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CNN LOU DOBBS MONEYLINE
Authorities Warn of Al Qaeda Attacks in East Africa
Aired May 15, 2003 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JAN HOPKINS, HOST: Hi, Kyra, and thank you. Good evening, everyone.
Tonight, a worldwide terror alert. Authorities warn of al Qaeda attacks in East Africa after bombings in Saudi Arabia. Jamie McIntyre will have the latest on the hunt for Osama bin Laden.
Boom or bust? The market advances, but the economic recovery is far from secure. Economist John Ryding will tell us if tax cuts will make a difference.
And fighting cancer. Patients want experimental drugs like Erbitux, but safety concerns mean those drugs are not freely available. We'll have a special report.
Tonight , security forces worldwide are on heightened alert for the possibility of more terrorist attacks. Defense Secretary, Donald Rumsfeld, today insisted the war on terror is making progress, but U.S. officials say that al Qaeda and Osama bin Laden, if he's still alive, remain a serious threat.
Senior Pentagon correspondent, Jamie McIntyre, has the story.
(BEGIN VIDEOTAPE)
JAMIE MCINTYRE, SENIOR PENTAGON CORRESPONDENT (voice-over): Despite the failure of the United States to capture, kill or otherwise account for Osama bin Laden, U.S. officials believe any involvement he may have had in this week's bombings in Saudi Arabia was probably limited.
DONALD RUMSFELD, SECRETARY OF DEFENSE: If he is alive and functioning, and playing a role, which I don't know, it is a much more difficult role than it had been previously. It's more difficult in terms of raising money. It's more difficult in terms of moving people and things and weapons. MCINTYRE: U.S. intelligence believes bin Laden remains holed up in an ungoverned region between Pakistan and Afghanistan. So, while bin Laden and other senior al Qaeda leaders may support or inspire the attacks, U.S. officials argue they likely lack the communication and freedom of movement to effectively direct them.
GENERAL RICHARD MYERS, JOINT CHIEFS CHAIRMAN: Our suspicions are they're living in areas where they can bribe the locals, the tribals that are inclined to support them and protect them, and they are in very difficult areas on this earth. MCINTYRE: U.S. intelligence experts are divided about what the attacks say about what's left of the strength of al Qaeda. Clearly, it shows the terrorist network, or at least one cell, can still carry out a coordinated strike resulting in significant casualties, but the latest tactic may reveal a weakness, having to go for easier targets that kill Arabs and Muslims as well as Americans and westerners.
MYERS: I think one thing that the bombings in Riyadh remind us of is that one thing it has not changed is the intentions of this terrorist group.
(END VIDEOTAPE)
MCINTYRE: So why can't the U.S. find bin Laden? The Pentagon offers three reasons. One is the difficulty of finding any single person. The second is the ease of hiding in ungoverned areas, and then there's the support from countries like Iran who still are harboring al Qaeda leaders. Jan?
HOPKINS: So really, no idea what part of the world he's hiding, if, in fact, he is?
MCINTYRE: Well, officially, the U.S. still says they don't know if he's alive or dead or exactly where he is, but in the intelligence community, all the betting is he that is in this area between Pakistan and Afghanistan that is essentially ungoverned under the protection of somebody that he's bribed. Jan?
HOPKINS: Thanks, Jamie McIntyre at the Pentagon.
A federal grand today jury indicted two suspected al Qaeda terrorists for their role in the bombing of the USS Cole in Yemen. The warship was attacked by terrorists in October, 2000. Seventeen sailors were killed. The two terrorist suspects are on the run after escaping from a jail in Yemen last month.
CNN has learned that Lebanon has prevented a terrorist rocket attack on the U.S. Embassy in Beirut. Lebanese sources say that nine people have been detained in connection with that plot. The suspects include Lebanese citizens and Palestinians.'
Britain today advised British airlines to stop flying to and from Kenya because of a terrorism threat. British Airways immediately cancelled its flights to Kenya, a popular tourist destination for westerners. Last November, terrorists tried to shoot down an Israeli airliner in Kenya. They fired two shoulder-launched missiles, but both missed. The State Department says that travelers should carefully review any plans to travel to Kenya and other East African countries because of the terrorism threat.
Concerns about a possible missile attack highlighted by Senator Chuck Schumer today.
(BEGIN VIDEO CLIP)
SENATOR CHARLES SCHUMER (D), NEW YORK: We came to the conclusion independently that this was one of the great dangers that Americans faced, that if a terrorist wanted to strike us, this would be a method of choice because of the availability of these weapons and the ease with which they can take down a commercial jet airliner.
(END VIDEO CLIP)
The White House today said that Saudi Arabia needs to do more to fight terrorism. The statements follows comments by the U.S. ambassador in Riyadh criticizing Saudi security measures before the suicide bombings. Those bombings killed 34 people, including eight Americans. Justice correspondent Kelli Arena has more.
(BEGIN VIDEOTAPE)
KELLI ARENA, CNN JUSTICE CORRESPONDENT (voice-over): U.S. investigators are now in Saudi Arabia to help hunt down the terrorists who killed eight Americans, but it's still unclear how much of a role the Saudis will let the U.S. team have.
SCOTT MCCLELLAN, DEPUTY WHITE HOUSE PRESS SECRETARY: We expect full cooperation in the investigation, and I think all indications are from the FBI assessment team is that Saudi Arabia's cooperating.
ARENA: A top priority, reconstructing the truck bombs, just as FBI agents did in the 1996 Khobar Towers bombing.
