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Lou Dobbs Moneyline
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Aired November 01, 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.
ANNOUNCER: This is LOU DOBBS MONEYLINE for November 1.
LOU DOBBS, CNN ANCHOR: Good evening.
Congress is about to strengthen security at airports and airlines around the country. The House of Representatives is set to vote on that measure this evening. Two of the biggest airlines today reported big losses. United lost a record $1 billion.
And the Pentagon today denied that the war in Afghanistan is failing to progress.
(BEGIN VIDEO CLIP)
DONALD RUMSFELD, DEFENSE SECRETARY: ... 24 hour news cycles. It's about will, the projection of will, the clear, unambiguous determination of the president of the United States.
(END VIDEO CLIP)
DOBBS: We'll have the latest for you on the war against the Taliban and al Qaeda targets in Afghanistan.
And the hunt for terrorist money has included, to this point, bank vaults, accounts in banks around the world, honey stores and now coupons. We'll tell you how terrorists are turning coupons into cash for their operations.
Investors weren't rattled by anthrax attacks or disappointing economic news today. The Dow gained 188 points, The Nasdaq gained 56 points on the day, while manufacturing fell to the lowest level in almost 10 years. And consumer spending is facing the largest monthly decline in 14 years.
Investigators in the anthrax attacks tonight are retracing the steps of a New York City woman who died of inhalation anthrax. So far, investigators don't know how the 61-year-old hospital worker contracted that disease. Her condition deteriorated so rapidly, she was unable to provide investigators with any information.
Mayor Rudolph Giuliani says initial tests on an employee with a skin lesion, as well as 28 other workers, have come back negative. Preliminary tests on four mailrooms used by the Food and Drug Administration have shown signs of anthrax. All four sites are located in Maryland. And all four have been closed.
President Bush outlined proposals today to improve a 1972 treaty banning germ warfare. Those include passing strict laws against biological weapons activities and establishing a United Nations procedure for investigating outbreaks of disease.
The debate over airline security continues tonight on Capitol Hill. House Republicans and Democrats kicked off their debate this afternoon with talks focusing on whether or not to federalize the entire system.
Kate Snow has the latest for us from Washington -- Kate.
KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: Lou, it's really going to be down to the wire.
We expect a vote about an hour from now on the Democratic version of an airport security bill. Right now, they are debating this on the floor of the House -- a very aggressive debate, a lot of strong emotions on both sides. And everyone is saying it's going to come down to one or two votes.
Now, this Democratic bill is not the one that's favored by President Bush, though the administration has indicated that the president may sign whatever aviation security bill reaches his desk ultimately. What the president would prefer, though, is the following: The Republican House sponsored -- House Republican bill is the one that calls for federal oversight over security screeners. But the administration would have a prerogative. The administration could either use private companies to do the screening or use federal employees.
Democrats support a very different bill. The one that's being considered on the floor right now is identical to the bill that passed the Senate by a vote of 100 to nothing. Now, that bill makes security screeners federal employees at the nation's largest airports. And joining Democrats are at least a handful of Republicans convinced that a federal work force is the right answer.
(BEGIN VIDEO CLIP)
REP. JIM RAMSTAD (R), MINNESOTA: Ground zero is still burning. Certain congressional leaders have been fiddling, and it's wrong. It's wrong that this bill was delayed for over seven weeks. What more evidence do we need than September 11 that we need law enforcement people screening bags and screening passengers? What more evidence do we need?
(END VIDEO CLIP)
SNOW: Congressman Ramstad's leaders, though, in the Republican leadership have a very different view. They've been lobbying very hard trying to convince people just like him to come on board with the president. They say the Democrat's bill is the wrong way to go; it is absolutely going to make things too complicated.
(BEGIN VIDEO CLIP)
REP. JOHN MICA (R), FLORIDA: I defy anyone in the House to take this bill and diagram this bill as to how it will work. We tried to do this -- it's not only bifurcated with different levels of responsibility between different agencies and different levels between big airports and small airports, I tell you, it would create a maze.
(END VIDEO CLIP)
SNOW: Now, the two bills do share some common ground. Both bills deal with creating better cockpit security, making reinforced cockpit doors. Both bills call for air marshals in the sky. Both would allow pilots to carry guns under certain conditions, with prior authorization and with training. And then finally, Lou, both will hit people in the pocketbook. Both would call for passenger fees of $2.50 to provide money for all this new security -- back to you, Lou.
DOBBS: Kate, thank you very much -- Kate Snow tonight from Capitol Hill.
In the war against terrorism, Defense Secretary Donald Rumsfeld today defended the pace of the military operation in Afghanistan. He provided a bit of a history lesson.
(BEGIN VIDEO CLIP)
DONALD RUMSFELD, DEFENSE SECRETARY: After December 7, 1941, the attack on Pearl Harbor, it took four months before the United States responded to that attack with the Doolittle Raid on April of '42. It took eight months after Pearl Harbor before the U.S. began a land campaign against the Japanese.
(END VIDEO CLIP)
DOBBS: The defense secretary denied deliberately holding off bombing Taliban frontline troops. The secretary said the United States now has its own people on the ground in Afghanistan who are better able to coordinate such attacks. And Rumsfeld said the number of troops conducting such operations will increase.
