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Aired January 28, 2002 - 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: Tonight on LOU DOBBS MONEYLINE, the economy is the focus of the president's state of the union address. His top economic adviser, Glenn Hubbard, joins us to spell out the president's plan.
Efforts by Congress to link Enron to energy policy could wind up in court, as Vice President Dick Cheney fights for executive privilege.
(BEGIN VIDEO CLIP)
DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: The collapse of Enron in no way, shape or form affects the basic principle. We're trying to protect it. And this is about the ability of future presidents and vice presidents to do their job.
(END VIDEO CLIP)
ANNOUNCER: And Colin Powell breaks ranks with the administration on what to call war captives. We'll have the latest on this unseeingly battle within the White House.
This is LOU DOBBS MONEYLINE for Monday, January 28. Here now Lou Dobbs.
LOU DOBBS, HOST: Good evening everyone. Tonight, the Bush administration is on the offensive. President Bush insists that captives in Cuba are not prisoners of war and never will be. The president also digging in for a court battle with Congress over his energy policy and those who attended task force meetings. Mr. Bush fighting Democratic criticism of his state of the union address even before he delivers it and his calls for tax cuts and more spending as well. John King our senior White House correspondent joins us now from the White House with more on the story -- John.
JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: Well, Lou, let's start with Enron. The vice president sat down for an interview with us at CNN today. You -- as you just noted, the president and also said some on Capitol Hill, in his view, trying to politicize this, a bit of history of course, this fight for the task force records predates the collapse of Enron, the Cheney energy task force. Some in Congress wanted them dating back to last summer. The administration said no, a president and a vice president have every right to private, secret meetings as they try to come up with policy. Since the collapse of Enron, some Democrats suggesting the company received special treatment from its friends here in the Bush White House. Our polling indicates it is more and more of a political issue out in the country, but the vice president, in that interview today, said he wasn't worried about the politics. This administration will go to court and fight for the principle.
(BEGIN VIDEO CLIP)
CHENEY: Yeah, we went through this debate with Henry Waxman and the GAO last summer. We said no, we're not going to give it you. And GAO at that point sort of went quiet. They kind of backed off because I think they know they've got a weak case. All the attorneys that reviewed this and the Justice Department and the White House Counsel's office and so forth have a concluded that the GAO doesn't have the authority they're seeking to exercise here.
What's happened now since Enron collapsed is the suggestion that somehow now the GAO ought to come back and get the information? But the collapse of Enron in no way, shape or form affects the basic principles we're trying to protect here. This is about the ability of future presidents and vice presidents to do their job.
(END VIDEO CLIP)
KING: The overwhelming majority of Republicans on Capitol Hill backed the administration when it comes to the principles. Some worried though this could become a political issue in this, a congressional election year. The vice president shrugged that off today. He said this was - quote - "a Washington feeding frenzy, a classic Washington feeding frenzy." He said he won't let it distract the president or himself from the agenda. But despite, Lou, increasingly, it looks like it will go to court perhaps as early as the end of this week.
DOBBS: John, is there a, in your judgment, a precedent in favor of either the GAO or the White House on the issue?
KING: Well, the vice president said all legal has been done by the lawyers. The Justice Department, the White House Counsel all believe the White House will win. He thinks the GAO, which is the investigative army of Congress, has no right to ask the executive branch for these types of documents.
He says, on the specific question of how many times did he meet Enron officials, did he discuss its financial situation, he says he's answered those questions. He says the rest of this is out of bounds. And he blames not only the Democrats, he says Republicans asked many of these questions and are still asking these questions about Clinton administration documents. This vice president said whatever the political fallout, this administration will take a stand.
DOBBS: And in terms of Enron and the president's state of the union address, any indication that Enron will be even be mentioned or a part of the president's address? KING: I am told, Lou, by senior administration officials, you will not hear the word "Enron" in the president's 45-minute address to the Congress tomorrow night, but you will hear the president say because of recent events, it is clear that the Congress and the administration need to work together to improve disclosure rules about corporations and also to increase protections in 401(k) and other pension-style plans. So he will address the political fallout of the Enron issue, but he will not, we are told, mention the name Enron.
DOBBS: And the remarkable report that Secretary of State Colin Powell, had in effect, broken ranks with the administration on the issue of detainees, captives or prisoners of war. How is the White House dealing with this sort of remarkable situation?
KING: Well, both the president and vice president today saying that there is no break in the big picture within the administration, but the secretary of state does not want those detainees classified as prisoners of war. He has apparently though said in some meetings he believes they deserve full protection, as would be given under the Geneva Conventions. But the president and the vice president - today, the vice president, in very plain language said, "these are terrorists." The administration, he says, believes it is handling it just right. They will not label them prisoners of war.
DOBBS: Isn't this, John, on the part of the administration an effort out of distinction without a difference? Whether one talks about the convention, the Geneva Conventions or whether one talks about prisoner of wars, the effect in terms of their standing within the United States is precisely the same, would it not be?
KING: The administration believes that is the case. Some human rights groups say that there would be visits and other regular meetings that those detainees should get, that they should be afforded more protections. The administration says when it comes to health care, when it comes to religious practices, when it comes to the most basic rights, they are being treated in accordance with the Geneva Convention, but that this administration will not give them the designation as prisoner of war. And the administration says it will not do that because they do not fit. It says they are not part of any state army or anything of the like because there's a fight about this. But the administration says, again, like on the Enron issue, it won't back down.
DOBBS: And I can remember, as I'm sure you can, vividly of President George W. Bush saying, as he nominated his secretaries to their positions in the Cabinet, he or she will be advising me first and foremost and you will find out later what we discuss should I decide it. This seems like a remarkable breach of what the president said would be and the first such breach.
