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CNN INSIDE POLITICS

Bush Prepares for Corporate Responsibility Speech While Congress Watches; Interview with Karen Hughes

Aired July 8, 2002 - 16:00   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.
JUDY WOODRUFF, CNN ANCHOR: I'm Judy Woodruff in Washington. President Bush goes before reporters about an hour from now to promote his agenda, and put pressure on the Congress.

JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: I'm John King at the White House. The president will face questions about corporate responsibility, about the new plan he will release tomorrow, and perhaps about controversies in his own business past.

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: I'm Jonathan Karl on Capitol Hill, where lawmakers are taking aim at the executives behind the WorldCom scandal, and at one another.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: I'm Candy Crowley in Washington. Presidential adviser Karen Hughes tells me about her last day of work at the White House, and whether this is really good-bye.

ANNOUNCER: Live from Washington, this is INSIDE POLITICS with Judy Woodruff.

WOODRUFF: Thank you for joining us. Well, after a long weekend with his family in Maine, President Bush had barely set foot back in the white when reporters were told he would hold a news conference at 5 pm Eastern. Why now?

Well, let's bring in our senior White House correspondent, John King -- John, pretty sudden announcement. What are they up to?

KING: Pretty sudden announcement, Judy, but a predictable one in some ways. Congress just back from the holiday as well as the president. Congress in session for about three weeks, and this session before lawmakers go home again to campaign. Remember, this is an election year.

We are told Mr. Bush will have a five-minute opening statement. He will focus first on the war on terrorism, asking Congress to resolve disputes over funding, budget matters for the war on terrorism. He will push Congress once again to move quickly to give him that new Department of Homeland Security.

The president also will focus on the theme du jour, if you will, corporate responsibility, and look for the president to be quite conciliatory. Some differences right now between the administration approach, and the approach pushed by leading Senate Democrats, but look for President Bush, in his opening statement, to say he is confident that in the end, all those differences can be resolved, and new, tough corporate rules, enacted quite soon. As for the president's own proposals, he will unveil them tomorrow morning on Wall Street.

(BEGIN VIDEOTAPE)

KING (voice-over): The new Bush proposal will call for corporate CEOs to personally vouch for financial statements and other public company reports, potential jail time for corporate officials who deliberately file misleading financial reports, new powers to revoke CEO bonuses if financial misconduct is proven, new authority to bar company officers who abuse their powers from serving on corporate boards or other leadership positions, and a new requirement that corporate leaders who buy or sell significant chunks of company stock disclose those transactions within two business days. Current law allows up to a year.

The president worked in one last round of golf before heading back from a long weekend in Kennebunkport, playfully declining to say much about the big speech.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm focussed on 18 holes of golf.

QUESTION: Will you talk to us after the (UNINTELLIGIBLE)?

BUSH: Probably not. It's not that I don't like you.

KING: A major White House goal is to ease investor anxiety. WorldCom cut 17,000 jobs. Enron laid off more than 4,000 workers. Contributing to a drop in consumer confidence in the latest monthly conference board survey. The accounting scandals are now a major midterm election issue. This ad by a liberal group called American Family Voices, an attempt to suggest that Mr. Bush is in no position to lead the call for reform.

UNIDENTIFIED FEMALE: Bush played a key roll at Harken Energy. They used Enron-style accounting to hide losses. Bush sold out early. The Bush team, Dick Cheney was CEO of Halliburton. More Enron-style accounting.

(END VIDEOTAPE)

KING: That ad will air on cable outlets in New York and Washington beginning tomorrow. It runs for three days. The ad buy is relatively short, the White House calling it a cheap shot, and calling it an example of the partisan politics that the White House says has no place in this debate over new corporate standards. Again, the president will outline some of his proposals in vague detail, we are told, in the news conference here in an hour. The big speech, of course, tomorrow on Wall Street -- Judy.

WOODRUFF: All right. John King, go off to get ready for that news conference.

Now to Capitol Hill we go, where many lawmakers are crowding aboard the corporate responsibility band wagon. The House has been holding hearings today on the WorldCom accounting scandal. Earlier, two of the company's former executives took the Fifth and refused to testify.

Our congressional correspondent, Jonathan Karl, is following the political fallout from the WorldCom debacle -- Jonathan.

KARL: Well, Judy, one immediate fallout here is the Democrats in the Senate have cleared the decks and put accounting reform at the very top of the agenda, pushing aside even such Democratic cherished ideas like prescription drug benefit for seniors. All of that has been pushed back now. Accountability and corporate reform is now at the top of the list. It is a sign of just how hot a political issue Democrats believe they have here with the latest wave of corporate scandals.

(BEGIN VIDEOTAPE)

KARL (voice-over): As WorldCom's former top executives took the Fifth, refusing to answer questions from an angry House committee, Democrats called on President Bush to support their plan to impose tough new regulations on the accounting industry.

SEN. PAUL SARBANES (D), MARYLAND: The president, of course, is going to New York tomorrow. We understand he is going to address punishing the wrongdoers. I'm very supportive of that, the so-called "bad apples." But getting at the bad apples is not enough. We need to make changes in the system.

