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Interview With Former U.S. Secretary of Defense Leon Panetta; Trump Administration Rolls Back Environmental Protections; Intelligence Uproar; White House: "Staff Has Met" to Discuss Health Care Bill; U.S. Commander: A "Fair Chance" Airstrike Killed Civilians. Aired 6-7p ET

Aired March 28, 2017 - 18:00   ET

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

[18:00:03]

WOLF BLITZER, CNN ANCHOR: Intelligence uproar. Chairman Devin Nunes reject calls for him to step aside from his committee's Russia investigation amid growing controversy and partisan rancor. I will ask the former CIA Director and Defense Secretary Leon Panetta for his take of Nunes' actions and his credibility.

Regulation rollback. The president signs a sweeping executive order to undo the Obama administration policies to combat climate change. Will it create jobs, as Mr. Trump claims?

And accepting blame? A top U.S. commander now concedes that an airstrike likely killed innocent Iraqis. Did ISIS deliberately lure coalition forces to attack a location, knowing dozens of civilians would die?

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: Breaking news this hour: The White House is pushing back against new controversy in the House investigation of the Trump camp's contacts with Russia.

The press secretary, Sean Spicer, flatly denying a report that the administration sought to block testimony by the former acting Attorney General Sally Yates. But Democrats are questioning whether a House Intelligence Committee hearing that had been scheduled for today was canceled to prevent Yates from talking publicly.

This is another cloud over the investigation led by Republican Devin Nunes, the House Intelligence Committee chairman. Tonight, Nunes is rejecting growing calls for him to step aside from the probe, as even some Republicans are joining Democrats and raising concerns about his credibility.

Also tonight, the Senate Intelligence Committee is moving forward with plans to question the president's son-in-law, Jared Kushner, about his Russia contacts. The panel's chairman revealing Kushner's testimony will be conducted in private and likely under oath. The president, meantime, is making good on a campaign promise to gut

Obama era environmental policies. His just-signed executive order is designed to put energy independence and jobs over efforts to combat climate change.

This hour, I will talk with Leon Panetta, who served as defense secretary and CIA director under President Obama. And our correspondents and analysts are also standing by.

First, let's go to our senior White House correspondent, Jeff Zeleny.

Jeff, Sean Spicer says the administration would actually welcome testimony by former the acting attorney general, Sally Yates.

JEFF ZELENY, CNN SENIOR WASHINGTON CORRESPONDENT: Wolf, that is what Sean Spicer said today at the White House briefing.

But I can tell there are some conflicting accounts of how serious the White House is about this testimony. Now, there was scheduled to be a hearing today on Capitol Hill, another hearing about these Russian allegations. Of course, that was called off.

But Sally Yates was going to be one of the star witnesses. Now, you will remember she was a deputy attorney general in the Obama administration and she was a holdover. She was the acting attorney general in the first days of the Trump administration until she was fired. That's a bit of background here.

But at the press briefing today, Sean Spicer said they would welcome her testimony.

(BEGIN VIDEO CLIP)

SEAN SPICER, WHITE HOUSE PRESS SECRETARY: On the 24th, Ms. Yates' attorney sent a letter to the White House counsel requesting that consent, specifically stating that if they did not receive a response by March 27 at 10:00 a.m., they would -- quote -- "conclude that the White House does not assert executive privilege over these matters."

The White House did not respond and took no action that prevented Ms. Yates from testifying. That's the story. That's what documents show.

I hope she testifies. I look forward to it. It was never -- let's be honest. The hearing was never -- was actually never notified. If they choose to move forward, great. We have no problem with her testifying, plain and simple.

(END VIDEO CLIP)

ZELENY: But the question here is executive privilege here.

And now the issue we're talking about, Wolf, is the investigation into Michael Flynn and contacts he had with Russian operatives. Of course, he is the former national security adviser who was fired.

But Sally Yates was involved in the investigation into him in the final weeks of the Obama administration. So she has a perspective on this that she wanted to share with the hearing today, with the House Intelligence hearing, which was abruptly canceled, Wolf.

So, even though the White House is saying they would like to have her testify, we will see if that ever happens in the House committee or on the Senate committee, which is also under way -- Wolf.

BLITZER: I'm sure it would have been a fascinating hearing. I was looking to that testimony.

Jeff Zeleny, thanks very much.

Also, tonight, the House Intelligence Committee chairman insists the panel's Russia investigation is in fact moving forward, as he rejects growing calls to recuse himself.

Let's go to our senior congressional reporter, Manu Raju.

