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Former Pence Chief Of Staff Appears Before 1/6 Grand Jury; Crucial Week For U.S. Economy As Recession Fears Rise; Russian Strikes On Key Port City Threaten Newly Signed Grain Deal; U.S. Intel Probe Uncovers Chinese Attempts To Plant Potential Listening Devices Near Military Facilities; Wildfire Near Yosemite National Park Forces Thousands To Evacuate. Aired 6-7p ET

Aired July 25, 2022 - 18:00   ET

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

[18:00:01]

WOLF BLITZER, CNN ANCHOR: Short is the highest profile witness known to have testified in the criminal investigation.

Also tonight, a make or break week for the U.S. economy, recession fears and an interest rate hike might and highly anticipated economic data that's all weighing on the White House right now.

And a newly signed deal to loosen the Russian stranglehold on the Ukraine's grain supply is already in jeopardy tonight after Kremlin forces attacked a major port city on the Black Sea. I'll discuss with John Kirby, a key national security official, this hour.

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

We begin our coverage this hour with the criminal probe into the January 6th. It's apparently gaining steam right now big time with a federal grand jury interviewing a major witness.

Our Congressional Correspondent Ryan Nobles is joining us from Capitol Hill right now. Ryan, as far as we know, former Pence Chief of Staff Marc Short is the highest profile witness to testify in the criminal investigation. What can you tell us?

RYAN NOBLES, CNN CONGRESSIONAL CORRESPONDENT: Yes, that's exactly right, Wolf. Marc Short is among the people that has the most insight into what was happening not just on January 6th and in the time leading up to January 6th and specifically the pressure campaign on his former boss, Vice President Mike Pence. And what this all shows is that that criminal investigation won by the Department of Justice is expanding at the same time the January 6th select committee's work is far from done.

(BEGIN VIDEOTAPE)

NOBLES (voice over): The January 6th select committee is far from done.

REP. LIZ CHENEY (R-WY): The committee will be in order. NOBLES: Planning hearings for September and promising their August will be spent expanding an already sprawling investigation.

CHENEY: We anticipate talking to additional members of the president's cabinet. We anticipate talking to additional members of his campaign.

NOBLES: All this while tonight, revealing new information they've uncovered.

UNIDENTIFIED MALE: Was the implication that the president was in some ways reluctant to give that speech?

UNIDENTIFIED MALE: Yes.

UNIDENTIFIED MALE: Okay. What do you base that on?

UNIDENTIFIED MALE: The fact that somebody has to tell me to nudge it along.

NOBLES: The committee sharing a video montage of interviews they've conducted to show how former President Trump cut lines from his speech he delivered the day of the Capitol riot.

UNIDENTIFIED MALE: And as you can see throughout the document, there are lines crossed out, there are some words added in. Do you recognize the handwriting?

UNIDENTIFIED FEMALE: It looks like my father's handwriting.

NOBLES: Trump cutting criticism of the rioters, even as some of his top advisers, like White House Counsel Pat Cipollone, made clear they thought the president needed to send a clear message.

PAT CIPOLLONE, FORMER WHITE HOUSE COUNSEL: In my view, he needed to express very clearly that the people who commit violent acts went into the Capitol, did what they did should be prosecuted and should be arrested.

NOBLES: The committee is also trying to determine what members of the Secret Service were up to especially after the homeland security inspector general accused the agency of deleting text messages from January 5th and 6th.

REP. ELAINE LURIA (D-VA): We have got information that we're requesting and receiving as well from the Secret Service and there is just a lot of questions still to be answered on that front.

NOBLES: And the committee still wrestling how to handle Ginni Thomas, the wife of Supreme Court Justice Clarence Thomas, who was in touch with Trump Chief of Staff Mark Meadows and Conservative Lawyer John Eastman encouraging them to continue efforts to overturn the election.

CHENEY: It's very important for us to speak with her, and as I said, I hope she will agree to do so voluntarily but I'm sure we will contemplate a subpoena if she won't. NOBLES: Committee members making it clear they want the Department of Justice to act.

LURIA: I sure as hell hope they have a criminal investigation at this point into Donald Trump.

