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CNN Obtains Letter Signed by Trump on Moscow Tower that Giuliani Said He Didn't Sign; Court Orders Company to Comply with Special Counsel Subpoena in Secret Hearing; Fed Expected to Hike Rates Despite Trump's Warning; Senate Passes Sweeping Criminal Justice Reform Bill; Loretta Lynch Getting Grilled over Clinton E-mail Probe. Aired 11:30-12p ET

Aired December 19, 2018 - 11:30   ET


[11:30:00] MICHAEL ZELDIN, CNN LEGAL ANALYST: The issue is, when did the project end and when did the president's knowledge of the project and did that go forward from January 2016 into the campaign? The president has denied that knowledge. Cohen said it went through until June. That is the key issue here is, when did the president know about the project's end and what was he telling the American people during the campaign about that project?

PAMELA BROWN, CNN ANCHOR: And as it relates to the responses to Mueller, Rudy Giuliani says the lawyers kept it vague in terms of the timing.

Chris Cillizza, four days ago, Trump's lawyer Rudy Giuliani told CNN's Dana Bash that Trump never signed such a letter. Can this be explained away as Giuliani not getting his story straight? What do you make of that?

CHRIS CILLIZZA, CNN POLITICS REPORTER & CNN EDITOR-AT-LARGE: Could, I suppose, Pam. It is very unlikely. He has made a number of admissions, slips, mistakes. Remember, we learned that Donald Trump paid Michael Cohen off for the hush money payments from Rudy Giuliani when he first came onto the legal team. He has done this sort of thing before. I think it's very unlikely. Maybe because Trump is a difficult client, maybe Giuliani didn't get the whole story. He asked and thought Trump answered the question and Trump didn't necessarily answer the question and there's a misunderstanding. I guess that is all possible. The problem here is that -- Michael touched on this -- there's just so much smoke. There are so many misunderstandings as it relates to Russia or things that Trump said that are either outright false or he didn't tell the whole truth. In a vacuum, one thing like this, maybe we can say he made a mistake, slip of the tongue, whatever. But there are so many slips of the tongue or mistakes or admissions or contradictions, it becomes difficult, I think, to swallow all of that and say this just makes perfect sense here, nothing to see here folks.

BROWN: I want to get to the secret court case that we were all sort of watching play out on Friday with the secret hearing. Now we are learning it seems to involve the special counsel. A federal appeals court has ruled that an unnamed company, which is owned by a foreign country, must comply with a subpoena. Michael Zeldin, what is your best guess about what could be going on

here and why all the secrecy around it?

ZELDIN: In these sorts of cases, sometimes referred to as Bank of Nova Scotia subpoenas, where you subpoena the American affiliate of a foreign-owned company, and you say to them, bring back to the United States all these records from overseas. They fight that on sovereign immunity or other grounds, such as the national law of the foreign country that prohibits it. And that seems to be what has happened here. The court has ruled that sovereign immunity does not apply and that the national law of that country does not prohibit it. So they have ordered these documents in. What we know from the court order is that it is a country with which we have no treaties for assistance. Those could be a country like Russia, where we don't have that. We also know that these types of cases often involve financial institutions. So this well could be a Russian financial institution. That would make sense in terms of the Mueller investigation. But as to who that organization is, it's speculative at this point.

BROWN: I want to get to Michael Flynn sentencing that was delayed and the dramatic hearing yesterday. The sentencing delayed until March. Flynn's brother tweeted yesterday that, "General Flynn pled and cooperated and kept his mouth shut for two years thinking this was the best course of action to ease the financial and emotional burden. The SC (ph) and DOJ agreed. The benefit of his cooperation did not materialize yesterday. We are in an alternative universe now trying to figure out how to move forward."

Michael, is Flynn's brother correct that yesterday signaled that his cooperation hasn't materialized?

ZELDIN: No. I don't think that's correct. I think that tweet is premature. I think that the judge has indicated to Michael Flynn that he wants to see continuing cooperation. This is the normal process of a three-branch government where the independent judiciary has the right to sentence. And Michael Flynn knew that the court could sentence him up to five years, notwithstanding the recommendations of the prosecutors and also the sentencing guidelines. The system is working as it is designed to work. We will have to see if Michael Flynn can convince the court that his crimes are mitigated by his cooperation such as to allow him a probationary sentence.

BROWN: Chris, the president started the day wishing Flynn good luck. His press secretary, Sarah Sanders, went on FOX News and said Michael Flynn was ambushed. Then Michael Flynn went to court and made clear that he wasn't ambushed. Here is what Sarah Sanders said when she was asked about this.


[11:35:08] UNIDENTIFIED REPORTER: Flynn said that he knew it was illegal to lie to the FBI and he was ready to accept responsibility. This is all before agreeing to delay of sentencing. Given that, are you in a position now or would you like to revisit your comments earlier today that the FBI ambushed Flynn?

