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Does Arming Pilots Make Skies Safer?; Americans Less Sure of U.S. Victory in War on Terror

Aired July 10, 2002 - 16:00   ET


JUDY WOODRUFF, CNN ANCHOR: I'm Judy Woodruff in Washington.

Congress takes aim at the question, would arming pilots make the skies safer or more dangerous?

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: I'm Bill Schneider in Washington. In the war on terror, Americans are less sure than ever about a U.S. victory. Is that creating problems for the president?

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: I'm John King at the White House, where officials are shrugging off criticism of the president's plan to fight corporate corruption, and shrugging off a new lawsuit questioning the vice president's dealings back when he was a CEO.

WOODRUFF: Also ahead, Giuliani versus Hanover. A private end to the former New York mayor's bitter divorce battle.

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

WOODRUFF: Thank you for joining us.

As all of us know, after September 11 the threat of terror is never very far from the minds of Americans and their public officials.

One day after condemning corporate crooks, President Bush put the war on terror front and center again. He urged federal workers to rally behind his plan to create a new cabinet department of homeland security.

A reminder today of heightened security and jitters the skies -- a Bolivian man described by police as mentally challenged was taken into custody in Miami and released because he repeatedly asked to tour the cockpit of an AirTran flight from Atlanta.

Meantime on Capitol Hill, the full House is nearing a vote on whether to allow commercial airline pilots to arm themselves with guns in the cockpit.

(BEGIN VIDEO CLIP) DEL. ELEANOR HOLMS NORTON (D), DISTRICT OF COLUMBIA: We are rushing to the security blanket of guns in the cockpit that could do more harm than good, and that is the test.

REP. DON YOUNG (R), ALASKA: Our duty is to protect the passengers, our cargo, and to maintain control of the ship at all times. And the only way can you do it is to make sure you are armed adequately to defend yourself.


WOODRUFF: CNN's Patty Davis is following the guns in the cockpit debate. Now, Patty, under this bill in the House, would all the pilots get guns?

PATTY DAVIS, CNN CORRESPONDENT: Well, that's a significant change which just occurred. Congressman Pete DeFazio from Oregon had put in an amendment that would have changed this from two-year test program to a permanent program, as well as -- the original bill was just two percent of pilots. DeFazio's amendment changed that to all pilots, also speeding up training from four months to two months for pilots. That has passed. So this has significantly changed that bill.

It significantly expanded the scope, bringing it more into line with what is being looked at in the Senate at this point.

WOODRUFF: Patty, the flight attendants had been against this, because they were not also going to be armed. Where do they stand now?

DAVIS: Flight attendants still will not be armed under this bill. But there were some charges that were made in -- by the sponsors, and the flight attendants now are now on board.

What they will be giving is a representative at the Transportation Security Administration, who will be responsible for making sure that the training is standardized, that the training is developed for flight attendants to have self-defense, to communicate better with the crew up in the flight deck, so that they can develop some procedures whereby if a hijacking takes place, they won't be armed but they'll at least know what to do in terms of self-defense.

That is incorporated in this bill now. They do support it. They also support the Senate version.

WOODRUFF: And quickly, Patty, what are the chances this is going to become law?

DAVIS: Well, it's definitely, at this point, the sponsors saying, going to pass the House. It is having trouble, though, in the Senate. Senator Ernest Hollings, the head of the commerce committee, does not support this.

Staffers over in the Senate saying they are going to try to attach it to an appropriations bill. the White House opposes this. The Bush Administration has come up very strongly, saying they do not want this. So it's going to be a tough road ahead, Judy.

WOODRUFF: But in the House, different story. OK, Patty Davis, thank you.

Well, in the war on terror today, President Bush once again promised a U.S. victory.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We will win the war on terror, no doubt in my mind, thanks to the heroism of our fighting troops and thanks to the patriotism of our people and thanks to the hard work of government officials here at home.


WOODRUFF: So, Bill Schneider, do Americans think the United States is winning the war on terrorism?

SCHNEIDER: Well, you know, Judy, they did back in January.

