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The Dow Closed Early And Deep In The Red; Defense Secretary James Mattis Now Leaving His Post Much Sooner Than Expected After President Trump Became Angry Over His Resignation Letter. Aired: 2- 2:30p ET
Aired December 24, 2018 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DANA BASH, ANCHOR, CNN: Hey, everyone. I'm Dana Bash in for Brooke Baldwin. Thanks for joining us this day before Christmas, Christmas Eve, to be exact.
An hour ago, the Dow closed early and deep in the red. And as markets fall, Republicans and Democrats are stuck unable to end the partial government shutdown that's now in day three. It's likely to last through Thursday. We'll explain why in a minute. But first, to the dive in the Dow, spurred in part by comments from Treasury Secretary Steve Mnuchin. They're baffling and apparently they backfired, instilling uncertainty when he was attempting to do just the opposite.
Mnuchin on Sunday called these six big bank CEOs and he talked about the idea that there are fears out there with liquidity. I want to get straight to Alison Kosik to give us more about that and what's going on in Dow. Alison?
ALISON KOSIK, CORRESPONDENT, CNN: Hey, Dana. So it was an interesting day today, because the trading session was only four hours today. And during the session, there was a tweet from President Trump where he blamed the Fed again. Trump has been blaming the Fed for the market meltdown for quite a while now.
But when he tweeted, it was interesting, because I watched the Dow's losses actually accelerate and we saw it end 650 points lower. So to say the least, it made the shortened trading session anything but sweet. It's not just Trump unnerving the market, it's what you talked about, Treasury Secretary Steve Mnuchin's phone calls to big bank CEOs over the weekend. Those didn't come off as very market friendly, either.
A source familiar with the calls tells CNN that the CEOs were totally baffled by the move, that came out of nowhere with Mnuchin asking if the banks were seeing any liquidity issues. For the record, the banks said "no." But investors, they spent the day trying to wrap their heads around why Mnuchin made those calls out of nowhere, and then putting out this statement about ample liquidity for lending for businesses and for Americans.
So the timing of these calls and of this statement really has the potential to spook markets. I mean, you look at when it happened, Mnuchin made these calls on a Sunday. He was in Mexico on vacation, right around the Christmas holiday and during a government shutdown. It's reminiscent of those emergency liquidity calls that were often made during the financial crisis.
Now, while it's normal for a Treasury Secretary, you know, to talk to banking executives and exchange ideas, Dana, the thing here is that the timing of this isn't sitting well with investors and it's really raising the question of whether the Treasury Department sees something brewing in the economy that maybe the market is missing -- Dana.
BASH: See something brewing in the economy or perhaps here or watch the President's Twitter feed, which we'll also get to in a minute. Alison, thank you very much. Now to the partial government shutdown, the third shutdown this year for President Trump and it's hitting 800,000 government workers hard during these holidays.
Four hundred twenty thousand of them are expected to work without pay during the shutdown and that includes the TSA agents manning airports right now during this very busy travel time. The other 380,000 workers are furloughed, meaning they're on leave without pay. Let's get straight to CNN's senior congressional correspondent, Manu Raju.
And Manu, the President is in Washington for Christmas because of the shutdown. He tweeted that he is home alone, parentheses, (poor me). But negotiations seem to be at a standstill, despite the fact that he's here. What's going on?
MANU RAJU, SENIOR CONGRESSIONAL CORRESPONDENT, CNN: Yes, they are virtually going nowhere at the moment. The last time they had a face- to-face meeting was on Saturday between Vice President Mike Pence, Chuck Schumer, and that did not go particularly well.
RAJU: Pence came and tried to offer $2.5 billion to deal with the border wall on the southern border along with border security measures. That's more than the $1.3 billion that the Democrats have been pushing and Schumer rejected that offer out of hand, and since then, they've closed shop on Capitol Hill, up until Thursday, when they get back into session. And that's just going to be five days before the House flips officially to Democratic control, so it's hard to see any resolution being -- to occur before January 3rd.