DAVE WILLIAMS, FORMER FBI AGENT: We were able to determine what it was, and based on the way it was put together, we had a fairly good idea who may have laid that down.
ARENA: There are still some question about what the U.S. told the Saudis before the attacks. U.S. government sources say that when top White House aide, Stephen Hadley, met urgently with the Crown Prince Abdullah, he did not provide intelligence about a specific target.
Instead, a senior U.S. official said the Saudis were given an analysis that al Qaeda was in the final faces of planning a major attack in Saudi Arabia and that it would most likely try to hit targets like businesses and housing compounds.
PRINCE BANDAR BIN SULTAN, SAUDI AMBASSADOR TO THE U.S.: I want security agencies (UNINTELLIGIBLE) seriously assess the situation and decided the measures were adequate.
ARENA: A week before the attacks, the Saudis did discover a safe house and weapons cache near one of the compounds hit, and some U.S. government officials say it's very likely the terrorists used it to case the targets.
JOHN ASHCROFT, U.S. ATTORNEY GENERAL: Saudi Arabia must deal with the fact that it has terrorists inside its country.
(END VIDEOTAPE)
ARENA: U.S. officials say that is imperative because intelligence indicates that al Qaeda is planning even more attacks in the kingdom. Jan?
HOPKINS: More attacks in Saudi Arabia?
ARENA: That's right. They say that these attacks in Riyadh are just the first of what they see as a series of attacks based on comments by Osama bin Laden and also based on intelligence that they are getting, Jan.
HOPKINS: Thank you. Kelli Arena, our justice correspondent.
In Baghdad today, U.S. forces stepped up security patrols in an attempt to maintain law and order. Nearly 50,000 troops are in the Baghdad area, and more are on the way. Kitty Pilgrim reports.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNNfn CORRESPONDENT (voice-over): Many say keeping the peace seems to be a lot harder than winning the war, and some are saying it takes a lot more manpower, too. More than 15,000 additional troops are on the way to Baghdad, adding to the 142,000 in the country already, 49,000 of those around Baghdad.
ERIC SCHWARTZ, COUNCIL ON FOREIGN RELATIONS: We need to have lots of personnel on the ground. We need military police. We need more troops than we have now.
PILGRIM: This issue the topic of a heated house hearing on Iraq this week.
REPRESENTATIVE DENNIS KUCINICH (D), OHIO: The administration is now reduced the number of troops in Iraq to fewer than 150,000. As a result, this weekend, General David McKiernan the commander of ground force in Iraq, made a frank and disturbing comment. He said, quote, "Ask yourself if you could secure all of California with 150,000 troops. The answer is no." This individual is the commander of the U.S. ground forces.
PILGRIM: The manpower issues were acknowledged by the new U.S. administrator, Paul Bremer, in his first press conference since taking over on Monday.
PAUL BREMER, U.S. ADMINISTRATOR IN IRAQ: We understand the importance of dealing with this problem. We believe we have -- we need an effort to put more troops on the ground here, and that's what we're going to do.
PILGRIM: U.S. troops in Baghdad today starting a new initiative for security and order, increasing patrols and even collecting trash, and some 7,000 Iraqi police officers are back at work to help with joint patrols, something the experts say is critical.
(END VIDEOTAPE)
Now, there's also a new neighborhood cleanup initiative; 20 to 30 Iraqis are going to be paid to help with that, and 300 soldiers are going to provide security at gas stations and refineries, all in an effort to improve the quality of life and also boost security. Jan?
HOPKINS: It seems like there is some progress this week.
PILGRIM: It certainly is a change of tone this week, and they have not been hesitant to address the problems. Let's see what the follow through is like.
HOPKINS: Thanks, Kitty Pilgrim.
Turning to border security and immigration in this country, a federal prosecutor today filed smuggling charges against a trucker after discovery of 18 dead migrants at a truck stop in Texas. The owner and driver of the truck has been charged with conspiracy and smuggling aliens. Gary Tuckman joins us live with more. Gary?
GARY TUCKMAN, CNN CORRESPONDENT: Jan, hello to you, and that smuggling suspect, Tyrone Williams, remains in jail in this hour in lieu of bond. He doesn't have an attorney just yet, but when he gets one, that attorney will have some damage control to contend with because an affidavit released today, in which the suspect has made some incriminating statements.
According to the affidavit, Tyrone Williams, we saw today for the first time as he entered court for an initial appearance hearing in Houston, says he did enter into an agreement with two men on the United States side of the Mexican border to transport illegal immigrants for a $5,000 fee from Harlingen, Texas, to Houston.
He said that he had a light dangling from the back of his trailer, so he decided to stop at the service station that we are at right now. He heard banking and screaming in the back of the trailer. He opened up the trailer, and he told police that, quote, "There appeared to be something wrong with the people back there."
He also said a female was yelling, "El nino!" which means in Spanish, the little boy. Indeed, a seven-year-old boy one of the 18 illegal immigrants who died in the steaming truck packed in with more than 100 people.
The man then told that in the affidavit that he bought 20 bottles of water in the store here. He said he was afraid, and he panicked. He then unhooked his tractor from the trailer, left the trail with the immigrants here at this truck stop, and took his tractor with a passenger who was with him the whole time, a female, and they traveled 120 miles to Houston.
He says then, Mr. Williams, that he went to a hospital because he was afraid. Nurses said he was nervous and very anxious. At that point, he started talking. Police came, and this man was taken into custody and ultimately placed under arrest on this smuggling charge.
