Trump battles self-made crises as markets tumble. TRANSCRIPT: 8/14/19, All In w/ Chris Hayes.

Guests: Mark Zandi, Joel Payne, Cornell Belcher, Vera Bergengruen

CHRIS MATTHEWS, MSNBC HOST:  I`m glad to see her out there making this position clear as hell.  We Americans believe in the promise of good Friday.  That`s HARDBALL for now.  "ALL IN" with Chris Hayes starts right now.

(BEGIN VIDEO CLIP)

ALI VELSHI, MSNBC ANCHOR:  Tonight on ALL IN.

UNIDENTIFIED FEMALE:  A major sell-off here on Wall Street today.

VELSHI:  Stocks plummet on growing recession fears.

UNIDENTIFIED MALE:  When the curve inverts tens to twos bad things usually happen regarding the economy.

VELSHI:  Tonight, what we know about what`s happening to the American economy and what the President is doing about it.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES:  Our economy is doing great. 

VELSHI:  Then --

REP. NANCY PELOSI (D-CA):  Moscow Mitch says that he is the grim reaper.

VELSHI:  New reporting on the Kremlin ties to Kentucky as Democrats turn up the heat on Mitch McConnell.  Plus, the growing calls for Donald Trump`s Attorney General to recuse himself from anything having to do with Jeffrey Epstein.  And new bipartisan outrage over Steve King.

UNIDENTIFIED MALE:  Rape and incest?  What were you trying to say, sir?

VELSHI:  As the congressman sets up another firestorm.

REP. STEVE KING (R-IA):  What if we went back to all the family trees and just pulled those people out who was a product of rape and incest?

VELSHI:  ALL IN starts now.

KING:  Would there be any population of the world left if we did that?

(END VIDEO CLIP)

VELSHI:  Good evening from New York, I`m Ali Velshi in for Chris Hayes.  It`s been another day of crazy volatility in the Trump economy.  The Dow Jones Industrial Average dropped more than 800 points.  That`s more than three percent.  That makes it the biggest drop of this year.

The reason, investors are seeing signs that a recession could be on the horizon.  And this man running this country, a man who constantly boasts about his business talents, the man who would be responsible for navigating the country through an upcoming recession is a guy who could not make money in the casino business.  A guy who had to be put on a budget back in 1990 because of his inability to manage his own money.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  $10 million, of course, is a lot of money but it`s not enough to cover Donald Trump for a full two years.  He manages to go through more than a half a million dollars a month for just personal expenses.

So today when a group of banks came up with $20 million in loans to help him through his business difficulties, they put him on a personal allowance of sorts.  NBC Chief Financial Correspondent Mike Jensen tonight.

UNIDENTIFIED MALE:  DONALD Trump this morning after he signed for his new loan.  As part of the deal, he`s been put on a personal allowance.  He`ll have to scrape by on $450,000 a month.  Next year he`ll be cut back to $375,000, and the year after that to $300,000.  By comparison in one recent month, Donald`s spent $583,000 on personal expenses.

As for today`s events, Donald Trump says he made great deal, a fantastic deal that his empire is intact and he`s running it.  But the bankers have another story.  One of them told me in our view, he`s in bankruptcy but instead of the courts presiding over a restructuring, we`re doing it.

(END VIDEO CLIP)

VELSHI:  So this afternoon as the stock market was tumbling, President Trump was definitely not panicking.  As the market was moving lower and lower, Trump unleashed two tweets where he managed to brag about his trade war with China, lie about the economy, blame the Fed and its chairman and demonstrated clear lack of understanding about how global economies work.

"We are winning big time against China.  Companies and jobs are fleeing.  Prices to us have not gone up and in some cases have come down.  China is not our problem though Hong Kong is not helping.  Our problem is with the Fed, raised too much too fast.  Now slow to cut.  Spread is way too much as other countries say.  Thank you to clueless Jay Powell and the Federal Reserve.  Germany and many others are playing the game.  Crazy inverted yield curve we should easily be reaping big rewards and gains but the Fed is holding us back.  We will win."

I`m not going to read that again.  You`ll have to go to the tweet to actually see that because it is a lot.  But to be fair, recessions happen.  The United States has actually overdue for one.  But given the indicators that a recession could be around the corner, why would the president continue to exacerbate the situation?

His signature legislative achievement was huge tax cuts for corporations and the wealthy.  Tax cuts that a study by the Congressional Research Service found had little to no impact on the economy.  He continues to escalate his trade war with China even after admitting that his tariffs harm American consumers.

Politico reported before today`s big stock market dropped that, "Instead of blaming a Fed, Wall Street economists are citing Trump himself as the biggest anchor on markets and the economy.  A recession is the last thing Donald Trump wants as he is up for re-election next year.

In fact, the last time the U.S. was in the middle of a significant economic downturn back in 2008 when President George W. Bush was in office, that recession worked against the Republican presidential candidate Senator John McCain.

Joining me now is someone who was right in the middle of that campaign Mark Zandi, Chief Economic Advisor for John McCain`s 2008 Presidential Campaign.  He`s the Chief Economist of Moody`s Analytics.  I`m also joined by Jennifer Rubin Washington Post Columnist and an MSNBC Contributor, and John Harwood Editor at Large for CNBC and host of the CNBC digital series Speakeasy with John Harwood.  Welcome to all of you.

Mark, makes sense of what is going on today, not the president`s tweet.  I won`t ask you to take on such a heavy lift, but about what happened that has caused the biggest percentage drop on the market this entire year.

MARK ZANDI, CHIEF ECONOMIST, MOODY`S ANALYTICS:  Well, I think, investors are coming to the conclusion that recession risks are uncomfortably high in rising and the principal reason for that is the President`s tariffs or trade war.  It`s doing a lot of damage to the economy.  Business investment is flatlined since the trade war got going about a year ago, exports were falling.

