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CNN SATURDAY EDITION

Interview With Tom DeLay; Greenspan Speaks But Cannot Stop Markets' Decline; Will Traficant Be Expelled?

Aired July 20, 2002 - 10:00   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.
(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We've got to change from a culture of greed to a culture of responsibility.

(END VIDEO CLIP)

JONATHAN KARL, HOST: President Bush talks tough about corporate greed, as Congress races to stay a step ahead in the crackdown on financial fraud. We'll talk with House Majority Whip Tom DeLay of Texas about the push for accounting reform and the political fallout.

(BEGIN VIDEO CLIP)

ALAN GREENSPAN, CHAIRMAN, FEDERAL RESERVE BOARD: The U.S. economy is poised to resume a pattern of sustainable growth.

(END VIDEO CLIP)

KARL: Federal Reserve Chairman Alan Greenspan speaks, but not even he can stop the market slide. Our financial experts weigh in on the bear market and its impact on your money.

Plus, our reporters roundtable provides a behind the scenes look at the White House, Capitol Hill and beyond. All just ahead on CNN's SATURDAY EDITION.

Good morning to California, the rest of the West Coast and all of our viewers across North America. I'm Jonathan Karl in Washington.

We want to hear from you over the next hour. Our e-mail address is saturdayedition@cnn.com.

The president's radio address is just a few minutes away, and we'll also be talking with one of the most powerful people in Washington, the House majority whip, Tom DeLay of Texas. But first, a news alert.

(NEWSBREAK)

KARL: We're just a few minutes away from the president's radio address, but first, joining us from Colorado Springs is Republican Tom DeLay of Texas. Welcome, Mr. DeLay, to SATURDAY EDITION.

REP. TOM DELAY (R-TX), MAJORITY WHIP: Good morning, Jonathan.

KARL: It's great to see you.

I want to get right off on something that has been bothering me since Congress started taking up this whole issue of corporate accountability, and that's your own record, Congress' own record with their own books. Let me just look at a couple examples and get you to tell me what you think is going on here.

Congress, in the last budget last year, classified $4.5 billion for the Census as a emergency spending. We've been doing a census since 1790. They also shifted a military payday from the first day of 2001 to the last day of 2000, creating savings of $2.3 billion that weren't there. And they also shifted a corporate tax deadline from the end of 2000 to the beginning of 2001. That move created an extra $23 billion in mythical income for the federal government.

Now, Mr. DeLay, you're a powerful member of the House. How does this stuff go on in Congress' own budget? And how do you guys have any credibility talking about corporate America?

DELAY: Well, first of all, what we're doing in Washington has -- and the way we operate in Washington needs to be cleaned up. We're working very, very hard to bring real accounting to our spending process. We're trying to restrain spending.

We're working with the president. We now have a president that we can work with, that understands how important it is to rein in government spending, how important it is to the economy, how if the government stands strong against increased spending and big spending, that sends a very real market -- a very real message to the markets, and it's a good message that helps restore confidence in our markets.

So we're trying to clean up those kinds of practices. They go on. We know they go on. It's unfortunate that some try to cook the books in order to spend more money, but we're trying to hold the line, as we speak.

KARL: And doesn't that create a credibility problem, though? I mean, if you look at some of those practices, they're almost exactly the kind of thing that Enron and WorldCom are accused of, this kind of moving of numbers around to make one year look better than the other. It seems like there's a credibility problem there.

DELAY: Well, I think -- of course those kinds of actions cause a credibility problem, but we're trying to stop them. We fight every day against the big spenders in Congress to stop the cooking of the books, to stop playing games as you described. In most cases, we're able to stop them.

I don't -- you didn't give me a little warning on those specific issues, and so I don't know what specific issues you are talking about, if that's last year's budget or the budget even the year before. I don't remember doing those kinds of things, so I can't speak specifically to those issues.

KARL: Now, we're only about 15 seconds away from the president's radio address. I want to ask you, though, he's going to ask you to pass this corporate accountability bill by August. Are you going to be able to do that?

DELAY: We certainly hope so. You know, the House passed a corporate accountability bill and a pension reform bill, pension reform to protect the retirement savings of Americans, back in April. We've been trying to get the Senate to act all this time. KARL: Mr. DeLay, sorry to interrupt. We have to go to the president's radio address. We'll pick it up where we left off.

BUSH: ... the August recess. It must take decisive steps to provide economic security to the American people, to demand high ethical standards from corporate leaders, to promote economic growth and job creation and to curb its appetite for excessive spending.

We must promote economic security by enforcing high ethical standards for American businesses. Unethical business practices by corporate leaders amount to theft and fraud. These practices are unacceptable, and we are fighting them with active prosecutions and tough enforcement by the SEC.

We will defend the rights and interests of every American worker and shareholder. And we will not accept anything less than complete honesty.

The House and Senate have both passed strong corporate accountability bills that toughen penalties and provide transparency and hold corporate executives accountable for their behavior.

I am confident that the differences between the House and the Senate approaches can be bridged. Some in Congress have predicted that it will take two months for the House and Senate to send a bill to my desk. There's no good reason for the legislative process to take that long. I call again on Congress to pass a bill before the August recess. It's time to act decisively to bring a new era of integrity to American business.

