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Federal Reserve Makes High Critical Interest Rate Hike Decision; NY AG Sues Trump, Company & Family Members, Alleging Massive Fraud; Biden Addresses World Leaders As Putin Threatens Nuclear Action. Aired 2-2:30p ET
Aired September 21, 2022 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
VICTOR BLACKWELL, CNN ANCHOR: Hello, I'm Victor Blackwell. Welcome to "CNN NEWSROOM."
ALISYN CAMEROTA, CNN ANCHOR: And I'm Alison Camerota.
The Federal Reserve is announcing its decision on interest rates at any moment. The central bank is expected to raise them significantly, again, in an effort to reduce inflation.
BLACKWELL: But the Fed is walking a fine line to bring down inflation without triggering a recession. CNN's Matt Egan is live at the Federal Reserve. Matt, what's the decision?
MATT EGAN, CNN REPORTER: Well, this just in. The Federal Reserve is once again raising interest rates by three-quarters of a percentage point. This is another monster move from the Federal Reserve. And they've signaled that they're not nearly done, projecting the interest rates are going to go significantly higher from here.
The message that the Fed is trying to convey is clear. They are very serious about trying to get stubbornly high inflation back down. But the moves they're making here have actually lifted interest rates to the highest level since 2008.
Now, the Fed was late to this inflation fight. They didn't start raising interest rates until earlier this year. They've been forced to play catch up. And so that has caused interest rates to go rapidly higher. We haven't seen three straight moves of three-quarters of a percentage point, which is what the Fed just did.
We haven't seen anything like that in the modern fed era. You actually have to go back to 1981. But that's not even a perfect comparison because that was before the Fed even publicly announced its interest rate moves.
So what does all this really mean? Well, simply put, it means borrowing costs are going higher, credit cards, car loans, and of course, mortgage rates, which have already spiked. Hopefully, the Fed's moves also mean that inflation is going to get under control because we know the cost of living is way too high.
But it also means a big risk for the economy because the Fed is trying to slow the economy down. They're not tapping the brakes here. They are slamming the brakes. And that causes that creates some risks here because the harder they hit the brakes, the greater the risk that they accidentally cause a recession.
CAMEROTA: OK. Matt, from a very buzzy busy fed there, stay with us. We have more questions for you. Let's bring in Catherine Rampell. She's our CNN Economics and Political commentator. Douglas Holtz-Eakin was the chief economist for the White House Council of Economic Advisers under President George W. Bush.
He's also the president of the American Action Forum. We also have CNN senior White House correspondent Phil Mattingly, live for us at the White House. Catherine, this is what was expected, but it was interesting to hear Matt just say they're signaling they're not done yet.
CATHERINE RAMPELL, CNN ECONOMICS & POLITICAL COMMENTATOR: Yes. If you look at their revised forecasts, as well, for this year, for next year, they have grown considerably more pessimistic than they were just a couple of months ago.
They've revised down their forecast for GDP growth, they've revised up their forecast for inflation, and they have indicated that their so- called terminal rate, basically how high they will continue raising interest rates until they stop has gone up since it was the case a couple of months ago, which suggests that they've just become much more pessimistic about the pace of inflation and their ability to get it under control with the previous strategy.
BLACKWELL: Yes. Doug, we just heard from Matt, the Fed, obviously trying to cool things down, slam the brakes here, but when we heard from President Biden in the "60 MINUTES" interview, he says that he's trying to grow the economy, grow the economy in a way that it hasn't, in years. Are these at least conflicting, if not contradictory?
DOUGLAS HOLTZ-EAKIN, CHIEF ECONOMIST, WHITE HOUSE COUNCIL OF ECONOMIC ADVISERS UNDER PRESIDENT BUSH: Well, everything the Fed does to control inflation is intended to slow the growth in the demand for goods and services and higher interest rates and less liquidity in the financial system are the tools they use to do that.
You can't get the economy to continue to grow if you push the supply out. But that's hard to do. There aren't easy ways for any government policies to move supply, especially in the economy as large as the United States, and especially quickly. So the president may aspire to that, but that's going to be very difficult to pull off in practice.
CAMEROTA: Phil, what's the take of the White House?
PHIL MATTINGLY, CNN SENIOR WHITE HOUSE CORRESPONDENT: You know, we haven't heard from them yet. And as you guys know, quite well, the White House is almost never if ever going to weigh in in terms of what the Federal Reserve is going to do. But this is kind of the reality, and everybody that you've spoken to so far has kind of laid out the double-edged sword here.
