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THE LEAD WITH JAKE TAPPER

White House in Chaos; Worst Ever Christmas Eve for Dow and S&P; Stocks Close Sharply Lower After Trump Unleashes on Fed. Aired 4-4:30p ET

Aired December 24, 2018 - 16:00   ET

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


[16:00:24]

JIM SCIUTTO, CNN ANCHOR: 'Twas the night before Christmas, and all through the White House, the only thing stirring is a president and his smartphone.

THE LEAD starts right now.

Day three of the government shutdown. President Trump spending most of it alone in the White House, likely watching cable news and blasting out a series of frustrated tweets. Is the president feeling walled in by his battle over the border wall?

Plus, no solution in sight, members of Congress back home for the holiday, negotiations stalled, and the White House warning that the shutdown could last well into the new year. Is there a way to break the ice?

And Wall Street Grinch delivering a nosedive to stocks, as the president launches another attack on the Federal Reserve. But was it the treasury secretary's phone calls that sparked the slide?

Welcome to a special holiday edition of THE LEAD. I'm Jim Sciutto, in for Jake Tapper.

And we begin this afternoon with a not-so-merry Christmas Eve. Here in the nation's capital, the federal government is in the third day of a partial shutdown, with lawmakers home for the holidays and the threat of political paralysis stretching well into the new year and the next Congress.

Nearly one million federal employees are impacted by the shutdown, some, including TSA and Border Patrol agents, forced to work without pay. Meanwhile, President Trump is holed up at 1600 Pennsylvania, instead of in his Mar-a-Lago club in Florida, stewing and tweeting up a storm.

"I am all alone, poor me, in the White House, waiting for the Democrats to come back and make a deal on desperately needed border security."

CNN's Abby Phillip joins us now from the White House.

Abby, at this point, the president, Republicans, Democrats, on the Hill, they don't seem to be talking, let alone budging.

ABBY PHILLIP, CNN POLITICAL ANALYST: No, not at all. And there doesn't seem to be that much urgency to resolve this government shutdown issue. Instead, we have seen President Trump behind his Twitter and not really seen in the public eye for three days, tweeting defensively, almost, about his demand for a border wall, but not really adding much clarity about what he's demanding in order to end this shutdown.

(BEGIN VIDEOTAPE)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We're going to have a shutdown. There's nothing we can do about that.

PHILLIP (voice-over): With the government shut down around him, President Trump has spent most of Christmas Eve on his phone, and alone at the White House, the first president to spend the holidays in Washington since Bill and Hillary Clinton 18 years ago.

The president hasn't been seen anywhere for three days, except on Twitter, where he has been making grievance the reason for the season, tweeting: "I'm all alone, poor me in the White House, waiting for the Democrats to come back and make a deal on desperately needed border security."

That message coming minutes before first lady Melania Trump was seen departing Florida to return to the White House early because of the shutdown. Trump's demand for border wall funding has even prompted some Republicans to question whether the fight is all for show.

SEN. BOB CORKER (R), TENNESSEE: This is a made-up fight so that president can look like he's fighting. But, even if he wins, our borders are going to be insecure. It's a spectacle, and, candidly, it's juvenile. The whole thing is juvenile.

PHILLIP: Amid a government shutdown, the stock market crumbling and turnover in his administration, the president is growing increasingly angry and isolated, according to "The New York Times," taking little pleasure in his job as leader of the free world, spending less time with old friends, and telling the ones he does speak to that he feels totally and completely abandoned, the paper reports.

With Congress gone until Thursday, hope seems slim that a compromise will be reached soon to reopen the government.

MICK MULVANEY, WHITE HOUSE BUDGET DIRECTOR: I think that is it's very possible the shutdown will go beyond the 28th and into the new Congress.

PHILLIP: Even as the incoming acting chief of staff acknowledged that Trump's fight for a taxpayer-funded wall isn't exactly what he campaigned on.

QUESTION: None that is Mexico paying for the wall. Let's just be technical. MULVANEY: You and I both know it cannot work exactly like that. I

can't spend any money at the Office of Management of Budget. The Department of Homeland Security can't actually spend money from Mexico. We have to get it from the Treasury.

(END VIDEOTAPE)

PHILLIP: And about a half-hour ago, the Department of Homeland Security secretary, Kirstjen Nielsen, left the White House after meeting with President Trump about border security and the wall, a meeting that was added quite late to President Trump's schedule on a day that he spent most of the time tweeting.

