Return to Transcripts main page
Lou Dobbs Moneyline
Dow Soars 342.95 to 11,215.92; Nasdaq Climbs 80.86 to 2,166.44; Lawmakers Blast FBI for Mistakes in McVeigh Case
Aired May 16, 2001 - 18:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: Live from the heart of New York City, this is LOU DOBBS MONEYLINE for Wednesday, May 16th, 2001. Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening.
They required almost 24 hours, but today investors decided that five interest rate cuts in less than five months is a good thing. The Dow Jones industrials soared nearly 343 points, posting its fifth-best point-gain ever, to finish above 11,000 for the first time since September. The Nasdaq soaring on the day as well.
Allan Chernoff has the story.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): A breakout, a powerful advance above 11,000 that had eluded Wall Street since last September. Through the day, the rally gained momentum, investors jumping in for fear of missing out. And speculators who had bet against the market were forced to buy back stock they had sold short.
SAM GINZBURG, GRUNTAL: The shorts are getting killed out there right now, and new people, new people, new money is entering into the markets. I have to tell you, the market looks great, the tone's fantastic.
CHERNOFF: The Dow Jones industrial average closed with a gain of 343 points, better than 3 percent at 11,215.92. On a percentage basis, the Nasdaq composite posted an even bigger gain, up nearly 3.9 percent, more than 80 points, at 2,166.44.
RICHARD CRIPPS, LEGG MASON: Investors who have perhaps too much cash on the sideline, it causes them to be uneasy to be the buyer here, because they don't to be left behind if this market just goes up from here.
CHERNOFF: After arguing yesterday that the market had already priced in the Federal Reserve's interest rate cuts, traders today retreated to an old Wall Street saying, "Don't fight the tape."
Big board volume was the heaviest in nearly a month, over 1.3 billion shares. And the rally was broad: Virtually every industry sector participating, and gains of better than 5 percent for widely followed indices of biotech, semiconductor, gold and software stocks.
Repeatedly in recent months, the Dow had bumped up against 11,000: Four times in February and twice in January it climbed above on an intraday basis, but failed to close above the millennial mark.
(END VIDEOTAPE)
CHERNOFF: Closing above 11,000 is a major accomplishment for the Dow Jones industrial average. Even more impressive would be staying above 11,000, exactly what investors will be watching very carefully now. It'll be an important indicator as to whether the stock market is in fact in the middle of a sustained advance -- Lou.
DOBBS: In the midst of it, at the beginning, anyone will accept an advance of any kind.
Also, important in this, as you reported, that heavy trading volume.
CHERNOFF: You want to look for big volume on big up-days. We got fairly big volume today. We want to see more of that if we're going to have a major advance.
DOBBS: I imagine a few people are thinking right now, Allan, even without volume, would like to see an advance.
Allan, thanks a lot. Allan Chernoff.
Inflation worries easing a bit today after April's Consumer Price Index rose less than had been expected. The CPI climbed by 3/10 of a percent in April. Excluding food and energy prices, the core rate climbed only 2/10 of a percent.
And a sign that housing remains healthy: housing starts climbing 2 percent in the month of April. Especially positive, starts in single-family homes jumping nearly 7 percent.
Bonds gained on that news, following four days of losses. The 10-year note finished up more than a quarter point in price and the yield tonight at 5.44 percent. The 30-year rose more than half a point, the yield there 5.85 percent.
We'll have more market perspective tonight from two major players on Wall Street: the Nasdaq's chairman, Frank Zarb, and later, UBS chairman Don Marron.
Well, in Washington, a humiliating day for the Federal Bureau of Investigation. The man who admitted killing 168 people, including 19 children, was supposed to have been executed today. Instead Timothy McVeigh met with his attorneys, talking about whether to ask for a new trial. And legislators grilled FBI Director Louis Freeh on how his agency botched such a high-profile case by failing to turn over documents to defense lawyers.
Kelli Arena reports from Washington.
(BEGIN VIDEOTAPE)
KELLI ARENA, CNN CORRESPONDENT (voice-over): Speaking publicly for the first time about the FBI's latest blunder, Director Louis Freeh called it a serious mistake.
LOUIS FREEH, DIRECTOR, FBI: As director, I'm accountable and responsible for that failure, and I accept that responsibility.
ARENA: He tried to explain how the bureau failed to turn over more than 3,000 pages of documents to Timothy McVeigh's defense team.
FREEH: It appears that most offices of the FBI either failed to locate the documents and items in question, misinterpreted their instructions and likely produced only those that would be disclosed under normal discovery, or sent the documents only to have them unaccounted for at the other end. Any of these cases is unacceptable.