And what we learned yesterday was the global economy is now very close to recession.  The German economy actually contracted last quarter.  The British economy contracted last quarter, and China is also struggling.  So the entire global economy including the United States is closer to recession.  And I think investors are very panicked by it.

VELSHI:  Mark, in fairness we`ve had a long time since the last recession.  It`s been more than ten years.  That`s longer -- much longer than the average.  It`s almost double the average.  And in theory, the average is five years and nine months since 1945.  We`re at ten years and two months.

Why does the president not acknowledge these facts?  Why does the president continue -- last night I was on here talking about the number of times the president tweets or says that this is the best economy America has ever had.  He doesn`t -- he doesn`t speak to this weakness at all.

ZANDI:  Well, no.  He`s going to -- he`s going to have no options pretty soon because -- and I think it`s going to start resonating with him in with the American people once it becomes clear that job growth is slowing to the point that unemployment is going to rise, and we`re pretty close to that point already.

I mean, we saw last year -- I`ll just give you some numbers.  Last year, average monthly job growth in the U.S. was about 225,000.  In the last three, six months, subtracting from the volatility today, we`re down to one 140K, and if growth slows to less than 100, then at that point unemployment will rise.

Once unemployment starts to rise, I think I`ve become patently obvious to everybody including the president that the economy struggling and recession risks are high.

VELSHI:  And Jennifer Rubin, this does cost political parties even when they`re in a strong position.  It would cost a president who was in a strong position.  At some point, this has got to be worrisome for Republicans who can`t prevent a recession certainly but they could certainly admonish the president to not make things worse on the global scale.

JENNIFER RUBIN, MSNBC CONTRIBUTOR:  Yes.  I don`t think he can help making it worse.  One of the reasons of course that the stock market is dropping like a stone it`s because they figured out he really is a protectionist.  He`s not involved in some fifth-dimensional chess to try to get the Chinese to capitulate.  He really doesn`t know what he`s doing and he really is out to I think remain at loggerheads with the Chinese for a very long time.

But Ali, you`re right.  For good presidents who have lots of other accomplishments, a bad economy is going to be bad news.  Look at George Bush 41.  He had just won a war.  His approval ratings were at 90, but the economy went into a little bit of a dip.  He was voted out by Bill Clinton.

Fast forward to 2008.  The economy went into the toilet when George W. Bush 43 was in office and of course, the Democratic Party made hay out of that.  And those were both presidents who had other accomplishments that they could point to and were generally likable people.

The economy is really all Donald Trump has and he`s taken ownership of it.  So his idea of blaming the Fed or blaming Democrats, I just don`t think it`s going to fly.

VELSHI:  John Harwood, I have to say, you and I spent a lot of time trying to make -- as do Jennifer and Mark -- trying to make economic concepts accessible to people.  That tweet that the president sent out, you need a Ph.D. on something to understand what he was talking about.

He was attacking kind of everybody in one fell swoop.  He`s talking about Germany, he talked about the Fed.  The Federal Reserve, he wants the Fed to continue to lower interest rates.  The Federal Reserve can use those interest rates and lower them at a time when it needs to do so to you know, to help the economy, to boost the economy a little bit.  Is there a danger in the president pressing for interest rate cuts now?

JOHN HARWOOD, CNBC EDITOR AT LARGE:  Well, there`s a broader danger of the president infringing on the independence of the Fed and making people interpret Fed actions as being in response to pressure.  The belief that the Federal Reserve is independent is an important economic asset for the United States as part of the credibility of the United States government, the United States economy.

Look, the reality is -- and the key phrase in what Jennifer just said is he doesn`t know what he`s doing.  Now, in most cases, the government can just roll along despite the president not being interested in it or not knowing much about issues.  But on tariffs which he can take action unilaterally without constraint by Congress, he really has the opportunity to make this economy stumble and fall into recession.

The expansion`s tend to end.  It`s been going on for about ten years now.  It might stumble no matter what the president did, but he`s giving it a shove with these tariffs.

VELSHI:  Mark Zandi, my producers made me swear that I would not use the term inverted yield curve on the show so I`m not doing that.  But the description of those three words, I`ve tried to describe to people to say it is like -- if you look at that, that`s the downturn in the -- in the graph before each of these recessions so that`s why we worry about it.

It is -- it`s like a tornado warning.  It doesn`t tell you that a tornado is going to happen.  It tells you the conditions for a tornado are present.

ZANDI:  Although this is a pretty prescient tornado warning.  I mean, in the last 50 years, the yield curve has predicted every single recession and it`s never falsely predicted a recession.  So you know, this is a pretty strong signal.

Now listen, you know, there are arguments why this time may be different but I`ll have to say, you know, look at my hairline.  I`ve seen a lot of business cycles.  I`ve been through a lot of inverted yield curves.  Every single time economists including me come out and say don`t worry, this time is different, here are the reasons why.  So you know, I take everything -- take that all the grace off.

The other thing I`d say is look, even if the yield curve inversion isn`t signaling recession, what it is surely signaling is a much slower economy in 2020, and the economy is going to be vulnerable to anything else things and go wrong.

And by the way, there`s a boatload of things that can go wrong.  Just go look at China, go -- you know, go look at the Brexit, go look at the VAT increase the Japanese we`re going to try to implement, and that doesn`t even count all the geopolitical you know, hot spots all over the world.  So we are very vulnerable here.

Jennifer Rubin, we haven`t even gotten to the fact that Donald Trump continues to tell everybody that everything`s fine with agriculture and farmers in this country, and that the effects of trade are paid for by the Chinese and not by Americans.  Tell that to a farmer in Iowa right now.