Manu, yet another chance to question Nunes today.

MANU RAJU, CNN SENIOR POLITICAL CORRESPONDENT: Yes. That's right.

I mean, he is really defiantly staying in that position, believing that these questions for him to step aside essentially amount to partisan politics. That's what even some Republicans on the committee, including Peter King of New York, told me earlier today.

[18:05:02]

Now, this all coming afternoon Nunes went and briefed the White House, President Trump last week over surveillance information that he learned from a secret source on White House grounds about some communications with Trump officials that were picked up in some of these intelligence reports.

But also his decision to abruptly cancel Tuesday's public hearing that was supposed to happen today and also the committee, because of this, canceling all other private briefings that were going on today, raising real questions about whether this committee can go forward.

Now, when I asked Nunes today, will you listen to these Democratic calls to recuse yourself, he said he would not.

(BEGIN VIDEO CLIP)

RAJU: But are you going to stay as chairman and run this investigation?

REP. DEVIN NUNES (R), CALIFORNIA: Well, why would I not? You guys need to go ask them why these things are being said.

RAJU: Can this investigation continue as you as chairman?

NUNES: Why would it not? Aren't I briefing you guys continuously and keeping you up to speed?

RAJU: But they are saying that it cannot run as you as chairman.

(CROSSTALK)

NUNES: You have got to go talk to them. That sounds like their problem. I don't have -- my colleagues are perfectly fine. They know we're doing an investigation and that will continue.

(END VIDEO CLIP)

RAJU: Now, we know today's hearing was supposed to also feature Sally Yates, as Jeff Zeleny was just reporting.

Now the question had been whether or not the White House was seeking to block her testimony. The White House denied that, of course. But when I asked Devin Nunes whether or not the White House had any role in urging him to cancel today's hearing, he would not say.

(BEGIN VIDEO CLIP)

NUNES: Look, you guys are just speculating. I'm sorry. Whenever there's time, we will did a press...

RAJU: But did they ask you to cancel the hearing today?

NUNES: Come on, guys. I mean...

RAJU: Why did you cancel the hearing?

NUNES: There's no -- nothing has been canceled.

(END VIDEO CLIP)

RAJU: Now, Nunes also today earlier suggesting that he is open to having FBI Director James Comey and Mike Rogers, the NSA director, come before the committee in a private briefing.

They actually canceled that briefing today, but Adam Schiff, a top Democrat, said he wants to have a public hearing before moving forward on some of their private briefings.

But the Senate Intelligence Committee Wolf, moving forward on its, including starting to make plans to interview Jared Kushner, who is President Trump's son-in-law and a top adviser, about his contacts with Russian officials.

The chairman of that committee, Richard Burr, telling me it is likely that that testimony will happen under oath, but it will be a private setting, not a public setting. We will see whatever we may learn from this private testimony, Wolf.

BLITZER: Manu Raju getting some excellent exercise up on the Hill as well. Manu, thank you very much.

We are also learning more tonight about the Senate's Russia investigation and plans to question the president's son-in-law and senior adviser, Jared Kushner. His testimony is likely to be under oath and it's likely also to focus at least in part on his newly disclosed meeting with a Russian banker who has close ties to Vladimir Putin.

CNN's Jessica Schneider is looking into all of this for us.

This hearing is supposed to take place, I take it, behind closed doors.

JESSICA SCHNEIDER, CNN CORRESPONDENT: Yes, that's right, Wolf.

The chairman, Richard Burr, saying that Kushner's testimony will be that private interview, but likely under oath. And, of course, on the list of likely questions, why did Jared Kushner take a meeting with the chair of a state-run Russian bank at the height of the transition?

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Jared Kushner met with this Russian banker during the transition. Sergey Gorkov is the chairman of VEB Bank and has deep ties to Russian government. Gorkov was appointed to his job by Russian President Vladimir Putin.

White House disclosed that Kushner met with Gorkov at the request of Russian Ambassador Sergey Kislyak in December 2016, but insists this was all part of Kushner's transition duties. "Jared attended the meeting in his capacity as transition official. Nothing of substance was discussed. There was no follow-up."

But the bank says its executives met with Kushner as part of a road show of business meetings in 2016, disclosing that Gorkov met with a number of representatives from the largest banks and business circles in the United States, including the head of the Kushner Companies, Jared Kushner.

So which was it, a transition officials meeting or a meeting to discuss private business? The White House not answering requests to clarify, instead insisting all inquiries about the administration's ties to Russia are just another distraction.

