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The Story Is with Elex Michaelson

Trump Threatens E.U. Tariffs Over Canada Partnership Proposal; Federal Reserve Raises Interest Rates for the First Time Since 2023; Trump Talks Crime, Rise in Interest Rates and Affordability in North Carolina; Macklemore Vows to Donate $1 Million to Palestinian Causes; El-Sayed Fires Back at Vance Over Election Strategy; House to Adjourn Early, Stave Off Hegseth Impeachment Vote; Feds Make Arrests in Alleged Homeless Aid Fraud Scheme; Nobel Laureate Hails 'Woman, Life, Freedom' Movement. Aired 12-1a ET

Aired September 17, 2026 - 00:00   ET

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

[00:00:00]

ELEX MICHAELSON, CNN ANCHOR: I'm Elex Michaelson live in Los Angeles.

Coming up, THE STORY IS hostile act. President Trump issues a warning to the European Union about their potential new partnership with Canada. Mark Carney's former chief of staff is with me live.

THE STORY IS affordability. The Fed raises interest rates for the first time in years in an attempt to contain inflation. But for Donald Trump on the campaign trail tonight's main message to voters was about security.

And THE STORY IS in her own words. An Iranian Nobel Laureate has spent much of the last two decades in prison. Now she's writing about the abuse she experienced in her new memoir. The Iranian government has tried to stop its publication, but she says she's ready to face the consequences. Her interview with CNN ahead.

ANNOUNCER: Live from Los Angeles, THE STORY IS with Elex Michaelson.

MICHAELSON: Our top story is in Canada, where the prime minister, Mark Carney, is turning to Europe as the country's trade war with Washington intensifies. He is expected to address European lawmakers in the coming hours after the European Union asked Canada to become the first ever, quote, "associate member."

President Trump not welcoming that move. Here's his strong warning for Europe.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Canada has been a terrible trade partner, and no, I don't see that. And if they do that, if I think it's at all a hostile act, I will put very serious tariffs or stop trading with Europe on many things. So if they do that, if Europe does that with a bad intention -- if it's a good intention, that's fine. If it's a bad intention, we'll put very heavy tariffs on Europe.

(END VIDEO CLIP)

MICHAELSON: So it's not clear exactly what being an associate member would actually entail. The E.U. ambassador to Canada told Canadian press that the partnership would be unlike anything that currently exists, without giving specifics of what he actually means.

Joining me now from Toronto is Marco Mendicino. He served as a Cabinet minister and chief of staff to Prime Minister Mark Carney. He's currently senior counsel at Cassels.

Welcome back to THE STORY IS.

MARCO MENDICINO, FORMER CABINET MEMBER UNDER CANADIAN PRIME MINISTER MARK CARNEY: Elex, great to be back with you.

MICHAELSON: So has Canada done anything in your view that would be considered a hostile act? What do you think a hostile act is?

MENDICINO: Not this. It's a head scratcher. It's hard to see how Canada becoming closer with a NATO ally is a hostile act. In fact, it's the exact opposite. And I say that not only because the United States obviously benefits from transatlantic defense cooperation, but America itself does a ton of trade with the E.U., about $1.6 trillion in 2-way trade last year. What is another shot across the bow is threatening to disqualify Canadian suppliers from the federal procurement system, which was what was contained in the presidential memorandum tonight.

And I think this is obviously an unfortunate development, but I think framing the Canada-E.U. trade relationship as hostile has got it all backwards. This isn't Canada choosing Europe over America. We want to do trade trading with both. But the fact is that with each tariff it gets harder to do business. And last point, that's one of the reasons why Prime Minister Mark Carney invited wealth from around the world.

About $120 billion in wealth at the first ever Canada investment summit in Toronto. And he was able to secure about a half trillion in commitments from Canadian pensions and banks, and yes, some foreign investors as well because they believe in doing business with Canada.

MICHAELSON: Let's hear from Mark Carney. This is him speaking in French earlier. Take a listen.

(BEGIN VIDEO CLIP)

MARK CARNEY, CANADIAN PRIME MINISTER (through translator): In an uncertain world, Canada offers the stability of a trusted partner and the unique opportunities of a country that's becoming the most connected major economy in the world.

(END VIDEO CLIP)

MICHAELSON: You know him well. You've been behind the scenes when he's preparing for a big speech. You kind of understand what's going on in his mind. What's happening behind the scenes? What's his game here?

MENDICINO: Well, he's very strategic. And I think when he talks about a more dangerous and divided world, he is principally talking about the conflicts in Europe. Obviously, the Russian-Ukraine war is of grave concern, especially in Europe. That's one of the main reasons why he's going to the E.U., why he's there, which is to stand in unity with Ukraine and with the E.U., who obviously care about standing up for democracy. He's talking about the war in the Middle East and all of the uncertainty that it brings with it, including with the energy supply chains. We've got about 20 percent of the world's oil that is, you know, very much vulnerable based on the Strait of Hormuz, about a third of the worlds fertilizer, which impacts food security.

