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Lou Dobbs Moneyline
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Aired November 29, 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 Thursday, November 29. Here now, Lou Dobbs.
LOU DOBBS, CNN HOST: Good evening, everyone. Tonight, another Taliban stronghold near collapse. And the largest corporate collapse in history is at hand.
Anti-Taliban troops have surrounded Kandahar, U.S. warplanes are pounding the city with bombs. We'll have a live report for you from Afghanistan. We'll be joined by General David Grange.
We'll also take a very close look at the collapse of Enron, tonight. One of the most breath-taking corporate disasters ever. We'll hear from the CEO of Dynegy who pulled out of a merger deal with Enron just yesterday. We'll take a look at what Enron's failure means for you. Just because you don't own the stock, or don't think you own the stock doesn't mean you won't be affected by it's incredible decline.
Also, tonight, Treasury Secretary Paul O'Neill who will share his thoughts on the economy, and the progress being made in tracking and stopping terrorist funding.
On Wall Street stock prices ended two days of losses thanks to a record jump in orders for durable goods in October, that helped. And it turned out to be a very good day indeed on Wall Street.
In Afghanistan tonight, Taliban troops in Kandahar are surrounded, they are being attacked by U.S. warplanes. The Pentagon released video of successful strikes against buildings, believed to house Taliban leaders, as well as tunnel and cave complexes.
Pashtun opposition forces are just outside Kandahar, but one leader says his commanders confirm that they have not yet entered the city.
Meanwhile, the Pentagon says it has no information on the reported capture of a high profile al Qaeda network operative. Today's "Los Angeles Times" reported that Ahmed Omar Abdel-Rahman was captured by Northern Alliance troops. Rahman is the son of a blind Egyptian cleric who was convicted of plotting to blow up New York landmarks in 1995. The U.S. military today called a temporary halt to parachute drops of large containers of humanitarian aid. That after a package filled with wheat and blankets crashed through a house killing a woman and injuring her child. Attorney General John Ashcroft has announced an initiative aimed at encouraging non-U.S. citizens to come forward with information about suspected terrorists.
(BEGIN VIDEO CLIP)
JOHN ASHCROFT, ATTORNEY GENERAL: In return for this information, the Department of Justice will assist non-resident aliens in obtaining what are called S-visas (ph).
(END VIDEO CLIP)
Ashcroft says people living abroad should contact the nearest U.S. embassy.
In Germany, today, the head of the Northern Alliance says that group will not oppose an international peacekeeping force on the ground, while an interim government for Afghanistan is being established. Those talks near Bonn, Germany are expected to conclude Sunday.
Kandahar, of course, is the last major city still under still under Taliban control. Afghanistan once 95 percent under the control of the Taliban, the Pentagon now says some Taliban fighters are vowing to fight to the death. Others appear to be trying to flee into neighboring Pakistan. For more on this we're joined by CNN's Christiane Aaliyah in Kabul -- Christiane.
CHRISTIANE AMANPOUR, CNN CORRESPONDENT: Lou, certainly the situation is getting more and more difficult for the Taliban, particularly in the last stronghold of the Kandahar region. There are more and more U.S. Marines landing in that Kandahar, and also CNN has confirmed that there are more U.S. infantry soldiers in country as well.
CNN personnel coming into the Bagram Airport, near Kabul, have seen uniformed U.S. soldiers there, as well as the report we had yesterday of U.S. soldiers being in control of the airport at Mazar-e Sharif. These are elements of the first -- the 10th mountain division of the U.S. Army. In the Kandahar area we asked the Northern Alliance defense minister, who's forces have swept through so much of Afghanistan in the last couple of weeks, what he expects to happen then? He said, he did not yet think that Mullah Omar was ready to sunder, but at the presence of U.S. troops there, we're going to put untenable pressure on him and the Taliban.
(BEGIN VIDEO CLIP)
GEN. ABDUL QASSIM FAHIM, N. ALLIANCE DEFENSE MINISTER (through translator): The American soldiers are in the Kandahar region to put pressure on the tribal leaders to force out the Taliban, and work together with Dr. Hamid Karzai. In my belief, there will be no fighting and they will surrender under the responsibility of Dr. Karzai.
(END VIDEO CLIP)
AMANPOUR: Now that's what he believes, and that's what others do believe as well, except for there has been yet another radio statement by Mullah Omar to his people, reported there by eyewitnesses who've been coming out of Afghanistan, saying that they should fight to the very end. This of course has been declared in previous battles, and it has not materialized. Everybody's waiting to see what exactly does happens with the fall down in the Kandahar region.
In the meantime, the talks go on in Bonn. And last night and yesterday, here on CNN senior Northern Alliance forces said, that yes they would be flexible and they would eventually envision having a multinational force here if that's what the international community wanted. And now these talks have been moved forward in Bonn, because delegates there of the Northern Alliance have confirmed that, and they say they now will accept a multinational force to protect humanitarian assistance, to provide security in the Afghan area as that interim government is being established. And officials in Bonn are saying progress is being made on the formation of a broad based interim political government for this country -- Lou.