At some point Americans are going to -- this is going to be laid bare for them the effects of this trade war.

RUBIN:  That`s right.   And some people think the day of reckoning at least for the farm community is coming up in fall is when they usually get all the money after they`ve harvest their crops.  And if that doesn`t come in, and they look at the welfare which is essentially what he`s giving them in exchange for raising tariffs and making their markets inaccessible, I think there`s going to be some real questions even in places that have supported President Trump.

But just going back to the hated inverted yield curve for just a moment.

VELSHI:  Just on the record, I didn`t say it, right?  You all said it.

RUBIN:  You didn`t, you didn`t.  It was me.  It was me.  Tell your producers.  What that signals is that people expect because of Donald Trump the future looks hazy, the future looks scary.  And that`s when people run into bonds because bonds are safe.  More demand will lower the yield on those bonds.

So it makes sense with this president stirring up so much chaos, so much uncertainty, that there would be a bit of a flight to bonds.  And frankly, his pressure to keep cutting interest rates, a lot of people think Jerome Powell did the right thing.  But frankly, if we hit a recession, we don`t have that much to work with.  We don`t have that much to work with fiscally and we don`t have that much to work with from a monetary policy.

VELSHI:  We`re not in remarkably strange -- strong position at the moment.  John Harwood, if you could using all your experience say hey, if you didn`t do this, this is the stuff that you could do to try and not make the situation worse.  What would that involve?

Would that involve figuring out a way to get to the end of this trade war, at least look like there`s something going on there?  Would it be stop badgering the Fed?  What does it look like?  What does success look like here for the president?

HARWOOD:  Well, it would involve pulling back on some of these tariffs and having a more rational approach to the trade war.  Remember, the president gave away some of his leverage at the beginning of his administration by pulling out of the trans-pacific partnership and alienating our allies both in Asia, and in Europe, and Canada, and Mexico with all sorts of saber- rattling about alleged economic misbehavior.

You`ve got to get allies together to confront China that the Trans-Pacific Partnership was going to bring together 40 percent of the world economy.  The president also is fixated on the bilateral trade deficit, how much stuff we buy from the Chinese as if that is some sort of a negative in and of itself, it is not.

If the president wants to focus on things like China stealing our intellectual property, that ---those are valid concerns, but you`ve got to go about it the right way, not by slapping tariffs here and there, doing it erratically undercutting your own negotiators which is what the president`s done.

I talked to Carla Hills who was a Trade Representative under a Republican president, a cabinet member under a different Republican president who said it is tragic the way this situation with China has been handled from the very beginning.

VELSHI:  Thanks to the three of you, Mark Zandi, Jennifer Rubin, and John Harwood.  We appreciate you helping us kick off tonight.  Still ahead, why today`s new lawsuit against the estate of Jeffrey Epstein could be the first of many.  The ongoing investigations after this.

(COMMERCIAL BREAK)

VELSHI:  Breaking news in Philadelphia tonight where six police officers have been shot in a standoff with a gunman who is now holed up inside a house.  Police still describe the situation as active and ongoing and officers are attempting to negotiate the gunman surrender.

(BEGIN VIDEO CLIP)

RICHARD ROSS, COMMISSIONER, PHILADELPHIA POLICE:  The critical thing to tell you that I did not tell you is I have you know, some situation we are worried about, potential hostage situation so we got to get this off, all right.

(END VIDEO CLIP)

VELSHI:  All right, here with me now by phone NBC 10 reporter Aaron Baskerville who is in Philadelphia reporting on this story.  Aaron, what`s the update?

AARON BASKERVILLE, NBC 10 REPORTER:  Well, right, you just heard the Commissioner talking.  He just came out about ten minutes ago gave a brief statement and said he had to rush back to the scene.  Right now I`m near Erie and Sydenham, north of Philadelphia.  We`re about two miles north of Temple University.

And right now I`m staring at about 20 to 30 officers.  Some are taking a defensive position behind cars, arms just kind of waiting for this situation to die down.  What we know so far this all happened around 4:30 this afternoon.  They were serving a warrant for drugs at a house.  A bunch of officers rushed inside that house, made it to the back of the house by the kitchen and then all of a sudden they started taking on gunfire.

The Commissioner described officers jumping out of windows, jumping out of doors to stop the barrage of fire to get away from it.  Other officers were coming in the door as well taking on that gunfire.  As you know by now, six officers have been shot.  The good news right now, none of those are life- threatening.  They`re at two different hospitals out here in the North Philadelphia area.

But the situation is ongoing.  The Commissioner describing this gunman shooting out of the window, hitting the SWAT truck, hitting buildings across the street.  I can tell you personally, I`ve been out here for about three and a half hours.  I`ve heard at least 50 to 60 different gunshot.

VELSHI:  Wow.

BASKERVILLE:  It`s a quick volley of shots, seven to eight shots, then it would die down for about five minutes, another seven to eight shots rapid fire, died down.  I mean, where I`m standing out, neighbors were you know, diving under cars, diving on the sidewalk, screaming, running.  As you can imagine, a very, very tense situation and it`s still going on as we speak right now.

VELSHI:  Can you give me some clarity as to what the Commissioner was saying about a hostage situation?

BASKERVILLE:  Yes.  There possibly maybe some others inside that house right now that he`s concerned about.  He wouldn`t go into detail at all.  He basically said that comment.  I`ve got to rush back to the scene where it`s going on right now.  He was outside the hospital at that point because he`s worried about a possible hostage situation.

He would not elaborate.  We are believing that he is scared for some folks that are still in that house right now.  I know nearby, there was a daycare and about 80 kids were escorted out of a daycare that was nearby.