ARENA: Freeh revealed the FBI has uncovered even more documents, the result of a search ordered Friday. He blamed the problem on management, not the FBI's computer system. At the same time, Freeh maintains the documents will not affect McVeigh's conviction or sentence.
FREEH: In fact, many of the documents relate to early leads that developed no useful evidence or information of investigative value.
ARENA: Even so, some members of Congress suggest this latest incident may further damage trust in the FBI.
REP. DAVID OBEY (D), WISCONSIN: I just think this is a -- it's a pitiful performance, which is feeding the paranoia of large sections of this country, and that's the last thing that we can afford these days.
ARENA: Freeh wants to hire an expert to oversee record keeping, and he's instructed the bureau to stand down for a day to underscore its importance. But some in Congress are calling for an inspector general within the FBI.
SEN. ARLEN SPECTER (R), PENNSYLVANIA: The brutal fact of life is that these agencies become so big, so powerful, so important that congressional oversight is not sufficient.
(END VIDEOTAPE)
ARENA: Louis Freeh disagrees. Of course, this will be an issue for his successor to deal with as Freeh is scheduled to leave the bureau next month -- Lou.
DOBBS: Kelli, thank you very much. Kelli Arena reporting from Washington.
Well, while Congress today questioned Louis Freeh, a grand jury indicted a 25-year FBI veteran: Robert Hanssen. The 21-count indictment accuses the former agent of espionage, allegedly selling secrets to Moscow for more than a decade: 14 of the counts involve capital offenses, meaning that Hanssen faces the death penalty if convicted.
The government hasn't yet assessed the damage Hanssen caused, but one spy expert recently described it as "the worst intelligence breach in the entire Cold War." The Hanssen affair is another huge embarrassment for the bureau. Taken with the McVeigh blunder, it shows an agency struggling to manage both domestic and international security.
Joining me now, CNN senior legal analyst, Greta Van Susteren, from Washington.
Greta, thanks for being here. I would like to ask you first, in terms of enforcement of the law, part of the charge of the FBI here, are there significant implications for law enforcement here as we now see the public focus turning to the FBI and these issues?
GRETA VAN SUSTEREN, CNN LEGAL ANALYST: I think, Lou, what we're going to see is that law enforcement is going to be much more careful when they turn over documents in all cases. There has been a lot of focus on high-profile cases. Today at the hearings, for instance, Louis Freeh, the director, had to answer about a lot of high-profile cases under his watch, and an awful lot of things that have happened in the last eight or so years.
So I think the big-picture analysis for law enforcement is that you better check all your drawers, check under your desk and look for every document you're obliged to turn over to the defense, because if you don't, the attorney general of the United States may step in and do something like he did the other day.
DOBBS: In the instance of McVeigh meeting with his attorneys, what would be your judgment about the likely outcome of those discussion? Will there will be a request for a new trial, in your judgment?
VAN SUSTEREN: My guess is that they will go back to court. Now, remember, Timothy McVeigh said that he was prepared to die, that he wanted to die. When he made that statement, though, Lou, his chances were absolutely none. He knew that he couldn't go to the president of the United States and get this president to lift this death warrant and to change his execution to a life without parole. And so he had given up.
Now, though, it's breathed new life into his case. We're now hearing noise -- I simply say noise; we don't know for sure that he may challenge it -- it is doubtful that he will ever get a new trial. Look, he confessed to some authors. If he did get a new trial, those authors would be subpoenaed to court. They'd come into court and say Timothy McVeigh confessed. He said he blew up the building, killing 168.
Where it's important to Timothy McVeigh is not guilt or innocence, but it's on the question of sentence, because it is theoretically possible that it could be established that he shouldn't get the death penalty because maybe there's a John Doe out there, and the federal sentencing guidelines suggest that if someone is out there that should have gotten the death penalty doesn't that Timothy McVeigh shouldn't.
One other quick note. There's always a chance of a federal moratorium, so the defense wants to drag this out.
DOBBS: OK. Greta, and we'll be watching at 8:30 Eastern tonight as you bring us "THE POINT" here on CNN.
Also in Washington today, President Bush rallied support for the release of his long-awaited energy proposal.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We haven't had an energy policy. Interestingly enough, this is the first comprehensive energy policy probably ever, certainly in a long time.
(END VIDEO CLIP)
DOBBS: The president went on to say that regulators are ready to investigate price gouging by energy companies should there be evidence of such a thing. And Mr. Bush added that his plan will assist California in both the short and long term.
And surely, California businesses could use the help as natural gas prices there have soared.
Casey Wian reports from Anaheim on one industry in particular that is suffering.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): The Bush administration's energy policy is aimed at problems like this.