KARL: Democrats believe they can pierce the president's high approval ratings by placing the blame for corporate scandals on the Republicans. As the president gives his speech on Wall Street, the Democratic response will be instantaneous, as Democratic leaders hold their own event with a laid off WorldCom employee, and James Carville's American Family Voices group releases its ad slamming the president and the vice president's own business records.

UNIDENTIFIED FEMALE: Bush thinks tough talk can hide the record. That's sly -- like a fox.

KARL: But even as Democrats hit Republicans for being cozy with corporate America, Republicans are jumping on the band wagon, supporting the new regulations pushed by Democrats.

STEPHEN MOORE, CATO INSTITUTE: Republicans, right now, are very spooked about this scandal in terms of whether it is going to cause them to lose seats in the crucial midterm elections in November. Republican party has always been seen by voters to be too cozy with corporate America, and I think that's a problem in this case.

(END VIDEOTAPE)

KARL: And Arizona Republican John McCain has emerged in a familiar role, pushing his party to go further. Today in an op-ed in the "New York Times, " McCain called for the resignation of the president's man at the SEC, Harvey Pitt, and on Thursday, McCain will give what is being billed as a major speech on corporate responsibility at the National Press Club, a speech that is likely, Judy, to be filled with ideas that will make his party quite uneasy -- back to you.

WOODRUFF: All right. Jon Karl at the Capitol.

Well, to help prove the point that many Democrats are banking on corporate responsibility as a political issue, we found five Democratic Senate candidates who are giving speeches, or talking informally about business scandals out on the campaign trail today.

Our senior political analyst, Bill Schneider is here now -- Bill, are the stakes in all these scandals lately, are the stakes particularly high for this president?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, I think they are. Look, how many presidents have been business executives? Tick, tick, tick. Give up? The answer is two, and both of them have been named Bush. This is the most pro-business administration since Dwight Eisenhower's, and in the face of this scandal, the president needs to take steps to protect his pro-business agenda.

WOODRUFF: So what does he need to do?

SCHNEIDER: I think two things. One, show that the federal government is committed to enforcing the rules of the game. Americans have to believe in the honesty of business transitions. No phony numbers.

Second, he has to make sure that the business scandals do not endanger the nation's prosperity. A president's job is to ensure prosperity. Business's job is to make money. Is that all? Well, President Bush recently said business has a higher calling. Now what could that be? Ensuring prosperity. Because for most Americans, prosperity is the gauge. If the country is prosperous, Americans believe the system is working, and new regulations on business are not needed.

WOODRUFF: But the argument from some is that the business scandals don't threaten prosperity. How do you think they do?

SCHNEIDER: Well, it doesn't work the way it used to work. The business cycle used to work like this. Good times led to a boom in speculation in stocks and real estate. The boom would lead to abuses. The abuses would cause the bubble to burst, and then a stock market panic would result. So far -- so far, that pattern holds. But in the past, stock market panics brought on bank failures, which then threw the country into depression. That happened in the 1830's, it happened in the 1870's and, of course, it happened in the 1930's. It hasn't happened since then because we now have a Federal Reserve system to protect the banking system.

Today, the stock market, I think, poses a different kind of threat. Think of this. In 1929, only 8 percent of Americans were invested in the stock market. Today, 63 percent of Americans are. So, the decline in stock prices, which is caused, in large part, by the corporate scandals, could undermine consumer confidence, and that would seriously endanger the economy.

WOODRUFF: OK. Bill Schneider, thanks very much.

CNN will carry President Bush's speech on corporate responsibility. That is tomorrow at 11:30 in the morning, Eastern. And stay with CNN for Mr. Bush's news conference, that begins at the top of this next hour.

Well, CEOs in a group called the Business Roundtable say they are -- quote -- "appalled by the revelations of corporate abuse." The group is running an ad today in four major national newspapers across the country that condemns the reckless disregard of a few. I asked the president of the Business Roundtable, John Castellani, if he is absolutely convinced that only a few have acted unethically.

(BEGIN VIDEOTAPE)

JOHN CASTELLANI, PRESIDENT, BUSINESS ROUNDTABLE: I can't know. We can't know. But what's important is, one is too many. What has happened is it has caused an erosion in the trust that the capital markets and investors have in corporate America, and in corporate governance. And one is too many, and we need to recover that trust so that we can sustain our economic system, and our economic growth.

WOODRUFF: You -- and among other things, are calling for the reform proposals put forward by -- or going to be put forward by President Bush and by members of Congress. But as you know, there are some disagreements among the three -- the two houses of Congress, and the president at this point. Which one are you saying you are in favor of?

CASTELLANI: Well, there have been a number of proposals. The House has passed the bill that was sponsored by Chairman Oxley. The Senate, this week, is considering Senator Sarbane's bill. He is the primary author. The SEC has proposed a number of regulations, and the president has proposed a number of changes. All of them embody some good points, and what we would like to see is that legislative process move forward quickly, so that we can get something on the president's desk that is reform, and can get that enacted so we can restore the trust in the capital markets and in corporate governance.