[00:05:09]

And obviously, Canada is an ally. We want to be there for our friends around the world. And that's one of the other reasons why at home, Elex, we're focused on really leveraging our energy and getting more projects done. And that's, again, one of the other things that came out of this investment summit was securing more private wealth to underwrite those energy projects so that we can trade with our partners and provide that additional energy security to the world.

MICHAELSON: So we've talked about the American perspective. We talked about the Canadian perspective. Let's talk about the European perspective right now, and let's listen to the European Commission president.

(BEGIN VIDEO CLIP)

URSULA VON DER LEYEN, EUROPEAN COMMISSION PRESIDENT: This is not a partnership against anyone else, but for our common strength. In short, we want to bring the relationship with Canada to the highest level possible.

(END VIDEO CLIP)

MICHAELSON: What do you think she means? What would an associate membership look like in your view?

MENDICINO: Yes, it's a good question because currently that status does not exist. But I think at a high level it means deepening the trade and economic partnership that exists between Canada and E.U.. It means deepening the defense and security cooperation. You know, about a year ago, when I was still Mark Carney's chief of staff, we entered into something called the safe agreement, which is a way to make defense procurement, you know, more easy, more efficient within the E.U.. And now Canada is a member of that agreement.

And as I said before, by Canada becoming closer to the E.U. as a NATO ally, this does accrue to the benefit of the United States because any defense and security cooperation across the transatlantic is a good thing. So I think we'll see how this gets negotiated. Obviously, the prime minister is going to give an address tomorrow, and there will be another set of meetings, I'm sure once we get into the details of negotiating. But it is a good thing on the whole. And I think, you know, we're

going to leave the door open. The last thing I would just say, Elex, is, you know, the prime minister has said repeatedly that Canada is there as a friend and as a trading partner to do business with the United States. We believe that securing another trade agreement will actually bring down the cost of living in the United States when it comes to things like food and fuel. We believe that lowering tariffs will actually lower the cost of living. That's something that is one of the underpinning principles of the trade relationship that we've had thus far. And we do hope to get back to the table.

MICHAELSON: Of course lowering costs, the number one issue in America and every voter survey right now.

Marco Mendocino, joining us live from Toronto to start us off, thanks so much. Really appreciate your time.

MENDICINO: You too, Elex.

MICHAELSON: Let's talk about Russia now. Some lawmakers are warning that President Trump's power to impose tariffs could get out of hand following the passage of a new Russia sanctions bill. It sailed through the House today. It's now headed to the president's desk for his signature. The bill allows for new tariffs of up to 100 percent on countries that buy Russian oil and gas, but sources say nearly a dozen Republicans wanted those tariffs powers to be removed from that bill.

They and many House Democrats were concerned about possible new price hikes the tariffs would cause ahead of the midterms. But House Speaker Mike Johnson and his team apparently rebuffed any proposed changes. The bill is named after the late Senator Lindsey graham, who had pushed it for more than a year before he died in July.

President Trump is defending Federal Reserve chairman Kevin Warsh, but attacking the rest of the Fed's board after the central bank unanimously voted to raise interest rates for the first time in more than three years. The president called them, quote, "very hostile," which clearly is a big word these days. And, quote, "very political," accusing the Fed of raising rates for political reasons rather than economic ones.

A social media post, President Trump argued that interest rates should be 1 percent or less because, quote, "We're the best credit in the world by far." He urged the Fed in all caps to lower interest rates and fast. Trump has long pushed for lower rates. He hand-picked Fed chairman Kevin Warsh to lead the country's central bank.

It is worth noting that the Fed's interest rate decisions are not made by its board alone, but by a broader policy making group that also includes the board.

The Federal Open Market Committee voted unanimously Wednesday to hike the key overnight lending rate by a quarter percent and 16 of 18 policymakers expect at least one more rate hike this year. The move underscores the Fed's concern about persistently high inflation, which has worsened in recent months due to the war with Iran. CNN's Richard Quest has more on all of this from London -- Richard.

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(BEGIN VIDEOTAPE)

RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: The fact that this rate rise was widely expected should not diminish the fact of what has actually taken place. It's the first rate rise in three years. But more importantly, perhaps it's the indication that the new Fed chair, Kevin Warsh, is serious about getting inflation squeezed out of the U.S. economy. He made it clear at his important Jackson Hole speech that inflation had been too high for too long, and that there needed to be action.