Police are still looking for at least three other people, the two people at the border who we talked about and the woman who was with him in the cab and at the hospital, who apparently left the scene.
Police have interviewed some of the survivors aboard the trailer who said they paid $1,000 to go along on this ride.
We can tell you we're talking about 62 people who are now being held here in Victoria County, Texas. Another seven people are in the hospital, one in critical condition. Between 20 and 50 people are believed to have run away.
One more thing I want to mention to you, Jan, regarding homeland security, a lot of people might be wondering, is it tighter now? Are less immigrants crossing the border from Mexico? Authorities truly can't answer that question. They're absolutely not sure about that. Back to you.
HOPKINS: Thank you, Gary Tuckman in Texas.
The Coast Guard took six Cubans into custody today after they tried to enter the Florida Keys in a small boat. Two of the Cubans treaded water for two hours before giving themselves up. Cubans who reach the shore are usually allowed to stay in the United States, but those picked up at sea are generally sent back to Cuba.
Still to come tonight, a look at how the United States is handling the increased terrorist threat. Former defense secretary, William Cohen, joins us.
And then, a special report on the future of AOL Time Warner and what the world's biggest media company must do to survive. Greg Clarkin will have that report ahead of tomorrow's shareholder meeting.
(COMMERCIAL BREAK)
HOPKINS: More good news for consumers tonight. Interest rates on mortgages fallen to their lowest levels on record. An average 30- year mortgage is now less than 5.5 percent, 5.45 percent. It's more than a full percentage lower than it was last year. And 15-year rates have dropped to 4.84 percent.
Gasoline prices continue to slide. The average price for a gallon of unleaded regular is now $1.49. That's a 22-cent decline from the all-time high that was set in March, just as the war with Iraq began.
On Wall Street, stocks rallied, ending two days of losses. The Dow industrials gaining 65 points, the NASDAQ adding 16, the S & P 500 gaining 7.
Christine Romans joins us now with more. Christine?
CHRISTINE ROMANS, CNNfn CORRESPONDENT: And, Jan, the Nasdaq and the S&P are now at their highest for the year, and for the third day in a row, you didn't see a big sell off on what could be considered bad news. Today's data showed industrial output shrank, and wholesale prices had the biggest one-month drop on record. Stock investors blame the PPI plunge on oil prices and took some comfort from a 13,000 drop in weekly jobless claims.
Now, tech stocks led the market higher. IBM's chief executive said demand for technology has stabilized, relative to a year ago. Analog Devices and Computer Associates served up earnings surprises, and Intel's chief stood by profit targets, although he said he was cautious.
Also raising eyebrows in tech land, Warren Buffett, famously avoided tech stocks during the late 1990s, but SEC filings revealed recent telecom holdings, WillTel Communications and Level 3 Communications. Now those stocks were on fire today. Level 3 up 36 percent today alone, up 42 percent this year. WillTel rallied nine percent today, although it is down for the year.
Meanwhile, Treasuries were mixed today, but the trend still intact. Stocks an uptrend. Bonds sporting yields at 40-plus year lows. That is a reversal from market patterns over the past five years, and you can bet that housing starts, consumer prices, consumer sentiment figures tomorrow will get plenty of attention because of this. Jan?
HOPKINS: Very interesting. Thanks, Christine.
It has now been 528 days since Enron filed for bankruptcy. Sixty-five executives from corporate America have been charged, 15 of them from Enron. No one has been sent to jail.
Checking on the national debt tonight, it stands at more than $6,460,332,649,709, and your family share is just under $70,000. The U.S. government isn't alone, personal bankruptcy filings at a record high with more than a 1.5 million filing in the latest 12-month period.
When we return, our quote for the day and the global threat of terrorism.
Then, increasing tensions from Korea to Saudi Arabia. Former defense secretary, William Cohen, will join us to talk about the United States' next move.
And later...
(BEGIN VIDEO CLIP)
JENNIFER MCNELLIE, CANCER PATIENT: This is something where you're on your way out, and you need it. You have to have it in order to live.
(END VIDEO CLIP)
HOPKINS: Casey Wian with a special report on terminally ill cancer patients fighting for access to drugs that could improve their quality of life.
(COMMERCIAL BREAK)
HOPKINS: President Bush and President Roh of South Korea issued a strong statement about North Korea after their summit in Washington. They said, quote, "We will not tolerate nuclear weapons in North Korea." End quote. At the same time, U.S. officials are warning of an increased threat from radical Islamists terrorists after the bomb attacks in Saudi Arabia.
Joining us now is former defense secretary and MONEYLINE regular contributor, William Cohen. Welcome back.
WILLIAM COHEN, FORMER DEFENSE SECRETARY: Good evening, Jan.
HOPKINS: Let's talk about Saudi Arabia first. There seems to be some debate about whether there was enough warning from the U.S. about potential attacks and whether Saudi Arabia did enough to protect foreign residents. What do you think?
COHEN: Well, I think even the Saudis have indicated that they didn't do enough to prevent this from taking place, although they have made a significant contribution in recent times to combating terrorism. Not enough. And they're going to have to do a lot better if they're going to be effective in this war against terror, which now, of course, has targeted the royal family, as well.
So, we have to understand, and they understand, that the goal of whether it's al Qaeda or some other group, the goal is to take down the royal family, as well as to drive the United States and other westerners out of the kingdom, as such.