The president has made very explicit, he will not jump on the Fed, he will not try and influence what Jerome Powell and the Federal Reserve Board do because they understand that this is an absolute necessity to try to address for decade-high inflation.
However, on the other side of that, when you look at kind of what's been at the core of the White House economic team's agenda and what they've pushed for over the course of the first 19 months in office, raising interest rates at this speed, at this pace for potentially a much longer time can have very serious effects on the very people that the White House and its agenda was intended to help.
And I think White House officials are keenly aware of that. They're not going to weigh in publicly about what it may mean.
But they understand that so long as inflation remains high, particularly as high as it is right now, and so long as the Fed is moving, even though they need the Fed to move, they want the Fed to move, the president has said he will support the Federal Reserve in whatever action they take, there are very, very real repercussions to that that could have an effect not just on the economy writ large, but particularly on the lower quartiles.
Individuals that the White House has said are kind of the targets for a lot of their agenda over the course of the first time -- first 18 months in office.
BLACKWELL: Let's take that right back to Matt Egan. The president often says that his administration trying to give the American family a little breathing room. How much does this continued increase of the interest rate tighten that, Matt?
EGAN: Yes. I mean, I think that everyone is feeling the impact of this war on inflation that the Federal Reserve has waged. We're feeling it in terms of borrowing costs. I mean, you look at what's happened in mortgage rates, they've basically doubled over the past year. That has eroded home values. It costs to get a car loan. That has also gone up. But it's all because the cost of living just remains way too high.
And I want to go back to what Catherine was saying, as far as what the Fed is seeing going forward in the economy, that is going to get a lot of attention from investors and economists today, the fact that the Federal Reserve has sharply raised its forecast for where interest rates are going is a big deal, at around 3 percent now, Fed is now saying it could be around 4 percent by the end of this year, and maybe almost close to 5 percent next year.
That is a big deal. They're also calling for virtually no economic growth this year. That is a sharp downgrade from what they had previously forecasted. It's also a big slowdown from what happened last year when there was blockbuster economic growth.
And Fed officials, they're penciling in a higher unemployment rate, saying that it's going to go from around 3.6 percent today to 4.4 percent at the end of next year. So I think if you put all of that together, I think it shows that even the Fed is concerned about the risk of a potential recession in the coming months.
CAMEROTA: All right, Catherine, I do want to get your take on the impact on consumers, but also at the same time, where gas prices are. So there was this 100-day streak of gas prices falling every single day, it seems like that may have leveled off. Today, it ticked up one cent to $3.68. Since, obviously, that's a lot better than a few months ago. But just give us the entire impact here.
RAMPELL: Well, obviously, it's good for consumers who don't have much control over how much gas they buy. Your commute is your commute. And you -- and a lot of cars -- households can't really cut back on how often they have to fill up their tank. Good news for them.
The challenges, the reason why gas prices are falling, it's partly because of these fears of a global recession. Those are bringing down global oil prices because usually when there is a recession, there is less demand for oil. So it's sort of a good news-bad news story and that immediately, the gas prices are declining.
But if in fact, the reason behind that decline in gas prices does materialize, we do have a recession, that's obviously less good for American consumers and for anybody who's working around the world because recessions are usually associated with big job losses as well.
BLACKWELL: Douglas, last question on the interest rate increase. There were some who said that the Fed should be more aggressive, full point.
BLACKWELL: We've heard from Larry Summers. There was even someone from Wells Fargo, their head of macro strategy who said 150 basis points, a 1.5 percent increase, just rip the band-aid off and do it all at one time. I mean, should there be -- this is aggressive, but should there be a more aggressive approach?
HOLTZ-EAKIN: You can make the case for a more aggressive approach. With interest rates at 3 percent, for example, there's no inflation measure. That's -- that 3 percent are all well above that. So we have negative real interest rates.
That's not even neutral for the Feds. So if they want to get to the point where they're restricting the growth in the economy more substantially, they have to get interest rates higher. Their forecast is that they will. The only question is how fast they get there.
The argument for going slower is that it's easy for the Fed to overdo it and to actually tip over into negative growth. They stopped using the word soft landing, those words are gone.
So they're concerned about that and they're going to watch carefully as they raise rates. But they have more rate raises in the future. There's no way around that. We're nowhere close to neutral. We're now nowhere close to attaining the inflation problem. And the thing I'd emphasize is that once you let inflation get in place, you have no good choices. You either live with it, and people don't want to live with something where food, energy, and shelter are rising at 10.5 percent year over year, or you do the things necessary to bring it down, that's bad news too.
That runs the risk of recessions, means less than the way of sales and jobs growth and things like that. So this is a tough situation for the Fed.
