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Fed Is Expected Soon to Raise Rates Despite Trump's Warning; Corker Says GOP Senators Giving an Earful to Vice President Pence on Syria Pullout; Senate Approves Criminal Justice Reform in Bipartisan Vote. Aired 2-2:30p ET

Aired December 19, 2018 - 14:00   ET


[14:00:00] BROOKE BALDWIN, CNN HOST: Hi, I'm Brooke Baldwin. You're watching CNN. Thank you for being with me. We've got breaking news on multiple front, including President Trump planning for a, quote, "full and rapid withdrawal of troops out in Syria," the President declaring "we have defeated ISIS in that country." Is that the reality on the ground? We is a lot to dig into. Top Republicans are blasting the move as a massive mistake.

Any second now, a major financial decision that could impact what you pay on your mortgage, your bank loans, the interest on your credit cards, investors big and small are waiting to hear whether the Federal Reserve will hike rates. While a slight hike is expected it, could send shivers to already volatile markets. President Trump has been routinely tweeting about it making it clear the President of the United States opposes any sort of rate hike. His latest shot by tweet, "I hope people at the Fed read "The Wall Street Journal" before they make another mistake." The President has boasted about the financial markets. He's tweeted about it at least 50 times by our count and we frequently hear him brag during rallies.


DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The stock market is at an all-time high. The stock market smashes one record high after another.

The stock market is shattering one record after another.

The stock market hit an all-time record high today.

The stock market is way up again today and we're setting a record literally all the time.

I told you, the stock market is hitting one all-time record after another.


BALDWIN: So, we'll check in with our CNN business correspondent, Christina Alesci who is at the New York Stock Exchange in just a second. I have Alexis Glick with me she is a former Wall Street executive, and Julia Chatterley, she is a CNN business anchor, so ladies to suddenly turn to the two of you. We now have news from the Fed which is?

JULIA CHATTERLEY, CNN BUSINESS ANCHOR: That they have decided to hike rates.

BALDWIN: They have.

CHATTERLEY: This is what the market was expecting. So this is really baked into the cake, it's the language around the statement that's important. There's a few things in there that if they decided to pause and not continue to talk about the prospect of rate hikes next year, they would have taken some language out and they've left that in there. So I think this is the first point. But what they've said is look the risks for the economic outlook appear roughly balanced but they are monitoring global events. I think that's touching to the dovish side here for me, one of the big lines that's important.

ALEXIS GLICK, FORMER WALL STREET EXECUTIVE: Absolutely. To me that is a dovish indication that they are concerned about the global economy. A lot of people felt that the Fed needed to do what the Fed need to do. If you looked at the statement just dating back in September, the Fed Chairman Powell was positive, bullish about a strong economy. So, they're really having to really, you know, duck and change their philosophy really quickly. And largely that's been based on health insurance been going -- what's been going on around tariffs and trades. For me the deflection of the balanced outlook that they're keeping an eye on the global economy says they are getting somewhat concerned. The prediction is they're going to raise rates as many as three times next year. This may indicate to the market maybe we'll only have a couple hikes. I think the market is going to be positive about this that they're going to pull back.

BALDWIN: Let's go to the New York Stock Exchange. We've got the news they will be raising those rates. How are markets responding and give us a little analysis as well?

CHRISTINA ALESCI, CNN MONEY CORRESPONDENT: The markets are not happy again. We saw an immediate reaction here to the down side. Look, to a certain extent, investors saw this coming. They digested some of this news and that's why we saw a little volatility earlier this week, they digested the anticipation of the news. Now that we have it, they're digesting it even further. The Fed is trying to do something really tricky here. It's trying to balance the need to raise interest rates against strong economic data yet not raise them too fast so that you slow economic growth. That's a very tricky thing against the backdrop of a much larger debate on what the true neutral rate is. That is the rate where you don't tip the scale one way or another. That is what you're saying play out in realtime, and investors are confused at this point. They thought perhaps they would have seen perhaps even more dovish signs.

