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Trump Lashes Out at Defense Secretary; Devastation in Indonesia; Worst Ever Christmas Eve for Dow and S&P. Aired 3-3:30p ET
Aired December 24, 2018 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DANA BASH, CNN ANCHOR: Top of the hour. I'm Dana Bash in Washington.
And we begin with the worst Christmas Eve ever for the Dow and S&P. The markets closed early for the holiday today, with the Dow finishing down 653 points.
And as markets made this history-making fall, the Republicans and Democrats, they're deadlocked here in Washington, unable to end the partial government shutdown that's now in day three. It's likely to last at least through Thursday.
And a short time ago, the president tried to blame Democrats for the shutdown, the one that he just days ago said in the Oval Office with them there that he would be proud to own.
Here's what the president tweeted. "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 comment caps a wild Trump tweetstorm in these hours before Christmas. And today's stock market dive was spurred at the beginning in part by the treasury secretary, Steve Mnuchin, because he made some baffling public statements that backfired.
He stirred uncertainty when he seemed to be trying to do just the opposite with a quite unusual move. Here's what he did. On Sunday, Mnuchin called six big bank CEOs from his vacation in Mexico. He then released the following statement.
He said: "The CEOs confirmed that they have ample liquidity available for lending to consumer, business markets, and all other market operations."
Ample liquidity. The question has been asked, why reassure about liquidity, unless there is a problem with liquidity? And that's what investors, analysts have been asking as they wonder what Mnuchin may know that they don't.
That might contribute, probably did contribute to the numbers that we just showed you about the stock market drop today. But there's more to the market's troubles today.
For that, let's turn to CNN's Alison Kosik, who is at the New York Stock Exchange.
Alison, people are taking notice not just of what the treasury secretary did yesterday, but what the president tweeted about today while the markets were opened. What happened?
ALISON KOSIK, CNN CORRESPONDENT: Exactly. Exactly.
During the session, when the president tweeted, blaming the Federal Reserve, I watched those losses on the Dow accelerate, so the Dow was actually on an upswing, but when that tweet came in around 10:45, it then went on a downward decline until the closing bell at 1:00 p.m., because we have a holiday-shortened session today.
Now, for months, Trump has been complaining about the Fed. He's been using Fed Chief Jay Powell as kind of a pinata for the market meltdown. But his latest public complaint really made the shortened trading session anything but sweet.
Now, it's not just Trump who is unnerving the markets. Treasury Secretary Steve Mnuchin's phone calls to the big banks over the weekend, they weren't interpreted as a market-friendly move on Mnuchin's part.
A source familiar with the calls tells CNN that the CEOs were baffled, that the call came out of nowhere, with Mnuchin asking about whether there were any liquidity issues with these banks. For the record, the banks said no. Investors, though, they spent the day trying to wrap their heads around why Mnuchin made these calls out of nowhere, putting out that statement about liquidity.
The timing really is curious. Mnuchin is on vacation in Mexico, Christmas around the corner, there's a government shutdown. So, usually when you get kind of calls like this, there's an emergency. It's reminiscent of those emergency liquidity calls that were made during the financial crisis.
And while it's normal for a treasury secretary to exchange ideas with banking executives, the timing is not sitting well with investors because it's raising the question of whether the Treasury Department sees something brewing in the economy that maybe the market is missing -- Dana.
BASH: Yes, and, Alison, the notion of him making a call is one thing, then putting out a statement that he made the call, without an explanation about this liquidity question that people weren't even questioning, which is...
KOSIK: Lots of confusion.
BASH: Led to what happened where you are right there on the stock market today. Alison, thank you so much.
KOSIK: You got it.
BASH: So why did Treasury Secretary Steve Mnuchin make this curious call to bank leaders?
Let's go to CNN's White House correspondent Boris Sanchez for some answers.
Boris, what are you hearing? Any possibility that the president asked him to make those calls, put out that statement?
BORIS SANCHEZ, CNN WHITE HOUSE CORRESPONDENT: No clarity on that just yet, Dana.
But what is clear and what we have heard from sources is that the president is frustrated with the economy, and specifically with his treasury secretary, Steve Mnuchin. We have heard that the president has openly and broadly complained that Mnuchin is not doing enough to stabilize the markets.
Now, President Trump, as you know, Dana, has staked so much of his reputation, so much of his branding on a roaring American economy. And watching the numbers this December has clearly made him upset.
So, perhaps what we saw this weekend was Steve Mnuchin try to compensate, try to make up for those diminishing numbers and perhaps overcompensate. On that call you were just discussing with Alison, one source familiar with it said that the belief among the CEOs after it ended was that he was simply trying to assert himself during a volatile market.
