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Sticking Point in JPMorgan, Justice Department Negotiations; Budget Grand Bargain Not Likely; 7.3 Earthquake in Japan; International Outrage over NSA Surveillance; Sarah Palin Reenergized During Government Shutdown; Interview with Rep. Tom Cole; Interview with Jane Harman

Aired October 25, 2013 - 13:30   ET

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

WOLF BLITZER, CNN ANCHOR: There's word from the Nigerian Navy today, still no sign of those two U.S. citizens kidnapped in a pirate attack off Nigeria. Officials say armed men stormed the U.S. flagged vessel Wednesday in the Gulf of Guinea, taking its captain and engineer. Not much is known about their conditions. One hundred and thirty-two people have been seized by pirates in the Gulf of Guinea just this year.

Other news, Iran may be only a month away -- only a month away from making enough weapons grade enriched uranium for a nuclear bomb. That according to a report by a U.S. based anti-proliferation group. It finds Iran could have the uranium needed for a bomb in one to 11 months, though actually putting it into weapons would take longer. The estimate comes as Congress is considering tightening sanctions on Iran until a deal is reached on its nuclear program. The Iranian government calls the report, and I'm quoting now, "a huge lie."

Should the U.S. government help JP Morgan Chase pay a $13 billion settlement? That's the focus of talks between the company and the federal government. Evan Paris is joining us now. He's got details of what's going on.

Evan, what are you learning? Because they're fined $13 billion. Then the federal government is going to pick up a chunk of that. That sounds unusual, doesn't it?

EVAN PEREZ, CNN JUSTICE CORRESPONDENT: It is very unusual. That's one of the sticking points of the negotiations, which have been going on. As you know, last Friday, they reached a tentative outline of a deal of $13 billion for JPMorgan to settle these allegations that they misled the government in the sales of mortgage securities. Now, one of the sticking points is whether or not JPMorgan can go to the FDIC and get reimbursed for some of the penalty and that it's going to have to pay -- some of the fines it's going to have to pay. That, I'm told, is one of the sticking points of the negotiations. Lawyers have been working through this over the weekend and all this week.

And you know, there's a very funny thing here. The FDIC sold Washington Mutual to JPMorgan in 2008. Washington Mutual was in trouble, so JPMorgan picked it up. The problem is the FDIC was stuck with some of the liabilities of Washington Mutual. So JPMorgan has the right to go back and claim some of this. The Justice Department, I'm told, is making a hard line on this. They want to make sure JPMorgan cannot try to reach back and get some of the money essentially from the government --

(CROSSTALK)

PEREZ: -- from one pocket of the government to another.

BLITZER: But the government asked JPMorgan to take over Washington Mutual. That was a request from are the federal government. They thought they were doing a favor to the federal government and now they're being penalized for that.

PEREZ: That's the way Jamie Morgan, the CEO of JPMorgan has --

(CROSSTALK)

BLITZER: Jamie Dimon.

PEREZ: Jamie Dimon -- I'm sorry -- Jamie Dimon has put tries to portray what happened. It is true that the government asked JPMorgan to take it over but JPMorgan basically knew what it was getting into. It wanted to get into this business. It thought there was a good purchase there. So you know, you're right, there is some of that at play here.

BLITZER: The Federal Deposit Insurance Corporation were to pick up some of the 13 billion dollars, what are we talking about, a few million, a few billion? Any estimate how much?

PEREZ: That's being worked out right now. One of the issues is we don't know how much of -- how much blame JPMorgan is going to accept, you know, as part of the final deal. I think the numbers are still in flux right now.

BLITZER: The lawyers will be very, very busy on this one.

PEREZ: That's right.

BLITZER: Evan, good work. Thanks very much.

Coming up, Congressman Tom Cole on the chances of a grand bargain. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Republicans and Democrats here in Washington are agreeing at least on one thing when it comes to a so-called grand bargain budget deal. Don't hold your breath. Republican Budget Committee Chairman Paul Ryan and the Senate majority leader, Harry Reid, say it won't happen, quashing expectations that some sort of large-scale deal will come out of the negotiations formally scheduled to start next week.

Congressman Tom Cole joins from us Capitol Hill right now. He's a member of this House/Senate Budget Committee.

Congressman, thanks for coming in.

REP. TOM COLE, (R), OKLAHOMA: Great to be with you, Wolf.

BLITZER: So can we forget about a so-called grand bargain? Are we going for a limited, small-scale deal?