SARAH SANDERS, WHITE HOUSE PRESS SECRETARY: No. We still firmly believe. We don't have any reason to want to walk that back.


BROWN: So the White House doubling down on this notion that he was ambushed, which flies in the face of what Flynn said under oath in a court of law.

CILLIZZA: Talk about living in an alternate universe. I don't know what else to say here. We see this a lot. Donald Trump and the people who work for him and the people who stay working for him create a reality that doesn't always comport with the accepted facts and truth. This is an instance there. He wants to believe that Flynn was railroaded and that is why he is cooperating. Michael Flynn doesn't say that under oath.


BROWN: But his attorney sort of fed into that notion last week with the court filings.

CILLIZZA: I think what they are trying to do there's to do everything they can to get Michael Flynn the best possible deal he can in terms of sentencing, which I get from a legal perspective. Michael Flynn himself says he was not entrapped, he was not pressured into this. He did it, he pleaded guilty. He doesn't want to rescind or recant that in any way, shape or form. Where do you go from there?

BROWN: All right, Chris Cillizza, Michael Zeldin, thank you very much, gentlemen.

CILLIZZA: Thank you.

BROWN: Coming up on this Wednesday, investors eagerly awaiting word from the fed on whether it will raise rates after President Trump warns the central bank against it. Can the president afford a potential market meltdown? Stay with us. We'll be back.


[11:41:38] Suspense is building as the Federal Reserve gets set to decide whether it will raise interest rates despite intense market volatility. The announcement is hours away.

President Trump has repeatedly slammed the Fed for even thinking about raising rates. He warned the board of governors to, quote, "Feel the markets" in order to avoid what he called yet another mistake. But most forecasters think Jerome Powell will move forward with a rate hike. How will the president react?

Joining us now is Stephen Moore, CNN senior economics analyst and President Trump's former economic adviser.

First, Stephen, do you agree with the president that the Federal Reserve should not raise rates?

STEPHEN MOORE, CNN SENIOR ECONOMICS ANALYST: I sure do. I think the president was spot on when he said three months ago that it was a mistake. We have seen a big stock market, not a crash, but certainly bearish market since then. I just don't see any inflation out there. The economy has slowed down a little bit. We were growing at four percent and now we are going at three. I don't see the need for a rate increase. There's an old saying that the Fed often times takes the punch bowl away from the party when it is getting going.

Pam, whether or not the Fed actually listens to the president, probably doubtful. The president can have an opinion on this just like any other American.

BROWN: OK, so clearly it doesn't bother you that the president criticizes the Fed publicly. But could the president create more market volatility by weighing in with his criticism?

MOORE: Maybe a little bit. Again, Donald Trump got a lot of criticism several months ago for saying the Fed was making a mistake in raising rates. It turns out Donald Trump was right, that they should not have raised interest rates. It was a big mistake to do so. By the way, even the "Wall Street Journal" editorial board yesterday, as you know, editorialized that the Fed should stop raising rates. And the editorial board of "The Journal" has been hawkish on inflation in the past. That was even a turn for them. We'll see what the Fed does.

What is really important, Pam, for people who watch these things and people who have retirement accounts is not so much whether they raise the rates this time. They may raise it a quarter of a percentage point. Rather, what are they signaling about what they'll do over the next year. Are they going to continue to raise rates over and over again? I think that is what spooked the markets last time.

BROWN: You have spoken about the divergence between the strength of the economy and the stock market losses. How do you explain that?

MOORE: It's a hard thing to explain. I followed these things for 30 years, Pam. We have an economy that is not quite as strong as it was three months ago but still very strong. We still have seven million more jobs than people to fulfill them. Consumer confidence is good. I spoke to the National Association of Manufacturers Board, the major manufacturers in the country, and I asked them, how is business. They all said better than ever and business is booming. Businesses conditions, other than the housing industry, which is weak, I think the business conditions are pretty good and yet the stock market has been going south.


BROWN: Really quick on that, because just this morning Fed Ex cut its profit outlook for next year by seven points, saying that its international business has been weakened by the trade dispute with China. What do you say to that?

[11:44:59] MOORE: There's no question about it, Pam, markets and businesses hate trade wars. We are in a trade war with China right now. It's a high-stakes trade war, no question about it. I think the American people are solidly behind Donald Trump, that we have to stand up to this abusive relationship that we are in with China. They have become economically very aggressive in terms of -- you saw what happened last week with their hacking of our American companies and our databases and they are stealing our technology. There's a lot of espionage going on, on top of the intellectual property that they steal every year. This is a big deal. Something is going to happen in the next couple of months.