UNIDENTIFIED MALE: I've got a past due gas bill here of $78,545.88. I need to collect.
WIAN: Anaheim Mills won't be paying. The textile dyeing company shut down Friday, laying off 125 workers.
UNIDENTIFIED MALE: Well, we have no alternative but to turn off the gas.
WIAN: As the gas goes off, a handful of workers load fabric to be returned to customers unfinished. Anaheim Mills says high natural gas prices forced it out of business. Last winter, the company's gas bill jumped six-fold. It tried to cope by scaling back operations, but throughout this year, natural gas consumed half its monthly revenue.
JOEL SCHECHTER, PRESIDENT, ANAHEIM MILLS: When your gas bill as a manufacturer goes from 40,000 to 200,000 and up, well, you can't survive: not for very long.
WIAN: Textile dyers and printers use natural gas-powered machines to color and dry fabric. Many companies that have survived competition from cheap imports and California's strict environmental regulations say they can't also survive gas prices. About 12 percent of the industry's 16,000 Southern California workers have lost their jobs this year.
Natural gas prices are higher in California than anywhere in the country, largely because of limited pipeline capacity into the state.
SCOTT EDWARDS, ASSOCIATION OF TEXTILE DYERS: Essentially what we have here is a Third World economy in that there is no -- there's no reliable infrastructure that the rest of the country takes for granted.
WIAN: Who's to blame is the subject of several investigations and lawsuits. Gas pipeline companies, who've been accused of manipulating prices, say for years the state had surplus capacity and low prices. They urged customers to sign long-term contracts. But many opted instead for the spot market, a decision they now regret.
(on camera): Anaheim Mills says the only way it can get back into business is by negotiating a long-term natural gas contract at cheaper rates. So far there have been no takers.
Casey Wian, CNN Financial News, Anaheim, California.
(END VIDEOTAPE)
DOBBS: In California, businesses are failing, a giant utility has filed for bankruptcy, residents face rolling blackouts and massive rate increases. You might be forgiven if you were to think Governor Gray Davis is facing a popular revolt. And yet a recent poll by a GOP women's organization found that Governor -- the governor would still beat a Republican contender. The Democratic governor grabbed 45 percent of the vote in a hypothetical matchup. California Secretary of State Bill Jones, a possible Republican rival, he received only 32 percent.
Coming up next on MONEYLINE, we continue our discussion with the vice president, Dick Cheney's view of who and what might be blamed for surging energy prices, and one high-profile name that's not pulling back on plans to go public: the Nasdaq. I'll be talking with the chairman, Frank Zarb.
(COMMERCIAL BREAK)
DOBBS: Late-breaking news from Hewlett-Packard. Quarterly net income at the PC maker down 66 percent, but in-line with dramatically lowered Wall Street estimates. On a pro forma basis, however, HP beat expectations by 3 cents a share.
Looking forward, CEO Carly Fiorina warned that sales for the current quarter will fall as much as 5 percent. She, however, she remains comfortable with analysts' earnings targets.
In after-hours trading, the stock is up nearly a dollar a share.
In tonight's "Technology Watch," a stellar mission for the -- session, rather, for the Nasdaq. With today's gains, it's up more than 30 percent from its low set in April. Is it on the road to recovery, a rally under way?
Joining me now, the chairman of the Nasdaq, Frank Zarb. Frank, good to have you with us.
FRANK ZARB, CHAIRMAN, NASDAQ: Welcome back to you.
DOBBS: Well, thank you, sir. Thank you. It's great of you to be here with us.
The fact is you're planning an IPO, you're raising a lot of capital. What are you going to do with all that money?
ZARB: Well, the markets have to keep pace with the rest of the economy, and that means technology, it means global interconnections. To serve the great companies of Nasdaq, we have to have the technology that accesses pools of capital or markets outside the United States.
And we serve over 80 million investors, and that also takes technology.
So we will use it to build a better market.
DOBBS: In terms of the market itself, your listings are down, you have been buffeted by the steepest declines in your history over the course of the past year. Give us your sense of where we are now from your perspective, both as you monitor trading with your -- your eye on business in this country.
ZARB: Well, interestingly enough, we've added 52 new companies to Nasdaq this year, to the more than 4,700, and -- and they are the companies that will better define the future of this economy going forward. The attitude of investors, interestingly enough, has been Nasdaq is the place where companies of tomorrow reside: those that are going to innovate and build our future.
DOBBS: In -- with that -- you've also had a remarkably effective marketing campaign built around that -- that very aspect. Is it your sense that we are in some ways at a bottom here?
ZARB: I think the -- the -- it depends on the economy.
DOBBS: Right.
