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Lou Dobbs Moneyline

Dow Tumbles 105.60 to 11,070.24; Nasdaq Falls 15.93 to 2,217.73; Democrats Take Control of the Senate

Aired June 06, 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.
LOU DOBBS, CNN ANCHOR: Tonight, a pullback on Wall Street: stocks tumble for the first time in a week. The Democrats take control of the Senate. We'll look at the work ahead for the new Senate Banking Committee chairman, Paul Sarbanes, and talk with the new Senate Finance Committee chairman, Max Baucus.

Powering America: Tonight, we're joined by Energy Secretary Spencer Abraham and the chief executive officer of oil refiner Valero. More trouble for California.

And a powerful Democratic senator under investigation: Did Robert Torricelli break the law? Why is he getting so much attention now? A MONEYLINE special report.

ANNOUNCER: From the heart of New York City, this is LOU DOBBS MONEYLINE. Here now, Lou Dobbs.

DOBBS: Good evening. Shortly after 11 o'clock this morning Eastern Time, Senator Thomas Daschle was officially named the new Democratic majority leader. He took the title from Republican Senator Trent Lott.

This is the first-ever change of power during a session of Congress. The event: a display of civility, pomp and ceremony. But the partisan rancor is sure to emerge in what remains one of the most closely divided Senates in history.

Jonathan Karl with a report from Capitol Hill.

(BEGIN VIDEOTAPE)

(APPLAUSE)

JONATHAN KARL, CNN CORRESPONDENT (voice-over): A shift in power, without precedent in U.S. history.

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: This indeed is a humbling moment for me. I'm honored to serve as majority leader, but I also recognize that the majority is slim.

(APPLAUSE)

KARL: At Daschle's first press conference as majority leader, he promised to reach out to Republicans, but also took pride in the title "partisan Democrat."

DASCHLE: I think being a partisan Democrat is what most people would expect you to be, in the best sense of the word, and that I have an agenda, a philosophy that I hope I can articulate reasonably effectively.

KARL: Republican leader Trent Lott went into his new role as minority leader, warning Daschle that leading a Senate majority is a heavy burden, comparable, he said, to the weight of the world on Atlas' shoulders.

SEN. TRENT LOTT (R-MS), MINORITY LEADER: This job will be tough. We're all going to try and make it bearable and easier for you, and of course, I'm hoping someday the weight will come back where it was fated to be.

(LAUGHTER)

KARL: Jim Jeffords, the man who single-handedly put the Democrats in power, has been eagerly embraced by his new Democratic colleagues, but he was not on hand as Daschle was first recognized as majority leader. And on the very first vote under Democratic control, Jeffords showed he can be a thorn in the side of Democrats just as he frequently was of Republicans.

UNIDENTIFIED MALE: Mr. Jeffords?

No.

KARL: Jeffords was the only senator on the Democratic side of the aisle to vote against an education amendment offered by Paul Wellstone on student testing.

(END VIDEOTAPE)

KARL: Daschle is still negotiating with Democrats on a resolution reorganizing the Senate's powerful committees under Democratic control. Until that resolution is passed, the Senate's 11 freshmen, nine of whom are Democrats, will have no committee assignments at all -- Lou.

DOBBS: Jonathan, thank you very much. Jonathan Karl from Capitol Hill.

Well, Senator Paul Sarbanes of Maryland will now head the Banking, Housing and Urban Affairs Committee. Sarbanes replaces Senator Phil Gramm of Texas, known as a free-market advocate and a friend of big business. Sarbanes is expected to focus instead on consumer issues.

Peter Viles is here now and has more on the new chairman -- Peter.

PETER VILES, CNN CORRESPONDENT: Lou, Senator Sarbanes is known on Wall Street as the Democrat who often questions Fed policy. Now, he's setting the agenda not just on Fed oversight but on banking issues as well.

(BEGIN VIDEOTAPE)

VILES (voice-over): Gone from the chairman's seat is the folksy Texan, Phil Gramm, a champion of deregulation who often praised Allan Greenspan. The new man to see on banking issues is Democrat Paul Sarbanes of Maryland, who has often questioned the wisdom of Greenspan's wars on inflation.

SEN. PAUL SARBANES (D-MD), CHAIRMAN, BANKING COMMITTEE: I have differed with Greenspan from time to time, and I (UNINTELLIGIBLE) -- usually it involves that the take rates up too soon or they don't bring the rates down soon enough. I'm a strong jobs, economic growth person.

VILES: Wall Street expects a certain amount of jaw-boning from Congress as long as it doesn't challenge the Fed's independence.

WAYNE ANGELL, BEAR STEARNS: It is very important that the Senate Banking Committee not be involved in a sort of Monday morning quarterbacking on the Federal Reserve. The Federal Reserve's independence is essential for maintaining confidence.

