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White House Rescinds Memo On Federal Aid Freeze; Robert F. Kennedy Grilled By Senators Over Vaccine Views; Trump Ordering Guantanamo Bay Camp Be Prepared To House Migrants; Three Israelis And Five Thai Hostages To Be Released By Hamas On Thursday. Aired 3-4p ET

Aired January 29, 2025 - 15:00   ET

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


[15:00:32]

ANNOUNCER: This is CNN breaking news.

JIM SCIUTTO, CNN HOST: I'm Jim Sciutto in Washington. Thanks so much for joining me today on CNN NEWSROOM.

And let's get right to the news.

We're following multiple breaking stories on President Donald Trump's agenda. Just moments ago, he signed his first piece of legislation on immigration. Plus, the White House is walking back a memo that halted all federal grant money and assistance, imperiling a whole host of constituencies, including veterans groups, Head Start, Meals on Wheels and other popular programs.

We're going to have more on both stories in just a moment.

First, though, on Capitol Hill, MAHA in the hot seat. Robert F. Kennedy, President Trump's nominee to lead the Department of Health and Human Services, taking tough questions from Democrats, at least for a Senate confirmation that is not assured. He was pressed about his promotion of debunked conspiracies about a number of things -- Lyme disease, AIDS, his strongly held views about combating big pharma. Also, access to abortion and his long-held beliefs, anti- vaccine beliefs, positions he attempted to walk back before senators today with mixed success.

(BEGIN VIDEO CLIP)

SEN. MICHAEL BENNET (D-CO): Did you say that COVID 19 was a genetically engineered bioweapon that targets black and white people, but spared Ashkenazi Jews and Chinese people?

ROBERT F. KENNEDY, JR., HHS SECRETARY NOMINEE: I didn't say it was deliberately targeted.

BENNET: Did you say that it targets black and white people but spared Ashkenazi Jews?

KENNEDY: I quoted a study, your honor. I quoted an NIH study.

BENNET: Did you say that Lyme disease is a -- is highly likely a materially engineered bioweapon?

KENNEDY: I probably did say that.

BENNET: Did you say that exposure to pesticides causes children to become transgender?

KENNEDY: No, I never said that.

BENNET: Okay, I have the record that I'll give to the chairman, and he can make his judgment about what you said.

Did you write in your book like it's undeniable that African-American -- African AIDS is an entirely different disease from Western AIDS? Yes or no, Mr. Kennedy?

KENNEDY: I'm not sure.

(END VIDEO CLIP)

SCIUTTO: Let's go to CNN's chief congressional correspondent, Manu Raju, on the Hill for us.

Manu, this hearing took on equality we've heard in other hearings so far, which is tough questions from Democrats, a lot of praise from Republicans. Do we know where his nomination stands right now?

MANU RAJU, CNN CHIEF CONGRESSIONAL CORRESPONDENT: It's really up in the air, Jim, for a variety of reasons because one key senator on that committee, Senator Bill Cassidy, he could be the swing vote, could determine whether this would have enough votes to be approved by the Senate Finance Committee. He refused to talk comment about this after the hearing. He had an exchange with Kennedy about the issue of Medicaid. There was some back and forth.

Democrats came out afterwards, said that that exchange illustrated how Kennedy was not familiar with Medicaid. Of course, that's low -- that's the health care program for low income individuals that it would be under his auspices if he becomes the secretary of health and human services. So that's a big question.

Democrats are indicating that they are going to be no across the board, including Senator Ron Wyden, who's a top Democrat in the committee, who told me this after the hearing.

(BEGIN VIDEO CLIP)

SEN. RON WYDEN (D-OR): When we tried to get out some of the specifics, like his many anti-vaccination statements with his few pro- vaccination statements, and we asked him to explain this in what way was he lying? He basically served up a big plate of word salad.

RAJU: Do you think any Democrats on the committee will support him?

WYDEN: I can't see it. I think that he was so untrustworthy and unprepared.

SEN. THOM TILLIS (R-NC): I'm in a presumptive lean on his position, and everything he did today hasn't eroded that position.

If the boss tells you to do something, are you going to tell them no, right? I mean, he's going to support the agenda of the president. We know what the president's policy is on vaccines. We know what the president's policy is on life.

(END VIDEO CLIP)

SCIUTTO: And tomorrow will be another critical hearing. Jim, that was before a second committee that will that has joint jurisdiction over this nomination that the Senate Health, Education, Labor and Pensions Committee, Bill Cassidy, the Senate, who is on the Senate Finance Committee, is the chairman of that committee. So it'll be interesting to see how he engages in his next round of questioning.

And, Jim, two other members on that committee, Senator Susan Collins and Senator Lisa Murkowski, perennial swing votes on the GOP side of the aisle.

