Return to Transcripts main page
Early Start with John Berman and Zoraida Sambolin
Wall Street Hits Bear Market Fearing Fed Response to Inflation; Today: Biden to Address "Building Economy Around Working People"; Capitol Riot Hearings: Witnesses Detail Internal Effort to Shut Down Trump Election Lies. Aired 5-5:30a ET
Aired June 14, 2022 - 05:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LAURA JARRETT, CNN ANCHOR: Good morning, everyone. Welcome to our viewers in the United States and around the world. It is Tuesday, June 14th. I'm Laura Jarrett.
CHRISTINE ROMANS, CNN ANCHOR: And I'm Christine Romans.
Wall Street this morning waking up to a growling bear market. A quick refresher, a bear market, that's when stocks close down 20 percent or more from a recent high. Take a look at that high was back in January for the S&P 500.
The reason for the slide, higher prices everywhere with and what the Federal Reserve may have to do to keep the prices under control. Inflation hit 8.6 percent last month, the hottest inflation since 1981. The Fed meets later today.
Fed funds futures markets are pricing in 0.75 point rate hike to curb inflation, hopefully without triggering a recession. "The Wall Street" journal reporting the Fed is likely to make a move larger than the 50 basis point move a few days ago. U.S. stocks index futures right now, are bouncing a little bit after a terrible day yesterday, a terrible two days.
CNN's Clare Sebastian is in London.
What about Europe and Asia right now Is there stability there as well?
CLARE SEBASTIAN, CNN INTERNATIONAL CORRESPONDENT: A little bit more stability today in Europe and Asia as they continue to sort of digest the falls that we saw those inflation fears out of the U.S. a mixed picture. Asia is now closed.
Tokyo is the outlier there. That economy vulnerable to monetary tightening in the U.S. because Japan is doing the opposite of decades of deflation to try to maintain inflation there. The yen is around a 20-year low against the dollar. China, though, rising despite renewed COVID restrictions there.
And here in Europe, Christine, again, a little bit of a mixed picture. They're digesting the worry, faster rate rises in the U.S. and, of course, in Europe. The Bank of England is set to meet this week. They are set to raise rates for a fifth consecutive meeting, which will bring rates to a 13-year high here in the U.K. -- Christine.
ROMANS: All right. Clare, thank you so much for that. Keep us posted if things change.
JARRETT: Meanwhile, President Biden will speak this afternoon about the economy during a visit to Philadelphia.
CNN's Jasmine Wright joins us on that.
Jasmine, good morning.
What's the White House saying about this bear market and inflation?
JASMINE WRIGHT, CNN WHITE HOUSE REPORTER: Well, the White House continues to be a defense mode over the economy here, as Americans are paying more at the gas pump, at the grocery store, really every day high prices, and they are getting more upset at that part of the economy and frankly the president's handling of it.
And so, the White House has been really boastful about the economy, they've said in the last year and a half and really they, said that this is top of mind for them and they projected the idea that the $1.9 trillion American Rescue Plan stimulus has been passed back in march of 20, 21 as in any way negatively impact to the economy and inflation.
Instead, they lay the blame squarely on Russian President Putin's feet, and his invasion of Ukraine. And so, we'll see the president likely make this same case later on today when he speaks in Philadelphia at the AFL, CIO convention.
And White House Press Secretary Karine Jean-Pierre, prevailing some of these remarks that he is expected to make yesterday in the briefing room. Take a listen.
(BEGIN VIDEO CLIP)
KARINE JEAN-PIERRE, WHITE HOUSE PRESS SECRETARY: The way we see this is that the American people are well-positioned to face these challenges because of the economic, historic gains that we have made, under this president, under this president in the last 16 months.
(END VIDEO CLIP)
WRIGHT: Now in addition to, that the president will also focus on talking about how he is building his economy around working people, rewarding those who work and not just necessarily the wealthy. Now, of course, the speech from the president comes before a critical meeting with the Fed, where they are expected to hike rates, trying to cool down those prices. White House is being adamant about warning the American people, that they could be uncomfortable for sometime, likely a tough pill to swallow for those who feel like they are already struggling -- Laura.
JARRETT: All right. Jasmine, thank you.
ROMANS: All right. So, let's bring in Spencer Jakab, editor of "The Heard on the Street" column at "The Wall Street Journal".
Nice to see.