We must also increase economic security for American workers through expanded trade. For over a year now, the United States Congress has debated trade promotion authority. This week I met with members of the House and Senate to urge them to resolve their differences and approve a bill. If Congress waits, less markets will be open to American goods and less jobs will be created for American workers.

To promote our economic security, we also need to act on a terrorism insurance bill. Until Congress sends a bill to my desk, some buildings will not be able to get coverage against terrorist attacks and many new buildings will not be built at all.

Commercial development is stalling and workers are missing out on these jobs. This year alone, the lack of terrorism insurance has killed or delayed more than $8 billion in commercial property financing. Congress should pass a terrorism insurance bill without unnecessary measures that increase frivolous litigation.

Finally, we must promote economic security by enforcing fiscal restraint. Congress must control its enormous appetite for excessive spending so we can meet our national priorities and return to a budget surplus without undermining our economy.

Unless Congress controls its spending, we'll face a decade of deficits. I will insist on, and if necessary I'll enforce, discipline in federal spending.

This is a crucial moment for the American economy. The economic fundamentals are strong. Inflation and interest rates are low. Productivity is increasing, and the economy is expanding, which creates more jobs.

But while the economy is growing stronger, confidence in our free-enterprise system is being tested. Unethical business conduct that began in the boom of the 1990s is being uncovered. Investors have lost money. Some in retirement have lost security. Workers have lost jobs. And the trust of the American people has been betrayed.

As we face these economic challenges, my administration will do everything in its power to ensure business integrity and long-term growth.

We must act quickly and aggressively on a variety of fronts to increase the economic security of the American people, and I ask the Congress to join me in this urgent task.

Thank you for listening.

KARL: Well, Congressman DeLay, you heard the president say he's confident that you'll work out your differences with the Senate on that corporate responsibility bill. Do you hope to see some changes, though? You've got one week left before you guys go home for August recess. Do you think you will be -- get some changes in that Senate- passed bill?

DELAY: Well, first of all, the Senate bill and the House bill are not that far apart. The House bill has some things in it that the Senate bill doesn't have. We'd like to see those put in it.

But the point here that the president's making is, this is not the only thing that ought to be done. I mean, the Senate has dragged its feet on a trade promotion authority bill, on a terrorism insurance bill. They have yet to schedule the pension reform bill. There's a whole economic security package here that the president's calling for and the House has already passed.

We've had over 50 bills sitting on Tom Daschle's desk since last year that they have not seen fit to bring to the House floor -- I mean, to the Senate floor. And it's very important legislation, and it's important legislation that could send a very real message to the markets and help to restore confidence in our economy and in our free- market system. KARL: All right, Congressman DeLay, we have a lot more to talk about. We need to take a quick break, and we'll be right back with you.

(COMMERCIAL BREAK)

KARL: We're continuing our discussion with Republican Congressman Tom DeLay of Texas.

Mr. DeLay, I want to ask you, I spoke with a prominent Republican pollster, somebody who even, on occasion, advised you. He says he is very concerned that the situation may be where the Republicans lose control of the House of Representatives. He says the current trend goes the economy, the stock market, concerns about corporate accountability, that we could see something not as dramatic but something similar to 1994, with the Republicans this time getting swept out of power.

Are you worried about that possibility?

DELAY: I'd like to know who you're talking to, because I don't see that at all. And if it's somebody that does work for me, I need to talk to him.

(LAUGHTER)

That's not what we're seeing at all. What we're seeing out there in the real world, in the districts that we really have races is that we're doing incredibly well.

We have probably -- we've had probably the best recruiting year that we've had in many, many a year. Our candidates are on the ground doing fantastically well. Every incumbent, especially our vulnerable incumbents, are leading double digits in their internal polls.

We feel very confident that we already have the majority in the bag, and we're working hard to grow our majority. We think we're going to pick up seats -- not very many, but we could pick up anywhere from five to 10 seats.

And when we see the Democrats doing what they're doing, their decade of deceit, their trying to make sure that people's misery might turn politics their way, that's just a signal that shows that they have no ideas, they have no agenda, they have no schedule. And we've got it all. And we're moving forward, and we're being strong about what we're doing. And we think we're going to really well.

KARL: And it's no surprise the Democrats are also trying to harp continuously on things like Halliburton and Harken and the alleged ethical improprieties of the president and vice president. But there was an interesting article in The Washington Post today that quotes -- I want to read you a quote from this, talking about Republican reaction to these issues.

"`Cheney's silence is deafening,' a senior House Republican aide said. `If there has been one thing that should have been learned from the Clinton era is was that this things have to be dealt with immediately, forthrightly and completely, and failure to do so gives the appearance that there really is something there. It only intensifies the political agony for all of us.'"

It's obviously an unnamed member of the leadership team in the House. But that said, do you think that the vice president should come out and answer some questions and put this matter behind us?

DELAY: I tell you, Jonathan, I just love the courage of the unnamed leadership team. That shows such great courage. And so whatever they say has no credibility at all.