NOBLES: Meanwhile, an investigation in Georgia is lurching forward. The Fulton County district attorney, Fani Willis, dealt a blow today, a judge blocking her from investigating State Senator Burt Jones, who is running for lieutenant governor. While the D.A. can gather evidence about his role as a fake elector, she cannot make him a target of her probe because she hosted a fundraiser for his opponent.

But another major witness, Governor Brian Kemp, did cooperate by submitting a video statement to the grand jury. Kemp resisted pressure from Trump to stand in the way of the certification of the election in Georgia. Kemp's office declined to comment on the message, the governor shared with the jurors.

(END VIDEOTAPE)

NOBLES (on camera): And there is no time clock on the investigation in Georgia. There is no time clock as of yet on the investigation that is greatly expanding by the Department of Justice. The same cannot be said for the January 6th select committee.

Now, conventional wisdom had dictated that they would wrap things up by the election but committee members are now saying that they may continue their work past election day, saying that the only thing the resolution says about concluding their work is that they have to issue a final report, something that they have complete control over.

[18:05:12]

Of course, things could change in a big way if Republicans win the majority this fall. Wolf?

BLITZER: Good point. Ryan Nobles up on Capitol Hill, thank you very much.

Let get some analysis right now from our Chief Legal Analyst Jeffrey Toobin and a constitutional law professor at Harvard Law School, Laurence Tribe.

Professor Tribe, you tweeted this today. You said, it's time to tell Attorney General Merrick Garland he has no choice but to indict the former president. Not indicting Trump, you say, amounts to giving him an unearned pardon. Garland was actually a student of yours at Harvard Law School. Is it dangerous, in your view, for him not to indict the former president, Trump?

LAURENCE TRIBE, CONSTITUTIONAL LAW PROFESSOR, HARVARD LAW SCHOOL: I think there is no excuse at this point for not going ahead with a criminal prosecution of Donald Trump. As I said in that tweet, not prosecuting him based on everything we know about the pressure campaign aimed at his vice president and everything we know about his attempts to obstruct the congressional investigation, not prosecuting him would basically be giving him what I called an unearned pardon.

But even if it were earned, even if Trump, and this is unthinkable, were to be contrite and to admit his guilt, the pardon power doesn't belong to the attorney general. It's not part of his job description. So, all of this talk about he has to -- you know, he has to worry about the harm to the country of indicting a former president is beside the point.

Those issues, the issues of whether it would bring harmony or division, those are above his pay grade, honestly, and those are questions for the pardon power, just like, you know, when Gerald Ford decided to pardon Richard Nixon to help heal the country. It necessarily didn't do all of that but it was within Ford's mandate to consider it.

It's not part of an attorney general's mandate. He's not healer in chief. He is prosecutor in chief. And the evidence is now overwhelming to justify the prosecution of the former president.

BLITZER: Let me get reaction from Jeffrey. Not only was Attorney General Merrick Garland a student of President Tribe's -- Professor Tribe's, I should say, but you were, as well. Do you agree with your professor on this?

JEFFREY TOOBIN, CNN CHIEF LEGAL ANALYST: I'm always wary of disagreeing with Larry about anything, but I think his statement is a little premature. This is a very appropriate day to talk about this. There has been a lot of criticism of the Garland Justice Department for only focusing on the people in the Capitol and not the higher level potential offenders. Now we know that the former vice president's chief of staff was in the grand jury.

These are the people who should be in the grand jury exploring President Trump's role in any potential conspiracy to obstruct Congress, conspiracy to defraud the United States and I think it's a positive step that people at that level are now in the grand jury. But whether there should be an indictment, I think we need to see more evidence but there is certainly plenty of evidence to justify an investigation and we'll see about that.

BLITZER: Well, let me get Professor Tribe to react to what his student just said. Go ahead, Professor.

TRIBE: I think Jeffrey was a better student, frankly, and he was an A student, a better student than he is an observer of the current scene. What are we waiting for? He says it's premature. Well, I'd rather be ahead of the curve than letting the clock run out and waiting until the democracy is completely lost.

I think in this case, we have more than enough evidence. We've seen it with our own eyes. We've heard it with our ears. Come on, Jeffrey, I think you're being a little slow on the uptake this time.

BLITZER: Go ahead, Jeffrey.