DOBBS: Christiane, in terms of Kandahar is there any indication, does the Northern Alliance, other opposition forces, do they feel they have a pretty good understanding of the strength of the Taliban troops still in Kandahar. And is there a high-level of confidence about where Mohammed Omar might be?
AMANPOUR: Well, in terms of the strength, what they're saying is they don't know exactly the numbers, because they think some have melted away. But what they're saying is that the evidence over the last couple of weeks of the Taliban fighting power, leads them to believe that the Taliban will eventually do what they did in the other parts of the country. Although, some do say that, you know, when they're faced with their backs against the wall, it's not clear whether some will put up a bit of a fight. But they do expect Mullah Omar, for instance, this is the defense minister here, to perhaps melt across into the border of Pakistan, because the tribal links are very, very strong there and that might be an element in a way for him to hide.
They don't know exactly where Osama bin Laden and Mullah Omar are, but they believe that they are still in the Kandahar region, but it's very hard to tell.
DOBBS: A bit of a footnote, Christiane, if we may, on culture. Going into this conflict, before the United States and Britain began the engagement, there was a great deal of discussion about martyrdom, the insistence on the part of the Taliban leaders -- that the Taliban would fight to the death. That this would be a great -- great eventuality, if you will, for the Taliban fighters to have the opportunity to go into paradise and so forth on religious ground. What we have seen is quite contrary to all of that. Could you give us some sense of what's happening culturally in that regard? AMANPOUR: Well, I think what's basically happening is the following. I think the Taliban, who themselves never really had to fight any serious battles in order to win their territory and win control of Afghanistan back in '94 to '96, they have now been faced with an opposition force which is the U.S. Air Force in massive bombardment and a ground force of the Northern Alliance. They are facing a force in the air and on the ground that they have never had to deal with before. And so they are not able to put up any proper resist to this.
You've seen a few elements of battles and a few attempts to hold out, but it hasn't lasted that long. And what they've done is, not so much culturally, but in terms of what this country has been doing in the last 10 years of war. Those who see they're own side weaker tend to follow and go to the other side. this whole switching sides business is quite common here in Afghanistan. And those -- the idea that they would fight to the end and go to martyrdom has not been borne out, except for among some of the foreign fighters, the mercenaries who have joined the Taliban. And that is because they have nowhere else to go.
The Afghan Taliban, we've been told, have mostly wanted to surrender in these untenable situations that they find themselves in. But the foreign fighters have put up the toughest resistance, for instance in the Kunduz region and, as you saw, the Mazar-e Sharif prison uprising because they are more committed and they actually nowhere else to go, other than to fight and go down in blazing glory, according to them.
DOBBS: All right, Christiane, thank you very much. Christiane Amanpour from Kabul
Turning now for more on the military effort, we are joined by CNN military analyst, General David Grange. General, good to have you with us.
GEN. DAVID GRANGE, CNN MILITARY ANALYST: Good evening, Lou.
DOBBS: Apparently the last stronghold, Kandahar, is about to fall. This -- Christiane referred to it, there'd been much discussion of martyrdom. What we're seeing instead is defection, if you will, which is somewhat unusual in any circumstance of warfare. People simply switching sides. Is this creating a military problem?
GRANGE: I don't believe so. I think that the defense minister of the anti-Taliban -- the Northern Alliance made it clear that they are trying to cut some deals, negotiate for peaceful resolution of the turnover of Kandahar. And I think that's what the international coalition wants to see, as well. I mean, no one wants to go in and do city fighting unless they have to. Our forces, both the United States and our allies, are ready to do a piece of that if need be, but hopefully it will be turned over without doing that.
Now in reference to martyrdom, I think that you're right, that it's not -- it was expected that if bin Laden was killed or captured or Omar himself, it would be an issue. But, I think the best thing that could happen is if they had their bodies and they were paraded through Kabul by the Northern Alliance, by Afghans, and represented as foreigners into Afghanistan. That would be the best way to solve that.
DOBBS: Well, we've heard a couple of conflicting reports -- actually several conflicting reports -- on just exactly where Osama bin Laden might be. At one time, it was narrowed to a 30-mile square area. Most recently, the Pentagon suggesting that there were two general areas in which Osama bin Laden might be.
As one who has had to make these sort of determinations, what's is you best judgment here?
GRANGE: Well, it's a good chance that bin Laden is out of the country, could be in Pakistan or elsewhere. And Omar, I believe, is still there.
However, even if they are gone, these complexes, these cave bunker complexes, would still have to be searched out by someone because there's obviously hardcore cadre and some kind of security force, probably of foreign mercenaries, in these locations. So they would still have to be cleared by someone before this fight within Afghanistan is completed.
DOBBS: At this point, we have U.S. special forces. We have the 10th Mountain Division in Afghanistan. We have the United States Marine Corps. These troop levels are very small. They remain small. Do you anticipate that we'll see any significant increase in those troop levels as this progresses?