So, they have a real interest in cracking down much more severely than they have in the past, even though the United States concedes they have done much more than they have had to do in the past.
HOPKINS: Well, U.S. troops are set to leave Saudi Arabia. Should they stay as a result of this?
COHEN: Well, the troops were set to leave by virtue of the fact there is no longer any need to maintain that force level to protect the kingdom. With respect to our presence there for security purposes, that depends upon whether the Saudi regime itself feels that we are necessary and, indeed, whether we see this as being able to continue the war against terror wherever it is and wherever we're welcome to fight it.
But it's clear that this form of terrorism really is not vertically integrated so that if you cut off the head or defeat the head that somehow it disappears. It's a very loosely knit horizontally organized network that can operate separate and apart and to take conventional explosives. It's not a terribly sophisticated operation, if you think about it, to accumulate 500 pounds of bombs and then to drive them into a guarded facility, but one in which the guards have no weapons.
So, it's not terribly sophisticated. I think it's easily accomplished, and it means that we have to get much, much more aggressive in terms of hunting down those groups that are associated, those individuals associated with terrorism.
HOPKINS: Well, Senator Graham says that our attention was focused on Iraq and not on hunting down those terrorists. Do you agree with him?
COHEN: I think we can do more than one thing at a time and we need to do more than one thing at a time. We certainly were focused on war in Iraq, which was accomplished successfully in a very short period of time.
But we also have to keep our eye very much on the ball of terrorism. So, the war in Afghanistan, with the beginning of taking down the Taliban network, al Qaeda network, but it didn't destroy it. And so what we have to do is to go back and to redouble our efforts to really go after those remaining elements which have apparently resurfaced and have regained some of their strength.
So, we need to do both. We have to continue the battle, not only in Afghanistan and Saudi Arabia and elsewhere, but as your earlier reports indicated, in many other parts of the world including East Africa, possibly in Asia, as well.
HOPKINS: So, this is a real indication that al Qaeda is ramping up again? Is really something that needs to be dealt with again?
COHEN: I think it's a real indication that terror networks exist whether al Qaeda, Islamic Jihad, or any other group, that they exist in many numbers spread throughout the world, all over the world, and they can be activated on a moment's notice, can have plans which can range from being sophisticated to fairly rudimentary. And so, what it means is we are going to have to cooperate on a global basis, that every country that treasures its society, its civilization, now has an interest at stake to cooperate on a global basis to root out these groups wherever they may be.
So, there are many out there, and we have more waves of terrorism to expect. And we have to work that much harder to prevent them from taking place, but more than prevention itself, we have to be aggressive in rooting it out, draining the swamp, as they say.
HOPKINS: In terms of North Korea, the meeting this week between the South Korean president and President Bush, some progress, do you think?
COHEN: Oh, I think so. I met President Roh at a dinner that was hosted by the Center for Strategic and International Studies, CSIS, and I was impressed with his intellect and his agility, I must also say. He has moved somewhat away from the statement that he would not consider a military option under any circumstances to not really mentioning it, period, to say that nuclear weapons cannot be allowed to be developed by the North.
And I found this really quite striking because just a few days ago in "The New York Times", there was some indication, hopefully a false story, that the United States is conceding that the North can build it without the United States being able to prevent it. That's not a good policy for us, and I hope it's discounted and discontinued.
So, we're probably much closer together on a policy on South Korea, as we need to be, than perhaps people anticipated. HOPKINS: Thanks very much, William Cohen.
COHEN: My pleasure.
And that brings us to our quote of the day on the bombings in Riyadh. Quote, "I think the bombing makes it clear that Saudi Arabia has a terrorism problem, just like many nations in the world have terrorism problems, and Saudi Arabia must deal with the fact that it has terrorists inside its country, and those terrorists are as much a threat to Saudi Arabia as they are other nations." End quote. That comes from U.S. Attorney General, John Ashcroft.
Coming up, the Senate votes on the tax cut. We will have that report and then talk to economist John Ryding about whether the tax cut will mean boom or bust to the U.S. economy.
And then, the French find a new way to bring their wine to the United States, claiming the Bush administration isn't playing fair. We'll have that story and more ahead.
(COMMERCIAL BREAK)
HOPKINS: Here are the latest developments in the SARS epidemic. Britain has confirmed its first case of Severe Acute Respiratory Syndrome. Officials say the patient has recovered and is no longer considered a danger.
In China, the supreme court has ruled that anyone who intentionally spreads SARS could be put to death. That ruling comes a day after the Chinese government declared the outbreak under control. Today China reported 39 new cases and four additional deaths.
Globally, close to 7,700 people have contracted SARS, 598 have died.
Erbitux was created to help people with cancer, but the drug ran into some major roadblocks. The FDA has yet to approve Erbitux, and the company that makes it, ImClone, has been embroiled in a huge insider trading scandal.
None of that matters to the patients who want Erbitux and who need it and who have applied enormous pressure to the FDA to approve it. Casey Wian has the report.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNNfn CORRESPONDENT (voice-over): Jennifer McNellie has the most advanced form of colon cancer. She's fought the disease and its devastating side effects for two-and-a-half-years. She's also fought for access to a controversial medicine she says is keeping her alive but isn't approved by the Food and Drug Administration.
MCNELLIE: We have done the research, so you know that it's a good drug, but you can't get it. So, you can imagine how that would make you feel, and this is something where you're on your way out, and you need it. You have to have it in order to live. WIAN: McNellie is talking about Erbitux, the drug at the center of the ImClone insider trading scandal. Before receiving Erbitux as part of a clinical trial, McNellie needed nearly a gallon of fluid drained from her abdomen every five days. The life-threatening build up was crushing her internal organs.