After we routed the Taliban, two-thirds of Americans said the U.S. and its allies were winning. All year, we have seen a steady erosion of that view. The latest figures, now only 39 percent say the U.S. and its allies are winning.

That is still more than the 16 percent who believe the terrorists are winning. But the prevailing view now among 43 percent of Americans is that neither side is winning.

You know, Americans don't like ties. That was clear, if you watched the All-Star game last night.

WOODRUFF: Very true, and we are supposed to be hearing any minute now from baseball commissioner Bud Selig. We'll go to that when it starts.

Bill, what would it take to persuade Americans that the United States is winning this war?

SCHNEIDER: Judy, I'd say one word: Osama. When he was asked about Osama bin Laden at his press conference on Monday, President Bush said, "If he's alive, we'll get him. If he's not alive, we got him."

The president is trying to treat bin Laden as more and more irrelevant to the war. Well, you know what? He's not.

In January the public said that this war will not be a success if Osama bin Laden is not captured. They say the same thing now by a slightly larger margin. Americans want their man, and right now that's Osama more than Saddam Hussein.

WOODRUFF: So is that shift having any political repercussion?

SCHNEIDER: Well, Judy, here's a surprise. No, it is not. President Bush's rating on international affairs is holding strong at 71 percent. Moreover, the president gets solid support whether or not you think the U.S. is winning the war.

The president said on Monday, "This war is a long journey. That's what people have to know."

Well, they do.

WOODRUFF: All right. Bill Schneider, thanks.

And now we turn to the big issue of corporate responsibility. The reviews of President Bush's speech on that subject were still coming in today as a watchdog group says that it was suing vice president Dick Cheney. At issue, accounting practices at the oil industry firm that Cheney once headed.

Here now, CNN's Brooks Jackson.


BROOKS JACKSON, CNN CORRESPONDENT (voice-over): A Washington watchdog group is calling Vice President Richard Cheney a crook.

LARRY KLAYMAN, JUDICIAL WATCH: We can show, and we are confident that we will, that Vice President Cheney broke the law.

JACKSON: Judicial Watch is filing a lawsuit against Cheney and Halliburton Corporation, the Houston based oil and gas services company Cheney headed for five years.

The suit claims they committed fraud through accounting practices that boosted the company's income. The White House reacted curtly.


JACKSON: And Halliburton issued a statement calling claims in the lawsuit untrue, unsupported and unfounded.

The suit stems from a matter first reported in a May 22 story in the "New York Times" Business section.

Here are the main facts. Halliburton made the accounting change in 1998, when Cheney was chief executive. It was not yet clear whether he approved it or was even aware of it. The change involved cost overruns and other billings that Halliburton's customers were disputing.

Before, Halliburton did not count the money as income until the customer agreed to pay. But after, Halliburton counted a portion of those disputed bills as current income, money it had not been paid and might never be paid.

The change boosted Halliburton's reported income by $89 million in 1998 alone. And the company did not disclose the change to investors until a year later. The matter is serious enough that the Securities and Exchange Commission started a preliminary investigation within days after the "Times" story. Chairman Harvey Pitt has said Cheney won't get special treatment.

HARVEY PITT, SEC CHAIRMAN: We don't give anyone a pass. If anybody violates the law, we go after them.

JACKSON: The Halliburton allegations pale compared to the multibillion blowups at Enron, WorldCom, Tyco and others. So far, Halliburton has not had to restate any of the income or profits it reported as a result of the accounting change.

But Cheney's possible involvement makes them a political target. Judicial Watch says it will try to get Cheney to testify under oath about the matter.


So how serious is all this, really? Well, eight out of 10 security suits like these are now thrown out of court under higher standards Congress set in 1995.

And as to what Halliburton did, two accounting experts have told CNN their accounting change was aggressive but probably not illegal -- Judy.

WOODRUFF: All right, Brooks, thank you. You finished just in time for us to go Milwaukee to the baseball commissioner Bud Selig to talk about that infamous tie in last night's All-Star game. Let's listen.


