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Lynch to Testify on The Hill; Fed Announcement on Rates; European Union Cables Made Public. Aired 9:30-10a ET

Aired December 19, 2018 - 09:30   ET



[09:32:31] POPPY HARLOW, CNN ANCHOR: All right, welcome back.

At any moment now we're expecting to see former Attorney General Loretta Lynch. She is set to arrive on Capitol Hill for a closed door interview. Republicans on the House Judiciary and Oversight Committees expected to grill her about a number of things, namely the FBI's handling of Hillary Clinton's e-mails and Russian election interference. It's pretty much their last shot to do this in this probe before Democrats take over House control next month.

Manu Raju is on The Hill with more.

Look, it was Comey. Now it's Lynch. I'm interested with Loretta Lynch, are all the transcripts of this interview also going to become public, just like the deal that Comey made?

MANU RAJU, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Probably not because James Comey, as you recall, Poppy, took this fight to court and got a deal cut with this committee to release those transcripts publically within 24 hours. We have not seen that with other witnesses, and we will probably not see it with Loretta Lynch.

But what we do expect in the coming weeks is Republicans and Democrats to put outcome competing reports about what they found in this investigation. Republicans will contend that there was nefarious action by the FBI in how it handled the Clinton e-mail investigation and its decision not to prosecute Hillary Clinton. Also raise questions about the Russia investigation and its initiation.

Democrats will say there's just nothing to it. So expect that to be the narrative also playing out today as Loretta Lynch will face questions about why she referred to the Clinton's e-mail investigation, according to James Comey, as a matter, not the investigation, why she met with Bill Clinton on the tarmac in 2016 right before the decision not to prosecute Hillary Clinton, something she said was just a personal conversation. All those questions are about to come -- expected to come out and why she decided not to move forward with the prosecution of Hillary Clinton.

But Democrats will say, Poppy, this is just re-trending old ground. We'll see if any new information eventually emerges.


HARLOW: Yes, but it's always helpful when you get those transcripts, like with Comey, so the American people can read them for themselves. Politics out of it.

Manu, thanks very much. We'll wait for her.


JIM SCIUTTO, CNN ANCHOR: A fact check now.

We know it is often difficult to keep up with all the legal developments surrounding the president and his administration. But in a week of explosive developments, we took note of two stories told by the president and his closest advisers for months, even years, that blew up in just the last couple of years.

First, the story that Michael Flynn was entrapped by the FBI into lying. The president and his supporters have been making that claim for months now. Just last week, Flynn's own lawyers took up that mantle, asking the federal judge overseeing his case to spare him prison time by suggesting, like the White House, that he had been tricked into lying. The president echoed that once again on Thursday, tweeting, quote, they gave General Flynn a great deal because they were embarrassed by the way he was treated. The FBI said he didn't lie and they overrode the FBI. They want to scare everybody in the making up stories that are not true by catching them in the smallest of misstatements. Sad.

[09:35:30] Well, yesterday in court, Michael Flynn himself, and his lawyer, denied repeatedly that he was entrapped. In one of several exchanges like this, Judge Sullivan asked Flynn's attorney if Flynn was, quote, entrapped by the FBI. His lawyer said, quote, no, your honor. Are you continuing to accept responsibility for your false statements, he asked Flynn. I am, your honor, said Flynn.

Bottom line, Flynn and his lawyers contradict the president. They were not entrapped. He lied willfully.

Second, President Trump and his advisers have claimed for more than a year that discussions about a Trump Tower project in Moscow ended in January 2016, long before the 2016 election. Michael Cohen, the president's former lawyer and fixer, in fact, testified to Congress in August last year that those project talks had ended then.

However, late last month, Cohen pleaded guilty to lying to Congress, acknowledging that those Trump Tower discussions, in fact, continued into June 2016, the month right before the Republican Convention. Then, earlier this week, Rudy Giuliani, the president's lawyer, said on ABC News, that those discussions could have, although the president doesn't remember the exact date he said, gone on even longer, right up to November 2016, just before the election.

Bottom line, discussions between then candidate Trump and Russia of a lucrative business deal in Moscow continued while Russia was interfering in the U.S. election. These big stories repeated by the president and his team now contradicted and undermined by the facts.

HARLOW: What important facts they are, Jim. Thank you for that.

All right, take a look at the market. Stocks flat ahead of a major announcement from the Fed today on interest rates. We all know how the president feels about this, but what will the Fed do? It's really important and we have more ahead.


