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Israel Retaliates Against Hamas; State Shortfalls Result In Early Release For Some Prisoners; Northwest Airline Filling Holes In Pension Fund With Something Other Than Money

Aired August 24, 2003 - 15:00   ET


SUSAN LISOVICZ, HOST: Welcome to IN THE MONEY, I'm Susan Lisovicz, Jack Cafferty is on vacation. Coming up on today's program: Ripping up the road map, a bomb attack in Israel brings a counter strike as the Middle East peace deal goes up in smoke. We'll look at that and the terror threat facing the U.S.
Plus, get out of jail free: States that can't flip the bill for prison inmates are turning some of them loose. Find out whether justice is getting shortchanged.

A buck by any other name: Northwest is filling a hole in its pension fund, but it isn't using cash. We'll show you exactly how it's done.

Joining me for our show today, CNN correspondent Christine Romans and Andy Serwer, "Fortune" magazine editor at large.

Welcome to both of you.

You know the headlines were dominated this week by these terrible bombings in the Middle East, but yet at the same time markets rallying. It seems like investors are just oblivious, in a way, to what's going on in the Middle East.

CHRISTINE ROMANS, CNN CORRESPONDENT: Well, in the middle of the day, I will say that the day that there were two bombings in one day, the markets were a little unnerved in the middle of the day and the bond market saw sort of flight to quality.


ROMANS: But, you know, overall investment managers are saying -- you know, this seems to be par for the course. It's a new reality. It's terrible what's happening there. But the market is showing an amazing ability...

LISOVICZ: Sounds kind of callous in a way.

SERWER: Yeah, that's right.

ROMANS: That's it, markets are callous and they're macabre, as well. In fact, I saw more activity in the markets this week on rumors, rumors of bin Laden being captured.

LISOVICZ: Or Chemical Ali. SERWER: Right.

ROMANS: Exactly. And, more rumor driven in this market than on what's really happening over there. It got attention but it didn't derail the market.

SERWER: But, your right, but you're right, it is a terrifying thing if this is the new reality and in fact, if our economy and Wall Street can handle it I mean, this is bad news for the U.S., bad news for the president, bad news for the road map to peace, bad news for our troops over there, bad news for the troops here who might be sent there. You know, I don't see a silver lining. Maybe some guys downtown, here in Manhattan, do.

ROMANS: Were you surprised that the market didn't move on it?

SERWER: I was very surprised and they were focusing again, like you're saying, on Chemical Ali.


SERWER: Who cares about Chemical Ali?

LISOVICZ: Well, you have to remember, of course, there was a lot of good economic data. And that seems have kept the markets afloat.

SERWER: Oh, that.

LISOVICZ: Oh, that. And that was all it needed, plenty of it.

Has the U.S. road map to peace suddenly become a road to nowhere? That's the question coming out of the Middle East, this week, where terrorism, once again, tore apart the fragile peace negotiations.

Tuesday, a Hamas suicide bomber disguised as an Orthodox Jew blew himself up on a Jerusalem bus killing 20 Israelis, including six children. With an additional 120 people injured, it is being called the worst bus attack in Israeli history. In retaliation, Israel killed a senior Hamas leader and his two bodyguards. As a result Hamas, Islamic Jihad, and the al Aqsa brigade have now declared an end to the cease-fire.

Joining us now, from Jerusalem with the latest is Jerrold Kessel.

Hello, Jerrold.


JERROLD KESSEL, CNN CORRESPONDENT: Hello, Susan. To see this has been a tumultuous period is an understatement, and to describe the situation as being bleak, well, that's a real understatement. With the cease-fire now declared dead and a mountain on that would-be peace road after that devastating suicide bombing aboard bus No. 2 in Jerusalem which left 20 people killed by the suicide bomber. And Israel's strike in Gaza, the assassination of the Hamas -- top Hamas man, Ismail Abu Shanab. Well, anger on the streets in Gaza and concern on the streets in Israel.

