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BRET BAIER, FOX NEWS CHIEF POLITICAL ANCHOR: A rocky start to the new Congress and a possible preview of what's to come with the new administration as House Republicans back down following a showdown with the President-Elect.


Good evening. Welcome to Washington. I am Bret Baier.

It was anything but regular order at the start of the 115th session of Congress. Today the House majority scrapped plans to gut an independent ethics panel after President-Elect Donald Trump sent out a couple of tweets aimed at his own party.

The about-face by House Republicans came less than 24 hours after a closed- door meeting to adopt the measure.

Chief congressional correspondent Mike Emanuel is on Capitol Hill tonight where it was more than just pomp and circumstance today on the first day of the new Congress. Good evening -- Mike.


The 115th Congress is up and running but there was some drama after President-Elect Trump criticized an early move by House Republicans.


EMANUEL: Last night behind closed doors, Republican lawmakers voted to reform the outside Office of Congressional Ethics as it considered its rules for the new Congress.

This morning Republican Majority Leader Kevin McCarthy was forced to defend a move he opposed.

REP. KEVIN MCCARTHY (R-CA), MAJORITY LEADER: First of all, it doesn't get dissolved. So I am not in favor of dissolving it.

I was not in favor of moving forward in the rules package with it because I thought we should take it by itself in a bipartisan manner because there are people on both sides of the aisle that would support these reforms. The Ethics Committee will still be there.

EMANUEL: But the real trouble came this morning when President-Elect Trump flexed some muscle on Twitter. Quote, "With all that Congress has to work on, do they really have to make the weakening of the independent ethics watchdog as unfair as it may be, their number one act in priority? Focus on tax reform, healthcare and so many other things of far greater importance. #DTS"

Shortly before gaveling in at noon, House Republicans reversed themselves, dropping plans for now on modifying the independent ethics panel.

The Office of Congressional Ethics investigated California Democrat Congresswoman Maxine Waters who was ultimately cleared by the House Ethics Committee after a three-year investigation and a $1 million legal bill for taxpayers.

Some GOP members called it an unforced error in terms of timing, especially since Democrats have complaints about that outside group.

REP. CHARLIE DENT (R), PENNSYLVANIA: There are members who believe there are needed revisions. I'd say it's a bipartisan agreement. There need to be some changes.

As I said last night, I voted against this particular amendment because of the oversight language that I thought was a bit ambiguous and needed further clarification.

EMANUEL: Democratic leader Nancy Pelosi pounced saying quote, "Reversing their plans to destroy the Office of Congressional Ethics will not obscure their clear contempt for ethics in the People's House. Once again the American people have seen the toxic dysfunction of a Republican House that will do anything to further their special interest agenda for transparency and undermine the public trust."

There was no drama on the vote for House Speaker with Paul Ryan being reelected as expected. He told members this is a once-in-a-lifetime opportunity.

REP. PAUL RYAN (R-WI), HOUSE SPEAKER: The people have given us unified government, and it wasn't because they were feeling generous. It was because they want results.


EMANUEL: In terms of delivering results, Republicans are getting started on repealing Obamacare in a hurry. Vice President-Elect Mike Pence is due up here tomorrow. At the same time President Obama will be meeting with Democrats about trying to save it -- Bret.

BAIER: Mike Emanuel, live on Capitol Hill. Mike -- thank you.

The President-Elect spent the day in New York, putting the finishing touches on his cabinet and once again calling out big business with 140 characters.

Correspondent Peter Doocy reports from New York tonight on Trump's latest moves.


PETER DOOCY, FOX NEWS CORRESPONDENT: The President-Elect showed again today he has no problem making an example out of an American company he thinks is trying to make money here off products made elsewhere. @RealDonaldTrump tweeted quote, "General Motors is sending Mexican-made model of Chevy Cruze to U.S. car dealers tax-free across border. Make in U.S.A. or pay big border tax."

Tweets like that have moved markets in the past. Just ask Boeing and Lockheed Martin who eventually adjusted costs that's meant for major projects under pressure by the President-Elect.

So GM quickly responded like this. Quote, "General Motors manufacturers the Chevrolet Cruze sedan in Lordstown, Ohio. All Chevrolet Cruze sedans sold in the U.S. are built in GM's assembly plant in Lordstown, Ohio. GM builds the Chevrolet Cruze hatchback for global markets in Mexico with a small number sold in the U.S."

But GM didn't mention there the Lordstown, Ohio plant they are touting as a defense is about to lose about a thousand jobs because gas is cheap, people aren't clamoring for fuel-efficient cars.