The Pentagon says it continues to target Taliban command-and- control centers in bunkers, tunnels and caves. In one attack, a secondary explosion can be seen after a cave complex is hit, that indicating a presence of either munitions, or fuel or both.
California Governor Gray Davis tonight saying law enforcement officials have credible evidence that terrorists may be targeting four California bridges during rush hour -- Governor Davis says the attacks were planned between tomorrow and November 9. Security has been intensified around the Golden Gate, Bay Bridge, Vincent Thomas and Coronado bridges.
For more now on the military operation, we're joined by General David Grange, military analyst for us here at CNN.
General, good to have you with us. RETIRED GEN. DAVID GRANGE, CNN MILITARY ANALYST: Good evening, Lou.
DOBBS: The defense secretary saying that it is clear now that we're going to increase the number of ground troops ostensibly to coordinate air operations: What do you make of that?
GRANGE: Yes, I believe to coordinate air operations, obviously, as well as supply support for the anti-Taliban forces, as well as probably set up some stuff later on for the international community, or maybe some humanitarian assistance aid in some areas that the anti- Taliban forces didn't occupy before -- but you're going to get a better effect on the airstrikes, especially the close airstrikes in support of ground troops when you have American troops on the ground coordinating the synchronization of those strikes.
DOBBS: And those attacks, do you think they will be springing from an air base or air bases within Afghanistan itself soon?
GRANGE: I don't think they'll be coming from bases within Afghanistan. In the future, there's a possibility that we -- we may use bases by Mazar-e-Sharif, as an example, to launch closer-in-type strikes. But we have the reach from bases throughout the Persian Gulf, Arabian Sea and elsewhere to strike just about everywhere we want.
DOBBS: Mazar-e-Sharif, we have been hearing accounts of to-and- fros. It's been described, battles between the Northern Alliance and the Taliban, with still no clear sense of who is prevailing in that. What do you make of that?
GRANGE: Well, tough fight, tough terrain -- you have got some hardened warriors on both sides. Taliban are tough warriors. I don't think they are any tougher than our experiences fighting the North Vietnamese Army in Vietnam, but these are tough soldiers. And they're dug in. They've used terrain very well to their advantage. They have to with the airstrikes that have been going in on them.
But I think, eventually they'll be defeated by the anti-Taliban on that key piece of terrain.
DOBBS: And is there much more that can be brought to bear against them from military, from air operations?
GRANGE: Well, the air operations can maybe increase a little bit more. But we are going to have to put the ground offensive into motion, combined with the airstrikes to get the effect to actually defeat, I think, the Taliban forces in these key areas, whether they be in Mazar-e-Sharif or whether they be north of Kabul.
DOBBS: And we are hearing reports, as are you, that the Taliban have moved men and material, or particularly their tanks and weapons, into populated residential areas, and are seeking shelter from bombing and missile strikes there. What can the United States do about that?
GRANGE: Well, that's pretty tough, because targeting enemy positions, equipment around civilian areas is something that we don't want to do. Our military takes extraordinary efforts not to have collateral damage, not to injure civilians in their strikes.
It's going to make it tough. I would say, unless there's a really high-payoff target, like key personnel that would be very leery of doing that type of targeting. It is something we have to live with and that is another reason why it drags out the length of this campaign, but that is something to be expected.
DOBBS: You say, General, it's something we have to live with. If we put ground troops in, do we face still the same difficulty?
GRANGE: Not as much so because you can get in and move amongst people, other civilians on the battlefield is what we call it, to take out certain targets. It does make it easier, but you have to be aware of that. You still have restrictions on use of force around religious buildings and schools and medical facilities.
We have those constraints, but as we should. We are a nation that has a military that has high values like most Democratic militaries have, and it just puts us a little bit more risk. But I think that is something we, again, have live with because we're proud of the way we operate.
DOBBS: We certainly are proud of the way we operate and we are proud of the way the military has conducted itself. But we also run the risk of taking the rules of engagement to the level, do we not, that we put too much risk on our troops and too much risk on those people that we're asking to do a very difficult job?
GRANGE: You know, I think back, at least the last 10 years, of conducting operations and I never had rules of engagement imposed on myself or my unit where I thought it put me at risk where I could not overcome that risk by always protecting my soldiers regardless of what those rules were.
So that caveat is always in there, that it is the commander on the ground's decision to take care of his troops in a situation like that. And I feel so confident about the rules of engagement, though I have not read them, that our Department of Defense has issued to the armed forces that I would be on the ground in a minute under those rules right now.
DOBBS: General, as a matter of fact, I suspect that you would like to get there straightaway. We thank you for being here, instead, with us. General Grange, thanks.
GRANGE: Thank you.
DOBBS: For more now on the investigation into the anthrax, we are joined by Gary Tuchman here in New York City. He is checking to see if investigators are closer to finding the source of the anthrax infection that killed a New York City woman -- Gary.
GARY TUCHMAN, CNN CORRESPONDENT: The mystery Kathy Nguyen death only gets deeper. The 61-year-old died early yesterday morning of inhalation anthrax. She worked at a hospital here in Manhattan. The hospital was given environmental tests. Preliminary results all negative.