GRANGE: I believe there will be a bit more buildup, but not that much. I think the three airfields that are now occupied by international coalition to include American forces, for instance, the Marines in Kandahar, 10th Mountain in Mazar-e Sharif and Bagram, those are like hubs of the spokes of a wheel that allow us to reduce the operational radius of international coalition forces because of the massive legs involved. For instance, if you came from the Arabian sea, as an example, it's 300 miles to the Kandahar province. So this really reduces the reach and it allows you to sustain combat operations quickly on targets of opportunity as well as distribute humanitarian assistance, which I believe is going to be a massive requirement and continue to grow in importance as we get closer to winter. But this really helps us in that.
DOBBS: OK. General David Grange, thanks.
Well, as we reported earlier, the "Los Angeles Times" saying a top Osama bin Laden operative has been captured by anti-Taliban forces. The Pentagon says it has no information by which it could confirm that capture.
Joining us now to discuss that and bin Laden's next possible move is Peter Bergen. He is CNN terrorism analyst. He is also author of the book "Holy War, Inc.: Inside the Secret World of Osama bin Laden." Good to have you with us.
PETER BERGEN, CNN TERRORISM ANALYST: Hi, Lou.
DOBBS: The fact that we have seen these defections -- if I may point to that for a moment up here -- instead of surrender, these Taliban switching sides, as it were, crossing the borders of Pakistan. While some people can derive great comfort from that, it seems that there's also a level of discomfort. Should the al Qaeda be part of those people defecting, as it were, and crossing the border into Pakistan, yet there doesn't seem to be any visible concern on the part of the oppositions forces about that. Should they be concerned?
BERGEN: Well, it's a little unclear who exactly those people are who are melting across the border. I think the really hardcore al Qaeda members are not going to disappear into the night, as it were. I think they are going to stand, do a final last battle.
If you think about that psychology -- you were talking about martyrdom earlier with Christiane -- the hardcore al Qaeda people are, I think, willing to martyr themselves. There has been a pattern of martyrdoms operations that they have conducted, not least of which was September 11, which in their mind was a martyrdom operation.
I think bin Laden himself has made a number of statements which suggest he's willing to die in this final battle. I take those statements at face value. I don't think he is -- I think he's understood that the game is up and he is going to conduct a final battle sort of on his terms if he can.
DOBBS: Is -- do you have a sense, Peter, of just how many Taliban remain and whether or not, for example, Omar is near the al Qaeda, the Taliban that he would marshal to martyrdom, where Osama bin Laden, their leader, would be in hiding. they really have no command, do they?
BERGEN: Well, you know, the estimates of Taliban strength at the beginning of the war were somewhere between 20,000 and 40,000. Obviously, a lot of those people have either switched sides at this point. I mean, you're looking at a much smaller number. It's very difficult to tell.
You know, we've read that there are 2,000 people perhaps at this Tora Bora camp. That seems to me just to be an educated guess. I think that around bin Laden, at the end of the day, you are going to find several hundred thirty committed, mostly Arabs, not that many Afghans, but, you know, maybe some hardcore Taliban who will go along with Mullah Omar. I think Mullah Omar also is willing to -- he never surrendered bin Laden. It was very obvious it was going to be a big war. Clearly, he believes he's done the right thing. I think that he too will go out fighting.
DOBBS: It is somewhat difficult for, I think, certainly the Western mind to square up those who would claim that they were seeking martyrdom and would fight to the death and, at the same time, watch the number of defections.
How does one square up the cultural impulses that would lead to some braggadocio, if you would, about martyrdom and then, at the same time, watch hundreds upon hundreds of these Taliban defect, switch sides?
BERGEN: One of the things about the Taliban movement is that a lot of people joined the Taliban when they saw the win was going in Taliban's favor. They were not necessarily ideologically Taliban, if you will. Some of them were even former communists.
So in Afghanistan, it's very typical for -- conventional battles often don't happen. People switch sides when they see -- people switch sides because they're paid. So I think you are seeing a rather typical Afghan thing, where Afghans will switch sides once they've seen the tide is going against them. But I think a separate issue, the Arab fighters around bin Laden are willing to martyr themselves because we've seen that pattern before.
DOBBS: This has to have an extraordinary impact in the Muslim world where there was, if you will, a great buildup of what the Taliban were. They were the ultimate fundamentalist. Their commitment was without question. And there was a great deal of discussion going into this. It has to have an impact on the confidence of those who would support terrorism anywhere.
BERGEN: Well, I think, Lou, that the very interesting thing that we didn't see happen over the past few weeks -- you know, cities like Karachi in Pakistan or Cairo in Egypt -- these are cities up more than 10 million people. You are not seeing huge demonstrations in bin Laden's favor or Taliban's favor. Even at the beginning of the war, these demonstrations were really rather small. But I think part of that is September 11 is un-Islamic by any standard. You know, killing innocent civilians by the thousand is something the Koran would hardly endorse. And I think bin Laden basically blew his -- you know, he did have some measure of popularity. I think that he shot himself in the foot.
DOBBS: And now plenty of others hoping to help him out in that regard.
BERGEN: I think so.
DOBBS: Peter, thank you very much. Peter Bergen, the author of the book "Terrorism Incorporated." And we appreciate it. Come back soon.
BERGEN: Thank you.
DOBBS: Coming up next, we'll have a special report for you on aviation security, in particular, air marshals. We'll tell you who they are, how they are being trained and what makes them qualified to protect all of us traveling by air.