WOODRUFF: But why not pick? Why not say, this is -- for example, the Sarbanes bill clearly has stronger language in there with regard to accounting -- excuse me, accounting practices. Why not say, that's what we want, and endorse that?

CASTELLANI: Well, you are right about Sarbanes' bill. It has very strong elements related to the oversight of the accounting profession, and that is key to restoring confidence. But if you look at Oxley bill, it has good provisions related to transparency and reporting, that are stronger than the Sarbanes bill. So it is a mix and match, take the best of both, and get to conference and get something that can be on the president's desk.

WOODRUFF: What should the president say tomorrow when he speaks on this subject on Wall Street?

CASTELLANI: Well, he has been speaking out for a number of months. In fact, he addressed our annual meeting just a couple of weeks ago, and what he said is -- what I expect him to say, and what he should say, is what he has said in the past, that this kind of behavior is unacceptable. It has to stop, and it has to be punished. And secondly, that we have to be responsible as corporate executives, and chief executive officers have to be particularly responsible for having high ethical standards, and promoting the atmosphere of trust.

I think this president will say that wrongdoers should be punished, and we agree with that. I think the president will ask that the process move more quickly, and we agree with him.

WOODRUFF: All right. John Castellani. He is president of the Business Roundtable. Thank you very much.

CASTELLANI: Thank you, Judy.

WOODRUFF: Good to see you.

CASTELLANI: Good to see you.

(END VIDEOTAPE)

WOODRUFF: Presidential adviser Karen Hughes will get in a last word about corporate responsibility up next, as Hughes packs up and leaves the White House today, how will she spin that story, and her own good-bye?

Would sending more U.S. troops to Afghanistan be smart or simplistic? The topic in our "Daily Debate."

And later...

(BEGIN VIDEO CLIP)

KITTY KELLEY, FRIEND OF TRETICK: Stanley used to tell me that this picture was the advent of celebrity covering. Of covering the rock stars, media star politician.

(END VIDEO CLIP)

WOODRUFF: A photographer's legacy, and the Kennedy mystique.

(COMMERCIAL BREAK)

WOODRUFF: Karen Hughes has been at George W. Bush's side since his first campaign for Texas governor. Today, she turns in her title of counselor to the president to return home to Texas with her family.

Earlier, Karen Hughes spoke with our Candy Crowley.

(BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Welcome to what will soon be the former office of Karen Hughes. Karen, thanks for taking some time with INSIDE POLITICS. So this is it.

KAREN HUGHES, COUNSELOR TO THE PRESIDENT: Well, this is it for this phase. I go back to Texas, and I'm going to continue, as I told you all the day I made my announcement, I am going to continue to advise the president. I'm going to be on retainer with the Republican National Committee so that I can continue to advise the president and continue to travel back and forth to Washington, although a little less frequently. My family and I are looking forward to having a little more flexible, little more relaxed life in Austin, Texas.

CROWLEY: But it changes. You know, much has been made of what will change now for President Bush. I mean, you have been the one that has been with him since the beginning. You are the one that he relies on most. What changes for him day-to-day?

HUGHES: Well, daily, obviously, I won't be able to run down the stairs and be in the Oval Office. I will be just a phone call away. I will travel up here, probably, every couple weeks. But I am going to continue to be very involved, and I would imagine on major speeches, major projects, if the president is going to be giving a major speech, I will probably come up to Washington and work on it. So I think, on the big things, it won't really be all that different.

CROWLEY: We can't let you leave your day-to-day job without asking you a couple policy questions about what the president has in mind, particularly...

HUGHES: Before we go on to that, if I could...

CROWLEY: Sure. Yes. Absolutely.

(CROSSTALK)

HUGHES: ... one little thing. You mentioned about the perspective. I really do think that what I lose in the proximity of being here on a daily basis I will gain in some perspective.

CROWLEY: And what do you think they are saying out in the hinterlands now, because that's where politics are really made...

HUGHES: Right.

CROWLEY: And that is where decisions are made, about this whole thing about corporate responsibility...

HUGHES: I think they are mad as heck, and I think they should be. And I know President Bush is mad as heck. I remember standing outside the of Oval Office on -- in the days right after Enron collapsed, last December, and him picking up a Texas newspaper and looking at it, and said, This stinks.

You know, the captain is supposed to be the last person off a sinking ship, not the first. And so, I think the president is understandably unhappy at some of the horrible excesses and abuses that we are seeing in corporate America right now, and our administration is working on cracking down on that.

CROWLEY: Can you give us a hint as to what sort of proposals you think he can put out there that would be -- feasible to assess?

HUGHES: Well, there are a couple of things, Candy. I think there are some places where we can strengthen laws. There are some places where we can more aggressively enforce existing laws.

Unfortunately, six, seven, eight years ago, during sort of the high-flying times of the '90s, some of these abuses -- or, apparently, the seeds of some of these abuses were sewn, and started growing up. And we are just hearing about them now. But these have been some time in the making, and the president is determined to clean it up.