SPICER: If the president puts Russian salad dressing on his salad tonight, somehow, that's a Russian connection.

SCHNEIDER: But ethics experts say there is cause for concern. VEB Bank was under U.S. sanctions for three years. Generally, simply meeting with an entity under sanctions isn't necessarily a problem, but doing business with it might be.

When Kushner met with Gorkov, he was still CEO of Kushner Companies. At the time, the company was trying to attract financing for a building project in Manhattan.

DAVE LEVINTHAL, CENTER FOR PUBLIC INTEGRITY: Jared Kushner's position within the Trump transition and administration was well known to the people who he was doing some sort of business with.

[18:10:03] So that's where you get the issue of gray area and lines blurring

between what somebody does in his or her private capacity as a business person and what somebody is doing in their public capacity as an official or an adviser to the most powerful man in the world.

SCHNEIDER: VEB Bank's strategy posted to its Web site highlights its tight relationship with the Russian government, stating, "Together with the government, we will select the most promising growth areas in the economy."

A Kremlin spokesman says the Russian government was not aware of the meeting between Kushner and Gorkov. The chairman of the Senate Intelligence Committee, Richard Burr, tells CNN that Jared Kushner will likely testify under oath, but privately to senators.

Republican Senator Susan Collins says her committee needs to clarify whether Kushner was acting as a member of the Trump transition team or his private business, but Collins suspects the Russian bank might just be trying to drum up more confusion.

SEN. SUSAN COLLINS (R), MAINE: This has been a longstanding practice of the Russians to spread disinformation. So, I was not surprise when they contradicted Mr. Kushner's explanation of why he had these meetings.

(END VIDEOTAPE)

SCHNEIDER: And the Senate Intelligence Committee begins its open hearings on Thursday. The first day will feature Russian and cyber- security expert, but still no word yet on when Jared Kushner might actually appear before the committee -- Wolf.

BLITZER: All right, Jessica, thank you, Jessica Schneider reporting.

Let's get some more on all of this with the former defense secretary, the former CIA director under President Obama, Leon Panetta, who is joining us now.

Mr. Secretary, thanks for joining us.

I want to get to all of the developments involving Jared Kushner in a few moments, but first let me ask you about the canceled testimony of the former acting Attorney General Sally Yates. Both the White House and the House Intelligence Committee chairman, Devin Nunes, maintain that they did not communicate about her testimony and that they still want to hear from her.

So why do you believe Chairman Nunes canceled that important hearing that had been scheduled today with Yates, the former CIA director, the former director of national intelligence as well?

LEON PANETTA, FORMER U.S. SECRETARY OF DEFENSE: Well, that's a major question, Wolf, why those hearings would be canceled, canceled abruptly.

The whole purpose here of these investigations is to determine the truth, the truth of what Russians did in the election, what can we do to prevent that from happening in the future, and was there any collusion between the Trump campaign and the Russians? Those are the issues. We're entitled to the truth.

The only way you find the truth is by allowing testimony to take place, by gathering evidence and by trying to find the facts involved. And when you cancel hearings, when you fail to look at the facts and the evidence, it does impact on the credibility of that investigation.

BLITZER: People are wondering why did those public hearings that have been announced for a while, why were they suddenly canceled?

In letters published, Mr. Secretary, by "The Washington Post," the Justice Department wrote to the law firm representing the former acting Attorney General Sally Yates. Let me read a couple sentences from that letter.

"Ms. Yates seeks authorization to testify about communications she and a senior department official had with the Office of the Counsel to the President. Such communications are likely covered by the presidential communications privilege and possibly the deliberative process privilege. The president owns those privileges. Therefore, to the extent Ms. Yates needs consent to disclose the details of those communications to the House Permanent Select Committee on Intelligence, she needs to consult with the White House."

The White House press secretary, Sean Spicer, said today the White House did not exert executive privilege and would have let her testify, her testimony proceed, had the hearing not been canceled. Explain this idea of executive privilege to our viewers. What's at issue here?

PANETTA: Well, there is something called executive privilege, where communications between members of an administration and the president are protected under this executive privilege rule.

It seems clear that somebody raised the issue of executive privilege. However, the press secretary made clear that they are not asserting that privilege. And obviously the deputy attorney general now has the opportunity to testify.

I guess my recommendation would be that the committees ought to immediately proceed to get her testimony.

BLITZER: When a former Department of Justice employee like her is asked to testify, is it typical to have this type of negotiation, possible restrictions on his or her testimony?

PANETTA: Normally, the role of a White House counsel is to raise the issue of whether or not executive privilege applies.