And while one American car company was being criticized by the next Commander-in-Chief, another was being praised. Ford announced it's not going forward with the new plant in Mexico and has instead chosen to invest $700 million in a Michigan facility -- something candidate Trump said he was hoping would happen.

DONALD TRUMP (R), U.S. PRESIDENT-ELECT: You look at what Ford is doing. They are building billions of dollars worth of plants in Mexico. I want them to build the plants in the United States.

DOOCY: This move saved about 700 jobs in the states. And the company's CEO says this was a business-first decision but he admits executives in the boardroom at Ford HQ have been paying attention to what Mr. Trump has said on the trail.

MARK FIELDS, FORD MOTORS COMPANY CEO: When we look at some of the tax and regulatory reforms that he's been talking about, that gives us a lot of confidence. And this is a vote of confidence that he can deliver on those things.

DOOCY: The promise of better trade deals helped Trump gain steam during the primaries. And he's announced he wants Reagan administration veteran Robert Lighthizer to be U.S. trade rep, a cabinet level job in an administration led by someone attempting to stimulate economic growth in a way no president ever has before.

BOB CUSACK, "THE HILL": I have never seen a president in the modern era go after specific companies like Donald Trump has and really trying to embarrass them into getting some changes which he has been able to do. So I don't think -- I mean I think this is without precedent.


DOOCY: And news is breaking tonight that someone Mr. Trump has fired before on "The Apprentice" may soon be hired for a job at his White House. Omarosa Manigault is being considered for a position in the Trump administration. She was one of his earliest and most enthusiastic celebrity endorsers -- Bret.

BAIER: Peter Doocy, outside Trump Tower. Peter -- thank you.

U.S. manufacturing activity hit a two-year high in December, showing a positive sign for economic growth. The Institute for Supply Management says its manufacturing index came in at 54.7 last month, the highest readings since the end of 2014. Any reading over 50 signals growth.

The markets ended the day in the green today. The Dow was up 119, just shy of that elusive 20,000 mark. The S&P 500 rose 19. The Nasdaq finished ahead 46.

So will the Dow hit the 20,000 mark this week? Liz Claman, host of Fox Business Network's "COUNTDOWN TO THE CLOSING BELL" joins me now with a look at the numbers. Good evening, Liz.

What did today's tone with that market set?


LIZ CLAMAN, FOX BUSINESS NETWORK: Well, it kind of gave us a scare, actually. At one point, Bret, we were up 176 points. Then we lost nearly all of the gains and then as you saw, we ended with a pretty sizable move to the upside of about 119 points.

But in between, a lot of people were saying wait a minutes, wait a minute. As January goes, so goes the rest of the year. That is an old saying that I want your viewers to forget. Why? Because it used to be that you could divine how the entire stock market would perform over the entire year simply by looking at the first five days of January.

Last year completely blew that theory to smithereens because January endured a jaw-dropping 5.5 percent loss and then what did we see? Had you sold on that, thinking that that would sort of color the rest of the year, you would've missed out on major gains. The Dow ended up adding about 13 percent. And even the small and mid caps saw a 20 percent gain which was just a great performance for all of 2016.

So you don't want to do that and look at those market voodoo numbers. What do you want to do? You really have to look at the moment with all we've got. And that is some serious optimism coming from a Trump presidency. It's just about 17 days away from the inauguration. Already we have seen incredible returns for the markets on the belief that Donald Trump will be very business-positive simply by cutting taxes. He will slice regulations. This is what he said he will do and, of course, instituting a pretty big infrastructure spending plan.

All of those things together give people optimism and it does tend to have a pretty decent velocity effect. So perhaps that's what we go on at the moment. And sure enough when you look at something like the Wilshire 5000, which is sort of a bigger index than the S&P 500. Since Donald Trump was elected, the day after, November 9 it added $1.7 trillion to the index. So, you know, you go with that, it looks pretty good.

BAIER: Yes. And quickly Liz, you know, you look at the pro-growth focus that the markets are looking at with the Trump administration. And yet, it might not be great for all stocks. We just heard from Peter's report. He took on General Motors, he's hit other companies before for the big jobs off shore.

What does this say about the power of the President-Elect's tweets and their effects on the market?

CLAMAN: Major power. And you saw it today as Peter articulated. You know, he took on General Motors. He wants any cars that are made south of the border that are coming back into the U.S. from American companies -- he says too bad, folks. You don't get a free ride there. You've got to pay a border tax.