It's officially a bear market. You point out this is the 12th bear market since World War II. We've been here before, right? So everyone, keep calm here. The White House says that Americans are well-equipped to handle this and all of this uncertainty right now in the American economy, are they?
SPENCER JAKAB, EDITOR, HEARD ON THE STREET, THE WALL STREET JOURNAL: No, they're not. No, they never well-equipped, because bear markets are scary. Bear markets put a dent in the number you see on your retirement account, and if you are one of the 46 percent of the United States that does not have money saved in the stock market, or not much, then that's not what you are worried about.
But you are worried about the cost of milk, and the cost of gasoline and how much your rent is going up. And this happens to be coinciding with the period of the highest inflation in four years. And so, there's anxiety on really across the spectrum.
And then as far as investors go, you know, you have this two groups of investors today, you have the older, more sober investors who have stocks and bonds and did what they were supposed to do and maybe you are a bit older like me and have 60 percent stop and 40, percent bonds, and the bond market has also had a horrible bear market, that is unusual about this, is that you have this horrible start to the year.
So, your portfolio might look a lot worse than it has at this point in previous supermarkets. And you have these new, people the people I wrote a book about, in meme stock mania, who bought flying car stocks, and whatever. And those stocks are a much sharper bear market. All the speculative stuff that really thrived on cheap money has gone poof, and cryptocurrency, let's not get it into that.
ROMANS: Yeah. As just a wipeout, talking about those young investors that thought that was a natural asset class, just creamed. Your newspaper is reporting that the Fed could raise rates as much as 75 basis points, when it meets this week, it has not happened since 1994, warranted, do you think?
JAKAB: Well, the fed felt that it was behind the curve, who is to say you can't. That's a thing of economics, you can't replay. And then look at it in ten years and say, what would they had just raised by half a percentage point instead of three quarters of a percentage point. But based on what they saw on Friday, on the consumer price index data, they are clearly alarmed.
And so three quarters of a percentage point is a very aggressive move. As you said, the most aggressive in a while. And this is coming from a low base. And so, that late in the day, that news coming up next during a training session yesterday, sent us another leg down and over the mark to the 20 percent decline on the S&P 500 that officially marks a bear market.
Yeah, but, price increases are quite alarming, to the Fed and to me and you've probably too, right?
ROMANS: Yeah, I mean, absolutely. You know, I see a little bit of stability this morning, thankfully, there is a word that we talk about a lot, those of us who watch markets. Capitulation, when thanks just get so pessimistic, that people are just throwing in the towel.
I haven't quite seen that yet, which makes me wonder, how much more damage can be done for investor portfolios here, in the interim, even though we have already a bear market. I mean, how much more is there to go if the Fed has to remain very aggressive here?
JAKAB: Yeah, capitulation is not a financial term. It's really a psychological term. When people have kind of given up and throwing the towel, even the people who are always peppy, who always say that there is a day tomorrow and the stock market, have thrown in the towel. And I definitely does not feel like we are there yet.
And just typical pattern in a bear market, this is no reason to sell today by the way, is that you have several false dogs. You have several bear market rallies, where it looks like things are over, and when you have that final rally off the bottom, that's when very few people believe it.
So we are probably not there yet. If you think of a typical bear market, not the last one we had, when COVID first appeared and you had this very rapid descent and very rapid recovery, you fall by 45 percent. Last two before that, stocks lost about half their value.
Stocks lost half their value, and then that would be the 20 percent drop we've seen so far, followed by another 20 percent, followed by another 20 percent, that would -- that would get you there. And in between there would be lots of false recovers.
So, just to answer your question, no, it does not appeal to me at all like we've capitulated. People are upset, but they have given up hope.
ROMANS: Yeah. All right. Spencer Jakab of "The Wall Street Journal", come back soon, exciting week here. So much happening, so many different things happening all the same time, remember a time quite like it -- Spencer, thanks.
JARRETT: Don't lose your 401k password again.
JARRETT: That was my lesson.
ROMANS: Just make sure you are not on crypto and tech stocks, please? That's not the place to be.
JARRETT: We know your feelings on that.
All right. Coming up, Donald Trump spreading election lies when he knew the real facts.
(BEGIN VIDEO CLIP)
WILLIAM BARR, FORMER ATTORNEY GENERAL: Told them that it was crazy stuff, that they were wasting their time.
(END VIDEO CLIP)
JARRETT: More from the January 6 hearings, next.
ROMANS: Plus, the state that just made it easier for teachers to carry guns in class.