TOOBIN: Well, I just think it's important to draw a distinction here between the January 6th committee and House of Representatives and the Justice Department. The January 6th committee is likely to go out of business because the Republicans are likely to retake the House. Merrick Garland and the Justice Department are not going anywhere for the full -- Joseph Biden's full term. So, I don't think there is the same urgency to proceed.

I do think the Justice Department has been somewhat slow but they are now moving forward. And I think, you know, if you look back to Watergate, if you look back to Iran-Contra, other big scandals, you know, it took over a year.

[18:10:04]

It took, in some cases, two years to bring a big, full conspiracy case, and that may be the case here. I'd rather see the Justice Department move slowly and methodically but I'd like to see them move.

BLITZER: All right. I'll give you one last chance, Professor, to respond to Jeffrey.

TRIBE: You know, Jeffrey, you may have forgotten something you learned in constitutional law, and that is that the power of the purse belongs to Congress. Yes, it's true, the executive branch will still be in business but I wouldn't count on, you know, the House of Representatives and the Senate, if they both happen to be in Republican hands, I wouldn't count on them funding even the -- turning on the lights at the Department of Justice, let alone (INAUDIBLE) complicated case. Yes, the clock is ticking and I do not thing we should be waiting.

BLITZER: What does this say to you, Professor, that Marc Short, the former chief of staff to then-Vice President Pence, has now testified, he testified last week before a federal grand jury investigating January 6th?

TRIBE: It says to me that Merrick Garland has got the message, that he knows he cannot afford to be any more methodical than he has already been. He's been methodical. He's taken his time. But now the evidence is incredibly clear. It's clear. We know now more than we knew even a couple weeks ago. We know that there was a mob that the president knew it was armed, that he said no problem, they're not going after me. He tweeted that the vice president was a coward. He inflamed the mob against the vice president. We know all of these things and I'm sure Merrick Garland of the Department of Justice know them as well. It seems to me that now that Marc Short, too, has testified that there is really no reason to wait.

BLITZER: This is a criminal investigation, Jeffrey. So, how do you read this development?

TOOBIN: Well, it shows that this investigation is a lot broader than just about the people who went inside the Capitol. It's not just about the Oath Keepers. It's not just about, you know, the physical violence. This is also an investigation of whether there was corrupt pressure put on the vice president to try to betray his oath and interfere with the peaceful transfer of power. That is a very legitimate thing for this grand jury to be investigating.

It is certainly -- the evidence that's been developed by the January 6th committee certainly suggests that this investigation should reach whether there was corrupt pressure put on the Justice Department. I'm just not ready to see an indictment just yet but maybe that time will come.

BLITZER: We shall see. Guys, thank you very, very much.

Just ahead, how close is the United States' economy right now to slipping into a recession? Critical new numbers are right around the corner, including potentially another interest rate hike here in the U.S.

(COMMERCIAL BREAK)

[18:15:00]

BLITZER: Inflation is up, interest rates are up, and this week, we'll be seeing a new set of numbers that will give us a clearer indication of where the U.S. economy is heading potentially including into a recession.

Here is CNN White House Correspondent M.J. Lee.

(BEGIN VIDEOTAPE)

JOE BIDEN, U.S. PRESIDENT: We're not going to be in a recession, in my view.

M.J. LEE, CNN WHITE HOUSE CORRESPONDENT (voice over): A blockbuster week of U.S. economic data as the Biden White House is on recession watch, the administration closely monitoring several key indicators coming in the next few days that could offer important clues on the direction of the economy.

BIDEN: My hope is we go from this rapid growth to a steady growth. And so we'll see some coming down but I don't think we're going to -- God willing, I don't think we're going to see a recession.

LEE: On Tuesday, the Consumer Confidence Index, an important measure of the public's economic outlook. On Wednesday, the Federal Reserve expected to announce yet another interest rate hike as the central bank tries to cool down the economy. And on Thursday, quarter two GDP numbers.

BIDEN: The employment rate is still one of the lowest we had in history. It's in the 3.6 area. We still find ourselves with people investing.

LEE: President Biden and his top economic advisors attempting to highlight the strength of the U.S. labor market, including a low unemployment rate and robust pace of hiring.

BRIAN DEESE, DIRECTOR, NATIONAL ECONOMIC COUNCIL: The spring and early summer. During that three-month period, the economy created 1.2 million jobs, about 400,000 jobs a month.

