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EARLY START

National Security Adviser Michael Flynn Resigns; White House Handed Setback in Travel Ban Case; The Stock Market is on Fire. Aired 4:30-5a ET

Aired February 14, 2017 - 04:30   ET

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


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[04:30:41] JOHN BERMAN, CNN ANCHOR: Michael Flynn, the president's national security advisor, out, resigning overnight. Serious questions remain now about the timeline of events. What the president knew and what the White House was told about controversial phone calls that led to his demise.

We have live team coverage from around the world.

Welcome back to EARLY START, everyone. I'm John Berman.

CHRISTINE ROMANS, CNN ANCHOR: And I'm Christine Romans. Nice to see you all this morning. It's 31 minutes past the hour.

Breaking overnight, the first casualty in the Trump White House. National Security Adviser Michael Flynn resigning, under fire, under scrutiny. This announcement coming amid mounting evidence Flynn spoke to the Russians about sanctions and then lied about it to top White House officials, including the vice president, Mike Pence.

Flynn's decision to step down coming moments after CNN learned the Justice Department warned the White House last month about Flynn's contacts with Moscow and his possible vulnerability to blackmail. The stunning demise of one of the president's top confident sending shockwaves through Washington.

I want to get to the very latest this morning from CNN's Ryan Browne, live in the nation's capital.

Good morning.

RYAN BROWNE, CNN NATIONAL SECURITY REPORTER: Good morning, Christine.

That's right. Michael Flynn forced to resign, you know, and we're certainly going to learn more and more to kind of what led to his ouster. He, as you mentioned, one of the main controversies circles around his call with Ambassador Kislyak, the Russian ambassador.

Now, the Justice Department under Acting Attorney General Sally Yates informed the Trump administration during the last days of the Obama administration, that the counterintelligence operations that intercepted some of these phone calls between Flynn and the ambassador, and they actually had transcripts of those calls, which showed that sanctions were indeed discussed. So, this information was communicated to the incoming Trump team.

Now, we're learning that other officials in the Obama administration, including director of the CIA, John Brennan, and the director of national intelligence, James Clapper, also wanted to communicate these discoveries to the Trump team. So, what they knew, we're starting to find out a little bit more about that. But this led to the gap between what Flynn had said publicly, what the vice president had said publicly and what actually took place.

And forcing Flynn to write a resignation letter last night that was made available to the media which said, "I inadvertently briefed the vice president-elect and others with incomplete information regarding my phone calls with the Russian ambassador. I have sincerely apologized to the president and the vice president, and they have accepted my apology. I am tendering my resignation, honored to have served our nation -- sorry -- and the American people in such a distinguished way."

Now, Flynn will be replaced in an interim basis by the current chief of staff of the National Security Council. Retired Lieutenant General Keith Kellogg, he was one of Trump's earliest former military backers. He has been with Trump for a long time as adviser. He is a Vietnam veteran, former commander of the 82nd airborne. His name, a senior administration official says, is one that's competing for the permanent position down the road.

And we've also heard General Petraeus who, of course, commanded U.S. troops in Iraq and Afghanistan, but is, of course, as an administration official tell us, has some baggage given the fact that he is on probation for disclosing information while he was director of the CIA, forcing his resignation.

And also, Vice Admiral Robert Harward who was actually Secretary of Defense Mattis' deputy while he's at U.S. Central Command. He's a former Navy SEAL. His name also is in contention.

So, we'll be watching in these days. We know that we believe General Petraeus will be visiting the White House possibly today to meet with officials. So, we'll be watching to see who gets this top post.

ROMANS: And just a fascinating turn of events.

Ryan, thank you so much for that.

BERMAN: And General Petraeus going to the White House today. Chris Christie having lunch with the president today. That should be an interesting discussion. And, of course, at 10:30, the president is having -- don't even know what the subject is. It's education --

ROMANS: It's a listen for a parent/teacher conference listening session.

BERMAN: So, at 10:30, that's happening at the U.S. It is open press. So, there'll be cameras in there. And you can bet reporters hopefully will try to ask to questions to the president about this whole situation.