Colin Powell -- Secretary of State Colin Powell had said that if the two sides abandon the peace road then they would find themselves going down a cliff. Well, we may not be right at the edge of that cliff, but we're perilously close to it, and it could be that we're even halfway down the cliff to judge by the declarations of the two sides, because after the funeral in Gaza and the mood on the streets was so angry and the cries of vengeance so demanding that that was Hamas's announcement of how far they are down the cliff.

But, Israel it seems is not just sitting by and waiting and bracing for the possibility of a Hamas attack. Israel is also very much on the offensive in a declaratory way, at least. Let's look at something that an Israeli newspaper did. It printed 35 -- 34, I beg your pardon. 34 cards of the top military men including Yasser Arafat they had there, very much like a replica of the U.S.'s issuing of their deck of cards of the wanted men they wanted in Iraq.

And, even though this is only from an Israeli newspaper, not an official thing, it certainly does represent, you could say, the mood in Israel. If there is Israel and Hamas literally, although not declaratory yet, at war with each other, well, that leaves the Palestinian authority and Mahmoud Abbas, the Palestinian prime minister, in a very precarious situation. That Israeli action in Gaza, the assassination of the Hamas leader, pre-empted the Palestinian authority's prime minister's promise to act against the militants himself, to go on a real crackdown after the suicide bombing.

Well, whether he'll be able to do so now in the wake of the Israeli action and that anger in the Palestinian street, a different matter. Whether he can do so, very difficult to say. It may be that the coming few days may even be bleaker than the ones we've seen over the last few days.

LISOVICZ: Jerrold, the secretary of state's warning, notwithstanding, is the thinking over in your part of the world, that the U.S. Should be much more involved in this situation?

KESSEL: It really is a key question. But, we don't really know which way the U.S. is going. Is the United States, is President Bush, perhaps personally, -- I don't want to say encouraging but giving a green light to Prime Minister Sharon to go after what they would both call the terrorist leaders, the heads of the militant groups, or is the United States seeking, as Secretary of State Powell seems to be suggesting, that Israel go on trying to pursue down the peace road despite the militancy, despite the terror. It is a big question.

One thing's absolutely sure. It does seem as if this idea that you could have a summer recess for this process of building peace process between the Israelis and Palestinians just isn't on. It seems that a peace process requires absolute nurturing every minute of the day. If there's no movement forward, then it's not just not standing still, it's moving backward, and that's what we've seen over the last several days. And one final thought about the U.S. position, someone -- so much was said just before the war in Iraq of the interaction between the U.S.'s determination to bring stability to Iraq and the whole Middle East and the attempt to stabilize things between Israelis and Palestinians, that they were interlinked somehow. I think that's proving true, very true, both ways, that the more stability you have in Iraq the greater chance you have of bringing stability to Israelis and Palestinian equation.

And the other way around, the more you're able to bring stability to the Israeli-Palestinian equation, perhaps that could add to the possibility of bringing stability to Iraq. But, we do know not a lot of stability in the U.S. effort in Iraq.

SERWER: Jerrald...

KESSEL: Not a lot of stability in that U.S. Effort here.

SERWER: Sorry, Jerrold, Andy Serwer, let me jump in here and ask you a slightly philosophical question, and that is: was there ever really a cease-fire? I mean there were acts of violence during the cease-fire. And I guess what I'm driving at is -- did we ever really accomplish anything in that period preceding these acts of violence?

KESSEL: That is a very pertinent point, Andy. I mean, certainly, the Israelis would argue it was their business, they wanted to stop the fighting for a while, fine, good for us, that's what the Israelis said, but we're not party to this. This was not a negotiated cease-fire like you're accustomed to where both sides commit themselves to not going after any -- after the other side in one way or another. Because the Israelis said, this was all working in the favor of the militant groups, or the terror groups, because they were able to gain the respite and at the same time the Palestinian authority was not doing what it was committed to do under the terms of the road map, go after the militant groups and dismantle them.

So it's true, we didn't have a real cease-fire. And if the Palestinian militant groups said, Israel was violating it, well, Israel would have said the violation was the fact that the militants were still in existence.

