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All Eyes on Wall Street; Whitaker Rejects Ethics Office Advice; World Leader Shaken over Resignation. Aired 9:30-10a ET

Aired December 21, 2018 - 09:30   ET

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

(COMMERCIAL BREAK)

[09:31:21] POPPY HARLOW, CNN ANCHOR: All right, let's take a look at the market here. A dismal week for the Dow. A dismal day for the Dow yesterday. The markets just opened really flat, up 38 points.

But think about this week alone, 2,800 plus points lost off the Dow in this week alone. All of this volatility raising a lot of questions about the market and the broader economy.

Our politics and business correspondent Cristina Alesci down on the floor of the stock exchange.

Good morning to you.

A few things to tick through here. The sell-off, look, we'll see. We're pretty flat right now. But what a week, whiplash week it has been for the market, and the president keeps pointing his finger at the Fed. It's the Fed's fault. It's the Fed's fault. Is this the Fed's fault?

CRISTINA ALESCI, CNN POLITICS AND BUSINESS CORRESPONDENT: Well, the selling certainly started with the Fed decision to raise interest rates, but, and this is a big but, I was on the floor here yesterday when he started tweeting -- when the president started tweeting about threatening a partial shutdown over the border wall funding, and that's when you saw selling accelerate quite dramatically.

And what was remarkable is this morning he was on Twitter saying that the shutdown could last a long time. That's after one of his economic advisers came on air yesterday to try and reassure the market that everything was going to be OK and that even if there was a partial shutdown it wouldn't have lasting economic impact.

But just to give you some context here about how brutal and what a blood bath it's been this week, we are down 5 percent on the Dow for the week. If you look at this over the course of the last year, we're on track for the worst year for the S&P 500, which is a broader index, and the Dow, in ten years, Poppy. Investors are just in a terrible, pessimistic mood.

HARLOW: And, by the way, Cristina, I mean that's a really good point about what you heard and saw when the president was tweeting yesterday about a government shutdown. It does not look like there's a deal that is likely by midnight tonight.

But that's not it, right? I mean China. China, trade war that persists has been weighing on stocks. FedEx, the Republican CEO of FedEx with a big warning to the president on this one this week, right? I mean this is -- this is a lot -- a confluence of a lot of really big, important things.

ALESCI: Absolutely. One of the traders here actually sarcastically told me this morning, maybe it's better if the government does shut down because nothing good comes out of D.C. these days. Obviously that was a joke.

But, to your point, there are serious concerns about a global economic slowdown, particularly some soft economic data out of China, which is an economic powerhouse, and particularly here domestically what's worrying investors is the fact that the stimulus in the tax cuts seems to be wearing off. It was supposed to be long lasting stimulus. But just a year after the tax cuts were passed, the stimulus from that seems to be wearing off at the same time that the Fed is removing easy money from the system.

Poppy.

HARLOW: Yes.

All right, Cristina, we'll see what happens in the market half day. It is open Monday morning, on Christmas Eve.

Thank you very much for the reporting.

Meantime, Acting Attorney General Matthew Whitaker completely disregarding the advice from the Department of Justice's own ethics office to recuse himself from the Russia probe. Why, ahead.

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[09:38:37] HARLOW: All right, so will the government stay open? That's a key question this morning. It is set to partially shutter at midnight if Republicans and Democrats can't get something passed that the president will sign.

We just learned moments ago that the president has invited Senate Republicans to the White House. They will be there in less than an hour's time, 10:30 a.m. Eastern Time. They will meet with the president there, see if they can hash out a deal. Let's hope.

All right, also, CNN has learned Acting Attorney General Matthew Whitaker is completely disregarding the advice of the Department of Justice's own ethics office. They said that because of his past public comments he should recuse himself from Mueller's Russia probe. Whitaker has been very critical of the probe in the past and he is not taking the advice of the ethics office.

Our colleague Kara Scannell joins me now.

Wow. I mean this is -- this is a big deal to have your own department's ethics office, which Rosenstein consulted and they said, no, no, no, you're good, you can stay in charge of the Whitaker probe, right, but they said, no, no, no, Whitaker, you shouldn't. But he is. How big is this?

KARA SCANNELL, CNN REPORTER: Well, that's right, Poppy, I mean this -- especially because this is all about the appearance of a conflict of interest because of the words that Whitaker has used. He was out there, you know, months ago when he was on the trail for Trump as a surrogate saying that, you know, if Sessions were to be replaced, maybe the next person in charge could just squeeze the budget and effectively straggle the investigation.

[09:40:06] And so while Whitaker did consult with these ethics officials and they told him that, you know what, there is no actual legal conflict of interest, but they did raise the issue of his statements and comments saying that it's an appearance of a conflict of interest. And so, you know, that is one of these issues that Whitaker was -- the feedback he thought. And they said if they -- if he sought a formal recommendation, that they would recommend that he recuse himself.