ZARB: And I really believe there's more productivity improvement to come out of this economy through technology that comes from Nasdaq companies. And as that productivity starts to grow again, the economy gets stronger, and of course the market will show that.
DOBBS: Of course, from the first quarter, for the first time in six years, we saw an actual productivity decline.
ZARB: Correct.
DOBBS: In terms of some of the pullbacks that we're seeing both in capital spending and investment by companies in this country, there's some -- some -- in some quarters concern that we're moving near a recession. Give us your sense of the economy itself.
ZARB: I don't know how you define a recession. We -- clearly, there has been a slowdown across the board. And productivity for the first quarter did decline. But many of us believe that that was a -- just a first-quarter event, and the rest of the year we'll see productivity begin to come back.
It's still a very strong economy, and consumer confidence has stayed relatively high. Unless something happens to consumer confidence, I'm pretty optimistic about what we do going into next year.
DOBBS: Terrific. Frank, thank you very much for being with us here on MONEYLINE.
ZARB: Nice to see you.
DOBBS: Frank Zarb.
Coming up next, my conversation with Vice President Dick Cheney continues, and are America's corporations pushing their employees too hard? Well, let's find out what the employees say about that. And Nintendo unleashes its latest weapon in the fight for video supremacy. But does Microsoft have something even more powerful awaiting in its arsenal? We'll find out, next.
(COMMERCIAL BREAK)
DOBBS: Well, new figures from Washington show online retail sales declining sharply in the first quarter of this year: the Commerce Department reporting purchases over the Internet plunged more than 19 percent, to just under $7 billion. That decline is the first since Washington began tracking online retail sales in the fourth quarter of 1999.
Well, if you feel like you're working too hard, there is a study out today suggesting that you're certainly not alone. Almost, 50 percent of those responding to the survey, funded by some of the biggest businesses in the country, say they feel overworked.
Kitty Pilgrim has the report.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Tired of the rat race? Hey, join the club. About half the people in a recent survey felt overwhelmed by work in the past three months. People are working a lot more than a standard 40-hour week.
UNIDENTIFIED MALE: I work about 70 hours a week, including Saturdays.
UNIDENTIFIED FEMALE: Six. You know, I usually work one day out of the weekend. PILGRIM: The Families and Work Institute survey of a thousand workers found 28 percent said they often felt overworked, 24 percent work 50 or more hours a week, and 22 percent work six to seven days a week. And it gets worse: 41 percent very often use a cell phone, beeper, pager, computer or e-mail during their nonwork hours, and a quarter don't take all their vacation time.
UNIDENTIFIED MALE: Sometimes you can have a vacation booked, and you know, your managers will come and say unbook it.
PILGRIM: All this because, in this economy, companies are squeezing profitability out of every worker, every minute of the working day.
ELLEN GALINSKY, FAMILIES AND WORK INSTITUTE: The economy has an important role in people feeling overworked. When companies are downsizing, people feel more overworked. When companies are having a harder time hiring people, people feel more overworked. Both of those things are happening now.
PILGRIM: All this generates a host of conditions that are ultimately counterproductive and hurt the bottom line. Overworked employees make more mistakes, suffer more health-related problems, call in sick more often, and even job hop more frequently: all very costly to a business.
(END VIDEOTAPE)
PILGRIM: So the conclusion of the survey is perhaps the biggest surprise of all: This kind of pressure on employees should be discouraged. In short, the boss wants you to take some time off and relax -- Lou.
DOBBS: Terrific idea. Kitty, thank you very much. Kitty Pilgrim.
Coming up next, what the vice president says about OPEC's role in the current energy crunch. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Vice President Dick Cheney tomorrow will face what may be his most challenging day yet. The White House will release the energy plan that he helped craft. There's been speculation that some within the administration believe we must push harder on OPEC to raise production. And many critics outside the White House are outright blaming the cartel for the energy crisis.
I asked the vice president if he thought that was justified.
(BEGIN VIDEOTAPE)
DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: I think it's shortsighted, I guess, is the way I'd put it. I won't say that OPEC's always been responsible in the past. There have clearly been times back in the early '70s when they took actions that were fundamentally harmful to the United States. What we really ought to shoot for, though, is some stability over time in oil prices; that's really what's in the interest of both the supplier and the consumer.
One of the problems we've had in recent years with these wide fluctuations in prices, when prices dropped, for example, to $10 a barrel, that dries up investment, and it's in our interest that there be long-term investment, multi-billion dollar projects that are required, really, to develop additional supplies outside OPEC.
For example, if you look at the Caspian today, at the north end of the Caspian there's a huge new find in the Kashagan oil field that may be among the five or six largest oil fields in the world that's outside OPEC, but it's going to take a lot of money to develop that resource and find some way to transport it to market.