Dick Cheney is a wonderful man. The American people understand how strong he is and what a strong leader he is. And they understand what this is. This is the politics of personal destruction. When your opposition have nothing to say and have nothing to stand on, they go after you and try to destroy you.

Dick Cheney is cooperating. He's putting everything out there. He's trying -- I mean, as far as what is necessary in the investigation. We are very confident that there's nothing there. You've got Cheney, he's in great, great demand in our congressional races all over the country. Wherever he goes, he's raising an incredible amount of money. People want to come out, people want to celebrate Dick Cheney and George W. Bush by going to the events for our members.

There is nobody running away from this administration, I've got to tell you. What people are running away from are the Democrats.

I mean, let me just quote Dick Gephardt. We finally got him on the record for what their agenda, strategy is. The Roll Call reported that the Democrats' big plan, and I quote, "is for unfolding corporate scandals to be kept in the political radar screen until November."

The Democrats are working to extend America's misery for their own political gain, and we just think that's just outrageous.

KARL: Well, let me ask you about another -- another hot topic is this Homeland Security Department. You had a big hearing yesterday and the big vote yesterday in the House on this, and it was a party line vote. All the Republicans on that select committee you established to do this voted against the creation of a Department of Homeland Security, along the lines proposed by Republicans.

Is this going to turn into another big partisan fight?

DELAY: I was so disappointed yesterday. I couldn't believe what I saw. We've been working with the Democrats on the committees. All of the committees have reported to the Select Committee on Homeland Security in a bipartisan way. We've been working really closely with the rank and file Democrats, and we pulled all of the recommendations of these bipartisan committees and put them together in a plan.

But I tell you, the Democrat leadership just can't help itself. They just have to try to play these partisan politics. And they brought -- every amendment they brought was for some special interest. They brought amendments to protect the union bosses. They brought amendments to protect trial lawyers' pocketbooks. They'd rather put their special interests ahead of homeland security. It was really outrageous.

KARL: But let me ask you, I've seen estimates that even just moving employees, moving offices to create this department could cost $3 billion. Are you concerned that one of the legacies of this Congress will be to create this vast, new bureaucracy that may, in fact, end up being a lot bigger than is now even talked about?

DELAY: Well, Jonathan, the reason I came on board and -- well, there's two reasons I came on board. One is I understand how important it is, and it's the top priority -- I mean responsibility, of the federal government is to protect the American people and defend them here at home. And that's what we're trying to do.

And secondly, this gave us an opportunity actually to reorganize government. And we're working very hard, and we put a bill together yesterday that is budget-neutral, it doesn't spend any more money, and it brings all these agencies together and reorganizes them, hopefully in a very efficient way.

The problem is, the Democrats are sitting there, wanting to protect their unions, wanting to protect the federal employees to the detriment of homeland security. I just -- I couldn't believe what I saw there. And now they're making it a partisan issue -- making a partisan issue out of homeland security.

But we're going to go forward. We're going to bring the bill to the floor. Hopefully other Democrats will support us. We think they will.

KARL: OK, I've got one last question for you. The Ethics Committee voted to throw James Traficant out of Congress. I'm wondering -- we'll see a vote in the House next week -- how are you going to vote?

DELAY: Well, I tell you, these are always tough situations and very sad situations when you have a member of Congress that's brought before the House for ethics problems.

The committee is recommending his expulsion. We'll listen to what the committee has to present to the entire House, but I think the House will vote to expel.

KARL: All right, well, Congressman DeLay, always a pleasure. Thank you for making your second appearance here on SATURDAY EDITION. Appreciate it.

DELAY: Glad to do it, Jonathan.

KARL: Great.

All right, and straight ahead, Federal Reserve Chairman Alan Greenspan weighed in on the economy and the corporate responsibility this week. We'll talk with three financial experts about Wall Street's response and the implications for your pocketbook, when CNN's SATURDAY EDITION returns.

And later, you won't want to miss Congressman James Traficant's wild week before a House Ethics Committee. Here's a preview.

(BEGIN VIDEO CLIP)

REP. JAMES TRAFICANT (D), OHIO: It's quite frankly, (UNINTELLIGIBLE). I am prepared to be beamed up.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GREENSPAN: The effects of the recent difficulties will linger for a bit longer, but as they wear off, and absent significant further adverse shocks, the U.S. economy is poised to resume a pattern of sustainable growth.

(END VIDEO CLIP)

KARL: He's got a way with words. Federal Reserve Chairman Alan Greenspan offering a cautiously optimistic view of economy to the Senate Banking Committee earlier this week.

Joining us now to help sort through this week's financial developments and what they mean for you are three guests: In Dallas, David Johnson, a business analyst and contributor to Public Radio's Marketplace; and in New York, Marion Asnes, senior editor for "Money" magazine; and also in New York, CNN's own Christine Romans.

Welcome to all of you to SATURDAY EDITION.

David, I'll start right with you. Where's the bottom?

DAVID JOHNSON, BUSINESS ANALYST: I don't know, maybe it was yesterday.

(LAUGHTER)

You know, you have to be optimistic about these things.

It's tough, it's very dangerous catching falling knives and trying to predict bottoms. But, you know, one of the things you look for is -- maybe the word "capitulation" is used too much, but you look for them to sell good stuff.