[18:15:05]

That was certainly done in the time I was in the White House. And the president usually operates to try to protect that privilege. However, if there is an investigation that is going on, then clearly that privilege can be waived.

It sounds like they are willing to waive that privilege. And I think that's good, because we will be able to find the facts out as to what she knew and what she didn't know.

BLITZER: Yes, Sean Spicer mincing no words. He says the White House wants her to testify. Let's see if that hearing does in fact take place.

Last week's testimony from the FBI director, James Comey, the National Security Agency director, Admiral Mike Rogers, contradicted President Trump's wiretapping claims against President Obama, considering the former acting Attorney General Yates' role in the departure of General Michael Flynn as the national security adviser from the Trump administration, is it likely that her testimony would also contradict previous statements from the White House on Russian contacts?

PANETTA: I think the issue here is, what did she know about the investigation, particularly as it related to the national security adviser, Flynn? And what were his contacts with the Russians and was he forthright in explaining what those contacts were about?

I suspect that that is the main area that she would testify to, although she is a deputy attorney general and is aware of a number of elements that may be involved in this investigation.

BLITZER: Yes. And as important as her testimony would have been if there had been that hearing today, the former director of national intelligence, James Clapper, and the former CIA director, John Brennan, they were also scheduled to testify in an open hearing today.

Their testimony could have been even more significant in the American public's learning what was going on. I assume you agree?

PANETTA: There's no question.

This is an intelligence issue. Our intelligence agencies are the ones who determined that Russians were deliberately trying to influence our election. Issues surrounding what Russians were doing clearly came to intelligence officials that were involved in this matter. So their testimony, I think, would be critical to being able to determine what exactly the facts are as it relates to Russian interference.

BLITZER: A lot of supporters of the president, though, feared that whatever they said could have contradicted some of the accusations that have been leveled by President Trump.

PANETTA: Well, again, you know, the whole purpose here, I think what the American people expect is that we will find the truth.

And that's the purpose of these investigations, the investigation by the Senate Intelligence Committee, by the FBI, and by the House Intelligence Committee, although clearly the House Intelligence Committee's investigation has some real credibility problems now, as a result of what Chairman Nunes did. But the whole point is to try to find the truth, find the facts and

determine exactly what happened, not speculate, not listen to the statements that are coming out of all sides as we go through this investigation, but what are the facts, what is the evidence, and what is established in truth in terms of what happened here?

BLITZER: Mr. Secretary, we have a lot more to discuss. I want to take a quick break. We will resume all of this right after this quick commercial break.

(COMMERCIAL BREAK)

[18:23:17]

BLITZER: We're back with Former Defense Secretary, former CIA Director Leon Panetta.

Mr. Secretary, I want you to listen to Republican Senator Lindsey Graham weigh in today on the House Intelligence Committee chairman, Devin Nunes, and his actions. Listen.

(BEGIN VIDEO CLIP)

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: The problem that he's created is, he's gone off on a lark by himself, sort of an Inspector Clouseau investigation here, trying to find some unmasking information about collection incidental with a Trump campaign and some foreign agent outside of Russia.

I think the only way this thing can be repaired, if he tells his colleagues on the House Intel Committee who he met with and what he saw and let them look at the same information.

(END VIDEO CLIP)

BLITZER: You agree with this Inspector Clouseau reference?

(LAUGHTER)

PANETTA: Lindsey Graham has a great way of framing those kinds of issues.

Look, it's pretty simple, Wolf. You cannot have a credible investigation by a committee in the Congress without a close working relationship between the chairman and the ranking member. That's absolutely essential to an objective and fair hearing.

What he did was wandered off, went to the White House, got secret information there, went to the president, then briefed the press, without telling his ranking member what he was doing. That's a major breach in the ability of both of them to trust one another. Whether it can be repaired or not, I don't know.

But it cannot work. You cannot have a credible investigation without a close working relationship between the chairman and the ranking member. [18:25:01]

BLITZER: You served in the House of Representatives. I think you were on the Intelligence Committee. You may have been chairman.

Did you ever find yourself in a situation where you would have withheld this kind of information from the ranking member, the rest of your committee?

PANETTA: In my day, there was a close working relationship between the chairman and the ranking members, and particularly when it came to this kind of investigation.

And if you're not -- if you're not making that person a part of everything you're doing, sharing the briefing, sharing the intelligence, sharing the evidence that is presented, so that both of you know what the committee is being made aware of, then it's going to break down. And I think Chairman Nunes has a real basic decision here as to whether or not he is going to run a credible investigation into this issue or whether he is just going to do a political sideshow.

