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Lou Dobbs Moneyline
Dow Plummets 382.92 to 8,376.21; Nasdaq Declines 56.87 to 1,470.93
Aired September 20, 2001 - 18:00 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: Good evening, everyone. President Bush will address the nation tonight at 9:00 Eastern time. He will be outlining his response to last week's terrorist attacks. Tonight, we will look at the fallout from those attacks on our economy, the markets and, of course, on you.
We'll begin with Wall Street, where stocks plunged once again, investors concerned about rising layoffs and shrinking profit. The Dow Jones industrials today, falling 382 points, For a loss this week of 12 percent. The Nasdaq dropping 56 points, and the S&P 500 closing below the 1,000 mark for the first time in three years.
The markets today losing more than $300 billion of value, and the nation's airlines have been hard hit. Several industry leaders warning Washington that they are in danger of simply going out of business. We'll have the latest report for you. The attacks also hitting companies like FedEx and MetLife. The chief executive officers of both companies join us tonight to talk about the damage and the prospects.
And we'll continue to follow the money trail of Osama bin Laden. Did he make a stock market profit on those attacks? Were those terrorists financed by so-called legitimate sources? The answers may well surprise you.
Here are the latest developments in America's new war tonight. The number of people missing and presumed dead in the World Trade Center attack now stands at 6,333. No survivors have been found now in more than a week. President Bush will address a joint session of Congress tonight to inform lawmakers and the nation of his plans to fight terrorism. Meanwhile, the flurry of diplomatic activity to garner international support for combating terrorism goes on.
British Prime Minister Tony Blair will meet with the president this evening. Secretary of State Colin Powell met with Saudi Arabia's and Belgium's foreign ministers as well, as EU officials today. Powell says the United States and the European Union have agreed to closer law enforcement cooperation and stronger aviation security measures.
Secretary of Defense Donald Rumsfeld today confirmed he signed deployment orders for American military forces, the defense secretary warning that the war on terrorism will be very, very different from previous wars, and will require a new vocabulary.
(BEGIN VIDEO CLIP)
COLIN POWELL, SECRETARY OF STATE: It is a marathon, it's not a sprint. It is not something that is easy -- it's difficult, and it will certainly require the patience of all of us. And it also will require a lot of international support. And fortunately, that's coming.
(END VIDEO CLIP)
DOBBS: And Senate Majority Leader Tom Daschle led a 38-member delegation of mostly senators to New York City to tour the World Trade Center wreckage and to offer their support for the families of the victims.
With today's 382-point plunge, the Dow has dropped now more than 12 percent over four sessions, putting the average on track for the worst one-week point loss ever.
Christine Romans joins us now from the New York Stock Exchange -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, by all accounts, a very tough day and a very tough week on Wall Street. Take a look at the Dow Jones Industrial Average today. It closed near its worst levels of the session, down 382 points and below the 8,400 level. Stocks this week have been plunging. The Dow Industrial is down almost 13 percent. The S&P 500 down 10 percent, Russell 2000 down 12, and the Dow Transports losing almost a quarter of their value in just these four trading sessions.
More than 540 issues at new 52-week lows, or multi-year lows. Among those Big Board losers again today: Boeing, United Airlines, United Technologies and Walt Disney. Not even Alan Greenspan could get the mood any better here on Wall Street here today, and a lot of traders are talking about so-called triple witching tomorrow -- that's options expiration, could get hairy.
DOBBS: Christine, thank you very much. Christine Romans from the New York Exchange.
Well, today Walt Disney shares hurt when 135 million shares were dumped on the market. Reportedly, the shares of the 6 percent interest in Disney held by Sid Bass, the investor, and Disney buying up 50 million of those shares. Goldman Sachs, apparently, the rest of the shares. Disney already hurt by the terrorist attacks last week, its ABC television network losing advertising revenue on coverage. Its movie unit has put a CIA film that focuses on a terrorist attack on New York on hold indefinitely. Its theme parks are freezing hiring because of a drop in tourism.
Well, the Nasdaq falling 56 points today. It is now at a new three-year low. Greg Clarkin from the Nasdaq marketsite -- Greg.
GREG CLARKIN, CNN CORRESPONDENT: Now, Lou, it's a very disappointing session on a number of levels to traders. You may recall yesterday we had that late rally that really saved the session. Well, today, no follow-through whatsoever. What we saw was just kind of wave after wave of selling, driving the Nasdaq down 56 points to 1,470. That's a 3.7 percent loss.