Erbitux helped relieve the condition, allowing McNellie to return to her job as an environmental scientist. But in March, she was removed from the Erbitux trial because one of her tumors had grown. The fluid returned, and her condition worsened.
McNellie was out of FDA-approved treatment options and in a dilemma faced by tens of thousands of incurable cancer patients each year. Limited access to drugs seeking FDA approval.
Patient activists like McNellie's husband says the FDA is not approving cancer drugs fast enough.
STEVE WALKER, ABIGAIL ALLIANCE: You have a patient that is facing certain death. The FDA feels that patient needs to be protected from a drug that might help them because they don't know enough about what the bad things the drug might do to them.
WIAN: After a decade of accelerated drug approvals, the FDA slowed in 2000. Since then, the median approval time has jumped from one year to more than 15 months.
In many years a problem, FDA Commissioner, Dr. Mark McClellan, vowed to speed the process when he took charge of the agency in November. He appears to be following through.
Just this month, the FDA approved two new cancer treatments, including Iressa even though the agency doesn't fully understand how it works and despite safety concerns.
PETER LURIE, PUBLIC CITIZEN: We do not think, though that the solution to people's desperate need to get drugs because they've run out of options is to lower the standards for approval. That in the end will hurt more people than it will benefit.
WIAN: Yet patients and activists like McNellie and Walker say they're encouraged by the FDA's actions and Erbitux may get a second chance. McNellie is back on the drug as part of one of several new trials and ImClone hopes to reapply for FDA approval. Meanwhile, McNellie hopes to return to work as early as next week.
Casey Wian, CNN, Los Angeles.
(END VIDEOTAPE)
HOPKINS: A ban on assault weapons will not be extended beyond 2004 according to House Majority Leader Tom DeLay. Congressman DeLay says an extension of the ban will not come to a vote because an extension does not have enough support to pass. President Bush is said to support an extension of the ban. It was passed in 1994. The Senate spent the day voting on a number of amendments to the tax bill. Democrats and Republicans found middle ground on several key issues. Congressional Correspondent Jonathan Karl has the report - Jon.
JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Well, Jan, it's been a marathon day of voting that continues right now on the Senate floor. We are expecting shortly a vote on what will be the critical vote of the day, a vote that would place the centerpiece of the president's economic plan in this Senate bill, the complete elimination of the tax on dividends.
Vice President Dick Cheney is here on Capitol Hill prepared for an anticipated tie-breaking vote today on that amendment. We expect that sometime within the next half hour or so.
At the end of the day we expect a significant but not complete victory for the president. It would simply not have been possible without the support of at least a few key Democrats.
(BEGIN VIDEOTAPE)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Let's not wait. Let's get tax relief to the American people as quickly as possible.
KARL (voice-over): The president aggressively courted Democrat Ben Nelson of Nebraska, personally campaigning for the tax cut in Omaha earlier this week. Nelson, however, insists his support has nothing to do with White House pressure.
SEN. BEN NELSON (D), NEBRASKA: I don't mean to in any way demean the presidency but it's not about pressure from the White House or anything like that. It's about the contents of the plan because I think that's what's the most important part of what we're doing here.
KARL: Republicans won Nelson's backing by agreeing to include $20 billion in aid to cash-strapped state and local governments. Nelson's support enables Republicans to completely eliminate the tax on dividends, the White House's highest priority but they had to use some creative accounting to fit that into a tax plan that costs less than half the president's original proposal.
Under the Senate bill that is expected to pass, the dividend provision would last just four years and the bill includes approximately $90 billion in so-called offsets, effectively tax increases to keep the cost of the overall bill at $350 billion.
(END VIDEOTAPE)
Now, even if the bill passes as expected tonight, the differences between the Senate tax cuts still need to be worked out with the tax cut passed by the House, but because that House tax cut was actually bigger than what they're debating here in the Senate, it looks like, Jan, the president will have the opportunity to sign into law a tax cut at least as big as the one that will pass here in the U.S. Senate.
HOPKINS: Thanks, Jonathan Karl in Washington, watching events that continue probably long into the night.
Joining us now for more on the tax cuts and what they could mean for the economic recovery, John Ryding, chief market economist for Bear Stearns, John welcome.
JOHN RYDING, BEAR STEARNS: Good evening.
HOPKINS: Do we need a tax cut at this point? Does the economy need a tax cut?
RYDING: I think it clearly does. I've likened it to the economy is like a 350 hitter in baseball that's really only hitting 200 or 250, not that bad but not achieving its potential and it's very important for job creation and for bringing down unemployment that it does.
Monetary policy has done its part in bringing the funds rate down to 1.25 percent, so I don't think it's about cheaper money to drive the economy forward. I think it's about creating incentives and a tax cut is pivotal to that.
HOPKINS: And are the incentives enough for business to create jobs? I mean you think it will have the effect that the president says that it will?
RYDING: I think it will. I would rather the president had won everything and we'd had the larger tax cut and not had to play these games because I don't think anybody would seriously believe that after this cut is passed that it will be phased out in four years' time.
I think it will have a very beneficial impact on the equity market and who's going to want to stand up and vote against the equity market in four years' time and not extend the dividend tax cut. So, let's take what we can get now and then fight the extension back (UNINTELLIGIBLE).