That's the choice, and that will determine whether or not the House really does conduct a credible investigation.

BLITZER: In your experience working at the White House, working at the CIA -- you were a White House chief of staff, CIA director -- is it normal for the chairman of the House Intelligence Committee to come over to White House grounds, use a secure room there to get access to executive branch documents?

PANETTA: Well, in my time at the White House and at the CIA, that never happened.

The fact is that they have a security room up on Capitol Hill in the Intelligence Committee operation where they can provide that kind of information. And the right way to have handled this is for the chairman and the ranking member to have sat down on Capitol Hill in their secure room to get that briefing together, so that they both were made aware of the information that was being provided.

BLITZER: On the issue of the senior adviser to the president, the president's son-in-law, Jared Kushner, we're getting some different explanations. He met, as you know, with the head of a Russian bank. That bank had been sanctioned by the Obama administration because of Russia's activities in Crimea.

The White House says Kushner held this meeting as part of his transition duties. The bank, though, says Kushner was representing his family's real estate business. In your experience, would a meeting like this has been a routine part of a presidential transition?

PANETTA: It's very strange to have somebody in a transition meeting with a Russian bank. I have no idea what that was about, and it doesn't sound like it was something done pursuant to the normal duties that somebody in a transition position would engage in. I have a feeling that it related to financial issues, since it

involved a Russian bank. But, to his credit, he is willing to testify on that issue. And I hope that the committee really thoroughly looks at what reasons were, why he engaged in that conversation.

BLITZER: Yes. If he were dealing with foreign governments, even matting with the Russian ambassador during a transition, that's much more acceptable, right?

PANETTA: No, that's right. You basically deal with foreign ambassadors. You talk with them. But to engage with a bank that was sanctioned by the United States, you would think he would think twice about doing that because of the implications involved.

BLITZER: Well, during a transition, this is after the election -- he is now president-elect -- wouldn't there be intelligence officials or law enforcement officials that would inform Kushner, for example, that this bank is seen as an arm of Putin?

The banker Kushner was meeting with had deep ties to the FSB, the Russian intelligence service. Wouldn't he be briefed on that kind of information before taking a meeting like that?

PANETTA: Wolf, you would think so, at least in the transitions I have been involved with.

There would be an awful lot of care exercised with regards to those kinds of meetings, and you would have intelligence officials who would make the individual aware of what implications are.

I have a feeling that the Trump transition did not engage in that kind of disciplined approach to the relationships that they engaged in during the period of the transition. And I think they are paying a price for that now.

BLITZER: Leon Panetta, thanks so much for joining us.

PANETTA: Good to be with you.

BLITZER: Just ahead, we will have more on the breaking news involving this entire Russia investigation. Is the House Intelligence Committee chairman, Devin Nunes, trying to protect the president? We have new reporting. We are going to tell you about that right after a quick break.

(COMMERCIAL BREAK)

BLITZER: involving this entire Russian investigation. Is the House Intelligence Committee chairman, Devin Nunes, trying to protect the president?

[17:30:08] We have new reporting. We're going to tell you about that right after a quick break.

(COMMERCIAL BREAK) BLITZER: We're following breaking news on the investigation of Russia and its contacts with the Trump camp, including the White House denial that it worked to try to block testimony by the former acting attorney general, Sally Yates. We're joined by our experts on all of this.

[17:35:07] And Gloria Borger, she was supposed to testify today, Sally Yates. John Brennan, the former CIA director, was supposed to testify. James Clapper, the former director of national intelligence. We were all looking forward to their testimony. Didn't happen. Had we heard their testimony, what do you think the upshot would have been?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, multiple sources tell me today that, had she testified, there wouldn't have been a major revelation, but it would have been an embarrassment to the White House.

Because what we have seen from both Reince Priebus and Sean Spicer in multiple public appearances is that they said Sally Yates came to the White House counsel to give them what they called a heads-up.

Rather, I think, what we would have heard from Sally Yates was something beyond a heads-up. I think we would have heard that she had significant concerns about an issue of compromise with General Flynn. And that would have -- that would have been more than embarrassing to the White House. And we didn't hear her say it today, Wolf.

BLITZER: You've been doing, Ryan Lizza, a lot of reporting on this. I read your piece in the "New Yorker" magazine just today. What are some of the new revelations you've gathered?

