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How Are U.S. Companies Handling Terroism Overseas; Howard Dean Using The Internet To Take Campaign to the People; Credit Card Companies Target College Students
Aired August 09, 2003 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: From New York City, American's financial capital, this is IN THE MONEY.
JACK CAFFERTY, HOST: Welcome to the program. I am Jack Cafferty. Coming up on todays addition of IN THE MONEY: overseas and under fire, as a car bomb wrecks a Marriott Hotel in Indonesia. Find out how U.S. companies are handling the threat of terrorism over seas. And the green, green grassroots of Dean, the Democratic candidate for president using the Internet to take his campaign to the people and raise money. See whether he is showing us the future of American politics.
Plus college credit: companies pushing plastic are targeting college student, including ones that are living in my house. And I don't like it a all. We'll look at the epidemic of student debt and what parents can do about it.
Side kicks on todays program, CNN correspondent Susan Lisovicz back from a well earned vacation to Scandinavia, Sweden, and the Fjords of Norway.
SUSAN LISOVICZ, HOST: Be gentle with me, Jack.
CAFFERTY: No, No. We're glad to have you back. We missed you.
And of course, "Fortune" magazine editor at large, Andy Serwer.
And you were back just in time, for arguable the one of the greatest politic comedies ever to hit the western world. We've got the body builder Arnold Schwarzenegger wants to be governor of California. I want him to win for one reason, and that is to see what "Saturday Night Live" does with him and to him week after week if he moves into the governor mansion in Sacramento.
LISOVICZ: That is my protest as a business journalist. We are so concerned about this jobless recovery, and this kind of announcement puts all of the comedy writers in the world out of business, the Terminator announcing on the "Tonight Show" that he is running for governor in the largest state of the union against Gary Coleman, and Ariana Huffington.
ANDY SERWER, HOST: And Larry Flynt. It's amazing, we had Arnold on "AMERICAN MORNING" on Friday, and I think he's going to win. I really do. The way he carries himself, he did a masterful job of not answering Leon Harris' questions. Like any good politician would do. He's very smooth. He's had a whole career of doing this.
LISOVICZ: He has deep pockets and big muscles.
SERWER: He's to pay for it, because it's going to cost about 10 million, 20 million and that's what he makes per picture. Actually he makes even more than that. But on a serious note, I don't like this recall stuff at all. We have a political system. You don't like the guy, you vote him out. Unless somebody does this outrageous. And I don't think Gray Davis has done anything outrageous to warrant this.
CAFFERTY: You could get people to argue with you.
SERWER: And they will.
CAFFERTY: Some of the stuff that went on when Enron was doing the energy scams out there. And all of a sudden they have a 38 billion dollar deficit. I mean There are people that would say this guy is guilty of gross mismanagement of the state's finances.
LISOVICZ: It should be our question of the day.
SERWER: I wouldn't go that far, no.
LISOVICZ: But it's not.
CAFFERTY: Let's move onto the news, a car bomb strike in Indonesia brought violence to the doorstep of American brand name. And raises a question whether extremist groups are targeting U.S. businesses as well as citizens. The hotel in the capital city of Jakarta (ph) was run by Marriott for a Chinese-Indonesia businessman. It carried the name of a U.S. firm with worldwide reputation, and it attracted western patrons including American's. For a look what U.S. firms are doing to protect themselves, and their customers against terrorist, we are joined by Jules Kroll. The chairmen of Kroll Incorporated, a global risk consulting firm.
Mr. Kroll, nice to have you can with us. Thanks for joining us.
JULES KROLL, KROLL INC.: Good morning.
CAFFERTY: In the case of Jakarta, this was a car bomb set off by remote by someone using a cell phone. Is there anything based on your knowledge of security techniques that the hotel could have or should have done to reduce the damage in this particular incident?
KROLL: This was a reasonably well protected facility for a hotel. It was physically sound. The only thing that could have happened, in a high risk situation, you want vehicles further away from the building. But this was a responsible, well-run hotel.
SERWER: Jules, let me ask you a question. I know the people at Marriott or United Airlines might not want to hear this, but doesn't it make sense for me as a business person to Fly Air Canada or Air France, or stay at the Parker Meridian Hotel which is a French chain hotel? I mean, aren't you setting yourself up by going around to American businesses like that.
KROLL: Well, it depends what's country you are visiting. And it depends what's going on from a geopolitical point of view. Certainly in countries where Islamic fundamentalist, and extremists are active such as Indonesia, you are better off in installations that are not symbols of America.
LISOVICZ: But having said that, Jules, is there anything any company can do when you have a terrorist intent on blowing him or herself up?
Is there really anything you can do to protect against those attacks?
KROLL: I would say there are three things you could do. No. 1 , you go to those places that are lower risk environments. But if you have to be in a high risk environment for an American such as a place like Pakistan or a place like Indonesia, or even parts of the Philippines, get the intelligence that you need to have as to what's going on presently. And more and more companies are doing this with these risk information services. No. 2, if you are going to a hotel, don't hang around in front of it, or in the lobby. I know it sounds basic, but get in and get out. And no. 3, make sure you are being picked up at the airport by people you know, that's a greater risk than being hit in a bomb attack.
CAFFERTY: Let's talk for a minute Jules about the corporate concerns. When a company contacts you and says we want to hire you to address our security needs, what kinds of things are upper most on their mind?
What are they most worried about?
KROLL: It depends who they are and where they are operating. But when it comes to overseas activity which is where the primary concern is today. They are concerned about companies that are clearly American, they're symbols of America, these are going -- the bull's- eye is going to be on these companies. So, no. 1, they are concerned about understanding more clearly who works inside the company. Because that's a greater risk than a bombing. No. 2, they want to make sure their physical facilities give them a fighting chance. Some of these facilities are very well protected, and people get out of vehicles at a distance from them, and they are less susceptible to bombing situations. And the third -- the third issue is to make sure that when they move around in that country, they move around in a safe and secure manner. So the issues in Brazil are kidnapping, but the issues in Jakarta are bombing.
SERWER: Jules, the U.S. State Department has travel warnings on 27 countries right now. I want to ask you, is that more then you seen previously, does the number keep going up and up?
Maybe this isn't your field, but what can we do, what is going to change to make that number go down?
JULES: Find the terrorists, and eliminate them. SERWER: What about the number of countries, is that an all-time high.
KROLL: I don't remember it ever being higher than this. We've been tracking this for over 20 years, and I don't ever remember having more serious warning levels. We have a sister company called iJet that does nothing but keep track of this stuff. And they tell me statistically this is an all-time high and it's not going to change any time soon.
LISOVICZ: Hey, Jules, a lot of your advice was important, you know, about not loitering in a hotel lobby, making sure that you have someone that is trusted to pick you up in the hotel, but what about the timing of visiting a certain city or country. For instance in Indonesia, we had this verdict in the Bali bombing, that horrible bombing, that killed all those Australians, and many westerners.
Wasn't there any sense of anticipation there could be an attack because of this heightened sensitivity?