LISOVICZ: One thing is for sure, though, there may have been no true cease-fire, but things are a lot worse, now.

Jerrold Kessel, thank you for your report.

ROMANS: The terrorist attacks this week in Israel and Iraq were a shocking reminder that militant Islamic groups can strike anywhere. For many Americans the images of rubble and rescue workers bring up a haunting question. What is the likelihood that another 9/11 awaits us? Well, for the first time a London-based research company has tried to provide some answers.

This week the World Markets Research Center published a report that estimates the likelihood of terrorist attacks in 186 different countries. The United States ranked as the fourth most likely country to suffer an attack in the next 12 months.

Joining us today to talk about these findings and how this report was put together is the report's author, Guy Dunn. He is the director of political and economic forecasting at the World Markets Research Center.

Welcome to the program. Within the next 12 months the fourth most likely, that's -- that's a troubling conclusion. How'd you get there?

GUY DUNN, DIRECTOR, WORLD MARKETS RESEARCH: I think the conclusion's more sobering than troubling. It's less than two years since we saw the 9/11 attacks, which was the worst terrorist attack in history. And since then -- you know, a whole series of global events has occurred which has actually, probably, increased the risk to the U.S. rather than reduced it. The wars in Iraq and Afghanistan are actually controversial affairs in much of the world, so the U.S., for a lot of terrorist groups, is the No. 1 target.

LISOVICZ: The three countries that preceded the United States, Colombia, Israel, Pakistan, certainly no stranger to violence on a frequent and troubling basis. Motivation one of the key factors in determining this rather unusual ranking?

DUNN: I think motivation is the key one. If you look at the countries above the United States -- Colombia, Israel, and Pakistan, as you said, I mean, they have long-term problems. If we'd run this report five years ago, ten years ago, you'd expect those countries to still be in similar positions. What's changed is that without -- this is the advent of al Qaeda that al Qaeda's internationalized the threat and its -- you know, its chief target is the U.S., so the motivation to hit the U.S. is the overriding factor.

SERWER: Guy, I notice in your top 10 you've got three countries that have already been hit by terrorist attacks -- Israel, Iraq, and Indonesia since your report's been completed, you know, and I wonder why Britain isn't on there in the top 10. After all, your guys are allies of the United States in this thing. And that doesn't have anything to do with the fact that you're British, or anything, does it?

DUNN: Well, I think the U.K. position is probably the most eye- catching position in the whole report because it comes in 10th place. And, why it's eye-catching is, really, because we're trying to assess the risk of terrorism, and the risk against the U.K. is all about potential because there has not actually been an attack against the U.K., yet. There's obviously been attacks against Colombia, Israel, Iraq, as you've mentioned, also -- you know, the 9/11 attacks in the U.S., but the U.K. is there solely because of its position, its association with the U.S....


ROMANS: Well, I would say, Guy, that the U.K. has a very long history of terrorism there, I mean, with the IRA and all kinds of things that -- you know, you walk through Central London and there are plaques all over the place for people who've died right there.

DUNN: Well, I think that's true, but if we'd assessed the U.K. solely on the threat from Northern Ireland these days, now that there's sort of an effective cease-fire in place, it would have come way lower in the risk. The reason why the U.K. there is almost soly because of the threat from al Qaeda.

LISOVICZ: Guy, your research goes out to many of your clients, or all of your clients, which include OPEC and many banks, many multinational companies. So they see this report and then what realistically can they do?

DUNN: Well, what clients need is that -- terrorism's really changed from being sort of a peripheral threat to a key business risk. And clients need an independent, kind of, yardstick or assessment against which to test their own assumptions, because -- you know, the vast majority of them considering terrorism when they're making investment location decisions, but all they have no tool to sort of test those assumptions against them. All they have is their assumptions.

LISOVICZ: But, Guy, I mean it's not...

DUNN: So, we help them out. Sorry.

LISOVICZ: But it's not like businesses are not going to invest in the United States, the biggest economy, the only superpower. It really isn't going to hurt investment for the United States, for instance.