Then, we'll have an in-depth look at the fall of Enron. We'll be joined tonight by the CEO of Dynegy who pulled out of that proposed merger with Enron just yesterday, the ramifications reverberating throughout the markets. Enron's collapse may also cost you some money. We'll tell you which mutual funds invested in Enron and which are losing millions of dollars. Congress is finally closer to passing that economic stimulus package. Coming up next, we'll hear from the White House point man on the economy, Treasury Secretary Paul O'Neill. Stay with us.
ANNOUNCER: Next, Lou speaks with U.S. Treasury Secretary Paul O'Neill.
(COMMERCIAL BREAK)
LOU DOBBS, CNN ANCHOR: The hunt for Osama bin Laden's terrorist funding continues while more than 100 countries have now frozen millions of dollars in assets around the world, others have not. The lack of cooperation by some so-called allies has raised many questions and some criticism.
I, earlier, asked Treasury Secretary Paul O'Neill for his assessment of the situation and what needs to be done to raise the level of cooperation.
(BEGIN VIDEOTAPE)
PAUL O'NEILL, TREASURY SECRETARY: The Saudis have been responsive to the request we have made of them. The Saudis and others are often in a situation where their own laws require them to mount a certain level of evidence to take blocking action. And we are responding to those requests.
I think it is really noteworthy when we block the al Qaeda assets, the Al-Barakaat assets two weeks ago. The lead was the United Arab Emirates. Before we blocked any accounts here in the U.S., because they were ahead -- their clock is ahead of us six or eight hours -- they blocked before we did. So I think we got great cooperation. They showed the world how to do it. And it's symptomatic of what we're getting from countries around the world. They want to help and they will help. We are going to have to give them some technical assistance. We are going to keep closing this net on the financing of terrorists.
DOBBS: At this point, you are satisfied with the cooperation you are receiving?
O'NEILL: Yes.
DOBBS: You have no major issues or demands that you would require of the Saudis?
O'NEILL: No. I tell you, I had a meeting yesterday with all of the agency people who were involved in working on this subject. And one of things we need to do, and we are in the process of doing, is raising the bar on our own efforts. I suggested to them going forward, that when one of our intelligence organizations identifies a probable terrorist financing operation, that we should figure out how to take action to block the accounts within seven days.
I'm sure you know, if you have followed this subject closely, that it turns out that some of the information in retrospect about some of these organizations that's been around for a couple years. We need the raise the standards so that when we've got probable knowledge and seven days, we close the books.
DOBBS: Well, it's obvious that a lot of changes are being made and nearly all of them to the good. A lot of changes in the economy as well, if I can turn to that subject and the economic stimulus program.
The president made it rather clear yesterday -- I shouldn't paraphrase the president -- but he made it rather clear he wants the economic stimulus package out of the Senate and soon. How satisfied are you with the way that is going at this point?
O'NEILL: Well, you know, I'm impatient by nature, I suppose. And when the president proposed this on October the 5th, I said let's get it done before Halloween.
We've now had Halloween and Thanksgiving. And I guess I would say having observed that it's taken too long, that I'm pretty optimistic they are going to get it done pretty soon. We had a good meeting with the congressional leaderships and the four leaders of the tax writing committees last night to work on progress and procedure. And I think we're on our way.
DOBBS: Well, this -- one of the concerns now from a number of economists, as you know, is that this stimulus package simply isn't going to arrive in time if this continues. We've already lost the holiday shopping season which will have a significant impact, as you know, on fourth-quarter GDP. What's to be done?
O'NEILL: Well, first of all, the data that I have seen from shopping malls and retail sales in the early part of this holiday season look pretty good. Tomorrow or the next day, I guess, we will get auto sales for the month of November. They look like they are continuing to run an 18 million annual rate.
Nevertheless, we need -- we believe we need stimulus. We need it as soon as we can get it. And the important point is that the stimulus that's been recommended by the president will raise the level of real economic growth by half a percentage point and that half a percentage point has profound implications for the number of people that continue to be employed. Job security is important. And the number of people that will be employed -- we think this will add another 300,000 jobs. So we need the stimulus. We need it now. And it will add incrementally no matter what.
DOBBS: Four million people unemployed as of now. Mr. Treasury Secretary, are you and the president prepared to assure those four million people that they will have continued extended benefits?
O'NEILL: One of the elements recommended by the president is that we provide assistance to those that are harshly effected by lengthening time in the unemployment lines. So, it's part of the stimulus the president has recommended and we're anxious to get it done.
DOBBS: OK. Mr. Secretary, we thank you very much for being with us.
O'NEILL: Nice to be with you. Thanks.
(END VIDEOTAPE)
DOBBS: Treasury Secretary Paul O'Neill.
Still ahead here, air marshals being hired to protect the flying public. Just who are they? What we doing to train them? How safe will we be? Tonight, a special report.
Then, Enron's collapse ranks as one of the world's worst corporate disasters. We'll take a look at how the fallout could, and most likely will, affect you.