And even though the committee had been predisposed to raise rates, it was this final act by the chair pushing it over the edge that everybody will remember. Kevin Warsh was in no doubt why it was necessary.

(BEGIN VIDEO CLIP)

KEVIN WARSH, CHAIRMAN, FEDERAL RESERVE: We cannot affect any individual price, whether it be oil prices, whether it be foodstuffs at the grocery store. But what we can do and will do is ensure that any change in relative prices don't broaden out, don't have second and third order effects in the economy. That's what were tasked to do, and that's what we will do.

(END VIDEO CLIP)

QUEST: What also became clear is that this will not be the first and only rate rise. Another can be expected probably before the end of the year.

The Federal Open Markets Committee, the interest rate setting body, is sending the strongest message it can to the markets that it will deal with this inflation once and for all.

Richard Quest, CNN, London.

(END VIDEOTAPE)

MICHAELSON: Richard, thank you.

President Trump blaming the Democrats for those affordability issues during a campaign stop in North Carolina.

CNN's Betsy Klein traveling with the president.

(BEGIN VIDEOTAPE)

BETSY KLEIN, CNN SENIOR WHITE HOUSE CORRESPONDENT: President Trump campaigning here in battleground North Carolina, as we are seeing some of his efforts to reimagine the use of executive authority hitting limits. We've seen that as the Supreme Court ruled against his efforts on mail-in voting. He's also lashing out around efforts to put his name on the Kennedy Center, and a growing number of members of his own party expressing opposition to his war with Iran. The latest move is that the Federal Reserve has voted unanimously to raise interest rates by a quarter of a percentage point.

But the reality is that this is going to make it more expensive for Americans who are looking to buy, to borrow money, to buy cars and houses in addition to voters who are feeling the squeeze with those rising gas prices now standing at $4.36 a gallon. President Trump offering this economic message here in Gastonia. Listen.

(BEGIN VIDEO CLIP)

TRUMP: If we lose, you're going to lose your border. You're going to lose your tax cuts. You're going to lose your wealth. And our country is going to go through hell. So on election day, November 3rd, vote to defeat the Democrats.

(END VIDEO CLIP)

KLEIN: But affordability was actually not the crux of President Trump's remarks here in Gastonia. Instead, Trump putting the focus on law and order in what, by all accounts, is a tightening Senate race between Michael Whatley, his former RNC chair, and Roy Cooper, the Democrat and former governor of this state.

He said that Whatley is, quote, "the candidate of law and order." He described American cities under Democrats as killing fields filled with lawlessness, filth and squalor. But President Trump's message on violent crime is certainly likely to animate his base. But here in North Carolina, about 40 percent of voters are unaffiliated. So it remains to be seen if that message is going to resonate in a state that has elected Cooper statewide four times.

Betsy Klein, CNN, traveling with the president in Gastonia, North Carolina.

(END VIDEOTAPE)

MICHAELSON: Yes, definitely a race to watch. Betsy, thank you.

The brother of the late Princess Diana claims that just days after her death, Charles, who was then Prince of Wales, said that she would be forgotten, quote, "soon enough." That comment appears in Charles Spencer's forthcoming memoir. According to an excerpt published Wednesday by "The Daily Mail," Spencer says that Charles, Diana's husband, launched into -- ex-husband at the time, launched into a stream of anger after Spencer argued that Diana would not have wanted her sons, William and Harry, to take part in her funeral procession.

The princes, then 15 and 12, ended up walking behind their mother's coffin days later in a very famous scene. In an unusually strong statement attributing a reaction directly to the king himself, Buckingham Palace suggested that grief had clouded Spencer's memory and judgment.

Princess Diana died in August 1997 after a car crash in Paris. Hard to believe it's almost been 30 years since that happened.

Still ahead this hour, the fallout grows after Macklemore was dropped from Ed Sheeran's tour over his pro-Palestinian comments.

[00:15:07]

Plus, ahead of Benjamin Netanyahu's visit to the United Nations General Assembly, a different tone from New York Mayor Zohran Mamdani. The mayor says he will not be joining any protests.

(COMMERCIAL BREAK)

MICHAELSON: As world leaders prepare to come to New York for the United Nations Assembly, Zohran Mamdani says he is staying focused on security.

(BEGIN VIDEO CLIP)

MAYOR ZOHRAN MAMDANI, NEW YORK: I do not have any plans to attend any protest at the U.N. General Assembly, and I have also been in touch with our P.D. in general, as we prepare for the U.N. General Assembly.

[00:20:12]

Right now there are no expected threats that we know of, and we are continue to be confident in being able to deliver safety and security for New Yorkers. And you know, to New Yorkers, I have never encouraged them to protest. What I have always told them is that they have the right to do so in this city. We respect that right. And this is a city that is proud of the Constitution, proud of the First Amendment, will continue to do so.