[15:05:03]

They both sit on that critical committee. How -- what is their exchange like and how do they emerge from that hearing? And do any other potential GOP no votes emerge as this heads towards the Senate floor? Because at the moment is, as we know, party line votes in the Senate mean you can only lose three Republican senators at most if there's more than three, that's enough to stop this nomination from going forward. Assuming no Democrats vote for this nomination on the floor.

So, a lot of questions, Jim, about whether he can get the job. Republicans say they believe he can, but if he does, it could be a very narrow vote, and yet another cliffhanger in the Senate.

SCIUTTO: Yeah. And listen, the Republicans have to prepare for the possibility if they vote against the president's choices of being primaried, being attacked by the president and others.

Manu Raju, thanks so much.

With me now, as we dive into the health issues brought up today is Dr. Perry Wilson. He's a professor of medicine and public health at Yale.

Dr. Wilson, thanks so much for joining.

DR. PERRY WILSON, PROFESSOR OF MEDICINE AND PUBLIC HEALTH AT YALE: Thanks for having me.

SCIUTTO: Let's begin on RFK's quite public anti-vaccine views over many, many years. I'm just reading from an interview in 2023. There's no vaccine that is safe and effective. We've seen him take this position on a number of vaccines. He tried to walk that back today saying, I am not anti-vaccine.

What does the history of his public comments and position show us? WILSON: Yeah. As I was watching the confirmation hearing today, just

it struck me how often he had to disavow statements that are on the record in the recent past. And the anti-vax statements are certainly some of the most concerning to people like me who care about public health. I'll just say that vaccines are a public health triumph of the past century. One of the reasons that we don't have a, you know, large amounts of deaths from infectious disease is because of the success of the vaccination program.

He's cast a lot of skepticism towards vaccines. It's clear, whatever his internal beliefs are, his statements have convinced a lot of people not to vaccinate themselves and maybe more concerningly not to vaccinate their kids, which harms children. And he doesn't seem to be able to reconcile that while he's testifying.

SCIUTTO: Caroline Kennedy, she made -- she noted in her letter to senators that he vaccinates his own kids, but his positions have contributed to this anti-vax view, which has led to -- we've seen it and you know this better than me. It's measurable, declining vaccination rates.

So I wonder if -- even if he were to moderate his position now, does elevating him to such a top role add fuel to that fire in effect of the anti-vax views, which we've seen have an effect in this country?

WILSON: It absolutely does. I mean, the head of HHS, that is a bully pulpit, that position in and of itself comes with an air of authority, whether it is deserved or not. It's one thing to be, you know, a contrarian, to be an outsider, to be asking questions of institutions.

It's quite another thing to be leading that institution and, you know, making policy judgments and policy choices that will affect the health of, you know, 350 million people in the United States. Absolutely.

SCIUTTO: Let's talk about another issue, because this is this brought a lot of attention today. And that was when he was asked about mifepristone, that, of course, the main drug used in medical -- medicated abortions.

Here's what he said. And I want to get your thoughts on the other side.

(BEGIN VIDEO CLIP)

KENNEDY: President Trump has asked me to study the safety of mifepristone. He has not yet taken a stand on -- on how to regulate it. Whatever he does, I will implement those policies and I will work with this committee to make those policies make sense.

(END VIDEO CLIP)

SCIUTTO: Now, the fact is that data from hundreds of studies, more than 20 years since this drug was approved, have shown that it is highly safe and effective. So what would be the function of a presidential ordered study of the

safety of mifepristone? And does that give you, as a doctor and a public health -- public health expert, confidence in where this would end up?

WILSON: This, in fact, was the single most chilling thing I saw in that hearing. The problem is, you know, when you try to reconcile RFK Jr.'s beliefs, which are very varied, you know, some are correct. His criticism of ultra processed food, for example, and some are sort of bizarre. His beliefs about Lyme disease, it all comes from what I think is lawyerly thinking, starting with the conclusion that you believe and finding data that leads to that conclusion, which is not how science works, right?

We get data. We use the data to draw conclusions. So when he talks about President Trump asked me to look into the safety of mifepristone, you're right, that we have hundreds of studies that say it's entirely safe. That makes me worried because there are bad -- there's bad science out there.

[15:10:02]

There's good science out there.

It -- I -- mark my words, he will be able to find some obscure, flawed study that suggests that mifepristone has some risk, and they will use that as justification for a ban on, you know, either nationwide or state to state to state mailing of mifepristone. That is what's most concerning to me. I think this is a full on attack on reproductive freedom at a federal level.