CROWLEY: Is that how you approach this politically? It is sort of something that grew out of the Clinton administration excesses? Because the president is seen as vulnerable because of his ties to the corporate and big business, because the vice president has -- you know, came from Halliburton. There has been some questions about when the president sold off stock, that sort of thing. This is seen -- widely seen as a political problem for the president.

HUGHES: Well, first of all, I just disagree with that, and I think the people of the country do as well. Both the president and the vice president are known as very ethical, honest, above board, strong business people. And so, I think there is a strong sense in our administration that we know what is wrong. We are going to go after the people who are engaging in illegal or unethical practices, and we are going to clean it up.

CROWLEY: But is there a sense that you need to sort of say, Look, this happened in the excesses of the '90s, which is sort of code for Clinton administration?

HUGHES: No, it is just the fact. I mean, for example, this morning I noticed some people are talking about Chairman Pitt, who is doing a great job, and has enacted some tough new reforms at the SEC. He was approved unanimously by the Senate last August. Now some of those same senators are apparently raising questions. But he is doing a great job. He has been in office less than a year, yet some of the things he has investigated started many, many years ago. And as I said, we are the administration that is cleaning it up, and I think the American people clearly see that.

CROWLEY: Is the president inclined to get rid of Pitt, as we are seeing that Daschle and Pelosi would like?

HUGHES: Again, the president has great confidence in Harvey Pitt. He is doing a great job. He has enacted a series of very tough reforms.

CROWLEY: Last question. You leaving anything behind? HUGHES: Oh, I gave some of my colleagues on the senior staff this morning a piece of unvarnished wood. When I first went to work for -- well, then he was -- I guess when I first went to work for him, he was George, it was before he was governor, before he was president. He told me that what he really valued most from his staff was their unvarnished opinions. And when I was named counselor to the president, I promised to always give him my unvarnished opinions.

And so a friend of mine sent me a block of unvarnished wood that sits on my desk. And so, I'm leaving behind some unvarnished wood to remind all of us that that is what he expects from us, and that is what the American people should expect from us too.

CROWLEY: And you are coming back anyway to remind...

(CROSSTALK)

HUGHES: And I will be back and forth. I have already got my trips planned out of Crawford in August. So I will see you in Crawford in August.

CROWLEY: It's a deal. Thanks very much. Happy trails.

HUGHES: Thank you very much.

(END VIDEOTAPE)

WOODRUFF: And we will watch for her back in Washington as well.

President Bush faces the media at the top of the hour. That and other top stories next in the "Newscycle." Plus, tough talk on Capitol Hill.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I'm asking the committee hold him in contempt, that it be submitted to the floor of the House, that the U.S. Congress hold him in contempt, and he be required to testify.

(END VIDEO CLIP)

WOODRUFF: Lawmakers in both parties dive into the fray over corporate accountability.

(COMMERCIAL BREAK)

WOODRUFF: Checking the "Newscycle," President Bush will hold a news conference about a half hour from now. As we have been reporting, Mr. Bush is expected to call for Congressional action on his legislative priorities, including new rules governing corporate responsibility.

On Capitol Hill, meantime, two former WorldCom executives invoke their Fifth Amendment rights at a Congressional hearing. Former CEO Bernard Ebbers, as well as the company's former chief financial officer both refused to testify. Ebbers did say he does not think he did anything wrong.

In the Mideast, a rare high level meeting between Israelis and Palestinians. Israeli foreign minister Shimon Peres met today with the newly appointed Palestinian finance minister, the first high level meeting between the two sides in months.

With us now, Maria Echaveste, former Clinton White House deputy chief of staff, and Rich Lowry of the National Review. Rich and Maria, with President Bush just minutes away from a news conference with his big speech planned tomorrow on corporate accountability, the White House is facing public opinion polls, among others, the one that came out from CNN in the last week or two saying -- you asked people, does big business have too much influence over this administration. By 2-1, 63 percent to 32 percent, people said, Yes it does.

Maria, can the president get out front of this issue? Can he be among those with the white hats on, in other words, by talking about this issue and talking tough?

MARIA ECHAVESTE, FORMER CLINTON WHITE HOUSE CHIEF OF STAFF: It will take more than talking, and I think this is a very critical point for this presidency. The poll numbers reflect widespread concern. This lack of confidence in our markets and our corporations really can threaten the economy in a very severe, serious way. And this president, if he is going to get ahead of it, has to do more than just talk. He has to put his weight in getting real reforms through the Capitol, through Congress. And up until now, he has talked about fudging numbers, he talked about a few bad apples. There is something here that requires more decisive action. So...

WOODRUFF: Rich?

RICH LOWRY, "NATIONAL REVIEW": Yes, well, I think we will see him continue to mount the bully pulpit in an aggressive way, as he has in the last week or so, which is a good and welcome change. The White House was a little slow to get on top of this thing. I think we will also see him probably, as has been reported, advocate criminal penalties for CEOs who fudge the numbers. I think that is the way to get out ahead a little bit of what is being discussed there in Congress.