HOPKINS: Is this already in the market, expectation that dividends won't be taxed? I mean is that part of the reason that the market has been up?
RYDING: I think it's been part of the reason but I don't think it's fully in the market because the Senate's position had been this $500 limit per individual which would have done nothing to boost incentives and wouldn't have changed behavior and I don't think would have had much of an impact on the equity market.
So, let's see what size a bill we get. I think the market is sensing out a stronger economy in the second half of the year and I think the tax cut is going to be part of that stronger economy.
HOPKINS: Do you think the market's right? I mean the market does seem to be predicting a stronger economy later in the year.
RYDING: I think so. I think there's too much concern now about issues of say deflation when the dollar's declined and the rise we've seen in gold prices seems to signal deflation is not a problem. If anything, we're beginning to re-flate the economy. Productivity is good. Oil prices are down. We've had a little bit of an increase but we expect those oil prices to fall back significantly later in the year.
So, I think things are slowly lining up for a strong economy. In many ways, the economy feels like 1993. No one's convinced that it can really perform at its potential and I believe in six months' time we will be.
HOPKINS: Mortgage rates at record lows, I mean is it going to bring more people to refinance, more people in the housing market, or has that already happened?
RYDING: Well, actually what's happened and it will happen again, many people, in fact most people could probably go out and refinance their mortgage again given where interest rates are and that's a strong safety net underneath the economy.
It will help the consumer, but a key thing to hitting a stronger recovery pace is getting business spending to come back both in terms of capital spending and job creation and that's where the tax cuts are very important.
HOPKINS: John Ryding of Bear Stearns, thanks very much.
That brings us to tonight's poll. "What do you think of the state of the U.S. economy?" Is it turning the corner, sinking further, or treading water? Cast your vote at cnn.com/moneyline. We'll bring you preliminary results later in the broadcast.
And now, for the results of last night's poll. We asked: "Who is responsible for the scandal at "The New York Times?" Eighteen percent of you said Jayson Blair, the reporter. Eight percent of you said the editors. One percent of you said the publishers, and 73 percent of you said all of the above.
Turning now to the U.S. trade deficit, by our calculations tonight it stands at more than $187 billion for the year. It is still increasing by about $1.4 billion every day.
The highly anticipated "Matrix Reloaded" opened nationwide today. The original "Matrix" earned nearly half a billion dollars and landed four Oscars. Warner Brothers, part of CNN's parent company, AOL Time Warner, is hoping that the sequel will be as lucrative as the original.
AOL is desperate for a bright spot. The stock is down 85 percent from its high and the anemic stock price is just one of a handful of problems plaguing the company.
Greg Clarkin reports from Leesburg, Virginia ahead of tomorrow's shareholder meeting.
(BEGIN VIDEOTAPE)
GREG CLARKIN, CNNfn CORRESPONDENT (voice-over): This is the new headquarters of AOL Time Warner, a $1.7 billion corporate palace rising over Central Park. Just what kind of company fills it remains to be seen.
AOL Time Warner is still struggling under the weight of the deal that brought the two companies together. Most of the deal's architects are long gone, pushed from the company in the post merger chaos. The cleanup is in the hands of Richard Parsons, the CEO for the last year.
Parsons is grappling with a mess of strategic and legal issues, including shareholder lawsuits, one from the University of California, which lost $450 million on its AOL Time Warner investment. The university accuses top management, including Steve Case, Gerald Levin, and Ted Turner, of insider trading.
BILL LEBACH, ATTY., UNIV. OF CALIF.: The accounting fraud here is so widespread, so systemic, and amounts to so much money as to leave no doubt that the conduct we are challenging was intentional, willful, manipulative conduct for the enrichment of the insiders.
CLARKIN: The makeup of the board is another issue. Capitol Group, the company's biggest institutional shareholder, wants Case off the board. Other big institutional stockholders are withholding votes for various directors, and investor watchdogs say the AOL Time Warner Board has done a lousy job to the point where it adds risk to investing in the stock.
NELL MINOW, THE CORPORATE LIBRARY: We have listed them as among the strongest concerns that we have in terms of the risk that they add to the investment. We would really like to see some turnover on that board. We would like to see some very, very strong new directors.
CLARKIN: One board member who many want to see stay on is Ted Turner. He's the only board member with media experience but he recently dumped more than half his stock. He still owns one percent of the company and that makes him the largest individual shareholder and a vocal one.
PORTER BIBB, TURNER BIOGRAPHER: He's not going to be quiet. If he sees a reason to criticize or to speak out or to compliment, you can expect to hear from Mr. Turner.
(END VIDEOTAPE)
CLARKIN: Now, tomorrow's shareholder meeting will mark the official departure of both Ted Turner and Steve Case from the executive ranks of AOL Time Warner but both are expected to remain on the board.
It also marks the one-year anniversary of Richard Parsons as CEO and that is a year that has been filled with a falling stock, as well as accounting scandals. Parsons is expected to be questioned on those and other issues by shareholders tomorrow - Jan.
HOPKINS: I also notice that Mr. Frank from Colgate, a member of the board of directors, bought a lot of shares. CLARKIN: That's right, Jan. Reuben Franks buying just over 500,000 shares of AOL Time Warner in early May and that is by far the largest purchase of stock in AOL Time Warner that we have seen by an insider in quite some time.
HOPKINS: Thanks, Greg Clarkin in Virginia.
Coming up, the French say their reputation has been (UNINTELLIGIBLE) and they're blaming the United States. Dana Bash will report on the latest French wine.