Those investments won't occur unless there's some degree of certainty over time with respect to what the price is going to be. So I think that stability is important, that's clearly what the suppliers are interested in. It really is what we ought to be interested in, too.
DOBBS: Labor has reacted not particularly positively to your proposals in your discussions with labor leaders this week. The other principal area of interest here, obviously, is in the environment, and environmentalists. Do you have a strategy in which to bring them along in the direction you want?
CHENEY: I think we've got a sound, environmentally-responsible set of recommendations. We spend a fair amount of time in our report talking about how important that is. Also, the great success we've had as a nation over the last 30 years in actually reducing the amount of pollutants going into the atmosphere, improved coal technology -- we want to invest even more in clean coal technology.
But I think it's important that people recognize that we can both produce adequate supplies of energy and protect the environment. To some extent, the debate gets cast in terms that were relevant maybe 20 or 30 years ago, but no longer make sense given the state of our modern technology.
There's a tendency for people to say that if you want to develop ANWR, for example, that means you want to despoil 19 million acres of Alaskan wilderness, and nothing could be further from the truth. It's not necessary to do that; the actual amount of surface that would have to be disturbed is a few thousand acres, smaller than Dulles Airport out here, west of Washington.
But the debate needs to occur. And there are legitimate questions here that need to be asked. But it needs to occur based on some element of fact, then we can argue and say, well, we should develop this or we shouldn't develop that, but in fact, we need to get everybody to sort of calm down here on both sides.
I would say there are some folks on the development side that are equally categorical in their condemnation -- little aggressive on both sides. And there really is, though, I think, the opportunity, given modern technology, to have it all, and there's no reason why we shouldn't do that in this case.
DOBBS: When you and Mr. Bush took office, you talked about bipartisanship, setting a new tone in Washington. Have you found it more difficult than you thought?
CHENEY: Of course, I'd been here for 25 years and then left for eight, when I was in the private sector. And it's still pretty partisan at times, no question. But I can remember times in my career when it was a lot worse.
And I think we've made some progress. I do. It's not always easy. Some days you have to bite your tongue. I spend a lot of time on the Hill as the president of the Senate, and with the tie-breaking vote in a 50-50 Senate, I spend a good deal of time up there.
DOBBS: And you work quite closely with the House, as well.
CHENEY: And I work closely with the House as well. I've got an office on the House side, courtesy of the speaker.
But it's -- we're working hard at it. The president's very good at it. Frankly, he's better at it than I am. It's probably his manner and his demeanor. And I suppose I still bear scars from partisan battles of 20 and 30 years ago, and he's fresh to the enterprise. And that's good. It's very important that we have somebody like that as committed as he is.
And so I think we are making progress. We finally got some bipartisan support on the budget resolution, and on the tax bill the other day, we had five Democrats come over and support the conference report on the budget resolution.
So we're getting there, but nobody should underestimate the difficulty of building those bridges between parties. It is hard.
DOBBS: And in terms of where the administration is today with your agenda, it was only three months ago that people were saying the tax cut was an impossibility, bad economics, and today moving toward law. Give us your best judgment as to where you are today.
CHENEY: I think it's been a pretty good three months, or more than that, now. We're about to pass the biggest tax cut in a generation. We have gotten very close to what the president asked for in terms of the budget totals that came out of the Congress. We're making major progress on education reform. A bill is up on the floor in the Senate, it's through the committee in the House, and should be passed out within the next month or two.
We've embarked upon a whole new approach with respect to strategic posture, in terms of nuclear weapons and offensive and defensive capabilities that just could revolutionize the way we think about our strategic posture. It's probably the most far-reaching changes in at least 30 years in that area.
So there are a great many things that are in the works. We're working the Social Security problem. We've got a good commission established there now. That's going to be a huge issue to address, very important, very sensitive one, but we will address it as we go forward.
There's a lot of work to be done, but I really feel very good about the start the president's made.
DOBBS: Mr. Vice President, thank you very much.
CHENEY: Thank you.
(END VIDEOTAPE)
DOBBS: Well, tomorrow the focus turns entirely to energy: The White House will report its plan. That plan to include 105 recommendations to raise energy supply.
Well, coming up next, a Wall Street veteran, one of Wall Street's leaders with his views on the economy -- Don Marron joins me. Also, the sweet taste of profit as one breakfast favorite rolls in the dough. Stay with us.