COLE: Who am i to contradict the majority leader of the United States Senate and the chairman of the Budget Committee of the House of Representatives? Look, i think they're right to try to keep expectations in line with the achievable instead of the ideal. But what could be achieved could be pretty significant. We're about $90 billion apart in terms of the House budget and the Senate budget. If we could, you, know, find a compromise in the middle, we could pay for with either savings, or with what I'd call growth revenue, not raising taxes but finding ways that would generate international revenue. That would be a good thing. If we could do it for this year and posit a number for next year so that the budget and the appropriations process can begin in January for fiscal year 2015, we'd actually get the government functioning under real order. I think that would be a very good thing. It would be a lot calmer and peaceful than lurching from continuing resolution and debt ceiling crisis one after another.

BLITZER: Yeah, if you could avoid another government shutdown and a crisis over raising the debt ceiling in January and February, that would be really important.

Congressman, what about this notion of coming up with a new deal on those forced budget cuts, the so-called sequestration? The next round goes into effect in a few weeks. A lot of people are deeply concerned this could have a negative impact whether on the military or other key areas of the federal government.

COLE: Look, i share that concern. I actually think both sides share that concern. Each side has said throughout the sequester is not the appropriate and best way to pare back government spending. Democrats have either wanted to wish it away. And this is a matter of law. We have to act pro actively to change. Or they've wanted to raise taxes to get the extra revenue. I don't think either one those are the appropriate solutions.

The president's put enough entitlement reform on the table himself that we could find the savings on the nondiscretionary side and take care of a lot of those cuts. There are some revenue measures that the two sides might be able to agree on.

So again, there's enough elements out there to avoid that, but if all else fails, what will happen is exactly what you outlined, we'll have government at sequester levels and that's going to be pretty painful for all concerned, Democrat and Republican alike.

BLITZER: Let's talk about the Obamacare health, the website. We learned today, Jeffrey Zients, who's been brought in to help deal with the problems of the website, he says now it should be almost fully functioning by the end of November. Is that good enough for you?

(LAUGHTER) COLE: Well, no. Obviously, it's -- i have a lot of respect for Mr. Zients. I worked with him on the Budget Committee when he was acting director at OMB. A very capable guy. But I think the problems with Obamacare are much deeper than a website. We're going to have to see what the composition of the population that's enrolled is. I suspect it's very light on young healthy people and probably long on older people that are going to be very expensive to take care of. There's a lot of other problems with it. Some of the funding mechanisms, medical device tax are pretty unpopular. So believe me, i think the website is the beginning of the problems. It's not the end. It's a deeply flawed, you know, law. And we can do some things to try and mitigate that. We already have. And I look forward to working with my Democratic friends. But long-term, this is not going to be a program that works out well.

BLITZER: What are you hearing from folks in Oklahoma, who never really had health insurance, but can now purchase it? They've had pre- existing conditions or they were very poor, but now for the first time they're eligible to get themselves some sort of health insurance plan? What are you hearing from folks in Oklahoma? How is that working out?

COLE: Well, it's a mix of opinions. Obviously, there are some people, particularly people with pre-existing conditions, that we've heard positive things from. Overall, the reactions mostly negative. People are not convinced the program is going to be able to be self- supporting. They've had the website problems other people have, and lots of folks that already had insurance that they were happy with are seeing their policies canceled and or their rates go up. So there's a mix of opinion. But honestly, it's still pretty heavily against Obamacare, and people are pretty fearful what's coming. The state so far has refused to participate in either the building of the website or the expansion of Medicaid. So I'd say, on balance, there's not much question this is not a popular program in Oklahoma at this time.

BLITZER: All right, we'll see it that changes.

Tom Cole, as usual, thanks for coming in.

COLE: Thank you. You bet.

BLITZER: All right. Appreciate it.

Apparently, there's a major development off the coast of Japan. Chad Meyers is standing by.

A large earthquake? Chad, what happened?

CHAD MYERS, AMS METEOROLOGIST: 7.3 in the same relative area as the much larger earthquake that caused the big tsunami years ago. 300 miles from Tokyo right there. That's not the real concern. The concern is that there may be a small tsunami that comes off of this toward the coast where they had the much larger tsunami earlier. But what I'm worried is the Fukushima Daiichi Power Plant. It is a triple nuclear reactor with water hanging up, with rods basically almost in thin air, just a little bit of water around them. We're still going to have to see -- these guys don't need shaking and certainly not a 7.3 earthquake. Technically, this would be still an aftershock. You would say, wait, that happened a couple years ago. Two years is a long time in people time. But it's certainly not a long time in earth time. So still a shock, still a quake, still a movement along the same fault that the large quake was. We'll keep watching it for you. Right now, so far, so good. No alerts for the U.S. or Hawaii.

BLITZER: No tsunami alerts or anything along those lines, right?

MYERS: Correct.