WOODRUFF: We are going to take a short break. When we come back, back to corporate responsibility. We will hear from House Minority Leader Dick Gephardt and Tom Donohue, president of the U.S. Chamber of Commerce.


WOODRUFF: Let's bring in our senior White House correspondent, John King.

John, we are watching the Senate. We know that by a vote of 97-0 they passed an accounting reform bill that would impose tough criminal penalties for fraud on the part of corporate leaders. How far apart now are the White House and the Congress on these questions?

KING: Well, Judy, that depends on who you ask. Here at the White House, they say the president is very close -- obviously, the president supports the bill that already passed the House, and the White House says he is very close now to what they see emerging as the votes continue in the Senate, so the White House says it does not see any problem here.

It believes the differences will be resolved in conference committee and then there will be a bill the president can sign. If you ask the Senate Democratic leader, Tom Daschle, however, he says there are still some significant differences, most especially over the so-called Sarbanes bill.

That deals with what kind of oversight committee, independent panel would you have to oversee the accounting industry. What the White House and even some Democrats concede here is that yes, privately both sides say the differences are not so substantial, but what have you going on right now is a contest for credit, if you will.

Everyone says this is the number one issue right now. The Democrats want to emphasize the divides as long as possible so that in the end they can claim credit for the toughest bill and say the president had to come their way. The White House would like to say, "We're all on the same page. We're just working out details."

WOODRUFF: John, we're watching the Dow Jones Industrials, the stock market come down today. The Dow was down something like 280- some points.

President's speech apparently has failed to reassure Wall Street. How closely is the White House watching all of this?

KING: Well, they are watching that number for two reasons. One, to the point you just made, the White House would like to see -- this debate in Congress is going to take some time, several weeks at least, and so what they would like to see is at least some psychological impact of the president's speech, that investors are more confident that Washington will do something, that investors are more confident that even put the Washington debate aside, the president's lecture to corporate leaders that they better shape up will have some effect.

So the White House wants to see that from a corporate corruption debate standpoint. You'd like to see the numbers on Wall Street going up, obviously, as a sign the president's speech had some impact, and let's just put back into context this president's own political standing.

The Dow was at about 10,500 when he took office. It is down around 9,000 right now. This president knows full well his own standing down the road, whether it is helping Republicans in this November's congressional elections or running for his own reelection two years from now. His standing will have a lot to do with how voters see the economy.

WOODRUFF: All right. John King at the White House. And now joining me to talk more about corporate responsibility and various proposals, the House minority leader, Dick Gephardt of Missouri.

Mr. Gephardt, Republicans, among them Senator Phil Gramm are saying, look, what the Democrats are doing here is turning this into a political issue. They're not going to be happy no matter what the president says or does.

DICK GEPHARDT (D-MO), HOUSE MINORITY LEADER: Well, that's just not right. What we want and what America needs and what capitalism needs in our business community, is good new regulations that will restore the rules that we always should have had in place on the accounting industry, on corporate governance and a lot of other important issues.

The bill the House Republicans passed was really an enshrinement of the status quo. They turned down a series of amendments here that we tried to get in. Now they say they are willing to move in that direction. We will see what really happens when we get into a conference on this bill.

WOODRUFF: I want to broaden it out a little bit. The last time you were on the program, among other things, you said that when the Republicans came into the majority in the mid-1990s, they created a climate that made it possible for some of these corporate abuses to take place, but now Republicans are coming back and saying no, it was during the Clinton administration. Democrats were in charge.

They were in charge of the executive branch that allowed this kind of thing to happen.

GEPHARDT: Well, I think again you got to go back to what happened in Congress. It was the Congress that made the statements -- Tom DeLay's statements, Newt Gingrich -- we're going to put those statements out tomorrow.

We are going to put out a whole list of actions and inactions that the Congress either took or didn't take in the last eight years. And then you've got to look at what happened to the SEC, the main watchdog agency of these issues.

When the Bush administration came in, they cut the budget. We now have an agency that has three people not appointed and not put in place because of a disagreement with the president over who should go in place.

WOODRUFF: But the White House is saying...

GEPHARDT: And you've got -- you've got an agency that has -- he's trying to put three people on the agency that come from the very industry that they are trying to regulate.