Now, most of the sectors were hit pretty hard today. If you take a look at the Philadelphia Semiconductor Index, the chip down 6.2 percent, Intel alone was down 7.2 percent. Goldman's hardware index, down 4.6 percent, Sun Microsystems off almost 7 percent. Goldman's Internet index down sharply, Goldman's software index also sharply lower, 3.3 percent.
So, Lou, really, no sector escaping the selling today, and again, the Nasdaq down about 13 percent in those four trading days this week -- Lou.
DOBBS: All right, Greg, thank you. Greg Clarkin.
Federal Reserve Chairman Alan Greenspan today confirmed to Congress that the economy will clearly suffer from the terrorist attacks last week. But the Fed chairman said the damage is short term, and long term prospects remain bright.
Tim O'Brien with the story from Washington.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT (voice-over): Fed Chairman Alan Greenspan called it a strike at the roots of our free society. He expressed confidence the country will recover, but also cautioned about moving too quickly to make policy judgments about the damage.
ALAN GREENSPAN, CHAIRMAN, FEDERAL RESERVE BOARD: While there is an obvious, very strongly desired sense to move rapidly, that it's more important to be right than quick.
O'BRIEN: Greenspan said it may take 10 days to two weeks to identify any serious damage to country's economic infrastructure. He noted that commerce all but came to a standstill with the grounding of domestic airlines.
GREENSPAN: There's a structure of this economy which rests on air travel, which is important that we bring back as quickly as possible.
O'BRIEN: Treasury Secretary Paul O'Neill said Congressional leaders and the White House are united in working out a bipartisan economic stimulus package, which is likely to include both increased spending and cuts in taxes.
UNIDENTIFIED MALE: Does that mean that that's a yes, as far as the administration is, as far as the administration is considering capital gains taxes relief?
PAUL O'NEILL, TREASURY SECRETARY: We're looking at every single one of the things that you mentioned as possible things that one might do.
O'BRIEN: And O'Neill expressed pride in how the markets performed when they reopened on Monday.
O'NEILL: If I had known on Monday morning that we would have the largest day of trading in the New York Stock Exchange, as measured by volume, that we ever had, I would have had a bigger lump in my throat than I already did.
(END VIDEOTAPE)
O'BRIEN: Fed Chairman Greenspan also said the spontaneous and almost universal support the United States has received could set the stage for a new round multilateral trade negotiations. And that, he said, could enhance world economic growth, the U.S. economy, and perhaps send a message about the futility of terrorism -- Lou?
DOBBS: That message, apparently, to be delivered in a variety of ways. Tim, thank you very much. Tim O'Brien from Washington.
The White House today urged Congress to quickly approve a $5 billion cash infusion for the nation's airlines. Transportation Secretary Norman Mineta warned if Washington's Reagan National Airport is not reopened within 10 days, a major airline would, in his words, "go under."
Kitty Pilgrim reports.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): The White House and the House of Representatives have reached an agreement on the emergency assistance package for the airlines. First of all, the airlines will receive the $5 billion cash payment they were asking for, and an additional $10 billion in loan guarantees. The government will insure claims against what it calls "Acts of War" for 180 days, and limit the liability of American and United Airlines to passenger and crew of the airlines only, and not the victims on the ground.
REP. JAMES OBERSTAR (D), MINNESOTA: The front line of attack of the terrorist was the U.S. airlines, the target was the United States. They hit the airlines. They have suffered the most, driving passengers away.
PILGRIM: The airlines are doing all they can to cut costs. American and TWA say they will not have food service on flights under two hours. Airlines are also cutting back on workers. So far, 65,000 layoffs directly related to the airline terrorist attacks.
During the trading day, stocks sold off heavily as passengers continued to shun flying.
UNIDENTIFIED MALE: We think that the public will begin to fly again once they begin to feel more and more comfortable that airline safety is not an issue. So from that standpoint, it is very critical to implement safety measures as soon as possible. PILGRIM: The House could take up the airline emergency assistance bill as early as Friday. Now, the help can't come soon enough. Airline industry executives have emphasized the industry runs on very thin cash cushion, and the major carriers could be out of money in a matter of weeks -- Lou?
DOBBS: Kitty, thank you very much.