[09:41:25] HARLOW: All right, in just a few hours, the Federal Reserve will make a major announcement, whether it has decided or not to hike interest rates for the fourth time this year. It is no secret what the president wants. He does not want interest rates to go up. He's repeatedly attacked the Fed and his own pick to chair the Fed because they have been rising. But is a rate hike really what is to blame for Wall Street's dismal December so far?

Let's talk about it with Douglas Holtz-Eakin, an economist and president of the American Action Forum, a conservative.

Nice to see you. Thanks for joining me.


HARLOW: You saw "The Wall Street Journal" editorial that the president liked yesterday that said, look, the Fed should pause on interest rates, but you also know that the counter argument to that, that has been made from a number of conservative economists is that if the Fed doesn't keep raising rates incrementally here, they're not going to have as much ammunition to ease them and to fight off a recession when it does come. Which camp do you fall in?

HOLTZ-EAKIN: Well, I think the Fed's almost certainly going to raise rates today, and they should. In my view, you don't want to look at the stock market to decide what the Fed ought to do.

HARLOW: Right.

HOLTZ-EAKIN: You look out there to the main street economy and what you see is a very strong economy, one where, in particular, household spending is growing at about 3 percent a year. It's pretty hard to get a recession out of households spending, 3 percent a year. And so, in that environment, you want the Fed to get interest rates back to normal.


HOLTZ-EAKIN: Adjusted for inflation, interest rates are zero right now.

HARLOW: Right.

HOLTZ-EAKIN: That's not normal. So a rate hike is appropriate.

HARLOW: All right. The president doesn't agree with you. So fact check the president for all of us on this. Is the president right when he points to the Fed and says, look, you're the reason, it's your fault that the market is tanking?

HOLTZ-EAKIN: In part it is. I think the Fed stayed too low for too long. A lot of money out there as a result. It was washing around and ended up inflating some stock and other asset prices. We're seeing that correction now. That's a good thing in the long run. You want to get the stock market and the main street economy hooked up in the right way. And this will do that.

It's a little painful if you happen to be an investor. Let's not kid ourselves. No one likes to see their stocks go down. But I think the Fed has done the right thing by and large over the past year. I think the real issue today is going to be not whether they raise rates or not. I think they almost certainly will. And the president's pressure almost guarantees that.


HOLTZ-EAKIN: It's what will Chairman Powell say? What -- how will he convey to the market the confidence that the Fed is doing the right thing and will know when to stop? And that's been the issue.

HARLOW: There are some concerns, though, about the economy. You know that when you look at the housing numbers, when you look at auto sales numbers --


HARLOW: When you look at some of those loan figures as well. And you advised the late Senator John McCain on all things economy during his presidential bid in 2008.


HARLOW: And, as you know, he took a really big hit when he said the fundamentals of economy are strong. I wonder if there's a warning there for this president because he polls so well on the economy. I mean his polling numbers are 10 points higher on how he's handling the economy right now than on his overall approval rating. Is there a lesson to be learned there, a warning that you would give this president on any comment like that?

HOLTZ-EAKIN: I think it's very difficult political territory to navigate. Let's face it, if you're in the home building business, the fundamentals of the economy are not sound.


HOLTZ-EAKIN: I mean your point is exactly right, we have a really weak housing sector. That's among the concerns. They don't lead me to think there's going to be a recession, but for anyone who's talking about the economy, I think you have to simultaneously express the confidence in the larger economy with some sympathy and concern for those sectors that aren't doing very well.


HOLTZ-EAKIN: And they're real. There are some out there.

[09:45:01] HARLOW: Yes. They're real. And, look, you know, as you know, half of Americans don't have a penny in the stock market, right? That is not the reality for them looking at the Dow every day.

Finally, just out this morning, a Republican CEO of a big, important American company, FedEx, just issued a major warning. They lowered their profit guidance 7 percent to 10 percent for this year. They are offering U.S. employees buyouts. They're scaling back their hiring plans. And why? The CEO said, and I quote, China's economy has weakened due in part to trade disputes.

This is a Republican talking about the negative impact of these tariffs. Your read?

HOLTZ-EAKIN: I think this is a very important signal to the administration about their trade policies. The global economy is slowing, and the U.S. cannot be entirely insulated from that. The trade war between the United States and China exacerbates that problem. It's a big risk to the U.S. It's probably the only way I see us getting into recession in 2019 is a dramatic policy error.

HARLOW: Really?

HOLTZ-EAKIN: So they control the near-term outlook for the economy.

HARLOW: That's really interesting.

All right, Douglas Holtz-Eakin, I appreciate your time. Have a good holiday. Thank you.

HOLTZ-EAKIN: Thank you. You too.