BLACKWELL: All right, Douglas Holtz-Eakin, Catherine Rampell, Phil Mattingly at the White House, and Matt Egan at the Federal Reserve, thank you all.
CAMEROTA: So, New York's Attorney General suing former President Trump, some of his adult children, and the Trump Organization, alleging that they took part in a massive fraud scheme. We have all the details next.
BLACKWELL: And President Biden delivers a strong rebuke of his Russian counterpart, how he and other global leaders are responding to Vladimir Putin's threat of a nuclear attack? Ahead.
CAMEROTA: The New York Attorney General just hit Donald Trump with a $250 million lawsuit accusing him of a massive fraud scheme that spans years. This is before he ever entered the Oval Office. AG Tish James said the state is also suing three of his adult children and two executives of the Trump Organization. They're accused of inflating or deflating assets for their own gain.
(BEGIN VIDEO CLIP)
LETITIA JAMES, NEW YORK ATTORNEY GENERAL: Over the course of our investigation, we found that Mr. Trump, his children, the Trump organization, created and used more than 200 false and misleading asset valuations on his statement of financial condition over that 10- year period.
(END VIDEO CLIP)
BLACKWELL: Not only is James demanding a quarter-billion dollar payback, but he's also calling for Trump and his three children to be barred permanently from serving as an officer for any business registered in New York State.
(BEGIN VIDEO CLIP)
JAMES: Claiming you have money that you do not have does not amount to the art of the deal. It's the art of the steal. And there cannot be different rules for different people in this country or in the state. And former presidents are no different.
(END VIDEO CLIP)
BLACKWELL: CNN Correspondent Kara Scannell was at the news conference where Attorney General Tish James detailed this 200-plus page lawsuit. So let's start, Kara Scannell. Explain the allegations.
KARA SCANNELL, CNN CORRESPONDENT: Yes, Victor, so these are sweeping allegations that Letitia James alleges the Trump Organization, its top executives, including the former president and his three adult children engaged in for over a decade.
She alleges that this was a massive fraud, saying that they had inflated the values of a various number of their assets, these included their properties, including condominiums, office, towers, and their golf courses, inflated these on the financial statements, was then she alleges that Trump used to obtain better favorable loan terms, better insurance rates and some tax benefits. She says that that helped enriched the former president and increase his net worth by billions of dollars.
Now in this lawsuit, there are more than 200 examples of alleged manipulation of these assets. As I said, they include some of all these properties and you know, across the company, and it really hits close to home, including his own apartment at Trump Tower. Let's listen to Letitia James explain that fraud.
(BEGIN VIDEO CLIP)
JAMES: Mr. Trump represented that his apartment spanned more than 30,000 square feet, which was the basis for valuing the apartment. In reality, the apartment had an area of less than 11,000 square feet, something that Mr. Trump was well aware of.
And based on that inflated square footage, the value of the apartment in 2015 and 2016 was $327 million. To this date, no apartment in New York City has ever sold for close to that amount. Tripling the size of the apartment for purposes of the valuation was intentional and deliberate fraud.
(END VIDEO CLIP)
SCANNELL: Now another example that James had laid out involved Trump's Park Avenue property. There, she says that they had claimed the valuations over a 10-year-period range from $91 million to $350 million. According to the lawsuit, it was appraised in 2020 at $84.5 but according to the lawsuit, Trump had valued it at $135.8 million, so another one of these allegations of how they inflated the assets on these financial statements that they then use to obtain millions of dollars in loans.
Now, Trump's attorney Alina Habba issued a lengthy statement. Here's what she said. Today's filing is neither focused on the facts nor the law. Rather, it is solely focused on advancing the Attorney General's political agenda. It is abundantly clear that the Attorney General's Office has exceeded its statutory authority by prying into transactions where abundantly no wrongdoing has taken place.
We are confident that our judicial system will not stand for this unchecked abuse of power. And we look forward to defending our client against each and every one of the Attorney General's meritless claims.
Now, in addition to this, James's office said that they have made several referrals, one to the IRS, one to the U.S. Attorney's Office in Manhattan, where they believe that there were some potential federal state law -- federal laws that were violated, Alisyn and Victor.
BLACKWELL: Kara Scannell, stay with us. And let's bring in now CNN legal analyst Elliot Williams. He served as the Deputy Assistant Attorney General in the Justice Department. Elliot, good to see you. Let's start here with, is this as open and shut as the AG suggests?
ELLIOT WILLIAMS, CNN LEGAL ANALYST: Well, the allegations are quite damning as the -- as the Attorney General lays them out. We haven't heard the former president's response or the Trump organization's response. And so we'll see how they rebuffed them.