The people who worked close to her at the hospital were given tests -- preliminary results all negative. The people who lived with her in her Bronx apartment and building itself have been given tests. Everything has come out negative, including her mailbox at home. So officials can't figure out where she got her anthrax from. They are completely puzzled at this point. They are trying to figure it out.
What they do know at this point there's no evidence the mail has been contaminated, but it appears that her anthrax is distinguishable, that is their word, from the tainted letters that have been sent out. So that only deepens the mystery. Meanwhile, there is more evidence of anthrax contamination near the nation's Capitol. The Food and Drug Administration has shut down some of its mailrooms after it found anthrax spores in four different locations in Rockville, Maryland that the FDA uses.
And Kansas City, Missouri, tests show anthrax spores at a mail facility there. More than 170 employees of that mail facility are now taking antibiotics. And in New Jersey, where seven people have confirmed or suspected cases of anthrax, the govern wants all post offices in the garden state checked for anthrax, the acting governor of that state now says, he now wants all post offices in the Garden State checked for anthrax. Lou, back to you.
DOBBS: Thank you. Gary Tuchman.
Just ahead: How major consumer product companies, all of them household names, could be playing an unwitting role in the support of terrorism.
And trying to coordinate the hundreds of millions of dollars in donations raised for victims and the families of victims of the terrorist attacks of September 11, I'll be talking with the man trying to oversee this huge effort, New York state's attorney general, Eliot Spitzer.
And the threat of anthrax is of course hurting the postal service. Some companies, however, are benefiting. We'll have that story for you and a lot more coming up next on MONEYLINE.
(COMMERCIAL BREAK)
DOBBS: In the effort to hunt down and cut-off terrorist funding, investigators are following a money trail that runs through banks, front companies, Islamic charities and now, the corner grocery store. Every year companies lose hundreds of millions of dollars because of fraudulent redemption of supermarket coupons.
Chris Huntington reports on just how easy that cash can end up in the hands of terrorists.
(BEGIN VIDEOTAPE) CHRIS HUNTINGTON, CNN CORRESPONDENT (voice-over): Twenty-five cents off Progresso Soup, $1 saved on Hefty Storage bags, up to $2 off a pack of Everready Batteries. Nearly $200 billion worth of coupons issued each year help American shoppers save money and American companies move merchandise.
Federal law enforcement officials also believe coupons may also help terrorists raise cash.
KENNETH DAM, DEPUTY TREASURY SECRETARY: There have been many suggestions that one of the ways in which terrorists are financing themselves is by coming into large quantities of coupons, the kind of thing you use in the grocery store, and turning those into ways of transferring money. We are actively investigating that possibility.
HUNTINGTON: Several investigations in the last 12 years discovered that Islamic terror groups, including the Palestinian Liberation Front, Hamas and Hezbollah ran elaborate schemes in the United States generating close to $100 million cashing in coupons without every buying the underlying projects.
Ben Jacobson, a former New York City police detective, led one of those investigations.
BEN JACOBSON, PEREGRINE GROUP: In the United States, terrorist cells were using coupons and (UNINTELLIGIBLE) were using coupons. We believe that still the same groups that were involved with the bombing of the World Trade Center the first time are still associated with this particular coupon fraud operation that operates in New York-New Jersey area, as well as in the Midwest.
HUNTINGTON: The fraud works like this: Operatives obtain coupons in bulk, often from newspaper recyclers or through Web sites. Coupons are clipped, crumpled up to make them look used, and sorted for shipping. Crooked stores, in on the scheme, claiming to have sold the products, redeem the coupons with the manufacturers and collect the checks.
BUD MILLER, COUPON INFORMATION CENTER: It's usually a small operation that is highly organized, highly concentrated, working through numerous retail outlets. Just individual cases, I have had, for example, $87 million in Detroit, $68 million in the greater the Philadelphia area, $44 million in Florida. It's a substantial amount of fraud.
HUNTINGTON: Miller tracks coupon fraud for the industry. He estimates half a billion dollars worth of coupons are fraudulently cashed in each year, roughly 10 percent of all coupon redemptions.
But criminal prosecutions are sporadic. Compared to murder and narcotics, coupon fraud is regarded as nickel and dime crime. Major coupon issuers do intercept about $100 million worth of fraud each year. But compared to the billions of dollars in new sales generated by coupons, chasing criminals is not a top priority.
CHARLES BROWN, NCH: All sponsors of coupons have to make that cost/benefit analysis -- the cost justification for controls versus the benefit of detection.
(END VIDEOTAPE)
HUNTINGTON: The average coupon is worth about 75 cents. Last year more than 250 billion of them were left unredeemed. That is a lot of paper lying around that organized criminals and possibly terrorists could convert into cash -- Lou.
DOBBS: Those are huge numbers. I had no idea.
HUNTINGTON: Astronomical numbers.
DOBBS: And I would ask, how many of these stores have been convicted? Because they would obviously have to be in complicity with terrorists.
HUNTINGTON: Good question. The convictions on this kind of crime are extremely rare. Many of the convictions that make it through are on sub-charges: wire fraud, mail fraud.
DOBBS: Are they going to change this, because if they suspect this is a source of terrorist funding...
HUNTINGTON: The heat is up. Just today an indictment coming out the eastern district in Pennsylvania on this type of fraud, not believed to be terrorist-related, but this is becoming a focus now for law enforcement.