KING: And they're not happy about it within the administration. The vice president today saying it is not helpful when these things are discussed in public. The president, in the past, has complained about leaks, about his policy especially what we were getting about the issues of the military tribunals. Remember, some preliminary drafts of that policy were released to the public as well. This is a president who puts a premium on being able to have candid and secret conversations with his advisers. He does not like leaks. He likes a secure ship, if you will. He's not happy about it. The vice president wasn't happy about it. You can be sure they're trying to find out just exactly who is trying to push this debate along with these leaks.
DOBBS: John, thank you very much. John King, senior White House correspondent. And we want to remind you to stay with us here on CNN 8:00 p.m. Eastern Time John King and his exclusive interview with Vice President Dick Cheney, 8:00 p.m. Eastern.
And we'll have more on the president's state of the union address. Later here, Glenn Hubbard, the chairman of the president's Council of Economic Advisers, will be here to discuss the Enron collapse, economic recovery, the budget and what we can expect from the president in his economic annunciations in the state of the union address. All of that coming up later.
The president, today, made it clear again, war captives in Cuba and Afghanistan are detainees, as John King just reported. They are certainly not prisoners of war. The president responding to reports that Secretary of State Colin Powell was pushing for a reversal of the president's position. Jamie McIntyre is at the Pentagon and has more on the story for us now -- Jamie.
JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, Lou, it's a question the Pentagon would just like to go away. Why is it that prisoners who are literally prisoners of war are not legally prisoners of war? And the Pentagon has made all the same arguments that you've heard. Some people have suggested what's really behind this is that the Pentagon is afraid that if they grant prisoner of war status to those detainees that all they can get out of them is their name, rank and serial number and they don't even have ranks and serial numbers. So all they get was their names. But the Pentagon insists that's not the case. Even if they were prisoners of war, they could be interrogated about war crimes.
And the other provision that seems to be in contention here is the one that requires that a military tribunal or some kind of independent body decide whether or not the prisoners rate prisoner of war status, such as Taliban fighters who were fighting for a de facto government. But today, President Bush made it clear again that the decision would not be made by some independent body, but would be his decision.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I am looking at the legalities involved with the Geneva Convention in either case. However I make my decision, these detainees will be well treated. We are not going to call them prisoners of war in either case and the reason why is al Qaeda is not a known military. These are killers. These are terrorists.
(END VIDEO CLIP) MCINTYRE: And in other news from the war today, another military accident has injured 14 soldiers from the 101st Army Division Airborne Assault and they were flying in a CH-47 Chinook helicopter, which was attempting to land near coast in eastern Afghanistan. Apparently, the helicopter either hit something or went out of the control at the last moment. It did what the Pentagon is calling a hand landing. It extensively damaged the helicopter and injured 14 soldiers. They're all receiving medical attention in Afghanistan. The exact nature of their injuries has not been disclosed.
This has been, though, a remarkable campaign. There's only been two deaths in this war as a result of enemy action, a CIA agent and a soldier. The other 19 injuries, deaths, have all come as a result of accidents and no deaths in this accident today - Lou.
DOBBS: Jamie, I want to, if I may, return to this issue on detainees, again, this rather public breach, an embarrassing one, I think it would have to be agreed for the administration. Colin Powell, some of the WAGs suggesting that there is a, if you will, an ego conflict between the secretary of defense and others in the administration and of course, Colin Powell. The secretary has been adamant in this, representing the president's interest. Is there anything going on within the Pentagon that would have suggested that this would be a timely moment for the secretary of state to take on, publicly, the secretary of defense and the president's administration?
MCINTYRE: Well, the Pentagon is completely down playing the reports of a rift between the Pentagon and the State Department on this critical issue there. You know the official line is that this was a misinterpretation by some lawyers who were working through some of these issues and that there will be a consensus administration view on this and that Colin Powell has signed on to this view.
Now, what goes on in terms of the debate behind the scenes, clearly this is a debatable issue? And one of the interesting things about this, is that Secretary of Defense Rumsfeld has - seemed to be want to want to put an end to the debate by saying that this is an unambiguous position, when in fact there's a lot of ambiguities surrounding it. So I the - you know, there's always a natural tension between the State Department and the Pentagon, a lot -- mostly that's kept behind the scenes. Sometimes it bubbles out publicly and it's a little bit of an embarrassment, but in the end, they'll have a unified position because the president makes those decisions and everybody signs up.
DOBBS: Jamie McIntyre from the Pentagon, thank you.
Enron employees who lost millions of dollars in retirement money want to make certain they receive, if it's possible, at least some compensation. And today, 400 of those Enron employees sued the company. The employees say they were encouraged to invest in Enron without being told of its shaky financial condition.
Ninety percent of Enron's revenues came from its energy trading business. That business now owned by UBS Warburg. With that operation gone, what is really left of Enron? Fred Katayama has the story.
(BEGIN VIDEOTAPE)
REV. JESSE JACKSON: We're going to have a prayer vigil and rally.
FRED KATAYAMA, CNN CORRESPONDENT (voice-over): The Rev. Jesse Jackson came to Enron to pray for its laid off employees, but the company could use a prayer if it's to survive. Gone is Enron's profit gushing crown jewel, its trading operation sold to UBS. Gone, too, is its prized Northern Natural Gas Pipeline, sold to Dynegy. And it's utility, Portland General, will be sold to Northwest Natural Gas.
What's essentially left of what was once the seventh largest U.S. industrial company is very little -- a few smaller pipelines worth about $1 billion, $1 billion in natural gas and power contracts and utilities in Brazil, Argentina, and India and other international assets worth roughly $6.5 billion. Those estimates by the investment bank, Simmons, add up to less than $9 billion, one-fifth, of what Enron claimed they were worth in early December.