VILES: 68 years old, Sarbanes was a Rhodes scholar, earning degrees from Princeton, Oxford and Harvard, worked in the Kennedy administration as an aide to economist Walter Heller, elected to the House in 1970, the Senate in 1976.

His agenda will differ from Gramm's in several respects. A longtime resident of Baltimore, Sarbanes is likely to focus on urban issues, such as affordable housing and mass transit and consumer protection -- notably predatory lending practices and privacy protection.

SARBANES: Most people, if you ask them, "Does that information belong to you as an individual or does it belong to the financial company to whom you give it, who in turn can do whatever they want with it?" most people, in response to that question, will say, "No, no, that's my information, I should be able to control it."

(END VIDEOTAPE)

VILES: Senator Sarbanes has already sponsored legislation that would give consumers greater control over financial and medical information they provide to their bank or insurance company -- Lou.

DOBBS: Pete, let me ask you, in terms of the nominees to the Fed, you just described a chairman who's going to be apparently critical of the Fed when he so feels. What about the nominees to the Fed that have to be filled?

VILES: Well, in an early stroke of bipartisanship, the new chairman has already scheduled a hearing next Wednesday on the nomination of Roger Ferguson to a second term as vice chairman of the Fed. So some sign of bipartisanship there already.

DOBBS: Terrific. Pretty good -- what? -- in less than 12 hours.

VILES: First day on the job.

DOBBS: Thanks, Pete.

The Senate majority leader today said the two parties are "required to find common ground" if they plan to push their initiatives through Congress. My first guest tonight showed bipartisan spirit, co-sponsoring the Senate tax cut bill with Republicans on the Finance Committee. Now, in this new day, he is the chairman of that committee. I'm joined now by Senator Max Baucus of Montana.

Senator, good to have you with us.

SEN. MAX BAUCUS (D-MT), CHAIRMAN, FINANCE COMMITTEE: Thank you, Lou.

DOBBS: Let's start right away. Where are you going to be with your priorities? What changes are we going to see on your committee?

BAUCUS: Well, the guard's changed but the rules haven't and the composition of the Senate hasn't. We're still the same 100 senators. Be voting pretty much the same way.

DOBBS: Did I detect...

(CROSSTALK)

Did I detect just a note of lament as you said that?

BAUCUS: Well, a little bit of perspective.

(LAUGHTER)

DOBBS: OK.

BAUCUS: I think that's the best phrase.

No, I'm very excited. It's a huge challenge, a huge opportunity, and it's -- I'll do the very best I can with it. No, I'll be working with clearly our new majority leader, Tom Daschle, who will set an agenda which is deep -- caring deeply for the American people, and also with Chuck Grassley, the former chairman of the committee, with whom I've made a very close friendship.

So I expect we'll be working together in the same vein, but with a little bit different agenda. But default is in a bipartisan basis, because that's the only way to get things done.

DOBBS: Now, you were obviously supportive of the tax cut legislation, yet there are already calls -- and some of those calls emanating from the Democratic leadership in the Senate. Do you think it would be wise to reopen aspects of the tax cut legislation at this juncture? BAUCUS: No, I -- no, Lou. No, Lou, I don't think that would be wise at all. You know, the president proposed and the Congress enacted a major tax cut. I think it's -- it's good legislation, it's good for the American people. They will not, however, be a major tax cut bill.

In the same vein, as we work through the rest of this year, I'm quite confident that the president's bill, which, I think, I helped changed and modified it to make it better, will not be reopened, it will not be revisited.

DOBBS: How likely is it that we will see significant elements of the Bush administration's agenda moved through this Congress with the Democrats now in control of the Senate? How likely is it we'll see the Senate leadership successfully initiate its own legislation?

BAUCUS: Well, Lou, that's a very good question, and in addition to asking how likely is something going to happen, I think another question is, you know, what should happen and what we'll be working for.

My personal view is that both the White House and the Congress, albeit with a Democratic Senate, should continue to work to try to get things passed that address major issues, like prescription drug benefits, patients' bill of rights, and fast track, or trade-promotion authority, just try to work together to get things done. And I hope that happens. It's certainly what I'm going to be pushing for.

DOBBS: And your colleague and fellow chairman, Senator Sarbanes, critical of the Fed at various junctures. No reason to think he will be otherwise now in chairing Senate Finance. But your committee working directly with the Fed and the Office of the Comptroller of Currency. What's your judgment about how well the Fed is doing and the Office of the Comptroller of the Currency?

BAUCUS: Well, my view is that, you know, it's not bad. We could easily second-guess, Monday morning quarterback. Actually, our committee has a little less jurisdiction over the Fed than the Banking Committee.

But by and large, you know, I think Alan Greenspan has done a pretty good job. I mean, it's a tough job. It's hard to predict this extremely complex economy, particularly the international aspects of it. But you know, certainly, in the ballpark I think he's done well.

DOBBS: OK, Senator, good to have you with us and congratulations on the chairmanship.