KROLL: There should be. The bombing took place approximately two days before the Bali case. There are these anniversaries, and these psychos who are doing these kinds of things generally do them around anniversaries of one sort or another. They are well documented, well-known. There are services that tell you about strikes, political insurrections, floods, and also terrorist related activities. And many companies today have these services. They are relatively inexpensive. And the information about it is key. We got 9/11 coming up, you know that different parts of the world, 9/11 is going to inspire some of these people from committing acts in different parts of the world. It's clear.
CAFFERTY: Jules, we are going to have to leave it there. I appreciate you taking time to be on IN THE MONEY this Saturday with us, thank you.
Jules Kroll, the executive chairman of Kroll Incorporated which is a global risk consulting firm.
Coming up, of mice and money, the Web paying off for Democratic presidential candidate, Howard Dean.
We will look at how Internet donations changing the face of American politics or are they?
Plus drastic plastic. Find out how college kids are racking up adult size debt, and see what parents who wind up holding the sack on this stuff can do to stop it. I know of what I speak on that topic.
And from reruns to a political race, actor Gary Coleman is just one of the many and varied, and in some cases, really weird folks who are trying to be governor of California. We will find out who stands to win the biggest. Probably Arnold.
(COMMERCIAL BREAK) CAFFERTY: Howard Dean, might be the most popular presidential candidate we've never heard of. Former Democratic governor of Vermont, gets major ink this week in American's biggest news magazines. He's on the cover of "News Week" the cover of "Time." It doesn't get any better than that, when he is one in a field of nine. Hey that rhymes. He's attracting attention for the power of his grass roots campaign and the role of the Internet in boosting his popularity. All from that from a man not so many months ago couldn't get arrested, never mind elected. It remains to see if he'll get elected. For more where Dean's coming from and how he got where he is, we are joined from Los Angeles by CNN's senior political analyst, Bill Schneider.
A cubby of Democrats, Bill, very few getting traction at all and suddenly Howard Dean is being noticed.
How come?
WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Anger in single word. Fury among Democrats at George Bush. And they look at this field of nine contenders, and Howard Dean is the only one that expresses that anger that Bush is far more right wing than anyone expected, when he described himself as a compassionate conservative. Dean was the first one and loudest one to condemn the Iraq war. In fact there are four Democrats in the race who supported the war resolution back in October. He opposes the tax cuts. And he is very much in your face with George Bush. A lot of the Democrats who are supporting Howard Dean say that's what we need. We need a tough fighter. We don't need another Al Gore.
CAFFERTY: But President Bush is a pretty popular man, and the poll numbers show that. The electorate likes him, and if Howard Dean ran against him today. He'd get run out of town on a rail.
SCHNEIDER: That's true. A lot of Democrats are nervous about this, because that anger, that I just described, is not felt by most voters. It is felt by an awful lot of Democrats. And there are other Democrats and a lot of voters are concerned that if the turns out Dean vs. Bush, Dean will turn it into a referendum refighting the war in Iraq, which is a war that the United States has supposed to have won. Or even more of a problem, Dean, signed a gay civil union bill in Vermont, the only state to do that. It could be a referendum on gay marriage or referendum on Bush's tax cuts which are pretty popular. Those are not issues Iraq, tax cuts, and gay marriage, that the party think it can win on.
CAFFERTY: Bill, how liberal is Dean or is it just a matter of the Republicans calling him liberal. And if in fact he is very liberal, isn't it true that he could galvanize one part of the Democratic party and make it a certainty they would loose sort of a la George McGovern.
SCHNEIDER: A lot of people compare him to George McGovern. His own supporters call him John McCain, this is our McCain. And I have been to Dean meet-ups and they come up to me all the time -- his supporters don't describe us as radical liberals, that's not it. We are not Goerge McGovern. John McCain had a very good relationship with the press, Howard Dean does not. He's in your face even with reporters. Is he that liberal? He is liberal on gay civil unions, and very much opposed to the war on Iraq, but on fiscal issues, he describes himself as a moderate. And in Vermont terms, whatever that mean, he's a moderate in Vermont, which is to say he stood up to a lot of the liberal activists who seem proliferate up there in the green mountains. But he is for a balanced budget, and calls himself a fiscal conservative. That combination, socially liberal, fiscally conservative fits the base of his support very well. The base of his support is upscale. Among people with postgraduate degrees which is about one-eighth of the electorate. Dean does well. Those are the old Jean McCarthy, George McGovern, Michael Dukakis, Gary Hart, Bill Bradley supporters, usually described as the left. But it is a based in the Democratic party. It's the wired left and they are coming out for Howard Dean.
CAFFERTY: If he is watching, I bet he is cringing with all those names you just read off in conjunction with his. I bet that's not what he wants to hear at all. Bill, thank you, appreciate it. CNN senior political analyst Bill Schneider joining us on IN THE MONEY from Los Angeles California. The Internet is playing a crucial part in Dean's campaign. It's just not a conduit for building support either. It's also away to raise money.
For more about political contributions over the Web, we are joined from San Francisco by Oliver Muoto of PayDemocracy. That is a for-profit Internet start-up which allows people to pool small donations on-line to help political causes. Welcome to IN THE MONEY, it's nice to have you with us.
OLIVER MUOTO, PAYDEMOCRACY: Thank you very.
CAFFERTY: Tell me how the Internet is changing the whole field of campaign finance.
MUOTO: Well, the Internet is changing in two big ways, one from an information perspective. Our society has developed an appetite for real-time information. An online campaigning allows you to do just that. Someone describes the Dean campaign as being a bit like a reality show. You have immediate access to what a candidate is doing how much money they are raising. So, that's an important aspect of online campaigning. I think, the second component is the ability to have a one-way, or a two-way discussion on-line. And Dean has very much embraced Internet technology and has gone out to reach supporters in a way that is meaningful to them. So that's very much from an information perspective. I think from a money perspective. I think the Internet makes raising money easier and a lot less expensive. I think Dean has demonstrated this with his Internet drive.
LISOVICZ: And PayDemocracy is a for-profit operation. So First of all, Oliver, congratulations for surviving the bursting of the Internet bubble. Because you are a veteran of Silicon Valley. But where do you see this going, ultimately. Because we just had our senior political correspondent saying that it's really the elite, the highly educated, somewhat affluent voters who are really going after Dean. I mean, it's not senior citizens who are voting online, do you see this becoming a democratic way of voting with your paycheck?
MUOTO: I definitely think so. I think the Iowa Utilities Commission did a survey and found that in Iowa, 68 percent of rural and urban areas have access to broadband Internet. So there's definitely Internet access out there. People are going online. And the Internet is a medium that allows you to reach a much broader support base. And I think that's why Dean is having some success at a grassroots level, because he is one of the few using the Internet effectively to reach that audience. I think that with more and more people online today than ever before, you will see more politicians embrace the Internet in the same way that Kennedy introduced a TV era of politics. I believe Dean has introduced the Internet era of politics.
CAFFERTY: Oliver, why don't you take a minute, and describe to us how your company works. I mean it's the Web site is paysdemocracy.com. I mean, tell us about it.