Parents, of course, were extremely worried that their kids were still kind of basically holed up themselves in the daycare nearby.  I can tell you that they`ve evacuated some of the homes where I`m standing but still, where I`m at, there`s still this defensive position, still officers behind car doors, behind the vehicles, and everybody is just waiting for this to end.

The Commissioner also said they attempted to talk to this guy several times by bullhorn, by phone.  Apparently, he`s picked up the phone several times but didn`t talk or make any comment.  So they are urging this guy to just give up and so there`s no more injuries out here.

VELSHI:  What a story, Aaron.  Thanks for your coverage of this.  Aaron Baskerville from NBC 10 on the phone with us from the scene in Philadelphia.  All right, turning now to a new law that just went into effect in New York State starting today.  Childhood victims of sexual abuse can sue their perpetrators.

The law, the Child Victims Act applies to victims who were previously barred from suing due to the statute of limitations.  The law gives victims one year to file those cases starting today.  As of the close of business today, 427 cases were filed pursuant to the Child Victims Act according to a tally by NBC News.

The defendants in those lawsuits include the Roman Catholic Church, the Boy Scouts, and the late Jeffrey Epstein.

(BEGIN VIDEO CLIP)

JENNIFER ARAOZ, ACCUSER OF JEFFREY EPSTEIN:  I just did what I was -- what he told me to do.  I was really scared.  I didn`t necessarily think that he was you know, going to rape me.

UNIDENTIFIED FEMALE:  Did he hold you there?

ARAOZ:  Yes.

UNIDENTIFIED FEMALE:  Did Jeffrey Epstein rape you?

ARAOZ:  Yes, he raped me.  He forcefully raped me.  He know exactly what he was doing.

(END VIDEO CLIP)

VELSHI:  Today, that individual, Jennifer Araoz filed one of the first civil lawsuits against the estate of Jeffrey Epstein saying he raped her when she was 15 years old and alleging his co-conspirators groomed her for sex when she was 14 years old as part of his sex trafficking ring.

The co-conspirators alleged in the lawsuit include Ghislaine Maxwell, Mr. Epstein`s longtime confidant, and Jane Doe`s one through three who are three unnamed household staffers referred to in the lawsuit as the recruiter, the secretary, and the maid.  Additional civil suits against Jeffrey Epstein`s estate are likely.

Meanwhile, despite his death, the criminal investigation into his alleged co-conspirators is ongoing.  That criminal investigation by the Southern District of New York is overseen by the Justice Department and Attorney General William Barr.

Our next guest former U.S. Attorney Joyce Vance has called on Barr to recuse himself with regard to the Epstein investigation.  Joyce Vance is also an MSNBC Legal Analyst.  She joins us now.  Joyce, what`s the basis on which you are calling for William Barr to recuse himself.

JOYCE VANCE, MSNBC LEGAL ANALYST:  So I should be clear Allie that I don`t make the argument because I believe that Barr is actually going to recuse.  I think the sad reality here is that he won`t.  But the reason he should recuse is because he has both conflicts of interests.  Conflicts that he has apparently decided don`t want recusal, but also those conflicts give rise to an appearance of impropriety.

That means that people in the public can`t have confidence that he`s a neutral decision-maker.  And when you have someone like that in a position of control over an important investigation like the one into Epstein`s death and the ongoing criminal cases, it causes the public to lose confidence in the Justice Department.

DOJ has already stretched too thin.  We can`t afford to have any more loss in its reputation and integrity.

VELSHI:  What`s the -- what`s the conflict that you see that he`s got?

VANCE:  You know, he has a number of conflicts starting with the fact that at his confirmation hearing.  He indicated that his former law firm had done some work on behalf of Epstein and he would look into whether that warranted recusal.  But also, Alex Acosta, his former colleague, the former Labor Secretary was involved in the plea agreement down in Florida for Acosta which has caused so much concern.  Their relationship certainly is some form of a conflict.

And then we have this really curious family detail that the attorney general`s father hired a very young Jeffrey Epstein when he was a college dropout to teach calculus and physics at the prep school that he was the headmaster of in New York City.

So even if these aren`t a formal recusal conflict issue, in combination, they create such an appearance of impropriety.  The Attorney General should have stepped away and let the Deputy Attorney General or someone else oversee this matter.

VELSHI:  Republican Senator Ben Sasse has called upon the Department of Justice to take that deal that was cut in Florida, the one that led up the investigation into that, the reporting from the Miami Herald and rip it up.  Tell me about that.  Is that even doable?

VANCE:  What really needs to happen here is a full-on investigation into what happened and perhaps an investigation by the Office of Professional Responsibility.  You can`t really be the government and rip up a plea agreement down the road in the absence of very unusual circumstances --

VELSHI:  Because that affect your ability to make on our deals.

VANCE:  Well, it does.  And also the rules of criminal procedure very strongly favor the finality of plea agreements.  So you can`t walk in down the road a decade later and say I take it back.  But that doesn`t mean that if you`re someone who`s engaged in criminal conduct that you can`t be prosecuted in this case other federal districts or even by state jurisdictions.

So it`s not like the government is without a way of dealing with the air that was made in the plea agreement or would have been had Epstein not died in prison.

VELSHI:  You know, usually prosecutors when you`re trying to get somebody at the head of something work your way up.  You find people who are junior to that person and get them to turn or get them to somehow testify.

Now, in this case, because Jeffrey Epstein is gone, we have been hearing since day one that there are other people involved in this thing.  Does the investigation that was underway with Jeffrey Epstein, does that die and does that have to start again?  And why isn`t -- why hasn`t something happened already given that we do know that there are other people who are consistently referred to by these alleged victims?