And Dynegy's $9 billion proposed merger with Enron looked like a good deal to some. Now that deal is dead. What's next for Dynegy? I'll be talking with the company's CEO, Chuck Watson, next. Stay with us.
ANNOUNCER: After the break, Lou speaks with Charles Watson, chairman and CEO of Dynegy.
(COMMERCIAL BREAK)
DOBBS: Shares of Enron today continued to plummet, losing 40 percent today, finishing at 36 cents a share. That's right, 36 cents a share. That stock had been $80 at the beginning of the year. Investors dumping those shares as the energy firm attempts to fend off bankruptcy. Just yesterday, Dynegy backed out of a proposed plan to purchase the company, that after Enron's credit ratings were downgraded to junk status.
Casey Wian is in Houston, the home of the corporate headquarters of Enron, and gives us a look now at what's next for Enron as best we can tell -- Casey.
CASEY WIAN, CNN CORRESPONDENT: Well, Lou, today was a day for Enron employees that they reported to work not sure about their future and not sure about the future of their company. It was also a day that Enron, for the first time, told us about what it is telling its employees. And those statements that Enron has been making to employees shed a lot of light on the company's financial picture.
First of all, Enron told its employees that they would be the first to hear about any potential layoffs. Those layoffs, of course, are widely anticipated. Enron says it has made no layoff notices, no announcements and has none planned at this time. But it did assure its employees that they would be the first to hear about them.
It also said that it is in the process of restructuring. Enron management has said that they are trying to do that outside of the bankruptcy court process. All the analysts we speak to, the employees we've spoken to today, and the people here in Houston seem to think that there's no other option for Enron besides bankruptcy. But the company, at least in its latest statements, has said they're still trying to explore other options.
Now perhaps the most telling statement that was made by Enron management to its employees today was this one. They said they will be paid. They will get paychecks tomorrow. The fact that a company that once the stature of Enron had to reassure its employees that they will be getting paychecks tomorrow to me was incredible. They said nothing about those paychecks in the future -- Lou.
DOBBS: Let me ask you, Casey, I think it's right. Number seven on the Fortune 500 list as of last year? This company has really just -- the devastation here is unbelievable. Is there you've talked there that anticipated a problem, anything approaching this magnitude?
WIAN: Not approaching this magnitude. There are plenty of people here in town who have -- who anticipated problems, who did not understand Enron's finances all along. And then especially had big questions, once the third quarter earnings came out in October that were sharply lower.
But no one anticipated that this company would unravel so fast.
DOBBS: OK, Casey. Thank you very much. Casey Wian reporting live from Houston, Texas.
Enron's downfall leaves, of course, a mountain of debt. Not only $13 billion on the company's balance sheet, but more than $5 billion of other debt, most of which is tied up in complicated, is an understatement, complicated share trust partnerships.
Allan Chernoff has the story.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): Because Enron's credit rating has been downgraded to junk status, the company's obligated to pay off the share trust partnerships within four months, a total of $3.9 billion. Add to that $2.1 billion due this quarter in bank loans and debt service. The next payment is $55 million due next Thursday, according to credit market participants.
TODD SHIPMAN, STANDARD & POORS: They do not have any kind of a severe liquidity problem in the very near term. The problem is more in the I guess medium term, as things become due over the next couple of months.
CHERNOFF: Enron has a broad list of creditors, including the bankers who try to shepherd Dynegy's takeover offer. J.P. Morgan Chase says it has $500 million in unsecured Enron debt and $400 million secured by Enron's pipelines. Analysts say Citigroup has $500 million invested, though the company refused comment.
Other U.S. banks with exposure, Bank of America, $500 million; Bank One, $300 million; and Wachovia, $50 million, according to C.S. First Boston. Overseas bankers today said they are at risk as well, including Credit Lyonnais with commitments of $250 million. Many energy companies have exposure from their trading activities, though they say they have been reducing their dealings with Enron in recent weeks.
The president of energy trader Aquila says his company has $50 million exposure.
ED MILLS, PRESIDENT & COO, AQUILA: And although that's not a insignificant number, it is a very manageable number for us. And we're looking forward to a very orderly transition.
CHERNOFF: Duke Energy says it has exposure of about $100 million. Williams, less than $100 million. The company today saying it expects to meet or beat earnings targets. El Paso Corporation about $50 million. Reliant Resources, $80 million. And Mirant, $50 to $60 million.
(END VIDEOTAPE)
(on camera): Chevron-Texaco invested $1.5 billion into Dynegy on November 9. The company now has the right to increase its ownership in Dynegy to about 36 percent from 26 percent or ask for its money back in two years. Investors don't seem overly worried. Chevron- Texaco stock today rose 90 cents -- Lou.
DOBBS: That was I think the only stock associated with this deal that rose on the day. Allan, this is extraordinarily complicated. It's still not clear what the balanced debt is -- off balance sheet debt here is for Enron, is it?
CHERNOFF: Well, there's really a ton of it. They had all these partnerships, where they put a lot of their -- what they consider to be non-core assets into those partnerships. They were hoping to basically have money generated, but that won't happen now.
DOBBS: How have the banks been reacting? How are they responding in this?
CHERNOFF: The banks are saying we can handle this. We're announcing how much we've got, liability wise. It not be too much of a problem for our earnings.