(COMMERCIAL BREAK)
DOBBS: In tonight's "MONEYLINE Movers," Sawtek gaining 2 1/4 on takeover news. Triquint Semiconductor offering $1.3 billion in stock for the chip company, roughly $30 a share. RealNetworks today gaining 41 percent. Sony selected the company's RealPlayer to link PlayStation 2 with the Web. The deal means PlayStation 2 aficionados can play Internet movie and music clips.
Krispy Kreme, up $7 a share after topping Wall Street estimates. Quarterly profits at the donut chain rose nearly 90 percent. Krispy Kreme also upped forecasts for the next two years. And separately, the stock moves to the New York Stock Exchange tomorrow under the ticker KKD.
And since its IPO just a year ago, it's risen just about 170 percent.
Krispy Kreme one winner in what was a banner day for stocks. The Dow began slowly, then shot higher, rising more than 340 points, closing above 11,000 for the first time in eight months. A strong showing on the Nasdaq as well, which gained nearly 4 percent on the day.
Joining me now, the chairman of one of the biggest brokerages on Wall Street, Don Marron of UBS PaineWebber.
Don, good to have you with us.
DON MARRON, CHAIRMAN, UBS PAINEWEBBER: It's very nice to be here.
DOBBS: An impressive day today.
MARRON: Sure was. DOBBS: What, in your judgment, is making for all of the exuberance?
MARRON: Well, first, it's only taken three days of you being back to get the market up this much in one (UNINTELLIGIBLE). It's very impressive.
DOBBS: Does this mean I also have to take the blame should it decline at any point?
MARRON: Absolutely. Always do.
DOBBS: Uh-oh.
MARRON: I think one of the things that happened, Alan Greenspan cut interest rates. That's important. But in addition to that, you have to listen to what Alan Greenspan says. He talked about the fact that he believes that the productivity gains we have been getting are going to continue.
DOBBS: Right.
MARRON: Maybe moderately slower. It seems to me that was an important vote of confidence in that key issue, which is, Can we keep up the pace of the last eight or nine years?
DOBBS: And you agree with the Fed chairman that we can sustain those productivity gains?
MARRON: I think it's the most important issue we have today. I think research and development is crucial. I think our development side is a little ahead of our research. But I do think the ingenuity of America is such that new ideas are coming along every day, and that's what's going to drive the markets.
DOBBS: And these markets, certainly today, were driven, but a delayed reaction to what was the fifth interest-rate cut by the Fed in less than five months. How important are those cuts? And what do you think they auger for both the markets and the economy?
MARRON: Well, I think change in interest rates are very different in an up-market than a down one. When you raise interest rates, you have a direct impact on businesses and consumers. Costs you more every day to borrow money. When you lower interest rates, while you're making money cheaper, you're not necessarily encouraging people to borrow more money.
DOBBS: Exactly.
MARRON: So this is a very different time. We're making it easier for people to borrow money, but we haven't yet given them a lot of reasons to do that. So we're setting the stage for some growth. But I don't think these things by themselves are going to do it, other than sending a signal that Alan Greenspan really cares. And that's an important signal.
DOBBS: There's something comforting about just hearing the words "Alan Greenspan Really Cares."
MARRON: Exactly.
DOBBS: At the same time, Don, as you know, the issues of credit quality is looming large out there. The office of the comptroller of the currency is keeping a rather close eye on the banks. As Alan Greenspan at the Fed is lowering rates, the comptroller is saying watch your credit quality very, very carefully.
Is that a complementary and concerted action, or is it a competing and contradictory policy?
MARRON: It is somewhat competing, because you're making the product the banks have cheaper. Bank stocks reacting pretty well to this thing. But it is a real issue. It's a real issue because we found in the last year, year and a half that a lot of businesses got more capital than either they could need or could use or could justify.
I think, though, the head of every major bank in this country, and most of the smaller ones, realizes their role here is to be an intelligent allocator of capital.
DOBBS: And you're optimistic for -- on this economy for the remainder of the year?
MARRON: I think this economy is going to bump along for the remainder of the year. What I am optimistic about is that the structure of the economy is very strong and that you now have in concert the government and the president with a tax cut, interest rate cuts with the head of the Federal Reserve, you back in the role here...
(LAUGHTER)
... and investors, I think, are now cash-flow positive. So they're back in the position where they can come back into the markets.
DOBBS: Well, Don, that -- on that optimistic note -- and I think there are a lot of people say just bumping along is pretty optimistic...
(CROSSTALK)
DOBBS: ... from some people's lights, I'll say thank you very much for joining us, and it's great to see you, as always.
MARRON: Nice to see you.
DOBBS: Don Marron.