But Whitaker has said he didn't want to set a precedent for someone else. The ethics official also said that they found him to be, you know, willing, you know, not just willy nilly disregarding the investigation, having a lot more, you know -- saying he wouldn't, you know, sort of irrational decisions on this. And that they found that he was being, you know, respectful of the law.

But, you know, this is going to be an issue for the Democrats on The Hill. They already had questions about Whitaker taking this position. And they're going to expect -- we expect them to call him on to The Hill, you know, soon early into the new year, Poppy.

HARLOW: Yes. You can bet on that, right?

Kara, thanks for the reporting.

Let's talk about this and everything that's going on today. "Politico" White House reporter Eliana Johnson is with me, and from "The Washington Post" David Swerdlick.

Good morning to you guys.

DAVID SWERDLICK, ASSISTANT EDITOR, "WASHINGTON POST": Good morning.

HARLOW: So let's remind people of just one of the critical comments that Matthew Whitaker, the acting attorney general, has made about the Mueller probe in the past. He was on this network in July of 2017 and he told my colleague Don Lemon that he could see scenario where whomever replaced Jeff Sessions as attorney general or acting AG could, quote, reduce Mueller's budget so low that his investigation almost grinds to a halt.

It's comments like that, Eliana, that made the ethics office say, yes, you don't exactly look impartial, so we think you should step aside from this one part of your job. What is the significance of Whitaker saying, thanks, but no thanks to that?

ELIANA JOHNSON, WHITE HOUSE REPORTER, "POLITICO": The significance, I think, is that he is going to get a lot more scrutiny from Congress. But, look, I think Whitaker is between a rock and a hard place here. The rock being President Donald Trump, who would throw a fit if he recused himself, and the hard place being Congress, because Senate Republicans and House Democrats do not want him to touch the Mueller probe.

The upshot is, he's a short timer in this job. And I think it matters a lot more whether he actually does anything to curtail the Mueller probe than whether he recuses himself. And thus far he hasn't done anything. So I think -- I think that's the thing to focus on. And that's -- I think that's ultimately what will get more attention.

HARLOW: Yes.

JOHNSON: He's going to be out of a job in eight weeks, probably.

HARLOW: Fair enough. He has not done anything. That's an important point.

David Swerdlick to you.

We know that he also wrote in an opinion piece and reiterated here on television that he feels, at least he felt a year ago in 2017, that Mueller looking into the president's finances of the Trump Organization is, in his words, a red line.

SWERDLICK: Yes, Poppy, I think Eliana's comment is spot on. Matthew Whitaker, before he became attorney general, I actually appeared with him once or twice on CNN's air. He was a nice guy, but he did certainly make those comments that were skeptical at least of the Mueller investigation.

HARLOW: Right.

SWERDLICK: So he comes into this as not a completely neutral broker.

That being said, he's almost too late. The special counsel investigation train has left the station. If he were to shut it down now, obviously that might temporarily help the subjects of that investigation, but there is so much information out there, there are so many indictments already out there, that I think ultimately we create a bigger scandal for the president and the White House without really sealing off information from the public.

HARLOW: Interesting.

It is quite something, though, to ignore the advice after multiple meetings with your own ethics office. You know, there's that.

Let me get you on some other things, you guys, and I want us all to listen way back, because so much as happened since then, to Republican Senator Bob Corker, Republican chairman of the Senate Foreign Relations Committee in October 2017. He was talking about those around the president and, quote/unquote adults in the room. And here's what he said back then.

(BEGIN VIDEO CLIP)

SEN. BOB CORKER (R), TENNESSEE: I think Secretary Tillerson, Secretary Mattis and Chief of Staff Kelly are those people that help separate our country from chaos.

(END VIDEO CLIP)

HARLOW: OK, Eliana, 14 months later, Tillerson is gone, Kelly is gone, Mattis is going. So, chaos?

JOHNSON: That's what we're seeing. And, look, the idea that there were adults in the room gave Republicans in Congress, and maybe Americans, some reassurance. But I think it turned out to be false reassurance because nobody can really control the president.

That being said, we've -- we've heard this a lot, but I truly think that yesterday was the worst day of the Trump presidency for Donald Trump.

[09:45:06] HARLOW: Really?

JOHNSON: I do. Between the combination of the backlash that he got on announcing the withdrawal from Syria hastily, shifting positions on a government shutdown, a backlash from his base on criminal justice reform, it really does seem like he's getting incoming from all fronts. And then the resignation of the defense secretary, Jim Mattis, who really was -- I think had bipartisan support was the last straw. And I think he has reason to be concerned. He's losing support from Republican senators who are the only thing come January, I think, standing between him and impeachment once that Mueller report comes down.

HARLOW: So the question becomes, WWRD, right, what will Republicans do, David?