WOODRUFF: But the White House is saying, among other things, the Democrats won't support the additional millions of dollars they want to put into the SEC for enforcement.

GEPHARDT: That is just absolutely wrong. In a bipartisan way Congress a few weeks ago tried to appropriate a 60 percent increase in funding for the SEC.

The president yesterday said he wanted a 20 percent increase. The truth is you need about $300 million more in order to make the SEC be able to do its work in a proficient manner.

The Republicans for 20 years have been saying that we need to get rid of government regulation, we need to free our corporations from any government regulation. Now we're seeing the bitter harvest of that -- of that investment that they made in those issues. WOODRUFF: Finally, the tougher accounting reform that you are calling for for the House to pass. Now we know that's likely to pass in the Senate but it didn't pass in the House. Isn't this likely to just have to be resolved in conference committee?

GEPHARDT: Well that's really the point. We now go to a conference. The House Republicans have been for a bill that had little or no effect. They are going to have to move a long way to get to the Sarbanes approach, which is apparently going to pass the Senate by large numbers.

This is a lot like campaign finance reform. You've got House Republicans in a different place than the rest of the Congress. You've got a president who is not leading them to come to a decent position, but he is saying, "I will sign whatever I get."

I hope we can get him a good bill and I hope he will sign it.

WOODRUFF: House Minority Leader Dick Gephardt, thanks very much.

GEPHARDT: Thank you.

WOODRUFF: We appreciate it. Well, for perspective now from the business community on issues of corporate responsibility, let's turn to Tom Donohue. He's the president and CEO of the U.S. Chamber of Commerce.

You know, Mr. Donohue, the markets were down yesterday, they're down even more today. The president's speech is getting mixed reaction across the country. What more is it going to take, do you think?

TOM DONOHUE, CEO, U.S. CHAMBER OF COMMERCE: Well, it's going to take far more than an address of this corporate governance and accounting issue to bring up the stock market.

Clearly, there is a problem with that issue. But there is also a problem with the continued fear of terrorism. There's a problem with the fear of the Senate to move forward on a bill for terrorist insurance, which will free us up to do a lot of job creation. There is a question of getting the trade bill done. There's a question of getting the energy bill done. There's a question of trying not to let the class action trial lawyers have a free run at the American business community by some of the material that it was originally, and may still, some of it, be in the Sarbanes bill.

You know, there is a real tough thing for the Congress to understand. The Congress doesn't drive the market. The Congress doesn't create jobs. The Congress doesn't create economic growth. They can help or they can hurt. And I'd wish they'd get off the political bit of -- and you look at these operatives writing, say, "Boy are we lucky. The economy is in bad shape, and we've got some corporate criminals. Maybe we can run for office that way."

I think it is time for everybody to get together, address the question of the real criminals and get rid of them and put them in jail, and recognize that 99.9 percent of the 17,000 public companies are playing by the law.

WOODRUFF: But Tom Donohue, are you saying that there are no real reforms that need to be made. It's just a matter of putting people in jail, and the system is OK as it is?

DONOHUE: Absolutely not. On Monday we came out and said three things we have to do. Renewed confidence in the economic system, get rid of the corporate people that deceive, distort and violated the law, and be as tough as you can on them, and then take advantage of this opportunity to pass some significant reforms.

We're for more money for SEC, we're for independent directors and independent audit committees. We're for very, very vigorous enforcement of the law, and we're going to support all of that.

But we had some serious objections to the Sarbanes bill. Some of them have been taken care of, and we got to take of the others or we'll create a conflict, where CEOs say, "Do I listen to this group? Do I listen to this group?" And you won't have simplicity and easy to understand rules.

WOODRUFF: But what do you say to Americans who are out there? As you know, most Americans are now invested in the stock market. They are looking for significant change that is going to give them the confidence that the economy is strong, which we're told that it is, and that the markets are safe to invest in.