VANCE:  So in a federal case, when a defendant dies a criminal case the prosecution comes to an end.  That`s true.  Even if Epstein had been convicted at trial and the case had been on appeal and he and died on appeal, the death of a defendant signals the end of that case.

As you point out though, Epstein was charged as a co-conspirator in a sex trafficking conspiracy.  Presumably, that means that there are other people out there who are criminally culpable conspirators.  And I expect based on the statement made by the U.S. Attorney in Southern District of New York that at the point where he believes he has sufficient evidence to convict those co-conspirators, he intends to move forward even with Epstein no longer in the picture.

VELSHI:  Joyce, thank you for joining us as always, Joyce Vance.  Coming up next, new questions about Mitch McConnell`s role in lifting sanctions for a Russian company that then invested millions into Kentucky.  That new reporting after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL, (R) KENTUCKY:  Over the last several days, I was called unpatriotic, unAmerican, and essentially treasonous by a couple of left wing pundits on the basis of bold-faced lies.

(END VIDE CLIP)

VELSHI:  If there is one thing we know it`s that Senate Majority Leader Mitch McConnell hates the nickname Moscow Mitch, a nickname he earned late last month for his failure to bring bills to the floor that would protect U.S. elections from Russian interference.  That moniker has spread widely since.  Kentucky Democrats are selling all kinds of Moscow Mitch merch.  There`s a new song titled Moscow Mitch from musician Ben Folds.  And today, the speaker of the House picked up the nickname.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, (D) CALIFORNIA:  They sent our legislation to the Senate.  Moscow Mitch says that he is the Grim Reaper.  Imagine describing yourself as the Grim Reaper, that he is  going to bury all this legislation.

(END VIDEO CLIP)

VELSHI:  But it`s not just Mitch McConnell`s unwillingness to protect elections that have earned him the Moscow Mitch label.  Tonight, there are new questions about McConnell`s role in lifting sanctions on a Russian company that then turned around and invested millions in a massive Kentucky aluminum project.

One of the reporters who wrote that incredibly detailed story for Time magazine, Vera Bergengruen, joins us tonight.  Vera, thank you for being with us.

It is a remarkable story.  It is a story of an industry that was going to come to an economically depressed part of Kentucky, northeastern Kentucky, promised great paying jobs.  It made a lot of sense.  They were going to take big slabs of aluminum, flatten them out and make them into cars and soda cans and things like that. 

And then it turned out that the only person they could partner with was Oleg Deripaska`s company, a Russian company, that was being sanctioned and suspected for involvement in the Russian interference into the U.S. election.  What happened next?

VERA BERGENGRUEN, TIME MAGAZINE WASHINGTON CORRESPONDENT:  Right.  And so basically what happens is the CEO of this company ends up talking to his lawyers saying I know it`s illegal to actually go and talk to them because the sanctions are still on, but I think I`m going to take the risk and do that.  So we reveal that he actually went to Zurich and met with Rusal when the sanctions were still in place.  He is careful to say they didn`t do any negotiations, they were just talking.  And then a couple of -- one day -- two days later, the -- a senate push to actually block the sanctions from being lifted end up being thwarted partly, because of the efforts of Mitch McConnell.  And then the sanctions were lifted as they were meant to be.  And, you know, three months later, this company invested $200 million in this Kentucky aluminum mill.

VELSHI:  Ahead of the 2018 mid-term elections, according to your story, one of Rusal`s long-time major shareholders, Len Blavatnik, contributed more than $1 million through his companies to a GOP campaign fund tied to McConnell.  So, this isn`t just speculative out there circumstantial stuff, there does seem to be stronger relationship.

BERGENGRUEN:  Right.  But I think what our story really shows is that while -- you know, when you go Kentucky, you`re seeing the Democrats are, like you said, they`re selling this merchandise.  There are these big billboards kind of saying, you know, Russian mob money and blaming Mitch McConnell.  But if McConnell hadn`t tried to block this push, the sanctions would probably still have been lifted.  You know, European countries were really putting a lot of pressure on the U.S.

And so what our story kind of shows is really why is it so easy for Russia post the Mueller report, post everything, to have this kind of economic influence?  You know, they`re using U.S. lobbyists, U.S. banker, U.S. donations, all of that in order to kind of get their way.

VELSHI:  And soon after, again, from your story, soon after the Kentucky deal was announced, Lord Barker sent a letter to the governors of eight more U.S. states.  In the April 18 note, he touted the benefits of the Rusal investment and said the company was, quote, eager to evaluate other opportunities around the country and your state in particular.

So not only did it happen, but in fact it`s touted as a success.  And I get that.  I get why in an economically depressed part of the country, a CEO who can raise that kind of investment to bring industry and good paying jobs would take it.

What is Mitch McConnell`s response to this?

BERGENGRUEN:  You know, he said it had absolutely nothing to do with his stance on sanctions, that he was just kind of following the Treasury Department`s move, and that he had no idea it was going to benefit his home state.

We do know that afterwards, you know, the CEO of the company says that he is a big fan.  You know, they`ve met afterwards.  But, again, what is really interesting is that in Kentucky, the governor, Matt Bevin, ended up kind of -- he ended up investing $15 million of Kentucky taxpayer money as well.  So there is a lot of people in Mitch McConnell`s state who are really upset about that, because they say that they feel now tied to Oleg Deripaska`s former -- you know, his company, and that they feel that they`re all somehow involved.

So, it`s really a tangled web in terms of how this deal came about.

VELSHI:  Vera, thank you for your thorough reporting on this.  Vera Bergengruen of Time magazine.

BERGENGRUEN:  Thank you.