Well, coming up next here on MONEYLINE, another legal victory for big tobacco and the arguments for why now is a good time to buy tobacco stocks. I'll also be talking about the future of AOL Time Warner with its chief executive officer, Gerald Levin -- next. (COMMERCIAL BREAK)
DOBBS: Tobacco, the sector tonight. A jury in New Jersey today unanimously ruled in favor of Philip Morris and RJ Reynolds, a case brought by the husband of a deceased smoker. Salomon Smith Barney analyst Martin Feldman notes this is the eighth-consecutive victory for big tobacco against individual claims and one reason for his strong outlook for the entire sector.
Feldman also says cigarette makers will never have to pay that $145 billion Engle verdict.
Feldman's favorite stock is Philip Morris, and taking a look at the stocks today, led by Philip Morris, RJR, the entire sector up on the day.
Well, just ahead on MONEYLINE, the man who runs the world's largest media company. We also just call him "boss." Stay with us.
(COMMERCIAL BREAK)
DOBBS: In our focus tonight, the world's biggest media company. It just happens to be AOL-Time Warner, the AOL empire formed by the merger of America Online and Time Warner. It stretches across the media world. It includes AOL, and of course, this network, CNN, HBO, time Inc., Warner Music, Warner Brothers, Time Warner Cable. And that merger, so far, has paid off for investors. Since closing earlier this year, the stock up 50 percent year to date.
And joining me now, the man who helped create this bridge of old and new media: Jerry Levin, the CEO of AOL-Time Warner.
Jerry, good to have you with us.
GERALD LEVIN, CEO, AOL-TIME WANER: Lou, it's good to see you.
DOBBS: Thank you. And at this point, the merger has brought together, since 1996, with Turner Broadcasting, with AOL, with the Time Warner properties, and we can go back to TIME and Warner. How's it working, by your lights?
LEVIN: Actually, I'm very comfortable. You know, we had a year and a day to get ready for this, because it took a little while to get through, and so we dealt with all of the issues, put the organization in place. We really hit the ground running, particularly with our first quarter.
DOBBS: Right. In that first quarter, impressive cash-flow results, impressive revenue results, and this against a backdrop of very severe downturn in advertising. Is this a sustainable rate?
LEVIN: Absolutely. You know, for example, AOL's advertising e- commerce was up 37 percent in the first quarter.
DOBBS: Right. LEVIN: The company overall is riding a different track than measured media, normal advertising for two reasons: one, subscriptions...
DOBBS: Right.
LEVIN: We have 133 million subscriptions, and it's an annuity- like form of revenue -- invested in the consumers' habit structure. At the same time, we're dealing with the direct marketing side of what companies are trying to do. So it's a totally different activity.
DOBBS: And when you talk about an annuity style form of revenue, you're really talking about cable, and well, combined in terms of subscription.
LEVIN: AOL and cable are definitely drivers for this company, but you know, we have HBO subscriptions, we have all these magazine subscriptions. And they're, in this environment, you have unit growth, you have lots of flexibility, and it's a totally different business formula.
DOBBS: I think there is probably a number of media CEOs out there scratching their head right now, Jerry, probably with some envy, because as confident as you are in the earnings results and the revenue results in this advertising downturn, I am sure they would like to be able to be as bullish. Do you see an end to this downturn?
LEVIN: Well, for our company, there is no downturn, because we're riding above. I also think -- I'm very optimistic about the economy. Essentially, we've taken a lot of the excesses out. There's a lot of new product introduction taking place. And the consumer is really there. And there are a lot of these companies that shouldn't have been financed in the first place.
So I view this as beneficial. We have a multiple-layer economy.
But from our point of view, we're where the consumer is.
DOBBS: In terms of film, the music business, problem areas in the past, how do you they look?
LEVIN: Really good, of course. In -- for example, today, we just came from watching 28 minutes of "Lord of the Rings," which will be out at Christmas. Tomorrow at our shareholders meeting, I'm going to run a trailer for Harry Potter, and Steven Spielberg's film "AI."
So I like our films. Music, not only because we have four of the top 10 albums last week, but with this digital world, these businesses are going to have extraordinary growth and high margin.
DOBBS: Now, Michael Eisner was here last night, Jerry. He said...
LEVIN: Michael who?
(LAUGHTER) DOBBS: Mr. Eisner.
LEVIN: Yes. He...
DOBBS: ... as we affectionately refer to him.
LEVIN: He is a good friend.
DOBBS: And Michael said he didn't like to promote, but that he found himself overcoming that resistance last night...
LEVIN: I noticed.
DOBBS: ... talking about "Pearl Harbor."
LEVIN: Yes.
DOBBS: "Harry Potter," one of the most eagerly awaited films -- I'm going to give you a chance to promote diligently here. Is it -- does it appear to be as good as everyone is both hoping and expecting?
