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Early Start with John Berman and Zoraida Sambolin

Israeli Supreme Court Hears Appeal On Key Law; Trump Hours Away From His Third Arrest In Fourth Months; Fitch Downgrades Freddie Mac And Fannie Mae's Credit. Aired 5:30-6a ET

Aired August 03, 2023 - 05:30   ET

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

[05:30:00]

OMAR JIMENEZ, CNN ANCHOR: Elliott Gotkine joins us now from the Supreme Court in Jerusalem on this latest appeal to a new law -- again, separate from the judicial oversaw that we've seen -- overhaul that we've seen many protests over.

So, Elliott, previously, the attorney general had held the power to declare the prime minister incapacitated or unfit for office, and this new law gave it to the cabinet. What are you expecting to see today?

ELLIOTT GOTKINE, JOURNALIST: Omar, it also reduced the powers of the attorney general to rule that Prime Minister Benjamin Netanyahu was -- should step down, effectively, because of the conflict of interest.

All of this -- what we're hearing today in the Supreme Court -- this hearing before three Supreme Court justices has its roots in Netanyahu's legal troubles. You will recall that he is on trial for corruption charges he vehemently denies.

So, at the time when his legal troubles began there were petitions to the Supreme Court saying Netanyahu is unfit for office. He shouldn't be able to be prime minister. The Supreme Court said no, he can be prime minister so long as there's no conflict of interest.

But then roll on to this government. It unveils this judicial overhaul -- this controversial overhaul that has led to hundreds of thousands of protesters being on the streets for several months here in Israel. And the attorney general says hang on, Netanyahu. You're on trial for corruption. This represents a conflict of interest. You can't be involved.

So the government passes a law effectively allowing Netanyahu to be involved because it reduces the attorney general's power to say that this is a conflict of interest and he would have to step down from office.

So what the Supreme Court is hearing today is whether that law is OK. The petitioners, including the attorney general, say no, it's not OK because it was tailored to Netanyahu and it therefore represents an abuse of power.

And the significance of this ruling is that this law that was passed is an amendment to a basic law. That's the closest Israel has to a constitution. And never before has the Supreme Court struck down a basic law or an amendment to a basic law. And if it does decide to strike down this basic law it could indicate the Supreme Court's willingness to strike down this reasonableness bill when it gets together in September -- this first part of the government's judicial overhaul. So that would make that less significant if it doesn't set a precedent because the precedent would be set in this case.

And that, Omar, is why this hearing matters.

JIMENEZ: A lot of testing of powers there in Israel. Elliott, glad you're keeping up with it live for us in Tel Aviv for us today. Thank you.

Just ahead, Donald Trump is facing his third arraignment but will it work in his favor? We'll explain.

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[05:37:39]

JIMENEZ: While former President Trump might be dealing with growing legal issues there is no sign his status as frontrunner for the Republican nomination is at risk. If anything, his lead could actually grow.

So let's bring in Michelle Price, a national political reporter for the Associated Press. Great to see you. Thanks for joining us.

So I want to start with Trump's former attorney general Bill Barr. He was on CNN last night and here is part of what he had to say about using campaign funds for legal fees.

(BEGIN VIDEO CLIP)

BILL BARR, FORMER U.S. ATTORNEY GENERAL: I find that sort of nauseating, and this guy claims to be a multibillionaire. And he goes out and raises money from hardworking class -- hardworking people -- small donors, and tells them this is to defend America and to take care of the election. He didn't provide any significant support during the '22 elections and a lot of this money seems to be going to his legal fees.

(END VIDEO CLIP)

JIMENEZ: So, along those lines, we've seen Trump's fundraising go up after previous indictments. I mean, is there any reason to expect that to change?

MICHELLE PRICE, NATIONAL POLITICAL REPORTER, ASSOCIATED PRESS (via Webex by Cisco): At this point, there's no reason to expect that to change. That being said, this is the third indictment. It's possible there will be a fourth indictment. It's unclear how many times he can kind of go back to this well and keep tapping these folks for donations.

But he has spent an extraordinary amount of money. I think it was $40 million that his political action committee has spent on legal fees just, so far, in 2023.