Initially General Motors started to fall and then it managed to eke out just under 1 percent gain. But we have seen other stocks like United Technologies, the parent of Carrier, before it sort of found the Trump religion and promised to bring these jobs back to the U.S. You saw those stocks start to falter. There is huge power in what Donald Trump is able to do when he takes on those companies.

You can bet other companies are kind of ducking and covering. Ford, of course, said don't worry, we are not going to open that plant in Mexico. But there are many, many companies, Bret, that have operations elsewhere that are based in the U.S. and can you take on each one? It's going to be very hard.

BAIER: Well, they're all definitely following Real Donald Trump. We can guarantee that. Liz -- thank you.

Another forceful response today from the controversial head of WikiLeaks who says the Obama administration is connecting dots where there aren't any.

Chief intelligence correspondent Catherine Herridge reports tonight on a new round of finger-pointing in the hacks of political figures around the election being blamed on the Russian government.


CATHERINE HERRIDGE, FOX NEWS CHIEF INTELLIGENCE CORRESPONDENT: In an exclusive interview, the head of WikiLeaks told Fox's Sean Hannity that the Russian government was not his source for the DNC and Clinton campaign e- mails.

SEAN HANNITY, FOX NEWS HOST: Can you tell the American people a thousand percent you did not get it from Russia or anybody associated with Russia?

JULIAN ASSANGE, WIKILEAKS: We can say -- and we have said repeatedly over the last few months, that our source is not the Russian government. And it is not states parties.

HERRIDGE: Assange, who sought refuge in London's Ecuadorian embassy four years ago to avoid extradition on sexual assault allegations, said President Obama is not being straight with the American people.

ASSANGE: He is acting like a lawyer. If you look at most of his statements, he doesn't say that. He doesn't say WikiLeaks obtained its information from Russia, worked with Russia.

HERRIDGE: On this recent analysis released by the Bureau and Homeland Security, or DHS blaming the Russian civilian and military intelligence services, Assange said the public evidence is weak.

ASSANGE: What was missing from all of those statements, the word "WikiLeaks". This is very strange.

SEN. RON JOHNSON (R), WISCONSIN: And we're still waiting to be briefed by the FBI and DHS --

HERRIDGE: While the chairman of the Senate Homeland Security Committee wants more information on the Russian government connections, he has no doubts about Moscow's aggressive activities in cyber space. Last week Homeland Security declassified this map showing infrastructure like the power grid in 60 countries has been co-opted by Moscow's intelligence services.

JOHNSON: We suspect that Russia might potentially have malware in different systems.

HERRIDGE: On Friday, the "Washington Post" reported that a Vermont power grid was breached by Russian hackers. But over the weekend the story was corrected. A laptop that was not attached to the grid contained malicious code linked to the Russian operations.

In a recent telephone interview from his Romanian jail cell, the hacker who first exposed Hillary Clinton's use of a private email for government business said the allegations are overblown because of Cold War sensitivities.

MARCEL LAZAR LEHEL, ROMANIAN HACKER: Americans are crazy about the Russians thing and -- ok, now the Russians are invading the United States. It's crazy, I mean. It's like, I don't know. It's this hysteria, you know?


HERRIDGE: CIA director John Brennan tonight cast doubt on the claims made by Julian Assange telling PBS that the report requested by the President will explain exactly what happened. That intelligence report could be ready as early as this week and based on our reporting, there's a real desire to make parts of the report public to answer lingering questions and to silence critics -- Bret.

BAIER: Ok. Catherine -- thank you.

HERRIDGE: You're welcome.

The White House continues to stand by the intelligence community in blaming Russia over the election-related hacks and the punishment the administration doled out. But critics wonder what made the Obama administration finally move on sanctions when it barely reacted to a hack on more than 20 million government employees that was linked directly to China.

Correspondent Kevin Corke has some answers tonight from the White House.


KEVIN CORKE, FOX NEWS CORRESPONDENT: Materially different, that is how White House officials described allegations of hacking conducted by the Chinese and Russian governments. A distinction that guided the Obama administration's very public rebuke of Russia for its alleged meddling in the run-up to the 2016 election and it's almost muted response to the Chinese OPM hack that compromised the private information of tens of millions of Americans.

JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: I'm not suggesting that somehow that's not important. What I am just saying is that it is materially different than the kind of hack and leak strategy that we saw the Russians engage in to try to influence our democracy.

CORKE: To suggest the U.S. responses were in contrast would be an understatement. This time the administration expelled operatives, shut down facilities, issued a report to Congress and made direct contact with Vladimir Putin.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: What we can also do is to, on a bilateral basis, warn other countries against these kinds of attacks. And we have done that in the past.