DOBBS: We all hope. All right, Allan Chernoff, thank you.
Well, as we reported, Dynegy pulled out of that proposed deal with Enron just yesterday. Dynegy saying it has to protect its shareholders. Despite calling the deal off, shares of Dynegy today again fell, closing down more than $2.00. Since the deal was announced, shares of Dynegy are down 8 percent.
Joining me now from Houston, Dynegy's chairman and CEO, Charles Watson.
Chuck, good to have you with us.
CHARLES WATSON, CHMN., CEO, DYNEGY: Good to be here.
DOBBS: These have got to be extraordinarily painful times for you. What was the final determinant in your decision to pull out of the proposition?
WATSON: We're actually continued to work on this deal literally up until yesterday morning. I had a board meeting around 10:30 or 11:00. And we were still trying to find answers. And when the rating agency downgraded Enron sometime late morning, I went into that board meeting and it was difficult to continue to support the merger with that knowledge. So we, the board, voted to terminate the merger.
DOBBS: Chuck, so you're saying that junk bond, that B-minus rating did it? But you couldn't have believed, could you, that that rating would be much higher, after you'd taken a look at all their books?
WATSON: Well, you know, I think the issue there is that -- what we've been trying to do since the time we did the merger, as you know Lou, there's a lot of optimism right when we completed the merger that this thing was going to be able to work. And then, when the 10Q got filed, all that confidence and credibility was sort of restored into the market was sort of destroyed.
And so from that point on, we've been trying to find short-term liquidity answers and then long-term viability answers. And we worked very hard, worked well over a week, almost 24 hours a day, to try to get there. So yes, we had a pretty good idea that things were not looking like there was light at the end of this tunnel. And then, I think when -- certainly when the downgrade happened, that first shut out any light that might be there.
DOBBS: Your balance sheet certainly much smaller than Enron's, at least at the beginning of the year. Give us your best judgment as to this point, what can happen with Enron?
WATSON: Well, you know, Enron has some very good pipeline assets, world class pipeline assets. And of course, those won't be necessarily impacted by this. I think the real issue is if and when they can restore their wholesale business to start moving volumes again, and if they can bring the counterparties back to their system. And that was -- the issue there is the short term liquidity. They've got to give confidence to the market that they can be back in business and so people would come back to them.
DOBBS: It looks like this could be, if there is such a thing as a final break in confidence in a market, when you look at that stock trading under 40 cents a share, it'd been up to $80, we've seen yours run off 8 percent. Those are big statements by Wall Street and investors.
In your case, eight percent is recoverable, but that's a lot of market cap. Enron rolling off $80 billion. You have rolled off market cap in this deal. The industry has lost another what, by my guess, in calculation, somewhere around $20, $25 billion. These are devastating reversals. What is the future?
WATSON: Lou, you know, the other slew with Enron going from $80 or $90 down to virtually where they are today, most of the rest of the industry is off, but I think that's certainly recoverable. I think there's a confusion in the market right now about Enron versus the other merchants and the other merchant energy players and the energy business in general.
And what we've found in the last 30 days and certainly the last week is that the market generally has managed to go around, because they're kind of wired around Enron in terms of the physical business. So I don't think the impact - this is new news to some people in the community, financial community. But at the end of day, I think you're going to find that Enron had a model that was much different than Dynegy's or any of the other merchants.
DOBBS: Oh, absolutely.
WATSON: They were a market maker in a lot of products, so that really, arguably, they didn't have the balance sheet to be able to handle.
DOBBS: Yes, that sure looks real clear right now. You mentioned the community at large in terms of the financial community. I mean, you're working with J.P. Morgan Chase, Citibank, both as bankers and investment bankers. You've got Anderson in as accountants here. There is a lot of new news for people that was sort of surprising that it was new news for. Wouldn't you say?
WATSON: Well, you know, you've also seen...
DOBBS: I just left out all the Wall Street analysts who had it wrong as well.
WATSON: You've seen a -- really a destruction in value that I think almost unprecedented in certainly the energy business, if not business in general. And it was a moving target. And I think the other thing that I would say is that you had some awfully bright people in there, trying to figure out a way to stop this, including you know, our whole team. And I think it's a shame. And I feel bad for the company.
I feel bad for its employees. This has just been a -- it's been a horrible last couple of three months. And I'm proud of Dynegy, the way we tried to step in and tried solve this and tried to put the merger together. It really worked. And we thought we had one. And as you know, they had some really good signs that this one was going to work, until there was another disclosure that surprised the market. And we never recovered.
DOBBS: Right. Well, you tried to be the white knight. This one looks like a problem that there is no, one hopes, consolable economic or financial problem, but this one looks very tough for Enron.
WATSON: As you know, Lou, there's always a time to say no. And we just -- we felt like at this point we weren't going to risk our shareholders and our employees and our brand. And unfortunately yesterday morning, we had to say no.
DOBBS: Yes, I suspect you've got some very thankful shareholders right now. All right, Chuck Watson, thank you for being with us. WATSON: Thank you, Lou.
DOBBS: Appreciate it.