And then, another intern, another presidential affair, the woman involved with John F. Kennedy comes forward, that story and more when we come back.
(COMMERCIAL BREAK)
HOPKINS: Checking other news across America, a woman who interned for the Kennedy administration says she had an affair with President John F. Kennedy. Mimi Fahnestock's admission comes after a new biography alleged Kennedy had an affair with an intern 41 years ago. Fahnestock said that she will have no further comment.
Robert Stack who fought crime as Elliott Ness, he reported on crime on "Unsolved Mysteries," tonight actor Robert Stack is dead. Stack, who also appeared in several movies died at his California home of heart failure. He was 84.
For the first time in three years, North America will be able to watch a total eclipse of the moon. Shortly before 11:00 Eastern tonight, the moon will pass into the earth's shadow and unlike a solar eclipse this one is safe to view with the naked eye.
Shortly after tonight's lunar eclipse, 51 Texas Democrats will be heading home. The Democrats fled to Oklahoma four days ago to prevent a vote on a redistricting bill. That bill dies at midnight tonight. The Democrats are claiming victory.
The French are whining again. They say the United States is smearing their reputation by making false claims about their complicity with Saddam Hussein. White House Correspondent Dana Bash has the report.
(BEGIN VIDEOTAPE)
DANA BASH, CNN WHITE HOUSE CORRESPONDENT (voice-over): France could have been upset with any number of things, elected officials taking French off the menu...
UNIDENTIFIED MALE: Throughout the capital it will be Freedom Fries and Freedom Toast.
BASH: Ribbing from the White House podium.
ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: I have heard people, particularly some of those who wear these type of shirts, wonder whether you call it a Freedom-cuff shirt or not.
BASH: But the French ambassador's letter to the White House and Capitol Hill complaining about "disinformation campaign aimed at sullying the French image and misleading the public" points to eight media reports he calls ugly and false attempts to link France to Saddam Hussein's regime.
A story that French companies sold spare parts to Iraq for military use, one quoting Bush officials alleging a French company brokered a deal to supply Iraq with long-range missiles through Syria, and what France says was the last straw, a report last week that the French government supplied fleeing Iraqi officials with passports.
JEAN-DAVID LEVITTE, FRENCH AMB. TO U.S.: Because it's attributed to officials, it raises a question of what is the purpose of these false accusations against France?
BASH: Paris is concerned that the allegations left unanswered could mushroom and even lead to congressional investigations. The White House denies there's a concerted effort to slander France but does admit their rapport has seen better days, pointing reporters to this comment from the secretary of state.
COLIN POWELL, SECRETARY OF STATE: The United States and France we've been in marriage counseling for 225 years. Guess what, the marriage is there, and it will be there.
BASH: Privately, sources on both sides of Pennsylvania Avenue, designed by French architect Pierre (UNINTELLIGIBLE), say this move could backfire because of lingering anti-French sentiment in the U.S.
(END VIDEOTAPE)
BASH: But just a few weeks from now there will a chance for (UNINTELLIGIBLE) because President Bush will be going to France for the G8 summit there, back to you.
HOPKINS: Thanks, Dana Bash in front of the White House. It looks like there's a storm coming.
BASH: It's brewing.
HOPKINS: Thank you.
A reminder now to vote in tonight's poll. "What do you think of the state of the U.S. economy?" Is it turning a corner, sinking further, or treading water? Cast your vote at cnn.com/moneyline. We'll bring you preliminary results later in the broadcast.
Coming up our "Thought of the Day" and the hardship of genius.
And then turning trash into treasure, Bill Tucker will have a special report.
BILL TUCKER, CNNfn CORRESPONDENT: (UNINTELLIGIBLE) on MONEYLINE, I'll tell you the story of how to turn tires and just about anything else into oil.
HOPKINS: And then we'll share some of your e-mail on the Jayson Blair scandal at "The New York Times."
(COMMERCIAL BREAK)
HOPKINS: The New York Stock Exchange today said that it would hold hearings to examine its own corporate governance structure. In a letter to the SEC, New York Stock Exchange Chairman Dick Grasso said a special committee will "review all aspects of the exchange's governance and present its findings and recommendations for changes to our board."
Former New York State Controller Carl McCall, former White House Chief of Staff Leon Panetta, and former AOL Time Warner chief Jerry Levin will head that committee.
And meanwhile, pressure is building at the New York Stock Exchange, to reexamine the way that Dick Grasso is compensated. Grasso reportedly made at least $10 million last year thanks to some very comfortable relationships on the exchange's Compensation Committee.
(BEGIN VIDEOTAPE)
HOPKINS (voice-over): The New York Stock Exchange family tree is made up of intertwining branches. The head of the Compensation Committee that sets Dick Grasso's pay package is Kenneth Langone, the former head of Home Depot. Grasso is on Home Depot's board. Langone's current company, Invemed, was recently charged by the NSD with unlawful profit sharing from its allocation of hot IPOs.
The head of the specialist firm LaBranche also helps decide Grasso's pay. LaBranche is being investigated by the exchange for its trading practices.
The head of Black Rock, which his owned by PNC Financial, also sits on the compensation committee, another committee member, David Komansky, former head of Merrill Lynch, sits on Black Rock's board.
Hank Paulson the head of Goldman Sachs, another Wall Street firm, also helps decide Grasso's pay package.
The exchange helps regulate Wall Street firms. Shareholder activists think the exchange needs to be more transparent.