But the fact is, if Democrats think they are going to run and win this election on accounting reform, they are totally nuts. No one on the street knows what the Sarbanes bill is. I think most congressmen probably don't know what is in the Sarbanes bill, and the only way this is going to hurt Bush, and I think it is a threat, is if the stock market continues to be soft because of this scandal...

(CROSSTALK)

ECHAVESTE: ...but that's exactly...

LOWRY: ... and if -- and if the economy begins to stall a little bit. Then you have a real vulnerability.

ECHAVESTE: That's exactly the point that the weekend papers were full of analysts talking about how serious this lack of confidence that investors -- remember, over 60 percent of Americans are invested in the stock market. Their dollars are in these companies, and if they can't trust those at the helm of those companies, you are going to have people not invest, and that's what drives our economy, so...

LOWRY: Yes. No, that's absolutely right.

ECHAVESTE: This president has to take some strong action. In fact, perhaps he needs to ask for Chairman Pitt to resign as many have called.

LOWRY: Well, a couple things here. One, you are right about the investors. And the fact is, Republicans, throughout most of 90's, were touting the investor class as a great thing for them, and I think on the whole, it will be, but this is an instance where it really could come back and bite them. If investors feel sour, you know, in the fall of this year, it could be a real problem for Republicans.

Now, the campaign against Harvey Pitt, I think, is totally political grandstanding. I mean, the idea that Harvey Pitt has done something in the last 18 months that somehow secretly signaled to all business leaders that they can be criminals I think is totally ridiculous. And the fact is, the market has, to some extent, to be self-policing, because there are not enough regulators in the country to sit over the shoulders of every accountant in America.

WOODRUFF: Just quickly, Maria, we just heard Karen Hughes refer to -- and other Republicans refer to excesses of the '90s, clearly talking about the Clinton administration. Can they pin the blames for some of this on your administration?

ECHAVESTE: Absolutely not.

Arthur Levitt, as head of the SEC, tried to pass serious reforms, new requirements on -- especially on accountants that the Republicans in Congress beat back, would not let us get through. And they also hampered some enforcement. So, more so this is not about just prosecuting, sending a few people to jail. This is not going to restore people's confidence. So, it is not the Clinton administration. And this is an opportunity to...

LOWRY: Well...

WOODRUFF: Let me.

LOWRY: Sure. Go ahead.

WOODRUFF: Sorry.

I want to finally ask you both about a very different subject. And that is Afghanistan. We had -- saw tragically over the weekend the Afghan vice president assassinated. In the wake of that, you have Republican and Democratic senators saying we need to review U.S. troops, U.S. forces in Afghanistan. Should the U.S. think about sending more troops there, Rich? LOWRY: I think it should. And I think it would be a mistake what some people are talking about, which is sending American troops to every corner of Afghanistan to police places like Mazar-e-Sharif.

The whole ball game in terms of the future for Afghanistan is in Kabul, is in the question of whether the national government can be made to cohere there. And the fact is, our former allies in the Northern Alliance are the chief bad actors and bad influence. So, I think we should send more troops to Kabul and tell the Northern Alliance they should get their troops out of the barracks, where they have been in Kabul as a way to influence Karzai's government, and send them home. I think that would be a good step. Sending troops all throughout the country would be a mistake.

ECHAVESTE: I don't think simply sending troops will provide the answer. What -- we can't abandon Afghanistan. That's the mistake we made back in the Soviet-Afghanistan war. What is required is more than just troops. We need to provide real resources, so that the infrastructure and stability of this country can be established, so that we will not have the kind of hotbed for terrorism that we have seen over the last decades.

WOODRUFF: All right, Maria Echaveste, Rich Lowry, good to see both of you. Thanks.

LOWRY: Thanks, Judy.

WOODRUFF: And we ask you to give us your opinions on these topics and more at CNN.com/INSIDE POLITICS. Plus, don't forget to e- mail Bill Schneider with your ideas for this week's "Political Play of the Week."

Would you send $25,000 to go a birthday party? Well, that story is ahead in Bob Novak's "Inside Buzz." And Bob will tell us about the second-guessing before President Bush's big speech on corporate responsibility.

(COMMERCIAL BREAK)

WOODRUFF: Here now with some "Inside Buzz": our Bob Novak.

First of all, what are you hearing about this early second- guessing about the speech, the timing of the speech, and so forth?

ROBERT NOVAK, CNN POLITICAL ANALYST: Judy, it's supposed to be a very strong speech, a very tough speech. He feels strongly about the wrongdoing by corporate people.

The problem is, it looks like the Democrats are trying to make a big issue out of it. And it looks like he's a Johnny-come-lately. But he has himself or his own aides to blame. The president -- I know and I have reported here -- weeks and months ago wanted to make a speech on this subject. And his staff counseled cautioned. They said they couldn't find the right venue for it and all that sort of thing.

But a strong president has got to override that. And now it looks like he is coming in just as things are getting very tough and coming in a little late.

WOODRUFF: Part of this issue has to do with the SEC chief, Harvey Pitt. Where are they coming down on that?

NOVAK: There's no question that he -- that Democrats are making him the fall guy. Senator John McCain called for his resignation.