VELSHI:  All right, coming up next, despite having lowered the bar for decorum befitting elected officials, Steve King still manages to trip over it, now sparking bipartisan condemnation.

What he said, after this.

(COMMERCIAL BREAK)

VELSHI:  He is a Republican congressman who has promoted Neo-Nazis, repeatedly disparaged immigrants, and questioned what`s so offensive about the notion of white nationalism.  And today he is suggesting that humanity itself would not exist without rape and incest.

Congressman Steve King, Republican of Iowa, made the remarks while discussing his push for a bill that would basically make all abortions illegal, even in case of rape and incest.  Here is his reasoning.

(BEGIN VIDEO CLIP)

REP. STEVE KING, (R) IOWA:  What if we went back through all the family trees and just  pulled those people out that were products of rape and incest, would there be any population of the world left if we did that, considering all the wars and all the rape and pillage that`s taken place and whatever happened in culture (inaudible) society, I know I can`t certify that I`m not a part of a product of that.  And I would like thank every one of the lives of us are as precious as any other life.

(END VIDEO CLIP)

VELSHI:  I`ve heard some weird arguments in my life, but that one`s interesting.

According to the Des Moines Register, King added, quote, "it`s not the baby`s fault for the sin of the father or the mother."

Now, Congressman King is not exactly new to this type of controversy.  As you may remember, House Republicans stripped him of all his committee assignments back in January after The New York Times quoted him as saying white nationalists, white supremacists, western civilization, how did that language become offensive?

His latest comments prompted calls for him to resign from Congresswoman Liz Cheney, the chair of the House Republican Conference, as well as a slew of Democratic presidential candidates starting with Senator Kirsten Gillibrand who tweeted simply, "you are a disgrace.  Resign."

NBC News tried to get King to clarify his rape and incest comments this afternoon.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  NBC News.  John Voxley (ph) of NBC News.

UNIDENTIFIED MALE:  He`s got a call to make.

UNIDENTIFIED MALE:  Excuse me, excuse me.  Your comments, Mr. King, what were you trying to say?  What`s your point?

UNIDENTIFIED MALE:  He`s got a call.

UNIDENTIFIED MALE:  Your colleagues have talked about...

UNIDENTIFIED MALE:  He`s got a really important call.

UNIDENTIFIED MALE:  Your colleagues have talked about you resigning.  They`re asking for your resignation.  What do you have to say, sir?  Sir? What were you trying to say?  What was your point?

UNIDENTIFIED MALE:  He`s got a call here.

UNIDENTIFIED MALE:  Rape and incest.  What were you trying to say, sir  What was your point?

UNIDENTIFIED MALE:  Thank you, thank you.

UNIDENTIFIED MALE:  What were you trying to say.  What do you have to say?

UNIDENTIFIED MALE:  Thank you.

(END VIDEO CLIP)

VELSHI:  Why did he clam up all of the sudden?

I`m joined now by journalist Laura Bassett who covers the intersection of politics and  reproductive rights and has written for outlets including The Washington Post, HuffPost and GQ.

Laura, I don`t even know what question to start with, but I will start with this one.  Is Steve King, the view he articulated about this weird defense of why abortion should be illegal in all cases, is that the mainstream of Republican thought or is he an outlier?

LAURA BASSETT, JOURNALIST:  He`s -- OK, so there is a couple of different questions I think within your question, Ali.  And a lot of Republicans, both the state level and the federal level, have argued that rape and incest should not be exceptions to abortion.

What`s different here is that Steve King is using the opposite argument.  Most Republicans, including famously Todd Aiken in 2012, say we don`t think there should be exceptions for rape and incest because those situations are so rare.  Aiken notoriously said women can`t become pregnant if it`s a legitimate rape, because the body has a way to shut that whole thing down.

VELSHI:  Right, it`s the first time we had all heard the term legitimate rape.

BASSETT:  The first -- right, legitimate rape.  That was a Todd Aiken special.

Now Steve King seems to be taking the opposite logic here saying not only is it common to have pregnancy result from rape, it`s normal, you and I wouldn`t exist without it.  The entire human population wouldn`t exist without it.

So he is essentially normalizing rape and incest, which it`s alarming and bizarre.  I haven`t heard -- I mean, Republicans have been stumbling over themselves for years, trying to excuse their opposition to rape and incest options.  This is a new one, though.

VELSHI:  Right, so to the extent that one could have an intellectual argument about the fact that there has been a lot of rape and incest throughout history and that hence some percentage of humanity is the outcome of that, I`ve never seen those two put together as an argument for abortion legislation.

BASSETT:  It`s baffling to me.  You would think Republicans would have learned their lesson  by now.

VELSHI:  You would think.

BASSETT:  Talking about rape and abortion never goes well for them, especially in an election  year.  It really backfires.  And that`s why we`re seeing a lot of people in leadership, Republican leadership especially, be really frustrated with Steve King right now.

VELSHI:  There is some polling from June and July of this year when we were talking a great deal about abortion legislation in the United States, 27 percent of Americans think that abortions should be legal in all cases, 14 percent think it should be illegal in all cases.  And generally speaking, when talking about all cases, we`re talking incest and rape.

Here is my question for you, Liz Cheney, not too many Republicans have tweeted about Steve King resigning, she is one of them.  She has done this in the past, by the way.  But even when they stripped him of his committee responsibilities earlier this year, I`ve been covering Steve King for years, this stuff is not all that new.  It always ends up being kind of remarkable that he thinks up a  new way of being offensive, but the idea that he has been doing this goes back years.

BASSETT:  You`re right, Ali.  I`ve been covering him since 2010 as well.  And he has been saying -- he was always the crazy quotes in my articles whenever I covered House hearings on abortion.  He has been saying the craziest things for years. 