And Mick Mulvaney, the President's incoming Chief of Staff, made that pretty clear yesterday. He said he thinks it's possible it could last into the New Year. Now, in a new statement that just came out from Chuck Schumer and Nancy Pelosi, they make it pretty clear that things are not going well. They attacked the President for plunging the country into chaos, in their words. And they say instead of bringing certainty into people's lives, he's continuing the Trump shutdown, just to please right-wing radio hosts, that's what they say in their statement.
And they say that different people from the White House are saying different things about what the President would accept or not accept. So they say it's impossible to know where the President stands, and they say that as long as he's guided by his conservatives, they say, quote, "It is hard to see how he can come up with a solution that can pass both the House and the Senate and this shutdown." Now, at the moment, the President meeting with his Homeland Security
Secretary, Kirstjen Nielsen. It's unclear any other talks that he is having privately, but Democrats are suggesting that nothing has been productive. And Dana, some Republicans are frustrated along with Democrats, including one Republican senator, Pat Roberts, who was at the Senate today, in a very brief session that they had, caught up with our colleague, Ashley Killough and said, 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.
He said he is beyond frustrated, but still saying there's no way to end this, despite the frustration from members of both parties.
BASH: Leave it to Senator Pat Roberts to tell it like it is, only like he can. But before I let you go, Manu, in the shutdowns that I've covered, shutdowns that you've covered, there has been an urgency to get it resolved. At least, they feign urgency to get it resolved. And there doesn't even seem to be an attempt to pretend that this is something that needs to be fixed. Is that just a sign of how low things have really gotten here in Washington?
RAJU: Yes, both sides are resigned to the fact that this could last for some time. The two positions are almost intractable at this point. The President is demanding money for his wall, and Chuck Schumer over the weekend said, he must abandon that wall, especially coming into this time during the holiday season, the members, most of them want to go home. Most of them don't know where the President stands after he suggested he would back a short-term deal and punt this issue into the new Congress.
So at the moment, people don't really know how to deal with it other than just say, let's just slow things down and deal with it in the New Year, see if anything changes. But it's hard to see at the moment how it does, Dana.
BASH: Yes, and you're thinking about those TSA agents in particular, who are right now trying to keep people who are flying during this very busy travel season safe, without pay, while they're basically doing nothing here in Washington. Manu, thank you so much. We'll talk to you in a little bit.
Again, today marked the worst Christmas Eve ever for the Dow, as well as the S&P. We're going to take a deeper dive on this. And to do that, we're going to go straight to senior -- CNN senior economic analyst, Stephen Moore, who is a former Trump economic adviser. Stephen, merry Christmas. Thank you so much for coming on, on Christmas Eve.
STEPHEN MOORE, SENIOR ECONOMIC ANALYST, CNN: Hi, Dana. My pleasure.
BASH: Let's get to the stocks and what they did today. They dropped even more, after the President sent one of 10, I think 12 tweets today. And this is the one in particular, at 10:55 a.m. "The only problem our economy has is the Fed. They don't have a feel for the market, they don't understand necessary trade wars and strong dollars or even democratic shutdowns over borders. The Fed is like a powerful golfer who can't score because he has no touch. He can't putt."
Stephen, your reaction?
MOORE: Well, there's no question, I mean, I've talked about to this with the President in the last number of days and he's extremely frustrated with the Fed. And who wouldn't be? I mean, we now know, based on what's happened in the last week that the Fed decision to raise interest rates was a catastrophically bad decision. Trump actually called it right back in September.
If you look at this big market sell-off in the bear market, it really began with the rate increases that happened in September and the market was falling and falling. And then, of course, this last decision to raise rates again, I think befuddles everyone, given the state of the economy and the fact that we actually have deflation, not inflation.
MOORE: So Trump is angry. I don't agree with everything he said in that tweet, but I do think this is a market sell-off that was really triggered by a bad decision by the Fed. And now Trump as you know it, Dana, Trump was the one who put Jerome Powell in this position a year ago. So he has himself to blame for what was a really poor choice.
BASH: Well, I want to ask you about that in a second. But you just said you've spoken to the President in the past couple of days.
MOORE: Sorry, last week, not the last couple of days.
BASH: Okay, but since the market has been incredibly volatile and since he's been blaming the Fed. Have you suggested to him that a President of the United States might make economic turmoil worse by weighing in the way he continues to do about the Fed?