DUNN: Well, companies' first priority is to safeguard their personnel and premises, so that's that's the key part in there. But actually, terrorism in itself, is only one of many risks that people have to consider. There are more boring considerations such as legal shortcomings, punitive tax systems, I mean, terrorism is only one of many risks that companies have to face and encounter.

SERWER: Guy, I notice in your work you suggest that the risk for the United States is greater now than before 9/11. Even with all our preparedness, you're telling me that we're more at risk, now than before when we were completely asleep at the switch?

DUNN: I think the risk -- there's a difference between risk and actually predicting an attack will actually take place. If you look at the, sort of, the evidence in front of it, because of the, kind of, the U.S. war on terror, the U.S. is arguably, sort of, conducting a, sort of, more controversial or most unyielding, sort of, foreign policy program. And that's actually increasing the motivation in certain, sort of, quarters around the world. The good thing, obviously, is that the preventative measures have increased similarly, so hopefully these attacks will be thwarted.

ROMANS: Foreign policy aside and ideologies aside, the fact that the freer countries are higher on the list is sort of ironic. You have North Korea, you know, which isn't even on the radar screen, yet, is the only state sponsor that, I guess that we know of, of terror. That's sort of ironic, isn't it?

DUNN: Well, it's actually a supposition where the North Korean is a state sponsor of terrorism. But actually, what this report's actually trying to do, it's not looking at state sponsoring, it's looking at the likelihood of an -- of an attack against these countries. And the reality in North Korea is state controls there are so repressive that it's almost impossible for terrorist groups to operate, so that the likelihood of an attack there is almost non- existent.

LISOVICZ: You know, guy, there has not been, thankfully, a terrorist attack since September 11th in the United States, but that silence is somewhat troubling to you and your colleagues. All terrorism ultimately is not created equal. The terrorist attack on September 11th was massive and unprecedented in using commercial Airliners as weapons. Do you think that the next terrorist attack, which you think could come in the next 12 months, is going to be of similar magnitude?

DUNN: I think -- I mean, it's very difficult to say. But, if you look at al Qaeda's, sort of, calling card in the past, they've tended to carry out very symbolic attacks. They've been high-profile attacks, they've been, sort of, synchronized attacks, and they've been -- tended to, sort of, cause mass casualties and destruction. So, if you looked at the likelihood of an attack against countries like the U.S. and the U.K., the likelihood is that they will carry on with those kind of tactics and target something high profile and be prepared to cause mass casualties. And that's just the reality that we -- of the world that we live in these days.

SERWER: All right, Guy. We'll have to leave it at that.

Guy Dunn, director of political and economic forecasting at the World Market Research Center. Thank you.

Coming up -- you know the states are dealing with big budget problems. But, we're going to tell you why that's good news for some prison inmates?

Plus, it's almost time to go back to school. Find out how to turn your course load into a load of cash.

And, we'll look at what one airline, that's found a new way to deal with a widespread problem in corporate America: Pension funds in the red.



SERWER: We all know budget problems force governments to make tough choices, but a few U.S. states are make the highly unpopular decision to give hundreds of prison inmates early release as a way to cut down on costs. Joining us now, to talk about that is Nick Turner from the Vera Institute of Justice.

Welcome, Nick.

NICK TURNER, VERA INSTITUTE: Thanks for having me.

SERWER: Nick, why don't you set the table for us a little bit and tell us what's going on. Are states really letting prisoners out early? We've heard a little bit about it in Kentucky, but is this going on across the country?

TURNER: It's not -- that's not going on across the country as much as the media would have people believe. There are states like Kentucky and a few others that are doing early releases for prisoners. The more interesting thing is that state legislators, elected officials, governors are trying to look at sentencing policy, so -- make upfront determinations about what to do with drug offenders and change the laws. So, rather than letting people out the back door, which is sort of what has become the popular understanding of this, just to stop and look at policies that -- around who should go to prison and who shouldn't go to prison and think about the cost of that and try to make smarter determinations about whether everyone who commits a crime needs to go to prison or whether only a certain few should be.