Meanwhile, Melania Trump, we believe, has returned back to Washington. So President Trump is home alone no more -- Jim.

SCIUTTO: All right. I guess he still has his phone, though.

[16:05:00]

So is there any hope for a breakthrough in talks?

CNN's Manu Raju joins me now.

Democratic leaders, they're firing back at the president. I have to say, looking at this statement, Manu, it looks like Democrats digging their heels in here as well.

MANU RAJU, CNN SENIOR POLITICAL CORRESPONDENT: Yes, there is really no incentive, or very little incentive, for the Democrats to move closer to the president's demand, knowing that, on January 3, Democrats we take control of the House.

They will have a much stronger and to push these negotiations.

Now, Chuck Schumer, Nancy Pelosi put out a very strongly worded statement just moments ago, saying: "It's Christmas Eve, and President Trump is plunging the country into chaos. Instead of bringing certainty into people's lives, he's continuing the Trump shutdown just to please right-wing radio and TV hosts. The president wanted the shutdown, but he seems not to know how to get himself out of it."

They're saying that different people in the White House are saying different things, and it's unclear exactly where the president stands. That's something we have heard from some Republicans as well.

But there has been no movement and very little talks since Saturday, when Vice President Mike Pence and Chuck Schumer discussed the president's demand for $5 billion for his border wall. They talked about $2.5 billion from the White House side. That was much too high for the $1.3 billion the Democrats have been pushing.

So it's unclear how much further the Democrats are willing to go. They're saying abandon the wall altogether. Of course, the president is nowhere near that, Jim, which means that both sides are expecting for a long, prolonged shutdown. And as Pat Roberts told reporters on the Hill today, LBJ said

sometimes you just have to hunker down like a jackass in a hailstorm and just take it. That's about where we are with this shutdown -- Jim.

SCIUTTO: That should be a bumper sticker in Washington, jackass in a hailstorm.

Manu Raju, thanks very much.

With our panel of smart people here.

Bill Kristol, what strikes me is both sides are calculating they have the upper hand here, right? Who has the upper hand, politically?

BILL KRISTOL, FORMER EDITOR, "THE WEEKLY STANDARD": Yes. Are there both sides? It's just Donald Trump on one side

SCIUTTO: Well, Donald Trump forming one side.

(CROSSTALK)

KRISTOL: Yes, he is, though. It's striking, because I don't think Mitch McConnell agrees with Donald Trump on this. He was happy to voice vote the continuing resolution without Trump's extra money for the wall through last week.

And Paul Ryan was clearly OK with that. I don't know. I don't think Trump has the upper hand. I just think the chaos -- I think if you combine the chaos -- government shutdowns end up not making as much difference as people think six or 12 months later, usually, as we've been through this a few times.

But if you combine a sense of chaotic governance, Trump changed his mind and is closing the government down sort of randomly over this thing he suddenly decided was a must-have on Friday after saying it was OK Thursday, you combine that with the stock market now down 20 percent from its highs in three months, it's kind of a big deal, you know?

And you combine that with a chief of staff who has been fired and attorney general who has been fired, secretary of defense who has been fired, in some cases, replacements clearly are not up at that same level, to say the least, I think people start to think -- the whole thing looks like it's coming apart at the seams.

In that respect, I think that Trump is not benefiting from this at all.

SCIUTTO: Jennice.

JENNICE FUENTES, DEMOCRATIC STRATEGIST: I think you have got to break it down and you got to go with the symbolic vs. the substantive.

And I think anyone who suggests that, OK, you have to support the $5 billion for the budget, because we're going to maybe give a little break to the dreamers, no. I mean, if you look at the numbers, we're talking about $5 billion vs. what they what it will cost to deport them, first of all, let alone the cruelty of keeping them in limbo, to what they contribute to our economy, which is a net revenue of $3.4 billion.

So it's apples and oranges. It's basically ransom money, but it doesn't apply. It costs you more to deport them. So what are you saying? Oh, let's say something nice to this crowd that's been cruelly waiting for such a long time when the numbers don't match up.

They bring so much more that they would ever take from us. Why would they even be part of this discussion?