SCIUTTO: Well, it's a good point because politically, there are folks, there are state officials who very much would like to make that the next target. Let me ask you about the good side. And you referenced it here, and that is his focus on -- on issues that I think a lot of Americans and others can relate to that is getting toxins and chemicals out of food and encouraging healthier eating, combating obesity. On those issues, let's say he's confirmed.

Do you think he has the potential for doing some good in that space?

WILSON: Well, you know, again, I think he reaches the conclusion that he wants, which is that, you know, these additives and chemicals cause a problem. And then he searches for data to prove that the truth is, ultra processed food is quite bad for us.

But the reason it's bad for us is because we eat too much of it. It's easy to eat. It's tasty. It has good shelf life. You ever try to put down a bag of Doritos? It's very difficult.

It's the caloric intake that gives us the obesity, the diabetes, the hypertriglyceridemia, the focus on, you know, additives and dyes is on the fringe here. The real issue is that we consume too much. And I would have really liked to hear him acknowledge the fundamental fact that we're putting too many calories into our body. Not, you know, what, what food coloring is getting into us. Yeah. SCIUTTO: Fair point. Well, Dr. Wilson, appreciate it. I suppose we can talk again and see if he gets through, and then we can see what the effects of the policies are. Thanks so much for joining.

WILSON: Thank you.

SCIUTTO: Well, happening just a short time ago, more confusion from the White House over its short lived federal funding freeze. Minutes after the White House Office of Management and Budget Announced it is rescinding a freeze order. Just yesterday on all federal grants and loans, the White House says President Trump's executive order on freezing certain federal funding actually still stands.

CNN's Jeff Zeleny is following the latest for us.

So what is actually happening here? Is there a freeze? Is it a partial freeze?

JEFF ZELENY, CNN CHIEF U.S. NATIONAL AFFAIRS CORRESPONDENT: Jim, we'll try and break it down for you. It is a -- not a freeze, what we thought on Monday and this really caps a dizzying series of events over the last 40 hours or so. But the White House making a move to rescind that Monday order, which was going to put a freeze on about $3 trillion in programs that touch so many corners of American life.

That now is not happening. Of course, a federal judge stepped in last night and halted that. So, clearly, the White House not eager to engage in a legal fight over that. However, we just heard from the president a short time ago trying to place blame for the confusion on others not accepting the responsibility for sowing the confusion. But it is clear that those executive orders that he signed last week on foreign aid, on diversity, on diversity, equity and inclusion programs, he said funding for those is still a subject to a review and perhaps a reversal.

So my guess is this is not the end of this legal fight, of course, but what it is the end of is just a broad look at this. Sweeping programs that were effectively brought to a halt and the White House, the reason they did this, we're told, is they were hearing just a wave of backlash from Republican lawmakers, certainly Democratic lawmakers as well, about the future of actual local programs that, you know, everything from grant funding at universities to Head Start programs to so many other things. They clearly were a bit broad in their in their executive order.

But the president saying he was simply trying to rein in the big bureaucracy. But, Jim, at least it looks like on this one, the bureaucracy caused the biggest walk-back, the biggest reversal yet on day nine of the Trump administration.

SCIUTTO: Yeah, one can say it was quite broad, given we're talking about $3 trillion.

Jeff Zeleny, thanks so much.

ZELENY: You bet. SCIUTTO: Well, just last hour, President Trump signed what's known as

the Laken Riley Act, signing it into law. It's the first piece of legislation of his second term. The law requires the detention of undocumented migrants charged with certain crimes, including misdemeanors. The law will have major implications amid the president's ongoing immigration crackdown.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Under the Trump administration, we're moving with urgency and speed to get these vicious and violent criminals the hell out of our country and to restore law and order to our suburbs, our cities and our towns.

(END VIDEO CLIP)

SCIUTTO: The Department of Homeland Security estimated the Laken Riley Act would cost $26.9 billion in the first year to implement, and warned lawmakers they do not have the existing resources, which could force them to release then thousands of detainees.

[15:15:16]

CNN's Priscilla Alvarez covers immigration and the White House.

Another headline from this press conference as he signed the bill, not quite press conference, at least speech, was that he now plans to use Guantanamo Bay to house migrants. And, of course, Guantanamo Bay, where nine over 11 suspects were held, some of them for many years without legal process. How exactly would this work, and how long is he talking about holding them there?

PRISCILLA ALVAREZ, CNN WHITE HOUSE CORRESPONDENT: Yeah, Jim, we're still trying to gather a lot more details about this announcement, which came as the president was taking a victory lap of the last week and change as his team has tried to carry out his immigration agenda, seeing, for example, an increase in arrests and talking about this in connection to the Laken Riley bill. But on Guantanamo Bay, we know that Guantanamo Bay has a migrant operation center. It has been used for years separate from where the other detainees are held for coast guard when they intercept migrants in the Caribbean.