But, clearly, it did the opposite, Mnuchin on vacation, apparently trying to seem engaged, as the downfall in the stock market continues. The question, of course, is, how will the president respond to this? Today, you saw him blame the Fed.
It's unclear that he is going to look at what one CEO apparently on this call mentioned, which is the turmoil here in Washington, questions about this shutdown, how long it is going to last. And questions about the president's approach to his Fed chair, Jay Powell, that continues to linger. And, clearly, it is affecting markets.
I should note, the president also tweeted that he is here at the White House alone, saying, "Poor me," as he awaits Democrats to return on Thursday as he waits to continue a conversation on how to reopen the government, Dana.
BASH: Boris, thank you so much.
Well, the president is going to be joined in a little while by his wife and youngest son, who are on their way back from Florida to Washington to be with the president on Christmas. But there is no sense that there is any movement on another thing that is clearly contributing to the volatility in the markets.
And that is, the government is partially shut down on this Christmas Eve. It's the third shutdown this year for President Trump. It's hitting 800,000 government workers hard during the holidays. They're either laid off or still working, but not getting paid, as this impasse continues. And let's get straight to CNN's senior congressional correspondent,
So, Manu, as I mentioned, the first lady is on her way back to be with the president, who is home alone, as he put it, in the White House. I'm just seeing images in my head of this. But we will move on from that.
BASH: But there isn't any negotiating going on. He blames the Democrats.
MANU RAJU, CNN SENIOR POLITICAL CORRESPONDENT: Yes. Yes, and this is much different than we have seen in shutdowns past, where the president would call in the leaders of Congress, try to at least make a public image of trying to cut a deal.
There's not even any of that. The last face-to-face discussions occurred on Saturday between Vice President Mike Pence and Chuck Schumer. Those did not go particularly well. Of course, this comes down to funding for the president's border wall on the southern border; $5 billion is what he initially came up with.
Democrats said, we will give you $1.3 billion for border security. Pence came back with about $2.5 billion, and Schumer rejected that, and now is saying that the president should abandon the wall. And that's something the president does not want to do.
Instead, the president is tweeting, attacking Democrats and having a meeting with his homeland security secretary, not with Democrats. And just moments ago, Democrats put out a statement, Chuck Schumer and Nancy Pelosi strongly criticizing the president for -- quote -- "plunging the country into chaos," in their words, and saying different people in the administration are saying different things and it's not clear where the president stands.
So they say it's hard to see how a bipartisan resolution could come to pass. That's why folks on both sides, Dana, are expecting this could go on for weeks.
BASH: Great. So, Manu, stay with us. There's a lot to talk about. It's hard to believe that it's Christmas Eve and there's so much real news going on. But stay with us.
We want to Toluse Olorunnipa, the White House reporter for Bloomberg News.
Toluse, thank you so much.
Let's take a look at the Dow again. The drop was precipitous after the president tweeted, slamming the Fed. You see there what happened. This is today, and you see that point where the president was making the analogy to a golfer and saying the Fed is like somebody who doesn't know how to putt.
Toluse, your publication follows the markets, and you also follow politics, so put those two together and explain how the reaction came down today.
TOLUSE OLORUNNIPA, BLOOMBERG NEWS: Yes, the Dow and the stock market has been a political weapon that the president has used for the first two years. He's talked about how markets have gone up in the early part of his administration.
He used to make a campaign slogan out of, how is your 401(k) doing, because the markets had been going up steadily during the first year of his administration. And now that we have seen over the past few months the markets go into bear territory, with the markets tanking sort of on a daily basis, today a 650-point drop, becoming almost normalized, because we have seen so many cascading falls in the Dow over the past couple of weeks, it's not something the president can brag about anymore.
That's part of the reason why you have seen Treasury Secretary Steve Mnuchin try to calm the markets, that backfiring, the president not being too happy with his treasury secretary, not being happy with his choice for the Fed chair, Jay Powell. This is not somebody he inherited. This was his own personal choice that was selected earlier last year by this president.
And now he's upset at his Fed chairman. So the president is looking for people to blame because the markets are not doing so well right now. And he doesn't have that political weapon, that political slogan that he can take to voters and say, I'm a businessman who was elected, and now I am putting more money in your pocket through your 401(k) and through your investments.
So that's part of the reason the president is so frustrated.
BASH: And, Manu, what are you hearing from your Hill sources about this reporting that we have done and Bloomberg first reported about the questions that the president has been asking about whether he can actually fire a Fed chair?
RAJU: Well, there's been pushed back, significant, among Republicans in particular. Jerome Powell was confirmed by this -- after this president appointed him by roughly 80 votes in the Senate, overwhelming bipartisan consensus getting behind him for the job.