The checking, the reporting I have done indicates that everybody is going to stick with Harvey Pitt. They think he's a good man. The problem with him is that he had so many corporate clients that he has recused himself from 29 cases, not participating in them. That's John McCain's main complaint, because these were former corporate clients. Judy, that only lasts a year, and he can go back and participate in all the cases.

But a lot of these cases now, only one SEC commissioner acts on them. That means the courts won't confirm them. So that is a mess. And it is not corrupt. It doesn't mean he is guilty of wrongdoing. But it does mean he can't participate in those cases.

WOODRUFF: But for the time being, he's staying, is what you're saying?

NOVAK: For the time being, yes.

WOODRUFF: The emergency supplemental spending bill, now, you have been talking about this. Where is this headed?

NOVAK: Well, the Senate passed a lot more money than the House did. And this is the emergency bill to fight the war and it just sits there. Nothing happens. Of course, they can't get the two to conform to each other, the Senate and the House. The president has threatened to veto if it's too much.

Now what I am hearing is, they have waited so long, they may not pass it at all, pass the appropriations as part of the regular appropriations. And that's the way Congress works, Judy. If you can't get it done on time, don't do it at all.

WOODRUFF: And, finally, Charlie Wrangle, House member from New York, has found a novel way to help his Democratic friend.

NOVAK: Yes, he is going to have his 72nd birthday party on the Tavern on the Green in Central Park in New York. And the money that you pay to go his to his birthday party is going to go to his PAC, which is going to try to elect Democratic members of Congress, which will then give him his life's dream, life's ambition, chairman of the Ways and Means Committee, if they get a majority in Congress.

Now, if you really want to go first-class, Judy, on the Tavern on the Green on July 31, it is only $25,000. And this is the last gasp for the great soft-money events before the campaign finance reform goes. I know that all -- a lot of good Democrats will be there with $25,000 to make Charlie Wrangle chairman of the Ways and Means Committee.

WOODRUFF: They will be standing in line right behind Bob Novak, right?

(LAUGHTER)

NOVAK: Just about, huh?

WOODRUFF: All right, Bob Novak, thank you.

And now we have an update on the health of Senator Jesse Helms: The North Carolina Republican has been largely absent from the political scene as he recovers from surgery to replace a heart valve. His chief of staff, Jimmy Broughton, tells INSIDE POLITICS that Helms is being kept on a pretty rigorous schedule at a Raleigh rehabilitation facility and he is working to regain his strength. Broughton says that Helms probably will not return to Washington until September, although he may come back for a vote if needed.

Well, checking the headlines in our "Campaign News Daily": California Governor Gray Davis is running a new television ad, the first since his Republican opponent, Bill Simon, debuted his offbeat TV ads criticizing Davis. The new Davis ads promote the governor as a public servant and they criticize Bill Simon on several issues, including his refusal to release his tax returns.

In Tennessee,a new poll finds Lamar Alexander leading Ed Bryant in the Republican Senate primary. Alexander has a 17-point advantage over Congressman Bryant in this survey. The poll also gives Alexander the edge in a head-to-head matchup with the leading Democratic candidate, Bob Clement. The poll results come just as Alexander released new TV ads featuring his plaid , made famous in his past campaigns for the White House.

A poll of Tennessee voters also asked if native son Al Gore should make another run for president. Well, 47 percent said they are against another Gore White House campaign; 38 percent said they are in favor; 15 percent said they are not sure.

Two members of the House Financial Services Committee will join me just ahead.

Plus, changing times on Wall Street: Jeff Greenfield on the shifting political winds driving the president's speech on corporate misconduct.

(COMMERCIAL BREAK)

WOODRUFF: As we continue to wait for President Bush's news conference at the top of this hour, our Jeff Greenfield has some thoughts on the president's speech that is planned for tomorrow in New York -- hi, Jeff.

JEFF GREENFIELD, CNN SENIOR ANALYST: Hi, Judy.

Yes, the president is coming here to Manhattan tomorrow. And, as you have been talking about, he will have some tough words for the financial and corporate communities. From a political perspective, it is easy to see why. It's not just that once-mighty companies are in ruins. It's not just the tails of greed and wrongdoing all over the headlines. It's that even some of those most closely identified with free-market thinking and with skepticism about government regulation have begun to sound some very distinctly different notes.

(BEGIN VIDEOTAPE)

(voice-over): Consider Louisiana Representative Billy Tauzin, a Democrat-turned-Republican who chairs a key House committee. Two years ago, Tauzin fought SEC chairman Arthur Levitt when Levitt proposed reform in the accounting industry that would have prevented firms from retaining profitable consulting contracts with the same companies they audit. Now Tauzin is saying that major corporate wrongdoers should be thrown in jail.

REP. BILLY TAUZIN (R), LOUISIANA: Not country-club jail, a real jail.

GREENFIELD: Senator John McCain described himself during the 2000 presidential campaign as a proud Reagan conservative. But he also broke with his party's dominant wing on issues ranging from campaign finance reform to the tobacco industry. And McCain's private views on corporate big shots who got rich as their companies tanked cannot be repeated word for word on this high-minded show.