DOBBS: And you know, $500 million worth of fraudulent coupons, I would wager, I don't know, but I would love it if you would look into this, I would bet you that is far and away a heck of a lot more money that is ever robbed from commercial banks.
HUNTINGTON: It's worth -- we'll take a look.
DOBBS: Great, Chris -- nice report. Thank you -- Chris Huntington.
Coming up next here, the latest on the bombing campaign against the Taliban and the al Qaeda in Afghanistan.
And America's postal crisis -- we'll take a look at how the anthrax attacks are changing our postal system and the way we handle the mail.
And in defense of junk mail -- we'll take a look at why direct mailers say it's important to keep business as usual.
(COMMERCIAL BREAK)
DOBBS: The country's mail system is in crisis tonight. Safety concerns are top priority for not only the U.S. Postal Service, but private mail companies as well.
Kitty Pilgrim looks at how consumers are changing their mail habits. KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Remember when the only dread of going to the post office was the long line? Everyone from the U.S. Postal Service to private mail companies are changing the way they do business.
Companies and customers are focused on security. The post office sends 30 percent of all parcels, Federal Express: 20 percent and UPS: 40 percent.
Federal Express has a Web site of safety tips and says their system to e-mail recipients that a package is on the way has been in place for years, but has seen a surge in usage.
UPS says their volume is about 3 percent below normal. And direct marketers worry about public avoidance of mail. Since September 11, the post office has lost an estimated $150 million a week.
E-commerce researchers like Forrester say e-commerce connections for business are more critical than ever. And the trend has already started.
GEORGE OMAS, POSTAL RATE COMMISSION: There is a diversion of first class mail to the Internet because of things like bill payments.
PILGRIM: Some say this will change the way companies do business with customers.
ALAN ROBINSON, DIRECT COMMUNICATIONS GROUP: That may change habits so that people who would be sending, you know, small merchants -- small vendors -- who would be sending a hard copy invoice may get into the practice of sending a fax invoice or a e-mail invoice that they may have not done before only because they have no other choice but to use electronic means.
(END VIDEOTAPE)
PILGRIM (on camera): Now 40 percent of mail volume is done by direct marketers. And we are coming into the peak mailing season. Retail analysts say between the weak economy and the mail issues, we may see a substantial decline in mail order business. But that could be offset by people staying home this year and ordering online.
Lou, so it might be awash.
DOBBS: It could be, but that would be an awful lot of volume to add to the Web.
PILGRIM: That be would very, very optimistic.
DOBBS: That's extraordinary -- 40 percent of the mail is direct mail.
PILGRIM: That's right.
DOBBS: Or what some would call junk mail. PILGRIM: Junk mail.
DOBBS: All right.
PILGRIM: I think you'd know that when you open your mailbox.
DOBBS: It looks like about the right -- some days it looks like it might be a little higher ratio actually.
PILGRIM: Exactly.
DOBBS: Kitty, thank you.
Well as Kitty just reported, the anthrax attacks are also having a major impact on the direct marketing industry. With this postal crisis, all mail is coming under close scrutiny by the postal service as well as by customers, especially those direct mailings.
Joining me now, the president and the CEO of the Direct Marketing Association, Robert Wientzen. Good to have you with us.
ROBERT WIENTZEN, CE0, DIRECT MARKETING ASSOCIATION: OK, Lou, good to be with you.
DOBBS: Well, OK, let's start with the impact, so far, on direct mail.
WIENTZEN: Well, so far, frankly, we feel the impact has been negligible.
While we're certainly concerned and stay tuned very closely to the situation, most of the people we talked to in the last 10 days or so have reported that they have not seen an appreciable drop in their response rates.
DOBBS: Right.
Well there's been -- the postal service tells us there's been an extraordinary drop off and at this point -- and it has to remain anecdotal because we simply don't have hard evidence.
Do you expect, because of the anthrax attacks and the rising anxiety on the part of some, that it would diminish the effectiveness of direct mail?
WIENTZEN: Well, indeed, that's what we're concerned about. But, as I said, we're not seeing it yet.
A number of companies recently commented on this. I think "Reader's Digest" just yesterday had a rather rosy optimistic viewpoint of the future. Lands' End has been fairly positive. Some of the big mailers have said they are not yet seeing a drop. But obviously if there's a loss of confidence in the mail, this could have a major impact on what is a $580 billion sales channel.
DOBBS: A $580 billion sales channel and, obviously, that means a lot of jobs and is an important part of the economy.
Is it your -- do you have -- let's put it this way, do you have a fall-back plan? Are there contingency plans? Is there a way to work through this from the perspective of the Direct Mail Association?
WIENTZEN: Well, we don't think so. And frankly, we don't see it on the horizon either.
The reality is that the American economy and, in fact, the American population need the postal service. We are a part of a system which is the only way essentially to get some physical goods to every household in America. So while the Internet is promising without question, while there are some other channels -- the reality is that the postal service is a vital part of the U.S. economy. As you indicated, about 4 million people have their jobs involved in this part of the economy.
DOBBS: And at this point, what would you have the postal service do if he could accommodate the interest of direct mailers?
