, having double digit returns on stocks, this is going to be a negative year. And there's a real shift in sentiment here. A couple of things, there is a feeling that this -- the economy is strong.

There's a feeling that right now the economy is strong, growth is good, the tax cuts have been great for companies. That's all going to fade. This is the peak. Next year won't be as great, growth will be fine, but it won't be robust. The Fed is raising interest rates, there is a meeting tomorrow, the Fed is expected to raise interest rates.

And will signal what it's going to do next year. Those higher rates could slow growth, could take a little bit out of the -- out of the steam of the economy. All these things sort of coming together here, you've got the worst quarter since 2008 and that awful, you know, worst December since 1931.

Remember, December is typically the Santa Claus rally. It's usually a good month. So this is not only the first negative year in a long time, it's going to be the worst December in a very long time.

SCIUTTO: Now, the president is making this very much about the Fed, now --

HARLOW: Yes --

SCIUTTO: The Fed is not backing him up, but Alison Kosik, I'm curious what you're hearing down on the trading floor. The fact is there are other troubling economic indicators. You have a slowdown in the Chinese economy --

HARLOW: Yes --

SCIUTTO: You have the ongoing difficulty in the U.S.-China trading relationship, which is basically the world economy right there or a big chunk of it. You have oil prices falling and not just because of increased production, because people are concerned about demand. On the floor there, do folks see larger economic worries about this ten- year expansion, right coming to an end.

[09:25:00] ALISON KOSIK, CNN BUSINESS CORRESPODENT: You know, there is no doubt that economies around the world are showing signs of slowing. I mean, you look at Japan, you look at Germany, their most recent quarter, there was contractions.

You talk about the Chinese economy, that is showing a slowdown as well. It's why all the focus right now is on central banks, especially here in the U.S., but also around the world because what you're seeing these Central Banks do is unwind these easy money policies, so they're tightening monetary policy which by definition slows down economies.

So you're seeing signs of this happen around the world, and it's why that focus is really on the Fed today and tomorrow. Tomorrow, the Fed is expected to raise rates another quarter of a percentage point, that's not the news. The news is going to be what is the chairman going to say about inflation? What is the chairman going to say about the economy?

What is the Chairman J. Powell going to say about the strategy for those rate --

HARLOW: Right --

KOSIK: Increases beginning --

HARLOW: Yes --

KOSIK: Next year? If the Fed says, they're going to go ahead and just stop raising rates for a bit, you could see the market rally at least in the short term. Poppy?

HARLOW: Yes, but guess what? I mean, Romans, the Fed has a dual mandate. And no part of that mandate is to have the stock market --

SCIUTTO: Right --

HARLOW: Go higher and higher --

SCIUTTO: It's not their job --

HARLOW: That is not the job of the Fed --

ROMANS: Inflexibility(ph) and unemployment --

HARLOW: Sure --

SCIUTTO: Sure --

ROMANS: And you're now seeing inflation. I would argue also though, if you saw the Fed signal that maybe it's going to slow down next year and pause, that could also send a worsened signal to the market, that, oh, wait, things are worse --

HARLOW: Right -- ROMANS: Than we thought, so you never know how markets are going to

respond --

HARLOW: And they need the ammunition in their sort of coffers to fight --

ROMANS: But remember --

HARLOW: A downturn --

ROMANS: They have been so accommodative for so long, by that I mean, ten years ago, in the depth of the crisis around the world, central banks rushed out there and saved economies. And now, the economy is strong and they've got to raise interest rates, right? They have to do it. It's how they do it and how tricky it is.

HARLOW: The president is pointing at the Fed this morning, blaming --

ROMANS: Yes --

HARLOW: The Fed --

ROMANS: He is --

SCIUTTO: And it gives him leeway in the next fall --

HARLOW: Yes --

SCIUTTO: To be able to do something to it --

HARLOW: Right --

SCIUTTO: To address that fall. Alison Kosik, I don't want to treat you or Christine Romans as financial advisors here. But I know, everybody --

ROMANS: But I do --

SCIUTTO: Everyone is looking at their 401Ks, right, you know, and they're saying what should I do? I'm not asking you to advise them, I'm saying, what folks on the floor say in these environments to people at home. What is the rule of thumb when this happens?

KOSIK: The rule of thumb, if you're not one of the professional investors that could handle these stomach churning, you know, 300- point, 400-point, 500-point moves in the Dow, the advice is just to sit it out and wait. The professional investors though, what you see happening seemingly every day is they're actually pulling these profits off the table to try to glean some sort of profit for 2018.

And then they're sitting on the sidelines waiting, you know, waiting to see what's going to happen into the next year. Now, this morning, we are expecting the Dow to rally in the triple digits, but it's certainly not enough to overcome the significant losses we've seen over the past couple of months. HARLOW: We do know that retail investors haven't taken their money

out of stock mutual funds. We saw some numbers on Friday from Lipper that showed that there are mom and pop investors who are nervous and have been scaling back on stocks.

Remember, they're up 30 percent in the Dow since the election, you've had ten years almost of steady gains, and ten years of an expansion. I think that it is fair as an individual investor to talk to your adviser, to sit down, talk to your spouse or your partner, figure out how close you are to retirement, how much you should have in stocks.

If you haven't been rebalancing, you are full of stocks right here, and so you should really look at --

SCIUTTO: Right --

HARLOW: Where you should be in terms of your asset allocations. Sounds boring, but it's important --

SCIUTTO: Good advice --

HARLOW: It's really important --

SCIUTTO: Talk to the professionals --

HARLOW: Yes --

SCIUTTO: Right? I mean, that's the simplest advice. Listen, they're unsettling times coming up on the holidays, it's understandable we're going to stay on top of the story. Alison Kosik --

HARLOW: Sure --

SCIUTTO: Christine Romans, thanks very much --

ROMANS: Thanks for having me --

SCIUTTO: In just 90 minutes, Michael Flynn, the president's former national security adviser will face sentencing for lying more than once to the FBI. And President Trump has a message for his national security adviser, good luck.

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