RAY NIMMER, UNIVERSITY OF HOUSTON LAW SCHOOL: The key issue is whether they can find enough left in the assets so that they buy a -- stripping away some of the assets, changing some others, they'll come out with a sort of basic core of a company that is profitable at least in terms of a positive cash flow and whether that kind of core would be sustainable as a separate company.
KATAYAMA: If the core business doesn't produce enough cash flow, liquidation could be the most likely outcome.
JEFF DIETERT, ENERGY ANALYST, SIMMONS & CO.: There is a case where the creditors would look at pure liquidation, cutting their losses and getting this issue behind them would benefit the creditors and there are liquid markets for most of the asset that's in - Enron's got. And they could be divested fairly quickly and easily.
KATAYAMA: But with some Latin American economies facing a crisis, some analysts feel Enron may be better off restructuring the company first and waiting for higher priced offers for its assets.
(END VIDEOTAPE)
KATAYAMA (on camera): But a few creditors are calling on the bankruptcy judge to appoint a trustee. If that were to happen, experts say, it's most likely the assets would be sold off and the lights would go out on Enron -- Lou.
DOBBS: Fred, you showed Reverend Jesse Jackson there praying with employees. Tell us more about that.
KATAYAMA: Well, it wasn't a big gathering, Lou. There were -- in fact, I think the media outnumbered the number of attendees. There were about 10 people gathering. The Reverend Jackson plans to take these laid off Enron employees, put them on bus and the caravan will travel several cities, such as Atlanta, and arrive in Washington tomorrow.
He wants - he wanted them to attend the state of the union address, but he says the White House wouldn't offer tickets. Basically, the message he's trying to get through is that the federal government should come to the aid of these laid off employees.
DOBBS: Well, a highly political solution suggested by the Reverend to a highly economic situation. All right, thanks a lot, Fred. Fred Katayama from Houston.
Enron's collapse so large, you might wonder how anyone could have missed the signals, especially the agencies that are supposed to watch for these things. Wall Street ratings agencies, S&P, Moody's, those agencies did lower their ratings on Enron shortly before the collapse. But critics want to know why alarms weren't sounded much, much earlier, Allan Chernoff with the story.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): In the final days before Enron's bankruptcy filing, it was Dynegy's planned purchase of the company that was driving Standard & Poor's rating of Enron rather than a new discovery of Enron's hidden finances.
TODD SHIPMAN, STANDARD & POOR'S: We had always connected Enron's investment grade rating to Dynegy's interest in the Enron trading operation.
CHERNOFF: While it is now clear that Enron's public financial statements failed to reveal the true state of the company, ratings agencies are taking action to try to be sure they uncover the next Enron well before the collapse. So Standard & Poor's and Moody's are committing to more frequent commentary, intensified surveillance and analysis of triggers, such as a decline in stock price that may force a company to borrow more money.
SHIPMAN: These are things that have not historically been disclosed and the focus of the rating agency should bring greater transparency to this issue.
Rating agencies are not auditors. We depend upon the quality and integrity of financial disclosure.
CHERNOFF: Even Enron's auditor, Andersen, argued Monday it did not receive complete details of the firm's financial arrangements and maintains it not at fault.
JOSEPH BERARDINO, CEO, ANDERSEN: Accounting issues did not cause Enron's stock price to fail. It's failed business investments it.
CHERNOFF: Credit rating agencies have come under criticism for not detecting serious trouble at Enron earlier and downgrading Enron's debt to junk status only five days before its bankruptcy filing on December 2.
Ratings agencies counter that they did provide some warning. Moody's said it might downgrade Enron in mid-October. And S&P had placed Enron on credit watch on November 1, seven days before Enron dropped the bombshell that it was restated earnings for the past four years and announcing a loss of more than $600 million.
(END VIDEOTAPE)
CHERNOFF (on camera): It is a delicate balance for the rating agencies. They need to provide timely and insightful analysis for investors, yet, they don't want to move too quickly in downgrading a credit for fear of precipitating a financial collapse that otherwise might not occur -- Lou.
DOBBS: Well, Allan, that's all well and good, but the point of fact, in some ways the rating agencies are in a superior position, a much superior position to the analysts. They can go in, take a look at the operations. They have no vested interest. They should be independent and rigorous and it doesn't seem that they were here. I mean I don't see how they can claim much bragging in the way of bragging rights six days before a bankruptcy?
CHERNOFF: Certainly, a lot of people, a lot of investors very upset with the performance of the rating agencies. No question about it, Lou.
DOBBS: OK, and you believe these steps that they are taking to reinvigorate their watchfulness, they seem, at least at the outset here, just a little tappet for what needs to be done, don't you think?
CHERNOFF: Well, I think they are taking the criticism seriously and they are only beginning to tighten up and speed it up.
DOBBS: Terrific. Allan, thank you very much. Allan Chernoff.
Coming up next here, Mr. Karzai goes to Washington, opening the Afghanistan embassy there and looking for more financial aid. We'll have a report for you from Washington. We'll also be updating the latest in the war against terrorism. U.S. Special Forces have ended a six-week siege by al Qaeda fighters. And the battle of the budget; it is underway. President Bush wants to cut taxes, boost defense spending. The administration defending the position right after this.
ANNOUNCER: Next, Lou talks with Glenn Hubbard, chairman of the Council of Economic Advisers.
(COMMERCIAL BREAK)
DOBBS: The president delivers his first state of the union address tomorrow evening. The president promises to make the economy much of the focus of his remarks. He wants to cut taxes while spending more on defense and homeland security. Democrats want to know how he can do that and balance the books. And many economists say there's not much need for an economic stimulus now, since they say the recovery is underway. Joining now us to straight all of them and us out is Glenn Hubbard. He is the chairman of the Council of Economic Advisers.