Well, business at FedEx badly hurt by last week's attacks. The chairman and CEO of the company, Fred Smith, says he will try to avoid laying off employees. But even before last week, FedEx was feeling the effects of a slowing economy. FedEx' earnings down more than 30 percent.
Fred Smith joins us now from our studios in Washington, D.C. Fred, good to have you with us.
FREDERICK SMITH, CHAIRMAN & CEO, FEDEX: Nice to be here, Lou.
DOBBS: Fred, your quarterly results coming in are a little lower, I know, than you would want. But still, even though declining by more than 30 percent, beating Wall Street expectations. Assess, if you will, the damage to your company, specifically, from last week's events.
SMITH: Well, we had a major issue with our express company, which is the world's largest all-cargo carrier, when the government appropriately shut the air transportation system down. That is not anything close to the problem for us that it is for the passenger airline business on a go-forward basis, but it's' still not clear exactly what our traffic levels at FedEx Express are going to be. Our other major companies, FedEx ground and FedEx freight, traffic levels popped back up to pre-event levels. But we're just a little unclear about the future at this point.
DOBBS: Visibility a problem for you, and you certainly are not alone, as a CEO who is having some difficulty finding visibility here, irrespective of the industry. In addition to the lowing economy and other issues confronting your company, what are the effects? I would imagine your pilots, many of them would be in the reserves, with the call-up of reserves and the potential engagements that we're led to expect from Washington, what would be the effect on your company?
SMITH: Well, FedEx Express has the largest single component of the civil reserve air fleet cargo aircraft available to the government. In Desert Shield and Desert Storm, we flew about 30 percent of the tonnage. If we are mobilized, there are three stages. They can go up to over 100 of our wide-body airplanes, but we're compensated for that.
I think, at the moment, with traffic levels down in the commercial sector, that would not be a negative issue for us.
DOBBS: Not a negative issue -- have there been discussions at this point, in terms of the deployment that we are seeing ordered up -- have you been told to get ready? SMITH: Well, our discussions with the Defense Department, of course, we don't comment on, but we're ready to be mobilized under the craft program whenver the government tells us.
DOBBS: Well, Fred, I know that you're disappointed in the results, but have to be pleased that you at least beat Wall Street expectations. And we hope you find greater visibility soon, perhaps everyone will. Fred, thanks. Fred Smith.
SMITH: Thank you.
DOBBS: CEO of FedEx.
Coming up next here on MONEYLINE, we will follow the terrorist money trail. And will it lead back to Osama bin Laden? We'll take a look next. Also, the insurance industry facing billions of dollars in claims. We will assess the damage with the chief executive officer of MetLife. Stay with us.
(COMMERCIAL BREAK)
DOBBS: The destruction at the World Trade Center is expected to cost the insurance city, by the most recent estimates, up the $30 billion. Life insurers estimate they'll settle around $4 billion in claims. Most, including MetLife, say they will not use active war clauses to avoid settlement. And MetLife expects to pay out as much as $300 million.
MetLife's chairman and chief executive officer, Bob Benmosche, joins us now. Bob, good to have you with us.
ROBERT BENMOSCHE, CHAIRMAN & CEO, METLIFE: Thank you, Lou.
DOBBS: I know that your own company did not escape the effects of this terrorist attack. Two employees missing, as I understand it.
BENMOSCHE: Yes. We're very saddened by that, and I think the -- not only with the two employees missing, but those who survived are feeling a lot of pain. And so there's an enormous amount of suffering for everybody.
DOBBS: Did that play a role in your decision not to advance the Act of War Waivers that might be asserted by some companies?
BENMOSCHE: No, our company history, our tradition, who we are, for 133 years, two World Wars and so on, we need to maintain that tradition of being here for people in this country.
DOBBS: This tragedy -- the effects just keep rolling on, it seems, and manifesting themselves in all sorts of ways. But in terms of your company, an estimated $300 million in liability?
BENMOSCHE: Three-hundred million after taxes. So we expect to pay out about 450 million in benefits to people.
DOBBS: And what will be the impact on your bottom line? BENMOSCHE: There will be an impact in the third quarter, but this is not material, from the financial point of view, for our company. It really is the emotional crisis that we have to go through. Because, remember, we're going to have to pay the benefits to people, talk with people and help them through this. So that's the hard part.
