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White House Freezes Federal Grants and Loans; Shan Wu is Interviewed about Grant and Loan Freezes; Justice Department Fires Officials; Gov. Andy Beshear (D-KY) is Interviewed about FEMA and Immigration. Aired 9-9:30a ET

Aired January 28, 2025 - 09:00   ET

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

[09:00:00]

KATE BOLDUAN, CNN ANCHOR: A potential five alarm fire. That is what nonprofits are saying today as the Trump administration makes its latest move, suddenly halting all federal grants, loans and financial assistance. We're talking trillions of dollars and millions of Americans impacted.

And is this what retribution looks like? Donald Trump from the campaign trail promised it. And overnight, Justice Department officials who worked with special counsel Jack Smith were fired.

And a little known Chinese startup shaking Silicon Valley to its core. What it now means for the AI arms race.

Kate - I'm Kate Bolduan, with John Berman. Sara Sidner is out today. This is CNN NEWS CENTRAL.

JOHN BERMAN, CNN ANCHOR: All right, breaking this morning, the sweeping, unprecedented order that puts a pause to all federal grants and loans at 5:00 p.m. today. This could be trillions of dollars in funding that impacts programs and people in the United States and around the world. Things like disaster aid, aid for medical charities, food assistance programs. This all came in a two-page memo that kind of lacks clarity on exactly how this should be implemented. It has also sparked new debates about constitutionality.

A lot of questions here. Let's get right to the White House for CNN's Alayna Treene, who I know has been digging on this.

Alayna.

ALAYNA TREENE, CNN WHITE HOUSE REPORTER: That's right. This is really the latest stunning use of power from President Donald Trump's White House, just eight days now into his new administration. And look, this internal memo that was circulated by the White House Office of Management and Budget says that all federal grants and loans will be halted starting at 5:00 p.m. today, potentially impacting trillions of dollars in spending and also potentially impacting millions of Americans who rely on this type of funding.

Now, I said, you know, this is expected to take effect at 5:00 p.m. today. That means a lot of these organizations were given less than 24 hours notice of this change. And they have until February 10th to submit reports to the budget office at the White House. And from there, you know, seeking clarity on how this will move forward.

Now, one thing that is clear is that the freeze on this is something that the budget office is saying is for organizations that don't necessarily align with Donald Trump's views. I want to read to you what Matthew Vaeth, the acting director of the Office of Management and Budget, said in an internal memo. He said, quote, "the use of federal resources to advance Marxist equity, transgenderism and green new deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve."

Now, to be clear, John, this memo does specify that Social Security and Medicare benefits are not going to be affected by this freeze. Also, individuals who receive these different loans directly will not be impacted.

However, you know, hundreds of different federal payouts are now in jeopardy, all from, you know, charities, to different research bodies, universities, community projects. All of those could be impacted by this move.

Now, we've heard a lot of top Democrats sounding the alarm on this. We heard just this morning from Illinois Governor J.B. Pritzker, a Democrat. This is what he had to say. He posted on X, quote, "the U.S. Constitution does not grant the president this unilateral authority. In Illinois, we will stand against unlawful actions that would harm millions of working families, children and seniors."

Now, we also heard from people on Capitol Hill who are arguing again that Donald Trump might not have the authority to do this. This is what Senator Chuck Schumer said in a statement last night. He said, quote, "Congress approved these investments and they are not optional. They are the law."

So, a lot of questions, as you can tell, about whether or not this is something the White House is actually able to do.

Now, some experts have said that the president does have the authority, at least temporarily, to put a pause on this type of funding. But again, we really do have to see the details of this, because the scope and scale of this directive is so broad and impacts so many different people, that there's going to be a lot of questions on this.

Now, we do plan to hear from Karoline Leavitt, the White House press secretary, later today at 1:00 p.m. I expect she's going to get a lot of questions on this, John.

BERMAN: Her first, I think, White House press conference.

TREENE: Yes.

BERMAN: And I do expect this will be a major topic there.

Alayna Treene, great to have you on with us this morning. Thank you very much.

With us now, his defense attorney and former federal prosecutor, Shan Wu.

And you heard Alayna talk about the legal questions here that stem from, say, the Constitution, which I think everyone knows puts the power to tax and spend in the hands of Congress. It's the spending clause that "Congress shall have the power to lay taxes and collect them, duties, imposts, excises, to pay the debts and provide for the common defense and general welfare of the United States."