MUOTO: Thanks for asking. At PayDemocracy, we believe that contributions are the life blood of online lobbying. And what we have done is we have built a site that allows people to collect or aggregate small contributions to create significantly larger contributions. So anyone can go to the site and either create a campaign around an issue or a cause or a politician they feel strongly about or they can donate a small amount of money to any of the existing campaigns, we are very much about empowering people and getting them involved it. If you lok at the numbers, in the 2000 election, only 600 thousand people gave any amount. Six hundred thousand individuals of voting age gave any amount to the presidential primaries. That represents one-third of 1 percent of the voting age population. So we are talking about 99.6 percent of the population who, for some reason, did not feel they needed or wanted to contribute any amount of money. And we are trying to change that.
CAFFERTY: Oliver, how much, if I send a check for $100 to your Web site, how much do you take?
MUOTO: We take, I believe, 5.25 percent of that.
CAFFERTY: You believe or you know.
MUOTO: I know.
CAFFERTY: So you take 5 percent. If I am passionate about a political issue or a candidate. And I only have a little money to spend, why wouldn't I put it in an envelope and send it to them?
Instead of them getting 95% of the meager amount that I have to give.
Nothing against your Web site, but why wouldn't I if I have limited resources, just contribute directly.
MUOTO: First of all that 5.25 percent is significantly less than what most professional fund raisers charge for raising money for candidates. All we do is make that very transparent. Paydemocracy is all about creating transparency online The second point is that it's actually rather expensive to go after small donations. It costs about 50 cents for every dollar raised to go after small political contributions. So if we are talking about, you know, that much money, to go after supporters using traditional mechanisms, the Internet, I believe, makes it a lot more cost-effective to go after that part of the population and raise those small donations.
LISOVICZ: Certainly Howard Dean's supporters have taken to the Internet in droves.
Oliver, it's worked nicely for you at paydemocracy.com. Thanks for joining us.
MUOTO: Thanks you very much. It's been a pleasure.
LISOVICZ: Up ahead, GE's power play with the company on a buying spree, we will look at whether investors foot the bill.
Plus extra credit: find out why students are getting in the hole before getting out of school.
And California scheming. Famous names, and familiar faces are in a jam-packed race for California governor. We can't make this stuff up. Find out which stars are ready to trade tinsel town for the stick of Sacramento.
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LISOVICZ: Times to check the week's top story necessary our "Money Minute."
The Energy Department says gas prices will keep climbing until the end of the summer. Vacation travel is picking up at the same time supplies are dropping. But the government says prices are likely to drop after Labor Day which comes early this year.
The sell-off in the bond market continued at the beginning of the week, sending mortgage rates higher. The selling did eased up by week's end, but the refinancing boom is definitely still on hold.
Microsoft's antitrust woes are back in the news. The European Union, says the company's monopoly power is on going. And plans to force it to share some information with competitors. It also may hit the software giant with a huge fine. The Europeans are giving Microsoft one more chance to comment on these findings before it makes a final decision.
SERWER: General Electric's buying spree continues, the company bought Aegon's Trance America's finance unit for a billion this week. GE has been buying up commercial finance companies this year, and shedding its insurance divisions. The total cost of those new acquisitions is $9 billion so far this. But is all this on track for GE which is still trying to emerge from the long shadow cast by former CEO Jack Welch. GE stock price has been riding the general market roller coaster over the past year, but shares now selling about half the price they were in the spring of 2000. So that makes GE our stock of the week. Jack Welch left in September of 2001, right before 9/11, and the question is does this company still have it, I guess, right?
LISOVICZ: Well, it certainly has a lot of stuff between light bulbs, and NBC, and financial services, engines. It has got a lot to ride out the storm. Jeff Immelt has emerged at a pretty good manager.
CAFFERTY: (UNINTELLIGIBLE) stop trying to follow Walter Cronkite, you know or John Carson. It can be done, but not easy. I mean, Welch was probably the most high profile charismatic hard- driving widely recognized CEO maybe in the history of corporate America. My question, and you probably would know the answer. I'm not smart enough to understand all the (UNINTELLIGIBLE) GE is.
How come the stock price isn't doing better?
I mean, this is a stock continually for years, and I used to work over there, so I kind have having been paying attention to it over the years. Would go up 10, 15 percent a year.
SERWER: The stock has under performed the market since Jack Welch left, and that speaks to the question of conglomerates are not the way to go, because basically bad businesses pull down good business. And what made GE work is Jack Welch's magic. He was a master salesman. Jeffery Immelt is much more understated. So when he goes to wall street, he doesn't have the same charm, the same magic, the same charisma.
LISOVICZ: But the strategy is the same. When GE does the deal, it acquires number one or two in that sector. That strategy had been unchanged right?
SERWER: Right. But they have a whole lot of -- they really rely on so much of the financial part of the company. GE capital, $425 billion of assets. Some people say this is just a big kind of complicated bank these days. So it's got issues like that. It's a very complicated company these days, and they have to explain it. That's what's hard, I think.
LISOVICZ: It's still the company with the highest stock value in the world. In the world.
SERWER: They must be doing something.
CAFFERTY: Well, I feel better know that. Thank you very much. That solves a lot of my problems.
Last week the email question of the week was about whether the U.S. friendship with Saudi Arabia is more trouble than it's worth. Gabe from New Orleans wrote this, "The Saudi's teach hatred and support terrorists, but the Buch-Cheney dependence on oil companies makes it hard for us to put real pressure on them."
Joe in North Carolina wrote, "We need the Saudis and they need us. Give diplomacy a chance. We're trying it with North Korea. We can do it in Saudi Arabia. Let's also consider becoming less dependent on foreign oil." Now there's an idea. Peter in California wrote this, "Saudi Arabia faces significant pressure from Muslim extremists as long as we remain friend's, they reap benefits from not appeasing these groups. If we turn out back on them, they would have no motivation not to openly aid terror groups.
The e-mail address of this fine little program is inthemoney@cnn.com. We'll read more emails and ask a new email question of the week a little bit later in the show. Something to look forward to. It's a funny question.
Much more ahead on IN THE MONEY as we plow ahead. Easy for college kids to get credit cards? You bet, it's too damn easy, if you ask me and I'm a father of a college student. We'll look how a little plastic can lead to big trouble.
Plus, classic suits "Fortune" magazine names the ten greatest CEOs of all time. Find out who's on the list and maybe more surprisingly, who isn't.
And political muscle, Arnold Schwarzenegger's one of the stars running for California governor. Actualy, he's the only star. There's a bunch of other nerdowells that are out there trying to get the job. We'll show you the field, tell you who has the most at stake, in a political race that could only happen there.
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CAFFERTY: Well, have times have changed. The term CEO is almost a bad word these days as opposed to the golden era back there in the late '90's and early 2000's. You got your corporate scandals, you got your golden parachutes, you got your angry stock holders, and you got bad behavior all combining to make the nations corporate leaders very unpopular. But our next guest says some of the captains of industry, in the past, could teach today's chief executive crop a thing or two or three or more.
It's something "Fortune" magazine addressed in a recent feature story called "The 10 Greatest CEO's Of All Time", Jerry Useem worked on that piece and he joins us now on IN THE MONEY. Welcome, nice to have you with us.
JERRY USEEM, "FORTUNE" MAGAZINE: Thanks for having me.
CAFFERTY: Who's the best ever. I won't got through the whole 10, but who's the best ever?