DOBBS: And in terms of the reinsurance aspect of this, where do you stand there?
BENMOSCHE: On the individual side, we have some reinsurance, but on the group business, remember, we're the largest life insurance company, and we have enormous expertise. So there's no reinsurer who could take on the business for us. That's our skill, and so that's not reinsured.
DOBBS: Warren Buffett is among those who has said that these estimates on liability here, being advanced -- not, certainly, on your account, but by all of the insurance companies, whether they be in in- line, property casualty or reinsurance, are just simply too low. How do you react to that?
BENMOSCHE: I can't react to the property and casualty site, because we're not in that commercial line. But I can tell you that each carrier has to begin to assess the follow on damage. So, for example, one of things we worry about is disability. We're a disability carrier. This will have enormous psychological impact on people -- stress, stress-related illnesses will start to occur. And that's the hard part, to assess what's going to happen with that.
DOBBS: OK. Bob, thanks for being with us here.
BENMOSCHE: Pleasure to be here.
DOBBS: Appreciate it. Well, as the hunt for Osama bin Laden intensifies, investigators are now launching an aggressive effort to uncover money laundering networks around the world. The federal government has asked Congress for new laws to make it easier to do just that, and is pressuring other countries for their full cooperation.
Allan Dodds Frank has the latest.
(BEGIN VIDEOTAPE)
ALLAN DODDS FRANK, CNN CORRESPONDENT (voice-over): In the dusty bazaars of Pakistan and Afghanistan begins the money trail that links Osama bin Laden to the outside world. Sometimes it's cash, moving through underground networks that do not leave paper trails.
Other times, money moves through legitimate businesses, shell companies and banks, zipping around the globe in wire transfers through western capitals and offshore money-laundering havens. That makes Osama bin Laden's network of funding a major challenge to investigators. JIMMY GURULE, TREASURY UNDER SECRETARY: Clearly, I would suspect what we're talking about, at a minimum, is in the millions, in the millions of dollars, to underwrite just the expenses related to this operation.
FRANK: The United States promises extraordinary pressure on countries currently blacklisted for money laundering. Panama, the Cayman Islands and two other havens just taken off the list have promised to open their records. But six others have just been added.
There's also a new twist in the investigation, a possible scheme to profit by betting that certain insurance and airline stocks would be hurt by the September 11th attack.
On Capitol Hill, officials cautioned about jumping to conclusions.
PAUL O'NEILL, TREASURY SECRETARY: These are very sophisticated things. You find, in many cases, that you have got to go through 10 veils before you get to a real source, so this is tedious, complex work. Believe me, we are pursuing it.
FRANK: Unraveling the trades could provide critical clues to terrorist funding.
WILLIAM MCLUCAS, FORMER SEC ENFORCEMENT CHIEF: Who was behind the trading? Where did the money come from? Where did the proceeds of any profits go?
FRANK: In financial capitals around the world, tracking Osama bin Laden and his money, from the sidewalks, through cyberspace, is becoming the biggest detective story ever.
Allan Dodds Frank, CNN Financial News, New York.
(END VIDEOTAPE)
DOBBS: Coming up next on MONEYLINE, we'll have the latest for you on the World Trade Center investigation. That, when MONEYLINE continues. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Now for the latest developments: The number of missing and presumed dead in the World Trade Center attack now stands at 6,333. The Federal Aviation Administration has placed a temporary ban on flights near professional and collegiate sporting events over this weekend. President Bush will deliver a very direct message to Afghanistan's ruling Taliban when he addresses Congress and the nation this evening. A man linked to Osama bin Laden and wanted in connection with last week's terrorist attacks, arrested outside Chicago today.
MONEYLINE will continue in just one moment.
(COMMERCIAL BREAK) DOBBS: Alan Greenspan, as we said, and others, including Treasury Secretary Paul O'Neill, testifying on Congress, assessing the economy, its damage and its prospects.
Kathleen Hays is here now -- Kathleen.
KATHLEEN HAYS, CNN CORRESPONDENT: As you know, Lou, frequently, some of the most interesting things in these testimonies comes in the question and answer period. And today Mr. Greenspan was asked quite pointedly by one of the senators about U.S. energy policy -- do we need one? He said we certainly do.