[09:05:05]

That is typically been meant to mean that Congress spends, right?

SHAN WU, DEFENSE ATTORNEY: Right. And not only is there a Constitutional issue, but there's also a law that was meant to address this, which does address it, the Impoundment Act. And this, on its face, clearly violates that. I mean the 45 days was just mentioned within the Impoundment Act allows for some temporary pauses, but the emphasis is on the transparency being required to Congress, that the executive branch would have to set forth the exact reasons. And, you know, the reasons they gave in this memo is just a bunch of campaign slogans, like Marxist - anti-Marxist things, anti-trans issues. And it's very flimsy. I mean on its face I think what's interesting, John, is it sounds like it's kind of more, you know, meat for the base. But underneath that is really this enormous expansion, continued expansion of the unitary executive theory, giving the president as much power as possible. So, it's definitely headed for the courts.

BERMAN: A huge potential expansion of power here. And I'm glad you brought up the Impoundment Act of 1974, because we can look at that - the Impoundment Control Act. We can look at that one of two ways here, whether or not it inhibits the president, whether or not it's constitutional. But one thing is clear, is that Donald Trump knows it exists. He knows there are limitations on what presidents can do in terms of not spending.

Listen to this. He put out a video like a year and a half ago on this.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES (June 2023): Thomas Jefferson famously used this power, as did many other presidents, until it was wrongfully curtailed by the Impoundment Control Act of 1974. Not a very good act.

(END VIDEO CLIP)

BERMAN: Now, again, in this, it's clear he doesn't like the act. But I imagine in a courtroom one could say he knows it's there.

WU: Oh, that's absolutely right. Again, you know, the Trump administration, in my view, likes the legalities of much earlier times. So he's going back to Jefferson. And, you know, that was enacted during President Nixon's period. And, you know, some people have opined only - that Nixon only signed it because he was too enmeshed in the Watergate scandal to really be able to object to it.

But certainly in the court, they're going to say that he's violating that. And unquestionably what the Trump folks are going to argue is that the act itself is unconstitutional. So, that's - that will head directly to the Supreme Court. And, you know, despite the extreme conservative majority right now, this is a pretty questionable one because it's a classic separation of powers issue.

BERMAN: It's a classic separation of powers. When Congress decides to do something, particularly if you look at this - this - this memo which the White House put out, it's not saying we want to spend the money on this cause that Congress voted on in a different way or a certain way. It says that we just don't like what Congress decided to do. So, that's going against an actual law passed by a majority in Congress, and signed by a president, correct?

WU: No, that's exactly right. And that's why under the act processes they would need to be far more specific than this general idea of, oh, we just think that generally everything's heading in the wrong direction. So we're not giving out any money until we approve it, make sure it goes through our filters. But you can't do that. I mean it - this is money that's already been appropriated. And the damage is enormous. I mean even this issue about not going to individuals is fuzzy because while they're exempting that on its face, there's money that is federal money goes to state agencies to distribute to individuals. So, it's very easy to see how it really wipes out a lot of benefits for individuals too.

BERMAN: Again, possible that he does have some authority to do it temporarily. Whether or not he intends this to be temporary, we will see. How far it goes from here, also to be determined.

Shan Wu, thank you so much for explaining it so well.

Kate.

BOLDUAN: There is also growing outrage and concern this morning after more than a dozen Justice Department officials were abruptly fired. All of them career federal prosecutors, non-political appointees, all with at least one thing in common, though, they worked with special counsel Jack Smith on the federal investigations into Donald Trump, those cases.

CNN's Katelyn Polantz has more.

KATELYN POLANTZ, CNN CRIME AND JUSTICE CORRESPONDENT: Really a stunning afternoon at the Department of Justice, where the people put in place by Donald Trump to lead his U.S. attorney's office and the entirety of the Justice Department, the acting attorney general, carrying out on that promise of retribution toward people who were working on criminal cases related to the 2020 election and against Trump specifically.

So, the main thing that happened, the acting attorney general fired more than a dozen people who had been back in the department just doing their jobs as career prosecutors, line attorneys. [09:10:03]

They were the people that worked on the special counsel investigations from Jack Smith. These were not political appointees, though. These were people who had long been with the department, not just as part of Smith's team, but had worked on the type of criminal cases that always were part of the Department of Justice's bread and butter. Those people were back in their home offices after Smith closed shop, and they were fired yesterday.