(END VIDEO CLIP)

MICHAELSON: Mamdani struck a different tone when asked Wednesday about Israeli Prime Minister Benjamin Netanyahu's attendance. Previously, he called Netanyahu a war criminal. On Wednesday, he dodged questions about that and focused on hosting world leaders and keeping New Yorkers safe.

Rapper Macklemore says he will donate the $1 million he would have earned from Ed Sheeran's tour to Palestinian causes. Macklemore was removed from the tour after making pro-Palestinian comments on stage. Well now, Sheeran and stadium owner Robert Kraft have each pledged their own donations.

CNN's Nick Watt has the latest on the backlash Sheeran is now facing.

(BEGIN VIDEOTAPE)

NICK WATT, CNN NATIONAL CORRESPONDENT (voice-over): Ed Sheeran, mild- mannered, middle-of-the-road musician to the masses, is embroiled in a very modern maelstrom. His tour now teetering over two words, free Palestine. Support acts have pulled out. He's reportedly hemorrhaging social media followers and now taking a kicking online. "All that money and fame and still no balls," Younes Bendjima, model.

"It's wrong to be silent during a genocide," Miss Rachel, YouTuber. "I say this as a ginger. I hope you get a really bad sunburn," Hannah Einbinder, actor.

Sheeran plays Philly Saturday night. We'll see what happens there.

MACKLEMORE, RAPPER: I've been trying to figure out a way to say this all day.

WATT (voice-over): This all began about 6,000 miles from Gaza City in east Rutherford, New Jersey, on September 4th. Macklemore, pop rapper with a social conscience, told the crowd one reason he joined his dear brother Ed on tour.

MACKLEMORE: Because I wanted to stand up here on stages and stadiums across America and say two words that are very near and dear to my heart. Free Palestine.

WATT (voice-over): Not at my place, you won't, said billionaire Pats owner Robert Kraft, who owns one of those stadiums. "Gillette Stadium has a longstanding commitment to providing a welcoming environment," Kraft wrote, "not providing a platform for hate speech." Sheeran says the promoter pulled the plug. Macklemore claims Sheeran threw him off the tour after a call from Kraft, who had rallied other stadium owners to issue an ultimatum.

"If Macklemore stays on the tour, you will not be allowed to play in our venues." Kraft also called out Macklemore's broader history of antisemitic rhetoric and imagery. In 2014, he wore what looked like an antisemitic stereotype get-up on stage. Later described it as a random costume in an apology "to anybody that I may have offended."

Kraft critics have also dredged up his past, flagging his arrest for soliciting prostitutes. In 2019, Kraft pleaded not guilty and the case was dismissed.

Sheeran critics, highlighting his closeness to Kraft. He played "Perfect" for the first dance at Kraft's wedding. Sheeran explained why on Sirius XM.

ED SHEERAN, RECORDING ARTIST: He was my first stadium that I played in the U.S. ever, and I've always had a lovely relationship with him. He's super sweet.

WATT (voice-over): Sheeran now much maligned for his part in this and for his largely apolitical public persona. It's very hard to just smile and strum these days.

Ed Sheeran sums up his position like this. "Just because I don't talk about something publicly doesn't mean I don't have an opinion, doesn't mean I don't care." Now, earlier, Macklemore laid out a challenge, donating $1 million, all his earnings from the tour, and saying to Robert Kraft, match that donation. Robert Kraft then came out and said, even before Macklemore made this challenge, Ed Sheeran had called me and asked me to donate $2 million. It seems, at least in public, that all three of these guys agree that the Palestinian people need some help. But beyond that, there is a lot of noise and it isn't getting any quieter.

Nick Watt, CNN, Los Angeles.

(END VIDEOTAPE)

MICHAELSON: We add it all together is going to be a pretty big donation.

Nick Watt, thank you for that reporting from here in Los Angeles.

[00:25:01]

Now to a small English village which says it is ready to secede from the U.K. over plans to house migrants in that area. The village of Piddington, population about 350 people, announced a decision on Wednesday following a referendum this week. The result has no legal weight, but it highlights opposition to government plans to move migrants from hotels to former military bases.

More than 1200 migrants would be housed at a former military site near Piddington. Local officials say the final decision is yet to be made.

The European Union has announced plans to ban social media for children 13 and under, and restrict digital technology for older kids as well. The E.U. plan would allow 13 and 14-year-olds to have so- called mini accounts with limited features. They could be used up to one hour per day with parental supervision. The Kids Act would have to be approved by individual E.U. member states before it could take effect.