WIENTZEN: Well, I think, first of all, we've got to be assured that the public -- the American public -- recognizes that there's a big difference between the way commercial mail is handled and the way that three or four envelopes that have been proven to be the culprits in this crisis so far are handled. The direct mail industry prepares its offerings at high-speed equipment. It's often sorted as it is prepared...
DOBBS: Right.
WIENTZEN: ...delivered to the post office.
DOBBS: No, I understand that it's quite a separate thing from what we've experienced so far. But the fact is that effect is there.
What could the postal service do here? The postal service itself is losing, as Kitty reported, $150 million dollars a week. It won't take long for that to have a serious impact on an already large deficit. The postal service straining here -- what would you like done?
WIENTZEN: Well, we think Congress, obviously, has got to step in here. The postal service could end up losing, I think, $4 to $6 billion as a result of this and the fact that there has been a decline in mail volume because of the economy.
So we have, as you point out, a crippled postal service going into this incident and now an even bigger problem. I think Congress is going to have to deal with it.
It's interesting to note that the rules at the postal service operates under were put together in 1970. Think about that, a business plan that's that old that still is running the postal service.
DOBBS: Well, frankly, any plan put together before September 11 is out of date, wouldn't you agree?
WIENTZEN: I would certainly agree with that.
DOBBS: We thank you very much for being with us here. Thank you.
WIENTZEN: You're welcome.
DOBBS: Let's take a look now at the latest developments in the war against terrorism: California Governor Gray Davis this evening saying terrorists may target four California bridges during rush hour. The governor says law enforcement officials have what he called "credible evidence" that terrorist are planning just such an attack between tomorrow and November 9. Security, we are told, has been heightened around Golden Gate, Bay, Vincent Thomas and Coronado Bridges.
And in New York investigators are retracing the steps of a New York City woman who died of inhalation anthrax yesterday. She worked at a hospital in Manhattan where no signs -- no other signs of anthrax have been found. Mayor Rudolph Giuliani says initial tests on an employee with a skin lesion, as well as 28 other workers have proved negative.
Anthrax spores have been discovered so far in Florida, New York, New Jersey, Washington, D.C., and Maryland. Smaller traces have also shown up now in Kansas City and Indianapolis.
The Pentagon says it continues to target Taliban command and control centers in bunkers, tunnels and caves in Afghanistan; and it says American forces on the ground are now helping to coordinate those attacks. Defense Secretary Donald Rumsfeld says more troops will soon be on the ground there, working in a similar capacity.
For more on tonight's breaking story about terrorist threats against bridges in California, we are turning to CNN's Thelma Gutierrez in Los Angeles -- Thelma.
THELMA GUTIERREZ, CNN CORRESPONDENT: Lou, this afternoon California Governor Gray Davis at a press conference to announced a special adviser to state security, also took the opportunity to alert the public of what he called a second credible terrorist threat to the state of California. The first credible threat came last month when reportedly movie studios in and around the Los Angeles area were identified as potential targets.
Again, this afternoon California Governor Gray Davis announced that four suspension bridges in California -- the Golden Gate, the Bay Bridges in the San Francisco area, the Vincent Thomas in the Port of Los Angeles, and the Coronado Bay Bridge in San Diego.
The governor said that the threats extend from November 2 through November 7, and specifically target rush hour traffic time periods. The governor also said that additional National Guards will be assigned to protect the bridges. We also have an update from the FBI special agent in Los Angeles, Matt McLaughlin. He says, quote: "The information came to the FBI through other intelligence agencies," and that the FBI is currently working vigorously to determine the credibility of the information.
Here's what the governor had to say a little bit earlier.
(BEGIN VIDEO CLIP)
GOV. GRAY DAVIS (D), CALIFORNIA: I want to refer to the threat you may be aware of against the suspension bridges in California. We believe there's a credible threat that there will be an effort made between November 2 and November 7 to destroy one of those bridges.
(END VIDEO CLIP)
GUTIERREZ: Now, the FBI office in Washington, D.C. says that this threat, apparently, is not as credible as the threat mentioned a few nights ago by Attorney General John Ashcroft.
Lou, back to you.
DOBBS: Thelma let me ask, if I understood you correctly -- who said this threat is not as credible as the other threat?
GUTIERREZ: This is information just coming into us right now, Lou, by the FBI Washington -- the FBI office in Washington, saying that the threat is not as credible. And again, the FBI office here in the Los Angeles area, according to Matt McLaughlin, are working now to determine the credibility of this threat.
DOBBS: OK, Thelma Gutierrez, thank you very much.
Well, after more than three years of legal fighting, it appears Microsoft and the federal government have found common ground. With the deadline looming tomorrow, there is a proposal to settle the anti- trust case against Microsoft. But critics say the terms of the deal aren't tough enough, and many question whether the 18 states also suing Microsoft will go along with it.
Steve Young reports.
(BEGIN VIDEOTAPE)
STEVE YOUNG, CNN CORRESPONDENT (voice-over): Several sources close to the case tell MONEYLINE an anti-trust settlement is all but completed between Microsoft and the federal government. Different versions of the terms have been circulating, and some Microsoft critics claim they're far weaker than those imposed by the judge tossed off the case, Thomas Penfield Jackson. Weaker, even, that Microsoft agreed to during earlier negotiations conducted by U.S. Judge Richard Posner.