DONOHUE: Well, I think that's a great question. And you are right, the economy is strong. The secretary of treasury reported today on the very strong numbers we have. But there is another problem. If the individuals don't invest, if corporations don't invest, if everybody waits around and say, we have 11 committees of the Congress that don't understand the subject, are looking into this issue, we have threat of additional terrorism and the other matters I mentioned, it is going to take a while to get some investment.

That's why we are joining with others who say, let's take advantage of the opportunity to improve the rules and then to enforce the laws and then to encourage people to understand this is the most audited, the most transparent, the most regulated economy in the world. And we're the best at it. We create more jobs, 40 percent increase in the standard of living in the last 10 years.

WOODRUFF: President and CEO of the United States Chamber of Commerce. Tom Donohue, thanks very much.

DONOHUE: Thank you.

WOODRUFF: Good to see you.

And we want to tell you that the House of Representatives is nearing a vote on whether -- or they're in the middle of voting on whether to arm commercial airline pilots. We are going to bring you the result of that vote as soon as it finishes.

In the meantime, one of the NBA's biggest stars could soon face criminal charges. We'll have details coming up in the "Newscycle."


WOODRUFF: Among the stories in our "Newscycle": A Pakistani judge is considering the fate of four men accused of kidnapping and killing "Wall Street Journal" reporter Daniel Pearl. The prosecutor said today he has requested the death penalty. A defense attorney said the judge will announce his verdict on Monday.

Philadelphia police say they have collected enough evidence to arrest basketball star Allen Iverson on aggravated assault charges. Investigators say Iverson barged into a home last week and threatened two men with a gun. Iverson is a former league MVP and perennial All- Star for the Philadelphia 76ers.

President Bush today told federal employees America needs a Department of Homeland Security, and the time to act is now. He called on Congress to approve legislation creating the department, which would bring together 170,000 employees to, quote, "identify and assess threats to the homeland."

Ron Brownstein of the "Los Angeles Times" is here now with more on corporate responsibility. Ron, we just heard Tom Donohue talking about this, but why has this resonated so much with ordinary Americans?

RON BROWNSTEIN, "LOS ANGELES TIMES": You know, it's been fascinating listening to the show for the last 15 minutes because we're really in the midst of the first political confrontation shaped by the era of mass investment. I mean, as you noted, 20 years ago, only one in five American families were invested in the stock market. Today, it is at least one in two and maybe two in three. That's a huge new constituency. Neither party has figured out entirely how to reach them. And both sides are making the efforts. That's why you see the kind of debate that we're having this week in the Congress, and also why the president probably had to make that speech he did yesterday.

WOODRUFF: What do you think, at this point, the political fallout is for the November election?

BROWNSTEIN: Well, my bet is that what we're seeing in this week, this debate over corporate accounting and corporate governance will not be the major impact, will not be the major way that this issue insinuates itself into the campaign. It is more likely to shape other issues that are more immediate to people.

Social Security: In the 1990s, when the stock market was going up, that provided wind in the sails for the Republican proposals to create individual investment accounts in Social Security, that would allow people to invest part of their Social Security money in the market. Now, it is likely before November you are going to see Democrats arguing do you want to turn over your Social Security to the same people who gave us WorldCom and Enron and all the other Wall Street scandals. The economy, the focus on the Dow and the state of the Dow is looming larger in people's assessment of how the overall economy is doing. And if these scandals keep the markets tumbling, that's probably going to reduce confidence about the direction of the country, which is never good for the party in power in the White House.

And finally, pensions. More people now have defined contribution pension plans where their employer buys them stock or makes an investment on their behalf rather than a defined benefit, where they're guaranteed what they are going to get when they retire. I would bet that the debate over pension reform that's coming in the fall may be more immediate and relevant to people ultimately in the election than this debate now.

But in all of these different ways, Judy, this mass investment era is going to shape this election. It's an unpredictable force because we really haven't been through it before, and no one's sure how it will play out.

WOODRUFF: And it's all come on very suddenly, kicked off this time by WorldCom. All right, Ron Brownstein, thanks very much.

BROWNSTEIN: Thank you.

WOODRUFF: We appreciate it.