He pointed to a number of factors. You know that our infrastructure is clearly in difficulty, both for electricity and natural gas. He noted that the technology usage from the Internet, telecom, big energy users, and he noted that these especially are draining natural gas reserves. He also said that to maintain adequate supply, we're going to have to drill more, possibly in environmentally sensitive areas, or impart more. His message here: the time to act is now.
(BEGIN VIDEO CLIP)
GREENSPAN: If we only address long term energy infrastructure problems three weeks before we need an answer, we're never going to get there. At the moment the demand for power is pretty soft because the economy is soft. That is going to change.
(END VIDEO CLIP)
HAYS: Remember, earlier this year it was the big spike up in energy prices that helped start pushing the economy over the cliff, which we seem to be facing now. So this is a very important issue, obviously one that's on the chairman's mind.
DOBBS: He's got enough to occupy his mind, as well. The fact is, we have seen energy prices, I think most people would be surprised. We've seen in terms of crude oil, no remarkable run up. In terms of gasoline prices, holding steady.
HAYS: Isn't it amazing? Of course, part of that is that the U.S. asked OPEC if they would reverse the cut that they wanted to put in place, and they seemed amenable to that. And also, sadly, it's one of those ironies of how the economy works. A soft global economy, possibly in recession, a lot of people say it is -- the risk of a global recession means less demand for all these energy sources.
DOBBS: And it is helpful in, not only geopolitical, military terms, but also, certainly in economic terms, that the Saudi foreign minister today said that they are 100 percent with the United States.
HAYS: Absolutely.
DOBBS: Kathleen, thank you. Kathleen Hays.
Well, Douglas Cliggott believes Tuesday's horrific events of a week ago will affect earnings in this economy significantly over the next perhaps six months, and that has prompted him to lower his S&P 500 outlook for 2002. Doug joins us now.
Doug, how should we assess what is happening in this market? We are looking at the Dow, down 13 percent since the terrorist attacks. The Nasdaq, down sharply, all of the major indexes. Declining issues swamping advancers. We're looking at new lows and very few, if any, new highs. How should we assess this market?
DOUGLAS CLIGGOTT, J.P. MORGAN: Well, I think there's two things to keep in mind. One, even before last week's horrible events, earnings were under dramatic pressure. And in the framework we use to look at stocks, stocks were looking very expensive two weeks ago, with what we think is now under way and pushing earnings even further down.
And I think more importantly, the earnings recovery next year is probably going to be a pretty sluggish one. We've basically got two words related to U.S. equity market, and that's be careful.
DOBBS: Be careful. Is there -- well, after watching what we have just in these four sessions this week, I think every investor is ready to take your words to heart. But no matter what these numbers are, what would be your best counsel, in addition to being careful? Should investors be looking for buying opportunities in this?
CLIGGOTT: Depends on who you are and where you are, Lou. If you're young and don't have much exposure to stocks, these is an excellent time to start building exposure to the U.S. equity market. If you're not young and you have a lot of exposure to U.S. stocks, I would be reducing exposure now.
DOBBS: Give us your best judgment about what the S&P will do next year.
CLIGGOTT: Well, it depends on where we bottom out. We have a published target of 900 for the end of this year.
DOBBS: Right.
CLIGGOTT: It looks like we may get there pretty quickly. Our target for the end of next year is 1100, but what we need the hit that 1100, we need a bit of a bond rally, because lower bond yields give you higher stock prices, and we need an earnings recovery. And so we think the earnings recovery is a second half of '02 event.
DOBBS: Second half.
CLIGGOTT: Second have. And so I think we will be cautious, we will be patient. If you are in a position, if you don't own much equities now, buy it gradually. I think the worst thing we could do is invest based on a view that the market is going to come roaring back after one or two special events in the next three months.
DOBBS: Doug, I know you don't do this. As we watch this volatility and these sharp declines this week, give us a short-term view. What do you see this market actually in your mind doing over the next few days?
CLIGGOTT: I don't know, and I'm very being honest. And I think one of the great uncertainties here is a lot of the selling appears to be emanating from abroad.
DOBBS: Doug, thank you very much.
Word tonight in the energy business, Duke Energy expanding its position in the North American natural gas. It's buying West Coast Energy, it's an $8 billion deal, including debt.
President Bush and British Prime Minister Tony Blair are expected to hold a joint news conference shortly. CNN, of course, will be bringing you live coverage. For tonight, that is MONEYLINE. Thanks for being with us. I'm Lou Dobbs.
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