ROMANS: I mean, you get the sense that they didn't want to lose Michael Flynn because it would show weakness at the White House, disarray at the White House. But at some point, you know, the story became so big and developments so quickly, that there was nowhere to go.

BERMAN: You know, and in fact, yesterday, the messages were all over the place. I mean, all over the place. It was a day of contradiction, a day of confusion. There was at one point, were Kellyanne Conway said that the president had full confidence in General Flynn and then all of a sudden, not.

Let's get the latest on this from CNN's Dan Merica who's live for us in Washington. And was trying valiantly, I should add, to follow all of this yesterday.

DAN MERICA, CNN POLITICS REPORTER: Yes, I think you're exactly right. They didn't want to let him go for a number of reasons, one being that it makes them look like they are admitting something went wrong. And that is something that Donald Trump doesn't like to do.

But this was a remarkably fast-moving story even by standards of the Trump administration. Not only is this the shortest national security adviser tenure ever, but it also just happened so quickly in the afternoon. As you noted, Kellyanne Conway was telling reporters around 4:00 that Flynn had the full confidence of the president. A mere 64 minutes later, Sean Spicer, the press secretary, was saying that, no, well, Trump is evaluating his position.

Now, Donald Trump is naturally verbose, likes to talk to people. But when he is in the Oval Office swearing in Steve Mnuchin, his treasury secretary pick, he didn't exactly want to talk about the story. I want you to take a listen.

(BEGIN VIDEO CLIP)

REPORTER: Do you have confidence in Michael Flynn, Mr. President?

REPORTER: What exactly will you be evaluating with Michael Flynn?

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Thank you.

(END VIDEO CLIP)

MERICA: We're told that Mike Flynn resigned. He wasn't asked or fired. Contrary to what Donald Trump as a reality TV star, he doesn't actually like firing people, one administration official said.

What's interesting about this story is that as it moves forward, there are so many questions that need to be asked and answered. And as you note, we'll see Donald Trump a couple of times today and hopefully get questions about that. When did he know about Flynn's conversations? Who knew about them first? What was said during the conversations?

Another interesting point about this is that it raises the level for Mike Pence internally. If Flynn had stayed on, it would complicate things for the Pence-Trump relationship, given the fact that Flynn basically misled the vice president during these conversations and had the vice president go on national TV and vouch for him even though that wasn't accurate. So, if he had stayed around, that could have complicated things for Mike Pence.

BERMAN: Just to be clear, you know, Dan, when you follow the reporting on this, Sally Yates, who was acting attorney general, she allegedly told Don McGahn, who's the White House counsel, about this, about the conversations between Flynn and the Russian ambassador and that sanctions were discussed there. What we don't know, I supposed, is the White House counsel told anyone else.

MERICA: Yes, it does expose the White House counsel office as well. Who did they tell? Did they tell the right people? Did they go through those checks?

This is a new administration, so there's going to be some growing pains. But it's also a concern because there are serious questions about who knew when and what was known in the Trump White House.

BERMAN: And again, there are questions about whether Donald Trump and Michael Flynn had any conversations about the Russian sanctions prior to Michael Flynn's conversation with Russia. Those questions will be asked today.

Dan Merica, great to have you with us. Good for America, as I like to say.

All right. Michael Flynn's resignation raises serious new questions about his contacts with Russia. Two lawmakers are demanding a briefing by Thursday to find out more about what we are told they were warned about -- a possible vulnerability to blackmail.

Democrats John Conyers and Elijah Cummings were the ranking members of the Judiciary and Oversight Committees. They write, "We in Congress need to know who authorized these actions, permitted them and continued to let him have access to our most sensitive national security information despite knowing these risks. We need to know who else within the White House is a current and ongoing risk to our national security." A little hyperbole there.

ROMANS: And this statement from the Democratic Congressman Adam Schiff, the ranking member of the House Intelligence Committee, "Flynn's departure does not end questions over his contacts with the Russians. The Trump administration has yet to be forthcoming about who was aware of Flynn's conversations with the ambassador and whether he was acting on the instructions of the president or any other officials or with their knowledge."