Still to come, the response from Democratic Senate nominee Abdul El- Sayed after Vice President J.D. Vance encouraged House Republicans to use him as a boogeyman on the campaign trail. Our political panel next.

(COMMERCIAL BREAK)

MICHAELSON: Thanks for watching THE STORY IS. I'm Elex Michaelson. Let's take a look at today's top stories.

[00:31:06]

OpenAI says it plans to report instances of concerning A.I. model behavior more frequently than it has in the past. The announcement comes after the company identified six more cases of models acting on their own over the past six months.

Many industry leaders and lawmakers are now calling for a slowdown in A.I. development to make sure that the technology does not escape human control.

The U.S. House has approved a Bill to address electricity price hikes and the boom in A.I. data centers. The measure creates a federal standard that requires data center operators to cover the cost of energy infrastructure upgrades.

But critics say it does little to protect against rate hikes, because state public utility commissions would only have to consider adopting the standard.

The Bill would still need to clear the U.S. Senate.

Former U.S. Vice President Kamala Harris will campaign with Democratic Senate nominee Abdul El-Sayed in Michigan one week from now.

On Tuesday, they will host a roundtable on maternal health care disparities facing black women. It's an issue Harris has promoted often, and one that could resonate with black voters that El-Sayed needs to win over in the midterm elections.

(BEGIN VIDEO CLIP)

ABDUL EL-SAYED (D), MICHIGAN SENATORIAL CANDIDATE: They'll talk about anything, not to have to talk about gas or groceries, or whether or not you can see a doctor, or the ability to send your kid to a good, dignified school.

So, yes, if the whole Republican caucus meeting is not about what we can do to actually make lives better, but instead what we should talk about so that we can change the subject from what -- what lives are because of their policies. Fine. Talk about me.

But you know what I'm going to be talking about? Gas, groceries, how hard it is to see a doctor.

(END VIDEO CLIP)

MICHAELSON: That is Abdul El-Sayed pushing back after Vice President J.D. Vance encouraged Republicans to make him a campaign target.

Vance told GOP lawmakers on Tuesday that they should just, quote, "talk about Abdul El-Sayed" if their Democratic opponents were, quote, "not that crazy."

Joining me now, two folks who are not that crazy. Lynn Vavreck, Hoffenberg professor of American politics at UCLA; and Ben Sheehan, host of the PBS series "Civics, Made Easy." He also writes the Substack "Politics Made Easy." We need help on both those fronts. So, welcome to the panel for the first time.

BEN SHEEHAN, HOST, PBS'S "CIVICS MADE EASY": Thank you.

MICHAELSON: Lynn, of course, great to have you back, as always.

Let's hear some more from Abdul El-Sayed, talking to Manu Raju as he had talked to the Democratic caucus on Capitol Hill, maybe checking out the Senate office to see what it looks like. Here's some of that.

(BEGIN VIDEO CLIP) MANU RAJU, CNN CHIEF CONGRESSIONAL CORRESPONDENT: Do you have to shift more to the middle, do you think, in this general election? Even disavowing Hasan Piker and shifting to the middle. Do you need to do that stuff?

EL-SAYED: This -- this conversation is so far removed from what people are talking about every day in Michigan.

(END VIDEO CLIP)

MICHAELSON: Is that true? What are people talking about, as the expert that literally writes books about what people are talking about on politics?

LYNN VAVRECK, HOFFENBERG PROFESSOR OF AMERICAN POLITICS, UCLA: Well, I'm going to hedge and say it depends on which people you're talking to.

MICHAELSON: That's true.

VAVRECK: And, you know, that's a little bit what's happening here between these two.

The Republicans know that their voters want to hear about the Democrats nominating people called socialists.

And Democrats know that their voters want to hear about prices and how the Republicans haven't solved their problems. It's a fight over what the fight is going to be over.

MICHAELSON: And Democrats want to hear about how terrible Donald Trump is, too, right?

VAVRECK: Yes, I'm sure they do. Yes. Yes.

MICHAELSON: Yes. I mean, how do you how do you see it? I mean, you're in touch with people online every day, hearing from people on politics.

SHAHEEN: Well, actually, I was part of a project in 2024 that ran focus groups all across the country in a number of different states. One of them was Michigan.

And so, we had in-person focus groups and surveys repeatedly with young voters under the age of 35 in Detroit and outside Detroit. Very diverse group.

[00:35:03]

And the No. 1 issue that kept coming up over and over throughout the election cycle was housing, the cost of housing.

We had people in these focus groups that had recently been unhoused, people who were worried that they were going to become homeless, people who wouldn't be able to afford their gross -- their groceries, their gas, their rent. And this even beat out reproductive rights. This beat out any other rights. This was the No. 1 issue, and I don't think it got enough attention.