[14:05:00] I think they're going to be paying attention to Jerome Powell and what he says, and they're going to be looking for clues about what will happen in 2019, next year, whether or not the Fed will continually to gradually raise, as planned, three rate hikes or if there's any include whether the Fed is paying attention to what is happening. We just ticked down red. It's a clear sign that investors aren't happy. Will Jerome Powell factor this into his decision?

BALDWIN: Standby. Before we get into what the President wanted and how he inserted himself into this whole conversation, of course the Fed supposed to be impartial, what about real-world consequences for folks saying I've got a lot of credit card debt, things of that nature. What should they know?

CHATTERLEY: That just got more expensive, credit card debt. Mortgage rates less so. Something with an adjustable rate, credit cards, that just got incrementally more expense. I think Jay Powell will be careful here, too. Just because the President said don't raise rates, no President likes rising rates at any point in time, let's be clear on that.

BALDWIN: What was it Alan Greenspan said do you, run for cover?

CHATTERLEY: He said if stocks stabilize and then go higher, run for cover. He also said the bull market was over. So, he was quite cautious here. But I think we have to be very careful and Powell has to be careful to say we recognize the economy is slowing here but if he's too cautious and too pessimistic, everybody will be very fearful and you can have a situation where you create something and a weakness and a concern and negative sentiment that perhaps might not ordinarily be there. It's a fine line.

GLICK: What the President was saying is don't slow down the stock market and the gains we've seen in the market. Those gains have been wiped out this year. We're in correction territory across the board. If you actually look at the data around something that we monitor, stock repurchases, they were up 58 percent in the third quarter. So much of what we've been seeing is a somewhat inflated marketplace based purely on the fact that there was a corporate tax rate and that corporations are using that money to go buy back their shares. So, I think if I'm at home right now, yes, interest rates are going to rise, it's going to impact your credit cards, it will eventually impact rates on homes and other things of that nature. But the thing that worries me, Brooke, that we're not talking about is we're talking about corporate America and the stock market. We're not talking about the heartland. If you look at what's

happening in the heartland right now, at what's happening in the agriculture and farming industry, you have people walking away from farms. These tariffs are killing them. So, what I worry about is if we don't fix trade quickly, if we don't sign a farm bill quickly, we're going to have an entire sector of this market that does cause a real pull back in the economy and we could be sitting here in q2 and q3 and talking about layoffs. So, to me right now, I think if I'm the President or his economic team, get the deal done on China, get the Canada/Mexico agreement done, sign the farm bill, give us some positive news.

BALDWIN: Certainly, we'll see some kind of tweet.

CHATTERLEY: None of this is something that Jay Powell at the Federal Reserve can control. We're asking him to make interest rate changes and support a stock market potentially but none of those things are things that the central bank controls. It does come from the government. Critical point.

BALDWIN: Going back to the President and how he was saying don't do precisely what they've done because he's fearing this slowdown in the economy, how rare, how unprecedented is it to have a President speak up and insert himself the way he has?

GLICK: Well, he's tenacious. We know he's tenacious.

BALDWIN: Tenacious.

GLICK: But believe me, we have seen other elections going into a fall interest rate environment during the election cycle where there has been a desire for no interest rate moves in an election cycle. So, I wouldn't say this is wholly unprecedented. I would say he is exerting his influence as he always does, and that's not all that unexpected. At the end of the day, though, if I'm sitting here and I'm in the Fed's position, I'm looking at what are the inflation risks, how is the economy doing, is global growth slowing? I'm looking at the data.

[14:10:00] Right now, consumer is doing pretty well. But all those tax cuts should have led to increased business spending. In her in theory they should have left to more investment in the United States, but what they're doing is inflating share purchases. Have led to increased business spending. In her in theory they should have left to more investment in the United States, but what they're doing is inflating share purchases.

CHATTERLEY: And a lot of that wind was taken out as a result of the trade concerns because the uncertainty that that provides has been a real concern for businesses too. It's giving with one hand and perhaps taking it with the other.

BALDWIN: The Fed has decided to hike interest rates. We'll hear from Jerome Powell, the Fed chair at the bottom of the hour. We will listen and for that. Obviously, the President has to be watching this very, very carefully as well. We will be on Twitter watch as well. This could be an albatross for him come 2020. Ladies, thank you very much. Appreciate you rolling with me.