BERMAN: And talk with Congressman Schiff, he's going to be on with me at 9:30 today. So, that will be an interesting conversation.

One prominent Republican is taking decidedly more gentle tone. Congressman Devin Nunes, the chairman of the House Intelligence Committee, says, "Washington, D.C. can be a rough town for honorable people, and Flynn who has always been a soldier, not a politician, deserves America's gratitude and respect for dedicating so much of his life to strengthening our national security."

ROMANS: All right. The resignation of Michael Flynn is certain to have a ripple effects on U.S. security agencies and worldwide diplomacy. In Russia, the Kremlin is taking a cautious approach to the news.

Let me take you now live to Moscow and bring in CNN senior international correspondent Matthew Chance.

Is there any official reaction from the Kremlin? And what is the sense there, how all of this makes the Putin regime look?

[04:40:00] MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes. Well, never underestimate the power of denial. I think that is the maxim by which the Kremlin is currently sticking to.

And they, again, in the past few minutes, told us on a conference call that they are not going to comment any further on the resignation of Michael Flynn. They referred us to the previous statements about the nature of the conversation between Michael Flynn and the U.S. ambassador to Washington, Sergey Kislyak, saying that sanctions effectively were not discussed. They're, even in the face of this resignation, they are refusing to acknowledge the issue of sanctions and the lifting of sanctions which was mentioned between these two figures.

So, obviously, we are waiting to see what else comes out on that. But the Kremlin I think is fair to say are deeply concerned about what this means for the future relationship between Washington and Moscow. Of course, they are getting used to the idea of an administration in Washington which is pretty pro-Russian, which has sympathies towards the Kremlin's point of view on a whole range of issues, from NATO to Syria, to the situation in Ukraine, to a certain extent.

Will that now change? Because the political situation in the United States is clearly that the -- the enemies of Donald Trump, the political economies of him, Democrats and Republicans, are looking for those around him with sympathies to Russia, looking for that as a sort of weak spot, a chink in his armor, as it were. And they are using it to discredit his administration, to the extent that they can.

Now, the concern in Russia is what will the reaction be of the Trump administration to that political sort of infighting? Will they change the pro-Russian position and become more anti-Russian, more hawkish when it comes to the Kremlin? Which is obviously be not beneficial to Moscow.

And so, these are concerns they had at the moment. They've been articulated in at least one tweet, but a couple of tweets actually from senior Russian politicians, from one Aleksey Pushkov, who is a senior Russian lawmaker here, saying the target of this resignation, the scandal, the target is not Flynn, but the relationship with Russia. So, reaffirming that idea that it's the detente with Russia that's under fire here, not just an individual within the Trump administration.

ROMANS: Certainly, a fascinating and fast-moving developments over the fast three hours. Thanks for being on top of it for us, Matthew Chance in Moscow.

BERMAN: And it's really to hear how the Russians are handling, it's basically denying it's an issue at all, you know, after the comments they made over the last several days.

There'd been so many issues swirling around and General Flynn hadn't resigned yet, but there were serious questions about whether he might, all during a news conference that the president had standing by the prime minister of Canada. You might think that President Trump would be asked questions about General Flynn. But no.

Why? Well, because the president took two questions from reporters decidedly friendly to the administration, handpicked reporters. You know, the White House, they tried to manage their message. There's nothing new or different about that, but clearly trying to dodge some potentially tougher questions yesterday.

And the reporters that President Trump picked obliged, and didn't ask about the entire Flynn situation. Maybe he will be asked today, if there is a chance.

All right. A new member of Donald Trump's cabinet sworn-in in the midst of all of this. But there is another nominee whose confirmation could be in trouble.

Stay with us.

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[04:47:31] ROMANS: Labor secretary pick Andrew Puzder's nomination seems to be in jeopardy after weeks of hearing delays and, you know, harsh criticism from Democrats over his record as a fast food CEO. He is now facing pushback from some Republicans.

Four GOP senators say they are withholding their support for him. Sources tell CNN the four are Senators Susan Collins of Maine, Lisa Murkowski of Alaska, Tim Scott of South Carolina, and Johnny Isakson of Georgia. Murkowski and Collins were the two GOP defectors in the vote for Education Secretary Betsy DeVos. That caused a tie which was broken by Vice President Mike Pence, a rare and historic moment.