Good to have you with us.
GLENN HUBBARD, CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS: Thanks, how are you?
DOBBS: Well, I am very well and it appears that the economy is getting better, is it - is it correct to say that in your judgment the recovery is underway?
HUBBARD: I think that's right. I think the quarter we're now in, the first quarter, will be positive growth and I think the recovery will get better throughout the year. Having said, there is still some downside risks in the economy and still the need for a good stimulus package.
DOBBS: Why a stimulus package here, Mr. Chairman, when the recovery is underway, as you acknowledge? We have an even dozen interest rate cuts by the fed to stimulate the monetary policy. What makes it necessary now if we are beginning to roll once again?
HUBBARD: Well, first, the forecast you and I just discussed would be like a consensus forecast from the private sector. But within that consensus forecast, there's really a large range and there are substantial downside risks to the economy as well. A stimulus package is a kind of growth insurance for job creation. And let's remember that the unemployment rate is likely to continue to rise even once the recovery begins. The key is to get job creation going again as fast as possible.
DOBBS: What is your best judgment as to where we will go with the unemployment rate? How many more hundreds thousands of Americans must lose their jobs before the recovery gains traction?
HUBBARD: I think this will, again, depend on part on the stimulus package. Without a stimulus package, I think we'll have about 300,000 fewer jobs this year. The unemployment rate probably will peak not much north of where it is now. But I think the pace of the recovery really will depend in terms of jobs on the stimulus package.
DOBBS: Let's turn, if we may, to the, the situation with Enron. You and Lawrence Lindsey both monitored the situation for the administration and decided it was, if I may paraphrase, no big deal. Did it surprise you, the scale, the scope, and the power of this collapse?
HUBBARD: Well, let me step back for a moment. What I think is important to separate are the issues having to do with the Enron matter as a firm and the issue with markets. And part of my job is to worry about everything. And in worrying about energy markets and financial markets, I think the Enron collapse probably had very little effect.
The Enron affair is, however, a very big deal to people who may have lost savings and investment. And the president as you know, has teed up two working groups, one in the area of pensions and the other in the area of corporate financial disclosure to make sure that we've got the right kind of disclosure for investors.
DOBBS: And is it your judgment that we do?
HUBBARD: I think that's an important area for the working group to consider. My personal judgment as an economist is that we could improve the substantially the quality of disclosure.
DOBBS: And if we may, to return to the president's proposals tomorrow, not asking to you anticipate it by much, certainly not more than 24 hours, Mr. Chairman, the idea that there should be further tax cuts when we have so much stimulus in the economy, a stimulus package plus tax cuts. That begins to strain at the outer reaches of even some Republican's thinking. How does the president justify further tax cuts?
HUBBARD: Well, let's be careful, Lou. I think the tax cuts are really what -- again, as the continuation of what was enacted already into law. In the Council, we've argued that that could add as much as four-tenths of percentage point to GDP growth over the next several years. Those tax cuts are still very, very important, as is the right kind of stimulus package.
DOBBS: So you're not - the administration is not talking about adding tax cuts to what has already been passed?
HUBBARD: Well, I don't want to get out in front of the president's description of individual proposals, but the tax cut that's really the centerpiece is the tax cut that's already been enacted.
DOBBS: And Mr. Chairman, we don't mind at all should you choose to get out ahead of the president here on this broadcast.
HUBBARD: I appreciate that.
(LAUGHTER)
DOBBS: Glenn Hubbard, thank you very much for being with us.
HUBBARD: Thank you very much, Lou.
DOBBS: Appreciate it.
Well, forget the embargo, American food and grain headed to Cuba, 227,000 tons of it. And Cuba has just ordered more, 1,500 tons of chicken legs from Tyson foods. Some are now wondering if the hard line against trading with Cuba is crumbling and whether American companies can expect more business with Cuba sometime soon. Kitty Pilgrim has the story.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): U.S. corn, wheat and soybeans are sailing into Havana harbor, part of a nearly $40 million sale to the Cuban government. U.S. companies like Archer Daniels Midland, Cargill, and Riceland, are all shipping food to Cuba. In addition, Cuba has just tripled its order from poultry company, Tyson Foods, to 1,500 tons of chicken legs.
VAN VEUTTER, CARGILL: They have given us some indication that they may be interested in buying in the future, which is a bit of a change from the past, so we're very pleased about that.
PILGRIM: The United States has an embargo against U.S. companies doing business with Cuba. But a U.S. law signed into effect in October 2000 allows sales of U.S. food and healthcare products, but only if Cuba pays cash. That's the sticking point. The Cuban government swore they'd never buy a grain of rice if they had to pay cash. Instead, Cuba buys $750 million worth of goods from overseas, mostly Europe, and much of that is on credit.
But then, Cuba backed off that statement, ordering food from U.S. companies after the devastation of hurricane Michelle.
JOHN KAVOLICH, U.S.-CUBA TRADE & ECONOMY COUNCIL: It may give angina to some U.S. policymakers, but the reality is that Cuba has continued to increase the quantities of some product both in November, December and most recently with Tyson Foods one week ago.
SUSAN KAUFMAN PURCELL, THE AMERICAS SOCIETY: It's clear they need food and they need it quickly. So in that sense, that's one explanation for the nicer tone. On the other hand, there may be a tactical change that we could be seeing.
PILGRIM (on-camera): No one is suggesting that the Cuban embargo will be lifted anytime soon. But policy is often made in small steps, and this pickup in commercial activity suggests that some small steps may be being taken in opening up U.S. trade with Cuba.