And a number of Republicans are happy with the job that he's doing as Federal Reserve chairman, because they believe a lot of his predecessors were more interventionist in the economy as they would like. It's more in line with their orthodoxy.
You have heard Richard Shelby, who is a senior member of the Senate Banking Committee, Pat Toomey also sits on that panel, both of them have been pretty clear the president should not take steps to dismiss Jerome Powell.
There's, of course, a question whether he can legally do so. But they're also trying to back him up, saying that they believe that he's made some of the right decisions going forward. So, clear the president is seeing again some divisions within his own party. And we will see what the president decides to do.
As Toluse was saying, I mean, he's looking for someone to blame, and it appears that if he can't rid of Jay Powell, but perhaps he's looking at Steve Mnuchin instead and that's one reason why Mnuchin is doing everything he can try to say everything's OK. But it could have backfired today.
BASH: Yes, it certainly did seem to do that.
And on the notion of the Fed, Toluse, as Manu was just talking about, there has been backlash among even Republicans to even the notion of asking about firing the Fed chief. But the fact that that is now out there has probably not had as detrimental effect as if he actually did fire the Fed chair, obviously, but it hasn't helped with the stock market today.
And that's why you saw Mnuchin over the weekend tweet out a conversation that he had with the president, where he sort of walked that back and said, I spoke to the president and he said that he doesn't even believe that he has the authority to fire the Fed chairman.
And you saw that amplified by the acting chief of staff, Mick Mulvaney, on the Sunday shows yesterday, because they realized how much this would probably unnerve investors, if you break that red line and have the president trying to fire someone who should be independent of politics.
I think Republicans and Democrats both agree that the Federal Reserve chairman should not be somebody who is subject to the whims of the political winds, and if the stock market is going down, the president can just fire this person.
That's not how Wall Street is supposed to work. It's not how the financial markets are supposed to work. And that's part of the reason you see that pushback from Democrats and Republicans, even from some of the people within the president's inner circle, trying to push back on the president's impulses, asking his friends whether he should fire Jerome Powell, the Fed chairman.
BASH: I remember, during the 2016 campaign, we would watch the president and -- then candidate's tweet saying, imagine if he does this as president? He's going to move markets. That's what we saw today.
This is what happens.
Thank you, both. Appreciate it. Merry Christmas.
RAJU: Thanks, Dana.
OLORUNNIPA: Thank you.
BASH: And coming up, President Trump is seething over coverage of the resignation of his defense secretary. So he pushed him out two months earlier than expected. And now some top military officials are worried about the impact of the upheaval on the armed services.
Plus, multiple investigations, a crumbling stock market, mounting scandals, a new report details what it's like these days inside the White House, as the president becomes increasingly frustrated and isolated.
And devastation in Indonesia. Look at those pictures. Nearly 400 are dead after a tsunami hits the coast, and officials warn more deadly waves could be coming.
BASH: The president is forcing Defense Secretary James Mattis out two months earlier than Mattis had planned, a big change from what the White House said just last week.
(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, time's up.
Having seen the overwhelming praise for Mattis, President Trump plans to replace him by next week. Deputy Defense Secretary Patrick Shanahan is now slated to take over, but he has no foreign policy or military experience.
And adding to that drama, the person in charge of the fight against ISIS, Brett McGurk, also resigned, saying he can't defend the president's decision to pull out troops of Syria.
And now President Trump is blasting McGurk and Mattis on Twitter.
Let's get straight to CNN's Barbara Starr at the Pentagon and also bring in CNN global affairs analyst Aaron David Miller.
Thank you both for joining me.
Barbara, let's start with you and what you're hearing from your sources in the Pentagon now about decision and the concerns about fact that there's not going to be very much overlap between Mattis and even his acting -- obviously, none -- with whomever will be nominated. BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, at this point,
Patrick Shanahan, who has been tagged to be the acting secretary of defense, is on his way back to Washington, we understand.
He had been out of town for the holiday, on vacation, and, clearly, this catching him unawares. He is now headed back to Washington. Mattis and Shanahan from worked together since the beginning. But it's important to understand, they really have two different jobs, as deputy, Shanahan very involved in the business affairs of the Pentagon, working on budget planning, acquisition, innovation, that kind of thing, Mattis much more out there on the global stage.
And it is that global stage that Shanahan is now going to have to step on to, with no foreign policy or military experience. He's going to have to go to NATO meetings. He's going to have to deal with the allies, give the president advice on adversaries.
It may be very tough going for him, Dana.
BASH: And, Barbara, put that in context. You have covered a few defense secretaries. Have you seen even an acting in a situation like this running the world's most powerful, complicated military, somebody who has no experience personally in doing that, never mind foreign policy?