And we need to remember that as recently as 2016, he was the national co- chair of Ted Cruz`s  presidential campaign.  This is not some fringe Republican, this is a guy that has been embraced by very mainstream members of the party.

And earlier this year, Republicans had a chance to expel him.  They had a chance to formally  censure him, and they didn`t do either of those things.  They stripped him of his committee assignments, which sure, it`s something.  But he is still writing and voting on federal laws.

VELSHI:  Right.  And according to the Des Moines Register story quoting his comments today, King said there was a plan for Donald Trump to criticize him as well.  This is talking about when he  was pulled from his committee assignments.  But he met with Trump and said there is no signal from Donald Trump that he is anything other than supportive of me.

Now, we don`t know whether that`s true, but we haven`t heard from Donald Trump that it`s not true.

BASSETT:  Well, Trump supports a lot of the things that Steve King says.  Trump hasn`t condemned white nationalism very strongly.  A lot of his supporters are the same people that elected Steve King.

Steve King denigrates immigrants, has compared immigrates to dogs, said they have cantaloupe calves pulling drugs over the border.  I mean, Trump has said a lot of these things and used a lot of the same language.  So, if Trump does come out and condemn Steve King, it`s going to be because his hand was forced by other people in his administration.

VELSHI:  I think it`s worth playing what Steve King said to Chris Hayes in 2016 apropos of what you just said.  Let`s listen to what he said about western civilization.

(BEGIN VIDEO CLIP)

KING:  Where did any other subgroup of people contribute more to civilization.

HAYES:  Than white people?

KING:  Than western civilization itself that`s rooted in western Europe, eastern Europe and the United States of America and every place where the footprint of Christianity settled the world.   That`s all of western civilization.

(END VIDEO CLIP)

VELSHI:  That`s the language that white supremacists and white nationalists do tend to use, that civilization came from Europe, America.  It carries the flag for white culture and everybody else is kind of messing it up a little bit.

BASSETT:  Yeah.  I used to work at Huff Post.  My colleague Chris Mathias (ph) over there has been beating this drum for over a year now.  He wrote the headline a year ago"Steve King is a white supremacist and he is still in congress and he is not being kicked out."  I mean, we`ve known this for a long time.  This is nothing new.

VELSHI:  Laura, thanks for joining me tonight.  Laura Bassett is us tonight on this story

BASSETT:  Thank you for having me.

VELSHI:  Coming up, many 2020 candidates are still fighting to qualify for the next debate, prompting renewed calls for someone who drop out and run for senate.  We`re going talk than ahead.

(COMMERCIAL BREAK)

VELSHI:  The number of Democrats supporting a Trump impeachment inquiry is ticking upward almost daily.  New Mexico Congresswoman Deb Holland is the latest to join the ranks, and she will explain how she arrived at her decision to my colleague, Lawrence O`Donnell, tonight on The Last Word at 10:00 p.m. Eastern.  Right here on this show last night, California Democrat Ro Khanna told me where he stands.

(BEGIN VIDEO CLIP)

REP. RO KHANNA, (D) CALIFORNIA:  I support Nadler.  I support the impeachment inquiry.  I haven`t gone on television calling for it, because Nadler has a process.  And he has a timeline.  And I didn`t want to put pressure on him based on that timeline.  He wanted to make sure we filed the court hearing against McGahn.  He did that.

Now we`re in an inquiry and I support him on that.

VELSHI:  Does that mean you could be added to the 120?

KHANNA:  For sure if they want to.

(END VIDEO CLIP)

VELSHI:  OK.  So Ro Khanna is added to the list and he`s on the list.  What about Jerry Nadler?

(BEGIN VIDEO CLIP)

REP. JERROLD NADLER, (D) NEW YORK:  This is formal impeachment proceedings.  We are investigating all the evidence.  We`re gathering the evidence.  And we will at the conclusion of this, hopefully by the end of the year, vote to -- vote articles of impeachment to the House floor, or we won`t.  That`s a decision that we`ll have to make.  But that -- that`s exactly the process we`re in right now.

(END VIDEO CLIP)

VELSHI:  So, Nadler and Khanna and Holland put it at 123.  The appetite for impeachment is clearly growing.  But the number that matters right now is actually 26.  That`s how many days are left  until congress comes back from recess and we get to see what they do with all this momentum.

But before then, the 20-plus Democrats currently running to replace Donald Trump will find  out who has made the next debate.  The deadline to qualify is just two weeks away.  Only nine candidates have qualified so far -- Joe Biden, Cory Booker, Pete Buttigieg, Kamala Harris, Amy Klobuchar, Beto O`Rourke, Bernie Sanders, Elizabeth Warren, and Andrew Yang.

And with the field whittling down, there are renewed pushes for some of the candidates to drop out of the presidential race and run for the senate in their home states against potentially vulnerable Republican incumbents.

The New York Times reported yesterday that former Colorado Governor John Hickenlooper, quote, "is giving serious considering to switching to the senate race."

A few days ago, the Houston Chronicle`s editorial board told Beto O`Rourke he should think about doing the same writing, quote, "drop out of the race for president and come back to Texas to run for senator.  The chances of winning the race you`re now in are vanishingly small and Texas needs you."

And earlier today, I asked presidential candidate and Montana Governor Steve Bullock whether he is thinking about running for senate instead. 

(BEGIN VIDEO CLIP)

VELSHI:  A lot of people don`t know you.  This is a hard slog to run for president.  And there are a lot of people who when they get to know think, wow he`d be great in the United States Senate.  They said that.