ROMANS: Well, there has been such an outcry Nick -- this is Christine -- about letting prisoners go, hardened felons on the streets, but when you talk about drug offenders and how to treat them, don't the statistics show that the treatment is a better option to -- you know, keep the drug offenders from repeating than just throwing them in jail in the first place? And also -- you know, giving sentencing leeway to judges, you know, why would people be upset about that?

TURNER: Well, I mean, in part -- you know, the -- you know, the formula for a criminal justice policy, for years in this country, has been to look tough on crime. Right? And the idea is that if you -- if you could advance things like three strikes laws and imprisoning every offender that would ensure your re-election in the next election cycle. And, what you're seeing now that's very different is that -- you know, after years and years where there was a lot of money and essentially states could imprison whoever they wanted to and actually pay for it, the past few years that's no longer the case. And fiscal reality...

ANNOUNCER: This is CNN breaking news.

RENAY SAN MIGUEL, CNN ANCHOR: Renay San Miguel at the CNN center in Atlanta. We're following the activities in the Gaza strip. Israeli helicopter gunships have fired at least two missiles at a Palestinian security installation in Gaza City. CNN's Michael Holmes is in Gaza city. He's got the latest -- Michael.

MICHAEL HOLMES, CNN CORRESPONDENT: Renay, I'm at the scene of where this missile strike took place. It's right on the beach in Gaza City, it neighbors onto buildings that house elements of Yasser Arafat's security forces, including the presidential bodyguard Force 17. The missiles themselves struck -- at least one of the missiles, struck a vacant lot next to some of these buildings, and the victims appear to be four men. I saw the bodies; two of them were in military fatigues, if you like. Witnesses have told me they were just sitting around on a sand dune here in this empty lot opposite the beach when the missiles struck. It left a crater about a foot deep, there is shrapnel all over. One of the men was decapitated, I saw him being put in the ambulance. The others suffering wounds you would imagine from a missile. As to why this was the target, well, as I say, it's a area that houses a lot of Yasser Arafat's security detail and other members of the security forces. But, why tonight and who the target remains to be seen.

MIGUEL: Michael, we don't believe that President Arafat was indeed in that compound. He's believed to be in Ramallah, right?

HOLMES: Yeah, he's been in Ramallah, Renay, essentially under what is in effect house arrest. He's been unable to leave Ramallah for some two years. When he was -- when he left here, last, much of his own officers were destroyed by Israeli forces. Some rebuilding has been done since that time. He has been nowhere near Gaza for a good couple of years, now. But, it's certainly a chaotic scene. There's a fairly bizarre scene of Palestinian onlookers who are now searching old scrub bushes, looking for the head of one of the victims so they can keep the body together for burial. A very distressing scene.

There's a fair degree of anger in Gaza already following the targeted killing of Ismail Abu Shanab, the senior Hamas leader who was killed just a couple of days ago. A man considered by many Palestinians and analysts to have been a moderating voice within the context, it has to be said, of the Hamas organization. And, in the last 24 hours we have seen Palestinian security forces undertaking some action to try to crack down on the smuggling of arms in Southern Gaza, for example, that took place last night with the sealing of tunnels and just a couple of hours ago we had word that elements of Yasser Arafat's security detail are trying, now, to set up road blocks to stop anyone firing Qassam rockets into Israel, trying to keep a lid on activity so that things can move forward, according to Palestinian security forces. So, people here are very concerned at the timing of this second attack, given that Palestinian security forces appear to be doing at least something, Israel will say not enough, but at least something, Renay.

MIGUEL: Yeah. I was going to ask you about that, and while we're talking, we should tell you and our viewers that you're looking at -- we are looking at unedited video, right now, from this latest Israeli rocket attack in Gaza City, but you had mentioned that an aide to Yasser Arafat had ordered security forces under his command to cease militant groups from firing those rockets and mortar attacks at Israeli towns. Those attacks came earlier today, and they fired very, very deep into Israel, from what I understand.