RYAN LIZZA, CNN POLITICAL ANALYST: Well, I think two things. One thing, I want to add something to what Gloria said, is the two other witnesses that haven't gotten as much attention today, those were going to be no picnic for the White House, as well, right?

BLITZER: Clapper and Brennan.

LIZZA: Clapper and Brennan. Brennan has said -- he's said that Trump should be ashamed of himself for his appearance at the CIA. Brennan -- excuse me, Clapper has said that there's no evidence of the president's tweets about the wiretapping.

And so anyway, the piece I did today was basically just laying out the evidence for some very obvious coordination between the White House and Nunes, including on the morning of the Monday hearing last week, a White House official told me very clearly that Nunes would start to raise the issue of incidental collection.

And we know since Monday after that hearing, one of the things that Nunes has done, I think arguably to change the subject, has been to say that incidental collection is the issue here, which led to him going to the White House, you know, the other night and then briefing the president. And so there was some very obvious coordination between the White House and the chairman of the Intelligence Committee on the last week of events. BLITZER: Because Nunes, he said to me yesterday the only law he

thinks that may have been broken was the releasing of the name of General Flynn in that phone conversation that may have been intercepted with the Russian ambassador.

BORGER: But General Flynn's conversations, the Russia issue would have come up, OK, if Sally Yates had testified. That was what some of those...

DAVID CHALIAN, CNN POLITICAL DIRECTOR: Because General Flynn was central to that story.

BORGER: Right. Exactly.

CHALIAN: But that's why...

BORGER: But the lead conversation and the unmasking conversation is that, you know, it's a diversion...

CHALIAN: That's why I don't think they can...

BORGER: ... from the Russia story.

CHALIAN: ... actually say it with a straight face that incidental collection is the real story here. It's not the real story. The incidental collection has nothing to do with the FBI investigation and the Senate and House intelligence investigations into Russian contacts with Trump campaign officials and Russian...

LIZZA: And that's what last week has been. It's been to...

EVAN PEREZ, CNN JUSTICE CORRESPONDENT: So it worked. For the past two weeks...

LIZZA: Right. Stop talking about Russia and start talking about the collection.

PEREZ: ... Nunes and whether he took an Uber. And what time did he go in? Was the sun up. I mean, this has been a week of basically not talking about the one issue that the White House doesn't want to talk about.

BLITZER: But David, you have a good understanding why this hearing today was cancelled?

CHALIAN: I don't think we have a really good understanding.

BLITZER: Because now -- I mean, what is the explanation?

CHALIAN: Well, the -- there was no clear explanation, one that satisfied, other than that Nunes clearly did not want to move forward with it. That was quite clear. The why, I leave it to...

BORGER: And Sally Yates wanted to testify. It wasn't as if she was hiding behind something and said, "Oh, I don't want to testify." She wrote -- you know, her attorney wrote multiple letters talking about the issue of privilege. And the Department of Justice said, "You know what? The president has all the cards on this. You need to talk to the White House counsel." And then the White House counsel didn't respond to her. And then suddenly Nunes cancels the hearing. She was trying to find a way to testify.

PEREZ: Look, the hearing, the hearing today that did not happen would have been a very bad day of headlines for the White House. It would have been last Monday, plus more than that, because you have Brennan; you have Clapper, who were prepared to back Comey's testimony which said -- in which he said that there was no proof to back up what the president said in his tweets. That would have been No. 1.

The second thing that Clapper and Brennan would have been able to describe is what they know about, as least as much as they can talk in an open setting, about the Russia contacts with Trump campaign members. Obviously, that's an FBI investigation, so there's limited amount of information that they can provide. But we would have seen another day like Monday. And that is what Devin Nunes does not want. That's something that Sean Spicer and certainly the White House operation did not want.

CHALIAN: Evan, isn't it also true -- the White House has touted this -- that Clapper has said in his time before he left his position, he saw no evidence of collusion.

[18:40:07] PEREZ: But they did not want -- but they did not want Clapper to have a hearing in which he could clarify...

CHALIAN: Yes. Just like they thought Comey was going to be able to grab them some headlines, and it proved not being true. So did they think maybe Clapper could provide some positive headlines, but that would not be true either.

LIZZA: That issue actually got cleared up on Monday. Clapper did say that he's seen no evidence in collusion. But it's in the IC's investigation of the Russian cyberattack. Right? Not -- that's separate from the FBI's investigation. He is investigating that issue.