PROF. CHARLES ELSON, UNIV. OF DELAWARE, CTR. FOR CORP. GOV.: Hopefully we will get to the point of: 1) figuring out how much is actually being paid to the executives of the exchange; and, 2) by what process were these figures arrived at, with whom are they going to be compared, and frankly going forward with who should they be compared.
HOPKINS: A "New York Times" editorial asked William Donaldson, the head of the SEC, to look at the way the New York Stock Exchange governs itself.
(END VIDEOTAPE)
HOPKINS: Now, earlier this week Donaldson told us that he wants the exchange to take another look at the way it decides compensation.
President Bush has called for America to reduce its dependence on imported oil. The answer to doing that may be as near as your garbage.
Bill Tucker has that story.
(BEGIN VIDEOTAPE)
TUCKER (voice-over): It goes in here, goes through here, and becomes this. That oil is then sent to a coker, which breaks it down. At the end of the line, these are some of the products you get, diesel fuel number on grade, pure carbon black, and depending on what's processed, there are other byproducts as well, pure sulfur, bonemeal, but no waste string. The process is completely clean. The commitment is to reuse everything.
JAMES FRIESS, V.P. OF ENGINEERING, CWT: There's a lot of farmland that actually needs sulfur. There's issues with nitrogen if it's in a certain form, but nitrogen is what makes the crops grow.
TUCKER: The diesel fuel could be put into an engine without any refining. The carbon can be used for agriculture or water filtration, among other uses. Perhaps just as amazing though is what can be processed, anything, tire parts, computer parts, sewage, so long as it's carbon based it's fair feed.
The process is called thermo depolarization process or TDP for short. It sounds too good to be true but it's for real. One of the company's advisers is the former head of the CIA, James Woolsey. The company's president Alan Libshitz (ph) ran Solomon (ph) Brothers Energy Group for 16 years and was a senior managing director at Bear Stearns in charge of the Energy and Project Finance Groups.
(on camera): Just recently, Changing World Technology signed a contract with the city of Philadelphia to develop plans to build a large-scale plant to process sewage waste.
(voice-over): And while that plant is yet to be built, in Carthage, Missouri, a plant to process turkey parts from the nearby Butterball plant will open next month. It's a joint venture between ConAgra and CWT with a $5 million grant from the Environmental Protection Agency.
BRIAN APPEL, CHMN. AND CEO, CHANGING WORLD TECH.: Once we can train the people to execute what they have to do to get these plants online, then years five through ten we should see 100 plants go up in those years. At the year ten, we should be able to deploy literally thousands of these plants and ultimately replace all incinerators and landfills.
(END VIDEOTAPE)
TUCKER: Now, the one knock, if you want to call it that, is this is not a zero sum gain. The process is 85 percent efficient. In other words, it takes 100 units of energy to yield 85, but you recycle, reuse, repurpose in the process, Jan, in other words get rid of the garbage.
HOPKINS: Is there any way that we can replace the oil that we import with this?
TUCKER: There is. We currently import four million barrels. It would take six billion tons of garbage. That's a lot of turkey parts but theoretically it's possible.
HOPKINS: Thanks, Bill Tucker.
That leads us to our "Thought of the Day" on brilliance and what it's commonly mistaken for. Investors and men of genius have almost always been regarded as fools at the beginning and very often at the end of their careers." That is from the Russian novelist Fyodor Dostoevsky.
And when we return, we will have a look at some of your thoughts on those Texas Democrats and the preliminary results of tonight's poll.
(COMMERCIAL BREAK)
HOPKINS: Time now for the preliminary results of tonight's poll. The question: "What do you think of the state of the U.S. economy?" Twenty-one percent of you said that it's turning a corner. Fifty-four percent of you said sinking further, and 25 percent of you said treading water.
Now for a look at some of your thoughts, Donna from Jonesboro, Illinois was angered by those Texas Democrats that fled to Oklahoma. "The Texas Democrats that eloped to Oklahoma need to look for other jobs because they evidently do not think much of the jobs or the people that elected them."
Dominick Pisano of San Antonio disagreed. He wrote: "Kudos to the 50 Texas Democrats who are protesting national and state Republican plans to commandeer the state. While the action may seem extreme, it is only through bold tactics like this that will get the nation's attention that the Democratic Party is alive."
Many of you wrote about the scandal at "The New York Times." Kirby Wilkerson of Toledo, Ohio wrote: "The New York Times" has violated the public trust. It can no longer regulate itself. The newspaper needs a complete overhaul from top to bottom."
And, Frank Stein from Park Ridge, New Jersey wrote: "I can't help but wonder if the editors at 'The New York Times' who refuse to take responsibility for their reporter after warnings are the same ones who were so critical of the Catholic bishops' failure to take action and assume responsibility for the actions of their priests."
And, F. Kasher of Staten Island, New York said about Jayson Blair: "Fool me once, shame on you. Fool me twice, shame on me, and shame on 'The New York Times' editors who allowed the lies to go on for years."
We love hearing from you. You can send us your thoughts at loudobbs@cnn.com. I'm Jan Hopkins in for Lou Dobbs. Thanks for joining us.
Tomorrow our guests will include editors from the nation's top business magazines, Rik Kirkland of "Fortune," Stephen Shepard of "BusinessWeek," and Steve Forbes of "Forbes" will join us for the editor's circle; for all of us here, goodnight from New York.
"LIVE FROM THE HEADLINES" with Anderson Cooper is up right after the break.
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