BAUCUS: Thank you very much.

DOBBS: Coming up next here: Philip Morris hit with a huge jury verdict in the billions of dollars. We'll have a live report for you from Los Angeles. We will be telling you about a broad retreat on Wall Street where stocks break a four-session winning streak. Hewlett-Packard, out with troubling news of its own: sales at Hewlett- Packard falling short. The company reporting a worldwide tech slowdown spreading. And...

UNIDENTIFIED MALE: Did he knowingly accept illegal contributions? If he knew about that, then he has committed a crime.

DOBBS: A MONEYLINE special report on Senator Torricelli. We'll follow the money trail that has the powerful Democrat now under federal investigation.

(COMMERCIAL BREAK)

DOBBS: A huge court loss for Philip Morris. A California jury has awarded $3 billion in damages -- that's an unprecedented amount -- to a lifelong smoker. The jury saying Philip Morris is responsible for his lung cancer. The jury verdict sent Philip Morris shares down nearly $2 in after-hours trading. Casey Wian has the story from Los Angeles -- Casey.

CASEY WIAN, CNN CORRESPONDENT: Lou, the size of the judgment as you mention, more than $3 billion is of course incredible. The largest individual award ever in a tobacco lawsuit. But what's perhaps most amazing, at least in the eyes of Philip Morris, is that a Los Angeles jury apparently accepted the testimony that the plaintiff in the case, 56-year-old Richard Boeken, never heard or read about the health risks of smoking until Congressional hearings were held in 1994.

Boeken started smoking at 13 and now suffers from lung and brain cancer. The man's attorney claimed that his client was able to quit both alcohol and heroin but never stopped smoking because of a tobacco industry misinformation campaign about the dangers of smoking.

BILL OHLEMEYER, ASSOCIATE GENERAL COUNSEL, PHILIP MORRIS: For the jury to have returned a verdict like this on the evidence they heard in the case, quite frankly, is outrageous. They heard that Mr. Boeken smoked cigarettes for more than 30 years that had warnings on them. They heard that people are well aware of the risks of smoking. It's really -- strange credibility to suggest that an intelligent person like Mr. Boeken, who I certainly have sympathy for, but it's strange credibility to suggest that he wasn't aware of the risks of smoking and somehow was misled about those risks.

WIAN: Now Ohlemeyer says Philip Morris will appeal the verdict. Salomon Smith Barney analyst Martin Feldman says it shows the tobacco industry has a lot of work to do in on its litigation strategy in the Western United States where it has lost several recent cases. And in an interview with one of the local TV affiliates just after the verdict was announced, one of the jurors said this was not about punishing Philip Morris, but it was about trying to sent the company a message -- Lou.

DOBBS: Well, with $3 billion dollars in a jury award that's certainly a very clear and loud message. Philip Morris, I presume, will appeal here?

WIAN: Absolutely. Their attorney said they will appeal and the judge -- they're also holding out hope that the judge in the case as other judges have done in other cases could reduce this verdict.

DOBBS: OK, Casey, thank you. Casey Wian reporting from Los Angeles.

On Wall Street today stocks pulled back after four straight sessions of wins. The Dow erased nearly all of yesterday's triple- digit gain, and all but eight Dow components ended the session lower. Financial stocks broadly lower after J. P. Morgan warned that revenue is declining.

And technology stocks were hurt by yet another warning from the world's second biggest computer maker Hewlett-Packard. Jan Hopkins reports from the New York Exchange.

(BEGIN VIDEOTAPE)

JAN HOPKINS, CNN CORRESPONDENT (voice-over): Voices from Silicon Valley to Wall Street to Washington made this much clear, investors may have to wait at least another quarter for an economic rebound. Hewlett Packard was the first to break the news, saying the slowdown in technology spending is spreading beyond the U.S. and Europe, and that it will need to cut costs further to meet its quarterly numbers.

HP's stock tumbled 4.5 percent, and J.P. Morgan Chase said it expects trading revenues for this quarter and the rest of the year to decline. Its shares sagged more than 3 percent. The Dow industrials followed both stocks lower, ending the day down 105 points at 11,070.

JOHN HUGHES, SHIELD & CO.: When we get these earnings for the second quarter, we probably won't see much improvement. But what you want to hear the companies really say is that business looks like it's bottomed here a little bit.

HOPKINS: No such optimism from Gillette. The stock lost more than 2 percent after the company drastically reduced its sales projections for the year, and said it would slash 600 more jobs. The Nasdaq composite drifted 15 points lower to 2,217, buoyed in part by Sun Microsystems after an analyst's positive comments on the company's prospects for recovery.

But the consensus is mounting that the majority of U.S. firms see no such evidence of a turnaround. That outlook was reinforced by Federal Reserve Governor Laurence Meyer, saying, quote, "There are no sign yet that the economy is strengthening relative to its first quarter performance and growth is likely to remain sluggish into the third quarter."