BORGER: I just don't think that the White House wants to keep peeling the onion over and over again. Because if you peel the onion, and you think, OK, Sally Yates went in and talked to the White House counsel and said, yes, there was an issue that you needed to worry about. There was some kind of a compromise. Then we might be asking the question, "Well, why did it take two plus weeks? Why did the White House sit on that? And why did it take two plus weeks for the White House to acknowledge it, only after a 'Washington Post' story came out and talked about Flynn's conversations? And why, then, didn't they tell Pence?"

And so we might continue peeling that onion, which would not be a good road for them to go down.

CHALIAN: But Sally Yates is going to testify.

LIZZA: That's why it's all backfired. BORGER: It backfires.

CHALIAN: Sally Yates is going -- what you're describing that she went, we're going to hear Sally Yates say this in an open format.

BLITZER: And I'm sure we're going to hear it from Clapper; we're going to hear from Brennan, all of them. If they don't testify on the Hill, they're obviously welcome to come here to THE SITUATION ROOM and give us their recollections of what happened.

Everybody, stick around. We have much more coming up. We'll be right back.

(COMMERCIAL BREAK)

[18:46:20] BLITZER: We're back with our panel.

You know, Gloria, the word came from the Republican leadership on the Hill today, from the White House, maybe repealing and replacing Obamacare is not dead after all.

BORGER: It's back. Yes, I think -- I -- who knows? I was talking to a White House official over the weekend and he said to me that there are whispers of it coming back and one of the reasons is that the Freedom Caucus seems to be splitting up a little bit. And that they are worried because some pro-life folks may be going after them for not killing Planned Parenthood, which repealing Obamacare would have done.

And I also think that if they are looking at tax reform and they are looking at infrastructure, there was a big chunk of change that they would have gotten from repealing Obamacare and they need the money, Wolf. They need the money to do it.

BLITZER: But, David, even if they get it passed, repealing and replacing Obamacare with something in the House of Representatives, there is no guarantee the Senate is going to approve it.

CHALIAN: No, I think that's what he ran into, he was trying to crop something he thought might have a shot in the Senate with some alteration, he wasn't crafting a bill that was really just about his base in the House. I think that was part of the problem.

But if you heard the White House today, it sounds to me like they really don't want this hot potato any more right now. They would like this -- if Congress wants to go ahead and get this through and do something, the president will be there with his signature, but it did not sound to me like the White House was about to take up an effort again to try it sell something that the president clearly saw was a loser for him last week.

And so, I think we've got to approach this sort of believe it when we see it.

BORGER: Right.

CHALIAN: Rather than think that a full attempt to repeal and replace Obamacare as we saw in the last three weeks.

BLITZER: But this was the pledge the president made throughout the campaign that Republicans have been making, what, for six or seven years right now. So, they are just going to forget about it?

LIZZA: I mean, that's the thing. You saw from the right. A lot of criticism that OK, you tried with one deal that nobody really liked and you're giving up? What is that?

I think there are two sides of this. The Freedom Caucus I think is feeling a little bit chastened. They lost one of their members who resigned in protest over their tactics. And so, as much as they drove this process, they are also feeling a little bit of heat. Trump had some mildly radical tweets against the Freedom Caucus.

And then the other thing I think there are some senior officials at the White House think who they let the president down and, or just doing their due diligence to explore whether there is any chance of getting it back --

BLITZER: Are you a hundred percent convinced, David, that if there had been a vote last Friday, when all is said and done, that the president and the Republican leadership, the speaker would have lost?

CHALIAN: I mean, I'm convinced because that's what every Republican member has said.

BLITZER: It's one thing to say but when they actually have to vote, they have --

CHALIAN: I think they were just one or two votes short where the psychology of the floor all of a sudden takes over. They were pretty significantly short of where they needed to be.

And I do think that that vote would have gone down. The other thing I would add to the list of members are feeling now, it's not just Freedom Caucus sort of chasten as you say, but they're going to hear from conditions back home, the very same complaint about Obamacare that they were sort of giving voice to across the country for the last seven years, those complaints are not going away. So, they're going to hear from their constituents on this.

BORGER: You can't just say never mind when have you every single Republican member of the House and the Senate campaign on repealing and replacing Obamacare. So, they have a problem here. And they understand it's a problem but the people who elected them.

[18:50:00] And so, they have to say we're going to come back to it. What else can they say, Wolf? They have to say we're going to come back to it.