MICHAELSON: So, why do you think that the online conversation, and certainly the cable news conversation, is not more about that? And all these other issues end up, you know, getting the algorithm's attention?

SHEEHAN: Because it's how social media works. Unfortunately, this is the way that you get people to spend more time on the platform: to make them mad, to play to their emotions, to say something that elicits a response. Because they want you to spend more time on the platform so you can see more ads.

VAVRECK: I don't want to defend social media, but the candidates are culpable here, too.

MICHAELSON: Yes.

VAVRECK: And, you know, it's rare to have a contest where both candidates want to fight about the same issue, because that issue is really only benefiting one side.

And so, while Democrats may want to talk about the cost of housing and blame Republicans for the affordability crisis, the Republicans don't want to talk about that. And they're trying real hard to change the subject.

MICHAELSON: Well, and Abdul El-Sayed did a debate yesterday on FOX-2 in Detroit, and Mike Rogers wasn't there. And they had an empty podium.

And tonight, Mike Rogers was on Sean Hannity's show on FOX News channel. Sean did not ask him one question about the debate that happened on a FOX affiliate. And all they did was talk about Hasan Piker and his danger to Michigan.

Hasan Piker is a streamer who lives in Los Angeles, and yet they're trying to make that the issue. So, everybody's trying to pick the issue and focus on that.

Meanwhile, a lot of Democrats right now are trying to talk about the issue of A.I. They've put pressure on Mike Johnson, the speaker of the House, saying, keep us in session. We have this huge, looming existential crisis. These businesses, for once ever are saying, please regulate us now. This technology could kill us all. And you're sending us home on vacation.

Well, today, Mike Johnson actually said, we're going to send you on vacation even sooner. We're going to go a day earlier, because there was potentially going to be a vote to impeach Pete Hegseth. So, they said, let's get everybody out of town.

Here's how Mike Johnson defended that.

(BEGIN VIDEO CLIP)

REP. MIKE JOHNSON (R-LA): What our candidates are doing is they are on the ground in their districts, talking to the people with authenticity and frankness.

Of course, gas prices are too high. When we get that thing resolved in the Strait of Hormuz, that will have a direct effect on that, and it will help to bring down grocery costs.

REP. NANCY MACE (R-SC): Democrats benefit from this as much as Republicans do. Everyone gets to go home and campaign. It's going to be a bloodbath in the midterms.

REP. MIKE LAWLER (R-NY): So, we will get to it as we come back after November 3rd. But staying here an extra week was going to do what?

REP. RALPH NORMAN (R-SC): Well, if you leave, if -- in the business arena, if you leave town, you don't get paid, you don't work. At this point, you ought to not be working (ph).

(END VIDEO CLIP)

MICHAELSON: So, different responses based off of where everybody is on their careers. If you notice that Nancy Mace, who's been -- who's not going to be returning, it just like, everybody's going to get voted out.

Mike Lawler is in a tough race; is trying to hedge. You see Ralph Norman, who just lost a race, kind of like whatever.

But how do you see this issue and especially this issue of A.I. and the decision to not regulate it right now?

SHAHEEN: I feel like, if there's one issue right now that the vast majority of Americans across the aisle can agree on, it seems to be this.

This is something that is dominating social media. This is something that people are aware of. Obviously, the reports coming out from Anthropic. The CEO of Anthropic wrote an essay that really detailed a lot of this.

Obviously, we've had, you know, like the Hugging Face issue. This is something people are really upset about. And I will say that even if Congress is not going to act, you've seen state and local governments take action.

A few miles from here, Monterey Park became the first city in the country to ban data centers. So, you are seeing people rally around at the state and local level to try to take action when Congress won't.

MICHAELSON: And -- but yet, it's been hard to figure out where the consensus is to act in terms of something on a congressional level.

A lot of folks are against data centers, but when it comes to the actual regulation of A.I. itself, there does not seem to be a bipartisan consensus. Part of the reason that nothing's gotten done.

VAVRECK: We don't have to solve this problem tomorrow. You know, there's --

MICHAELSON: Maybe A.I. could.

VAVRECK: Well, yes. Very funny.

MICHAELSON: Yes.

VAVRECK: Republicans need a win. They're -- they're in this -- they're going into these midterm elections. The -- the, you know, the ship is sort of sinking. They need a win.

And you know the old saying, every crisis is an opportunity. This could have been a great opportunity to actually say, We hear you, America. We are going to have some hearings. We're going to start working on this. And we're taking it very seriously.

[00:40:07]

MICHAELSON: But -- but you know who doesn't hear them? Donald Trump, who says that we don't need to have regulations, other than a president with a high I.Q.

So, if that's who they're getting their marching orders from, how can Mike Johnson say, Yes, let's do this. Let's make this regulation happen?