ART HOGAN, JEFFERIES & CO.: Our hope is the fourth quarter is the turnaround quarter, both the economy and earnings growth turns around in the fourth quarter. We're making a pretty big bet right now with the markets drifting higher off of the March lows. I think that that's probably the case.

(END VIDEOTAPE)

HOPKINS: That bet will be tested when Intel tells analyst what's going on in the business in the midst of the quarter. That call comes after the closing bell tomorrow. And, Lou, I should tell you that all week analysts have told me that there are bets on both sides. Some say that Intel stock is still too expensive and has to come down. Others say it is too cheap and even bad news will push the stock price higher. We'll see --Lou.

DOBBS: Jan, it sounds like they're making a market down there, taking both sides of that.

HOPKINS: Yeah, amazing, amazing, isn't it? We'll also have to see what happens with Philip Morris of course.

DOBBS: Right. Jan, thank you very much. Jan Hopkins from the New York Exchange tonight.

Another sign of some weakness in this economy: Sales at the electronics retailer Circuit City plunging 23 percent in the latest quarter. That sharp decline mainly because of weak personal computer sales, and the company's decision to stop selling major appliances. But it still says it will meet profit targets because of strong results at its Car Max used car business. Circuit City shares down just 14 cents on the day, but down still 70 percent from its 52-week high.

Shares of Wells Fargo are trading lower in after hours. The bank taking a $1.1 billion charge in the second quarter to write down bad investments. Nearly all of that relates to its venture capital portfolio, heavily exposed in the telecommunications and technology. Wells Fargo stock down nearly a dollar in after hours trading.

Next here: Trying to fix the way we all fly. After a year of record delays and huge passenger complaints, details of an ambitious new plan to reduce the pain of air travel. Also, just as Hewlett- Packard has been receiving some encouraging words from researchers, it is offering discouraging words for investors. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Overhauling the nation's air traffic control system: The Federal Aviation Administration today unveiled an $11 billion 10-year plan. That plan is meant to reduce airport delays and to give passengers a safer trip.

Tim O'Brien has our report from Washington.

(BEGIN VIDEOTAPE)

TIM O'BRIEN, CNN CORRESPONDENT (voice-over): Frequent flyers know the problem all too well.

UNIDENTIFIED FEMALE: I think it's impossible. I was delayed over a day at La Guardia.

O'BRIEN: The cancellations and delays so contagious that a single five-minute delay in Newark can hold up 250 other flights as far away as Minneapolis. The plan unveiled by the Federal Aviation Administration is aimed at making air travel faster and safer while allowing 30 percent more planes in the air. It has about 50 components, some of them already in development, such as a satellite- based global position system that will allow pilots to fly more direct routes, saving time and fuel. Pilots will be better-able to communicate with one another and with controllers on the ground via a high-speed form of e-mail, clearing radio communications for emergencies: a far cry from what we have today.

HERBERT ARMSTRONG, COLLEGE OF AERONAUTICS: We're basically operating our air traffic system on the same concept that was developed in the 1930s when air-mail flights started flying at night between bonfires.

O'BRIEN: To increase air travel capacity, the FAA wants planes to fly at higher altitude but closer together, separated by only a thousand feet of altitude rather than the current 2,000 feet. With the new technology, they say, safety will not be sacrificed.

And a critical aspect of the plan is the construction of new runways. Although often opposed by those who live near airports, analysts say without new runways the FAA's proposals are not likely to produce noticeable improvement.

(on camera): There is some skepticism anyway, particularly in light of the FAA's last big effort in innovation in 1994. It went nowhere, but cost taxpayers some $2 billion. So the agency was understandably low-key, promising only a new commitment to making air travel better.

Tim O'Brien, CNN Financial News, Reagan National Airport, Washington.

(END VIDEOTAPE)

DOBBS: Pfizer donating millions, tens of millions of dollars in the war against AIDS around the world. I'll be talking also with Energy Secretary Spencer Abraham about a worsening California energy nightmare. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Pfizer, which is donating $50 million worth of its anti- fungal drug Diflucan to South Africa, has decided to expand those donations to 50 other nations where some 12 million HIV and AIDS patients live. At the United Nations today, Pfizer CEO Hank McKinnell said the plan was developed with the blessing of the U.N. and World Health Organization.

Next on MONEYLINE, investors hoping for a smooth recovery in the technology sector hearing discouraging words from Hewlett-Packard. Can Intel paint a better picture tomorrow when it talks with analysts? We'll have a preview. And later, the criminal investigation of the financial affairs of a U.S. senator. We'll have a MONEYLINE special report. Stay with us.

(COMMERCIAL BREAK) DOBBS: Checking our top stories tonight, stocks finish in negative territory for the first time in four sessions: the Dow losing 105 points, the Nasdaq down just under 16 points. And a huge setback for Philip Morris: A jury in Los Angeles has ordered the tobacco giant to pay more than $3 billion to a 56-year-old cancer patient. The damage award is the largest-ever in an individual smoker case.