USEEM: Best ever is Charles Coffin (ph) a guy you've heard of, and I doubt anyone else has either.
CAFFERTY: No. Who is he?
USEEM: He is the founder of the General Electric company and what Coffin did was, he created machine called GE, that for the past century has created a series of giant CEO's, the latest of which have been Jack Welsh and Jeff Imelt, whose names have ultimately have eclipsed his own and in a large part they are playing on the stage that he built. So, when all said and done, we think he stood a notch higher than everyone that came after him.
SERWER: A lot of people not on that list, Jerry, like Bill Gates, Jack was pointing that out earlier to me. Bill Gates, Warren Buffet, how come they're not there? I mean these guys are giants.
USEEM: Yes, well, we did this list with Jim Collins whose the best-selling author who studies, bascially, a century of American business and the logic was really simple that you can't really tell how good a job a CEO has done until they've been out of office for a while. The goal is to build...
SERWER: Microsoft right?
LISOVICZ: But Warren Buffet and Bill Gates they've revolutionized certained things.
USEEM: The goal is to build something, a sustainable company that's going to be great long after you've left the building and you've got to be out of the building for a while. We set the decade as kind of the cut off mark.
SERWER: Now this is firm.
USEEM: Yes, that was it. So 10 years from now, you might see Bill Gates, Jack Welsh, that might make it. But Lee Iacocca looked like the greatest thing ever...
SERWER: That's interesting.
USEEM: ...six years after he left they were speaking German in Detroit, so you never know.
CAFFERTY: What about a guy like Henry Ford who, you know, automobile, internal combustion engine, the assembly line production, stuff that is still very much a part of American life today.
USEEM: He had a huge impact, unfortunately he was a complete nut bag too.
SERWER: By gum, nut bag. That's some serious analysis.
USEEM: That pretty much...
LISOVICZ: And you still see that characteristic, unfortunately, pervasive in the corner suites. Let's ask you about any common characteristics. James Burke, not a lot of people know him. I do remember him from Johnson & Johnson. The whole Tylenol thing. Is crisis and the ability to steer the company...
USEEM: Right, the famous Tylenol cyanide poisoning episode is taught in business schools and he acted very swiftly to take them off the shelf, but his real defining moment was 3 years earlier when they looked at the J&J credo which is sort of "We hold these truths to be self-evident" and he said look, are we going to live by this or not. He started a whole set of discussions. So when the crisis hit they didn't need to debate what...
LISOVICZ: Integrity.
USEEM: Yes, the debate was done. So he makes the list because he lead in the absense of crisis, not during.
SERWER: Just quickly Jerry, one person who surprised me on the list, K. Graham from "the Washington Post" who did she have to stand up to?
USEEM: Well, she had to stand up to Richard Nixon and publish the Pentagon Papers, give long leash to Woodword and Bernstein, and she took over, she was an accidental CEO, her husband had commited suicide and she sort of the very definition of courage. People think of her as a publisher, but she was a great CEO. Financial reterns were enough that Warren Buffet invested and was one of the great -- one of the 50 best IPO's in the last quarter century.
And she, of course, is one of the -- there were even fewer women in executive posts.
USEEM: Back then it was a really remarkable...
LISOVICZ: A fascinating list and a good read. Jerry you seem senior writer at "Fortune" magazine. Thanks so much for joining us.
Coming up, the big question in California is who isn't running for govenor these days. We'll find out whose already won in the recall election.
And we'll also ask our email question of the week and hear a little of what you have to say. You can weigh in too at inthemoney@cnn.com
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SERWER: There's been a lot of interest in junk bonds lately and no wonder. Junk bonds or high yield bonds are securities issued by companies that aren't in the best of health. In order to raise money, these companies sell bonds, but to attract investors, they have to pay higher yields than companies that are in better shape.
With bond yields still down at multi decade lows, corporate bonds are yielding 4 percent and less. Investors are clamoring for yield to juice their portfolios. And junk bonds with yields from 6 percent and up look awfully tempting. But, of course, there's great risk in junk bonds. Basically, the higher the yield the riskier the bond. If you see a bond yielding 12 percent, well the market is telling you there's a real chance this company could go bankrupt, in which case you could lose all your money. On Wall Street there's no such thing as a free lunch.
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CAFFERTY: Arnold Schwarzenegger, Larry Flynt, Ariana Huffington, Gary Coleman, and before this week is over, the cast of "Love Boat," all probably running for governor of California. But there are some businesses in that state who see this crowded as a beautiful thing. We're talking about all the TV stations in California, who will make anywhere from 30-70 million extra dollars on campaign adds in the unexpected race.
With the election set now for October 7, the candidates have less time to get their spots on the air and that should drive the bidding higher for the available television time. Got to be the greatest show in town, I mean...
SERWER: Who would you really vote for, Jack. I actually, like -- I was listening to Larry Flynt. I thought some of the stuff he said made sense. I mean, why not. He's just as good as any of them isn't he?
CAFFERTY: What I don't understand is the Lieutenant-Governor of the state of California says he wants to run. What would happen if Gray Davis would resign, say, you know, I'm out of here. Does he take over? I don't understand how the law works.
SERWER: And how do they put 500 names on a ballot. Like you said, Rin-Tin-Tin's paw print.
LISOVICZ: I don't know how you can read it with a straight face, Jack.
CAFFERTY: It's unreal.
LISOVICZ: It's so funny, but of course, one of the reasons why Gray Davis is in so much trouble is because of the poor state of the budget, with all this money coming to the TV stations, can you imagine just what these advertisements are going to look like?
CAFFERTY: No.
SERWER: Is Charo running?
CAFFERTY: Let's check the email again, Joseph offered this helpful hint, "To the gentlemen said he's paying $300 a month for a cobra health insurance policy for his recent college graduate daughter," that would be me, "you should call your daughter's college or alumni association and see if they offer health insurance. Many of them do for just $50 a month. Maybe I will do that.
Jim in Cooperstown, New York came up with this idea, "My wife and I are considering buying and inexpensive dinner at a local cafe and we'll pay with 4000 shares of Enron stock. The cafe owners have agreed, but will only accept the shares at a 50 percent discount, any ideas?" I like that.
Now, the long awaited, much anticipated and certainly worth the wait email question of the week, "would you ever donate money to a political campaign on the Internet or in any other way?" As always, you can send us your answers to inthemoney@CNN.com.
LISOVICZ: But no money?
SERWER: No, they can send money.
CAFFERTY: Well, I don't know. No, I guess not. That's it for this addition of our program. Thanks for watching. As always, my thanks to my colleagues. Susan Lisovicz, it wasn't the same without you, lady. Good to have you back. CNN financial news Andy Serwer and "Fortune" magazine,
Coming up tomorrow, Sunday, 3:00 Eastern on IN THE MONEY, as Israel's security fence goes up, the Bush administration says it may cut its loan guarantees to the country if the construction doesn't stop or the route of the fence isn't altered. We'll be talking to Michael Moran about the -- from the council of foreign relations about that.
Tune in tomorrow 3:00 Eastern time and enjoy the rest of your Saturday and we'll see you tomorrow afternoon.
END
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Dean Using The Internet To Take Campaign to the People; Credit Card Companies Target College Students>
Aired August 9, 2003 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: From New York City, American's financial capital, this is IN THE MONEY.