But they are very limited in the space that they have. And what the president was saying was that they would be using this for 30,000 people. Take a listen.

(BEGIN VIDEO CLIP)

TRUMP: We're going to like it. Today, I'm also signing an executive order to instruct the Departments of Defense and Homeland Security to begin preparing the 30,000 person migrant facility at Guantanamo Bay. Most people don't even know about it. We have 30,000 beds in Guantanamo to detain the worst criminal illegal aliens threatening the American people. Some of them are so bad we don't even trust the countries to hold them, because we don't want them coming back. So were going to send them out to. (END VIDEO CLIP)

ALVAREZ: Now, previous administrations have also explored this in the course of grappling with surges. This was true under the Biden administration. They did not move forward with it, but it was only a few hundred beds that they were looking at -- at this center, again, separate from the detainees who are also held at Guantanamo.

So, again, we're collecting more details on what exactly this will entail. But it is telling, Jim, because it is another example of how this administration is trying to build out its immigration enforcement apparatus. This week, they also added Justice Department agencies to their operations, which are focused again on arresting and detaining undocumented immigrants, they say, who are public safety and national security threats.

That was a move that was new. This was because the acting homeland security secretary at the time had given them immigration authority, so that in addition to trying to build out facilities, including a base near Aurora, Colorado, to hold migrants as telling of the direction in which they are moving. This, after laying the groundwork for much of the last week.

So, certainly, we'll try to gather more details on how exactly this plan for Guantanamo Bay is expected to look, because, again, from the numbers that we have seen at this migrant operations center, it does not reach those 30,000 beds. So whether or not they have to build a new facility is a question that we'll be asking. And how and who exactly would be expected to go there, because again, it has been used before for those intercepted in the Caribbean. The question here being, will they send those who are arrested in the interior of the United States there before they're repatriated?

SCIUTTO: And how long would they stay there? All fair questions. Priscilla Alvarez, thanks so much.

Coming up next, the Department of Justice has dropped charges against President Trump's former codefendants in the classified documents case.

Stay with us for an update.

(COMMERCIAL BREAK)

[15:21:46]

SCIUTTO: Welcome back.

Three more Israeli hostages, along with five Thai nationals held in Gaza, are expected to be freed on Thursday as part of the ongoing ceasefire hostage deal between Israel and Hamas. According to Israel, the three Israelis are 29-year-old Arbel Yehud, 20-year-old Agam Berger and 80-year-old Gadi Mozes.

CNN's Jeremy Diamond has more on their release, and the U.S. Middle East envoy Steve Witkoff's visit to Gaza today, along with his meeting with the Israeli prime minister.

(BEGIN VIDEOTAPE)

JEREMY DIAMOND, CNN JERUSALEM CORRESPONDENT: Well, President Trump's special envoy for the Middle East, Steve Witkoff, is making his first official visit to the region since President Trump came into office. Witkoff is not only meeting with the Israeli Prime Minister Benjamin Netanyahu to talk about the ceasefire agreement and talk about potential regional partnerships, but also, of course, these negotiations that Israel and Hamas are about to enter into to potentially extend this six-week ceasefire.

But Witkoff, as I understand it, according to a source familiar with the matter, has indeed now visited the Gaza Strip. He went there alongside Israel's minister of strategic affairs, Ron Dermer, one of the closest advisors to Prime Minister Netanyahu, and the two men visited the Netzarim corridor. That is where Israeli troops have been stationed for much of this war, separating the northern part of the Gaza Strip from the rest.

Israeli troops have now left, but there is now a vehicle checkpoint at Netzarim corridor, run by American security contractors. And that is apparently what Witkoff and Dermer went to go see as they monitor the implementation of this ceasefire agreement.

We are indeed, in a very delicate period of this agreement, as we now near the time when Israel and Hamas are going to go back to the negotiating table to see whether or not this temporary ceasefire can be extended into a permanent one, one that would see beyond the 33 hostages set to be released during these six weeks, the release of all the remaining hostages and an end to the war in Gaza. We are expecting the next release of hostages to take place tomorrow, with three Israeli hostages scheduled to be released, three more scheduled to be released on Saturday.

Now, as all of this is happening, we are also closely monitoring Israel as it is ramping up military operations in the occupied West Bank, in the city of Jenin in particular, where Israel's Defense Minister Israel Katz says the military operation that has been ongoing there for about a week now is actually going to last much longer than that, saying that after Israel routes out Palestinian militant groups in that city of Jenin, the Jenin refugee camp specifically, he says that Israel will maintain a military presence in that refugee camp.

And that is a precedent breaking it is something that we have not seen for decades now, since the Oslo agreements went into effect. Jenin is considered Area A, which is meant to be administered by the Palestinian Authority. While we have, of course, seen sporadic Israeli military raids into parts of Area A, establishing a permanent military presence would be something altogether very different.