BLITZER: Chad, thanks very much.

MYERS: Thanks.

BLITZER: Chad Myers reporting.

International outrage over NSA surveillance. Now allies are demanding answers. We'll talk about that and more with former Congresswoman Jane Harman, get her reaction, whether the anger out there among the allies is justified.

(COMMERCIAL BREAK)

BLITZER: U.S. intelligence gathering efforts among -- with allies could be compromised. That's the statement from a European Union meeting in Brussels today. It comes after allegations surfaced that the U.S. was surveilling on the cell phone used the German Chancellor Angela Merkel. The United States, meanwhile, is reviewing surveillance programs even as we speak.

Joining us from Rome is the former Democratic Congresswoman, Jane Harman. She is now the head of the Woodrow Wilson Center here in Washington.

Congresswoman, thanks very much for coming in.

Let's talk about this. You're in Europe right now. How big of a problem is this, these allegations that the U.S. has been spying not on enemies necessarily, because we all know that goes on, but also among the closest of allies?

JANE HARMAN, DIRECTOR, WOODROW WILSON CENTER & FORMER DEMOCRATIC CONGRESSWOMAN: Yeah. Well, look, the response so far in it seems muted. Our very able new ambassador, John Phillips, i don't think has been called in yet by the foreign minister. And he hasn't been taken to the woodshed as have our ambassadors in other capitals, Berlin, Paris, and i think now Spain.

But foreign leaders are displeased. They're displeased because the public here doesn't get this and has higher expectations of privacy than the public in the United States.

I think the Obama administration response to this is right, that we are reviewing this and discussing it with foreign leaders. Whatever it was that we were doing with respect to cell phone numbers of foreign leaders may have to be revised, but the basic core NSA program, which is in place to track foreign terrorists who are trying to do harm to the United States, is, to me, still a justified program. It needs to be explained better, but it's justified. It complies with law and there are strict safeguards both in terms of the FISA court, which is a serious place where a lot of actions of NSA have been overturned, and the Congress, which is now well briefed and paying a lot of attention.

So I would argue the core program must be kept if we want to protect the United States. If we scrap it, and have another Boston Marathon bombing, people will rue the day and perhaps want to create something more draconian.

BLITZER: The Senator from Florida, Marco Rubio, he was on CNN earlier today on "New Day" and he said that we shouldn't necessarily be shocked that the U.S. is spying on allies and friends, sort of compare diagnose to gambling in "Casablanca," and the shock, shock, shock.

HARMAN: Right.

BLITZER: That this goes on all the time. Does it really go on like this all the time?

HARMAN: Well, that's a -0 like -- it depends what like this is. Again, this material that Edward Snowden took is being leaked out, at it's strategic times, in ways that cause maximum confusion and harm to us. It's a poke in the eye, and one wonders how much of this information perhaps the Russians have and the Chinese have, and whether they're part of these leaks.

But at any rate, putting that aside, there are different levels. At one level, the intelligence agencies of the U.S. and certainly all you have Europe work very closely together. In Italy, there is an enormously capable intelligence community. And Italy has a large concern about terrorism in North Africa and we're working closely with them. I don't think they're shocked. Maybe those who have to account to the electorate are more shocked at least in public, but i think a number of public officials, like Angela Merkel today, her statement today, was very good. She walked this back. She said there will have to be a discussion, but we should not scrap the trade talks between the U.S. and Europe, and we should carefully understand how to proceed together in the future.

So i think this will calm down. I don't know what the next leak is going to be. But i think a public conversation in the United States and in Europe about what these programs are intended to do is long overdue. And if they should be somewhat modified, that's fine. But let's remember, the goal is not to compromise privacy. The goal is to keep Americans and Europeans safe.

BLITZER: Isn't it true, Congresswoman, top U.S. National Security officials go anyplace outside of the United States, certainly in a country not friendly to the United States, but even a very friendly countries, including major NATO allies? They're warned, be careful with your cell phones, your laptops, your iPads, your sensitive information because the host country is going to be listening in? HARMAN: Yes, and as i traveled around as a member of the intelligence committee, very often, i did not take my cell phone into certain countries. I was told not only would i be listened to, but i would be looked at in hotels, and it's a little up comfortable, but i did not have an expectation of privacy.

And let's understand, as you're implying, that the United States is not the only government that, from time to time, spies on other governments. This has been going on forever. And you think about capitols where there are numerous foreign countries operating, you have to imagine it's going on. I don't discount that it's going on right now as I'm talking to you from Rome by somebody. And certainly, it's going on when one visits China, as i did a couple months ago.

BLITZER: Certainly true, indeed. I have been told by many top National Security officials they don't even want to take a cell phone into those countries because they assume everything --

HARMAN: Right. Right.