MOORE: No, look, I think he has every right to weigh in about the Fed decision. And I think the media has been wrong about this. Trump was right. He warned back in September when the Fed started raising rates that it was the wrong thing to do. And now, Dana, the stock market, the Dow Jones has lost 3,500 points since that first rate increase was unnecessary and the second one, of course, just defies any common sense.
So I think that there's a sense by Trump that, you know, he's put in place the tax cuts, the deregulation policies, the pro-American energy policies, these things that have really gotten the real economy moving. And then he feels like the Fed is trying to put it back, because the Fed believes wrongly that increases in growth and increases in prosperity causes inflation, and that's just the wrong model.
BASH: But, Stephen, what we're looking at on the screen is what's happened in the last month in the Dow. And S&P experts say that that is the worst December -- this is the worst December since the Great Depression. Since the '30s. You're saying that's all about the Fed? What about the President's policies? What about the trade war? MOORE: No, you're exactly right. So there's really two factors at
play I think. I don't think the government shutdown really, I mean, most people think this is going to get resolved in the next week or so --
BASH: But it doesn't help, right?
MOORE: It doesn't help, but I don't think it's a big factor. I think the big factor is number one the Fed decision. And you're right, Dana, the other one of course that's looming large out there is the trade war with China. And right now China has 60 days to come forward with some concessions on trade.
I mean, everything that Trump is asking for from the Chinese is perfectly reasonable. China is a bad actor on the international scene. They are -- this is the new Cold War we are in with China. My point that I made to investors is, look, if Trump can get this deal done in the next 60 days, and I think there's a reasonable likelihood of that happening, then the stock market is just going to be in jubilation. You'll see a lot of buying rather than selling.
So my point to investors, just my one piece of advice to investors who are really nervous right now, never sell during the big bear market. Because you're engaged in the worst thing you can make, you're selling low, you want to sell high. A lot of people get frightened and they sell when the stocks are low.
I actually like the stock market right now. I'm looking at these prices of stocks, I am like, "Oh, my god," stocks are cheaper today than they've been at any time in 20 years.
BASH: Okay, so you're doing your Christmas shopping on Wall Street, it sounds like. Stephen, I've got to ask you about the Treasury Secretary. Steve Mnuchin released a statement, a rare Sunday statement, the fact that he did it on Sunday is one thing. What he said in it was really odd. He said that he talked to the CEOs of six major banks and the following, "The CEOs confirmed that they have ample liquidity available for lending to consumer, business markets, and other market operations."
He also confirmed that they have not experienced any clearance or margin issues that the markets continue to function properly. Stephen, putting out there, out of nowhere, that the banks have ample liquidity seems to have backfired, because it put in people's minds, wait a minute, was there an issue with liquidity? Having that statement come from the Treasury Secretary, mistake?
MOORE: Well, you know, I just learned about this this morning and I was a little bit surprised. This is not 2008. I remember 2008 very vividly where banks were failing ...
BASH: And did that come across as 2008?
MOORE: Well, look, Steve Mnuchin I think was just engaging in a cautionary measure to say, are you guys okay? We've had a big stock market fall, and he wants to make sure that there isn't any kind of domino effect of banks failing. But the banks basically said, "We're in great shape." But that might have spooked investors a little bit. I wish he would had done it a little more surreptitiously and nobody had actually found out. That he was actually checking with the banks because that might have spooked people a little bit.
BASH: Well, he was very -- it's not like a reporter scooped it. He put out a statement saying this, very explicitly. I mean, you are an economic adviser -- you know the atmospherics there.
MOORE: Yes, I know.
BASH: Was he doing that because he wanted to make sure that the President knew that he was talking to the CEOs?
MOORE: I think he was trying to reassure investors everything is okay, but investors sort of took it the other way, Dana and said, wait a minute, why are you assuring us about something we had never really thought about. And so you know, in retrospect, it was probably a mistake.
Steve Mnuchin is a good friend of mine, and I think he's been a great Treasury Secretary, but in this case, I think he probably made a mistake. And that probably has -- that's another factor. What's -- the Dow down 600 points or something today. Oh my gosh, I don't have any money to do anymore Christmas shopping.