JACK CAFFERTY, HOST: Welcome to the program. I am Jack Cafferty. Coming up on todays addition of IN THE MONEY: overseas and under fire, as a car bomb wrecks a Marriott Hotel in Indonesia. Find out how U.S. companies are handling the threat of terrorism over seas. And the green, green grassroots of Dean, the Democratic candidate for president using the Internet to take his campaign to the people and raise money. See whether he is showing us the future of American politics.
Plus college credit: companies pushing plastic are targeting college student, including ones that are living in my house. And I don't like it a all. We'll look at the epidemic of student debt and what parents can do about it.
Side kicks on todays program, CNN correspondent Susan Lisovicz back from a well earned vacation to Scandinavia, Sweden, and the Fjords of Norway.
SUSAN LISOVICZ, HOST: Be gentle with me, Jack.
CAFFERTY: No, No. We're glad to have you back. We missed you.
And of course, "Fortune" magazine editor at large, Andy Serwer.
And you were back just in time, for arguable the one of the greatest politic comedies ever to hit the western world. We've got the body builder Arnold Schwarzenegger wants to be governor of California. I want him to win for one reason, and that is to see what "Saturday Night Live" does with him and to him week after week if he moves into the governor mansion in Sacramento.
LISOVICZ: That is my protest as a business journalist. We are so concerned about this jobless recovery, and this kind of announcement puts all of the comedy writers in the world out of business, the Terminator announcing on the "Tonight Show" that he is running for governor in the largest state of the union against Gary Coleman, and Ariana Huffington.
ANDY SERWER, HOST: And Larry Flynt. It's amazing, we had Arnold on "AMERICAN MORNING" on Friday, and I think he's going to win. I really do. The way he carries himself, he did a masterful job of not answering Leon Harris' questions. Like any good politician would do. He's very smooth. He's had a whole career of doing this.
LISOVICZ: He has deep pockets and big muscles.
SERWER: He's to pay for it, because it's going to cost about 10 million, 20 million and that's what he makes per picture. Actually he makes even more than that. But on a serious note, I don't like this recall stuff at all. We have a political system. You don't like the guy, you vote him out. Unless somebody does this outrageous. And I don't think Gray Davis has done anything outrageous to warrant this.
CAFFERTY: You could get people to argue with you.
SERWER: And they will.
CAFFERTY: Some of the stuff that went on when Enron was doing the energy scams out there. And all of a sudden they have a 38 billion dollar deficit. I mean There are people that would say this guy is guilty of gross mismanagement of the state's finances.
LISOVICZ: It should be our question of the day.
SERWER: I wouldn't go that far, no.
LISOVICZ: But it's not.
CAFFERTY: Let's move onto the news, a car bomb strike in Indonesia brought violence to the doorstep of American brand name. And raises a question whether extremist groups are targeting U.S. businesses as well as citizens. The hotel in the capital city of Jakarta (ph) was run by Marriott for a Chinese-Indonesia businessman. It carried the name of a U.S. firm with worldwide reputation, and it attracted western patrons including American's. For a look what U.S. firms are doing to protect themselves, and their customers against terrorist, we are joined by Jules Kroll. The chairmen of Kroll Incorporated, a global risk consulting firm.
Mr. Kroll, nice to have you can with us. Thanks for joining us.
JULES KROLL, KROLL INC.: Good morning.
CAFFERTY: In the case of Jakarta, this was a car bomb set off by remote by someone using a cell phone. Is there anything based on your knowledge of security techniques that the hotel could have or should have done to reduce the damage in this particular incident?
KROLL: This was a reasonably well protected facility for a hotel. It was physically sound. The only thing that could have happened, in a high risk situation, you want vehicles further away from the building. But this was a responsible, well-run hotel.
SERWER: Jules, let me ask you a question. I know the people at Marriott or United Airlines might not want to hear this, but doesn't it make sense for me as a business person to Fly Air Canada or Air France, or stay at the Parker Meridian Hotel which is a French chain hotel? I mean, aren't you setting yourself up by going around to American businesses like that.
KROLL: Well, it depends what's country you are visiting. And it depends what's going on from a geopolitical point of view. Certainly in countries where Islamic fundamentalist, and extremists are active such as Indonesia, you are better off in installations that are not symbols of America.
LISOVICZ: But having said that, Jules, is there anything any company can do when you have a terrorist intent on blowing him or herself up?
Is there really anything you can do to protect against those attacks?
KROLL: I would say there are three things you could do. No. 1 , you go to those places that are lower risk environments. But if you have to be in a high risk environment for an American such as a place like Pakistan or a place like Indonesia, or even parts of the Philippines, get the intelligence that you need to have as to what's going on presently. And more and more companies are doing this with these risk information services. No. 2, if you are going to a hotel, don't hang around in front of it, or in the lobby. I know it sounds basic, but get in and get out. And no. 3, make sure you are being picked up at the airport by people you know, that's a greater risk than being hit in a bomb attack.
CAFFERTY: Let's talk for a minute Jules about the corporate concerns. When a company contacts you and says we want to hire you to address our security needs, what kinds of things are upper most on their mind?
What are they most worried about?
KROLL: It depends who they are and where they are operating. But when it comes to overseas activity which is where the primary concern is today. They are concerned about companies that are clearly American, they're symbols of America, these are going -- the bull's- eye is going to be on these companies. So, no. 1, they are concerned about understanding more clearly who works inside the company. Because that's a greater risk than a bombing. No. 2, they want to make sure their physical facilities give them a fighting chance. Some of these facilities are very well protected, and people get out of vehicles at a distance from them, and they are less susceptible to bombing situations. And the third -- the third issue is to make sure that when they move around in that country, they move around in a safe and secure manner. So the issues in Brazil are kidnapping, but the issues in Jakarta are bombing.
SERWER: Jules, the U.S. State Department has travel warnings on 27 countries right now. I want to ask you, is that more then you seen previously, does the number keep going up and up?
Maybe this isn't your field, but what can we do, what is going to change to make that number go down?
JULES: Find the terrorists, and eliminate them. SERWER: What about the number of countries, is that an all-time high.
KROLL: I don't remember it ever being higher than this. We've been tracking this for over 20 years, and I don't ever remember having more serious warning levels. We have a sister company called iJet that does nothing but keep track of this stuff. And they tell me statistically this is an all-time high and it's not going to change any time soon.
LISOVICZ: Hey, Jules, a lot of your advice was important, you know, about not loitering in a hotel lobby, making sure that you have someone that is trusted to pick you up in the hotel, but what about the timing of visiting a certain city or country. For instance in Indonesia, we had this verdict in the Bali bombing, that horrible bombing, that killed all those Australians, and many westerners.
Wasn't there any sense of anticipation there could be an attack because of this heightened sensitivity?
KROLL: There should be. The bombing took place approximately two days before the Bali case. There are these anniversaries, and these psychos who are doing these kinds of things generally do them around anniversaries of one sort or another. They are well documented, well-known. There are services that tell you about strikes, political insurrections, floods, and also terrorist related activities. And many companies today have these services. They are relatively inexpensive. And the information about it is key. We got 9/11 coming up, you know that different parts of the world, 9/11 is going to inspire some of these people from committing acts in different parts of the world. It's clear.