LEVIN: Oh, yes. This is Chris Columbus, who's done this with an extraordinary cast. It's a -- it's a phenomenon. What J.K. Rowling has created is something we've never seen because you have teenagers around the world really entranced by this story. So on November the 16th, we're quite confident that this will be the highest-grossing film in the history of Warner Brothers.
DOBBS: Well, that is terrific, and we have just used up our promotional quotient, and we, as always...
LEVIN: Equal -- equal time.
DOBBS: It is good to have you with us here.
LEVIN: Thank you, Lou, and...
DOBBS: Thank you very much.
LEVIN: ... best to you.
DOBBS: Thank you, sir.
Well, coming up next here on MONEYLINE, the shootout for control of the videogame market. Nintendo blasting away with a new system. We'll tell you how Microsoft is firing back. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Nintendo today unveiling its challenge to Sony's popular PlayStation 2. It's called the GameCube. But Nintendo couldn't keep the spotlight to itself. Microsoft muscling in, promoting a new system of its own.
Bruce Francis reports on the escalating war for the lucrative videogame supremacy. (BEGIN VIDEOTAPE)
BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): Be afraid, Luigi. That haunted house Nintendo has built for you on the new GameCube system has more than a few goblins to worry about, especially Microsoft, it's $500 million marketing war chest, and a new device called the Xbox.
As it announced key details of the system today, Microsoft came out shooting.
ROBBIE BACH, MICROSOFT: Through holiday, about 1.0 to 1.5 million units of Xbox will be sold. That's a great start to what is going to be a great platform.
FRANCIS: Nintendo is counting on deeper relationships with Japanese game designers to fend off the Microsoft challenge.
PETER MAIN, NINTENDO: Nintendo happens to have the largest single group of game development resources of any company in the world. So we're going to have more exclusive products running on this system than anybody else in the game. We're ready to go.
FRANCIS: Here's how the three systems stack up: Nintendo says it won't announce the price for GameCube until next week. The console goes on sale November 5th with five titles available. Microsoft's Xbox will go on sale three days later for just under $300. Microsoft expects there will be 15 to 20 titles to choose from. By then, Sony's PlayStation 2 will have been on the shelves for nearly a year. The system sells for $299 and there are no plans to cut prices. The big advantage: a catalog of already more than 80 titles and more by the fall.
ERIC SCHEIRER, FORRESTER RESEARCH: This is going to be a very difficult competitive situation for Microsoft to come into.
(END VIDEOTAPE)
FRANCIS: Well, those who buy the Xbox might want to consider writing a thank you note to Bill Gates. Merrill Lynch estimates that Microsoft will lose about $125 on each console it sells and won't break even for two years after nearly $2 billion in losses. And Lou, Microsoft won't comment on that.
DOBBS: Are you saying that they will be able to recover 2 billion in losses within two years?
FRANCIS: They must believe it...
DOBBS: Wow, that's impressive.
FRANCIS: ... or they wouldn't be doing it. Remember, they can drive some software sales long the way.
DOBBS: They've got a fairly deft hand at marketing.
FRANCIS: And a deep pocket, too.
DOBBS: All right. Bruce, thank you.
Well, coming up next here on MONEYLINE, the hefty price tag for a sculpture. Proven again: Beauty is in the eye of the beholder.
Also "Ahead of the Curve" is next. Stay with us please.
(COMMERCIAL BREAK)
DOBBS: Tomorrow brings the first look at the White House's highly anticipated energy proposals. The Bush administration is expected to unveil its energy policy tomorrow morning. And more on the economy with jobless claims anticipated to rise in that report tomorrow. And you may expect leading indicators to remain unchanged for April. That's the consensus among economists.
Also, quarterly reports from technology firms Dell Computer and Ciena, as well as K-Mart and The Gap.
Finally tonight, a public offering that had a spectacular debut, not on the trading floor, but on the Sotheby's auction block. An important piece of artwork last night fetched nearly double what had been expected: a work described by one Sotheby's rep as "a ravishing object with chilling and subversive power." One museum called it "instantly recognizable and undeniably beautiful."
The title is austere, unpretentious: "Michael Jackson and Bubbles." An anonymous buyer paid -- are you ready? -- $5.6 million for the Jeff Koons piece, an artifact of 1980s art-world heyday creativity. Perhaps you can see why the new owner wouldn't want anyone to know.
How much would you pay for "Michael and Bubbles"? Well, that was the question of the day on "The Wall Street Journal" Web site. More than 90 percent said you would have to pay me to take it home.
That's MONEYLINE for this Wednesday. Thanks for being with us. I'm Lou Dobbs. "CROSSFIRE" is next.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