Now, GOP leadership is scrambling to save Puzder's nomination. His confirmation hearing is scheduled for Thursday.

But another top money pick is not officially part of the administration. Hello, Steve Mnuchin.

BERMAN: Hello.

ROMANS: Mr. Treasury Secretary.

BERMAN: He is waving to you. ROMANS: Yes.

BERMAN: Oh, no, that's not what's happening there.

ROMANS: Yes, he is the new treasury secretary. He's a former partner of Goldman Sachs and a former mortgage banker. He's got a very diverse kind of resume honestly.

BERMAN: From "Avatar" to "Intern."

ROMANS: More recently, he produced movies in Hollywood. In fact, he's one of the producers on this "Lego Batman" movie over the weekend. Mnuchin has repeatedly said tax cuts are top his issue, but preventing a debt ceiling crisis will likely become his first big test. That's, of course, the country's legal borrowing limit set by Congress. The current ceiling expires on March 15th. Put it in your calendar.

If Congress doesn't act by that deadline, Mnuchin will have to start using special accounting measures just to keep pay on the country's bills without violating the borrowing limit. Eventually, those special measures will run out and that could upend markets and caused financial crash.

I think there's almost zero chance they don't raise the debt ceiling.

BERMAN: No, I can't imagine going through that again.

ROMANS: Yes.

BERMAN: All right. A new blow for the Trump administration's travel ban, or proposed travel ban that is not in effect right now. Federal judge in Virginia has granted that state's request to halt the ban, again, even though it is not in effect nationally. The ruling affects everyone who lives in Virginia and anyone who attends or works at a public university there.

In her opinion, the judge wrote, "Maximum power doesn't mean absolute power." The decision came the same day that the Trump administration was back in a Seattle courtroom facing the judge who initially halted the ban nationwide. There were developments inside that courtroom.

Let's get the latest from CNN's Dan Simon.

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DAN SIMON, CNN CORRESPONDENT: John and Christine, the legal challenge to President Trump's travel ban will proceed here in Seattle federal court, that despite the administration's attempt to postpone things amid the possibility of more appeals. Judge James Robart says he wants the merits of the ban to be argued in his courtroom. He was a little taken aback by the administration's efforts to postpone things, saying, quote, "I'm a little surprised since the president said he wanted to see you in court", a clear reference to one of Donald Trump's tweets. [04:50:06] In the meantime, the administration is still figuring out

how to proceed. There is the possibility of rewriting a brand new travel ban. But as long as the current one is being advanced, what the judge in Seattle is saying is that he wants it to be contested in his courtroom -- John and Christine.

(END VIDEOTAPE)

BERMAN: All right. Dan Simon, thanks so much.

Some members of the Freedom Caucus or conservative wing of the Republican Party in the House, they want Obamacare repealed immediately and Planned Parenthood defunded. But they're running to roadblocks on both fronts. The Freedom Caucus voted last night to fast track a vote on repealing the Affordable Care Act.

That sets up a clash on those trying to move the bill along more slowly. There are others who fear that the Planned Parenthood language complicates the matter even more, and they want to separate that with the ongoing discussions.

ROMANS: All right. Have you looked at your 401(k)? Have you looked at your 401(k)?

BERMAN: I did --

ROMANS: Wow. It has been up big for like six years, and now, another incredible rally in the stock market. Two days of record highs for all the major averages. And I'm going to tell you, there's one stock that is shining just months after the naysayers were bruising it. What's this bruising?

We'll get a check on CNN Money Stream next.

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[04:55:31] BERMAN: Jeffry Sandusky, the son of convicted sex abuser, a former Penn State football coach Jerry Sandusky is under arrest, charged with soliciting sex from a child under 16 and soliciting child porn.

The 41-year-old Sandusky was arraigned in court Monday. He faces 14 felony and misdemeanor counts involving two girls. Sandusky has reportedly been suspended from his job at a correctional facility pending the outcome of this case.