Kitty Pilgrim, CNN Financial News, New York.
(END VIDEOTAPE)
DOBBS: President Bush, today, said the United States will play a leading role in rebuilding Afghanistan. President Bush made those comments to Afghanistan's interim leader Hamid Karzai on his visit to Washington.
In his first television interview since coming to the United States, Karzai tells CNN tonight that U.S. support is critical to the future of Afghanistan.
(BEGIN VIDEO CLIP)
HAMID KARZAI, CHAIRMAN, AFGHAN INTERIM ADMINISTRATION: The Afghan people want to be with America in this struggle against terrorism to the end of it. But Afghans also want their country to be made, their country to stand back on its own feet. So our people, the Afghans, want America and the rest of the world to stay with us.
(END VIDEO CLIP)
DOBBS: President Bush says the United States will stay with them and will help Afghanistan train police officers and help with the development of an Afghan national military.
Earlier today, Karzai watched as his country's flag was hoisted in front of Afghanistan embassy in Washington. That embassy was closed in 1997 after the Taliban seized power. And you can see certainly and hear more of Hamid Karzai's interview with Wolf Blitzer coming right after MONEYLINE.
In Afghanistan, U.S. Special Forces today brought a deadly end to a six-week standoff with al Qaeda forces. Special Forces were joined by Afghan soldiers in today's 12-hour assault. The al Qaeda fighters were barricaded in a hospital in Kandahar since December, and six of them were killed in the raid. And five Afghan soldiers were injured, but there were no reports of injuries among the U.S. Special Forces.
An unknown Pakistani group has kidnapped an American journalist. Daniel Pearl, a 38-year-old reporter for the "Wall Street Journal" has been missing since last week. In an e-mail with photographs sent to news organizations over the weekend, the group says it's holding Pearl in retaliation for the detainment of Pakistani prisoners in Guantanamo Bay, Cuba. One of the photos shows Pearl bound in chains with a gun pointed to his head. The State Department says it's working with Pakistani authorities to try to secure Pearl's release.
The U.S. submarine responsible for the deadly collision with a Japanese fishing vessel last year has been in another accident. The USS Greeneville collided with a Navy surface ship Sunday off the coast of Oman. That accident happened as personnel were transferring from one craft to the other. The Pentagon says no one was injured.
Last February, the Greenville hit a Japanese fishing vessel off the Hawaiian coast, nine people were killed.
Just ahead here, a company that promised to open up a new frontier in global communications has failed, and investors worry about the timing of an economic recovery, but my next guest says don't worry.
ANNOUNCER: Next, Lou speaks with Lakshman Achuthan of the Economic Cycle Research Institute.
(COMMERCIAL BREAK)
DOBBS: Another high profile bankruptcy today. Fiber optic network operator Global Crossing has filed for bankruptcy. The New York Stock Exchange halted trading on the stock. Shares closed Friday at just 51 cents a share, a 99 percent decline from its high. Peter Viles has the story.
(BEGIN VIDEOTAPE)
PETER VILES, CNN CORRESPONDENT (voice over): Here's something you don't see every day. A CEO goes to the New York Stock Exchange to tell investors their stock is essentially worthless.
JOHN LEGERE, CEO, GLOBAL CROSSING: You know, I categorize us as a very healthy operating business right now, but with a sick balance sheet.
VILES: So sick, Global Crossing may never trade again on the New York Stock Exchange, where Gary Winnick rang the bell a little over a year ago, and where Winnick last May sold $123 million worth of company stock.
Shares never opened today, suspended by the Big Board after the company filed for Chapter 11, telling investors: "Existing common equity and preferred shareholders would not participate in the new capital structure." No surprise on Wall Street, which had been anticipating a Chapter 11 filing.
DAIVD BARDIN, JP MORGAN: The company said point blank, very forthrightly, end of third quarter result, that their earnings were not on track to meet their commitments in their bank facility.
VILES: Global Crossing wrote a compelling story. It laid a global network of fiber optic cables, built to market value of $47 billion, once had a deal to merge with Baby Bell US West, but that deal collapsed. So did Global Crossing stock. It fell from a peak of near $60 to below $1 a share.
The company lists assets of $25.5 billion, debts and liabilities of $14.6 billion. Major creditors include Citibank and JP Morgan Chase. It has tentatively agreed to sell control of the company to Hutchison Whampoa and Singapore Technologies for $750 million.
(END VIDEOTAPE)
VILES (on camera): Global Crossing joins a long list of upstart telecoms in bankruptcy, which means a lot of telecom assets on the block at the same time, which helps explain the bargain basement price for control for control of the company -- Lou.
DOBBS: $750 million for all of those assets?
VILES: Somewhere more than a half, 60 percent we're told.
DOBBS: That's amazing.
VILES: Yes, those assets are well below book value to sell.
DOBBS: And it's suggested there may be a little over, a little excess capacity on the (UNINTELLIGIBLE).
VILES: Well, overbuilding, a little under demand, terrible price.
DOBBS: Remarkable. The stock price with the CEO getting out with $123 -
VILES: That's just this past May. He's cashed out much more than that, although in fairness, he once had $5 billion in paper value. In the stock, he was getting pretty high up on the Ford's List. He didn't cash out anywhere near a billion dollars.
DOBBS: Well this company, Global Crossing, isn't this the one that President, the first President Bush --
VILES: Former President Bush -
DOBBS: -- gave a famous speech and put it in stock?
VILES: He sure did. Instead of taking his normal fee of $100,000 in cash, he took $80,000 in stock before the company was public. He rode that roller coaster up to $14 million when that deal was reported publicly. We don't know if he rode the roller coaster or not.