BASH: Look under your mattress, Stephen. Let me -- I want to remind you and our viewers how eager the President has been to talk about the stock market, particularly as it was soaring.
(BEGIN VIDEO CLIP)
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.
(END VIDEO CLIP)
BASH: You live by the stock market, you die by the stock market, politically speaking, right?
MOORE: You do. You know, and I think Trump would be better off -- and by the way, I've boasted about the stock market myself. BASH: But you're not President.
MOORE: Yes, but I helped him put some of these policies together. But look, I think that Trump would be better off talking about the real economy. I mean, I'm actually very proud of what we accomplished in the last year, 2018, we have got one week left, is going to come in as the strongest year for the economy in 20 years.
So it's really odd that you have this very strong record on the economy, on jobs and construction and manufacturing and employment and wages, and then you get the stock market sell-off. I mean, they're moving in opposite directions. So maybe Trump should stick to talking about employment. You have got the lowest unemployment rate in 50 years. We have seven million more jobs than people to fill them.
The Christmas season shopping, Dana, has been very good according to retailers. So I don't get -- I think there's excessive fear. You know, Wall Street is guided by fear and greed, you know that. And fear has totally taken over right now.
BASH: On that note, we're heading into 2019 and it is going to be the beginning of the Presidential re-election season for President Trump. And people around him have told me, maybe you're one of the people on the other end of one of these calls, he has been, even before the fluctuations in the markets that we've seen over the past couple of weeks, very concerned about the economy. Because it is so central to any Presidential re-election.
MOORE: Of course.
BASH: Particularly his, as it's so high, as it has been doing so well. How concerned are you about that, particularly given the fact that you have, frankly, some self-inflicted wounds. Things like -- reports that he is asking questions about whether he can fire the Fed chief, which is one of the things that is rattling the markets.
MOORE: Well, Dana, what you're saying is, it's the economy, stupid. And of course, it is. That's been a truism in Presidential elections going back at least 40 or 50 years. So, yes, Donald Trump watches the economic news and the stock market news every day. He understands that if -- you know, I've always said, if the economy continues to be as strong as it's been this year, for the next two years, Trump will, I think, win a fairly easy re-election.
If the economy goes south, I'm talking about on jobs, on wages, and more unemployment, then he's going to be in a big problem. So he is focused like a laser beam on the economy. But so far his record on the economy has been very positive. We are going to get 3.25 percent GDP growth for 2018. When we took over, it was growing 1.5 percent. So that's a doubling of the growth rate. That's a pretty darned good achievement.
BASH: Maybe you should be composing his tweets on Christmas Eve. That kind of stuff nobody can beat.
MOORE: Nobody can do that. You know that. BASH: Stephen, thank you for your time. Have a merry Christmas.
MOORE: Thank you, merry Christmas.
BASH: And up next, early exit. Defense Secretary James Mattis now leaving his post much sooner than expected after President Trump became angry over his resignation letter. Is Trump's support from Republican leadership now starting to crack in the wake of this? It really all has to do with Syria and Afghanistan and the strategy there. We'll discuss that, next.
(BEGIN VIDEO CLIP)
SARAH HUCKABEE SANDERS, WHITE HOUSE PRESS SECRETARY: Secretary Mattis came in, he met with the President, they made the decision, and he won't leave for another couple of months.
(END VIDEO CLIP)
BASH: Well, that didn't last long. President Trump is now ousting defense Secretary James Mattis sooner than two months from now. He had planned to leave at the end of February, but the President decided to kick him out early, planning to replace him now at the start of the New Year. So like in ten days or so. Why the rush?
Well, the President is reportedly angry over Mattis' resignation letter, his very public rebuke of Trump policies and world view and probably more importantly, the news coverage about that letter.
And Brett McGurk, the top diplomat leading the fight against ISIS also quit in part because of Trump's decision to pull U.S. troops out of Syria. And today the President is taking swipes at both McGurk and Mattis on Twitter.