LEE: But record high inflation remaining a stubborn economic and political problem for President Biden, who, last year, incorrectly predicted that high prices would be a fleeting phenomenon.

BIDEN: By the way, talk on inflation, the overwhelming consensus is going to pop up a little bit and then go back down.

LEE: With the midterm elections less than four months away, public polls showing the majority of Americans unhappy with Biden's overall performance, including his handling of the economy and inflation. And according to a new CNN poll, 64 percent of Americans believe the U.S. is already in a recession, other top U.S. officials also insisting that that is not the case.

DEESE: Certainly, in terms of the technical definition, it's not a recession.

JANET YELLEN, TREASURY SECRETARY: What a recession really means is a broad base contraction in the economy. And even if that number is negative, we're not in a recession now.

(END VIDEOTAPE)

LEE (on camera): And, Wolf, we did just get a health update from the president directly. He, of course, has been isolating ever since he tested positive for COVID. He told reporters that he got two full nights of good sleep, that his test, his vitals, everything has been coming back normal, that what is left is his voice that is a little raspy and a bit of a sore throat, but he told reporters that he is feeling great.

[18:20:03]

Now, remember, today is day four of isolation for the president. Of course, the CDC says you have to isolate for at least five days, so the president telling reporters that he hopes to be back at work in- person by the end of the week. Wolf?

BLITZER: We wish him a speedy recovery, of course. M.J. Lee at the White House, thank you very much.

Let's take a closer look at all of this. Joining us now is CNN's Matt Egan.

Matt, if the U.S. does, in fact, go into a recession, how will that present itself in the everyday lives of Americans?

MATT EGAN, CNN REPORTER: Well, Wolf, hopefully, the United States can avoid a recession. Many Americans are still recovering from the last downturn that began barely two years ago.

Now, we don't know for certain if a recession is coming but we do know it would be a painful for experience for millions of Americans. A recession would likely mean a surge in layoffs that lifts unemployment off historic lows, pay cuts for workers, bankruptcies for small, medium and large companies and market chaos that shrinks our nest eggs.

A recession could ease very high inflation, although there is no guarantee. I mean, the nightmare scenario would be a recession and high inflation, what is known as stagflation.

Recession or not, it's clear that Americans are getting crushed by the high cost of living and, Wolf, this is forcing the Federal Reserve to take dramatic steps to try to get inflation back under control.

BLITZER: Well, as far as that is concerned, in terms of this expected rate hike, maybe this week from the Federal Reserve, just how high should Americans be bracing for rates to go?

EGAN: Wolf, the Fed is clearly been late to the scene of this inflation fire. And so now they are trying to play catch-up by aggressively raising interest rates designed to cool inflation off. They have been steadily increasing their pace of rate hikes in recent months, last month, raising interest rates by three quarters of a percentage point, the biggest single move since 1994. It is a slam dunk that they're going to raise interest rates again at this week's meeting and investors are betting a rate hike of the same amount. We haven't seen anything like that in back to back meetings in recent history, at least not since the Fed introduced a target range in the late 1980s.

Now, for families, this means higher borrowing cost, credit cards, car loans and, of course, mortgages. Mortgage rates have basically doubled from a year ago and that means that, for many families, they're going to be priced out of the housing market because people can't afford the borrowing costs. I think the problem here is that the more the Fed does to try to cool off inflation, the greater the risk that it accidently slows the economy into a recession. This is not going to be easy, Wolf.

BLITZER: You're absolutely right. Matt Egan, I appreciate it very, very much.

Coming up, a key development on the war on Ukraine as the country prepares to resume critical grain exports following brazen, new Russian strikes. We're going live to the scene when we come back.

(COMMERCIAL BREAK)

[18:25:00]

BLITZER: A new deal to facilitate grain shipments out of Ukraine is now in serious jeopardy after Russian forces struck the key port city of Odessa. But Ukraine is vowing to keep the exports going despite the Russian attacks.

CNN International Diplomatic Editor Nic Robertson has the latest from Kyiv.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR (voice over): Despite Russia's missile strikes in Odessa, Saturday, Ukraine's officials are vowing to push ahead with the U.N. deal to get grain from their ports to the world's needy.