In New York, Rudy Giuliani's latest battle is over. Up next, how did the former mayor finally settle his nasty and very public split from his wife, Donna Hanover?


WOODRUFF: It threatened to be one of the splashiest divorce trials of the rich or famous. But today, former New York Mayor Rudy Giuliani and Donna Hanover reached an out of court settlement.


RUDY GIULIANI, FORMER NEW YORK MAYOR: For the sake of the children and really all of us, I'm relieved that we're able to reach an agreement on all of these different terms and spare everyone any further pain or embarrassment or anything else. And I hope the very, very best for Donna, for her future. I think that's -- we have two children and I want everything to work out the very best for them as well as her.

HELEN BREZINSKY, DONNA HANOVER'S ATTORNEY: Rudy has admitted that he was cruel and inhuman. The children will remain with Donna. He will be paying her more than $6.8 million.

QUESTION: I'm sorry. Could you say that again?

BREZINSKY: He will be paying here more than $6.8 million. This is a spectacular win for Donna and the children.


WOODRUFF: It was a quiet end to a very messy and public breakup. After 20 years of marriage and two years of separation, during which his wife refused to move out of the mayor's residence, Rudy Giuliani and Donna Hanover today settled their divorce. Their public breakup came at the worst possible time for the then-mayor, at the height of his U.S. Senate race with Hillary Clinton, and while he was fighting prostate cancer.


GIULIANI: For quite some time, it has probably been apparent that Donna and I lead, in many ways, independent and separate lives.


WOODRUFF: Hanover charged him with infidelity. She was furious that Giuliani was appearing in public with his girlfriend, Judy Nathan, and that he told the press he was filing for divorce before he told her.


DONNA HANOVER, GIULIANI'S WIFE: Today's turn of events brings me great sadness. I had hoped to keep this marriage together.


WOODRUFF: The mayor dropped out of the Senate race a few days later, citing his cancer.


GIULIANI: I've decided that what I should do is to put my health first and that I should devote the focus and attention that I should to running -- to being able to figure out the best treatment and not running for office.


WOODRUFF: When Rudy Giuliani left office at the end of last year, Judy Nathan was at his side.

With us now, Michael Goodwin of the "New York Daily News." Michael, does this mean the whole Rudy Giuliani marital story is completely behind us, never to be thought of again?

MICHAEL GOODWIN, "NEW YORK DAILY NEWS": Well, I wouldn't go quite that far. I'm sure he's hoping that. But I think that certainly some of the details will come out over time. But I do think, in large measure, this does put to rest a very big problem for all of them and I think personally, as Rudy was quoted as saying, they're for the children. I think that anybody who knows them, knows their two children, had to fear what was coming here.

This was a train wreck that was going to -- of epic proportions. There was going to be a public trial, in effect, over what ended the marriage. And so what we have here is a settlement wherein he pays her a lot of money and avoids the public embarrassment. And I think it would have been, as I say, a train wreck for the whole family. So, you have to think this was a better settlement for everybody.

WOODRUFF: Well, it had to have already been very painful for everyone involved and, as you say, especially for the children. How does this affect his political future, if he wants to have one?

GOODWIN: Well, I think that we pretty much know the dirt on him in this sense, that, I mean, his openly being in public with Judith Nathan I think signaled to everybody that this was not going to be an ordinary divorce. So, I don't know how much more there will be to know ultimately, and the public seems to have accepted all of that with him.

There's something of a Teflon character with Rudy Giuliani. He's been through a lot publicly and yet he's lionized around the world now. I mean, the man is perhaps the most famous person on the planet these days. And anywhere you go, he gets these standing ovations, whether it's the All-Star Game or as you're showing there in England. Around the world, he's revered right now because of his handling of New York after the terrorist attacks.

So, I think that this ends that chapter, by and large, and I think that he will be able now to get on with a public life of some sort once a little time has passed.

WOODRUFF: Michael Goodwin of the "New York Daily News," you're right, 9/11 changed many things, and it certainly changed things for Rudy Giuliani. Thanks a lot. Good to see you.

GOODWIN: Thank you.