And it comes, of course, as Israel has now added, this goal of rooting out Palestinian militants from the West Bank as part of its official goals for this war.

[15:25:01] Jeremy Diamond, CNN, Tel Aviv.

(END VIDEOTAPE)

SCIUTTO: A lot of developments short period of time. Thanks to Jeremy Diamond.

Coming up next, what came out of the Federal Reserve's first interest rate decision since President Trump took office? And amid economic uncertainty from the new administration's many actions.

(COMMERCIAL BREAK)

SCIUTTO: The last loose end in a long legal saga involving Donald Trump has been tied up by the new Justice Department under Trump. The DOJ has dropped the case against Trump's former co-defendants, Walt Nauta and Carlos de Oliveira, in the classified documents investigation, a move critics say sets a troubling precedent that if you're on Trump's side, you are protected from the law.

Nauta, an aide and body man for Trump, was in the Oval Office as Trump signed executive orders as recently as last Thursday. The Justice Department, of course, dropped the charges Trump faced after he became president-elect.

For a legal perspective on this, let's bring in CNN's senior legal analyst and former state and federal prosecutor, Elie Honig.

Elie, listen, there's a lot to get into here, just in the simplest terms. Let's -- let's start with the evidence. How strong was the evidence against Nauta and de Oliveira and Trump in this case?

ELIE HONIG, CNN SENIOR LEGAL ANALYST: Well, the evidence was quite straightforward and quite strong, I think, against all three of the originally charged defendants in this case, just to refresh the viewers' memories. This relates to Donald Trump's retention, his taking of hundreds of classified documents with him when he left the White House the first time, down to Mar-a-Lago, and then his refusal to turn them back over, and then his conspiracy with Nauta and de Oliveira to obstruct justice, to mislead the grand jury, to mislead investigators, to hide documents.

[15:30:04]

And it's really important to understand, the reason for the dismissal of the case against Jack Smith, the reason for today's dismissal of the remaining pieces of the case against Nauta and de Oliveira had nothing to do with the strength or weakness of the evidence, nothing to do with the merits of the case. In Donald Trump's case, it was dismissed because he got reelected, and DOJ will not pursue a prosecution against a sitting president. And in the two defendants today, it was just simply straight up a move to benefit his co- defendants.

SCIUTTO: Yeah, because they're not -- of course, they don't fall under the immunity decision of the Supreme Court. There are people like you and me, except they have proximity to Trump. I suppose that was the difference here.

The Biden administration took a hands-off approach -- approach to his own classified documents, probe. The special counsel report indicated Biden cooperated with that investigation. They ultimately decided not to -- to charge there.

So what signal do we get as to how the DOJ will operate under Trump?

HONIG: Well, we are getting early signs, and I think that's a good contrast to draw. During the Biden administration, there were two special counsels appointed to investigate. One to investigate Joe Biden on classified documents, the other to investigate and prosecute Hunter Biden.

Now, both of those cases, both of those special counsel cases, were allowed to play out to their natural end. Although you have to add a very important footnote, which is that Joe Biden eventually pardoned his son, Hunter Biden.

Donald Trump so far has shown essentially an approach to DOJ that you will not look at me, you will not look at anyone around me. We see that both in the dismissal of today's cases against Nauta and de Oliveira.

We see that in some of the moves earlier this week, including the firing of the dozen or so prosecutors who remained in DOJ after having worked on Jack Smith's team and the letter firing those prosecutors doesn't say you've committed wrongdoing or you've violated prosecutorial practice or ethics. It just says you were on the team that tried to convict Donald Trump. Therefore you're out.

So it's pretty clear that Donald Trump takes a transactional, self- protective approach towards his DOJ.

SCIUTTO: Yeah. On another note, one of the other trials he faced, of course, where he was convicted of multiple felonies that in New York, the hush money case, we learned that Trump is now officially appealing that conviction. How do you see that appeals process go? You pursued some cases in New York. You see how the law works there.

HONIG: Yeah, I think Donald Trump has a very good chance to get that hush money conviction thrown out in the appeals courts. Frankly, I think his chances are much better in the U.S. Supreme Court than in the New York state appeals courts.

And part of that's just straight politics. If you look at the composition of the New York state appellate courts, it's almost entirely Democratic appointed judges. But let's put aside the politics of this. I mean, I've been on this position for a long time now.

I think the way the D.A. constructed the charge against Donald Trump is legally, technically and constitutionally flawed, floor number one being Donald Trump was charged with a federal campaign finance crime in a state court that has literally never, ever been done to any other person in U.S. history. And I think the argument that Trump will make is federal campaign finance laws are supposed to be litigated in federal courts, and they preempt they block any state court from doing that. I think that's a persuasive argument. Legal election -- excuse me, liberal election law scholars have said the same thing.