Pointing to a seven-to-nothing appellate court decision that Microsoft seriously violated anti-trust law, the company's critics are angry. They say the Bush administration's anti-trust chief Charles James is not settling, he's selling out. F.D. BLACK, CEO, CCIA: We now have 16 federal judges that have looked at some issues related to this case, and they've all come down against Microsoft. But the government seemed to be willing to settle for a remedy which is weaker than what they rejected back before they even won the trial. That just doesn't compute.
YOUNG: No comment from the Department of Justice or from Microsoft, except that it urges caution about what to expect when the parties meet tomorrow morning before Judge Colleen Kollar-Kotelly.
If some of the key states in the group of 18 suing Microsoft disagree with the settlement, some anti-trust experts say the company would be in a tough spot.
DAN WALL, LATHAM & WATKINS: Because the trial court judge will likely order that the remedies hearings proceed. And once you get into that phase of it, the outcome of this could be much more disfavorable, much more dramatic for Microsoft than the deal that is, at least, being reported in the press.
(END VIDEOTAPE)
YOUNG: Late today a spokesman said the Massachusetts attorney general is not going to go along with the deal tomorrow morning. He wants more time to get comfortable; wouldn't say how much more. What the judge will do, unknown -- Lou.
DOBBS: OK Steve. Progress, at least; now we'll find out how much. OK, thanks Steve.
A powerful rally on Wall Street today: the markets brushing off reports of continued weakness in manufacturing. In sticks -- stocks building on a potential settlement in the Microsoft case.
Christine Romans at the New York exchange, Greg Clarkin at the Nasdaq Marketsite. Christine, a pretty good day.
ROMANS: It really was. Plenty of bad news out here, and stocks didn't mind a bit. The Dow having a triple-digit advance -- 188 points, and closing above 9,200.
Take a look at the Big Board winners. America Online, parent of this network, one of them -- gets a new CFO. General Mills soaring after completing its purchase of Pillsbury. Clorox beats the street on its earnings. And AMD and the computer chip stocks having a great day on hopes for improvement in dismal chip sales sometime in the fourth quarter.
Also there were some interest rate-related plays here in the market as well. Washington Mutual was the most actively traded stock here on the Big Board -- WM is the ticker symbol. Down about 5 percent. Lower mortgage rates (UNINTELLIGIBLE) fueling a financing boom. That's bad news for companies that service mortgage loans, like Washington Mutual.
Others fell as well -- other (UNINTELLIGIBLE). Meanwhile, Freddie Mac and Fannie Mae rallying. Long-dated agency papers seen benefiting by the phase-out of that old benchmark long bond, Lou. So a stock bond play today in the market.
Back to you.
DOBBS: All right Christine, thanks; Christine Romans.
Let's turn over to the Nasdaq. Microsoft leading the advance for technology stocks. The Nasdaq today up more than 3 percent.
Greg Clarkin also having a pretty good day -- Greg.
CLARKIN: Exactly, Lou. And that Microsoft news being really welcome by technology traders. It really lit a fire under the software stocks. We saw the semiconductor stocks rallying strongly as well. All in all, a very solid day for the Nasdaq, up 56 points. It reclaims that 1,700 level; closes at 1,746.
Here's how Cisco did on the day: It was up 74. Intel gaining $1.52. Sun, a nice gain. Microsoft with the big pop-up, better than 6 percent; $3.69 was the gain there.
Now as for the sectors today. Semiconductors, 6.7 percent gain. That after the industry association said sales fell in September 2.5 percent, better than the 3.5 percent that they had fallen the previous month; so we saw a big pop there. Software, hardware, networking all posting nice gains on the day.
And all in all, Lou, a fairly solid day all around. And we saw every technology category participating today on the up-side.
DOBBS: We'll take that. Greg, thanks; Greg Clarkin.
Despite a sharp drop in consumer spending, the top three car makers reporting rising sales, boosted by zero and low-interest loans. Customers have been taking advantage of those deals, which generally expire later this month. Ford says its sales jumped 34 percent last month. General Motors' sales up 31 percent. Chrysler up 5 percent. And on Wall Street, Ford and General Motors shares moving higher; DiamlerChrysler up more than $1 a share.
The jump in car sales has not translated into higher factory production; car makers are concentrating on working down their inventories. And new reports today show manufacturing in continued decline.
Kathleen Hays is here, and has a look at the economic news, and gives us a little bit of a preview of a big report tomorrow -- Kathleen.
KATHLEEN HAYS, CNN CORRESPONDENT: A lot going on, Lou, that's for sure.
In fact, we've seen the latest numbers -- it's just more evidence that the September 11 attacks hit the economy hard, and continue to reverberate, especially in the battered manufacturing sector. The National Association of Purchasing Management conducts a monthly survey. Their latest number for October: 39.8, the lowest level since the last recession, down from 47 in September. In fact, it's the 15th month that index has declined.
The NAPM saying that the September 11 attacks caused a very significant setback in manufacturing. In fact, some sectors that were starting to recover are not recovering now. Production and new orders -- the drops there among the worst they have seen since they started doing this survey in 1931 just after the Great Depression. Imagine that. It's from bad to worse.
What's interesting, though, is the consumer. We saw those auto sales looking so good, right? So we've seen the consumer come back in October after consumer spending plunged in September. I want to show you a bright spot, though, because there was a bright spot, and I know how you like bright spots.