We asked the former President's office today, and they said these personal financial decisions are completely private. So, we know he rode it up to $14 million. We don't know what happened.
DOBBS: Well, you kind of hope he got out at the top.
VILES: I would think so. We would think so. We were saying how smart he was to make the deal. If he was really smart, he did get out.
DOBBS: And I noticed also again, the creditors here, large amongst them JP Morgan Chase, Citibank.
VILES: And another familiar name in this, the auditor, Arthur Andersen.
DOBBS: Oh, my goodness.
VILES: But no suggestions of impropriety in this particular case.
DOBBS: OK, thank you very much, Peter Viles. Well, we can tell you about a modest rally today on Wall Street, modest but the emphasis should be on rally.
The markets opened with a solid advance, followed by mid session with lower prices, blue chips then gaining for the fourth straight session, the Dow gaining 25 points. The Nasdaq up six points. The S&P 500, however, fell less than a point. Amanda Lang at the New York Stock Exchange, Greg Clarkin at the Nasdaq marketsite. Let's begin with you Amanda.
AMANDA LANG, CNN CORRESPONDENT: Lou, it was certainly modest but higher. Volume here moderate, just over a billion shares and the distance between winning and losing stocks pretty tight.
Have a look at some of the most actives though, some familiar names. Tyco, a big decline, they're not loving this move to split into four pieces. Ford Motor higher, and analysts upgrading this company to outperform from neutral. Kmart, not a big move off a low base, but that's an eight percent jump, that seven cent move. Xerox, a beneficiary, now trading at an eight-month high after posting a 15 cent profit, and EMC gaining after Merrill Lynch resumes coverage of the long-term buy. Have a look at some of the movers here today, and they're also some names we've seen lately. The asbestos concerns continue. Will President Bush mention litigation in the speech tomorrow night? United Technologies up nicely. Rite Aid, that is a six percent decline. IBM weighing on the Dow today, and Calpine, the Enron rival, has been under some pressure, down again today.
Overall, many traders today saying this story is later this week. We're waiting, of course, for President Bush and Alan Greenspan. All the action could come Thursday and Friday, Lou.
DOBBS: OK, Amanda, thank you. The Nasdaq up six points as I said. That means it's time to turn to Greg Clarkin to tell us all about it.
GREG CLARKIN, CNN CORRESPONDENT: And, Lou, I'll tell you this modest rally really came after a day of very defensive, almost cautious trading. Now, as Amanda reference, you do have some big events this week, State of the Union. You have a Fed meeting, as well as some key economic reports, and the markets have a lot to digest.
And ahead of that, nobody was getting too aggressive or being too bold today, although we saw the market trading sideways for much of the day, and little change at the close.
But take a look at the big name tech shares. They were pretty much mixed on the day, again in fairly quiet trading. You saw Cisco higher. Sun finished a little bit lower. Intel, Oracle and JDS Uniphase finishing modestly higher.
But there were some nice movers among some of the companies out there, driven by corporate news. Let's start, if we can, with Palm. They introduced their latest handheld device. That stock soared on that. Amazon.com a week ago was trading at $10 and change. It's now at $15.50. The stock continues to rise after the company posted their first ever profit last Tuesday.
And take a look at those last three stocks. Hotel Reservations, Priceline, Expedia, they're all on the online travel business. Hotel Reservations came out today before the open and blew away estimates with their earnings. That gave a nice rally to it. And if you're wondering, is there another leg to this rally, well quite possibly.
After the bell today, Expedia came out with their earnings, and they say hotel bookings are very solid. They've rebounded nicely since September 11th, and that stock was up sharply in after hours trading after Expedia blew away their earnings estimates. So possibly that group may be on the move tomorrow. Lou, back to you.
DOBBS: It's deja vu, the Internet driving the market.
CLARKIN: How about that. Let's go back a couple of years, huh?
DOBBS: Greg, thank you very much.
CLARKIN: Sure. DOBBS: Greg Clarkin. Well the policy-setting arm of the Federal Reserve meets tomorrow, the Federal Open Market Committee. Wall Street is wondering if the Fed's most aggressive rate cutting campaign ever is now ended. Kathleen Hays is here, and she will tell us precisely whether it is or it is not -- Kathleen.
KATHLEEN HAYS, CNN CORRESPONDENT: Of course, as always. Actually, I'm going to start by telling you why it's a two-day meeting, instead of the one-day meeting.
It's not just because they want to keep us in suspense. The Fed has to meet for two days because they are preparing a forecast on the economy, on unemployment, et cetera, for the entire year. They have to get Mr. Greenspan ready for some high-profile testimony.
But as Lou just alluded to, the first time in over a year the Fed is not expected to cut interest rates, and the big reason is that they're looking at a lot of signals of economic recovery.
The level of new claims for unemployment benefits is trading down - has fallen down - trading, these market types, that's all we can think of is trading, back down to around 384,000 in the latest week, well below the spikes we saw after the September 11th attacks.
In addition to that, it looks like manufacturing is stabilizing. That's another plus. Housing market, very strong. A record year for both new and existing home sales in 2001, and reports that auto sales are holding up pretty well.
Now, another reason why we expect the Fed not to cut interest rates tomorrow, why Wall Street expects that, is because of things Mr. Greenspan has said lately. Two and a half weeks ago, he said he wasn't sure if an economic recovery was taking hold, and then last week he said something a little bit different.
He sees signs that economic activity is firming. He also said he doesn't even think the economy actually needs a fiscal stimulus package to recovery, although he said it wouldn't hurt.
But you know he was a little cautious when pushed. He said maybe it's premature to say just how strong the recovery is going to be. He says right now it looks like the economy has a zero growth rate.