The memo from Acting Attorney General James McHenry, it said, "you played a significant role in prosecuting President Trump. I do not believe that the leadership of the department can trust you to assist in implementing the president's agenda faithfully."

This announcement to those people came just after the announcement by the D.C. U.S. attorney. So that is the interim person in charge of the office that prosecuted the 1,500 or so Capitol rioter cases since that took place on January 6th of 2021. That interim U.S. attorney, Ed Martin, he announced that there was going to be a special project, an investigation into the work of dozens of line prosecutors in charging the people in the Capitol riot who initially were charged with a felony obstruction count that the Supreme Court later tossed out. That investigation, which appears to be an investigation of the investigators, the people that were doing those cases on a daily basis, it's asking for documents by this Friday. So, it is unclear how far of a reach that will go as Ed Martin tries to push forward some sort of investigation into what happened there.

But this is two things that happened on Monday in the Trump administration that are so extremely out of the ordinary for any president and any leadership of the Justice Department to take on upon themselves.

BOLDUAN: Katelyn, thank you so much for your reporting on that.

Coming up still for us, FEMA has been a lifeline for Americans in the aftermath of disasters over and over again. President Trump now looking to overhaul the agency, possibly dissolve the entire federal emergency response system. What do governors think about that now? We'll ask one.

And President Trump has taken the first steps toward pushing out transgender troops from the military. And we are hearing now from the first openly transgender infantry soldier.

And deep panic spreading through the AI industry over China's DeepSeek app as it threatens to upend the tech world.

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[09:17:10]

BOLDUAN: One message that President Trump has sent loud and clear since taking office is that FEMA is on thin ice. He signed an executive order Sunday to form a FEMA review board to evaluate the agency and look for reforms. He's also floated just getting rid of FEMA altogether, saying this while in North Carolina last week.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: FEMA just hasn't done the job. And we're looking at the whole concept of FEMA. I like, frankly, the concept when North Carolina gets hit, the governor takes care of it. When Florida gets hit, the governor takes care of it. Meaning, the state takes care of it.

(END VIDEO CLIP)

BOLDUAN: Then there is this from the Republican House Speaker Mike Johnson.

(BEGIN VIDEO CLIP)

REP. MIKE JOHNSON (R-LA): So, I have some expertise with FEMA. I'm from Louisiana. We're a disaster-prone state, as is Florida. And we - we have a lot of experience with that. In - in my experience, it is very often the case that local workers, people that - who are, you know, working through FEMA, do a pretty good job, but often it's the leadership at the top that can affect the outcome of how a disaster is handled. There's been a lot of frustration, of course, over the last four years with how FEMA has been handled.

(END VIDEO CLIP)

BOLDUAN: Another state that has been hit hard by natural disasters and has been on the receiving end of federal disaster assistance, the state of Kentucky. The state has needed 12 major disaster declarations since Governor Andy Beshear took office in 2019. The state has been hard hit by storms after storms.

Joining us right now is the Democratic governor of Kentucky, Governor Beshear, to talk much more about this.

Governor, thanks for coming on.

I've been wondering since I heard Donald Trump talk about this, and when they're looking to overhaul FEMA and maybe just dissolve the agency altogether, and, as he says, turn it over to the governors, turn it over to you, what would that mean?

GOV. ANDY BESHEAR (D-KY): Well, FEMA has its challenges, but there are also some things it does very well. When I look at a natural disaster, and I've seen a lot of them, you really have three phases. You have that first emergency response phase, and that's when you're trying to save as many lives as you can. After our flooding in 2022, we had over 1,400 rescues, 1,400 Kentuckians that are still alive today. And, yes, we did most of them through our state police and our National Guard. But FEMA helped us bring in Tennessee's National Guard, West Virginia's National Guard, and surged other resources when we needed them the most.

In those hours when power is knocked out, FEMA can help you source things like generators, can bring in some extra resources, and in the very least, bring a whole lot more people in to help in those moments where you need it the most.

I think a lot of the criticism that FEMA gets is how hard it is to qualify for assistance, and the rules that are out there.

[09:20:03]

But most of those rules have been established or pushed on FEMA by Congress.

But - but here's the thing I think the president's not thinking about. We still have to obey federal law. We would still have to make sure that anyone wanting individual assistance, or states or cities seeking public assistance meet all the requirements that are there. And right now that's done through FEMA. So, one group handles all the administrative jobs and costs for 50 states. If you dissolve it, all 50 states would have to create their own, you know, administrative arm, and that would eat up so much of the funding that ultimately needs to go to the people and to the states to - to rebuild.

