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Civil Rights Attorney Lee Merritt Runs Against Texas A.G. Paxton; Consumer Prices Reach 13-Year High, Fueling Fears of Surging Inflation; DOJ Watchdog Says, FBI Botched USA Gymnastics Doctor Abuse Probe. Aired 10:30-11a ET

Aired July 15, 2021 - 10:30   ET

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

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JIM SCIUTTO, CNN NEWSROOM: In the next hour, several House Democrats from Texas will meet with Senator Joe Manchin. Why? They're advocated for federal, national voting rights legislation. This as Republican legislators in Texas try to pass restrictive new voting laws and restrictions.

This week, prominent civil rights Attorney Lee Merritt announced that he is officially running for Texas attorney general. He will challenge Republican incumbent Ken Paxton, this is next year. His campaign focused on voting rights.

In a statement, Merritt accused Paxton and Texas Republicans of launching a quote, all-out assault on our voting right and civil liberties.

Well, joining me now is Attorney and Civil Rights Activist Lee Merritt. Thanks so much for taking the time this morning.

LEE MERRITT, ATTORNEY AND CIVIL RIGHTS ACTIVIST: Thank you for having me, Jim.

SCIUTTO: So, first, to the central message of your campaign, and that is that these new voting restrictions, that they're an assault on voting rights and civil liberties. Can you explain to folks at home, if this bill does pass in Texas, how exactly will it suppress votes, either Democratic voters or particularly people of color in your view?

MERRITT: I've heard it described as a solution looking for a problem. The legislation being proposed by the Republicans is a response to when we're honest, massive voter turnout that we saw in the last election cycle and a changing demographic in Texas that is not favorable to the people in power.

If passed, and when passed, it will impact -- the data shows almost 600,000 Texans, mostly black and brown constituents, in the areas where people already have a difficult time voting. And so the bill, first, it is addressing the problem that is made up. There is no evidence of widespread voter fraud in Texas. And then it creates addition encumbrances for regular citizens to participate in the political process.

SCIUTTO: As you know, to block this going through, the Texas legislature, Democratic members, have left town. They hopped on a plane and came here to Washington. Do you believe that was the right move?

MERRITT: I do. One of the congressmen who participated in the flight was a former legal partner of mine, Jasmine Crockett, a freshman state representative. And Ms. Crockett and I discussed the decision to leave and we said how important this was that the people of Texas deserved a fight at least before we allow the Republican legislature to strip any Texan of their right to vote or make it more difficult for black and brown populations in Texas to participate in the process.

It was a desperate move, but this is a desperate time. And I'm grateful for the bravery of those 50-plus congressmen who went out there and are advocating on behalf of all Texans.

SCIUTTO: Okay. So how about the bravery of congressional Democrats? Of course, the reason they're meeting Joe Manchin, because, to this point, he has said, not willing to reform the filibuster to get even a limited Voting Rights Act through Congress. Are you disappointed by congressional Democrats? Are you disappointed by the president's efforts so far?

MERRITT: Well, I'm disappoint in Joe Manchin not siding with his party on this most important issue. Tomorrow, we celebrate John Lewis and all of his efforts to protect the vote rights. Joe Manchin has had nice to things about John Lewis and so has the president. But let's honor his legacy and do whatever is in our power to protect the voting rights of citizens in America.

We need to pass the For the People Act to ensure that states can, and it is not just Texas, as you know, but states all over the country are offering these voter suppression laws that are designed to set us back. And that has been a disappointment that everyone is not standing up and fighting adamantly against that.

SCIUTTO: As you know, Texas not the easiest state for Democrats to run statewide. In 2018, the current A.G., Ken Paxton, he beat his Democratic opponent then by 3.6 points though, but that is -- that is not a giant margin. And we should note that Paxton has been indicted for securities fraud, he's also under FBI investigation for abuse of office.

But Democrats have been talking about winning statewide office in Texas for a long time and don't quite push it over the finish line. Why do you believe you have got a shot this time?

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MERRITT: Not since 1994 has a Democrat in Texas held this particular position. Paxton is on his way out. The people in Texas are fed up with his performance. His failure to do -- mostly, essential part of his job including checking those responsible for keeping our power grid online, he's, instead, focused on Trump's priorities. I think that that has -- fell out of popularity with Texans. The data reflects from the recent census that the demographics in Texas are changing and they're looking for people to fight for them.

I've had unusual success with Republican elected officials, particularly prosecutors, obtaining the first successful prosecution of a police officer in Dallas County and it is not because people in Dallas County hate police but because it is the right thing to do. I think if we present the case, this campaign to Texans as the right thing to do, as not on one political side or the other but just practical decisions that would make the quality of life of Texans better and will provide basic protections to all Texans, then we have a chance of winning it over.