A major military decision by President Trump planning for a full withdrawal of American troops from Syria while declaring victory against ISIS in that country. A number of top Republicans are blasting the move saying it could create a power vacuum for terrorists. We'll discuss the reality on the ground coming up next on CNN.


BALDWIN: "A grave error on the part of the United States and an Obama-like mistake that a big win for is." That is some of the sharp and swift reaction from Senators Marco Rubio, Lindsey Graham after learning President Trump is preparing a full and rapid withdrawal of U.S. troops from Syria. The decision affects about 2,000 service members whose main job it is to train local forces fighting is. A U.S. figure says the timetable is expected to be sometime between 60 and 100 days. But the timing of the President's decision a bit of a head scratcher given some recent wins by the U.S.-backed Kurdish-led democratic forces. And one former United States attache to Syria tells CNN that's exactly why the troops should stay.


LT. COL. RICK FRANCONA (RET.), CNN MILITARY ANALYST: They are on the cusp of moving ISIS out of that area. And now is not the time to pull back our support. Yes, we will continue airstrikes, yes, we will continue artillery. Having U.S. forces on the ground has been key and has given them the SDF that extra support they need. I'm a little surprised. I'm a little disappointed.


BALDWIN: We have also just learned Republican senators including Foreign Relations Chairman Bob Corker are giving Vice President Mike Pence a, quote, earful about this behind closed doors right now. Let's go to our senior international correspondent Nick Payton Walsh. He has reported extensively on the war in Syria from Syria and CNN reporter Ryan Browne. Ryan, it was two weeks ago General Dunford said this about what it will take to defeat ISIS in Syria. Do we have it, guys? Do we have the sound? Do we have it from the Joint Chiefs?


GEN. JOSEPH DUNFORD, CHAIRMAN, JOINT CHIEFS OF STAFF: I will give you some idea of the order of magnitude of the work to be done. We estimate, for example, about 35 to 40,000 local forces have to be trained and equipped in order to provide stability. We're probably somewhere on along the line of 20 percent through the training of those forces. With regard to stabilization, we still have a long way to go. I'd be reluctant to affix a time.


BALDWIN: Ryan, my question is was the military on board with this?

RYAN BROWNE, CNN PENTAGON CORRESPONDENT: It's a great question, Brooke. You heard there from America's top military officer, General Dunford, he's saying we're only about 20 percent done and this was just a few weeks ago. Only 20 percent done with setting up this permanent kind of security force that could help ensure that ISIS remains defeated. There have been some successes on the ground against ISIS in recent days but military officials have said these on- the-ground victories won't necessarily result in the long-term defeat of is, they have to do other steps, stabilization missions and that requires training and requires U.S. military personnel on the ground. You can do air strikes and military strikes from across the borders and they've been doing that. Military planners expected to keep troops there for some time. Definitely a reversal. If this pull-out goes ahead and happens quickly, it's a reversal from what the planners had been considering when they were looking at Syria.

BALDWIN: Nick, what about from you? You know the area. Word is that allies were in a word blindsided, that it was a total surprise. What does it mean for U.S. relationships going forward?

NICK PATON WALSH, CNN CORRESPONDENT: Absolutely nobody was expecting this. I don't think even the troops on the ground even had a whiff this was coming. This was being held out as a potential permanent U.S. presence there. There was an indefinite kind of timetable. And you heard Dunford talking about training troops.

You have to bear in mind in a 35,000 to 40,000 strong security force is an enormous undertaking and you have to look at the damage down to Raqqa and all the towns. There was a massive reconstruction there. The U.S. didn't want to own it. They wanted Gulf allies to come into the mix. That was slow. When was the point the U.S. would say they'd finished the is fight? There's absolutely no real reason why today you'd make that announcement. Yes, there's been fierce fighting, they were pushed out, they've come back. And there are a couple more towns where they're holding out. But their leader is still out there.

[14:20:00] Those U.S. Special Forces were doing an enormous amount of strategic work. Not only were they fighting ISIS. They were also blocking Iranian and Russian influence in that area. That is a huge goal for the United States. It meant they didn't have to have that many troops in neighboring Iraq, which has been historically complicated and sensitive, and essentially it meant they also give a little reassurance to Turkey because so long as the U.S. were in that area the Kurds weren't about to do anything stupid. Everybody was slightly more relaxed knowing they were there, including the U.S. ally Israel.