CAFFERTY: Jules, we are going to have to leave it there. I appreciate you taking time to be on IN THE MONEY this Saturday with us, thank you.
Jules Kroll, the executive chairman of Kroll Incorporated which is a global risk consulting firm.
Coming up, of mice and money, the Web paying off for Democratic presidential candidate, Howard Dean.
We will look at how Internet donations changing the face of American politics or are they?
Plus drastic plastic. Find out how college kids are racking up adult size debt, and see what parents who wind up holding the sack on this stuff can do to stop it. I know of what I speak on that topic.
And from reruns to a political race, actor Gary Coleman is just one of the many and varied, and in some cases, really weird folks who are trying to be governor of California. We will find out who stands to win the biggest. Probably Arnold.
(COMMERCIAL BREAK) CAFFERTY: Howard Dean, might be the most popular presidential candidate we've never heard of. Former Democratic governor of Vermont, gets major ink this week in American's biggest news magazines. He's on the cover of "News Week" the cover of "Time." It doesn't get any better than that, when he is one in a field of nine. Hey that rhymes. He's attracting attention for the power of his grass roots campaign and the role of the Internet in boosting his popularity. All from that from a man not so many months ago couldn't get arrested, never mind elected. It remains to see if he'll get elected. For more where Dean's coming from and how he got where he is, we are joined from Los Angeles by CNN's senior political analyst, Bill Schneider.
A cubby of Democrats, Bill, very few getting traction at all and suddenly Howard Dean is being noticed.
How come?
WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Anger in single word. Fury among Democrats at George Bush. And they look at this field of nine contenders, and Howard Dean is the only one that expresses that anger that Bush is far more right wing than anyone expected, when he described himself as a compassionate conservative. Dean was the first one and loudest one to condemn the Iraq war. In fact there are four Democrats in the race who supported the war resolution back in October. He opposes the tax cuts. And he is very much in your face with George Bush. A lot of the Democrats who are supporting Howard Dean say that's what we need. We need a tough fighter. We don't need another Al Gore.
CAFFERTY: But President Bush is a pretty popular man, and the poll numbers show that. The electorate likes him, and if Howard Dean ran against him today. He'd get run out of town on a rail.
SCHNEIDER: That's true. A lot of Democrats are nervous about this, because that anger, that I just described, is not felt by most voters. It is felt by an awful lot of Democrats. And there are other Democrats and a lot of voters are concerned that if the turns out Dean vs. Bush, Dean will turn it into a referendum refighting the war in Iraq, which is a war that the United States has supposed to have won. Or even more of a problem, Dean, signed a gay civil union bill in Vermont, the only state to do that. It could be a referendum on gay marriage or referendum on Bush's tax cuts which are pretty popular. Those are not issues Iraq, tax cuts, and gay marriage, that the party think it can win on.
CAFFERTY: Bill, how liberal is Dean or is it just a matter of the Republicans calling him liberal. And if in fact he is very liberal, isn't it true that he could galvanize one part of the Democratic party and make it a certainty they would loose sort of a la George McGovern.
SCHNEIDER: A lot of people compare him to George McGovern. His own supporters call him John McCain, this is our McCain. And I have been to Dean meet-ups and they come up to me all the time -- his supporters don't describe us as radical liberals, that's not it. We are not Goerge McGovern. John McCain had a very good relationship with the press, Howard Dean does not. He's in your face even with reporters. Is he that liberal? He is liberal on gay civil unions, and very much opposed to the war on Iraq, but on fiscal issues, he describes himself as a moderate. And in Vermont terms, whatever that mean, he's a moderate in Vermont, which is to say he stood up to a lot of the liberal activists who seem proliferate up there in the green mountains. But he is for a balanced budget, and calls himself a fiscal conservative. That combination, socially liberal, fiscally conservative fits the base of his support very well. The base of his support is upscale. Among people with postgraduate degrees which is about one-eighth of the electorate. Dean does well. Those are the old Jean McCarthy, George McGovern, Michael Dukakis, Gary Hart, Bill Bradley supporters, usually described as the left. But it is a based in the Democratic party. It's the wired left and they are coming out for Howard Dean.
CAFFERTY: If he is watching, I bet he is cringing with all those names you just read off in conjunction with his. I bet that's not what he wants to hear at all. Bill, thank you, appreciate it. CNN senior political analyst Bill Schneider joining us on IN THE MONEY from Los Angeles California. The Internet is playing a crucial part in Dean's campaign. It's just not a conduit for building support either. It's also away to raise money.
For more about political contributions over the Web, we are joined from San Francisco by Oliver Muoto of PayDemocracy. That is a for-profit Internet start-up which allows people to pool small donations on-line to help political causes. Welcome to IN THE MONEY, it's nice to have you with us.
OLIVER MUOTO, PAYDEMOCRACY: Thank you very.
CAFFERTY: Tell me how the Internet is changing the whole field of campaign finance.
MUOTO: Well, the Internet is changing in two big ways, one from an information perspective. Our society has developed an appetite for real-time information. An online campaigning allows you to do just that. Someone describes the Dean campaign as being a bit like a reality show. You have immediate access to what a candidate is doing how much money they are raising. So, that's an important aspect of online campaigning. I think, the second component is the ability to have a one-way, or a two-way discussion on-line. And Dean has very much embraced Internet technology and has gone out to reach supporters in a way that is meaningful to them. So that's very much from an information perspective. I think from a money perspective. I think the Internet makes raising money easier and a lot less expensive. I think Dean has demonstrated this with his Internet drive.
LISOVICZ: And PayDemocracy is a for-profit operation. So First of all, Oliver, congratulations for surviving the bursting of the Internet bubble. Because you are a veteran of Silicon Valley. But where do you see this going, ultimately. Because we just had our senior political correspondent saying that it's really the elite, the highly educated, somewhat affluent voters who are really going after Dean. I mean, it's not senior citizens who are voting online, do you see this becoming a democratic way of voting with your paycheck?
MUOTO: I definitely think so. I think the Iowa Utilities Commission did a survey and found that in Iowa, 68 percent of rural and urban areas have access to broadband Internet. So there's definitely Internet access out there. People are going online. And the Internet is a medium that allows you to reach a much broader support base. And I think that's why Dean is having some success at a grassroots level, because he is one of the few using the Internet effectively to reach that audience. I think that with more and more people online today than ever before, you will see more politicians embrace the Internet in the same way that Kennedy introduced a TV era of politics. I believe Dean has introduced the Internet era of politics.
CAFFERTY: Oliver, why don't you take a minute, and describe to us how your company works. I mean it's the Web site is paysdemocracy.com. I mean, tell us about it.
MUOTO: Thanks for asking. At PayDemocracy, we believe that contributions are the life blood of online lobbying. And what we have done is we have built a site that allows people to collect or aggregate small contributions to create significantly larger contributions. So anyone can go to the site and either create a campaign around an issue or a cause or a politician they feel strongly about or they can donate a small amount of money to any of the existing campaigns, we are very much about empowering people and getting them involved it. If you lok at the numbers, in the 2000 election, only 600 thousand people gave any amount. Six hundred thousand individuals of voting age gave any amount to the presidential primaries. That represents one-third of 1 percent of the voting age population. So we are talking about 99.6 percent of the population who, for some reason, did not feel they needed or wanted to contribute any amount of money. And we are trying to change that.