STEVE BULLOCK, GOVERNOR OF MONTANA AND 2020 PRESIDENTIAL CANDIDATE:  You know, we`re going have a good candidate certainly to compete in 2020.

VELSHI:  So you`re not putting your mind to what happens in it`s not president right now?

BULLOCK:  Yeah.  And I`d ruled out early on that I won`t be running for senate.  We have good candidates.  I`ll do everything I can to make sure that they win.

(END VIDEO CLIP)

VELSHI:  I want to bring in two people who can help shed some light into the challenges and choices facing these candidates.  My old friend, Joel Payne, who served as a senior staffer for the 2016 Hillary Clinton presidential campaign, and Cornell Belcher, a Democratic strategist and pollster and an MSNBC political analyst.

Gentlemen, thank you for joining me.

Cornell, let`s start with you.  What is going through their minds?  There are -- got to be 15 of the 20-plus candidates who are saying, not likely to be the president of the United States, or are they thinking if they can get to the ground in Iowa, maybe something will change.  Maybe they`ll go from 2 percent to 20 percent.

CORNELL BELCHER, DEMOCRATIC POLLSTER:  What`s going through their minds is I really want to be president.  And I`m special, but people really don`t understand how special I am.  And when I get a chance to explain to them how special I am, all this is going to change and I`m going to leap to be front-runner.

But that aside, at some point, I think it`s fairly soon, if you`re not -- if you don`t make that stage in the next debate, your campaign`s over.  And I think you`re already seeing pressure from a lot of the folks who are at 1 percent and sort of still staying at 1 percent, they can`t really put together a real campaign because the money`s drying up.

I think there was -- there was -- there was pretty good fund-raising on the first half of this, but I think you`re going to see money dry up and their inability to put together a campaign in most of the battleground states.

And if you don`t make that debate stage, you should pack it up because your campaign is over.

VELSHI:  You know, Joel, when you think about prior races, there are some people who got into the race who were not front-runners.  They may not have looked successful and they turned tout be either interesting candidates or relatively successful.  And there were some people who were front-runners, or had that kind of status, that suggested they were going to make it to the finish line and burned out first.

So, is there any sense in these candidates, as Cornell said, who think that they`re special, in giving up any time soon or wait until January and closing in on Iowa?

JOEL PAYNE, SENIOR STAFFER, 2016 HILLARY CL INTON CAMPAIGN:  Well, so we`re talking about two different things, right.  We`re talking about the candidates and then their campaigns.

Their campaigns probably, meaning the advisers around them, have a very strong sense of what reality is.  I think we`ve even seen from Hickenlooper even before The New York Times reporting yesterday, his campaign had been urging him to get out for weeks.  And we`ve even seen people like John Delaney and others whose campaigns have been urging them to get out because I think they understand the realities on the ground sometimes better than the candidates.

But in terms of, you know, looking at Beto versus Hickenlooper and whether or not they could transfer this into a senate run, I think you`re looking at two completely different situations.  Beto O`Rourke is probably not well positioned to do that as much as people think.  M.J. Hegar is a pretty strong candidate.  And I think John Cornyn is a different type of Republican for him to run against.

VELSHI:  He`s not Ted Cruz.

PAYNE:  He`s not Ted Cruz.  And he`d be running in 2020 when President Trump is on the  ballot, and you`re going to bring out a lot of Republicans.

John Hickenlooper is running against a very weak Cory Gardner, that`s a different race all together.

VELSHI:  Let`s look at recent Economist/YouGov poll for the Democratic primary.  You know, you can put up any of these polls, Cornell, they show similar things -- Biden, Warren, Sanders, Harris up there, Buttigieg usually up there.  In this particular poll, it`s got Beto O`Rourke at 5 percent.  And then after that, you drop to 2 percent, and there are a whole lot of people who are under 2 percent and 1 percent.

To your point that these people think they`re special, and by the way, by many measures, they are.  They`re accomplished.  They`re interesting people with some really good policy prescriptives.  But what they don`t seem to be asking themselves is am I more special than someone else who I can get out of the race and support?

BELCHER:  Well, you know, is it your time?  And certain candidates catch fire because it`s their time. 

I had the fortune of working for -- for a young senator from Illinois who most people said shouldn`t run and he -- it was his time and he caught fire with hope and change.

If your are in the top five or six of the pack, you probably -- there`s still a chance for you, because the electorate is still very fluid.  And I, here, again, David Plouffe`s voice in the back of our heads saying, you know, it`s not a national race, it`s a state-by-state race.  And we pay a lot of attention to these national polls where Biden`s running really far ahead, but if you look at some of the state-by-state polls, you know, Biden is in a dogfight and a tossup in a lot of these states and it matters who wins Iowa, and it matters who wins New Hampshire and it`s really, really, really going to matter who wins South Carolina.

VELSHI:  Joel, let me ask you, we were talking about the people who have some standing, who might get out o the race.  Is there anybody you`re sitting looking at who`s running at 1 or 2 percent at the moment in most of these polls, who given the opportunity you think might break out?

PAYNE:  Oh, absolutely.  I think someone like Cory Booker is really well positioned to break out.  He`s invested a lot in organization in those early states, particularly New Hampshire and Iowa.  He`s got amongst the strongest of any of the Democratic field.  And I think he`s somebody who will benefit from a smaller field.  There`s so many people out there right now I think it`s a little bit difficult for voters to discern between this person versus that person, when there`s 25 people out there.  When there`s 10 people, eight people, I think someone like Cory Booker will benefit from that.

VELSHI:  Guys, thanks very much.  Great to talk to you both.  Joel Payne, Cornell Belcher.

And that is ALL IN for this evening.  "THE RACHEL MADDOW SHOW" starts right now.  Good evening, Rachel.

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