SCIUTTO: Well, Seung Min Kim, I wonder -- Newt Gingrich has raised this as well. And the president talks to Newt Gingrich sometimes -- this idea of a dreamers for $5 billion wall exchange, which was discussed as a possible bipartisan solution a number of months ago.

I mean, would that have legs in this environment?

SEUNG MIN KIM, CNN POLITICAL ANALYST: No, not right now. And it's partly because, and it's mostly because Democrats after the November elections, they do feel incredibly politically emboldened, and they see no need to compromise on this core issue.

Back in March or back in February, earlier this year, when the dream -- the fate of the dreamers was really in limbo, Chuck Schumer even offered up $25 billion and border security money in exchange for protecting the fate of those dreamers. And that is a deal that, first of all, the president didn't accept at the time.

Some people say he should have perhaps taken it, last, best chance for a while. But Democrats say they're not going to do any wall for a dreamer exchange now, because, again, they do have that political leverage.

Dreamers largely as a constituency say, we should not be used as ransom for border policies that we don't support. So even if that idea is well-intentioned, it's not something that appears to be happening on Capitol Hill anytime soon.

SCIUTTO: Mick Mulvaney, the acting chief of staff, he admitted something that might mean his job security is going to disappear. He admitted the fact that Mexico will not be paying for -- paying for this wall, something we have known for a long time, but it's another thing to hear it from the administration.

[16:10:11]

Have a listen.

(BEGIN VIDEO CLIP)

QUESTION: None of that is Mexico paying for the wall. And let's just be... MULVANEY: You and I both know that it cannot work exactly like that. I can't spend any money at the Office of Management Budget. The Department of Homeland Security can't actually spend money from Mexico. We have to get it from the Treasury.

(END VIDEO CLIP)

SCIUTTO: So he's saying something that the president just will not say, even though we all know it to be true, and his own chief of staff knows it to be true. Mexico is not paying.

And you also can't play this game, which Sarah Sanders has repeatedly posed, which is, well, I will get some money elsewhere in some sort of slush fund and move it over.

RYAN LIZZA, CNN CONTRIBUTOR: They have had all sorts of ways that Mexico is going to pay for the wall since the campaign. Remember, during the campaign, it was about remittances, right?

Now trump says he's renegotiated NAFTA and money is pouring into the country from the new deal and that's going to pay for the wall. All incorrect.

And, look, Mick Mulvaney during the campaign, as CNN recently reported, he, like most Republicans, thought the wall was an absurd idea. He called it childish. And now he's in this very bizarre position of trying to sort of coddle Trump, trying to put some lipstick on this pig.

And Trump has dragged the entire Republican Party to make the wall the end-all/be-all position. What the entire Republican Party thought in 2015 was absurd, what his acting chief of staff -- they're all acting right now, I think.

(CROSSTALK)

LIZZA: That the administration called childish, the entire party has now rallied around, and conservative talk show hosts and conservative media have now pushed the president into making the ransom for a government shutdown, shows you how much the Republican Party has been remade in Trump's image.

KRISTOL: But let's see, because I think, if you think it through, let's assume they don't get a solution later this week. It's January 3.

First thing the House of Representatives does under Speaker Pelosi is pass the same C.R., I suppose, same continuing resolution, without the $5 million. Trump says, no, unacceptable. So who is in the middle? Who has got the leverage?

The Senate, and really the Senate Republicans. And I think that's an interesting moment. And I do not assume that Senate Republicans just stay in lockstep behind Trump at that point.

SCIUTTO: They think they would buck the president? (CROSSTALK)

KRISTOL: I think they could cut their own deal.

SCIUTTO: And override a veto?

KRISTOL: I think they could cut their own deal. McConnell is a good deal-maker. He and Pelosi can get together and decide on something, give a little something to give the Republicans something to say and then tell the president, we're passing this with -- all the Democrats will vote it.

A lot of Republicans will vote for it. And Mr. President, you sign it or veto it, and you know what? Presidential vetoes have been overridden in the past.

SCIUTTO: The question is, they would then face the same ire that the president faced last week from the Ann Coulters of the world or Rush Limbaughs, right, which has a powerful voice in this Republican Party. Is Senate Republican leadership willing to do that?

KIM: I think the important point to remember is that what the president wants to do in instigating a shutdown over border wall funding is something that has very little constituency on Capitol Hill.