So I think I would don't be shocked if someday six, eight, 10, 12 months from now, the hush money conviction gets reversed by some court of appeals.

SCIUTTO: Before you go, I want to ask about another quite significant legal issue. And that was the short lived blockage of all federal aid and assistance across the board that has been partially rescinded. It seems that that now it's only going to apply to certain programs. Not every federal program, but there's already a temporary restraining order against this.

Can you explain? Set aside the politics for a moment here -- can you explain the law? Is a president able to write an executive order that negates congressionally authorized spending?

HONIG: Generally speaking, Jim, no. And this is straight down the heart of the middle of the Constitution. Let me give you a couple reasons why.

First of all, Article One, which creates Congress, gives Congress the power of the purse, the power to tax and spend. That is not an executive power. The president has plenty of executive power. That is a congressional power.

Number two, there was a law passed by Congress in 1974 that sort of reiterated this notion that the president cannot block congressionally allocated funding except in narrow circumstances for very limited periods of time and with notice to Congress.

And finally, there was a Supreme Court decision in 1975, a long time ago. But it's still valid. That says even without respect to that law that I just referenced, again, it's not the presidents power to unilaterally decide to undo or not to actually spend money that Congress has allocated.

[15:35:00]

So, again, I agree with you. I think this is an ongoing saga. It's been wildly confusing over the last several days. It appears there's been a pullback, but I don't think it's over.

But generally speaking, if Donald Trump as president tries to block money that Congress has already allocated, the law is generally against that.

SCIUTTO: Elie Honig, thanks so much.

HONIG: Thanks, Jim.

SCIUTTO: The Federal Reserve just announced its first interest rate decision of the new Trump administration. As expected, it held off on rolling out a fourth straight interest -- interest rate cut thanks to a generally strong economy. It's the first key decision from the central bank under Trump during his second term comes after Trump said he should have some say in rate decisions.

Here to discuss is CNN's Richard Quest.

Richard, good to have you here. First, let's get to the Fed's decision here not to cut now. Any surprise to that?

RICHARD QUEST, CNN BUSINESS EDITOR-AT-LARGE: No, none whatsoever. After all the cuts that they have seen and done, they wanted to wait and see and I guess they would have waited. In any event, because monetary policy has a lag, they need to wait and see what the effect of what they've done so far is.

So the environment of inflation coming at 2 percent, employment is strong, unemployment is contained, that is a scenario that they can justifiably say, wait and see.

Now if you add on top of that the uncertainty from the Trump administration, it makes perfect sense. Good. A good operation of this is the tariffs issued. Jerome Powell was just asked about this because tariffs tend to be inflationary. But you're also going to have tax cuts which are inflationary. You're going to have spending. There's all sorts of things you're going to have.

And what Powell has just said is were going to wait and see. We're going to read up on it. We're going to study exactly likely effects, but we're actually going to wait to see this is entirely a legitimate, correct way to proceed, in his view.

SCIUTTO: Now, that aligns with history, as you know, but as you also know, Trump has taken shots at Powell before because he likes interest rates to go down, helps the economy and think he thinks helps him, right?

So Trump's going to react. Can he put any pressure on the Fed? He seems to believe he has the ability to do so.

QUEST: He has the pressure of the bully pulpit, as it was called. And if any terms of office come up, he can always change them.

But Powell's made clear he's not resigning, and Powell's made clear he doesn't believe Trump can get rid of him. Not in those circumstances.

So the answer the short answer is no. It's just really pressure. And the Fed is only immune to pressure up to a point. They're human beings like everybody else, and they want to be loved at some level.

Where I think this all gets a bit tricky is as the policies start to flow out more and the Fed has to react towards them. I'll give you an example. Today, we had Howard Lutnick, who's the commerce secretary nominee on Capitol Hill in his hearing.

Jim, he gave a strong defense that said tariffs are not inflationary. And yet the traditional orthodoxy of economics is exactly the opposite. So we have still got to -- pardon the phrase --

SCIUTTO: Yeah.

QUEST: -- wait and see.

SCIUTTO: I mean, but the other inflationary thing, and this is not just folks bloviating, is that cutting taxes, which is going to be a part of the first appropriations bill, is also inflationary.

QUEST: Well, there's going to be an extension of the existing tax cuts. So you could arguably say much of it is already baked into the economy. What is going to happen, of course, is you're going to see increased spending in some areas. You will see around a different rate of tax cuts. You're going to see a shifting of the economy, and you're going to see tariffs.

The Fed is not going to take any opportunity or chances here. They just want to see what's going to happen. It's too soon. It's too soon.