JARRETT: And the White House forced to confirm something that is usually a given.
ROMANS: Welcome back.
January 6 Committee making its case in public, that former President Trump was told over and over again that he lost the 2020 election to Joe Biden, but Trump refused to listen, declaring victory and spreading lies about election fraud against the advice of his closest advisors.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I never saw any evidence whatsoever to sustain those allegations. What they were proposing, I thought was nuts. In theory was also completely nuts.
BARR: The claims of fraud were bullshit, completely bogus, and silly. Based on complete misinformation. I thought, boy, if he really believes the stuff, he has you know lost contact with -- become detached from reality.
(END VIDEO CLIP)
ROMANS: The committee also focused on $250 million from donors that were supposed to go to an election defense fund that the committee said didn't exist.
CNN's Katelyn Polantz is live in Washington.
Katelyn, what did the committee say they found when they followed that money?
KATELYN POLANTZ, CNN SENIOR CRIME AND JUSTICE REPORTER: Well, Christine, the committee yesterday was looking into all of these different Donald Trump was lying and how he was telling those lies. And ultimately, the committee found when they follow the money that this was a grift, that Donald Trump was making false claims about the election and then he was fundraising right lucrative off of it.
This $250 million you mentioned, that was being pulled in after the election to ward something that was being marketed as the official election defense fund. It sounds very official, nearly $100 million of that came in the first week after the election, they committee said. But whenever they asked the campaign staffer about this, we saw yesterday that campaign staffer say that this official election defense fund wasn't real, it didn't exist.
Instead, after the election, Donald Trump set up a PAC called the Save America PAC, and instead of moving that money, most of it at least to something that would go towards election related litigation, he had 60 or more different court cases across the country trying to challenge the election, that's not where the money went.
It went into the Save America PAC, and then it was distributed to a bunch of different places that were not about the election at all. They were for political purposes, including a charitable foundation for Mark Meadows, who was the chief of staff at the end of the administration in the White House, $5 million went towards the rally at the ellipse committee found and the company that is putting on that rally, and $200,000 went to what the committee said was the Trump Hotel collection, so the Donald Trump collection of businesses.
And so, as the committee looked into this, whatever they found this, Representative Zoe Lofgren said the big lie was also a big rip-off. Big rip-off, obviously this was a disinformation campaign preying upon his followers.
ROMANS: Right, Trump supporters who were getting, at one point, 25 emails a day asking for money to help defend the president and keep him in power. That money went to all those other places, not to actually contest the election.
All right. Thank you so much, Katelyn.
JARRETT: So, if the January 6 committee is indeed laying out a roadmap for the potential prosecution of the former president, or those in his war room, some of those critical to that decision is paying close attention.
(BEGIN VIDEO CLIP)
MERRICK GARLAND, ATTORNEY GENERAL: I am watching, and I will be watching all the hearings. Although I may not be able to watch all of it live, but I will be sure that I will be watching all of it. I can assure you that on January 6th prosecutors are watching all the hearings as well.
(END VIDEO CLIP)
JARRETT: That, of course, the current attorney general.
Let's bring in Paul Rosenzweig, former federal prosecutor himself and former senior counsel to Ken Starr. Sir, nice to have you this morning. This whole exercise the January 6 committee is doing, it is not a courtroom, they do not have to follow the rules of evidence. But if you are the attorney general, would have stood out to so far?
PAUL ROSENZWEIG, FORMER JUSTICE DEPARTMENT PROSECUTOR: I think the most interesting thing that the committee has done has really put structure on the entire story that we have been hearing from the past year and a half. We now have an arc from the election, and from Donald Trump summoning the crowd to the actual violence at the end of the day on January 6, linked by other efforts. We still haven't heard but we will hear it later this week about the effort to take over the Department of Justice, the effort to put pressure on Vice President Pence, to throw out the election.
What they are trying to do is paint the prosecutable picture, the statement that Liz Cheney gave last week live in primetime was essentially an opening statement of the sort of any prosecutor would put together for a case. And doing so, they're really laying both for the public, and as you have said, for the attorney general the entire scope of President Trump's conduct between the election, and the insurrection, and putting the question very plainly, where are you going to do about it?
JARRETT: Let's talk about this other piece that was exposed yesterday which the committee is calling the big rip off, this is the piece of it that basically Trump's false voter fraud claims help drive his supporters to donate $250 million to what was billed as the official election defense fund, which, in fact, did not exist at all. That money was not going to litigation.