HOLMES: Yeah, from the record of the Qassam rocket it was deep, and it was very worrying to Israeli security officials that this rocket actually went about five kilometers into Southern Israel, which is further than any other Qassam rocket has gone before. This rocket was actually what they're calling the Qassam 2, a new generation of what is, in essence, a homemade rocket. They're put together in small victories, very small victories, and they run on -- the fuel for these things is like fertilizer and fuel oil and alcohol. They're very crude and not very effective, it has to be said. Then, I can't remember a death because of one of them, there has been some minor damage, they're wildly inaccurate. But, the concern from the Israeli point of view is that one of them got about five or six kilometers into Israel, which is a lot further than any other has. But, as you point out, the Palestinian security is in Northern Gaza around Beit Hanoun, which is near the Arrow's crossing (HP), and they're also in -- just south of Gaza City around the Gush Katif settlement block, precisely to stop any further incidents like the firing of the Qassam.

Now, given that, given the action of Palestinian police in Rafah, those Palestinian police under the control of Mahmoud Abbas, the prime minister, they were sealing off tunnels used by arms smugglers and the like overnight and today. So, action has been taken and people here are certainly asking the question -- why now?

MIGUEL: And we should point out also, that an aide to Ariel Sharon had told some media that the closing of some of the tunnels, was, quote, "smoke and mirrors," so maybe not everybody in the Sharon government is convinced that -- you know, that those are legitimate measures to try to aid security there.

I don't mean to try to catch you off guard here, but we do know that the U.S. envoy to the Middle East, John Wolf, was meeting with the Palestinian cabinet minister, Saeb Erekat, today. Do we know anything about the -- what was said at that meeting and if there were any kind of concrete steps taken to get anybody, all parties back on the road map to peace? It would appear, right now, that -- you know, that things are deteriorating even faster.

HOLMES: Yeah, it's a difficult job to get things back on track. One of the feelings here is Mahmoud Abbas is between a rock and a hard place. They say that Palestinian security officials say that he's trying to do something, but every time there is a targeted killing like this that it just sets everything back. Hamas has a large amount of support on the street in Gaza and two targeted killings in a matter of a couple of days is not going to help Mahmoud Abbas try to take action against these militant groups. There was a sense out of Israel that perhaps they would wait for a couple of days and see what came out of these latest attempts by the Palestinian authority to crack down, but that clearly is not the case. The difficult thing to establish here is just who the target was. (INAUDIBLE) for want of a better word -- foot soldiers in a vacant lot near the quarters housing some of those security details of Yasser Arafat -- Renay.

MIGUEL: OK. We should also point out that -- you know, Mahmoud Abbas seems to be in the center of some kind of a power struggle here with Arafat. Arafat, today, naming somebody else in charge of security and setting up some kind of a struggle over who exactly will be in charge of security.

We've been talking with Michael Holmes, who is reporting from Gaza strip. Again, Israeli helicopter gunships firing at least two missiles. The "Associated Press" is reporting four dead from this attack. We're looking at some of the unedited video, right now. The Israeli rocket attack in the Gaza City. Earlier today an aide to Palestinian president Yasser Arafat had ordered security forces under his command to stop militant groups from firing rocket and mortar attacks at Israeli towns and settlements. There were some Qassam rockets, as you heard Michael Holmes say, fired earlier into Israel. We want to bring Michael Holmes back in for just a second.

What about that -- the situation that's going on here over who is actually in charge of security, whether it's Mohammed Dahlan, who is Mahmoud Abbas' man, or the gentleman who was named today, by Yasser Arafat?

Michael, are you still with us?

Well, I wanted to -- if you're still with us, Michael I was wondering if you could talk about the security arrangement that's going on here the struggle between Mohammed Dahlan, who is Mahmoud Abbas' security chief, and the gentleman who was named today by Yasser Arafat to be in charge of security. There seems to be -- you know, a struggle going on here over who exactly's in charge of the Palestinian security forces.