They do need to figure out a way to pay for their tax reform. And that is really a problem for them because what they're going to wind up is a much more narrow tax cut bill rather than a massive tax return effort. LIZZA: Yes. I mean, look, they spent seven years saying that this --

Obamacare puts us on the road to socialism and is the main reason the economy isn't doing as well. And if one failed vote, you can't just shrug and say, oh, well we will move on to tax reform. I mean --

BLITZER: They decided today, David, to move on to the Environmental Protection Agency, and doing away with some of President Obama's executive orders involving climate change and the president today, you know, one president can sign an executive order. The next president can sign a different executive order eliminating the early order.

CHALIAN: It's much -- when you're sitting in the Oval Office, I'm sure you enjoy that perspective much more than what you do with the signature on your own rather than fight this legislative battle in Congress. But this too was a campaign promise. And this too is a belief by the administration that by freeing some of these regulations, despite -- forget the ideological component of just not wanting to be where Obama was on this stuff, they think it's going to put sort of turbo boosters on the economy.

BORGER: On the economy, yes, they do.

BLITZER: And do you think of this?

BORGER: Well, I don't -- I'm not an economist. I don't know. That's the theory of the game here, that's -- you know, that's their argument.

One more thing about health care, though. You can't put the president front and center too many times on things that he's going to lose, and that's -- you know, that's something that they're confronting. They thought the sheer force of Donald Trump on his first big legislative move would have put them over the finish line and that didn't -- that didn't happen.

And they can't afford to be out front on something this massive again that loses.

BLITZER: Getting back to what we were discussing, Evan, earlier. The Senate Intelligence Committee, the chairman, the ranking Democrat, they're going to announce, presumably, the witnesses that they're calling to appear in the coming days and presumably this is not going to necessarily be very good news for the White House, either.

PEREZ: Well, no. I mean, we expect that Jim Comey, the FBI director, is going to testify in the Senate hearing. That's it. He doesn't plan to come back to the Hill and talk about this investigation.

Again, he knows that he has to do this one because obviously he already spoke to the House hearing, so we're going to have another day of bad headlines for the Republicans for the White House. They want to talk about unmasking and leaking, but that's going to focus on this investigation.

BLITZER: Yes, we'll watch that very, very closely.

Everybody, stay with us.

Just ahead: who's to blame for civilian deaths after an airstrike in Mosul? A top U.S. military commander is now speaking out.

(COMMERCIAL BREAK)

[18:57:17] BLITZER: Tonight, a top U.S. military commander says there's a, quote, "a fair chance" that a coalition airstrike in Iraq killed civilians.

Let's go to our Pentagon correspondent Barbara Starr.

Barbara, tell us more about what the lieutenant general had to say and what we're learning about this investigation.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Where we are right now, Wolf, is more than 100 souls, 100 bodies pulled from the remains of this wreckage in west Mosul. Today, the top U.S. general in Iraq overseeing operations was the first to come out publicly and say that a U.S. airstrike did fall in this neighborhood and there was a fair chance it was involved in this death and destruction.

Listen to what General Stephen Townsend had to say.

(BEGIN AUDIO CLIP)

LT. GEN. STEPHEN TOWNSEND, COMMANDER OF COMBINED JOINT TASK FORCE, OPERATION INHERENT RESOLVE: We took some people up there who have some technology and some kills and we let them look at the scene. But my initial assessment is that we probably had a role in these casualties. Now, here's what I don't know -- what I don't know is were they gathered there by the enemy? Now, we still have assessments to do. I would say this that it sure looks like they were. The Iraqis firmly believe that they were gathered there by the enemy.

(END AUDIO CLIP)

STARR: What he is saying is the U.S. and Iraqis believe it is potentially very likely at this point these people were being used as human shields. General Townsend adamant that the U.S. military does not target civilians.

But still, what happened here, they have to determine, was the house booby-trapped? Did they bomb actually suicide truck bomb, and secondary explosions brought the house down? What brought the house down? From a technical standpoint, they need to figure this out so they know exactly what happened so they can try and keep it from happening again.

But at the end of the day, Wolf, a lot of people who had nowhere to go, being held in a neighborhood controlled by ISIS, not able to get out of that neighborhood and really caught between those in ISIS who were holding them, and the U.S. and Iraqis who were trying to liberate that part of Mosul -- Wolf.

BLITZER: And very quickly, Barbara, has there been any change in the rules of engagement?

STARR: So far, no. They say they are not doing that yet. They want to -- and it's one of the big reasons they want to find out what happened. If they can find out that something that went wrong in how they understood the target in the information or intelligence they had, then perhaps some changes -- Wolf.

BLITZER: All right. Barbara, thanks very much.

And that's it for me. Thanks for watching.

"ERIN BURNETT OUTFRONT" starts right now.