And Wells Fargo blaming losses in its venture capital unit for a $1.1 billion charge. The reason: telecom and technology exposure in that portfolio.

Also today, another warning from Hewlett-Packard. HP telling analysts that the slowdown in information technology spending, already afflicting this country and much of Europe, is spreading around the world. The stock today tumbled nearly 5 percent. It's lost nearly half its value over the past year. Steve Young has the report for us -- Steve.

STEVE YOUNG, CNN CORRESPONDENT: Lou, HP's chairman, president, and CEO was late to report a technology slowdown that was pulverizing their competitors. Now she's firmly in the front ranks.

(BEGIN VIDEOTAPE)

YOUNG (voice-over): There's no other word. HP's semiannual analyst meeting was a bummer. The company's chief executive said the technology spending slowdown is spreading from North America and Europe, to Africa and Asia, including, for the first time, China.

She warned HP's current sales in its third fiscal quarter which finishes at the end of next month could be worse than expected. Those expectations were already modest -- growth flat to down 5 percent from about $11.5 billion in the previous quarter.

CARLY FIORINA, CEO, HEWLETT-PACKARD: I don't have a crystal ball like anyone else. But we don't see near term signs of recovery.

YOUNG: To meet earnings expectations, the company has been delaying bonus payments and says in the second quarter it managed to save $145 million.

DON YOUNG, UBS WARBURG: Late last year, when they were in the same similar meeting, they were way too optimistic and disappointed investors. Now I think they're telling to it straight, and it's a recent expectation to expect the rest of the world to slow down.

RICHARD CHU, SG COWEN: They're certainly doing all the obvious things, which is controlling the cost and expense picture. It's going to be hard for any company, including HP, to expect to do much about the top line.

YOUNG: Ironically, Hewlett Packard's cautious words came as a research firm said the manufacturer had vaulted ahead of Compaq in the first quarter to lead in worldwide consumer desktop PC sales.

It also held onto its U.S. home desktop lead while Dell, despite waging a ferocious price war, dropped to fourth place. But Fiorina said she wouldn't wage price wars for the sake of market share and called PCs "nonstrategic to HP's business."

(END VIDEOTAPE)

YOUNG: With the stock falling more than 50 percent from its one- year high, individual investors may be getting impatient with Ms. Fiorina. But in tough times, analysts still seem willing to cut her some slack -- Lou.

DOBBS: She's describing a worldwide slowdown for her particular business, any suggestion as, what's going to drive the business forward if PC sales are not strategic for Hewlett-Packard?

YOUNG: Well, she said, solutions (UNINTELLIGIBLE). Of course, Mr. Gerstner at IBM has known that for some time.

DOBBS: We've heard that from a number of companies since IBM adopted that strategy. Great, thank you Steve. Steve Young.

HP is not alone in this mid-term phenomenon, as it's being called. Intel will release its first mid quarter update tomorrow. And in an unrelenting environment for chip-makers, the news isn't likely to be upbeat. The influential Dan Niles of Lehman Brothers says Intel will lower its revenue guidance.

And while Niles expects Intel to promise a second half recovery, he says there's no getting around the fact that things are getting worse, not better. Ahead of that report, Intel shares are basically flat.

Late-breaking news from Broadcom. The communications chipmaker warning revenues this quarter will be as much as 35 percent below last quarter. Prior to that announcement, Broadcom said it was expecting a decline of about 20 percent. Broadcom said it will also launch a full fledge restructuring after two years of acquisitions, that will result in job cuts, though there is no indication of how many.

Some of today's biggest market movers: Priceline.com up 30 percent after a vote of confidence. Two companies controlled by Hong Kong billionaire Li Ka-shing buying another 25 million shares of Priceline from founder Jay Walker. Li Ka-shing now controls 30 percent of priceline shares.

Lab testing firm Unilab up nearly 45 percent in its market debut, raising just over $107 million. June is slated to be the busiest month so far this year for IPO's, and includes the largest U.S. offering in history, the $8 billion IPO of Kraft Foods.

And Citrix Systems up more than $4 on news that the sales this quarter are growing faster than had been expected. Citrix shares have gained 24 percent on the year.

Coming up on MONEYLINE, oil refineries protesting rolling blackouts in California. We'll hear how they're fighting back from Valero Energy's chairman and CEO. And what's the White House doing to help with California's crisis? I'll be asking Energy Secretary Spencer Abraham.

And later, Senator Robert Torricelli in the fight of his political life, a MONEYLINE special report.

(COMMERCIAL BREAK)

DOBBS: As concerns mount over the nation's energy supply, we're going to be taking a very special look every night on this broadcast on energy in a new segment, "Powering America." And the most critical part of the country by far: California.

Just today, the new Senate Energy Committee Chairman Jeff Bingaman said the Bush administration needs to impose price caps on electricity in California, something the president of course has flatly rejected.