CAFFERTY: Oliver, how much, if I send a check for $100 to your Web site, how much do you take?
MUOTO: We take, I believe, 5.25 percent of that.
CAFFERTY: You believe or you know.
MUOTO: I know.
CAFFERTY: So you take 5 percent. If I am passionate about a political issue or a candidate. And I only have a little money to spend, why wouldn't I put it in an envelope and send it to them?
Instead of them getting 95% of the meager amount that I have to give.
Nothing against your Web site, but why wouldn't I if I have limited resources, just contribute directly.
MUOTO: First of all that 5.25 percent is significantly less than what most professional fund raisers charge for raising money for candidates. All we do is make that very transparent. Paydemocracy is all about creating transparency online The second point is that it's actually rather expensive to go after small donations. It costs about 50 cents for every dollar raised to go after small political contributions. So if we are talking about, you know, that much money, to go after supporters using traditional mechanisms, the Internet, I believe, makes it a lot more cost-effective to go after that part of the population and raise those small donations.
LISOVICZ: Certainly Howard Dean's supporters have taken to the Internet in droves.
Oliver, it's worked nicely for you at paydemocracy.com. Thanks for joining us.
MUOTO: Thanks you very much. It's been a pleasure.
LISOVICZ: Up ahead, GE's power play with the company on a buying spree, we will look at whether investors foot the bill.
Plus extra credit: find out why students are getting in the hole before getting out of school.
And California scheming. Famous names, and familiar faces are in a jam-packed race for California governor. We can't make this stuff up. Find out which stars are ready to trade tinsel town for the stick of Sacramento.
(COMMERCIAL BREAK)
LISOVICZ: Times to check the week's top story necessary our "Money Minute."
The Energy Department says gas prices will keep climbing until the end of the summer. Vacation travel is picking up at the same time supplies are dropping. But the government says prices are likely to drop after Labor Day which comes early this year.
The sell-off in the bond market continued at the beginning of the week, sending mortgage rates higher. The selling did eased up by week's end, but the refinancing boom is definitely still on hold.
Microsoft's antitrust woes are back in the news. The European Union, says the company's monopoly power is on going. And plans to force it to share some information with competitors. It also may hit the software giant with a huge fine. The Europeans are giving Microsoft one more chance to comment on these findings before it makes a final decision.
SERWER: General Electric's buying spree continues, the company bought Aegon's Trance America's finance unit for a billion this week. GE has been buying up commercial finance companies this year, and shedding its insurance divisions. The total cost of those new acquisitions is $9 billion so far this. But is all this on track for GE which is still trying to emerge from the long shadow cast by former CEO Jack Welch. GE stock price has been riding the general market roller coaster over the past year, but shares now selling about half the price they were in the spring of 2000. So that makes GE our stock of the week. Jack Welch left in September of 2001, right before 9/11, and the question is does this company still have it, I guess, right?
LISOVICZ: Well, it certainly has a lot of stuff between light bulbs, and NBC, and financial services, engines. It has got a lot to ride out the storm. Jeff Immelt has emerged at a pretty good manager.
CAFFERTY: (UNINTELLIGIBLE) stop trying to follow Walter Cronkite, you know or John Carson. It can be done, but not easy. I mean, Welch was probably the most high profile charismatic hard- driving widely recognized CEO maybe in the history of corporate America. My question, and you probably would know the answer. I'm not smart enough to understand all the (UNINTELLIGIBLE) GE is.
How come the stock price isn't doing better?
I mean, this is a stock continually for years, and I used to work over there, so I kind have having been paying attention to it over the years. Would go up 10, 15 percent a year.
SERWER: The stock has under performed the market since Jack Welch left, and that speaks to the question of conglomerates are not the way to go, because basically bad businesses pull down good business. And what made GE work is Jack Welch's magic. He was a master salesman. Jeffery Immelt is much more understated. So when he goes to wall street, he doesn't have the same charm, the same magic, the same charisma.
LISOVICZ: But the strategy is the same. When GE does the deal, it acquires number one or two in that sector. That strategy had been unchanged right?
SERWER: Right. But they have a whole lot of -- they really rely on so much of the financial part of the company. GE capital, $425 billion of assets. Some people say this is just a big kind of complicated bank these days. So it's got issues like that. It's a very complicated company these days, and they have to explain it. That's what's hard, I think.
LISOVICZ: It's still the company with the highest stock value in the world. In the world.
SERWER: They must be doing something.
CAFFERTY: Well, I feel better know that. Thank you very much. That solves a lot of my problems.
Last week the email question of the week was about whether the U.S. friendship with Saudi Arabia is more trouble than it's worth. Gabe from New Orleans wrote this, "The Saudi's teach hatred and support terrorists, but the Buch-Cheney dependence on oil companies makes it hard for us to put real pressure on them."
Joe in North Carolina wrote, "We need the Saudis and they need us. Give diplomacy a chance. We're trying it with North Korea. We can do it in Saudi Arabia. Let's also consider becoming less dependent on foreign oil." Now there's an idea. Peter in California wrote this, "Saudi Arabia faces significant pressure from Muslim extremists as long as we remain friend's, they reap benefits from not appeasing these groups. If we turn out back on them, they would have no motivation not to openly aid terror groups.
The e-mail address of this fine little program is inthemoney@cnn.com. We'll read more emails and ask a new email question of the week a little bit later in the show. Something to look forward to. It's a funny question.
Much more ahead on IN THE MONEY as we plow ahead. Easy for college kids to get credit cards? You bet, it's too damn easy, if you ask me and I'm a father of a college student. We'll look how a little plastic can lead to big trouble.
Plus, classic suits "Fortune" magazine names the ten greatest CEOs of all time. Find out who's on the list and maybe more surprisingly, who isn't.
And political muscle, Arnold Schwarzenegger's one of the stars running for California governor. Actualy, he's the only star. There's a bunch of other nerdowells that are out there trying to get the job. We'll show you the field, tell you who has the most at stake, in a political race that could only happen there.
(COMMERCIAL BREAK)
(INTERUPTED FOR LIVE EVENT)
(COMMERCIAL BREAK)
CAFFERTY: Well, have times have changed. The term CEO is almost a bad word these days as opposed to the golden era back there in the late '90's and early 2000's. You got your corporate scandals, you got your golden parachutes, you got your angry stock holders, and you got bad behavior all combining to make the nations corporate leaders very unpopular. But our next guest says some of the captains of industry, in the past, could teach today's chief executive crop a thing or two or three or more.
It's something "Fortune" magazine addressed in a recent feature story called "The 10 Greatest CEO's Of All Time", Jerry Useem worked on that piece and he joins us now on IN THE MONEY. Welcome, nice to have you with us.
JERRY USEEM, "FORTUNE" MAGAZINE: Thanks for having me.
CAFFERTY: Who's the best ever. I won't got through the whole 10, but who's the best ever?