VAVRECK: Well, if he -- if he wants to stay in his position, you know, it would have been an easy win to say, we know that you think, you know, things are rough, but this -- everybody's freaked out about this. You're absolutely right.

You can't go to the grocery store. You can't have a conversation anywhere without someone talking about A.I. This is an amazing opportunity to let fly away.

MICHAELSON: Well, and when we think about easy wins, your point that housing affordability is the No. 1 issue. Remember when Congress passed a bipartisan housing affordability Bill, and Donald Trump wouldn't sign it after they had set up a signing ceremony for him?

So, it seems like the folks may be on different -- different playing fields in terms of what their agendas are.

We've got more coming up with you guys in about a half hour. Great to have two very, very smart minds here: Lynn Vavreck, Ben Sheehan, thank you so much.

Still ahead, I followed federal agents as they made arrests in an alleged fraud scheme involving millions of dollars, help meant to help the homeless. Wait till you hear what these folks were supposedly spending it on instead. Stay with us.

(COMMERCIAL BREAK) [00:46:13]

MICHAELSON: THE STORY IS homelessness. The state of California has more people experiencing homelessness right now than any other state in the union.

The Golden State has spent billions to try and fix that problem. Yet, the problem has consistently gotten worse in many areas.

So, where is all that money going? The feds told me early this morning much of it is going towards fraud.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Come to the front door with your hands up.

MICHAELSON (voice-over): Federal agents arrest LaKia Malone, who they say abused taxpayer dollars meant to help people experiencing homelessness.

MICHAELSON: This arrest, part of a larger effort to try to tackle fraud.

MICHAELSON (voice-over): CNN, along with several news organizations, invited to embed with federal law enforcement before 5 a.m. in Los Angeles as they prepared to make a series of arrests. Officials say they're doing all of this on camera to send a message.

SCOTT TURNER, U.S. SECRETARY OF HOUSING AND URBAN DEVELOPMENT: If you commit fraud, we're coming.

MICHAELSON (voice-over): On hand. U.S. Housing Secretary Scott Turner, first assistant U.S. Attorney Bill Essayli, and assistant attorney general Colin McDonald.

COLIN MCDONALD, ASSISTANT U.S. ATTORNEY GENERAL, NATIONAL FRAUD ENFORCEMENT: There's no population that fraudsters won't steal from: the elderly, the sick, the hungry, and now the homeless.

MICHAELSON (voice-over): According to a federal indictment, Malone is charged with taking bribes and fabricating ghost participants while working for Special Service for Groups, a nonprofit which receives millions of dollars each year from the U.S. Department of Housing and Urban Development.

The feds say she was working with Alexander Soofer and his organization, Abundant Blessings from Above.

BILL ESSAYLI, FIRST ASSISTANT U.S. ATTORNEY, CENTRAL DISTRICT OF CALIFORNIA: In her position of trust, she accepted bribes and funneled money to fraudsters, who then misused the money for their personal use.

MICHAELSON (voice-over): Special Service for Groups said in a statement sent to CNN that they have strengthened their prevention protocols and have, quote, "been working with the U.S. attorney's office and will continue to do so to ensure that any responsible individuals are held accountable."

Malone is just one of multiple defendants facing corruption charges. On the same day, Alexander Soofer's plea agreement was released, outlining admissions of wire fraud and money laundering.

ESSAYLI: He bought a house. He went on vacation. He bought a Range Rover. He did everything other than help the homeless.

MICHAELSON (voice-over): Also arrested, Michael Young, a founder of the group Home at Last. A federal criminal complaint charges him with wire fraud involving spending millions of taxpayer dollars intended for the homeless on a car and even opening his own nightclub.

UNIDENTIFIED MALE: Michael Young's organization was called Home at Last. Instead, he created a home of last resort with a nightclub.

UNIDENTIFIED FEMALE: We have an arrest warrant.

MICHAELSON: Some critics will see this and say, it seems like you're targeting blue cities run by Democrats as a way to make them look bad politically before an election. You say what?

MCDONALD: They're wrong. We're going wherever the fraud is.

TURNER: California has really led in the amount of homelessness over almost two decades, and it's been record funding, Elex, record funding, but yet record homelessness. That has to come to an end.

Corruption is not Democrat. It's not Republican. It's not blue. It's not red. Corruption is wrong. Period.

(END VIDEOTAPE)

MICHAELSON: Of course, most of this state top Democratic leaders -- are Democrats. None of them attended that news conference today. Trump administration officials say there's an open invitation for California Democrats to join them in the future.

We didn't see any public statements from them on this topic today.

CNN also reached out to both Home at Last and Abundant Blessings from Above. We haven't heard back from them.