Joining me now from Washington D.C., the man is charge of energy policy and the Energy Department: Energy Secretary Spencer Abraham.

Mr. Secretary, good to have you with us.

SPENCER ABRAHAM, ENERGY SECRETARY: Lou, thank you. Good to be with you.

DOBBS: Price controls, any change in the administration's viewpoint?

ABRAHAM: No, because we think putting price controls would be the worst step we can take in California. We think it would make the blackouts that's already a problem much worst, last well in the future, discourage in investment in the new generation.

And frankly, we can only cap a portion of the California energy market. If we only cap half the market, which is one of the problems they've had in the past, I think it will only make matters much worse.

DOBBS: Has Governor Gray Davis' position with the administration made matters in fact worse? I know everyone has said there's nothing personal, but it sounds awfully personal. Is it really coloring the outcome between the relationship between the administration and Governor Gray Davis?

ABRAHAM: No, and in fact, the very first official call I made as secretary was to Gray Davis back then. Since then, we've responded to a variety of requests which California has made for extending emergency orders to make sure they had electricity and natural gas, to working to impose conservation methods on our federal facilities in our state, to reduce our use of energy.

And we'll continue to work with the state. But the one thing we won't do is make the blackouts worse. And price caps in our judgment would only worsen the issue. And that issue with the governor we have a disagreement. DOBBS: Another huge disagreement boiling up, as if there weren't enough disagreements: the CEO of Chevron has sent a letter to the governor, saying in fact they may have to shut down gasoline refineries because of the impact of those rolling blackouts. What do you think of that?

ABRAHAM: Well, there's no question if a blackout hits a refinery, I happen to yesterday be visiting the last refinery built in America in Louisiana. And I asked about this, that it would have a very significant both safety implication as well as, obviously, an impact on supply, which would cause prices in the market to surge by such refinery to go up probably very substantially.

I don't know what California's choice is. Because when these blackouts hit, they're going to exempt some entities. If they don't exempt refineries, what do they exempt? I just don't know that.

It once again, I think, attests to the fact that if we make the blackouts worse, which price controls would do, then more and more impact will be felt and it could be for the worse in a variety of ways.

DOBBS: If more oil companies and energy companies react to the prospect of these rolling blackouts -- you asked the question what could be done? -- and that is to give them an exception as is being done with fire departments, police departments and hospitals of course. If that's not done, and these oil companies are forced to cut back and shut down production, then there will be a further exacerbation of the problems with gasoline supplies as well as energy itself. Is the administration going to take any action here?

ABRAHAM: Again, we don't know yet what the actions are. If you exempt refineries, I don't know what that means. You have to include in the black outs. California has got to make that assessment. I don't know what the ripple effect will be, the alternative.

But we do know what the impact would be if refineries are not exempt, and it will be higher gasoline prices, and potentially some implications with regard to safety.

DOBBS: Just what California needs, more problems. Mr. Secretary, we thank you very much for being with us on MONEYLINE.

ABRAHAM: Lou, look forward to doing this again. Thank you.

Well, the California energy crisis has businesses, lots of businesses worried, and some are fighting back. Oil refiners Chevron and Valero Energy have threatened to produce less gasoline if they're not exempted from this summer's rolling blackouts, simply because they could not produce it. The threat is particularly potent. Californians -- Californians are already paying some of this country's highest prices at the pump.

Joining me tonight from San Antonio is Valero's chairman and chief executive officer, William Greehey.

Bill, good to have you with us.

WILLIAM GREEHEY, CHAIRMAN & CEO, VALERO ENERGY: Thank you, Lou.

DOBBS: Bill, the action by Chevron, the suggestion that refineries are going to have to be shut down, why is that?

GREEHEY: Well, before refineries were exempted, and just recently the public utility commission said that we would now be subject to the rolling blackouts. Well, when you shut down a refinery, it takes hours to get a refinery ready to shut down and then it takes days to get the refinery back in service. So you lose a lot of production, plus there's a lot of start-up problems.

And so what Chevron has elected to do is if there's going to be rolling blackouts, they do have co-generation and they will cut back their production so that their co-generation can take care of their power demands.

DOBBS: Hold on. To many people watching what is happening in California, it just -- it simply does not make a lot of sense, because, as I understand it, until January there was an exemption for the refineries. Is that correct?

GREEHEY: You know, there has always been an exemption. For example, in January what happened was the product pipelines that moved 80 percent of the product from our pipeline to market were being curtailed 12 hours at a time. And all of the sudden, we could not have enough storage. So we were in danger of shutting down our refinery because we couldn't move it through the pipelines. The public utility commission then immediately took action and went from a 12-hour curtailment to a two-hour curtailment.