There are some unique things going on this election cycle, including this assault on the voter rights and I think that that is not going to be popular with either Republicans or Democrats, conservatives or liberals in Texas.

SCIUTTO: If Democrats, both at the state level in Texas but also at the national level, are not able to either block legislation like what you're seeing there or enact protective legislation, do you feel that Democrats will find it hard to win in 2022 and beyond?

MERRITT: No, I think they kick the hornet's nest. I think that regardless of what happens now, there is going to be a backlash from voters that you're going to see a unique amount of people registering, jumping through the additional hurdles if they're able to put them in place and showing up like they never have before.

I think the fact that they're attacking voter rights and making it more difficult to vote is a wake-up call to Texans and people around the country about how critical it is that they participate in the process. I think this strategy is going to backfire on them.

SCIUTTO: Attorney Lee Merritt, we wish you the best of luck and thanks so much for taking the time this morning.

MERRITT: Thank you for having me, Jim. Take care.

SCIUTTO: And we'll be right back.

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POPPY HARLOW, CNN NEWSROOM: This morning, growing questions from millions of you about why prices are so high from your gas prices to airline prices, to used car prices, is it just temporary? We don't know.

Just this week the Consumer Price Index, the nation's key inflation figure, rose to a 13-year high, sounding at alarms that higher inflation may be here longer than expected.

Federal Reserve Chair Jerome Powell vowed to lawmakers yesterday the Fed will use its power to prevent runaway inflation. Listen. (BEGIN VIDEO CLIP)

JEROME POWELL, CHAIRMAN, FEDERAL RESERVE: If we do see that inflation expectations are moving up or inflation is on a path to remain well above our goals and risk of setting us off on a period high inflation, then we'll use our tools to guide inflation down to 2 percent.

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HARLOW: Jason Furman is here, former Chairman of the Council of Economic Advisers during the Obama administration, also known Economics Professor at Harvard. Good morning, Jason, thanks for coming on.

JASON FURMAN, FORMER CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS: Good morning.

HARLOW: So you've got Powell saying don't worry, and then you have Jamie Dimon, head of J.P. Morgan, saying inflation could be worse than people think and worse than the Fed thinks. I don't think it is only temporary. And now Larry Fink from BlackRock jumping and saying, we're going to see, he thinks, between 3.5 and 4 percent inflation, the Fed is going to have to switch gears here. What do you think we're going to see next year, because this is hurting a lot of folks right now in terms of price increases that are pretty astounding for things like used cars?

FURMAN: Right. There are two different things, I think. Inflation this year has been much, much more than anyone forecast. At the beginning of this year the Fed said it would be something like 2 percent inflation. It looks like it is going to be 4 or 5 percent inflation this year.

Next year, it is almost certain that the inflation rate is going to come down from 4 or 5 percent. The question is, will it come all the way down to the 2 percent the Fed believes it or will or will it end up higher than that?

I think it will probably end up higher than that next year. And they'll probably need to act more than they're going to act.

HARLOW: How high?

FURMAN: I have a number like 3 percent next year is a reasonable guess. I don't think 3 percent is terrible. Part of why we're getting this inflation is that Americans got checks, which is a great thing. Americans are getting jobs, which is a great thing. And part of that recovery, the economy is the inflation. But, yes, I think it is going to be higher than what the Fed is counting on right now.

HARLOW: I think part of what worries me and just has a lot of people scratching their heads is the fact that we don't know because we don't have a historical equivalent, right? We don't know how the economy will react to this much stimulus coupled with this rapid of a reopening, right? FURMAN: Exactly. No one has ever been through anything like this. Almost every aspect of what we're going through now is bigger in magnitude than anything we've ever seen before.

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Financial markets, people bet trillions of dollars on what they think the inflation rate will be. They are largely betting that the Fed is right, that this is transitory and that inflation will come back to the more normal 2 percent next year. So there is a lot of smart people and smart money that is not at all worried about inflation.

HARLOW: Okay. But then you've got the -- you've been vocal about the fact that the Fed continues to buy up all of these the mortgage-backed securities despite Chairman Powell saying back in April, quote, the housing sector has fully recovered from the downturn. And then just this, this morning, from Senator Pat Toomey, listen.

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SEN. PAT TOOMEY (R-PA): With housing prices absolutely soaring in many places to completely unaffordable levels, I have to ask, why on earth is the Fed still buying $40 billion in mortgage-backed bonds each month?