OLEKSANDR KUBRAKOV, UKRAINIAN INFRASTRUCTURE MINISTER: I hope that during upcoming days, we will start delivering grain from our ports in Odessa.

ROBERTSON: Russian missiles aren't the only obstacle creating uncertainty about Russia's commitment. Russia's foreign minister asserting nothing in the deal prevents them hitting military targets in Odessa and misinformation, too, claiming rights for Russian ships not in the agreement.

SERGEY LAVROV, RUSSIAN FOREIGN MINISTER: In the open sea Russia, Turkey, together with another participant, which is to be determined to accompany the convoys to the straits.

KUBRAKOV: So, we weren't allowed to do this, our territorial waters and our seaports, only Ukraine and Ukrainian Navy will be there.

ROBERTSON: So, no Russian ships escorting the convoys anywhere along the convoy?

KUBRAKOV: No ships at all in this process.

ROBERTSON: Ukraine's plan B to export grain by train, truck and river is still in play. But like the U.N. deal, this, too, is beset by uncertainty. Train cars full of grain have been shelled by Russia and tracks blown up.

KUBRAKOV: We're again doing our best. We are trying to export more through our venue (ph) ports with the help of our railway, Ukrainian Railways Company, and by trucks.

ROBERTSON: If the U.N. deal to export grain from the ports can hold, Ukrainian officials estimate the value to their beleaguered nation could be a much needed billion dollars a month.

(END VIDEOTAPE)

ROBERTSON (on camera): And what we've heard from President Zelenskyy this evening, he, too, like his officials absolutely committed to getting this deal done. Indeed, Ukraine has already sent officials to Istanbul to be part of the joint center that is going to monitor this deal. That's important. It's going to have Ukrainians, Russians, the U.N. and Turkish on board.

[18:30:02]

But the real wild card is, how will Russia play its hand? And this is something Ukraine can't predict and it can't control. Wolf?

BLITZER: Good point. CNN's Nick Robertson on the scene for us in Kyiv, thank you very much.

So, let's discuss with John Kirby, the National Security Council coordinator for strategic communications. John, thanks for joining us.

As you heard and as you know, Russia struck Odessa, the port city, just a day after signing this deal, but the Russian foreign minister, Sergey Lavrov claims this didn't break Russia's commitments. How do you respond to him?

JOHN KIRBY, COORDINATOR FOR STRATEGIC COMMUNICATIONS, NATIONAL SECURITY COUNCIL: It's pretty disconcerting to see not only the strikes less than 24 hours after signing this deal but then the Russian sort of cavalier attitude about this. These strikes actually did hit the port of Odessa and we have some indications that they certainly got close to some grain terminals. Whether they damaged those grain terminals or not, we haven't seen exact battle damage assessment, but it sure flies in the face of what they say is their commitment to be good faith participants in this arrangement to get grain out. So, we're going to be watching this very, very closely.

Unfortunately, Wolf, we seen this side of the Russians before. You can go back even into the war in Syria, where they were hitting humanitarian aid shipments that were meant for Syrian citizens and Syrian refugees. So, this is just something unfortunately we seen out of their playbook and, hopefully, this won't happen again and that they will actually participate in good faith in Istanbul.

BLITZER: Let's hope that happens. So, many millions of people around the world need those grains in order to survive, to eat.

Ukraine is about to get, John, four more HIMARS, these high mobility artillery rocket systems from the United States, but there are concerns that Russia is adopting Ukraine wants more HIMARS and wants missiles with a much greater range. Is that on the table?

KIRBY: Well, we are in talks with the Ukrainians literally every day, Wolf, about their capabilities. And so I wouldn't, at this point, tell you what is on or off. What I can tell you is that we are continuing to explore with Ukrainians near real-time what their capabilities are in trying to get them those capabilities as fast as we can.

You're right, another four HIMARS. These HIMARS are being used very, very effectively by the Ukrainians in the field. They do give the Ukrainians standoff range. It gives them a chance to hit deeper behind Russian lines and we know it's having an effect on Russian operations in the Donbas and in the south, which is why we're going to continue to contribute these systems as much as we can.

I would also note that other nations are also providing these high mobility advanced rocket systems, artillery rocket systems, the U.K. has, Germany has. So, that's a good sign, it's not just the United States.