HOLMES: Nasr Yusef is a brigadier general that Yasser Arafat put forward as somebody to run the security forces, but it has to be said there is some confusion over exactly what was proposed. I am led to believe that Yasser Arafat did name Brigadier General Yusef, but did not offer to put all security forces under his command and in fact kept the intelligence services and another one of his services out of the mix. Now, what the U.S., Colin Powell and others want is for everything to come under, preferably, the umbrella of Mahmoud Abbas, the Palestinian prime minister, and his security chief, Mohammed Dahlan.

Now, what happened in Ramallah, I am led to believe from my sources, was that Yusef was put forward. Mahmoud Abbas was not against that idea as long as he had complete control of all elements of the security forces. I am told Yasser Arafat did not agree to that, so Mahmoud Abbas withdrew his support for Yusef, and it's at a stalemate. He has not indeed been appointed at this stage. It has to have the approval of Mahmoud Abbas for that to happen, and he has not yet given that approval. So, at the moment you still have security forces that are essentially fractured into two camps. Those run by Mohammed Dahlan, who is in -- if you like, for want of a better description, Mohammed -- Mahmoud Abbas' man, and those that are run by security officials linked with Yasser Arafat -- Renay.

MIGUEL: Michael, you had said that the Palestinian police were starting to crack down, they were closing those tunnels, had said that the aide to Arafat had said he was ordering the security forces under his command to stop militant groups from firing those rockets into Israel. What are we hearing from the Palestinian street, from the Palestinian people as far as the measures taken by the Palestinian authority to try to clamp down on security?

HOLMES: It was interesting, in Rafah today, which is a town that borders on the border of the Gaza Strip and Egypt, it's been a place where tunnels are dug routinely to get various contraband, but including drugs and weapons, which find their way into the hands of the militant groups like Hamas and Islamic Jihad. Now, what the people were saying down there was -- they were saying it's good that our people are doing this because normally what has happened in the last couple of years, the Israeli military will hear of these tunnels, they will go in and they will do it by blowing up houses or things like that. And, they've also torn down several hundred, it has to be said, houses along that area for security reasons. And, so the people there are angry and they were actually rather pleased that they had the Palestinian authority coming in and just simply pouring cement into these tunnels. On the other hand, there were people, we believe, to be relatives of militants, who literally threw stones at the Palestinian police and abused them for what they were doing, so you've got a bit of a mix there, Renay.

MIGUEL: Michael Holmes is in Gaza city. Michael, we'll let you get back to report on this latest strike. Again, Israeli helicopter gunships firing missiles into a Palestinian security installation in Gaza City. It is believed to be the base for members of Force 17, that is Palestinian authority, President Yasser Arafat personal guard. The "Associated Press" is reporting that four have been killed in this latest attack -- this rocket attack. It's been a day of rockets firing back and forth between Palestinian areas and Israel.

We will be following this story, we will get you more information as it becomes available. Right now we're going to take a quick break.


LISOVICZ: Welcome back to IN THE MONEY.

College is one of the biggest investments you can make, and some of us want that investment to pay off. Of course, if you'd like to spend four years studying Indo-European basket weaving rituals, well, don't let us stop you. Then again, don't come crying to us if you can't bust out of that Roman Noodle bracket after graduation.

But you want to make a buck. CNN Money contributing writer, Les Christy, is here to tell you how. He's been researching the most top 10 most profitable college majors. And shock: basket weaving is not there in the top 10 list.

LES CHRISTIE, CNN MONEY: I think it is, but, you know, it's somewhere in between.

LISOVICZ: So, what is the most profitable major right now?

CHRISTIE: Right now, it's pharmacy. Pharmacists, when they get out of...

SERWER: Oh, come on! Really?

CHRISTIE: Yes, yes. Now, it's a little bit of an unfair comparison, because it's usually about a six-year program rather than a four.

ROMANS: Right. CHRISTIE: But the starting salary for a pharmacist now is over $81,000.


ROMANS: But I have heard that that's a great starting salary, but it doesn't necessarily advance. Like, in other careers, maybe you start a little lower, but you have this sort of exponential ability to advance. Does pharmacology, 81,000, and you sort of make 81,000 forever, or you can even make more that that eventually?