So, yes, while FEMA can do better, the idea of dissolving it would put so much administrative burden and costs on states that it would distract us from doing everything we can in the moment and in the weeks and in the months to - to rebuild.

BOLDUAN: And that's what I was wondering. It's not that governors aren't involved and don't have a huge part in receiving federal assistance and being in control and divvying it out. It's also the personnel that FEMA brings in to - to do that administrative work. I get from you, that's a - this is a bad idea if they move to dissolve this agency.

BESHEAR: It's a very bad idea to dissolve the agency. Again, there are things that FEMA could do better, and we've seen it firsthand, but we've also seen FEMA improve over time. We pushed FEMA and ultimately got them to finally put decision making authority for whether someone gets personal assistance with the people on the ground, the people that go to the house and see it totally wiped out. You know, the challenge in FEMA, which I think Speaker Johnson was alluding to, wasn't at the top, it was in the middle. And so, what would happen is a team would come out, would look at everything that's lost, would tell people, oh, you're going to qualify, and then it would go to what I called almost the call center in the sky. Like the people making those decisions weren't on the ground, but they also weren't the top leadership. So, changes there that FEMA's made have improved for every other disaster that's happened since.

Governors lead in the response to every natural disaster. But what FEMA does is give us more resources, take some of that administrative burden off our hands, bring some expertise for folks that have been through certain types of natural disasters before and connects us to resources that we need. And at a time when we're all working as hard as we can, you know, I was up for three straight days during the tornadoes and during the floods. They are surging those additional resources to help us out.

BOLDUAN: It is - it's really important to hear that perspective kind of on - on this end of receiving federal emergency aid, hearing it from a governor, straight - from - from yourself. Another major impact, though, that's happening on states right now across the country are the mass deportation operations being led by President Trump's border czar, Governor. Are they happening in Kentucky?

BESHEAR: Well, we haven't seen the types of operations in other states in Kentucky to - to this point at least.

You know, there's a big difference in - in targeting known criminals and - and ultimately putting extra resources from the federal government to finding, detaining and deporting them if they are violent criminals.

What I want to make sure is that we are not in - in these efforts ultimately infringing on the rights of U.S. citizens and - and people who are here legally.

BOLDUAN: You have been - you have - you're a Democratic governor in what's - you know, in a - in a red state. So, you - you understand a balanced approach. It's how you have to operate. You have called for a balanced approach on immigration before. You've been critical of some of Donald Trump's approach to immigration in the past.

These operations, as he is running - these - but these operations as he's running them, it's something that he ran on. How do you square it all? Do you think this is the right way if this is what he was elected on?

BESHEAR: Well, there are - there are portions of what he ran on that - that I think fit into a balanced approach. You know, border security is national security. And ensuring we have a secure border is important.

But when you look at - at the approach, it's only addressing the supply side, if you will, the number - the people who are trying to enter the country or who are in the country illegally. It's not looking at the demand side whatsoever. It's not looking at the number of migrant visas that are needed. It's not looking at our economy and saying, we're going to need more workers in these different areas and how do we fill them? So, we're only going to get to a point where we're truly addressing immigration when - I understand there are alternative facts now, but how about math? Let's hopefully not have alternative math.

[09:25:01]

When we sit down and we do the math about how many new citizens we need in the United States, how many folks that we need for really important industries, and doing that math is going to be important if Donald Trump is going to fulfill his campaign promise to lower prices.

You know, that was, I think, one of the - one of the defining issues of the campaign. I think it's why he is president. But what I've seen out of his executive orders are him addressing everything but inflation and prices. We see more executive orders on culture war issues than we do on the economy. So, as he's doing this immigration approach, I think it's really important that he brings Congress together to ultimately get the math right, and that could help us to ultimately decrease prices at the - at the grocery store.

BOLDUAN: Governor, thank you so much. I will say, my only issue right now is, we don't do math on this show. That's what we don't do.

BESHEAR: Fair.

BOLDUAN: Thanks for coming in, Governor. I appreciate your time. Thank you very much.

We are minutes away from the opening bell on Wall Street. Will the markets rebound after yesterday's tech sell off? We're going to find out together.

And President Trump's lawsuit against the Pulitzer Prize board is facing a big hurdle. His own words, previous statements that could cost him the case.

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