Well, now we have the capacity to move the products out of the refinery, but then they put us now in the rolling blackout. And again, if they think they have an electric crisis in California, they're going to have a transportation fuel crisis in January. They almost ran out of jet fuel in L.A., San Francisco, and we did run out of gasoline in Southern California at a number of our terminals.

DOBBS: Well, for people who -- and I should point this out -- you produce just about 10 percent of the gasoline in California. Is that correct?

GREEHEY: That is correct.

DOBBS: Now, what is the governor, what is the California Public Utility Commission, what are those agencies and those people in charge saying they're going to do about this? What has been their response?

GREEHEY: Well, the public utility commission said you can file for an exemption, which we did. But they're also saying that they have until August 3rd to respond. Well, obviously August 3rd is going to be too late.

As far as what's happening at the state legislature, the assembly did pass a bill putting refineries on a top priority but the Senate has not acted upon it. Now the California Energy Commission has recommended very strongly that refineries not be part of the rolling blackouts.

DOBBS: Will Greehey, we thank you for taking the time to bring us up-to-date at least with your perspective on what is happening in California. And obviously, like everyone else, we hope it all gets worked out to the benefit for the Californians as well.

Thank you, Bill Greehey of Valero Energy.

GREEHEY: Thank you.

DOBBS: Well, coming up, news that has oil companies grumbling and consumers celebrating. That story is next. Stay with us.

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DOBBS: Oil in our "Sectors Report": Prices at the pump may finally be heading lower. Data from the American Petroleum Institute and the Department of Energy show surprisingly high inventories of both gasoline and crude oil. As one analyst optimistically quipped, "The shortage is over: There's plenty of gasoline out there." Although drivers won't see price changes for perhaps another few weeks, crude oil prices have reacted immediately, down 52 cents, settling today at $27.72 a barrel.

The oil companies also lower, their shares dropping a dollar or more on fears those record profits may be history. We'll see.

Coming up next, a MONEYLINE investigation: Senator Robert Torricelli and his controversial relationship with a campaign donor.

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SEN. ROBERT TORRICELLI (D), NEW JERSEY: David Chang was my friend. We were friends for several years.

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DOBBS: The senator, the target of a federal investigation. We'll have a MONEYLINE special report.

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DOBBS: Now a MONEYLINE special report: Senator Robert Torricelli of New Jersey. His attorneys today asked the Justice Department to appoint a special prosecutor to take over the criminal investigation into his finances and campaign activities. A federal grand jury has been investigating him for more than a year. And the senator is fighting vigorously, of course, to avoid possible prosecution.

Allan Dodds Frank reports.

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ALLAN DODDS FRANK, CNN CORRESPONDENT (voice-over): Early last April, the FBI took the unusual step of searching the residence of a sitting U.S. senator, the home of New Jersey Democrat Robert Torricelli. The agents went to Torricelli's house looking for evidence, including gifts that could link him to a mysterious Korean businessman, David Chang.

Prosecutors running the grand jury want to know whether Chang improperly influenced the senator's conduct in office. The 57-year- old Chang had been a close friend of Torricelli and a significant contributor to the senator's 1996 campaign.

That campaign was notable for allegations raised by Torricelli's opponent, Republican Dick Zimmer.

LARRY WEITZNER, MEDIA DIRECTOR, ZIMMER CAMPAIGN: We raised a lot of issues about his personal finances, about his campaign finances. And unfortunately, in the campaign, the issues weren't fully explored, I thought, by the press, because they were legitimate, and that's the reason he's being investigated today.

FRANK: The investigation picked up speed after Chang pleaded guilty last year to funneling $53,700 illegally to Torricelli's 1996 Senate campaign and to obstructing justice by tampering with a witness.

LARRY NOBLE, CENTER FOR RESPONSIVE POLITICS: The question then is, did Mr. Torricelli know about that? Did he knowingly accept illegal contributions? If he knew about that, then he has committed a crime.

FRANK: Now, Chang, as a cooperating witness, is pointing Justice Department prosecutors toward Torricelli.

TORRICELLI: David Chang was my friend. We were friends for several years.

FRANK: But Torricelli now is attacking Chang, calling him a liar.

TORRICELLI: I believed David's representations. Now we know that everything about his life -- from his marriage, addresses, places and dates of birth, and businesses -- were complete fabrications. Indeed, none of us really know who David Chang really is.

FRANK: Letters filed by prosecutors last year damaged Chang's credibility, accusing him of destroying documents, lying and obstructing justice. But rather than face a decade in prison, Chang is detailing for investigators gifts worth more than $20,000 he says he gave Torricelli. They include: Rolex and Concord watches from this Fort Lee jeweler, Italian-designed silk suits from this tailor shop, cufflinks and a watch from Tiffany's, an oriental rug, a 52-inch color television and a compact stereo from this appliance dealer, and jewelry for a former girlfriend.

A grand jury is examining whether the senator took gifts and campaign contributions illegally, and was influenced by Chang in his official conduct. The senator, who was a Congressman when he first met Chang, said in an open letter to New Jersey -- quote -- "Perhaps I have earned some political enemies, but I have done nothing to betray the trust of the people of New Jersey."