BLITZER: While I have you, John, I also want to ask you about House Speaker Nancy Pelosi's possibility trip to Taiwan. President Biden has said the Pentagon thinks this isn't a good idea. Will President Biden tell her directly to call off this trip?

KIRBY: I won't speak to private conversations between the president and the speaker of the House. The speaker makes her own travel plans. She makes her own decisions. We respect that. Our job at the National Security Council and inside the national security establishment is to make sure that as she goes through that decision-making process, she has all the facts, all the context and information that she needs, both from a security perspective and from a geopolitical perspective, and we're doing that.

And so I'll leave it to her to decide whether she's going to make a trip or not, but what I can tell you is that we're making sure she has all the information relevant to her.

BLITZER: Well, let me ask you, yes or no, is it safe for the speaker, Nancy Pelosi, who is second in line in the presidential succession, to travel to Taiwan?

KIRBY: I won't get into specific intelligence assessments here. Wherever she goes, there obviously has to be an appropriate security footprint, no matter where she goes overseas, and that's part of advice and counsel that we provide her and her team. We will do -- and when she travels, if she travels, we'll certainly do everything we can to make sure that she can do so safely and securely.

BLITZER: John Kirby, as usual, thanks so much for joining us.

KIRBY: My pleasure.

BLITZER: Just ahead, former President Trump returns to Washington just as his rivalry with his former vice president is heating up big time.

(COMMERCIAL BREAK)

[18:35:00]

BLITZER: Former President Trump is now poised to return to Washington tomorrow amid increasingly dramatic developments in the House investigation into the January 6th insurrection.

Let's get some more from our CNN Senior Commentator John Kasich, he's the former Republican governor of Ohio, and CNN Senior Political Commentator David Axelrod, a former Obama senior adviser.

Governor Kasich, the former president will return to the nation's capital tomorrow. This will be the first time since leaving office to come to Washington. Supposedly, he wants to give -- wants to come to, quote, give a major policy speech. That's what he's calling it. Are we seeing what could potentially be the beginnings of his 2024 presidential run?

JOHN KASICH, CNN SENIOR COMMENTATOR: Yes, I think it is, Wolf. And, look, he is going to have targets he is going to fire at. He is going to talk about the economy. He is going to talk about the border. He's going to talk about gas prices. He's going to talk about Afghanistan. These are all target rich for him. The problem he's going to have, I think, is that he doesn't have any solutions. He's just going to lay this out. I think it will be -- much of it is going to be based on attacks on Joe Biden but I don't think you're going to hear a lot of new ideas out of Donald Trump. I mean, he may say we need to drill more -- we need to build more walls but that's hardly a significant policy.

[18:40:01]

But the whole purpose of it, I think, is to come in here and really try to compare what his record was with Joe Biden's and he's going to pick the things that allows him to have the most effective hits on Biden. That's what I think we're going to see.

BLITZER: David, we were supposed to hear from former Vice President Pence earlier today as well. He was supposed to be in Washington. But his speech was canceled due to the weather. It does seem like these two men are on a bit of collision course right now. Pence was expected to take some veiled swipes at Trump in his speech here in Washington.

DAVID AXELROD, CNN SENIOR POLITICAL COMMENTATOR: Well, in fact, Wolf, I think the two speeches are somewhat related because the swipe that Pence was going to take, as some people want to talk about the past, I think we as a party need to talk about the future. And the reference, of course, was to President Trump's obsession with the 2020 election and disputing the outcome of the 2020 election, which is really -- these are the fulminations that dominate in his public appearances and his statements.

I think his people are hoping that the speech that he gives tomorrow will be forward-looking in the sense that it projects into a race with President Biden, the scenario that Governor Kasich laid, and that he doesn't sort of drift off script and make more references to 2020.

As you said, John Kasich talks to more Republicans than any of us but I'm sure what he's hearing is what you hear in focus groups, that a lot of voters who like Trump like what he did generally. They don't particularly like what happened on January 6th, and more than anything, they don't want to hear about it anymore. And that is what has really contributed, I think, to a lessoning of support, at least support for him to run again.

So, I think what his folks are hoping is that he can pump up his support for a 2024 campaign by making a future-oriented speech.