Beyond that, he said "if you can say with any greater conviction what it's going to do," he says, "you haven't been in the forecasting business as long as I have."
DOBBS: I was going to say, if you have any doubt about the fact that before he was Fed Chairman he was an economist, he removed any doubt with that possibly a double dip. The White House has got to be going nuts though with the suggestion that that economic stimulus package isn't necessary.
HAYS: It just goes to show, he's not always as political as some people think? I mean Mr. Greenspan that is, not Mr. Bush.
DOBBS: Yes, I'm trying to think just how political he is. Adroit he is.
HAYS: Adroit, indeed.
DOBBS: Whether we want to put in terms of politics or not. Thank you very much, Kathleen. Kathleen Hays. Well, some additional encouraging signs on the economy today. As Kathleen mentioned, new home sales up in December, in fact pushing last year's total to a record high. Lakshman Achuthan, economy, MONEYLINE contributor is here, and he is here to reinforce his view.
LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: Yes.
DOBBS: That recovery is here.
ACHUTHAN: Recovery is here, and the reason that I can say that is because within that group of economists. There's this small set called business cycle economists, and we forecast...
DOBBS: The elite.
ACHUTHAN: ... recessions and recoveries.
DOBBS: The elite.
ACHUTHAN: Well, we focus on turning points, and we get those right. And, we got the recession right.
DOBBS: Absolutely.
ACHUTHAN: And we're getting the recovery right with a mirror image of what the indicators are doing. They're rising in a pronounced, pervasive, and persistent way. The timing of this recovery -
DOBBS: I want to hear that again, pervasive, persistent?
ACHUTHAN: And pronounced.
DOBBS: And pronounced.
ACHUTHAN: Repeats.
DOBBS: I like that.
ACHUTHAN: All right. And it's going to be in the first quarter. The recession will end sometime in this first quarter. I would agree with the tone of the chairman's discussions, where there's concern about the strength of the recovery. It could be challenged.
DOBBS: In other words, a double dip?
ACHUTHAN: I wouldn't go that far. I would say that a double dip...
DOBBS: You're more cautious than Alan Greenspan?
ACHUTHAN: Oh, no. I'm probably a little more optimistic in that sense, that we're not going to have a return to negative growth.
DOBBS: Right.
ACHUTHAN: It will be a gentle recovery, but I don't see a return to negative growth after the rebound begins.
DOBBS: Unemployment, you just heard Glenn Hubbard, the President's Chief Economist say that he believed that we were right at the top in terms of the unemployment problem, in terms of the rate. Do you agree?
ACHUTHAN: Probably a little optimistic there. Those - the unemployment rate tends to rise, even though the recovery begins, and the gentler the recovery, the softer the slope of the recovery, the more it's likely to rise. And this is probably...
DOBBS: Do we need economic stimulus?
ACHUTHAN: You probably need some sensitivity to the unemployment problem. I think workers are still going to be under pressure.
DOBBS: And that is precisely Glenn Hubbard's point is, as you I think heard him say. And in terms of the rest of the year, what can we expect in the way of growth since we have now moved to recovery? Are we talking about a quick run to five percent?
ACHUTHAN: No, decidedly not. This is not a V-shaped recovery. Japan and Germany, the second and third largest countries in the world are in recession, so our international trade side is not going to help us very much. It's a homegrown recovery.
Businesses, business profits still under pressure, so they're not eager to spend too much right now. A lot of it has fallen on the backs of the consumer, with the help of lower interest rates.
DOBBS: Is the consumer going to be able to stay in this economy. He and she have been taxed in terms of debt. They have been taxed in terms of staying power throughout this recession.
ACHUTHAN: I think they stay in here. That's why we have the recovery. But I don't think they can step it up in a surprising fashion here.
DOBBS: So you don't want to give me a growth rate for 2002?
ACHUTHAN: It will be - when we look back, it will be a gentle year, a gentle recovery.
DOBBS: That's a non-numeric response.
ACHUTHAN: I know.
DOBBS: I appreciate it. Thanks.
ACHUTHAN: OK, thank you.
DOBBS: Thanks a lot. Coming up next here, "Black Hawk Down" takes on the competition and wins big. We'll tell you all about it.
(COMMERCIAL BREAK)
DOBBS: In other corporate news tonight, Toys "R" Us closing 64 of its stores, slashing 1,900 jobs. The company will focus on its most profitable stores, cutting the work force at its support center as well. Toys "R" Us is fending off competition from discount stores, which have cut into its market and profits.
Some evidence today that Xerox' restructuring is working. Xerox narrowed its quarterly loss to $4 million, down from $20 million a year ago, but revenue also down, down by 13 percent. Xerox expects to make a profit this year by selling assets, leaving some business altogether and laying off thousands of employees.
And two of Wall Streets biggest firms are moving some of their operations out of New York City. Morgan Stanley, the World Trade Center's largest tenant is buying Texaco's former headquarters, about 30 miles north of Manhattan. Morgan Stanley lost more than a million square feet of office in the terrorist attacks.
Goldman Sachs is continuing with construction to move some of its key businesses to New Jersey. Both firms will continue to be headquartered in New York City.
Enron has been accused of hiding massive amounts of its debt. ImClone has been accused of misleading investors about its cancer drug. Now, members of the boards of directors of both companies are under fire. Steve Young has the report.
(BEGIN VIDEOTAPE)
STEVE YOUNG, CNN CORRESPONDENT (voice over): Mindful of the enormous financial ruin caused by the Enron collapse to 21,000 employees, the giant AFL-CIO Union is calling on companies to refuse to renominate Enron directors to their boards.