Well, the typical thing that happens, of course, is that there's a changeover when there's an inauguration and a new president. And what we typically see is, on Inauguration Day, as a president is sworn in, the previous secretary of defense, of course, leaves off, and someone is appointed, a senior civilian, if you will, to sort of be the acting for a while.
But, as you know, Congress normally confirms a new secretary of defense, a new secretary of defense for a new president very, very quickly.
STARR: So there isn't this sort of vacuum. So, right now, fair to say, a lot of the tension is shifting to who the president may pick to be his permanent secretary of defense, a nominee, and will that nominee quickly get through the Senate, Dana?
BASH: Barbara, thanks.
And, Aaron, I want to ask you about one of the specifics, one of the reasons why both Mattis and McGurk resigned. And that's the president's insistence that U.S. troops are going to leave Syria.
What are you hearing from your diplomatic friends and colleagues in the region and around the world about that decision?
AARON DAVID MILLER, CNN GLOBAL AFFAIRS ANALYST: Well, I think you know the answer to that, Dana. [15:25:00]
I mean, there's almost no souls in Washington who believe that this is other -- anything other than a complete and utter catastrophe. Some people are predicting the apocalypse.
I mean, there's no question that the way in which was handled, no consultations with Congress or allies, no conditions, no effort to even negotiate with the Turks or Russians to determine whether or not the Kurds could be -- somehow find a niche in a post-American scenario.
But I have to say, on balance, there's a certain reality here; 2,000 American forces and a dozen SFOs in Syria competing with the Russians, the Turks, and the Iranians are not going to be able to accomplish what the administration's inflated goals seem to allow.
We're not going to push the Iranians out. We can't constrain the Russians, and we're not going to be able to facilitate a transition. So, while I think the way this decision was made is bad, and I think it will degrade to a certain degree our capacity to combat the Islamic State, I'm not so sure the end of the world is coming.
And as de Gaulle pointed out, the cemeteries in France are filled with indispensable people. Mattis will be a huge loss. And the issue, again, in the end is not who going to be the new secretary of defense, but will that person be willing and able to offer real sober, sound device, if it conflicts with the president's sensibilities and his instincts?
BASH: Right, no question. I mean, the reaction has been, not just to Mattis and the kind of person he is. It's what he said in that letter and it's about the policies, in particular his allusion to Syria.
And, on that, I want to show you and our viewers again something that the president tweeted today about his decision to pull out of Syria and promise that Turkey is going to handle things just fine.
Here's what he said: "President Erdogan of Turkey has very strongly informed me that he will eradicate whatever is left of ISIS in Syria, and he is the man who can do it."
MILLER: I don't believe it.
The Turks have one overriding goal in Syria, and that's to crush any possibility of a Syrian Kurdish national movement that has aspirations to set up an autonomous enclave.
And, frankly, Dana, the Turks have proved pretty risk-averse in terms of projecting their own military force and holding territory. The real issue now, though, is, will the Russians, the Iranians, and the Turks, now shackled for the first time with the reality that the Americans are not going to be able to do their dirty work in terms of dealing with ISIS, are they going to fill the gap and fill the void? And it's just one more example, it seems to me, of the fraught
political terrain that is Syria and how ill-equipped I think we really are to stay the course.
BASH: And, Barbara, I know that you're hearing from sources from and about how active-duty troops in that region and elsewhere are feeling when it comes to that uncertainty, not just there, but more broadly about what America's policy is in these hot spots.
STARR: Well, think of it this way.
I mean, troops around the world, very savvy, very connected to social media, watching all of this through a variety of outlets. They -- even if they're in the war zones, they are not isolated. They see, read, and hear all of this.
And what we know now is, a couple of key military leaders, the commandant of the Marine Corps, the secretary of the Navy, have become traveling in Afghanistan over the Christmas holiday to give their holiday wishes to the troops.
But, instead, what they're getting back from young troops are a lot of questions about what is going to happen, will they be going home, when will they be going home, what will happen in the combat zones they have been in, and those leaders are being very honest with the troops and telling them, they don't have any answers.
So, that kind of uncertainty, that kind of unease is just something the U.S. military does not like to deal with.
BASH: Yes. Yes, the U.S. military, which has plans for their plans and plans for those plans and every scenario.
Barbara Starr, Aaron David Miller, thank you so much. Appreciate it.
MILLER: Thank you, Dana.
STARR: And coming up, sources are telling CNN that the president lashed out at his own acting attorney general over his former attorney Michael Cohen and what federal prosecutors are doing in New York. Now the president is tweeting his reaction to CNN's reporting.
And just in, what we're learning about actor Kevin Spacey now facing felony assault charges -- details next.