Many investors are dealing, of course, with the realization that Enron shares are now at 36 cents each, but there are plenty of shareholders who aren't even aware they own the stock.
Deborah Marchini has that part of the story.
(BEGIN VIDEOTAPE)
DEBORAH MARCHINI, CNN CORRESPONDENT (voice-over): Investors who think they're watching the Enron drama from afar might want to think again.
RICHARD PETERSON, THOMSON FINANCIAL: I think, you know, Enron is probably held indirectly by millions of individuals, both in terms of mutual funds, public employee pension plans, and even those in 401Ks. So the exposure is widespread.
MARCHINI: Anybody with money in an index fund owned Enron, until now. Fund managers had to sell after Standard and Poor's kicked the company out of the S&P 500 on Wednesday.
Other stock funds held Enron, too. The biggest included Alliance Capital, Janus, Putnam, Barkley's and Fidelity. Sources close to Janus say it sold everything before the downgrade. And with the stock in a steady slide, it's likely others lightened their positions as well.
Caught with less warning were the bond funds. Many held on to the bitter end, sharing the faith of the rating agencies that a merger with Dynegy would bail them out.
JAY DIAMOND, GRANT'S FINANCIAL PUBLISHING: Well, if you own a taxable bond mutual fund that, as its charter, has to own investment grade bonds, you probably, your fund probably owned Enron.
In September, those bonds may have been valued on the books at 95 cents on the dollar. Well, if they're marked accurately in the December statement, those bonds are now going to be worth 25 cents.
MARCHINI: That hit will affect not only direct investors, but those who invested through retirement plans as well.
(on camera): For most individuals, the impact of the Enron implosion will be small. Though Enron was huge, it does not appear that any one fund had that much of it, enough to do real harm.
(voice-over): Regrettably, the investors most affected worked for Enron. Much of their retirement money was invested in Enron stock. And for a month, they were prevented from selling that stock while the plan changed managers and the stock price slid.
Deborah Marchini, CNN Financial News, New York. (END VIDEOTAPE)
DOBBS: Just ahead, the Taliban surrounded in their last remaining stronghold in Afghanistan. They are being bombarded. We'll have the latest for you on the war against terror in Afghanistan. And later, like it or love it, a business that's always in your face, advertising. Thank you. Madison Avenue's long road to recovery is next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: The latest developments in the war against terrorism. More than 50 U.S. Army troops have been deployed to an airfield near Bagram. Those troops will provide security at the Afghan field, which will be used to launch further military operations. The U.S. military now controls three Afghan airfields. U.S. war planes continuing to target Taliban forces near and in Kandahar. Recent sorties have been carried against Taliban buildings and cave complexes. Pashtun opposition forces are now positioned just outside Kandahar.
The Justice Department named Clayton Lee Wagner as its chief suspect in hundreds of letters sent to abortion clinics. Those letters falsely claimed to contain anthrax. Wagner escaped from a jail in Illinois in February. He is now on the FBI's 10 most wanted list.
The Justice Department also announced an initiative to encourage foreign nationals to come forward with information about suspected terrorists. People supplying such information would be eligible for visas and eventual U.S. citizenship.
Just ahead, stocks make solid gains. The market with new life. Some doubts, however, persist in some quarters of Wall Street. We'll take a look at the day's activity on the market. And then from Wall Street to Madison Avenue, the advertising industry in the grips of its own recession. We'll see if there's any hope for this battered business soon.
(COMMERCIAL BREAK)
DOBBS: One of the first budgets to be cut during a recession is often advertising. This downturn has pushed advertising business, in fact, into the worst decline in more than a decade. General Motors, one of many big advertisers, canceling their options to buy ads next year.
Susan Lisovicz now takes a look at how the spending slump has created a business climate on Madison Avenue that is murky at best.
(BEGIN VIDEOTAPE)
SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): This is advertising's great white hope for the new year. But even the winter Olympics in Salt Lake City hasn't put a thaw in the lingering chill on Madison Avenue. General Motors, Kraft Foods, and Coke, three of the largest advertisers in the world are among the companies that have canceled options to buy ads in the first quarter of the year. Those options were purchased last spring in the so-called upfront season, when the broadcast and cable networks trot out their fall programming lineup before ad executives.
Commitments made well before September 11, when an already pronounced ad recession got even worse. Media buyer John Mandel says he's never seen anything like it. Advertisers this skittish this close to the first quarter.
JOHN MANDEL, MEDIACOM: In other years, I could sit here the week after Thanksgiving and tell you within 5 percent where the first quarter was going to be. This year, I'll get back to you on March 29, March 30, somewhere in there and tell you.
LISOVICZ: That's why the Olympics are so important.
MERCEDES CARDONA, ADVERTISING AGE: People who committed to the Olympics are still going to advertise in the Olympics. People who buy into the Super Bowl, they're still going to go in for the Super Bowl. They may not five spots, they may only do three or two, but they still want to have the visibility.
LISOVICZ: Many analysts say they are in the process of adjusting their forecast for 2002, which generally see a stronger second half when the overall economy is expected to improve.