SCIUTTO: Fascinating. Something the markets are going to be watch very closely today, as are homeowners, as are 401(k) --

HARLOW: Yes. Sure. And he's a conservative -- he's a conservative and he's saying to the administration, look, watch out.

SCIUTTO: Yes. Yes. Yes.

Well, listen, hackers have targeted thousands of diplomatic communications meant to be secret from the European Union. They reveal just how the world views the Trump administration.


[09:50:56] SCIUTTO: Hackers have infiltrated the European Union's diplomatic cables exposing serious international concerns about the unpredictability of the Trump administration. According to "The New York Times" report, the cyber security firm Area One discovered the hack that had been tracking communications for years.

HARLOW: And the hack revealed details about what European officials really thought about the meeting that President Trump had with Vladimir Putin in Helsinki, the China relationship between the president and Xi Jinping. There was a lot here.

David Sanger, part of the reporting team that broke this story. He joins us now.

Just week after week, David. You better not take a week off for Christmas. You're breaking all of these important stories every week.

Thank you for being here.

DAVID SANGER, CNN POLITICAL AND NATIONAL SECURITY ANALYST: Oh, Poppy, I plan to -- I plan to take the week off.

HARLOW: Darn. Me, too.

SANGER: We'll see how successful that is. Yes.

HARLOW: Me too.

David, let's go through some of this because these cables show European diplomats describing a meeting between Trump and Putin as successful for Putin, their concern about how to do damage control after that. When it comes to China, Xi Jinping is quoted in these talking about the president's, quote, bullying, comparing it to a no- rules, freestyle boxing match, saying China will not succumb or submit to that bullying.

What is the goal of the hackers here to make this stuff public?

SANGER: You know, Poppy, I don't think the hackers here planned to make it public. Unlike the Russia hack in 2016 where, in fact, the stuff was deliberately, you know, put out on WikiLeaks and so forth.

HARLOW: Right.

SANGER: Area One, the firm that found this stuff, found what they believed to be a Chinese origin, or at least has the characteristic of a Chinese PLA hacking team that moved some of these from the EU system to a public site temporarily on their way to uploading it into the cloud. And the way Area One's surveillance worked, it saw it in this public site out in the open and downloaded them, you know, just toward -- just as they intercepted them, I guess they should say, as they were -- as they were moving through a public area of the Internet.

So I don't think that the hackers had any intention for this to get out. I think it was pure surveillance as the Chinese, assume it was the Chinese, were trying to figure this out, trying to figure out what the Europeans were saying.

SCIUTTO: So that's the intent here, right, even if they didn't mean to publicize. And this is part of a broader pattern of China. And I imagine the U.S. government, other governments, they surveil to figure out what other leaders are saying about themselves and each other.

SANGER: That's right. And, of course, you know, the NSA does this and other U.S. government entities do it. The Chinese campaign, though, is incredibly broad. I mean as we've discussed before, they went into the Office of Personnel Management. They went into the health care records of Anthem. We believe they were behind the Marriott hack that we were talking about just a week ago.

HARLOW: Right.

SANGER: And those were all to sort of draw a picture of American decision makers, how they move, where they move, what kind of security clearances they have, what they work on.

This case was sort of more pure espionage of diplomatic cables. The part that U.S. intelligence will tell you everybody does. In this case, what was interesting about the cables was that the Europeans just gave expression to things that they frequently say to the three of us, you know, on background, that the president's decision making is erratic or unpredictable. Look at Afghanistan and what we think is happening today, right? That Xi Jinping, as you mentioned, Poppy, regards the United States as not only trying to be a bully, but ignoring the fact that China has risen to become a great power that's not going to bend to American or other will the way it may have a century ago. So it just sort of brings out in the open, as WikiLeaks did, what people are really saying among each other.


HARLOW: Right. Tell me what you really think. And now we know.

David Sanger, incredible reporting. Thank you. Have a good week off.

[09:55:04] SANGER: Thank you. You too, Poppy.

HARLOW: Straight ahead, the U.S. is preparing -- this is big -- for full and rapid withdrawal of all of our troops on the ground there in Syria, about 2,000 American troops on the ground. The breaking details are next.


HARLOW: All right. Good morning, everyone. I'm Poppy Harlow.

SCIUTTO: And I'm Jim Scioto.

We are following breaking news this morning.

President Trump ordering, a surprise order, a full and rapid withdrawal of U.S. troops from Syria. This according to a U.S. defense official.

CNN's Barbara Starr is at the Pentagon with more.

[10:00:00] And just in the last few moments, the president tweeted, Barbara, we have defeated ISIS in Syria, my only reason for being there during the Trump presidency. Do the facts -- does the intelligence support that claim?