And this week, this past week, and to some degree the week before, we really saw them selling the good stuff. It was as though they said, "Well, nobody is ever going to drink a Coke again." Yesterday Coke was down $2.84. "Nobody is ever going to buy Scotch Tape again." 3M down $7.77. And I know Johnson & Johnson has got problems right now, but you know, they sell a lot of cotton swabs and Band-Aids.

And when you get down to that point, where they're just sort of taking a machine gun right across the board and selling everything, you know, you've got to think that that is toward the end.

KARL: Well, Marion, that assumes that the market's rational. I mean, what do you think? Is there more to go?

MARION ASNES, SENIOR EDITOR, "MONEY" MAGAZINE: Well, you know, it's kind of -- yes, I do want to go. I wanted to say that Thursday morning, I arrived in my office, and I had an e-mail in my mailbox that said -- and I'm going to read this -- it said, "Please read this before giving up on investing." This was from a very mainstream firm.

So clearly, there's a sentiment out there that is very, very negative, and in a way, you know, that's terrible because people are selling out. But in a way, maybe this does mean that we could be heading toward the bottom soon, which would, you know, wonderful to see things turn around.

KARL: Well, our friends at the Gallup organization did a CNN-USA Today poll for us -- I want to show this -- about whether or not economic conditions in the U.S. will improve. Here's what people think. Thirty one percent say they're getting better; 57 percent, getting worse.

Christine Romans, you spend a lot of your time right there in the New York Stock Exchange. What is the view there? I mean, are traders optimistic that this bottom may be there, or is the pessimism lingering?

CHRISTINE ROMANS, CNN FINANCIAL NEWS CORRESPONDENT: They're saying that the market is very depressing right now, but there isn't the utter despair that they need to see to really think that there's a bottom being put in.

Plus, there are a lot of folks down there on the floor of the big board who have been calling for the bottom all the way down. When you saw Dow fall below 8,000, I mean, literally there were people who couldn't believe -- some of the most bearish people down there couldn't believe it. You've got to go back to June of '97 to see these kind of levels on the S&P 500.

So, I mean, I guess, it's interesting -- and I think David and Marion might agree with this -- when you get people completely throwing in the towel, that's when the opportunity to start buying stocks come in.

My sense is they haven't completely thrown in the towel yet.

ASNES: Well, I...

KARL: Well, let's go back even further than 1997. I want to play Alan Greenspan back on December 5, 1996, a very famous quote. Here it is.

(BEGIN VIDEO CLIP)

GREENSPAN: But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions, as they have in Japan over the past decade? And how do we factor that assessment into monetary policy?

(END VIDEO CLIP)

KARL: OK, David that was December 5, 1996. Quiz to you, where was the Dow on that day that Alan Greenspan warned about "irrational exuberance"?

JOHNSON: It was trading around 6,500 or so. He got us out. We missed the last 4,000 points or 5,000 points...

(LAUGHTER)

... of a pretty good rally. You know, we don't get investment advice from Alan Greenspan happily. We get, you know, we get really good steady hands on the tiller that sort of directs this economy overall. But...

KARL: But wait a minute, though. I mean, if he's talking about irrational exuberance at 6,500 on the Dow, and we are only 8,000 now, now, true, there have been few years in between, but I mean, are we still overvalued?

JOHNSON: Well, I mean, you know, we evidently were a week ago and a week prior to that. You know, I mean, Christine makes a good point, is that people are still bearish and they're getting more and more bearish. And this is sort of what you need.

I mean, you know, you witnessed, Christine, the highest volume in the history of the New York Stock Exchange yesterday.

ROMANS: Oh, yes. Yes.

JOHNSON: There were a staggering number of people throwing in the towel.

ROMANS: Oh, you're right. And the volume has been strong for days. And you look at some of the names, like you pointed out, the household names on this list of stocks hitting new 52-week lows. Seven Dow stocks hit new 52-week lows yesterday. I don't think I've ever seen seven Dow stocks hit new one-year lows on the same day before.

So a lot of people -- they're throwing a lot of stocks out with the bath water, that's for sure.

JOHNSON: Well, and you know what this, a lot of it...

KARL: All right, we need to...

JOHNSON: Jonathan, I think we're going to see some of this -- we may well see some of this on Monday, is it's so convenient and necessary to pick up the telephone, call the 800 number, and tell Fidelity or Vanguard or Dreyfus or whoever it is, "Get me out of that index fund." And so, the fund doesn't stop -- it's not supposed to stop and say, "Well, I'm going to sell the bad stocks and keep the good stocks." They sell everything right across the board.

ROMANS: Right.

KARL: All right, well, we need to take a quick break. But it sounds like it could be the makings of another fall on Monday, seems to be what you're saying.

But we will come right back after a quick break and finish up with our experts on the economy.

(COMMERCIAL BREAK)

(NEWSBREAK)

KARL: We're continuing our conversation about your money and the economy with market expert David Johnson of Public Radio's Marketplace, Marion Asnes, senior editor of Money Magazine, and our own CNN financial correspondent Christine Romans.