BLITZER: At this point, Governor Kasich, could anybody, even Pence, let's say, give Trump a significant primary challenge?

KASICH: First of all, I don't know what Pence is doing. It's like what are people going to go for Pence because he's Trump light? I mean, I don't know why he's tiptoeing around and being careful what he says. I guess he doesn't want to make the Trump supporters angry or something.

But I do think, Wolf, that you may have a candidate or two who will have money. David knows this as well as I do. In politics, you know, money is the mother's milk. If you have significant sums of money, you can then organize, you can get organized in the states, you can do some advertising, you can become better known and that's what you have to keep your eye on.

There are billionaires now who are looking around and looking at other candidates. They're funding some of them. I don't know where they're going to come when this is all over but that's really the question is what is the money game and we'll be talking about that for the next couple of years.

BLITZER: They say money talks. John Kasich, David Axelrod, guys, thank you very, very much.

Coming up, a CNN exclusive report. We investigate what some U.S. intelligence officials now say could be China's attempts to spy on America's nuclear arsenal.

(COMMERCIAL BREAK)

[18:47:44]

BLITZER: We're back with CNN exclusive reporting this hour about an alarming FBI investigation into potential Chinese espionage on U.S. soil.

Intelligence officials have determined that Chinese made tech equipment installed across the country could disrupt sensitive American military communications including information about the U.S. nuclear arsenal.

CNN's Brian Todd is working this story for us.

Brian, what exactly is this equipment capable of doing?

BRIAN TODD, CNN CORRESPONDENT: Wolf, one cybersecurity expert says the Chinese could use this to block or scramble important phone calls by U.S. military officials regarding the readiness or the use of nuclear weapons.

CNN is told this is all part of an increasingly aggressive Chinese spying operation inside the U.S.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Three, two, one, turn, turn.

TODD (voice-over): America's arsenal of nuclear armed intercontinental ballistic missiles at the ready and underground silos in rural remote areas of the U.S. could be threatened with vulnerabilities tonight. Officials have long raised alarms about Chinese made equipment manufactured by the firm Huawei sitting on top of cell towers, near U.S. military bases in the rural Midwest, including bases that have nuclear silos.

Multiple sources tell CNN the FBI determined that that Huawei equipment was capable of capturing or even disrupting restricted U.S. military communications, including communications from U.S. Strategic Command, which oversees America's nuclear weapons. KATIE BO LILLIS, CNN INTELLIGENCE REPORTER: So it could allow China

to for example collect the communications of military officials who are moving around and in between these various different instillations.

TODD: CNN intelligence reporter Katie Bo Lillis has a new report on a multi-year investigation by U.S. officials into China's ramped up espionage operations inside the U.S. She says it's not clear if the U.S. intelligence community has found whether any sensitive data was actually intercepted and sent back to China from those cell towers where Huawei equipment is used.

Experts say even though American bases use encrypted communications.

JAMES LEWIS, CSIS SENIOR VICE PRESIDENT AND DIRECTOR, TECHNOLOGY POLICY: ICBM are supposed to be pretty hard. That might not be easy to do, but doesn't mean our opponents won't try to figure out if they can do it.

TODD: But China's alleged spying aspirations don't end there. According to multiple sources familiar with the matter, in 2017, the Chinese government offered to spend $100 million to build an elaborate Chinese garden at the national arboretum in Washington, a project that would have included temples, pavilions and a 70-foot pagoda.

But when U.S. counterintelligence officials began digging, CNN sources say, they found that pagoda would have been strategically placed inside the arboretum's grounds on one of the highest points in the city, just two miles from the U.S. Capitol.

LILLIS: So, the concern for counterintelligence officials was that China was going to be able to use this friendship garden, this pagoda as a prime platform for signals intelligence.

TODD: U.S. officials quietly killed that Chinese project at the arboretum before it got started.

As for the Chinese equipment sitting on the cell towers, Katie Bo Lillis reports that in 2019, after the FBI briefed the White House on their existence, the Federal Communications Commission ordered the American companies that were using that equipment to remove it from the cell towers, but not enough money was allocated to reimburse the companies for that.

LILLIS: That equipment is still sitting there and still in use.