Senate Republicans want to be able to support the president in the border wall funding, but they also hate shutdowns. They don't want to be blamed for a shutdown and they don't want to be in the middle of one.

When Pat Roberts was speaking to us reporters earlier on Capitol Hill today, he said, you know, I am sympathetic to what the president wants in terms of border security money. We do need money down there, but not in the form of this wall that he keeps talking about.

So Republicans do -- Senate Republicans do want to find other ways to satisfy border security needs from the administration and from Democrats. And they're not going to -- they're not as willing as House Republicans are to go down fighting for that wall, like the president.

(CROSSTALK)

LIZZA: We saw this all with the last shutdown. They get pushed from the right. It blows up in everyone's face, and then they have to backtrack.

SCIUTTO: We also remember it's the third shutdown this year.

(CROSSTALK)

LIZZA: Rush Limbaugh is not a master parliamentary strategist.

(CROSSTALK)

SCIUTTO: And there's still time to have another one, right?

Listen, stay with us. We're going to have many more issues to discuss and more time to do it.

A record-setting Christmas Eve for the markets. This is not a record President Trump will take credit for. Just look at all that red. That's next.

(COMMERCIAL BREAK)

[16:17:58] JIM SCIUTTO, CNN HOST: In our money lead, look at those numbers. So much for a, quote, Santa Claus rally on Wall Street. The Dow diving 653 points, nearly 3 percent, marking its worst Christmas Eve ever. This after the Dow and Nasdaq posted their worst week since 2008.

Remember 2008? That was a crash year.

In what appeared to be a preemptive attempt to calm investors, the treasury secretary, Steve Mnuchin, spoke with major bank CEOs yesterday with that message much no need to panic, might have done exactly the opposite.

CNN's Alison Kosik joins me now.

Alison, I mean, listen, a Fed -- a treasury chief calling banks to say, hey, you've still got enough money to lend is normally the kind of thing you do in the midst of a free-fall. So you see it happen now. How did that impact the market?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Spooks the market. And then you've got President Trump himself trying to, quote, calm the market. That backfired. I'm talking about when president Trump tweeted during the trading session, blaming the market meltdown on the Federal Reserve. It actually accelerated the selloff during this four-hour trading session. We saw this tweet come around 10:45, and actually the Dow was on an upswing around that time.

Then that tweet came through. We saw the Dow slide again, plunging all the way 650 points by the time the bell rang at 1:00 this afternoon. It also comes after you said, after Treasury Secretary Steve Mnuchin called six of the country's biggest banking CEOs. The CEOs later said that the calls came out of left field, they were puzzling and unnecessary.

Mnuchin's statement saying banks have ample liquidity for lending to American households and businesses. That left investors trying to wrap their heads around why was he doing it at that time, why was that announcement made at that time? Usually, you see the treasury secretary exchange ideas with bank executives. But the timing was making investors really uncomfortable, because it's raising the question, Jim, of whether the Treasury Department sees something brewing in the economy that the market may be missing -- Jim.

SCIUTTO: Alison Kosik, interesting days on the market trading floor. Thanks very much. Back with our panel now.

[16:20:01] Jennice, the president himself has made the Dow his favorite barometer of success. And the Dow this year is tanking. And you see the president panicking, apparently, at that thought by lashing out at his Fed chairman, talking about firing him. This is consequential for this administration.

JENNICE FUENTES, DEMOCRATIC STRATEGIST: Yes. You live by the Dow, you die by the Dow.

I think, you know, what resonates right now is something that John Kelly said once, that Ivanka was playing government. I think the president plays president every day. And I think the lack of stability would always affect the markets. We have never seen stability like this.

What are we? The third chief of staff? The third national security adviser? The sixth communications director? The second A.G.? The soon to be secretary of state? The soon to be second defense secretary?

That never helps. And if he thought he had a way -- a magic pill to make this happen, you know what, step it. Reel it in. Because lack of stability will never help the markets. We all know that.

SCIUTTO: You know, it's interesting. So the president raises this idea of firing the fed chairman, and -- may have been told by law can't do it, Ryan Lizza. But let's not -- there are a lot of firings this president has done that folks said, well, there's no way he would go -- just look at James Comey, look at Jeff Sessions. Defense secretary was not a firing, it was a resignation. But forced by a series of decisions that Jim Mattis could not stand with.