Marion, Democrats here in Washington say that one of the problems here is that the Bush economic team doesn't really include anybody that has credibility on Wall Street, you know, not one of their own, no Bob Rubin at the top level of this economic team. Is that a problem going forward, or do you think that is actually true?

ASNES: I don't know that that's necessarily true. I think that, you know, if you're going to talk about people having a key into the Wall Street world, I think, you know, you have very well-connected people in Washington. You don't have the level of friendship that you had with a Bob Rubin, but I think he's kind of a pretty unique guy in that regard.

I think the real concerns now, though, are more an issue of who is doing long-term thinking about the economy, what is going to be the net effect of deficit spending on the resumption of prosperity, and the issue not only of productivity, which Alan Greenspan pointed out is very good, but honesty is a big issue.

You know, people are going to be flooding into the stock market when they believe there is wealth to be gained by doing so, and not before. And the issues of corporate corruption do mitigate any idea that you might have that you can make money. You do feel that the market is stacked against you. And when you feel that way, it's very easy to say "Oh, I'm not getting back in there. I don't care what's going on, I don't care whether stocks are cheap or not."

So I do think we're at a point now where it's not only a matter of passing a corruption bill, but people really do want to see some guys in handcuffs. And that hasn't happened. The Enron scandal has been more than a year, and there doesn't appear to be the action that people are going to want to see before they feel they can trust the markets. KARL: I mean, Christine, you've been there on the floor while the president has given his various speeches on corporate responsibility and on the economy. And, you know, the cable business, you know, the news channels, CNN included, often show the split screen, the market going down while the president spoke.

But were people actually listening there? Did you see people listening to what the president had to say, and could you see any impact?

ROMANS: They were, and you have to realize that the attention span on Wall Street is very short.

(LAUGHTER)

You know, they watch the speech, they watch the bullet points come out on the wires, and if there's nothing that really shakes them up, then they go back to business.

Clearly, Wall Street is underwhelmed by what it's seeing coming out of Washington on this front. There's just a complete sense of mistrust here.

And, you know, Jonathan, it's so important now for people to know what's in their portfolio -- I mean, I know a lot of people who don't know what's in their portfolio -- when you bought it, how long you have until retirement, what kind of sense you have of risk. You have got to do your homework.

This is a perfect example of you can't just, you know, hear a Merrill Lynch analyst say "I think you should buy X stock" and then you buy it and you don't know anything about it. You know, you really have to do your homework, because even good companies are getting hurt here. So you need to make sure that you own good companies, so that when things come back -- and they will eventually -- that you can benefit.

KARL: Well, David, let me ask you something that really kind of hits close to home here. You're the only one who is not conflicted on this one because you don't collect a paycheck from them. But AOL Time Warner was certainly in the news this week, and that stock has taken a beating. What's going on?

JOHNSON: Well, you got me. I mean, this was a merger that, as far as the stock market was concerned, was not made in heaven, but for just the opposite reasons. If you remember, when this thing was first announced, everybody said, "My gosh, you're taking this go-go Internet company with enormous growth potential and you're saddling it with this, you know, smelly, old media company that's just going to drag down the growth." And of course now it's flipped around. You know, thank goodness you've got this media company that's going to participate in the upwards.

You know, Christine hit it, I think, earlier, and Marion talked about it. This is not a rational market. This is a bear market. And this is an important concept, because this is just the opposite of what you saw in the '90s. There were days when companies were reporting enormous losses, everything else, and the stock would go up in the '90s. The reason was they found excuses to buy stocks. They said this is a buying opportunity. Every sell-off in the market was seen as a chance to run in and buy something cheap.

This is just the opposite. They're looking for excuses to sell off. I mean, you can't blame Bush's speech or Greenspan's address before the Senate Banking Committee or the House Financial Services Committee last week. I mean, they didn't move markets. Why? Because it's a bear market.

JOHNSON: You know, they're going to find an excuse to take a day on these things. You know, these things are like a bad case of prickly heat or something...

(LAUGHTER)

... they just sort of have to run their course.

ASNES: Well, you know, actually, harking back to the clip that you showed earlier of Alan Greenspan's "irrational exuberance" speech, there was a time that no matter what Alan Greenspan said or did, bad or good, the market just zoomed the minute he spoke.

ROMANS: Yes.

JOHNSON: Right.

ASNES: Now what you see is the market doing something else. And this really is the mood of the market. There have been so many bad events that it almost doesn't matter anymore what the magnitude is of any individual event. People see it and say, "More bad news. Another shoe dropping."

ROMANS: And the Greenspan quote of the week was "infectious greed in corporate America."

ASNES: Right.

ROMANS: That's interesting. And there's infectious fear on Wall Street.

KARL: Yes.

ROMANS: So "irrational exuberance," that's old news.

JOHNSON: Well, and everybody is going to come down hard on greed right now.

(LAUGHTER)

KARL: One cartoon put it, "I should have sold somewhere between irrational exuberance and infectious greed."

(LAUGHTER)

ROMANS: Right.

KARL: Hey, well, you guys have been great. Thank you so much for joining us. Enjoy the rest of your Saturday.

ASNES: Thank you so much.