JIMENEZ: Yes. So, I -- after the -- I guess I have multiple indictments to choose from now, but after the second one -- the classified docs one -- I spoke to a lot of Trump voters and the indication I got from them was they weren't just going to take Jack Smith or any federal indictment at face value because value-wise they just don't trust the Department of Justice.

And so, along those lines, when you look at the rest of the GOP field they're still figuring out how to walk the political tightrope and being critical of Trump without upsetting his base, outside of Chris Christie who I think it's safe to say has held nothing back.

What types of lines have you seen these candidates try to walk and how they navigate these indictments?

PRICE: Yes. I mean, one, we've seen the Chris Christies, the Asa Hutchinsons, who have been very critical of Donald Trump for his role in January 6 and the election fraud lies that he was -- he was telling up to the election and after that. But beyond that we've seen kind of a middling of comments from some of the other candidates in the field.

[05:40:11]

We saw Tim Scott and Ron DeSantis. They've made comments that they're concerned about a president being prosecuted.

Ron DeSantis, who is the closest in the field to catching Donald Trump though he's still a ways beyond him in the polls -- he has made a lot of comments about he's concerned about a president being prosecuted. He's concerned about a president or anybody being able to get a fair trial in Washington, D.C. He's making the claim that it's not a friendly territory for Republicans.

So some of them are making kind of broader criminal justice arguments -- maybe not weighing in on the merits of the allegations in the underlying case.

JIMENEZ: And look, I think at this point in the campaign it's been a factor that has not gone away for these candidates and we'll see if they've worked out their positions when we get to the debates come August -- the first one at least.

Michelle Price, thank you so much for being with us.

Now, just ahead -- or right now, honestly, Lionel Messi continues to show why he's considered the greatest soccer player of all time with another showcase performance last night. The MLS -- it just seems like it hasn't been able to handle Lionel Messi.

Andy Scholes has this morning's Bleacher Report. How you doing?

ANDY SCHOLES, CNN SPORTS CORRESPONDENT: Yes, good morning, Omar.

You know, Messi's start in the MLS -- I mean, really, it could not have gone any better so far, right? His club, Inter Miami -- they were taking on state -- in-state rival Orlando City in the Leagues Cup round of 16 last night and Messi was just at it again. In the seventh minute, he's going to receive this ball off his chest and just drills it into the back of the net.

Now, Orlando was not making this easy on Messi. They were getting really chippy with him and Messi was giving it right back. He even got a yellow card in the 21st minute. But we're going to fast-forward all the way to the 72nd minute. Josef Martinez is going to receive this ball and get it over to Messi and he, once again, just rifles it in.

Messi, five goals in three games now with Miami. They win 3-1 to advance to the quarterfinals of the Leagues Cup.

All right. Elsewhere, Iowa State quarterback Hunter Dekkers is stepping away from the team after criminal charges were filed against him as a part of an ongoing sports wagering investigation. The redshirt junior is accused of placing 366 bets with 26 of those involving Iowa State events, including a 2021 football game in which he did not play.

The complaint alleges the bets were made from Dekker's phone using an account set up under the name of a family member. He was also under the age of 21 at the time, which is below the legal betting age in Iowa. Dekkers has denied the accusations.

Seven current or former Iowa and Iowa State athletes are facing charges, including Broncos defensive lineman Eyioma Uwazurike. He was suspended indefinitely by the NFL last week for gambling on league games, some that he played in. He can petition for reinstatement in one year.

All right. In the latest chapter of college realignment, the Big Ten could soon expand to as many as 20 teams, according to multiple reports. The league has reportedly begun preliminary talks to add Oregon and Washington. Cal and Stanford are also said to be under consideration. All four of those schools are currently members of the Pac-12 conference. That would leave the future of the Pac-12 certainly uncertain.

In addition to USC and UCLA already going to the Big Ten, the league also is going to lose Colorado to the Big 12 after this coming season.