SCIUTTO: Yeah. Finally --

QUEST: Yes.

SCIUTTO: -- the Fed chair has a term. That term is going to end in 2026.

Can Trump find a Fed chair who's willing to obey his orders on rates?

QUEST: Can he? Absolutely. Of course. But it's never as naked as that. It's never as obvious.

In the same way, for instance, you know, the Supreme Court justices, he appointed, they're not his justices. They don't vote that way because he appointed them. They have a like minded conservative philosophy. Therefore, they are minded to decide cases the way he would wish them to do so. And that's what it's going to be.

He will find somebody who is like-minded. It doesn't mean they are a rubber stamp. It merely means that when push comes to shove, they think the same way.

[15:40:02]

They have the same economic philosophy, dot, dot, dot, dot, dot. They will make the decisions accordingly.

SCIUTTO: We'll see. I mean, certainly some of the cabinet appointees are going to test that. It's not a rubber Trump stamp. I mean, we'll watch.

QUEST: Okay, all right, all right, all right. Cabinet is -- I walked into that, Jim. I absolutely walked into that trap. And you snapped it shut. The cabinet -- cabinets are different. They are, in some cases -- dum dum dum -- rubber stamp.

SCIUTTO: Yeah. Richard Quest, thanks so much. You can get more of Richard's analysis of the Fed's decision next hour

on "QUEST MEANS BUSINESS".

On just a second day as the new defense secretary, Pete Hegseth revoked the security detail and security clearance of the former top uniformed general of the U.S. military, former chairman of the Joint Chiefs of Staff, General Mark Milley, who, by the way, served under both Presidents Biden and Trump. Forty-four years in the military, appointed to the chairman of the joint chiefs by President Trump back in 2018.

But the relationship soured over the years, with Trump accusing Milley of treason. Not clear how he got to that accusation for calling Trump a wannabe dictator. Hegseth has also directed the department's inspector general to launch an investigation into Middle East conduct to determine whether he should be demoted.

CNN's Natasha Bertrand is at the Pentagon.

Natasha, Milley, of course, was given a pardon by President Biden in the last days of the presidency to protect him from criminal prosecution. So what kind of investigation could we see take place?

NATASHA BERTRAND, CNN NATIONAL SECURITY CORRESPONDENT: Well, this is exactly I think, the reason why President Biden felt the need to give Milley a pardon, because he knew that he would be subject to some form of retribution by this administration. But what were seeing right now in terms of a department led investigation that would be focused more on Milley's career and his status and his rank, really.

So if the inspector general or the acting, I should say, because the inspector general of this department was actually fired last week, found that Milley committed some kind of unethical act, then in theory, they could strip him of a star and demote him, but this would not have any legal repercussions, right? It would just be a stain on Milley's legacy and his career. And that is exactly what the Pentagon, of course, is, is looking into here.

The reason they say they are investigating his conduct. They did not make that abundantly clear. But it does seem to all go back to that phone call or those two phone calls I should say that he had with his Chinese counterpart in October of 2020 and January of 2021, when he said publicly that he warned the Chinese that there was not going to be an imminent attack by the United States on China, and that if there were going to be such an attack, then he would let them know.

Essentially, he was trying to make sure that World War III didn't break out, and there was reason to be concerned at that point. According to Milley's comments later on, that Trump might order some kind of attack on Beijing.

So, this all goes back, of course, even further than those phone calls. It goes back to Milley's comments following the Lafayette Square incident, when President Trump wanted to invoke the Insurrection Act against protesters who were protesting George Floyd's death. Later, Milley said that he regretted his participation in that, and he

notably pushed back on Trump's desire to invoke the Insurrection Act, which would allow him to use the military to police the streets and quell protests.

So there was just all of this resentment building, and now it seems like the only way that short of a legal pathway here, that the administration can investigate, Mark Milley is not only, of course, by looking into whether he should be demoted, but also by stripping his security detail as well as his security clearance, security detail, pretty important given that he apparently, according to the previous administration, does still have active threats on his life from the Iranians -- Jim.

SCIUTTO: Yeah, that's why they have the detail in the first place. Natasha Bertrand, thanks so much.

Coming up next, celebrations in China over DeepSeek's breakout A.I. success as the tech race between the U.S. and China heats up.

(COMMERCIAL BREAK)

[15:47:20]

SCIUTTO: The breaking news former senator, a Democrat, Bob Menendez, has been sentenced to 11 years in prison. The New Jersey senator was convicted in July of 16 felony counts for a long-running corruption scheme. The sentence is lower than the 15 year recommendation. The judge said he considered Menendez's age, service and his health.