JOHNSON: Don't give up the good fight.

KARL: All right. President Bush's homeland security plan hits a snag in Congress, and Democrats begin to take on the White House over the war on terrorism. We'll get the inside scoop on that on more from our reporters roundtable when SATURDAY EDITION returns.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: I've got great confidence in the vice president. He's doing a heck of a good job. When I picked him, I knew he was a fine business leader and a fine, experienced man. And he's doing a great job.

And that matter will run its course, the Halliburton investigation, and the facts will come out at some point in time.

(END VIDEO CLIP)

KARL: All right, well, President Bush expressing his support of Vice President Cheney during the SEC investigation of Mr. Cheney's former company, Halliburton.

Welcome back to SATURDAY EDITION. It's time for our reporters roundtable. Joining me, Mike Allen of "The Washington Post," Martha Brant of "Newsweek" magazine, and John Dickerson, White House correspondent for "TIME" magazine, and CNN's own White House correspondent, Kelly Wallace, from the lawn of the White House.

Welcome to all of you.

John, I'm a little confused. The vice president's office says he cannot comment at all on Halliburton because it's an ongoing investigation. Well, the president just exonerated him. I mean, why can the president talk about this, but not the vice president?

JOHN DICKERSON, TIME MAGAZINE: Well, that's exactly right, and this is the box that the White House is in. They say about the president's remarks, "Look, he didn't exonerate him because the SEC investigation isn't about Cheney. It's about Halliburton." Well, if the investigation isn't about Cheney and it's about Halliburton, then why can't Mr. Cheney talk about it? And so they have this box that they're in.

The president though wanted to make sure he went out and defended his vice president. Before the press conference, he talked with his aides, and he wanted to make sure he got out there, said some positive remarks. Because Cheney isn't able to defend himself, Bush wanted to stick up for him.

KARL: So are we going to hear from Cheney at all?

MIKE ALLEN, WASHINGTON POST: Eventually. But in the meantime, the reason this is such a problem for them is that an investigation, a dozen private lawsuits provides tremendous oxygen, tremendous new information all of the time for these scandal stories which they wanted to get rid of. Heard a lot about Harken Oil. We probably know what there is to know about that. That's old, this is new, and will keep being news. Just what they don't want.

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: And I don't know, guys, if this is White House spin, but you know, aides are saying they don't think there's a lot of air there for Harken and also for Halliburton.

One aide I talked to said, "Look, the major five newspapers are really focusing on Halliburton. The rest of the country's newspapers aren't really focusing on that. They're talking about corporate responsibility, what the president is doing."

So really, right now, again, it could be wishful thinking, they think it's not really resonating. The key, they say, is clearly how the economy is doing, if the market continues to decline. They know the president and Republicans will pay a price in November.

MARTHA BRANT, NEWSWEEK: But, Kelly, I mean, even if there is no there there with Halliburton, they are trying to put Vice President Cheney out as a tremendously good business leader and talking about him in the context of corporate responsibility.

And one thing that happened during Halliburton was he led the drive to acquire Dresser Industries, which is now liable for lots of asbestos suits. And so at the very least he doesn't look like a very great business leader after all.

WALLACE: And there is no question, it's difficult, Martha, as you're saying, because just like they don't -- they're not putting the vice president out there because one of his top advisers were saying, you know, it would be, quote, "inappropriate for him to talk about an ongoing investigation." And of course, we had the president just the other day talking about it.

So it's a bind for them. They're not putting him out there. They're not really answering all of the key questions. Was the vice president aware? Did he know of some of these accounting practices?

Their hope, I guess, is it wraps up very quickly.

DICKERSON: Jon, I think this is, here's why this is all important, how this all ties together.

The White House insists that they're not hiding the vice president, that he doesn't really go out in public and speak very much. But when he does go out, it is moments just like the one we're in right now. The country doesn't really know what's happening with the economy. A lot of people are worried. Confidence in the country is a little shaky. This is just the time that they used to put out Dick Cheney, who, just by his very presence, has a calming effect for the country. And this is the way they...

KARL: Put him out on Sunday. He's got his low tone...

DICKERSON: That's right. They put him out, I mean, exactly. Put him on one of the news shows so that he talk; have those soothing, reassuring tones about the war on terrorism, about the economy, whatever it may be. That was the sort of ace that they had in their hand at the White House. And they just can't use it now.

BRANT: I get a little bit of a sense that Cheney would like to go out and address the specificity of the accounting charge. Halliburton is being accused of being Enron-like in its accounting tricks. And he says that people are misunderstanding this, Cheney saying this behind the scenes.

And just as John was saying, he's tremendously convincing. I think he's getting some bad press. Well, of course, I'd like to say that because I'm a reporter and...

(LAUGHTER)

... I'd like to be able to ask him questions. But he'd probably be convincing on this.

KARL: But we all see the reporting from you all and others that Cheney, behind the scenes, is arguing against some of these measures on corporate responsibility. I mean, is that true? Is that what's going on?

ALLEN: Yes, people in the administration say that Bush's original package was much tougher. Cheney apparently, his method is, the vice president, when he's talking to the aides, he asks questions, very loaded, barbed questions and...