ROMANS: All right. It appears disaster has been averted thankfully at the Oroville Dam in northern California. Officials say they are cautiously optimistic about containing the threat of flooding from the dam, the tallest in the country. Some 188,000 were people evacuated from surrounding towns, after a was hole discovered in an emergency spillway. The evacuation order remains in place for three counties. Governor Jerry Brown has formally requested federal money to help with this response.

BERMAN: There is a truce, thank goodness, between Charles Oakley and James Dolan. This comes after the former New York Knicks forward was forcibly removed from Madison Square Garden last week and banned by the team owner. This would only happen in New York. I feel like this is the most covered thing in New York City right now.

There was actually a peace was negotiated by NBA commissioner Adam Silver and Michael Jordan. This happened in a summit meeting on Monday. Now, Jordan played with Charles Oakley for the Bulls. Before Oakley went to the Knicks, Oakley played on the Bulls before they won the championships.

I know you lived through that because you lived in Chicago after Iowa.

ROMANS: Yes.

BERMAN: Dolan now says he hopes that Oakley will return to the garden as his guest in the near future.

ROMANS: I actually got to cover Michael Jordan as a reporter when they were winning all those --

BERMAN: It was because of you, I'm told.

ROMANS: And it's a good thing, you know, I know something about basketball. I didn't then. It's sort of embarrassing.

All right. Let's get a check on CNN Money Stream this morning.

By nearly every available measure, the U.S. stock market is on fire. The Dow, the NASDAQ, the S&P 500, the Russell 2,000 all closing at record highs for the second day in a row. They're seemingly endless optimism right now about lower taxes and less regulation, even as political turmoil grips Washington. Futures are down a little bit here this morning.

The darling on Wall Street is Apple. It's up a stunning 15 percent this year, trading at a record high above $133 a share. The biggest gainer of the 30 stocks in the Dow, slumping iPhone sales had some analysts talking down the stock, right? They were wrong.

BERMAN: Wrong.

ROMANS: Sales are rebounding and stock is surging. Remember how many times people said, in the post-Steve Jobs era, Apple will just not be able to shine?

BERMAN: Is there a rumor that it's going to wireless charging on the next iPhone and people love that idea?

ROMANS: I don't like rumors, but I do love what I see right there. That's a fact.

BERMAN: Can you confirm that moments ago, during commercial, you were talking about the fact you have corn inside your desk?

ROMANS: I do -- I do deep corn on my desk, because I like to cover big commodities like corn. You are very -- tell all my secrets this morning.

This is why we're talking about corn. President Trump meeting with Canadian Prime Minister Justin Trudeau at the White House. Well, this is not why we're talking about corn. We're talking about corn after this.

He was joined by a dozen female business leaders. That meeting was set up by Ivanka Trump who was also in attendance. Trump and Trudeau vowing to set up a special council to support women in the workplace.

The big question: what is the future of NAFTA? That is what people want to know here. Trump says the two leaders will be tweaking their trade relationship. We don't know how.

And he emphasized that his main trade issues are with Mexico, not Canada. One reason Trump cites is this, the trade balance. The U.S. has an $11 billion deficit last year with Canada. You know, that's basically considered almost balanced trade. You know, it's $500 billion goods and services crossed each year. So, $11 billion is essentially balanced trade. But with Mexico, the U.S. has a $63 billion trade deficit.

Now, here is the corn story, John Berman. If the president does anything drastic on trade, Mexico is ready to hit America where it really hurts, the cornfields. A Mexican senator who leads the Committee on the Foreign Relations says he will introduce a bill this week to instruct Mexican businesses to buy corn from Brazil and Argentina, instead of the United States.

It's one of the first signs of a serious response to President Trump's threat against Mexico. The U.S. is the world's largest producer and exporter of corn. American corn shipments to Mexico have catapulted since NAFTA was signed. And many say, auto industry and corn farmers, the two agriculture, the two biggest beneficiaries of NAFTA, both stand to lose a lot.

BERMAN: They'll be hitting America below the Farm Belt, I suppose, you can say.

You're going to miss this. You're going to miss it.

EARLY START continues right now.

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