Joining me now, Major General James "Spider" Marks who is CNN's military analyst and Sam Vinograd, a former Obama administration official who is now a CNN national security analyst. Good afternoon to you both.
BASH: General Marks, let me start with you, you are talking to active duty military personnel who are concerned. What are you hearing?
JAMES "SPIDER" MARKS, MILITARY ANALYST: Well, the key thing is it is very difficult to replace Jim Mattis. Let me tell a quick story. Right after Jim Mattis took over as Sec Def, I was walking through the Pentagon and there were two majors, think middle level managers, these are combat vets, multiple tours and they are sitting in their little cubicle and they have this picture of Jim Mattis and they have underneath it the sign that says, "Watch over us."
Sadly, that is gone. This tremendous commitment that he has made over four decades is now going to kind of fade to the side and a new Sec Def is going to step up and I don't know that this individual feels good about trying to replace Jim Mattis.
Yet at the end of the day, let's be frank, the Pentagon will be fine. The Defense Department is going to be fine. It's much stronger and has the sinews and the connections with foreign leaders and partners and allies at multiple levels and we will be okay. It's just very, very difficult at this time to have this incredibly talented George Marshal of our time, take off.
BASH: Yes, no question, obviously, as you just described in that story, General Mattis, Secretary Mattis, has a lot of respect from within the rank and file. But it's not just the person, right? It's the policies that he very publicly criticized on his way out the door, leaving a big question mark as to what these military personnel are supposed to be doing right now.
MARKS: Well, correct. And you know that senior leaders this time of year and all the time are routinely in theater and they are meeting with their deployed soldiers and marines and airmen, et cetera.
So they're getting a sense of the questions that are out there -- the very legitimate questions about, what's next? Hey, boss, what does this mean for me as a young marine? What does this mean in terms of how my family is going to respond? But again, bear in mind, that the leadership, although there might be some administrative and executive order and operational order confusion, at the end of the day, these service members will follow the last legal order that they've been given.
They're deployed, they've got a mission, they'll drive on until something else occurs. So, again, the disruption is at the higher levels. At the lower levels, we should all rest very soundly that great men and women are out there on the horizon take caring of business.
BASH: Well, Sam Vinograd, let me bring you in here. Because it is a question of not just Mattis, the person, but of the policy and what those legal orders that the general is talking about really are. What is your take on the Mattis resignation and the letter that he wrote out, particularly from your point of view, somebody who was on the National Security Council and saw the inner workings of the interactions between people like a Secretary of Defense and a President when there are differences over policy?
SAMANTHA VINOGRAD, NATIONAL SECURITY ANALYST, CNN: Well, Dana, I think every American should be disturbed that the Secretary of Defense, who served under countless Presidents, both Republican and Democrat, felt that he was unable to serve the sitting President, because of gross differences on a policy level.
I was at the National Security Council when General Mattis was a CENTCOM Commander, and he and President Obama differed continuously on issues related to Iran. President Obama ended up relieving General Mattis of his post early, but General Mattis stuck around, even though he had differences with President Obama, because he still trusted where President Obama was in terms of keeping our country safe.
But with General Mattis' resignation, I want to point something out in terms of the timeline. There is a reason why there's more than a two weeks' notice period when a Secretary leaves their position. I helped manage the National Security adviser's transition from NSA Donilon to NSA Rice. You do these things over several weeks, if not, several months so that there is not any institutional knowledge that is lost, no balls are dropped.
And particularly, in such a high-risk period for our country, we are in the middle of the holidays, which is always a high risk period, the Secretary of Defense is supposed to be managing two withdrawals in addition to all the regular business of the day, the President is cutting off his nose to spite his face by pushing General Mattis out earlier than General Mattis had suggested, without allowing for adequate time to make sure that the acting Secretary of Defense can get fully up to speed.
BASH: General Marks, let's talk about one of the drawdowns that Sam was talking about, and that is in Syria. The President has now signed that. And one of the dozen or so tweets that the President has sent out on this Christmas Eve day is about ISIS, it's a reference to Syria, and a reference to the head of Turkey. Listen to this. He tweeted, "President Erdogan of Turkey has very strongly informed me that he will eradicate whatever is left of ISIS in Syria and he is ..."