Now, look, the central point here, and this would have been President Trump's argument, which is that it -- valuation of real estate is inherently subjective. Come on, who among us has not rounded up you know the value of a property? That would be their argument.
Now, what Attorney General James has laid out quite persuasively in this document is you're not talking about a few dollars here or a few square feet there. It's a systematic pattern of rounding up by orders of magnitude. One of them was 500 percent higher than the estimated value. So we shall see how the president responds but it was a very persuasive case, at least on paper, from the Attorney General.
CAMEROTA: Yes. Elliot, I mean, the rounding up according to Tish James, it went from a 10,000 square foot apartment, which is huge, OK, in New York, but Donald Trump, she says claimed it was 30,000 square feet.
These are measurable. I mean, some of these things that she's alleging are so flagrant because you -- they -- there are, you know, blueprints. You can measure this kind of stuff. It's -- if this is true, it's amazing it took so long for someone to hold him responsible.
WILLIAMS: Look, it's both quantitative and qualitative, Alisyn. It's the number of times. And you know, there are -- there are hundreds of allegations that the Attorney General lays out in the document. But also, like you said, the specific dollar amounts, the specific percentage amounts, but also -- and like you said, blueprints don't lie, the square footage of the room I'm sitting in does not lie.
I could get -- I can take a tape measure and measure out this room. It's very -- it's not that large but at the end of the day, you can measure how large a room is. And when you lay them all out in succession like this, it is clear that there's at least a colorable allegation, as lawyers would say, of misconduct here.
BLACKWELL: Elliott, the AG pointed out that more than 500 times Donald Trump invoked his Fifth Amendment rights. In a criminal case, that may not be worth much, but this is a civil case. What's the value?
WILLIAMS: It's not -- even not worth much in a criminal case. In a criminal case, you cannot hold someone pleading the Fifth against them. That's all of our rights in America under the Constitution that if you plead the Fifth against incriminating yourself, they can't use those statements against you -- against you.
That's how our -- a hallmark of our system. In a civil case, on the other hand, any invocation of the Fifth can be used against you as in what's called an adverse inference. The jury or the judge can take your pleading the fifth and say, wait a second, that's fishy or suspicious, he must be hiding something. And so certainly, the Attorney General was mindful of that fact and made sure to note it at a press conference today.
CAMEROTA: Kara, one of the things that the Attorney General said was this is not a victimless crime. Basically all of this, you know, fuzzy math and inflating things and deflating them based upon, you know, their own financial scheme, that it has repercussions. But what does she mean by that?
SCANNELL: Right. Well, she was making the point that there are two systems of justice sometimes, where she's saying that if you were an everyday person, and you had misled your bank about the value of your home, that you would have -- there'd be some accountability for you.
So her point was that this is -- this is Donald Trump's reckoning day going through this, you know, vast steam that she's alleged, all of these valuations that have -- she's alleged to have been manipulated and making the point that no one, not even a former president is above the law.
She wanted to say that white-collar crime is not a victimless crime, that this impacts everyone and trickles down into just everyone even walking past me on the street that these have repercussions. And she was saying today she was looking to hold the former president and his family accountable for that.
CAMEROTA: OK. Kara Scannell, Elliot Williams, thank you all for helping us understand this breaking news today. Be sure to check out our interview next hour with Donald Trump's former fixer, Michael Cohen, who was cited in today's press conference by Letitia James, the Attorney General, as playing a huge role in launching this investigation.
BLACKWELL: President Biden condemns Vladimir Putin's fresh threats of nuclear action. We'll discuss.
[14:29:06] CAMEROTA: President Biden met with global leaders at the United Nations General Assembly today. Much of his focus was on Russian President Vladimir Putin's war in Ukraine.
BLACKWELL: Putin just announced a partial mobilization of 300,000 Russian citizens to strengthen his invasion and threatened the possible use of nuclear weapons. Now since the announcement, more than 500 people have been arrested across Russia for participating in anti- war protests.
And the demand for flights out of Moscow has soared amid fears that a mandatory draft could be next. CNN National Security Correspondent Kylie Atwood is live at the UN. So Putin's rhetoric raised the stakes today for President Biden's speech.
KYLIE ATWOOD, CNN NATIONAL SECURITY CORRESPONDENT: Indeed. And the president responded directly to that rhetoric that we saw from President Putin overnight, saying that Russia has violated the United Nations Charter and making it very clear that no one sought this conflict when it comes to the Ukraine war except for the Russians. The president also spoke to what he sees as the Russian motivation for this war. Listen to what he said.