The one thing I will say positive, since we have six days until Christmas, I believe that Trump is going to win here. And I think when he wins and we get a trade deal with China, then the stock market will go through the roof. But there's no guarantee of that because the ball is in Beijing's court.

BROWN: We will have to wait and see what happens. We'll be watching the Fed announcement closely later today.

Stephen Moore, thank you very much.

MOORE: Thanks, Pam. Merry Christmas.

BROWN: Merry Christmas to you.

Coming up, a big win for the White House with rare approval from Democrats. The Senate passing a huge criminal justice reform bill. How did the White House get it done? That's next.


[11:50:44] BROWN: Well, just hours ago, there was a rare moment of bipartisanship in Washington. The Senate passed a criminal justice reform bill by a whopping 87-12 vote. It's expected to clear the House and get the president's signature. The bill is called the First Step Back and it aims to reduce the federal prison population. Part of it includes lighter sentences for non-violent offenders.

I want to bring in CNN's Jeremy Diamond.

Jeremy, you've been covering this story from the beginning. You wrote an article detailing how this bill was dubbed by opponents a zombie bill because it would not die. Tell us how it finally made it to the finish line.

JEREMY DIAMOND, CNN CORRESPONDENT: That's right. Allies and opponents alike call this the bill that would not die. Opponents called it the zombie bill for that very reason. It was the product of this unlikely coalition that emerged. President Trump, when he was elected in office, private prison stocks soared because he had been talking about bringing back these tough-on-crime policies during his campaign but the president's son-in-law and senior adviser, Jared Kushner, pushed this effort from within. over the opposition from several key administration officials, including at the time the Attorney General Jeff Sessions, working with Democrats as well. Kushner was able to convince the president to support this measure and get it through Congress, which this has been attempted in the past, and this was ultimately successful. It passed the Senate yesterday, a key hurdle, 87-12. And the president is expected to sign it later this week.

BROWN: You mentioned how many hurdles and that included the president's initial fears. Explain what that was all about. What was he afraid of?

DIAMOND: That's right, Pam. There were multiple moments that supporters of this bill said where they felt it was about to die, and one of the reasons was because the president had been told about Willie Horton. Willie Horton, of course, was the subject of a 1988 devastating presidential campaign ad attacking Michael Dukakis over the fact that Horton was out on a weekend furlough from prison while Dukakis was governor and he ultimately raped a woman during the furlough. And a devastating racially charged ad.

Tom Cotton, one of the chief congressional opponents of the measure, talked to the president about Willie Horton and became concerned he could be saddled with a similar ad in 2020 if he went through with this measure. But in an Oval Office meeting with Kim Kardashian and Van Jones, they told him about Alice Johnson, the woman he pardoned from prison, and that helped eased some of the president's concerns and, ultimately, he came to support this -- Pam?

BROWN: It's truly a remarkable story about how all of these different sides came together and how Kim Kardashian, Van Jones, Republicans, everyone came together to make this happen.

Jeremy, thank you so much for that great reporting.

Right now, former Attorney General Loretta Lynch is behind closed doors on Capitol Hill getting grilled over the investigation into Hillary Clinton's e-mails. Details just ahead.


[11:58:22] BROWN: Former Attorney General Loretta Lynch is behind closed doors on Capitol Hill getting grilled by a Republican-led congressional committee over the investigation of Hillary Clinton's e- mail use.

CNN senior correspondent, Manu Raju, joins me now from Capitol Hill.

What are you hearing Lynch's turn in the hot seat today, Manu?

MANU RAJU, CNN SENIOR CONGRESSIONAL CORRESPONDENT: She's been there for roughly two hours. Some Democrats emerged saying they've learned a whole lot of nothing new in this. We'll see what Republicans believe. They have the first hour of questioning. Lynch has come under scrutiny from Republicans about the decision not to prosecute Hillary Clinton. This all part of the GOP-led investigation into actions the FBI took in 2016. Something the Republicans believe was not done properly, the Clinton investigation and the Russia investigation. The Republicans want to know about that meeting she had with Bill Clinton on the tarmac in 2016 right before that decision not to prosecute Clinton. And then what she knows about the Russia investigation and her interactions with James Comey. Both of those situations. Ultimately, we'll see what they turn up here, Pamela, because

Democrats have made it very clear that they are going to stop this investigation on their first day when they take power in January. So she's very well the last witness of this investigation. We'll see what they turn up, what Democrats say, and not a lot new so far -- Pamela?

BROWN: We'll have to wait and see. Of course, she's coming back to the Hill to talk about this issue. We'll see if there's anything new that's coming out. As you pointed out, Democrats say nothing new. So we'll have to wait and see.

Manu Raju, on Capitol Hill, thank you very much for that.

And thank you so much for joining me today. I'll be back here tomorrow at 11:00 eastern time.

"INSIDE POLITICS" with John King starts right now.