(on camera): One advertising veteran compared the current environment to the tag line in a popular commercial. Never let them see you sweat. He says network executives are putting on a face, as they nervously try to sell airtime ever closer to game time.
Susan Lisovicz, CNN Financial News, New York.
(END VIDEOTAPE)
DOBBS: Joining us now for a closer look at what's happening in the media industry is Chris Dixon of UBS Warburg, a man who always knows what's happening in the media business.
Good to have you here, Chris.
CHRIS DIXON, UBS WARBURG: Nice to see you, Lou.
DOBBS: These are, as Susan Lisovicz has just reported, difficult times for advertising supported media in particular. What is your take as to what we can expect for the advertising supported media over the course of the next year?
DIXON: Well, I think you have to realize that advertising and the advertising stocks, the advertising driven stocks, are going to disconnect. Everybody knows that advertising's really weak, but we think the end of this year's going to be very close to inflection point. In fact, in the next couple of weeks could be a good time to be taking a hard look at these stocks.
The reason is simple. Advertising tend to move out, coincide if you will, with capital spending. And so, as companies start to see some view of what this is going to look like, as we move into recovery, the market will discount by six to eight months. And that suggests that advertising stocks will be some of the first ones to start to move, as you take a look at what's going to be happening.
DOBBS: Really? The idea being that the first in is the first out in this case?
DIXON: Well, the market tends to be a discounting mechanism. And we've already seen a runup in many of the advertising. European stocks have run up very, very well in the past 15 to 20 percent. And yet, the fundamentals are just horrid.
So the issue here is are investors willing to look through to the other side, to see a light at the end of tunnel, instead of an oncoming train?
DOBBS: Right. Well, we have seen this market, as you know, rebound remarkably from the levels of the week following the terrorist attacks. Will we see these levels sustained, in your judgment?
DIXON: I think we've seen a steady response. What we're going to see is probably another 30 to 60 days of very choppy behavior, particularly in some of the big names that we focus on, companies like AOL, Viacom. And clearly, this is going to be a unique opportunity. We're telling investors at UBS now is the time that if you own them, hang on to them. They can be a little bit bumpy, but they can great businesses. And if you don't own them, pay attention because the next 30 days could give you an opportunity to really build positions.
Fundamentally, you have an industry where you've got major consolidation. You've got new companies. AOL Time Warner, Viacom, CBS, Vivendi, Universal. You've got great balance sheets. And everybody needs information to be informed and to be connected.
DOBBS: Well, you're connecting a few folks next week at your conference on the media. What do you expect? Are those CEOs going to be showing up with rather dour faces in the face of all that they've gone through over the course of last year?
DIXON: Well, I don't think that many of the CEOs, as you well know in the entertainment industry, tend to talk down their businesses.
(LAUGHTER)
I think the reality is next week, we'll certainly have some sober optimism looking to very disappointing fourth quarters and urging investors to look through the other side.
This is the 29th year we've done this. And I think that at UBS this year, we really are going to be at an inflection point. DOBBS: You make a fascinating point. I hadn't really thought about it. There are some major mergers here that have still -- that are really very fresh. The AOL Time Warner. the Viacom, CBS. That's an interesting point.
DIXON: Well think about it. You have got companies that have effectively gone out. They've integrated their operations, two years of integration. They've downsized or rightsized. They've got stronger financial footings.
And yet, at the end of it, people still want to be informed, want to be connected. I mean, one of the awful things or interesting things that happened at the awful events of September 11 and the aftermath is that media worked. It went out there. And we all were able to understand what had happened around the world. It's there.
DOBBS: And even the entertainment side.
DIXON: And entertainment, whether it's "Harry Potter" or even "Monsters." And that certainly added relief for us.
DOBBS: Two blockbuster films.
DIXON: Yes.
DOBBS: Chris, as always, good to have you here.
DIXON: Thank you, Lou.
DOBBS: Chris Dixon, UBS Warburg.
A few mixed signs on the economy today. Orders for big ticket items rebounded in October sharply in fact. Durable goods orders soaring a record 12.8 percent. That's the first increase, by the way, since May.
Separately, the number of first time filings for unemployment benefits far higher than economists had expected, jumping 54,000 last week. The boost in durable goods orders, helping to lift markets higher on the Street. The Dow scoring a major gain, up 117 points. The Nasdaq surging 45 points, gaining almost or 2.5 percent. The S&P 500 up 11 points. But today, the index was really the S&P 499. Enron dropped from the S&P 500 before the open of trading today.
NVIDIA added after the closing bell.
(PREVIEW)
DOBBS: Coming up next here, we'll take a look at what could move some of the markets tomorrow. What we can expect on the morrow. Stay with us.
(COMMERICAL BREAK)
DOBBS: Tomorrow, we'll have preliminary third quarter Gross Domestic Product numbers. Those numbers are expected to show a sharp revision from the first report. The economy contracted at a rate of eight-tenths of a percent, according to most economists. And Fed Chairman Alan Greenspan will be talking to the Euro 50 group in Washington, D.C. And our own Kathleen Hays will be there covering that for us.
And for tonight, that is MONEYLINE. Thanks for being with us. I'm Lou Dobbs. Good night from New York City.
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