Does that raise any alarm bells in your former persecutor mine in the criminal sense?
ROSENZWEIG: Oh, well, certainly. I mean, we need to see the details. Cases like that made with accounting and business acumen. But if you assume that the kind of truth of what has been asserted, that's a -- that's a garden variety fraud, but on an extreme scale.
And it's exactly the sort of wire fraud that would interest a criminal prosecutor. And in many ways, it is a lot easier to prove because the elements are simple. I lied to you, I took your money, and I converted it to my own personal benefit.
And if you can make that case, that one is kind of easy. The cautionary note of course, Donald Trump has been down this road many times before accused of fraud, gone into bankruptcy, and always managed to avoid criminal liability in this sphere. So I imagine this will have cut outs and false books and things that would be partially protected in this area as well.
JARRETT: Yeah, we don't know all the disclaimers that were on this some fundraising emails. My understanding is some of that stuff is still tied up in litigation and was put on hold for the purposes of that hearing.
But help me out on where the line is. You know, people obviously don't to big fans of the time, not knowing exactly where the money is going to end up, where is the line of deviation there if you will?
ROSENZWEIG: Well, I think in the and it will be whether or not any of the Trump supporters or a significant faction of the Trump supporters who gave to this fund kind of care, whether it was material to them, in the words of the law, or whether they were simply donating to support Trump, and they knew they were supporting Trump. And they did not really care whether it was the election defense on particularly, or some other pro-Trump campaign.
The conversion to personal use of the Trump Hotel that you mention would be especially problematic because that would be outside of even that broad understanding. It also seemed like that was a relatively small amount of money that might have some plausible explanation. It was in support of the campaign, for example.
So, in the end, the question is going to be what did the Trump donors expect of their money, and are any of them actually willing to complain? And that -- we'll see about that.
JARRETT: I mean, that is -- it is such a great point given that people currently are buying into the big lie, and currently fundraising off of it for current races. So, query, as you say, whether people care. That's one of the great questions that will come out of this.
Paul Rosenzweig, thank you so much for getting up with us. Appreciate it.
ROSENZWEIG: My pleasure. Thanks for having me.
ROMANS: All right. Just ahead, some tough questions for the White House before the president's trip to Saudi Arabia.
JARRETT: And next, what senators are saying to gun owners about this bipartisan deal on firearms safety.
JARRETT: All right. Twenty-six minutes back now.
Senators on both sides of the aisle working hard to hammer out a deal on gun safety legislation, and they are all pushing the same message, that the bill will not change anything for law-abiding gun owners.
(BEGIN VIDEO CLIP)
SEN. JOHN CORNYN (R-TX): The gun related provisions in this proposal will only impact criminals, and those adjudicated mentally ill. Law- abiding gun owners will not be subject to any new restrictions. Period. SEN. JOE MANCHIN (D-WV): No law-abiding gun owners should be offended
by this. We take no rights away, no privileges away, we don't basically
threaten -- you are not going to lose anything at all, except maybe if we don't, you might lose a child or a grand child.
(END VIDEO CLIP)
JARRET: This deal was announced with the support of ten Republicans, that is enough to get the mission to the floor for a full vote. Senator John Cornyn, the lead negotiator on the GOP side says the next step is putting the deal into legislative language, perhaps by the end of this week. Many of these fellow Republicans, though, say they are waiting to see the actual text before announcing their support.
ROMANS: It's a lot easier for Ohio school teachers to carry guns in schools now that Governor Mike DeWine assigned a Republican backed bill that reduces the hours of training required for army school personnel from 700 to 24.
(BEGIN VIDEO CLIP)
GOV. MIKE DEWINE (R-OH): Every school will make its own decision, I will say, schools that have school safety officers in those schools have done other things, they are very understandably made the decision that that is what they want to do, and they do not want to harm anyone else.
(END VIDEO CLIP)
ROMANS: The bill passed on a mostly party line vote. Teachers unions and education groups have condemned the new law. The legal question I have is, what about liability if there is an accident? Is the school liable? Is the teacher liable? What kinds of protections are there, I guess legally, and for the kids in the classroom? I mean, what if the parents don't want a teacher with a loaded gun?
It's unclear how that is going to work.
JARRETT: Yeah, it's a complete mess.
All right. Just ahead, President Biden and China's Xi face to face. New diplomatic of developments that could make it happen.
ROMANS: And the flood disaster that has forced a national park to close.