All right. In baseball, Yankees pitcher Domingo German is going to miss the remainder of the season after voluntarily entering inpatient treatment for alcohol abuse. The right-hander, who turns 31 tomorrow, threw a perfect game back in June against the A's. He was scratched from his scheduled start Monday night against the Rays. The Yankees said it was because of armpit discomfort. But German did enter in relief and tossed five scoreless innings of two-hit ball in that one.

All right. Finally, Tom Brady is back in football.

(BEGIN VIDEO CLIP)

TOM BRADY, 7-TIME SUPER BOWL CHAMPION: So here's the deal. I'm officially coming on board at Birmingham City Football Club. And maybe you're asking what do you know about English football, Tom? Well, let's just say I've got a lot to learn. But I do know a few things about winning and I think they might translate pretty well.

(END VIDEO CLIP)

SCHOLES: Yes, Tom Brady making that announcement earlier this morning. He purchased a minority ownership stake in Birmingham City, who plays in English soccer's second-tier championship right now. This comes after JJ Watt purchased a minority stake in Burnley.

So I guess, Omar, it's the cool thing to do if you're a Hall of Famer and you retire from the NFL. You get a minority stake in one of those English premier league teams.

JIMENEZ: Exactly. Football is football no matter what side of the pond.

Andy Scholes, thank you so much.

SCHOLES: All right.

JIMENEZ: Coming up next, recession? What recession? A big bank just changed its forecast for the U.S. economy. We'll explain.

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[05:49:03]

JIMENEZ: Fitch Ratings is cutting U.S. mortgage giants Freddie Mac and Fannie Mae down a notch. Both their scores have been lowered from the gold standard of AAA to Anthony AA+.

CNN's Richard Quest has more.

(BEGIN VIDEOTAPE)

RICHARD QUEST, CNN ANCHOR AND CORRESPONDENT (on camera): The U.S. Treasury wasted little time after the downgrade was announced. The Treasury Sec. Janet Yellen made her views abundantly clear she disagreed. This was entirely unwarranted. The U.S. economy was fundamentally strong.

JANET YELLEN, TREASURY SECRETARY: Fitch's decision is puzzling in light of the economic strength we see in the United States. I strongly disagree with Fitch's decision and I believe it is entirely unwarranted. Its flawed assessment is based on outdated data and fails to reflect improvements across a range of indicators, including those related to governance that we've seen over the past 2 1/2 years.

[05:50:01]

QUEST (on camera): It wasn't only the Treasury. Top economists and respected names also came out and said the decision was inept. That the timing was off. It was bizarre, in the words of one. And yet, Fitch stood by its decision to downgrade the United States. This was not just about the immediacy of a recession, which they say

will happen in the fourth quarter of this year -- something else everyone disagrees on -- or, indeed, about the growth that's currently being experienced. In the view of Fitch, this was longer-term. It was about the erosion of governance.

RICHARD FRANCIS, LEAD ANALYST ON THE U.S. SOVEREIGN, FITCH RATINGS: And we do feel like governance has deteriorated again steadily over the last 20 years. And because of that, I think we have less confidence that the government can tackle these fiscal challenges.

QUEST (on camera): And so, now, two of the three major rating agencies have downgraded the United States -- admittedly, 11 years apart. What's interesting is the S&P never went back to the top level, having done the downgrade back in 2011. And it seems unlikely that Fitch would restore the highest grade anytime soon.

This is not about what's happening today. It is a warning for the future. Fitch has sent a warning shot across the bows of the U.S. The only problem is who's listening?

Richard Quest, CNN, New York.

(END VIDEOTAPE)

JIMENEZ: So, to talk about it all, let's bring in John Leer, chief economist at the Morning Consult. Jon, good to see you.

First, OK, it downgraded the U.S. debt rating, then to Freddie Mac and Fannie Mae's. Is the Biden administration justifiably angry about Fitch's recent decisions or are these decisions pretty warranted at this point?

JOHN LEER, CHIEF ECONOMIST, MORNING CONSULT (via Webex by Cisco): I think there is a reason to be disappointed. Of course, they're private sector enterprises so I don't think that the government really has room in this instance to get too bent out of shape. But it is particularly concerning because I think the timing is -- it's just off. It is a little bizarre, as Richard said in that prior piece.