KARL: What are we doing here?

ALLEN: Exactly. Exactly.

KARL: Well, I want to look at the latest -- we do this almost every week -- the latest approval rating for the president. This is the Gallup poll taken earlier this month. It's our latest poll. It shows that 73 percent still approve of the president's performance, 21 percent disapprove, still defying the Republican top pollster's prediction that the approval rating would come down.

But, John, as you well know, every silver lining sometimes has a touch of gray, to quote somebody. Is there some bad news in the numbers as well?

DICKERSON: Well, there's a lot of bad news around the president. And basically, when you ask the president they're still extremely supportive. And he has extraordinarily resilient numbers, so resilient in fact that it worries some Republicans who are terrified the day they go down, it will lead to a spate of stories.

But all the numbers around him, when you ask people "Do you think the administration cares more about business than they do you," people really think the administration does. When you ask them the same question about Bush, they think, "Oh, no, he's on our side."

But all of the other numbers about confidence in the country, confidence in the direction the country is going, confidence in the administration's ability to handle the economy, those are all going down.

The worry at the White House is that all of that negative feeling could suddenly turn toward the president.

KARL: Well, Kelly, let me ask you. We're about getting to the time of year when the president goes to Crawford, Texas, for a nice vacation on his ranch. Are you sensing any change in vacation plans, or does the president, does the White House really want to see pictures of him out enjoying himself on his ranch while this is going on?

WALLACE: Well, a change also in the communication of the president's vacation plan, because as you and my other colleagues know, the White House was definitely criticized about the president taking that month-long, quote, "working vacation" last year.

So Ari Fleischer, the president's spokesman coming out yesterday and saying, "Look, the president is going to Crawford, but it's basically like, Crawford, the White House moving to Crawford. He's going to be on the road two to three days of the week."

KARL: Summer White House.

WALLACE: Exactly, getting out there, talking about the economy.

So they're very sensitive that if Wall Street continues to reel, what the pictures will be if the president is out on his ranch. They're going to have him out around the country, also talking about the economy, but also of course trying to help key Republicans before November.

KARL: Well, President Kennedy of course had a nice summer White House over there in Hyannisport, so it wouldn't be unprecedented.

We need to take a quick break.

Do you have a very quick point you wanted to...

BRANT: I'll make it after the break.

KARL: We'll take a very quick break. And we'll have the highlights and lowlights of one of the strangest hearings ever seen on Capital Hill.

Stay with us.

(COMMERCIAL BREAK)

KARL: Welcome back.

Ohio Congressman James Traficant was convicted in April by a federal grand jury of bribery, tax evasion and racketeering. This week, he faced lawmakers with the House Ethics Committee, who voted to throw him out of Congress.

Here is a sampling of his most unusual defense.

(BEGIN VIDEO CLIP)

REP. JOEL HEFLEY (R-CO), CHAIRMAN, HOUSE COMMITTEE ON STANDARDS OF OFFICIAL CONDUCT: All participants will be required to avoid unruly, inappropriate language or behavior.

TRAFICANT: Yeah, have them give me some room. I mean, this is disgusting. Man, if I had a gas-leaking emission (ph) that would destroy every camera in the joint.

KEN KELLNER, SUBCOMMITTEE COUNSEL: By clear and convincing evidence, we will show that Representative Traficant engaged in a continuing pattern and practice of official misconduct.

TRAFICANT: I'm not going to admit to crimes that I did not do, had no intent to ever commit a crime, and will do the time, and expect a long time to try and shut me up.

Other than that, I'm feeling fine. If someone in the audience has a cough drop, I would appreciate it. My throat is sore. I'm having some rectal disorders, as a matter of fact, as a result of this. My stomach is upset. And I am hard to live with.

Are you and I sex partners?

UNIDENTIFIED FEMALE: No.

TRAFICANT: Why not?

(LAUGHTER)

I'm just kidding.

I am prepared to be beamed up.

(END VIDEO CLIP)

I've been railroaded once, and I'll be damned if I'm going to be railroaded twice.

HEFLEY: I think I've heard that several times.

TRAFICANT: (UNINTELLIGIBLE) did not testify about...

HEFLEY: Sit down!

TRAFICANT: No one has testified about any of this. Any of these damn lying witnesses.

HEFLEY: Mr. Traficant, would you like the hearing closed?

TRAFICANT: No, not really.

HEFLEY: I wouldn't think so, so sit down and let Mr. Lewis complete his testimony.

TRAFICANT: I want you to disregard all of what opposing counsel has said. I think they're delusionary. I think they've had something funny for lunch in their meal. I think they should be handcuffed to a chain-link fence, flogged. And all of their hearsay evidence should be thrown the hell out. And if they lie again, I'm going to go over and kick them in the crotch. Thank you very much.

I will take with me a file, a chisel, a knife. I'll try and get some major explosives and try to fight my way out. Then when I get out, I'll grab a sword like Maximus Meridius -- Dimidius, and as a gladiator, I'll stab people in the crotch.

(LAUGHTER)

(END VIDEO CLIP)

KARL: All right. Well, James Traficant says that even if he gets thrown in jail, he is going to run for reelection, and he says he will be elected from his jail cell. Will be the first person to do it since Matthew Lyon, who was thrown in under the Alien and Sedition Acts back under President Adams.