In today's "New York Times," McCain calls for very tough legislation to control the behavior of corporate chiefs. And he also calls for the resignation of the chairman of the Securities and Exchange Commission, Harvey Pitt, for being too tepid with white- collar wrongdoing.

For his part, Chairman Pitt, who came to his job after years representing the titans of the boardroom and who promised a kinder- and-gentler SEC, is sounding a lot less kind and gentle right now.

HARVEY PITT, SEC CHAIRMAN: It's very important that investors have confidence that the SEC is on the job, on the beat, and is going to hold every corporation and every officer and director accountable.

GREENFIELD: But maybe the clearer signs of the new political climate come from two distinctly nonliberal voices. The current "Weekly Standard," an influential conservative publication, has an article that accuses the Clinton administration of indifference to corporate abuse, for being more interested in campaign contributions than in cracking down on white-collar evildoers.

And take a look at this full-page ad that appears today in "The New York Times" and in many other major newspapers. "The Business Roundtable," an organization of CEOs almost genetically opposed to more government regulation, is calling for the passage of a Senate bill that would mandate business and accounting reforms that the corporate and financial worlds vigorously opposed just a few years ago.

(END VIDEOTAPE) GREENFIELD: So, what happened to the celebration of the marketplace, to the staunch opposition to the heavy hand of government? Well, a Nasdaq at 1400 makes the world look a lot different from a 5000 Nasdaq. And with more than half of all American households holding equities of one kind or another, bad news from Wall Street pretty quickly becomes bad news on Main Street.

As that well-known stock analyst Bob Dylan once put it, the times, they are a-changin', Judy.

WOODRUFF: And, Jeff, we thank you for calling us a high-minded show.

GREENFIELD: Always.

WOODRUFF: Jeff Greenfield, thanks.

With me now: two members of the House Financial Services Committee, which held today's WorldCom hearing. They are Representative Peter King -- he's a Republican of New York -- and John LaFalce, also of New York. He's the panel's ranking Democratic member.

Congressman LaFalce, your committee is holding these hearings, but just today, you had the CEO, former CEO of WorldCom, the former chief financial officer, both of them not testifying, pleading the Fifth. What do you really accomplish in these hearings when they come before you and you get nothing?

REP. JOHN LAFALCE (D), NEW YORK: Well, sometimes you don't accomplish very much from a particular hearing. But you can accomplish something when you produce and pass meaningful legislation. And that's what we need to do.

We squandered an opportunity earlier this year and last year because the bill that the House passed was cosmetic in nature. It was not tough. I offered individual members of the Financial Services Committee and the House of Representatives the opportunity to pass tough reforms, both in committee, before the Rules Committee, and the House floor. And, unfortunately, they voted against the tough reforms.

My reforms were even far tougher than those being advocated by Senator Sarbanes. We need a tough accounting board, not just with tremendous powers, but with members who would be zealous in protecting investors. We need to have the certification by the CEOs of the financial statements, both as to their accuracy and reliability. The individual numbers of the House split on a party-line vote on that discrete issue.

I suspect that President Bush will jump into the fray -- a little bit late, but better late than not at all.

WOODRUFF: And, Congressman King, is that right: the president is getting in a little bit late, but at least he is getting in? Is that your view? REP. PETER KING (R), NEW YORK: The president is getting in. The president has been in. The president is providing leadership.

I think tomorrow's speech will consolidate his position. It will lay out an agenda. And then we can combine the House bill that was passed, which John had objections to -- I thought it was a pretty good bill -- I think it probably can be improved -- the Senate bill of Senator Sarbanes, plus whatever recommendations the president makes.

And I think president has been out front on this. But, obviously, this an issue that is moving very quickly. I hope it is not treated in a partisan way. I think what it comes down to is: Is the president going to provide honest leadership? I am convinced he will. I think the American people believe he will. But it's important we try to go ahead together, work together, pass legislation. Then we can fight it out in the fall as to who was right and who was wrong, who came first and who came second.

WOODRUFF: Congressman LaFalce, sir, are you convinced that the president is going to do what Congressman King is saying, that he's going to...

LAFALCE: Well, I hope he will. Up until now, President Bush has been Cal Coolidge. It is not too late for him to be Teddy Roosevelt. And that's exactly what I told his chief economic adviser, Lawrence Lindsey. We need a Teddy Roosevelt in the White House, not a Cal Coolidge.

Look at the State of the Union address. He barely mentioned Enron. Look at the budget he submitted in February of this year for the SEC, a minuscule 6 percent increase, when I have been calling for almost two years for a 200 or 300 percent increase in the budget of the SEC. We need to beef up the legal power of the SEC to take meaningful action. And up until this day, the president has not endorsed those meaningful changes that even the SEC has called for.

It is not too late, Mr. President, but it's awfully late.

WOODRUFF: And I should mention, Larry Lindsey, who is the president's chief economic adviser, will be a guest tomorrow on INSIDE POLITICS.