USEEM: Best ever is Charles Coffin (ph) a guy you've heard of, and I doubt anyone else has either.
CAFFERTY: No. Who is he?
USEEM: He is the founder of the General Electric company and what Coffin did was, he created machine called GE, that for the past century has created a series of giant CEO's, the latest of which have been Jack Welsh and Jeff Imelt, whose names have ultimately have eclipsed his own and in a large part they are playing on the stage that he built. So, when all said and done, we think he stood a notch higher than everyone that came after him.
SERWER: A lot of people not on that list, Jerry, like Bill Gates, Jack was pointing that out earlier to me. Bill Gates, Warren Buffet, how come they're not there? I mean these guys are giants.
USEEM: Yes, well, we did this list with Jim Collins whose the best-selling author who studies, bascially, a century of American business and the logic was really simple that you can't really tell how good a job a CEO has done until they've been out of office for a while. The goal is to build...
SERWER: Microsoft right?
LISOVICZ: But Warren Buffet and Bill Gates they've revolutionized certained things.
USEEM: The goal is to build something, a sustainable company that's going to be great long after you've left the building and you've got to be out of the building for a while. We set the decade as kind of the cut off mark.
SERWER: Now this is firm.
USEEM: Yes, that was it. So 10 years from now, you might see Bill Gates, Jack Welsh, that might make it. But Lee Iacocca looked like the greatest thing ever...
SERWER: That's interesting.
USEEM: ...six years after he left they were speaking German in Detroit, so you never know.
CAFFERTY: What about a guy like Henry Ford who, you know, automobile, internal combustion engine, the assembly line production, stuff that is still very much a part of American life today.
USEEM: He had a huge impact, unfortunately he was a complete nut bag too.
SERWER: By gum, nut bag. That's some serious analysis.
USEEM: That pretty much...
LISOVICZ: And you still see that characteristic, unfortunately, pervasive in the corner suites. Let's ask you about any common characteristics. James Burke, not a lot of people know him. I do remember him from Johnson & Johnson. The whole Tylenol thing. Is crisis and the ability to steer the company...
USEEM: Right, the famous Tylenol cyanide poisoning episode is taught in business schools and he acted very swiftly to take them off the shelf, but his real defining moment was 3 years earlier when they looked at the J&J credo which is sort of "We hold these truths to be self-evident" and he said look, are we going to live by this or not. He started a whole set of discussions. So when the crisis hit they didn't need to debate what...
LISOVICZ: Integrity.
USEEM: Yes, the debate was done. So he makes the list because he lead in the absense of crisis, not during.
SERWER: Just quickly Jerry, one person who surprised me on the list, K. Graham from "the Washington Post" who did she have to stand up to?
USEEM: Well, she had to stand up to Richard Nixon and publish the Pentagon Papers, give long leash to Woodword and Bernstein, and she took over, she was an accidental CEO, her husband had commited suicide and she sort of the very definition of courage. People think of her as a publisher, but she was a great CEO. Financial reterns were enough that Warren Buffet invested and was one of the great -- one of the 50 best IPO's in the last quarter century.
And she, of course, is one of the -- there were even fewer women in executive posts.
USEEM: Back then it was a really remarkable...
LISOVICZ: A fascinating list and a good read. Jerry you seem senior writer at "Fortune" magazine. Thanks so much for joining us.
Coming up, the big question in California is who isn't running for govenor these days. We'll find out whose already won in the recall election.
And we'll also ask our email question of the week and hear a little of what you have to say. You can weigh in too at inthemoney@cnn.com
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SERWER: There's been a lot of interest in junk bonds lately and no wonder. Junk bonds or high yield bonds are securities issued by companies that aren't in the best of health. In order to raise money, these companies sell bonds, but to attract investors, they have to pay higher yields than companies that are in better shape.
With bond yields still down at multi decade lows, corporate bonds are yielding 4 percent and less. Investors are clamoring for yield to juice their portfolios. And junk bonds with yields from 6 percent and up look awfully tempting. But, of course, there's great risk in junk bonds. Basically, the higher the yield the riskier the bond. If you see a bond yielding 12 percent, well the market is telling you there's a real chance this company could go bankrupt, in which case you could lose all your money. On Wall Street there's no such thing as a free lunch.
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CAFFERTY: Arnold Schwarzenegger, Larry Flynt, Ariana Huffington, Gary Coleman, and before this week is over, the cast of "Love Boat," all probably running for governor of California. But there are some businesses in that state who see this crowded as a beautiful thing. We're talking about all the TV stations in California, who will make anywhere from 30-70 million extra dollars on campaign adds in the unexpected race.
With the election set now for October 7, the candidates have less time to get their spots on the air and that should drive the bidding higher for the available television time. Got to be the greatest show in town, I mean...
SERWER: Who would you really vote for, Jack. I actually, like -- I was listening to Larry Flynt. I thought some of the stuff he said made sense. I mean, why not. He's just as good as any of them isn't he?
CAFFERTY: What I don't understand is the Lieutenant-Governor of the state of California says he wants to run. What would happen if Gray Davis would resign, say, you know, I'm out of here. Does he take over? I don't understand how the law works.
SERWER: And how do they put 500 names on a ballot. Like you said, Rin-Tin-Tin's paw print.
LISOVICZ: I don't know how you can read it with a straight face, Jack.
CAFFERTY: It's unreal.
LISOVICZ: It's so funny, but of course, one of the reasons why Gray Davis is in so much trouble is because of the poor state of the budget, with all this money coming to the TV stations, can you imagine just what these advertisements are going to look like?
CAFFERTY: No.
SERWER: Is Charo running?
CAFFERTY: Let's check the email again, Joseph offered this helpful hint, "To the gentlemen said he's paying $300 a month for a cobra health insurance policy for his recent college graduate daughter," that would be me, "you should call your daughter's college or alumni association and see if they offer health insurance. Many of them do for just $50 a month. Maybe I will do that.
Jim in Cooperstown, New York came up with this idea, "My wife and I are considering buying and inexpensive dinner at a local cafe and we'll pay with 4000 shares of Enron stock. The cafe owners have agreed, but will only accept the shares at a 50 percent discount, any ideas?" I like that.
Now, the long awaited, much anticipated and certainly worth the wait email question of the week, "would you ever donate money to a political campaign on the Internet or in any other way?" As always, you can send us your answers to inthemoney@CNN.com.
LISOVICZ: But no money?
SERWER: No, they can send money.
CAFFERTY: Well, I don't know. No, I guess not. That's it for this addition of our program. Thanks for watching. As always, my thanks to my colleagues. Susan Lisovicz, it wasn't the same without you, lady. Good to have you back. CNN financial news Andy Serwer and "Fortune" magazine,
Coming up tomorrow, Sunday, 3:00 Eastern on IN THE MONEY, as Israel's security fence goes up, the Bush administration says it may cut its loan guarantees to the country if the construction doesn't stop or the route of the fence isn't altered. We'll be talking to Michael Moran about the -- from the council of foreign relations about that.
Tune in tomorrow 3:00 Eastern time and enjoy the rest of your Saturday and we'll see you tomorrow afternoon.
END
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Dean Using The Internet To Take Campaign to the People; Credit Card Companies Target College Students>