But the senator has not denied receiving gifts from Chang, a businessman with an unusual specialty.

(on camera): Chang operated from this building in Englewood Cliffs, New Jersey. He specialized in international business and tried to sell commodities, including grain and medical supplies, to countries hostile to the United States.

(voice-over): By 1995, Chang claimed North Korea owed him $71 million for grain shipments. First as a Congressman, then as a senator, Torricelli stepped in. He wrote letters and arranged meetings for Chang at the State Department in an attempt to get access to frozen North Korean accounts in U.S. banks. State Department records show the senator, accompanied by Chang, visited top officials in South and North Korea in 1999.

Torricelli asked the U.S. embassy in Seoul to arrange a meeting with South Korea's finance minister to discuss the economy, according to government officials. But Torricelli took Chang along to outline an offer to buy Korea life insurance for $1.5 billion. Stephen Bosworth, then the U.S. ambassador, has told Justice Department prosecutors he considered the senator's visit "inappropriate." Bosworth later apologized to the Korean officials for the senator's visit. Torricelli's office says the senator was simply providing constituent service.

But Former New Jersey Democratic Senator Frank Lautenberg, who also wrote a letter on Chang's behalf, is puzzled by Torricelli's trip.

(on camera): Is that a normal constituent service?

FRANK LAUTENBERG (D), FORMER U.S. SENATOR: It's unusual.

FRANK: Unusual? That's all you would call it?

LAUTENBERG: Well, I'm not one of the prosecutors or the investigators, and I don't have first-hand knowledge. But one doesn't have to be a United States senator to think that it's unusual.

FRANK (voice-over): Lautenberg, though a fellow New Jersey Democrat, admits his relationship with Torricelli is "frosty." But the senator's defense attorneys may have to confront former Torricelli staffers and fund-raisers who are now cooperating with the government.

Alan Dodds Frank, CNN Financial News, Bergen County, New Jersey.

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DOBBS: Senator Torricelli has declined our repeated requests to speak with him. As we mentioned, attorneys for the senator today asked the Justice Department to appoint a special counsel. And that move could delay any potential indictment for several months. Coming up next, some final thoughts on the day, plus "Ahead of the Curve." Stay with us.

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DOBBS: Tomorrow morning President Bush is expected to sign the $1.3 trillion tax package in Washington, D.C.

And Great Britain's general elections will be held. Many expect Tony Blair's and the Labour Party to win in a landslide.

Also, Intel holds its mid-quarter analyst call tomorrow, and National Semiconductor will report its quarterly earnings.

Earnings warnings today slowed yesterday's euphoria. It was just yesterday that some analysts were talking about the worst is behind us. It may be, but making daily determinations of our collective fiscal fate is neither likely to be accurate, nor good for our collective peace of mind. There should be considerable comfort, however, in the fact that the economy continues to move ahead -- not at a vigorous pace, nor at a pace of a year ago -- and the markets continue to defy broad generalities and forecasts, as does the economy. Now, that's actually comforting, and so is the fact that there was a change of power in Washington today, and for all the world, the world looks very much the same: still bright, still brimming with possibility, even with an uncertain market.

Last night, we invited you to send your comments to us here at MONEYLINE. I'd like to share some of those comments we received from you.

Matt, asking: "When are we going to have the greatest CEO of the 21st century on your show?" He's referring to Boeing's chief executive officer, Phil Condit. Matt, going on to ask: "What other CEO has managed to alienate his entire work force... irritate and disgust longtime shareholders?" with a cross-country move of its corporate headquarters.

Well, Matt, shareholders just might not agree with you. Shares of Boeing are trading above $66, near a 52-week high. And of course, we have invited Mr. Condit to join us here on MONEYLINE soon.

James wrote about our report on nuclear power. Quote -- "I was astonished you didn't comment on the period of time that wastes have had to be stored and monitored." A period of 10,000 years. Well, James also reminds me to ask the hard questions about nuclear power, and I assure you, we are doing exactly that.

And finally, Karen's only comment was -- quote -- "I am glad Lou Dobbs is back!! Now, if only my portfolio would come back."

Our address is moneyline@cnn.com. We look forward to hearing from you.

Thanks for joining us tonight. That is MONEYLINE. "CROSSFIRE" is coming up next, and here is Bill Press -- Bill? BILL PRESS, HOST, "CROSSFIRE": Thank you, Lou. I want my portfolio to come back, too, and you're in charge.

DOBBS: Yes, sir.

PRESS: Tonight our show: The countdown resumed for Timothy McVeigh today when a federal judge refused to give his lawyers any more time to study those new documents found by the FBI. So is this the end of the road for the Oklahoma City bomber or does he deserve a new trial? Justice or rush to execution, next on "CROSSFIRE."

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