DOBBS: I love bright spots.
HAYS: OK, the purchasing managers have been doing a special survey on inventories. Now, actually 22 percent say their inventories are actually too low; 67 percent say their inventories are just about right. So about 90 percent, apparently, have done enough inventory slashing, that if they get the consumer even mildly interested they will get the orders and maybe the production will come back up.
DOBBS: That is starting to look like a little Goldilocks triangulation there, that -- too low, too high.
HAYS: Exactly, well, there was one that was too high. And the other bright spot, Christine just touched on -- the big drop in bond yields, big drop in the treasury 10-year note yield, which mortgages are priced off, it is down like 50 basis points in the last couple of days. And mortgage rates have already started to fall.
These are the lowest mortgage we have seen since 1998. With this big rally in the treasury market after they canceled the 30-year bond sales, a half percentage point, I guess, you could see those rates falling like another half percentage point, if it goes, you know, tit- for-tat.
DOBBS: Building the base for a recovery.
HAYS: Employment tomorrow, though, a big drop in payrolls expected, Lou. People are seeing a loss of 300,000. Some people are saying 400,000, 500,000. The unemployment rate rising, so we have got a little bit more bad news to get under our belt before it gets better.
DOBBS: Just when we get that bright spot firmly established, you had to go to tomorrow.
HAYS: Well, yeah, but I have a reason to come back, right?
DOBBS: Kathleen, as always, you have a reason. Thank you, Kathleen Hays. Coming up next here, a solid rally on Wall Street. One strategist tells us where he's putting his money, and he will make sense of these markets in these difficult times.
Also, in the midst of confusion, a potential plan. New York's attorney general finds a way to fairly distribute the September 11 charity money that we've been reporting on here for some time. That is next.
ANNOUNCER: Next, Lou speaks with Eliot Spitzer, New York State attorney general.
(COMMERCIAL BREAK)
DOBBS: As we've reported here on MONEYLINE, millions of dollars have been raised to aid the families of September 11 victims. But dispersing that money has been, at best, difficult. Now, both the Red Cross and the September 11 fund have agreed to join a confidential database, put together by New York state's attorney general. Eliot Spitzer, good to have you with us.
ELIOT SPITZER, ATTORNEY GENERAL, NEW YORK: Good to be chatting with you, Lou.
DOBBS: Have any other charities now, besides the two largest, that is the September 11 fund and the Red Cross joined in on your idea?
SPITZER: Sure, we have, we think, about 80 percent of all the funds that have been raised have been given to charities that have agreed to work with us. I think that by the end of the day in very short order, we will have all the charities agreeing to that concept. And the reason for that, Lou, is that it makes common sense. It is modeled on what was done in Oklahoma City. I think everybody agrees there's a common sense virtue to having this data base.
DOBBS: In terms of the Red Cross, and I want to say at the outset, the Red Cross does many things wonderfully well. But why in the world was the Red Cross so resistant to what had been the model in Oklahoma city, which was your idea, which you, as the attorney general would have had supervision of, why did they fight that for so long?
SPITZER: Well, you're asking me to make the case for somebody I disagreed with. They highlighted the privacy concern, which is a legitimate issue. You don't want too much data about the victims being stored in a data base that be can accessed by too many people.
We have addressed that issue. We have made sure that there are security issues. Only people who are giving away money to victims will have access to this data and they will use the data to ensure equity, to insure rationality in how the funds are disbursed, to ensure there's no fraud and no duplication. This is what we need and I think we have addressed those privacy concerns and so the Red Cross has said conceptually, they are on board here.
DOBBS: Let me follow on a couple of things there, Mr. Attorney General: One of them is just the shear small percentage of the money that's been raised, particularly by the Red Cross, that will move to the victims and the families of the victims of the 11th. Is there any role for oversight there? Because many people, and I could show you hundreds of e-mails here of people protesting the stories you know as well as we do -- and are reporting -- some of this has just raised anger to a very high level.
SPITZER: There's no question. When word began to get out that some of the charities were not going to use the money they had raised for direct assistance to the victims, there was an anger that the public has been expressing and a legitimate anger. When the public gave funds to these charities, believing that that money would go to the victims, the charities to have respect that intent on the part of the donors.
If the money doesn't go to the victims, the trust that the charities have generated over many years will be sacrificed. And I think the charities are beginning to understand that. They are going to feel intense pressure to use all the money they have raised for direct assistance to the victims, otherwise there will be a real problem here.
DOBBS: Let me move to an area which is perhaps a little more difficult, and that is the identification of the families of victims. We have tried, and I know other news organizations including the "New York Times" have worked hard, to come up with a list of victims, a reliable list of those missing.
And we are hit by all sorts of statements from various agencies including the city of New York, which has control of that list, as to why they can't turn it over. And the numbers are in -- there's a dispute here of vast numbers involved.
SPITZER: We are going to be able to access that data. We will have the cooperation of state and the city and the other government organizations such as FEMA, that were on the site initially, so we will be working with, we believe, a comprehensive list. I can understand how government agencies are somewhat hesitant to give that data over to press organizations not knowing exactly what that information would be used for.
But we will have that data and we will be using it to reach out to the victims to make sure that they, the victims are getting in touch with the charities.