Who is to say he wouldn't do that, or fire Mnuchin because Mnuchin chose Powell to be the Fed chairman?

RYAN LIZZA, CNN POLITICAL ANALYST: You know, there is a view that the president should be able to fire anyone in the executive branch. I don't know if that extends to the chairman of the Fed. But I've -- your colleagues make this argument all of the time, Bill, right? So maybe that's what's in the president's mind.

But I have a slightly different view of his effect on markets. A previous president who wasn't on Twitter ten times a day saying ten crazy things. One statement about the Fed or about interest rates would have earth-shattering effects.

I think the fact that Trump musing about firing Powell, musing about not wanting interest rates to go one way or the other, it shows that he is just not -- that his words don't matter as much any more. And I think it is sort of baked into the cake for the markets.

SCIUTTO: It's an interesting contrarian argument.

LIZZA: If Obama had done that -- SCIUTTO: Yes, there is a diminishing return. That said, certain

things do break through. And a call from Cabo from Steve Mnuchin to the chairman of all the top six banks saying, hey, do you still have money in your vaults was clearly -- had impact.

BILL KRISTOL, DIRECTOR, DEFENDING DEMOCRACY TOGETHER: I think the markets are not just reflecting -- don't like Trump tweeting. They're reality. The markets are a reliable predictor.

But nonetheless, I mean, there are real problems between trade, the deficit, between erratic governance on the world stage and world order at risk. People leaving, people had some confidence in, Gary Cohn not there, what a check to trade guys.

Mnuchin. That thing they put out Sunday was nuts. I mean, he is on vacation in Mexico, and they -- one thing to call the heads of the six largest banks and say things are OK, right? Putting out a press release saying that, that's just like a sign -- that is -- don't panic, you know? That's when everyone panics, right?

SCIUTTO: It happened with cause in the midst of the crash in 2008 because folks needed to know that the banks were --

KRISTOL: And even then -- it was a real crisis, not just a crisis of feelings. So I think the market is saying something serious. I think the political implications are underrated. I mean, the Republican establishment, not the base, so to speak.

The Republican establishment has swallowed a lot to accept Trump because of the economy in general, but in particular because of the markets because guess what, the Republicans of the party are businessmen who care a lot about the stock market.

SCIUTTO: The hedge fund or their stock market -- yeah.

KRISTOL: And at some point now -- I got a call from someone late last week, hey, why don't you help out, save the Republican Party from Trump and have a primary challenge. Well, no. There are some bad things, but the economy is so good. The markets -- he called me late last week. I don't know, bill, maybe you're right.

I think you're seeing -- these senators, I think Mitch McConnell and all these characters on the hill are beginning to hear from their biggest donors, like geez, this isn't so great.

SCIUTTO: You've seen Republicans break with this president in the last month in a way that they haven't been willing to. You saw that on Saudi Arabia, Lindsey Graham and others. You saw that on the Syria withdrawal and the public belittling of Jim Mattis. When you speak to folks, you know, I assume off the record, Republican lawmakers, do they tell you that their support for the president is wavering, panic, et cetera?

SEUNG MIN KIM, CNN POLITICAL ANALYST: I think -- I mean, definitely they are more candid when they are not being quoted on the record. I think that's fair to say. But there definitely is a palpable concern. I mean, Mitch McConnell has talked about -- he has touted the economic

successes of this administration, combined with the Republican Congress, talking about the tax law, talking about the roll back in regulations.

[16:25:09] But really, remember one of the biggest rifts between congressional Republicans and this administration and that's been over the issue of trade, with every tariff that the president has threatened or leveled, you have seen this considerable pushback. Perhaps not always accompanied by action, but considerable pushback from Republicans on Capitol Hill saying they vehemently disagree with the protectionist trade policies from the administration, because they are concerned about the state of the economy. They know that as long as the economy is doing well, this is a president that they can get behind. But once you see all these kind of indicators decline a bit, you're going to see that nervousness increase.

SCIUTTO: And for folks at home, you know, when it affects the working men and women in the country, when they see that, of course, that will have enormous political consequence.

Listen, thanks to you. We'll have more time.

There's new reporting just into CNN about just how rash and sudden President Trump's decision on Syria really was. It's an inside view. That's coming up.

(COMMERCIAL BREAK)