WOODRUFF: We want to tell you that the House of Representatives has voted to pass that legislation that would permit pilots, commercial pilots, to carry firearms. And I can't quite read the vote, but it looks like it is pretty substantial, 310 to 112 with 13 not voting. So, a substantial win for those who want commercial pilots to be able to win. But as we've been -- to want commercial pilots to be able to carry firearms. But as we've been reporting, this is a measure that's having a tough time in the Senate. It's not clear that it is going to go anywhere after this vote in the House.

And now, checking the headlines in our "Campaign News Daily," Massachusetts gubernatorial candidate Mitt Romney is threatening to sue fellow Republican James Rappaport. Romney says Rappaport is boosting his own campaign for lieutenant governor illegally by using their names together on signs and bumper stickers. Romney has chosen a different candidate, Kerry Healey, to be his running mate. But a Rappaport spokesman says the signs and stickers are here to stay.

Texas Democrat Ron Kirk once said that Bill Clinton would have to, quote, "rehabilitate himself before working the campaign trail in Texas." Well, now, Kirk has announced plans to hold a Manhattan fundraiser with Bill Clinton. A spokesman tells the "Dallas Morning News" that Kirk stands by his original comments. He says don't expect to see the former president campaigning in Texas, quote, "anytime soon."

Florida Governor Jeb Bush has named the first Hispanic to serve on the Florida Supreme Court. Raoul Cantero is a Miami attorney. He is also a grandson of former Cuban leader Fulgencio Batista, the man overthrown in 1959 by Fidel Castro. Cantero is Governor Bush's first solo appointment to the court. The choice does not require legislative approval.

Keeping watch on Wall Street at the state level. Coming up next, my conversation with New York state's Attorney General Eliot Spitzer on punishing misconduct and the push for reforms.


WOODRUFF: With us now is the attorney general for the state of New York, Eliot Spitzer. Mr. Spitzer, you have said that what the president offered yesterday really was no solution at all. What do you think should be done?

ELIOT SPITZER, NEW YORK STATE ATTORNEY GENERAL: Well, I think there are several discrete issues that have to be addressed. One of them is analyst conflicts. With respect to the analyst conflicts, I think there are a number of ideas that are out there. One, total separation of analyst compensation from investment banking, refuse to permit -- do not permit analysts to participate in investment banking transactions.

In short, there's an independent review of the analysts' recommendations before they are issued, and much more fulsome disclosure of the conflicts that exist because the investment banking houses have business relationships with the companies which they are making recommendations about. So, when it comes to analysts, there are very serious, discrete ideas that are out there. The president, unfortunately, did not make any of those points. He hid behind the Oxley bill, which is the House bill that really does not do any of these things.

WOODRUFF: Now, you're focusing on analysts. What about the point being made by a number of observers today that actually passing more criminal laws is not going to be the answer, that these are very hard to enforce. You have the former head of enforcement at the SEC saying corporate fraud is very hard to detect and almost impossible to prosecute.

SPITZER: Well, I do not think there's a problem with increasing the penalties and creating the task force that he has created. That's all well and good. But I think it goes back to the mentality that the president approached this with, which is that there are a few bad apples, prosecute them but do not change the rules of the game.

The problem is he hasn't come to grips with the underlying notion that the rules of the game have to be changed, whether it comes to corporate governance, whether it comes to accounting, whether it comes to the analysts, the three large areas that are being discussed. The rules themselves have to be rearticulated and changed. He is fixating on getting tough, he says, by putting a few more people in jail. We will do that. But so, he has really ignored the larger, more difficult issue here.

WOODRUFF: You're saying the Oxley bill is inadequate. Does that mean the Sarbanes bill, the bill moving through the Senate, has all the answers to it?

SPITZER: No, I don't think the Sarbanes bill has all the answers. And I've dealt a great deal with Senator Sarbanes, have enormous respect for him. His bill is a good first step. It makes a lot of progress in these areas. I think it could be stiffened when it comes to analysts. I hope that will happen in due course.