DOBBS: And that is the issue here too, and that is that some of the charities cannot get that list of victims and therefore cannot move their support, those that are trying. So we're delighted that, and I know the victims families are delighted that you are moving in to help speed the process up here.
SPITZER: Well, thank you. We're just trying to coordinate, get information, so that smart decisions can be made.
DOBBS: And obviously oversight is required here.
SPITZER: Absolutely.
DOBBS: Let me turn quickly. Microsoft, we have received word, Mr. Attorney General, that Justice Department has called a 10:00 a.m. press conference tomorrow to discuss the Microsoft settlement -- tentative agreement, if you will, on the antitrust charges. A lot of talk that the 18 states attorneys general will not go along with this deal. What's your judgment at this point knowing what you do?
SPITZER: Well, I can not say publicly yet where we are. We will be in court tomorrow morning. There's a judicial order that will -- has asked and required the parties to be back in court tomorrow.
I think tomorrow morning in court, you will hear where the states are, where the federal government is. I don't want to speak for anybody else. There has been a lot of talk between, among the three pieces to this puzzle, the feds, the states, and Microsoft, over the past month. Has there's been real progress? I think there's been real progress and tomorrow morning, I think, we may find out how much or where there's still some gaps.
DOBBS: The sufficiency -- all right.
Eliot Spitzer -- New York state attorney general -- thanks for being here.
SPITZER: Thank you.
DOBBS: For more information on how you can receive help or donate funds, we ask you to log on to the attorney general's special Web site set up for wtcrelief.info. That's wtcrelief.info.
Coming up next here on MONEYLINE, a horrible quarter for the nation's second largest airline. We'll take a look at United's record billion dollar loss.
And we'll tell you about a long time bull who has a new, somewhat sober perspective on this economy. Stay with us anyway.
(COMMERCIAL BREAK)
DOBBS: Well, as we reported, the markets rallied today -- a strong rally, in fact, after three sessions of steep losses.
Joe Battipaglia joins me now.
And, Joe, it's good to have you here.
JOE BATTIPAGLIA, GRUNTAL & COMPANY: Good to be with you.
DOBBS: You've been a bull for a long time and taken some beatings here over the course of that time. Are you backing off at all, given everything that is happening?
BATTIPAGLIA: No, in fact, the beating has been going on for two years now. But the reason for it is, essentially, that the economy got overheated. The Fed intervened, raised rates and the economy slowed. So we had 15 months of a slowing economy preceding to September. Now those events have brought the recession upon us and we've got to deal with that.
And I think what happens here is our success in the effort against terrorism will translate into a recovering economy very quickly.
DOBBS: Now, you talk about the success against terrorism. We just had the GDP report yesterday, the first report on GDP for the third quarter showing a 0.4 percent decline, our first contraction since the last recession.
It looks as though we're set up for recession without any question. Can we have a strong rally in the midst of recession here?
BATTIPAGLIA: Interestingly enough, Lou, in the past when we've had recessions, the market performance from beginning to end of the actual recession has been on balanced positive. Most of the damage had preceded it in terms of a slowing down and a turn in attitude by investors.
So I believe in this case, as this unfolds, we may well be coming out of this particular recession by the second quarter. The market will sniff that out with lower interest rates and stimulus coming in, rally heavily ahead of it.
DOBBS: How soon would such a rally begin? And how far would it be?
BATTIPAGLIA: I believe it could be as soon as the December month and into the first quarter of the new year.
Why? I think what we really have is a cold war against terrorism that's going to take quite a long time. Now if the coalition can have demonstrated success, it translates into confidence. The economy can come back that much quicker.
DOBBS: And you would advise investors at this point to what?
BATTIPAGLIA: I would be moving money out of bonds into safe places and be more aggressive into more secular growth categories of the economy. Because once this economy goes back to a three percent run rate, then the profit opportunity there is too great and equities become the better choice.
DOBBS: Great. Joe Battipaglia, thank you for being with us.
BATTIPAGLIA: My pleasure.
DOBBS: Appreciate it.
"WOLF BLITZER REPORTS" begins in just a few moments.
And as our custom, let's go to Wolf to find out what's ahead -- Wolf.
BLITZER: Thank you very much, Lou.
We're following a breaking news story out of California. The governor there, Gray Davis, says there are credible terrorist threats against the Bay, Golden Gate and other landmark bridges in California. We'll have details.
Also, we'll assess the war on terrorism with three guests: former CIA director James Woolsey, Senate Intelligence Committee Vice Chairman Richard Shelby, former national security adviser Dr. Zbigniew Brzezinski.
That and much more next -- Lou.
DOBBS: Looking forward to it, Wolf, thank you.
Coming up next here, we'll tell you what you may expect tomorrow. Stay with us.
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DOBBS: Tomorrow, we'll have the employment report for the month of October. Economists expect the unemployment rate to rise well above five percent. And they estimate that at least 300,000 jobs were lost in September.
Also tomorrow, we'll have a report on factory orders for the month of September. And insurance company Cigna among those expected to report their quarterly results.
That is MONEYLINE for this Thursday evening. Thanks for being with us. I'm Lou Dobbs. Good night from New York.
"WOLF BLITZER REPORTS" begins right now.
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