JOHN SWEENEY, PRESIDENT AFL-CIO: We think that this is really a crisis situation far beyond Enron, and we just want to call to attention national corporation leaders about how important it is.
YOUNG: The Enron directors the AFL-CIO have in mind, in clued Frank Savage, who also sits on the boards of Lockheed Martin, Qualcomm, and Alliance Capital; Ronnie Chanc, whose boards include Motorola and the giantbank, Standard Chartered, headquartered in London; Norman Blake who serves on Owens Corning's board.
Wendy Gramm, wife of Senator Phil Gramm. She's on the board of several Invesco mutual funds, and Dr. John Mendelsohn who's not only on Enron's board, but also the biotech company, ImClone. It has a cancer drug put on hold by the Food and Drug Administration.
One drug analyst calls it a terrible coincidence that Mendelsohn happens to be on both boards. He discovered ImClone's cancer drug Erbitux and is among the most qualified board member to help ImCone win approval from the FDA. Firms that recruit board members say the biotech could be hot water with the FDA now because it picked too many board members with the wrong kind of expertise, attracting investments, instead of gaining drug approval.
DANIEL SILVERSTEIN, PRESIDENT, SILVERSTEIN ASSOCIATES: I think that the process is fairly daunting. There's a great deal of clinical, scientific, and management expertise required to do it properly.
(END VIDEOTAPE)
STEVE YOUNG (on camera): One ImClone board member, Peter Peterson, chairman of the Blackstone Group, resigned from ImClone's board last week, after being appointed only in November. Perhaps he recognized his widely acknowledged expertise is in private investment banking, not FDA regulatory affairs. A spokesman said Peterson has no comment -- Lou.
DOBBS: Let me ask you this. ImClone has been under all sorts of scrutiny, unlike the situation with Enron. ImClone has been the subject of a great deal of scrutiny and yet, it just continues to roll on. Any sense as to why?
YOUNG: One of the issues is, in the case of ImClone, communications between the FDA and the company are secret, under regulatory rules, and there is a movement, or at least people are saying, well you want to protect the intellectual property of the company, but isn't there a way to sanitize that so investors can get straight information.
DOBBS: But I think we have to point out here too, that the FDA took the unusual step of saying rather publicly that ImClone had not followed its directions.
YOUNG: Well, it was very limited in what it said.
DOBBS: Right.
YOUNG: It was the cancer newsletter really that got out more details than the company was telling us.
DOBBS: Exactly, and it goes to the strict - to the heart of it, the drug that it was putting so much of its investor hopes on?
YOUNG: That's right.
DOBBS: Steve, thanks. Steve Young. Coming up next here, the cost of becoming a U.S. Citizen is going up. We'll tell you why. And "Black Hawk Down" makes a big splash at the box office, the Commander- in-Chief among its many viewers. We'll have the rest of the weekend box office for you, right after this.
(COMMERCIAL BREAK)
DOBBS: "Black Hawk Down" is at the top of the box office. The film recounts an incident in Somalia during a 1993 U.S. peacekeeping mission of U.S. rangers. "Black Hawk Down" grossing $17 million over the weekend, bringing the total box office to nearly $60 million.
The President and his top advisers among those watching the movie this weekend. Sony arranged a screening for the President and his advisers at Camp David. Disney family comedy "Snow Dogs" barely edging out "A Walk to Remember." That's Warner Brothers new teenage romance. And rounding out the top five "A beautiful Mind" and "Count of Monte Cristo."
"WOLF BLITZER REPORTS" begins in just a few minutes. Let's go to Wolf to find out what's ahead. Wolf.
WOLF BLITZER, "WOLF BLITZER REPORTS": Thank you very much, Lou. Afghan interim leader, Hamid Karzai, met today with President Bush and won some major commitment. I'll have a special interview with Mr. Karzai.
Also, how far should the United States go in supporting Afghanistan? Should the U.S. lead the international peacekeeping force there? I'll ask Senator Joe Biden, the Chairman of the Foreign Relations Committee. All that, and John King at the White House, at the top of the hour. Lou.
DOBBS: Looking forward to it, Wolf. Thank you very much. Coming up, a preview of what's ahead tomorrow, and the higher price of becoming a U.S. Citizen. Stay with us.
(COMMERCIAL BREAK)
ANNOUNCER: Tomorrow on Lou Dobbs MONEYLINE, Senator Jeff Bingaman, Chairman of the Committee on Energy and Natural Resources, sheds light on the effect of the Enron collapse on energy markets, tomorrow on Lou Dobbs MONEYLINE.
(COMMERCIAL BREAK)
DOBBS: Tomorrow, Fed policymakers hold a two-day meeting to determine interest rate policy. It is the first day of that two-day meeting. Rates are expected to remain unchanged. Quarterly earnings results will be reported by Coca Cola, Honeywell and ChevronTexaco amongst others.
The cost of becoming a U.S. Citizen is rising. Beginning in February, people applying for citizenship will have to pay a fee of $310. That's a $60 increase from the current price.
Some immigration advocates have expressed frustration at the rising cost, but the INS says the increase will speed up the application process, and that's what that's all about. The agency saying the money could cut the applicant's waiting time from two and a half years to just four months, and we think that's a good thing.
Well, $300 will probably seem like small change to six shuffleboard players from a Phoenix suburb. They won a little more than $95 million in the Power Ball Lottery. Each will receive about $5 million after taxes. The group says they plan to quit their respective jobs.
They may take a cruise together, where they can play a lot of shuffleboard, one would assume. The $95 million winning, the ninth largest since the multi-state drawing began almost a decade ago.
That's MONEYLINE for this Monday evening. Thanks for being with us. Good night from New York City. "WOLF BLITZER REPORTS" begins right now.
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