But I think that it is certainly a vast improvement over the Oxley bill. The Oxley bill does not call for any action with respect to analysts. It is a void. There's absolutely nothing there. And I think that is why it was disconcerting to me at least to see the president hiding behind the Oxley bill, saying that the House of Representatives had passed what he viewed as an adequate piece of legislation. I think it is really grossly inadequate.

WOODRUFF: Well, Eliot Spitzer, New York attorney general, thank you so much for joining us. Good to see you.

SPITZER: Judy, thank you so much.

WOODRUFF: And straight ahead, making special education more valuable to the children who truly need it.


REID LYON, NATIONAL INSTITUTE OF CHILD HEALTH & HUMAN DEVELOPMENT: That is, if we can get the kids very early with the right stuff, we know that we can reduce the numbers of kids with academic failure by upwards to 70 percent.


WOODRUFF: A new approach to special ed with an emphasis on early detection.


WOODRUFF: For the past two days, Congress heard recommendations from a presidential commission on the nation's special education programs. Among the suggestions, less paperwork, a focus on results and a new emphasis on detecting problems early. CNN's Kathy Slobogin has more.


KATHY SLOBOGIN, CNN CORRESPONDENT (voice-over): It looks like fun, but this is actually a form of diagnosis. These kindergartners are learning reading skills, and their teachers are learning who needs help. It's part of a plan the Greenwich, Connecticut, school district put in place to catch reading problems before they develop into a need for special education, special education that had nearly bankrupted the system.

ROGER LULOW, GREENWICH SUPERINTENDENT: The number of kids in special ed, where we were up almost to 20 percent of our student body being identified as handicapped.

SLOBOGIN: Superintendent Roger Lulow says the cost of educating those students was swallowing his budget, forcing the school district to borrow money from the town three years in a row.

The landmark 1975 Special Education Law opened school doors to millions of children with disabilities who were once shut out. But it has also grown beyond all expectations, now serving more than 6 million children. With that growth has come bureaucracy, litigation and controversy over how to pay for it.

Today, Congress heard from a presidential commission on reforming the sprawling program. One of the central recommendations: early intervention.

LYON: Early intervention is the key; it's paramount.

SLOBOGIN: Reid Lyon, a member of the commission and an adviser to President Bush, says many children end up in special education not because they really have disabilities, but because they have not been taught well.

LYON: When we look at those children, we find that quite a few of them would not have needed special education at all had we gotten to them earlier.

SLOBOGIN: Lyon says nearly half the children in special ed are there because they can't read. But a growing body of research shows that with the right methods, that can be changed.

LYON: If we can get the kids very early with the right stuff, we know that we can reduce the kids with academic failure by upwards to 70 percent.

UNIDENTIFIED FEMALE: We took out the letter O. That's right.

SLOBOGIN: Greenwich schools catch problem readers in kindergarten and give them special instruction in first grade. Those that still struggle get even more intervention in second grade. Now, special ed is down from 20 percent of the student body to only 13 percent. Costs are under control too.

LULOW: In fact, we've returned money to the town each year out of our budget for the last three years.

SLOBOGIN: Training teachers in intervention methods will take time and money. But reformers believe the investment would pay for itself in reduced special ed costs, which are roughly double the cost of a regular education. (on camera): Even more than saving dollars, reformers say early intervention will save children from years of unnecessary frustration and failure.

Kathy Slobogin, CNN, Washington.


WOODRUFF: I will be back in a moment. But now let's take a look at what is coming up on "WOLF BLITZER REPORTS." Hello, Wolf.

WOLF BLITZER, CNN ANCHOR: Hi, Judy. In a moment, another tape showing a police officer apprehending a man. Did the police go too far this time? We'll show you the videotape.

Also, the letter that may give the parents of Elizabeth Smart some new hope.

And is one of basketball's superstars headed for trouble with the law? It is all coming up at the top of the hour right after INSIDE POLITICS.


WOODRUFF: Tomorrow on INSIDE POLITICS, the two leaders of the U.S. Senate, Tom Daschle the Democrat, Trent Lott the Republican. They'll be with us.

"WOLF BLITZER REPORTS" is next. We thank you for joining us. I'm Judy Woodruff.


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