The scheme involved taking cash, a Mercedes Benz, and gold bars as bribes in exchange for helping three New Jersey businessmen and the government of Egypt. The longtime politician was indicted in September 2023 along with his wife Nadine, but their trials were severed after she was diagnosed with cancer and began receiving treatment. She has pleaded not guilty and is scheduled herself to go to trial in March.

Well, as the Fed hits pause on interest rate cuts, U.S. tech firms are scrambling to get ahead following the release of a new A.I. model from the Chinese company DeepSeek. Its R1 model, as its known, comes at a fraction of the cost of rival A.I. assistants like ChatGPT. The makers say some tech analysts want proof that R1 actually lives up to the hype. There are also concerns about the influence of the Chinese government.

CNN's Ivan Watson has the details.

(BEGIN VIDEOTAPE)

IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): Celebration erupts across Chinese social media at the surprise success of Chinese A.I. startup DeepSeek. The launch of DeepSeek's latest A.I. chatbot triggered a selloff in American tech stocks, while the app surged to the top of the Apple App Store, beating out higher profile A.I. competitors like ChatGPT and Google Gemini. DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The release of DeepSeek A.I. from a Chinese company should be a wake-up call for our industries that we need to be laser-focused on competing to win.

WATSON: I've just installed DeepSeek on my phone. I'm going to ask it a question. How much did it cost to develop DeepSeek?

As an A.I. assistant, I don't have access to internal company information. For more details about DeepSeek, please visit the official website.

The company claims it cost just $5.6 million to develop this model, a fraction of the investment spent by much bigger American rivals.

DeepSeek's founder is Liang Wenfeng, a 40-year-old CEO who emerged from relative obscurity last week when he was invited to address the second most powerful man in the Chinese government.

Liang studied information and electronic engineering at China's prestigious Zhejiang University.

[15:50:06]

He founded the hedge fund High-Flyer Quant in 2015 aimed at using mathematics and A.I. for quantitative investment.

Less than two years ago, he launched the A.I. company DeepSeek, employing young homegrown talent. Liang described DeepSeek as an accidental disruptor in this interview last week, adding, there's a gap of one or two years between Chinese A.I. and the United States, but the real gap is the difference between originality and imitation. If this does not change, China will always be a follower.

ACH KASS, FORMER HEAD OF GO-TO-MARKET, OPENAI: The success of open- source models, wherever they come from, in this case China, is great because it actually means that better technology will be available to more people at less -- at lower costs.

WATSON: But it's when you ask DeepSeek about China that you see glaring limitations.

I'm asking DeepSeek, has Chinese leader Xi Jinping ever made a mistake? I am sorry. I cannot answer that question. I am an A.I. assistant designed to provide helpful and harmless responses.

ISAAC STONE FISH, CEO, STRATEGY RISKS: DeepSeek as the leader in A.I. would be catastrophic, but it would also be incredibly dangerous for free speech and free thought globally.

WATSON: DeepSeek appears to have revolutionized the A.I. space race and opened many unanswered questions about the company and its founder.

Ivan Watson, CNN, Hong Kong.

(END VIDEOTAPE) SCIUTTO: Our thanks to Ivan, and we have to note that CNN has reached out to DeepSeek, its founder, and High-Flyer Quant, for comments.

We'll be right back.

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(BEGIN VIDEO CLIP)

MIKE BANNISTER, FORMER CHIEF CONCORDE PILOT, BRITISH AIRWAYS: There we are. XB-1 is supersonic faster than the speed of sound. We've got confirmation from the control room that she is supersonic. What a wonderful achievement.

(END VIDEO CLIP)

SCIUTTO: The voice there, former chief Concorde pilot Mike Bannister, reacting to Tuesday's test flight of boom aviations XB-1 prototype as it broke the speed of sound. It's the first time any civilian aircraft has gone supersonic over the Continental U.S. Boom is aiming to build the world's fastest airliner, and the first commercial supersonic flights since the Concorde stopped flying back in 2003.

[15:55:07]

Well, around the globe, celebrations are underway for the lunar New Year, marking this time around the year of the snake. In Beijing, a team of robot dancers performed alongside their human counterparts during a televised gala. These high tech droids strutted their stuff in moments, synchronized in a slightly scary way to the music.

In Sydney, Australia, the Chinatown there they ushered in the new year with a traditional lion dance. Festivities for the lunar New Year continue now for two weeks.

And finally, the famed Mona Lisa painting is getting its own dedicated room at the famous Louvre museum in Paris. According to "The Associated Press", the new room will be part of a major renovation that could cost more than $800 million and last up to ten years. The project will include a new entrance near the River Seine, as well as new rooms underground. If you've ever seen it, it might be kind of nice for it to have its own room.

Thanks so much for joining me. I'm Jim Sciutto in Washington.

"QUEST MEANS BUSINESS" is up next.