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HARLOW: And then you have President Bullard saying he's concerned that maybe we're feeding into an incipient housing bubble. I wonder if you worry that this fed program of continuing to buy up these mortgage-backed securities is unintentionally worsening inequality because people are being priced out of these homes.

FURMAN: Yes. I think the Fed should be worried about an overly hot housing market right now. I don't think we're anything close to the bubble we were in 15 years ago. Mortgages are much smaller part of household financial portfolio right now. But, you know, cheap mortgage rates are a wonderful thing. But the flipside of cheap mortgage rates is that house prices go up a lot and it becomes harder to buy one. We're going to start to see rents going up as well.

So I think if the Fed has tools, which it does have, to tamp down the housing market a little bit, that would mean mortgage rates would go up. We all hate that, but they are 2.5 right now. There is room for them to go up and still be quite low.

HARLOW: I have one final question for you. I don't think this got nearly enough coverage, but the warning yesterday from Fitch that it may downgrade the U.S. stellar credit rating because of self-inflicted wounds, by the way, because of the deepening political polarization, they say, the nation's governance being, quote, a weakness in it, and then citing directly the January 6 insurrection and efforts to restrict voting rights in Republican-controlled states. I mean, S&P still hasn't given back the stellar AAA credit rating to the U.S. that it downgraded a decade ago. How big of a deal is it that Fitch is warning this and it is because of things that we can change? FURMAN: Yes. I don't think it is going to be a big deal for the bond market. People know that the United States is going to pay back the money that it borrows. We're about as good for our credit as any country at any point in world history.

When Fitch says that, I think they're raising a very legitimate and important set of issues. I don't think they're going to -- that financial markets are going to care very much.

HARLOW: I'm glad to hear that. Still, though, alarming to hear them raising issues like that. Jason, good to have you. Thanks.

FURMAN: Thank you.

HARLOW: Thanks a lot. We'll be right back.

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SCIUTTO: This morning, a scathing watchdog report says that the FBI botched the sexual abuse investigation of disgraced USA Gymnastics Dr. Larry Nassar.

HARLOW: Jean Casarez is here with the details. Good morning, Jean.

JEAN CASAREZ, CNN CORRESPONDENT: Good morning. The DOJ officer of the inspector general found that senior officials with the Indianapolis FBI failed to respond to Larry Nassar allegations with the utmost seriousness and urgency that the allegations deserved and required.

It was 2015. USA Gymnastics went to the FBI field office in Indianapolis, which is where USAG is based, told the special agent in Georgia, that office, Jay Abbott, a supervisory special agent in the office, that three gymnasts have reported being sexually assaulted by Larry Nassar.

Through its three-year investigation, the office is now confirming the FBI only did a limited follow-up on these initial allegations of assault by Larry Nassar. They didn't formally open up an investigation or fully document their activities.

Additionally, Indianapolis FBI later said they had referred the case to Lansing, Michigan FBI, where so many gymnasts trained and attended MSU, but the report states they did not do that. So, for over a year, nothing was done on the allegations against Larry Nassar because the only law enforcement agency that knew about him was the FBI in Indianapolis, and they did nothing.

And during that year, the report states, more than 70 young athletes were allegedly sexually assaulted by Nassar. John Manly, who is the attorney for so many of these victims, tells me, at this point, there is actually 120 women allegedly sexually assaulted from 2015 to 2016 while the FBI was silent.

The inspector general confirms in his report that materially false statements were made by an FBI supervisory special agent during the inspector general interviews, that the field office provided incomplete, inaccurate information in response to internal FBI inquiries.

[10:55:04]

They did not forward the allegations to other FBI agents.

The attorney for former Indianapolis field officer special agent in charge John Abbott does tell CNN Mr. Abbott has received a review copy of the report. Mr. Abbott thanks the law enforcement officers and prosecutors who brought Larry Nassar to justice. Mr. Abbott hopes the courageous victims of Nassar's horrible crime find peace.

The report states that DOJ declined prosecution of two personnel in this matter last year. The FBI has demoted one, waiting a response from the FBI's office of professional responsibility, the other retired.

And Attorney John Manly, who has been in this and represents the majority of these victims says criminal charges need to be file. And he told me last night on the phone that you've got to have accountability. Because, otherwise, you were telling the FBI, their field offices, you can do whatever you want. Poppy, Jim?

HARLOW: Wow, Jean, and so many victims. Thank you for your reporting.

And thanks to all of you for joining us today. We'll see you tomorrow morning. I'm Poppy Harlow.

SCIUTTO: And I'm Jim Sciutto. At This Hour with Kate Bolduan will start right after a quick break.

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