SPECIAL REPORT

What does court setback mean for the Trump administration?

This is a rush transcript from "Special Report with Bret Baier," February 10, 2017. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

PRESIDENT DONALD TRUMP: We will be doing something very rapidly having to do with additional security for our country. You'll be seeing that sometime next week. In addition, we will continue to go through the court process, and ultimately I have no doubt we will win that particular case.

(END VIDEO CLIP)

CHRIS WALLACE, ANCHOR: President Trump in a news conference today with Japan's prime minister taking a much more subdued tone in reacting to the ninth circuit court of appeals decision last night blocking his travel ban.

Time to bring in our panel: Tim Farley of Sirius XM radio; Matt Schlapp, contributor for The Hill, and syndicated columnist Charles Krauthammer. So Matt, let me start with you, because I think it's fair to say we were all struck by this, that President Trump was very careful and much more subdued today, saying he is going to take new action next week to protect the homeland, but not telling us what it is, and that he's also going to pursue his legal options in this travel ban case. But there was no talk about "so-called judges," no talk about disgraceful rulings. I guess two questions -- your thoughts about his tone down rhetoric and your thoughts about what it is he may do next week.

MATT SCHLAPP, THE HILL: I like two parts about it. I like the fact that they're taking their time. He's got a lot of different ways he can go on this travel timeout. And he is going to have a lot of innings in this game to go as well.

And on the legal challenge alone, there are several different paths they can take. And what I want to see is this White House have the legal teamwork with the national security team, the Homeland Security team, and the communications team to really roll out well the next step, because this issue, the issue of immigration and terrorism, this is going to be the issue of the Trump presidency, and they've got to get it right.

WALLACE: The president seemed to indicate on Air Force One that he might not pursue the case and might just write a new executive order. To some degree, that might seem to be the best way to handle it.

SCHLAPP: Or maybe not just appeal this particular ruling, maybe go through the district level, and maybe eventually this gets solved by the Supreme Court, and maybe, like you were saying, they also come up with additional executive orders. Look, they are going to be on this issue for the next four years.

WALLACE: Charles, you said last night, as we were covering the ruling as it came in that you thought that the president needed to get off this subject. And in your column today, you called his travel ban "stupid but legal." So is he taking your advice?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: He never does. It would surprise me if he did this time.

The point I wanted to make in the column was there is the moratorium and there is the vetting. The vetting will get 90 percent support in the country, but they actually should do. It doesn't depend on a moratorium.

The fact is they have lost the case in the most liberal circuit in the country, they lost it at the district level, and for now the Supreme Court is deadlocked, so it's likely to return. In other words, the case is stacked against him. I happen to think its legal, but these courts have decided not.

So why playing a losing hand? What he needs to do I think is exactly right, either rewrite the order or have a new one so you're dealing on a different playing field. You've gotten essentially the feedback of the ninth circuit, so you know what will pass muster and what won't. For example, from the beginning you exclude the holders of green cards, and then what you do is you slow walk the appeals case and you fast walk the nomination of Gorsuch. There is no hurry on appealing this ruling. They are not going to win it in the end.

Put out something else, accelerate the vetting process, announce new procedures. There is a way to keep out people in these countries simply by the vetting process. You essentially have no central government. They have no information. So you can write the vetting process in a way that will honor the moratorium even without calling it a moratorium. And get the other justice on the court so that if it ever gets bumped up to the Supreme Court again, he'll win.

WALLACE: I am sure they are sitting there in the White House right now taking notes on all this. You did speak a little fast.

KRAUTHAMMER: That is why they have stenographers.

WALLACE: And they can also just replay the tape.

Tim, let me switch subjects on you and let's turn to Kellyanne Conway, because this continues to be a controversy, going out on television yesterday from the White House briefing room, counselor to the president, and saying people should go out and buy Ivanka Trump products because some department stores were dropping her lines from the store.

Sean Spicer said that she had been counseled -- he wouldn't explain what that meant. But within a short time, a couple of hours, Kellyanne Conway was back with Martha MacCallum here on FOX News saying that, in fact, the president supported her and very much was unhappy with any suggestion that she had been counseled. Your thoughts about all of this? Is there an ethics problem in the White House? And if so, do they get it?

TIM FARLEY, SIRIUS XM RADIO: I don't know about the ethics problem itself. That would have be adjudicated by somebody else. And even Jason Chaffetz and Elijah Cummings had signed a note together. This is the chair and the Democratic leader of the Oversight and Government Reform Committee, and they were critical of what she had done. They wanted to look into it.

I think the bigger problem is they don't have a communications director at the White House right now. This is one of the issues for them right now is that whatever has happens, they need to have a message and they need to be able to deliver it consistently. President Trump is de facto the communications director, and he's doing the job, and he's doing it badly, which means that whenever anything like this comes up they should put their heads together. When it came to doing the executive order, poorly rolled out. Whenever it comes to a lot of the news that they had this week they wanted to get out there, whether it was the new Intel factory in Chandler, Arizona, whether it was the FAA realignment, whether it was the Dodd-Frank rollout, all of these things got lost in this over-preoccupation with Kellyanne Conway, with tweets about whether or not the Nordstrom deal was a bad one for Ivanka -- all of that got lost, and they just need somebody who is saying, look, let's put our heads together, let's try to figure out exactly what message we want to get across.

WALLACE: There may not be a communications director, but there's a lot of communications, some would say too much. And I want to talk to you about that, Matt. Leaks, there always leaks from the White House, and you always get one faction trying to knife the other, quite frankly. But what astonishes me is you are getting leaks of phone calls between President Trump and foreign leaders. We are finding out what President Trump said to the Australian prime minister. Now we are finding out what he said to Vladimir Putin.

SCHLAPP: You always have leaks, you're right. And you always have more junior White House staffers wanting to be in the know with reporters. But the leaks of these conversations, I think, are problematic. I don't know whether that leak is coming for the communications team, but I do think they have to tighten this up. This is not in the best interest of the president nor of his agenda.

And look, I think he has had some great foreign policy successes over the course of the last couple of days. I think this weekend the golf summit seems to be going swimmingly. These are positive things. And I think hearing these phone calls characterized, it underlines it. They need to tighten it up quickly.

WALLACE: Less than a minute, Charles. I don't think that when you're talking about leaking private phone calls, that sounds to me like it is people in the permanent government who don't approve of this president trying to embarrass him.

KRAUTHAMMER: You wonder about sort of the preliminary stuff involving Trump and the FBI, the CIA, the struggle he had, the battle he had with the intelligence agencies. And I have thought that some of these leaks are a way for the agencies to say you're messing with the wrong bureaucracy, because we are the keeper of the secrets. A classic case of that, of course, J. Edgar Hoover. He had something on everybody, so he had a lot of control.

This is the beginning, the feeling out, the beginning of the boxing match. But I think Matt is right, this is really hurting the president. If you can't speak to a foreign leader without having the transcript on the front pages of the papers, then you're really hampered.

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