The U.S. economy has been pretty steadily improving. We got through the debt standoff and the debt ceiling negotiations I think without really harming the underlying governance structure. And so, yes, I am surprised and I don't think it's going to be good for the U.S. economy going forward.

JIMENEZ: And I think a big indicator in any of these economic discussions for a lot of people watching is basically, their ability to put food on the kitchen table.

And so, for people that might not fully understand the role of these credit rating firms put it into perspective for us. Why are their ratings so important?

LEER: They're so important because they allow the U.S. government to go out and raise money -- to raise debt, in particular, and to raise it at a fairly low interest rate. So it's going to allow -- you know, this decision essentially will make it more expensive for the U.S. to finance its debt going forward. That means to finance things like infrastructure investments. To finance all of the investments in the U.S. economy that I think have made the U.S. so resilient and so fortunately, really, relative to the rest of the world.

JIMENEZ: Yes. And another indicator a lot of folks have been keeping an eye on is, of course, interest rates. We've already seen them lifted to their highest levels in over 20 years.

Should we expect more rate hikes for 2023?

LEER: Yes, I think I'm a little bit of an outlier here where I think the likelihood of a rate hike is not crazy. I would put it at maybe 50-50 between the end of this year. Yes, I think a lot of folks on Wall Street think that inflation is over. We don't quite see that yet. I think it's likely that you'll get some sort of a bounceback inflation possible from the housing market.

And so, on top of that, I think it's a slightly nuanced view. But even if interest rates stay the same and inflation starts to fall, which we've seen, real rates -- inflation-adjusted rates are essentially becoming higher so, effectively, borrowing money is becoming more expensive. So even if the Fed doesn't raise rates again going forward there's a chance that it will, in fact, become more expensive and ultimately, more contractionary in the economy.

JIMENEZ: Yes, a lot to keep an eye on.

John Leer of the Morning Consult. Thank you for joining us.

LEER: Thank you. My pleasure.

JIMENEZ: Now, in -- of course.

In an effort to crack down on internet addiction, China is looking to limit screen time for children.

CNN's Anna Coren is live in Hong Kong with more. So, Anna, given we seem to live in an online world. How exactly would this rule work?

ANNA COREN, CNN CORRESPONDENT: Yes, it's not just a Chinese problem is it, Omar? It's a Western --

JIMENEZ: Yes.

COREN: -- problem. But China is doubling down, you know, proposing new restrictions on children and teenagers and the time that they can spend on the internet and mobile devices each day in a bid, as you say, to counter internet addiction.

[05:55:08]

The country's cyberspace regulator says it wants providers to introduce a so-called "minor mode" that would cut off users from accessing the internet from 10:00 p.m. through till 6:00 a.m. The proposal also includes a limit on how much time that kids under

the age of 18 would be allowed to go online each day. If you're under the age of eight, it's 40 minutes a day. Eight to 16, an hour a day. Sixteen to 18, two hours a day. Once it's reached the limit the device will shut down.

Now, there are a number of exemptions, including emergency services, educational products such as online classes, apps for physical and mental development.

Parents -- they can also choose to exempt apps for the child, plus opt out of time limits.

We spoke to one parent this morning. Let me read to you what this mother of two had to say. She said, "I think it's good. On one hand, it can protect their eye vision as many young kids cannot stop themselves while watching something they like. It helps automatically cut it off. On the other hand, it's easier for us parents to control our kids' screen time. Without parent's approval they only have 40 minutes. Most importantly, the content under the teenage mode is more positive and healthy."

Now, parents, Omar -- they might be happy, but internet companies and their investors certainly were not. Shares in Chinese tech firms fell yesterday after news of the restrictions was announced, but they have bounced today.

One lawyer in China, Omar, said that this is going to be a big headache for internet companies if this is implemented.

Back to you.

JIMENEZ: Yes, we'll keep an eye on it. Thank you, Anna, for that.

And thank you all watching for joining us this morning. It's been great. I'm Omar Jimenez. "CNN THIS MORNING" is next with former President Trump appearing in court today for his third arraignment. What to expect.

And the story of two injured soldiers. How the Ukrainian army rescued one who was on their side and one who wasn't.

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