BALDWIN: What about the timing of this? It comes right after the phone call President Trump had with Turkish President Erdogan. How much of a factor is this?

WALSH: If you're looking for timing, that's almost certainly it. President Erdogan over the last week plus has been making very open noises about his desire to send his troops in to take on Syrian Kurds. The Syrian Kurds, Turkey considers them to be terrorists. They hoped the U.S. would assist in a brokered deal and the U.S. and Turkish are allies. Now soon and the term rapidly depends, it's pretty elastic, now they look like they're on their way out and it opens the door for the Turkish to potentially move in. Eventually the Americans were going to leave here but why now with so little gain for people on the ground, I'm baffled. I think it is really a geopolitical call made by Donald Trump and possibly his closest national security advisors in the White House. He probably only really knows why today.

BALDWIN: Nick has reported extensively on the ground. It's good to hear from you, Nick. Ryan, this withdrawal causes a vacuum for terrorism. How big is that concern?

BROWNE: There's a big concern. There's thousands of ISIS fighters still in the area, there's a significant threat of them surging and reconstituting themselves. But you also have the vacuum with Iran and Russia. They have long sought to get the United States out of Syria. They've called for the U.S. to withdraw from its bases in Syria. They see that has a bulwark against them. This is a victory for Iran and Russia absolutely and in addition having a surge in ISIS that could threaten the west and the United States.

BALDWIN: Ryan and Nick, thank you guys so much. We'll have more on that next hour. Meanwhile, it is considered the biggest overhaul of the criminal justice system in a generation. We'll talk about what it took to bring a deal like this to together.

And a deal that handed a big bipartisan victory to President Trump. We'll talk to David Gergen about the timing of a win like this. We'll be right back.



REP. TREY GOWDY (R), SOUTH CAROLINA: On behalf of a grateful Congress and grateful country, thank you for your service and the humility with which you have discharged it. Ladies and gentlemen, the Speaker of The House Paul D. Ryan.

REP. PAUL RYAN, (R), SPEAKER OF THE HOUSE: Thank you, Trey. Thank you for being a great colleague and even better friend and most importantly thank you for combing your hair today, Trey.


BALDWIN: A little banter between Republican Congressman Trey Gowdy and outgoing House Speaker Paul Ryan. Gowdy got a bit emotional when introducing his friend and colleague. Speaker Ryan saying he's proud of his time at the helm of the House.


RYAN: The drivers of our broken politics are more obvious than the solutions. So, this is a challenge I hope to spend more time wrestling with in my next chapter. As I look ahead to the future, this much I know, our complex problems are absolutely solvable. That is to say our problems are solvable if our politics will allow it.


BALDWIN: Speaker Ryan is retiring after more than two decades on capitol hill and three years as House speaker.

Supporters are calling it a Christmas miracle. The Senate in a rare act of bipartisanship has passed the most sweeping criminal justice reform in a generation by a vote of 87-12. The House is likely to approve it today and President Trump is expected to sign it this week. This bill expands early release programs for non-violent offenders. It eliminates so-called stacking provisions for crimes involving firearms. It shortens mandatory minimum sentences and reduces disparity between crack and powder cocaine conviction.

[14:30:00] So, legislation had Democrat Cory Booker working with Republican Chuck Grassley and Grassley thanking liberal groups for its support.


SEN. CORY BOOKER (D), NEW JERSEY: I don't know whether the ACLU considers themselves very liberal but at least they're on that end of the spectrum. Over here you've got people like the American Conservative Union and everything in between.

This would not have happened if it wasn't for the willingness of Chuck Grassley to listen, to learn and to work with us. He is the chairman of the judiciary committee, and he's the person that in my opinion that made this possible, taking it from being impossible to being possible. I'm deeply grateful to you, sir.


BALDWIN: CNN White House reporter Jeremy Diamond is with us with some incredible insight on how this whole thing game together. Let's start with the fact that they actually refer to this as the zombie bill because it refused to die.