CORKE: Indeed, experts suggest the U.S. strategy for China was a year's long series of diplomatic and legal efforts, a far cry from the decision to publicly humiliate Moscow.

PETER BROOKES, HERITAGE FOUNDATION: There's issues of legacy, there's optics that are critically important to be able to back up their assertions about the Russian cyber operations against American political entities.

CORKE: And while there have been conflicting reports about Russia's involvement in the hacks, analysts believe the White House had little choice but to make an example out of the Kremlin.

JOHN BOLTON, FORMER U.S. AMBASSADOR TO THE U.N.: The notion that you have to wait for absolute proof about something before you act is a bad formula to use in international relations. You never have absolute proof. And if you are simply waiting for more information, more intelligence, you are letting events dictate your policy rather than you dictating it.


CORKE: Bret -- senior administration officials say the crux of their argument is simply this. While the Chinese stole for intelligence gathering, the Russians tried to weaponize the use of that data to influence the U.S. election. And they quickly add that the U.S. response, Bret, is not over yet -- Bret.

BAIER: Kevin Corke, live on the north lawn. Kevin -- thank you.

The false reporting by the "Washington Post" mentioned in Catherine Herridge story over the possibility that Russia hacked into our electrical grid raises questions about the media's quest for more examples of Russia hacking that dealt with Vermont.

Fox News media analyst and host of Fox's "MEDIA BUZZ" Howard Kurtz is here with whether the story was founded or whether it's really a case of media hysteria on this issue. Good evening -- Howard.


BAIER: How did it all come to pass?

KURTZ: Well, the "Washington Post" ran a dramatic headline last Friday. "Russian hackers penetrated U.S. electricity grid through a utility in Vermont" -- U.S. officials say the paper said the discovery of a computer code associated with Russian hackers of this utility reflected a potentially serious vulnerability for America's electric grid.

Democratic Senator Pat Lahey called it a direct threat to Vermont but the story quickly began short-circuiting.

BAIER: Did the "Post" acknowledge problems with the story?

KURTZ: Slowly. 90 minutes after the piece was posted online the utility said, as we just heard, only a single line of so-called malware was found at one laptop not connected to the Burlington grid. The "Post" which should have waited for the utility's response, softened its headline to say there was only a risk to the grid.

The next day, Bret, the newspaper acknowledged in an editor's note that the original story incorrectly said that Russian hackers had penetrated the U.S. electric grid which brings us to the "Washington Post" story today that essentially amounts to a complete retraction.

BAIER: Yes. So how much of the original story will be all there (ph)?

KURTZ: Here's the headline. Russian government hackers do not appear to have targeted a Vermont utility say people close to the investigation. In fact, the paper said that line of suspicious code may even have been benign. In other words, every key element of the first story was wrong. And some media outlets have pounced on the "Post" with "Forbes Magazine" calling the story fake news.

A spokeswoman told me today the paper has no comment.

BAIER: Ok. Howie -- thank you.

Donald Trump's former presidential rival will be in attendance at his inauguration later this month. Aides to Hillary and Bill Clinton confirmed the couple will be there on January 20th. Also attending will be former President George W. Bush and former first lady Laura Bush, former President Jimmy Carter will be there too but we are told former President George H.W. Bush will not attend due to health reasons.

Up next, the fight for Utah land and the steep climb facing critics of what they say was a land grab by the Obama administration. We'll explain.

First, here's what some of our Fox affiliates around the country are covering tonight.

Fox 13 in Salt Lake City where a security camera captures a two-year-old boy rescuing his twin brother after a dresser fell over on the toddler. The twins' parents say they were upstairs when the incident happened and did not discover that one of the boys had been trapped until reviewing the camera footage. Despite their son being ok, the parents say they have posted the video online to remind others of the dangers of not securing furniture to the wall.

Fox 6 in Birmingham, Alabama where a possible tornado caused four out of five weather-related deaths in the southeast. Severe storms swept across Alabama, Georgia and into the Florida panhandle where a man died in flooding.

And this is a live look from our affiliate in Atlanta, Fox 5. The big story there tonight, state legislature's plan to ban adults from smoking in a car when children are present. State Representative Sandra Scott has pre-filed legislation for the ban that could be taken up as early as next week. Representative Scott says she knows such a law would be difficult to enforce but said the goal is about education.

That's tonight's live look outside the Beltway from SPECIAL REPORT. We'll be right back.


BAIER: Utah's attorney general is promising a fight over land designated a national monument last week by President Obama. The AG there says a lawsuit is already in the works over the 1.3 million acres in the southeastern part of the state.