Congressman King, what about the question of -- we just heard Congressman LaFalce refer to the SEC. What about this call by Senator McCain, who is a fellow Republican of yours, calling for Harvey Pitt to step down?

KING: Senator McCain is a very good friend of mine. I think it is premature, though, to call for Harvey Pitt to resign. Let's give him the opportunity to get the job done. I think he is absolutely committed to getting it done.

I would disagree with John, also. The fact is, President Bush has been very clear in denouncing corporate greed, very clear in saying that there has to be honesty at the highest levels in corporations, and that investors have to be protected. And I think the same leadership the president has provided the war on terror we're going to see him providing against corporate abuse and greed, misfeasance, malfeasance. And tomorrow's speech I think will be a crowning point in that fight.

LAFALCE: Well, I hope that Peter is right. But, up until now, unfortunately, President Bush has winked at the problem. It has been see no evil, hear no evil, speak to no evil.

What did they do? They went after the Arthur Andersen firm for shredding, rather than going after the corporate officers, the Texans, from Enron. That's who they should have been going after, corporate America. And they never did get them on the shredding charge, in any event.

KING: No, the fact is, though, that if you are laying out a case, it's not good to have a rush to judgment. The fact is to get the job done.

I have no doubt you are going to see the top people at Enron indicted. You're going to see them convicted. They did go after Arthur Andersen when many felt it was not the thing to do. The fact is, they did pursue it. And the people in the Justice Department are going full speed ahead. And I would not base a case based on what happened in the last six months. Let's wait and see. This is a nine- inning game.

WOODRUFF: Gentlemen, gentlemen, we are going to have to leave it there.

Representative Peter King, Representative John LaFalce, good to see you both. And we appreciate you talking with us.

LAFALCE: Thank you, Judy. Thank you.

WOODRUFF: Well, President Bush is expected to touch on corporate responsibility and promote his political agenda when he holds a news conference at the top of this hour. Stay with CNN to see it live.

Photographs and memories. Coming up next on INSIDE POLITICS, we will check out snapshots from a different time, when the media helped burnish a president's image.

(COMMERCIAL BREAK)

WOODRUFF: Four decades after John F. Kennedy's death, his political star power remains undisputed. That is due, at least in part, to photographs that captured Kennedy's glamour and charisma for posterity.

CNN's Bruce Morton reports on the works of one man who helped create the Kennedy mystique.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice-over): Washington's Corcoran Gallery is showing the work of Stanley Tretick, a photographer who shot many things, but, most famously, the Kennedys. That is Stan at work.

Celebrity biographer Kitty Kelley, a close friend of Tretick's, had a lot to do with getting the exhibit together. This shot from Kennedy's 1960 campaign was Tretick's favorite, she says. He called it the hands.

KELLEY: Stanley used to tell me that this picture was the advent of celebrity covering, of covering the rock star, media star politician.

MORTON: The yearn to touch him. The staff talked about the bouncers and the screamers.

KELLEY: Bill Clinton certainly had the glamour and the sex appeal. But I doubt that Bill Clinton could have drawn the kind of frenzied crowds, with confetti and ticker tape parades, that John F. Kennedy did.

MORTON: But Tretick's most famous pictures, and maybe the president's, involved the kids. Mrs. Kennedy objected.

KELLEY: In fact, in order to get the famous picture of John Kennedy Jr. under the desk, Stanley worked for 18 months and had to wait until Jackie left the country. And once she left the country, the president said to Evelyn Lincoln, "Call Stanley. Get him over here right away." And even with Mrs. Kennedy out of the country, the president said to Stanley: "We've got to hurry this up. Things get really sticky when Jackie is around."

MORTON: They were two men with something to offer one another.

KELLEY: Stanley had something that Kennedy wanted very much. And that was access to the most important picture magazine of the era. John F. Kennedy obviously had something that Stanley wanted, which was access to the most important person of the era.

So they worked. They were very good for one another. And I think, Bruce, though, that they came to respect one another and like each other.

MORTON: It's a different time now, more media. Hard to imagine one photographer having that kind of access. And back then, there were things you didn't write about.

KELLEY: The press never covered the girlfriends in those days. They heard about them. They certainly didn't see them. And so John F. Kennedy was really given a nice ride.

MORTON: Was it better in those more private times?

KELLEY: No, I don't think so. I think, as much a sunshine as possible is better for us as citizens.

MORTON: But you do miss those moments, those looks at a president in private.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: A lot of things have changed in 40 years.

I'll be back in a moment, but now let's take a look at what's coming up on "WOLF BLITZER REPORTS" -- hi, Wolf.

BLITZER: Hi, Judy.

We are standing by to hear directly from the president of the United States, his news conference live. We'll be there in the White House briefing room. Also, Dr. Atkins of the famous Atkins diet: why his advice for losing weight is back in the spotlight -- and a controversial farewell to a baseball legend.

It's all coming up at the top of the hour, right after INSIDE POLITICS.

(COMMERCIAL BREAK)

WOODRUFF: That's it for INSIDE POLITICS. "WOLF BLITZER REPORTS" is next. Thanks for joining us. I'm Judy Woodruff.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com



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