(END VIDEOTAPE)

TODD (on camera): The Chinese government denies any efforts to spy inside the U.S. Huawei sent a statement to CNN saying all of its products imported to the U.S. have been tested and certified by the FCC before being deployed. Huawei denies that its equipment is capable of operating in any spectrum that's allocated to the U.S. Defense Department, and the company says it's never been involved in any malicious cybersecurity incidents -- Wolf.

BLITZER: Brian Todd reporting for us, Brian, thank you very much.

Let's discuss all of this with CNN counterterrorism analyst Phil Mudd who is with me right now.

Phil, you served in the FBI. How damaging potentially would it be if China could use this equipment to spy on the U.S. military community, including on the nuclear arsenal?

PHIL MUDD, CNN COUNTERTERRORISM ANALYST: I think it's hugely significant. You're not just talking about spying on the nuclear arsenal in the Midwest. You're talking about countries like Iran and China and Russia looking at military infrastructure, but think about things like U.S. water, U.S. electrical grids.

In the event of a conflict, countries like China are absorbing so much information, you have to ask the question, how would they use that information, not with bombs but by shutting down America, in this case, potentially America's control of nuclear weapons in the Midwest.

BLITZER: So far, we'll told none of this Chinese equipment brought over here has been removed. Just how vulnerable is the U.S. right now?

MUDD: I think if you step back and say, look, we don't see any information they're intercepting direct communications about nuclear activity, too simple an answer. If you're an intelligence professional, you want to know subtler things. For example, when there's a training exercise in the Midwest in these facilities, does the communication change?

You don't have to actually intercept a phone call. You can see patterns changing. So, as long as this stuff stays up and the Chinese government can tell Huawei what to do, they can learn a lot, Wolf.

BLITZER: They certainly can.

All right. Thanks very much, Phil Mudd, helping us appreciate the enormity of what's going on.

We'll have more news just ahead. Firefighters are battling an aggressive blaze outside Yosemite National Park. We'll go there live when we come back.

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[18:57:17]

BLITZER: Tonight, at least 60 million Americans are under heat alerts after high temperatures smashed records over the weekend. The Northeast could get some relief later this week, but the heat in the Pacific Northwest is expected to grow even more intense in California, ferocious wildfire is raging outside Yosemite National Park, and forcing thousands and thousands of people to evacuate their homes.

Officials say this mega fire is moving extremely fast and displaying unprecedented, their word, unprecedented behavior.

CNN correspondent Adrienne Broaddus is joining us now from Mariposa County, out in California.

Adrienne, have emergency personnel been able to contain this fire at all?

ADRIENNE BROADDUS, CNN CORRESPONDENT: Wolf, they finally have been able to contain the fire. It's now at 10 percent. And that is up from, of course, zero percent containment over the course of nearly two days. At least or I should say more than 16,000 acres have burned here behind me.

I want you to take a look -- I'm going to step out of the frame so our viewers at home and around the world can better see. You'll notice this orange linear line at the foot of the sierras. That is flame retardant. Fire officials were here using aircraft to drop this retardant on the area here.

Their goal was to protect the homes that are just under that orange linear line. They succeeded, when it comes to protecting the homes there, but in other neighboring -- neighborhoods, there has been some destruction. Fire officials say this Oak Fire, as they have described it, is moving rapidly and quickly.

Our next update will come from fire officials soon after I speak with you, Wolf, I just spoke with a spokesperson with the fire department a short time ago, and he says one of the challenges firefighters are facing is the topography. If you look around, we're in a rural area. There's a home on the other side of this camera, and the homeowners here have allowed us to stage in this area.

One of the homeowners has remained here, but they were worried that their home and their neighbors' houses would be threatened as well. And if you're wondering what the topography is like here, it's rugged and as I mentioned rural, and there are a lot of steep canyons -- Wolf.

BLITZER: Very quickly, Adrienne, why are officials describing this fire as unprecedented?

BROADDUS: Well, in part, because it's moving so rapidly. For example, we heard from a fire official earlier who said it moved so quickly, they had very little time to tell folks in the community to evacuate. Many of them leaving with the shirts on their backs.

BLITZER: Adrienne Broaddus on the scene for us, be careful out there. Thank you very, very much.

And to our viewers, thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM.

"ERIN BURNETT OUTFRONT" starts right now.