SWERDLICK: I think for right now Republicans will not challenge the president significantly. They may -- at least not in public. They may, behind the scenes, convince him at some point between now and the 15 hours away potential shutdown --

HARLOW: Right.

SWERDLICK: And somewhere over the holidays that this might not be The Hill that Republicans want to plant their flag on. But it's hard to predict.

I think what the events of this week have brought into focus is that in the immediate tense the White House has three problems swirling around it. There's the HR problem, Poppy, that after -- no one wanted President Trump's chief of staff job, and he had to take Mick Mulvaney on an interim basis. Now he's got the last, as Senator Corker said, adult in the room leaving under protest essentially. He's also got a running the country problem. Stock market as of last night's close up 15 percent since Inauguration Day, which is good by normal standards, but not good compared to where we were a year ago and not even as close to as good as President Obama's record.

HARLOW: Right.

SWERDLICK: President Obama left office with 150 percent stock market gain.

So, all of these things coming together --

HARLOW: Yes.

SWERDLICK: Plus the investigations equals White House in trouble.

HARLOW: I hear you. Not exactly apples to apples, though. President Obama was coming from the depths of the recession, right? But I hear your point. Look, the market is making --

SWERDLICK: Well, harder to bring it up from the depths of a recession than a full employment robust humming along economy into which President Trump did a tax cut now doesn't have that tool in his tool kit presumably if there's an economic downturn.

HARLOW: Yes. And, you know, part of the reason for the Fed raising rates is so that you do have the ammunition in your tool kit in a downturn to ease them, to lower them, right, to fight it off.

SWERDLICK: In theory. Yes, in theory.

HARLOW: Thank you both.

SWERDLICK: Thanks, Poppy.

HARLOW: David Swerdlick, Eliana, nice to have you both. Have a good holiday.

The resignation of Defense Secretary James Mattis has shaken up not only leaders here at home, but around the globe, except for a top Russian official who calls it, quote, rather positive.

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[09:52:15] HARLOW: All right, welcome back.

This morning, a top Russian lawmaker is calling the departure of Defense Secretary James Mattis, quote, rather positive for Russia. So, to be clear, Russia likes this. And, remember -- remember what Mattis wrote in his resignation letter about being clear-eyed about our adversaries. Well, that includes Russia.

Let's go to our chief international correspondent Clarissa ward following the international reaction.

That Russian lawmaker in Russia sort of on an island when it comes to other global leaders and how they feel about this, right, Clarissa?

CLARISSA WARD, CNN CHIEF INTERNATIONAL CORRESPONDENT: Well, I think it really comes down, Poppy, to your view of the role of the United States. If, as traditional allies of the United States, you view the U.S.'s role as being something of the world's policeman, a beacon of security, of democracy, working with allies and other partners on the ground to try to fight against terrorist threats, outwardly, outspokenly rebuking authoritarian regimes, if that's how you see the role of the U.S., then yes, you are likely dismayed by the steps that we have seen from the president, including withdrawing troops from Syria and Afghanistan, and also by the resignation of Secretary Mattis.

And particularly with Mattis, I think the reason you're hearing a Russian lawmaker or senator say rather that he is -- thinks it's positive is because Mattis is seen to embody in the eyes of the world those fundamentally American values or values that have traditionally been seen as fundamental American values, the importance of allegiances, the importance of alliances, the importance of our partners on the ground throughout the world. So unsurprising that you would hear from Russia that they actually view this as a rather positive move.

HARLOW: Let's talk specifically, Clarissa, about why, though, Russia would see this as positive when it comes to how Mattis had at least advised the president on Russia specific issues.

WARD: Well, I think there are several key areas. First of all, Russia has been increasingly trying to assert itself in the Middle East and to maximize its leverage in the region through the Syrian conflict, having the U.S. presence in Syria obviously limits the leverage and the impact that they can make. So, obviously, they're glad to see the U.S. pulling out of that conflict arena. It gives them a lot more flexibility. And it gives them a lot more power.

Similarly, we've seen Russia now starting to take more of an interest in Afghanistan, too. And it will be interesting to see what happens in the coming months as we see the drawdown take place, Poppy.

HARLOW: Absolutely. And what's the impact? Clarissa, thank you for the important reporting. Appreciate it.

[09:55:01] HARLOW: So minutes from now we just learned that Republican senators are heading to the White House. The president has invited. They are trying -- everyone should be trying to reach a deal to stave off a government shutdown that is just now hours away. We're on it.

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HARLOW: In just about an hour, President Trump will sign an historic criminal justice reform bill into law. It is pretty unprecedented, at least in recent history. It's known as the First Step Act and it will overhaul the system in a number of ways, allowing thousands of federal inmates to, if they have good behavior and do certain things, be released early. It will also ease mandatory minimum sentences and give judges more leeway in sentencing.

[10:00:06] It is something that this Congress came together across the aisle to do.