Mike Allen, your take on James Traficant?

ALLEN: Well, Congressman Traficant reminds me of that Mafia don that used to wonder through Queens in his bathrobe so that he could plead insanity. The congressman tries to, with this act, deem sympathy or absolution of what he's doing. You talk to people on the Hill, there's not. What he did was directly related to his official acts. That makes it easy for them to expel them.

KARL: So he's gone, right, John?

DICKERSON: He's gone. He may have a talk radio future.

(LAUGHTER)

KARL: Can they do that from a jail cell?

DICKERSON: I don't know. I don't know whether that works.

It reminds me of when I used to cover conspiracy theories. You get mail -- perhaps you guys get this as well -- you get an article from the newspaper with scribblings in the margins, sometimes in Crayon or thick Magic Marker. And the scribblings in the margin sounded a lot like what Congressman Traficant sounded like in his testimony.

KARL: Do we know what happens if he gets expelled but then gets reelected? I mean, what's the precedent there?

Mike, you're our constitutional scholar. I guess we will refer that one to the research department.

But on a more serious...

ALLEN: I'll be back.

(LAUGHTER)

KARL: But on a more serious note, the House elections. Kelly, you heard Tom DeLay say, that the House, the Republicans have the majority in the bag.

WALLACE: I know, I heard that. Making some news there. He told you majority in the bag and they're looking to maybe pick up, what did he say, five to 10 seats.

Obviously, when you talk to people behind the scenes, they are saying something else, that Republicans are worried. I believe Congressman Dick Gephardt, the House Democratic leader, is thinking Democrats could pick up dozens of seats. So it really depends who you talk to.

Republicans appear to be getting worried. They believe certainly if the markets continue to go down, if people are not getting more confident in the economy, they believe they're going to be the ones to pay the price, not the Democrats.

DICKERSON: And what's extraordinary is you get Republicans in tough races -- well, maybe not extraordinary. Their political self- interest is at play here. But what you hear is Republicans in tough races saying, "We have to cut loose from the president."

You have a president whose approval ratings are so high -- right, in the 70s -- don't budge. And they're saying, "We have to get ahead of him on corporate responsibility, on homeland security. On any issue we can, we have to run past the president because he's not helping us."

BRANT: Which goes back to Jon's poll point, which is that, sure, Bush is popular. They think that he's able to empathize with people, and people like him. But if you look more detailed at the poll numbers, it doesn't work across the board for Republicans, which is exactly why they're cutting the coattails of Bush and think that they are in trouble.

ALLEN: And the White House and Republicans have known for a long time that, as long as people are focused on the war, he was fine. What this poll and the criticism Bush is getting for these speeches are, as soon as he gets off the war, he gets in trouble.

And they've known for a long time that the economy is the one thing that could gain more news coverage, more attention. People are opening their 401(k)s, and they're reminded of what's going on.

KARL: So is Karl Rove losing sleep?

BRANT: I'm sure he is. But Karl Rove probably only sleeps two hours a night. He's so hyperkinetic.

(LAUGHTER)

BRANT: But the president is clearly worried about this because he's made getting back the Senate one of his top priorities. And that's why, as Kelly was saying, he's going to be out there during his so-called vacation, but he's going to be doing a lot of fund-raising.

KARL: Kelly?

WALLACE: Exactly. I was going to say, you know, it is so funny, you say Karl Rove losing sleep. They always say, "Oh, we don't really watch the polls. We're not really paying close attention to them."

Of course they are. And they are looking at how the president's approval rating continues to be high. But again, looking at those other numbers, they think Republicans are in a bit of trouble.

KARL: All right, John Dickerson, Kelly Wallace, Mike Allen, Martha Brant, a pleasure to have you here on Saturday. Enjoy the rest of your weekend.

BRANT: Thanks.

WALLACE: Glad to be with you.

KARL: Take care.

When we come back, My Turn.

(COMMERCIAL BREAK)

KARL: Here's an accounting scandal that hasn't yet hit the business pages. The offending organization concealed debts, inflated revenues and understated costs.

And it gets worse. Billions of dollars in expenses were simply left off the books, and other expenses were paid by raiding the pension fund.

The scandal here is the federal budget. And it's brought to you by Congress, the very folks now pointing the finger at corporate America.

But Congress pulls accounting schemes a lot like Enron and WorldCom. In one typical move, Congress gave corporations an extra two weeks to make their last quarterly tax payment of the year 2000. This neat trick made the 2001 budget look $23 billion better than it really was.

If a corporation tried to inflate its quarterly profits that way, it would be dragged before congressional committees and investigated by the SEC. In fact, back in 1985, Reagan budget director David Stockman said that if the SEC investigated the government, many of them would be in jail.

If Congress wants to have credibility on the corporate responsibility front, it should get its own books in order first.

Thanks for watching SATURDAY EDITION. I'm Jonathan Karl in Washington.

A news alert is next, followed by People in the News, with a behind-the-scenes story of American Taliban John Walker Lindh and Osama bin Laden.

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