BLITZER: -- that may be there is going to be compromised. It's a serious problem.

Jane Harman, from the Woodrow Wilson Center --

(CROSSTALK)

BLITZER: -- joining us from Rome today.

You want to make a final thought?

HARMAN: Thank you, Wolf. Yeah, which is why, when Edward Snowden claims that when he went to Hong Kong, no way that the foreign government, which is China in this case, had access to what he had on his computer, is a little hard to fathom. I know that when i go to China, i should take what's called a clean cell phone or no cell phone.

BLITZER: Yeah, that's what a lot of people do.

Thanks very much, Jane Harman. We'll see you back here in Washington next week.

HARMAN: Thank you, Wolf.

BLITZER: Thank you.

The partial government shutdown wasn't a downer to everyone. Sarah Palin appears to be re-energized by the shutdown and a bruising battle that led up to it. You'll hear what Sarah Palin is now planning to do in the coming weeks. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Just getting a statement in from the Department of Health and Human Services, responding to Congressman Darrell Issa, the House Investigation Committee chairman, who has subpoenaed information from the Department of Health and Human Services about the Obamacare website and all the problems that have developed. The statement basically says they'll cooperate. "Since the government reopened on October 17th, we have been engaged in discussions with the committee to understand and prioritize their requests. We are working to provide information responsive to the committee's request. Look forward to continue working cooperatively to satisfy their interests in the matter." So they're promising to work with Darrell Issa. We'll see how that unfolds in the coming days and weeks.

The 16-day partial-government shutdown had a negative affect on a lot of people, but Sarah Palin wasn't one of them. The shutdown appears to have re-energized the former vice presidential nominee, and given her a new political torch to carry into the 2014 elections.

Our national political reporter, Peter Hamby, has been covering this story for us.

Excellent reporting, CNN.com. What's going on? Sarah Palin is coming out of this government shutdown, trying to score some points.

PETER HAMBY, CNN NATIONAL POLITICAL CORRESPONDENT: Yeah, absolutely. The Tea Party movement came out on the losing side of this government shutdown if you look at poll numbers. But people like Ted Cruz, Mike Lee, Sarah Palin, they know the conservative base feels emboldened by this. They saw this as a rallying cry. And Sarah Palin was in communication with Ted Cruz and Mike Lee throughout this process. She came to Washington, as the video showed, to a rally at the World War II Memorial that was temporarily shut down. She wants to get involved in these midterm races in Republican primaries next year, and potentially some of these big Senate campaigns in Kentucky, Tennessee, Mississippi, South Carolina, where you have incumbent Republican Senators like Mitch McConnell, for example, running against insurgent conservative Tea Party candidates. And Sarah Palin once again wants to make a splash like she did in 2010 and in some races in 2012 and get involved in the races.

BLITZER: She's obviously now aligned with the Tea Party supporters across the country. She thinks she can make a difference.

Here's the question: Is there any indication she wants to get directly involved in politics directly, run for some sort of office?

HAMBY: NO. I think that's off the table. We know she flirted with running for president in 2011. She could have made a play in the Iowa caucuses. She had a lot of buzz and support in Iowa. I don't think a lot of people thought she could win the nomination. But, no, i don't think she wants to run for office, for the White House again. Her name came up to run for the Alaska Senate seat next year. That's not going to happen.

What she wants to do, again, is play right in her strike zone, fire up the conservative grassroots, the Tea Party movement against the so- called establishment and play in a lot of the Republican primaries next year. BLITZER: So she wants to be a player, basically, sort of influence a lot of the races, even if it irritates some moderate Republicans or establishment Republican incumbents?

HAMBY: Yeah, absolutely. And one interesting thing, talk to anyone in the political professional class in the Republican Party in Washington today, they think Sarah Palin is a joke. They want her to go away. They don't think she's relevant. However, i e-mailed a bunch of people working in these Senate campaigns yesterday, and they did not want to pick a fight with Sarah Palin. They know, in a conservative state, she can move the needle. She really still can. Even though a lot of people in the political class don't think she's relevant.

BLITZER: If you're an incumbent, and you're being primaried by a Tea Party supporter, you have to worry about Sarah Palin?

HAMBY: I think that's still the case.

BLITZER: Peter Hamby, good reporting. Thanks very much.

HAMBY: Thank you.

BLITZER: Peter Hamby is one of our political reporters. You can read more of what he's writing on at CNN.com.

That's it for me. Thanks very much for watching. I'll be back, 5:00 p.m. eastern in "The Situation Room."

In the meantime, NEWSROOM continues right now with Brooke Baldwin.