And yes, if you're keeping track, we shot that at 5 a.m. and on -- on -- on hour 17 of my day right now, let's press on towards our 18.

And still to come here on THE STORY IS, an Iranian human rights activist and Nobel laureate speaks to CNN, despite the risk of retribution from the regime.

[00:50:06]

We'll hear from her next.

(COMMERCIAL BREAK)

MICHAELSON: Nobel Prize laureate Narges Mohammadi symbolizes resilience within the Iranian women's movement.

She spent much of the last two decades in prison on charges of propaganda and collusion, and has just sat down for an interview with CNN's Jomana Karadsheh.

[00:55:09]

To avoid putting her at further risk of retribution by the regime. CNN agreed to focus the interview on her new memoir and personal experiences, rather than recent events in Iran.

(BEGIN VIDEOTAPE)

NARGES MOHAMMADI, IRANIAN NOBEL PEACE PRIZE LAUREATE (through translator): I was subjected to a very difficult arrest last December and was assaulted by security forces. The blows I received to my head caused many problems.

JOMANA KARADSHEH, CNN INTERNATIONAL CORRESPONDENT (voice-over): In one of her first interviews since her temporary release from prison, Nobel Peace laureate Narges Mohammadi spoke to CNN from her home in Tehran, where she says she's recovering and still under medical care.

Mohammadi's health severely deteriorated after her rearrest at this event in December. After warnings from her family and the Nobel committee that she was in critical condition, Mohammadi was released for medical treatment in May.

She spoke with us about her memoir that's releasing this week.

KARADSHEH: How do you even write a book in Iranian jails and get that writing out?

MOHAMMADI (through translator): Well, getting the writings out was very difficult. I was very fortunate that many of my fellow prisoners, whose names, unfortunately, I still cannot mention, because the Islamic Republic is still in power; and some of them are still in prison or being pursued by the authorities. These courageous prisoners helped me get a large part of the book out of prison.

KARADSHEH: So, did you smuggle your writings out of prison?

MOHAMMADI (through translator): It was smuggled out. It was extraordinary. I couldn't have done it on my own.

KARADSHEH (voice-over): Mohammadi, a fearless defender of human rights, has spent much of the past two decades behind bars. And for her activism, sentenced to a total of 44 years in prison and 154 lashes, accused of actions against national security and propaganda against the state.

Speaking with CNN could put her at risk of retribution, but Mohammadi is not worried. She says this is her duty.

KARADSHEH: Every time you speak out, you get punished. Your prison sentence gets longer and longer. You are risking this again with the book. Why did you feel that that risk is worth taking?

MOHAMMADI (through translator): Every moment of my life has involved confronting the system, a system that was systematically violating human rights.

This book, too, is part of the course of my life and is written from this perspective. I may have taken risks, and there may be consequences, but this is what life is like for us here in this region and in this country.

KARADSHEH: In the book, you describe some of the terrible things that take place inside Iranian prisons. You name interrogators. You name judges. Why did you feel it was necessary?

MOHAMMADI (through translator): In order to document these things, it's better to speak out openly about their methods, to expose and reveal their torture. Perhaps the names remain in the minds of survivors and prisoners, and later, we may be able to identify the person.

KARADSHEH: All these years of being behind bars, being denied medical treatment so many times. What impact has that had on your health, on you physically and mentally?

MOHAMMADI (through translator): One of the government's tools of repression is, in fact, depriving prisoners of timely and adequate medical treatment in prison. That seriously endangers their health and in some cases, leads to their death. These deaths are a form of silent execution without any public attention.

Naturally, I was no exception. I was repeatedly denied medical care, and as a result, I now have medical conditions for which I'm currently receiving treatment.

KARADSHEH: Do you at times sit there and regret the path that you have chosen in your life that has led you to sacrifice your time with your children and your freedom?

MOHAMMADI (through translator): I believe that, if I could go back to the moment when I began my struggle, and to each and every moment when I was arrested, even knowing what would happen to me, I would certainly make the same choice to begin the struggle and continue it. I have no doubt about that, and I have no regrets.

But when I look at Ali and Kiana, I find myself faced with doubt. Did I really have the right to deprive them of a very ordinary life, of having their mother with them? That is the difficult part of the question, and I cannot answer it with certainty.

KARADSHEH: I can see you've got the photo of Mahsa Jina Amini there behind you, and that calligraphy next to you that reads "Woman, life, freedom."

It has been four years since the death of Mahsa Amini in the custody of the so-called Morality Police and the Woman, Life, Freedom uprising that followed. What has the impact been of this movement? MOHAMMADI (through translator): This is an opportunity through the

pages of this book and --

(END VIDEOTAPE)