National correspondent William La Jeunesse reports tonight on the controversy over Bears Ears.


UNIDENTIFIED MALE: This canyon is a little ruins site.

WILLIAM LA JEUNESSE, FOX NEWS NATIONAL CORRESPONDENT: Indian ruins and one of a kind rock art -- just two reasons why President Obama recently set aside more than a million acres in Utah as the Bears Ears National Monument -- a designation already under attack.

UNIDENTIFIED MALE: He ignored us. They continue to ignore us.

LA JEUNESSE: Hundreds of Utah residents recently rallied against the monument calling it a land grab to satisfy the President's environmental allies while restricting access, grazing, and development.

UNIDENTIFIED MALE: We will have a comment when we actually file the lawsuit.

LA JEUNESSE: So you are going to file one?

UNIDENTIFIED MALE: We're planning on filing a lawsuit.

LA JEUNESSE: But Utah's new attorney general faces a daunting challenge. The courts have never reduced the President's authority on the Antiquities Act.

UNIDENTIFIED MALE: I think to be fair the case would have to go to the Supreme Court of the United States.

LA JEUNESSE: Previous attempts to unwind national monument declarations have failed including lawsuits challenging President Clinton's designation of 1.7 million acres in Utah in 1996.

Bears Ears is smaller but contains unique artifacts.

UNIDENTIFIED MALE: He's just in a class all of his own if you compare to other rock art around here.

LA JEUNESSE: Critics admit these Indian petroglyphs deserve protection but feel the area being protected goes beyond the scope of the law.

UNIDENTIFIED MALE: We hope Trump can do something to repeal this thing.

LA JEUNESSE: The new Utah claim is unusual. It comes with the governor's support and a new president not beholden to tradition.

WILLIAM PERRY PENDLEY, MOUNTAIN STATES LEGAL FOUNDATION: I think we are in a new day. And if the attorney general of Utah sues or if the Nevada attorney general sues, I think they're going to get a different response from the President of the United States and Attorney General Sessions.


LA JEUNESSE: The proclamation does remove the land from oil and gas development. But opponents argue that any monument should require congressional approval as well as the state where it is located -- Bret.

BAIER: William -- thank you.

The President-Elect's challenge to Chicago's Democratic Mayor Rahm Emanuel to ask for help put another spotlight on that city plagued with violence. The New Year got off to a violent start with more than 40 people shot over the holiday weekend.

Tonight correspondent Matt Finn reports from Chicago on the problems facing the city's police department.


MATT FINN, FOX NEWS CORRESPONDENT: President-Elect Donald Trump is taking on Chicago Mayor Rahm Emanuel over the city's record-violence. Trump tweeting "Chicago murder rate is record-setting; 4,331 shooting victims with 762 murders in 2016. If mayor can't do it, he must ask for federal help."

This just week's after the liberal Democratic Mayor Emanuel met with the President-Elect at Trump Tower. Emanuel's spokesperson replying to Trump's tweet saying in part quote, "As the President-Elect knows from his conversation with the mayor, we agree that federal government has a strong role to play in public safety."

In 2016 more people were killed in Chicago than New York and L.A. combined. The highest figures in two decades.

FATHER MICHAEL PFLEGER, ACTIVIST: This is a Chicago problem.

FINN: Father Michael Pfleger has led Chicago's African-American community in its fight back against crime.

PFLEGER: If they're going to band-aid (ph), we're going to continue to see carnage on our streets.

FINN: Pfleger says he reached out to Trump during the 2016 campaign but didn't hear back. He agrees that Chicago needs federal funding.

PFLEGER: When there is a fire in America, when there's a hurricane, when there's a tornado in call, they call a state of emergency. Federal funds come in and help rebuild that town, rebuild that community.

Well, we have a state of emergency in Chicago.

FINN: In the crowd, at Pfleger's march, his ally civil rights leader Reverend Jesse Jackson calling for a White House conference on violence.

Chicago's crime problem is complex. Illegal guns, gang battles over turf and cheap narcotics, the city's exclusive agreement with the ACLU that ended stop and frisk and low police morale among accusations of racism and brutality. The city's top cop says it's time to get tough.

EDDIE JOHNSON, CHICAGO POLICE SUPERINTENDENT: If you do pick up a gun and you use it, you will be held accountable. Right now we don't do that.


FINN: Heavily criticized, Mayor Rahm Emanuel recently cleared the funding to add 1,000 new officers to the streets of Chicago. CPD is under investigation by the Department of Justice for misconduct and the entire city awaits its ruling -- Bret.