CHRISTIE: Absolutely. And one of the reasons why is because there is a real shortage of pharmacists, and that's going to get worse as the time goes on. And that's because of demographic trends...


CHRISTIE: ... and also because of the whole trend in pharmaceuticals, where the pharmacy companies are just churning out new medicines for whatever ails you.

SERWER: And these are pharmacists who work at the big chains, like CVS and Walgreens? You don't have to own your own pharmacy?

CHRISTIE: That's right. And...

SERWER: I'm surprised. That's so much more money than I thought.

LISOVICZ: You put on a white smock and you...

SERWER: I'm leaving! Hang on a second. I'm out of here. I'm going to go work at a pharmacy.

CHRISTIE: Well, I mean, that's true. And, as we know, mom and pop are going by the wayside.

SERWER: Right.

CHRISTIE: You walk down any street in New York and you'll run into chain store after chain store.

ROMANS: Right.

SERWER: Wayne Reed (ph).

LISOVICZ: Well, you know, Les, I guess the big question is, now that we are a few years past the shock of the Internet bubble, is tech high on the list?

CHRISTIE: Tech is still high in terms of salaries, but it's coming down. And there's a couple of reasons for that, one of which is an awful lot of the people who were laid off in the -- after the tech bubble burst are very young, and they are willing to settle for entry-level positions again.


CHRISTIE: So that the people coming out of college, they're getting hit with a double whammy on this one.

ROMANS: When I was in college, every time I'd come back, my parents would sit me down and talk about my major. And my dad would say, "So, have you switched to engineering yet?" I never did switch to engineering, and, you know, (UNINTELLIGIBLE).

SERWER: We're glad.

ROMANS: Yes. But I'm wondering, is engineering still a very sought-after career? I know that chemical engineering and electrical engineering and things like that, they also have pretty good starting salaries.

LISOVICZ: No fun in college.


SERWER: Double EEs, those double EEs, yes. They weren't real partiers.

CHRISTIE: No, but they do very well still after they graduate. Their salaries have not really popped much the last couple years, but they're still getting hired. And there are a couple of other advantages to that kind of technical degree. You tend to be more sought after, so that if there are fewer jobs available, you are sort of at the top of the queue, or the front of the queue. But also, it gives you a lot of flexibility later on in your career. If you want to go into sales or management, you can.


CHRISTIE: Whereas if you go -- if you're a humanities major or if you're a poet or a basket weaver, there is very little possibility of you going on...

LISOVICZ: Or a journalist.

CHRISTIE: ... to those more technical.

LISOVICZ: You mentioned pharmacy number one, and you mentioned the demographics, but also there is a nursing shortage. So, a nursing degree is also something very valuable right now.

CHRISTIE: Right. Of course, the starting salary for nursing is not as high as pharmacists, but there's a huge shortage of nurses, and it's only going to get worse.

SERWER: (UNINTELLIGIBLE) for years, right?

CHRISTIE: Yes, for years. I think the figure is something like they're going to need a million nurses over the next 10 years.

ROMANS: So, except for what your major is in and what your grade point average is, there must be other ways to sort of really bone up before you get out. I'm sure internships, relevant work experience. What kind of advice do you get from the experts about what people should do to augment just a degree?

CHRISTIE: Well, internships are great, but not everyone does it. A lot of students could be doing it, but they don't. Fewer than half actually try to take internships. The second thing that you can do is you can network. You can start networking while you're still in college.

ROMANS: How do you do that?

CHRISTIE: Well, you can join clubs at school and join national clubs and, you know, attend the conferences of the professional organizations that you are aiming at. You can also do things like just get acquainted with the whole hiring process, you know. Colleges offer resume writing classes or seminars and interviewing techniques.

SERWER: Right.

CHRISTIE: And, you know, a lot of -- one of employers' biggest complaint is that kids come into interviews, and they don't know anything about the company, they don't know anything about the job. That's really a no-no.


SERWER: Les, let me ask you a quick last question. This has the old humanities debate. I was a humanities major.



SERWER: So, all of these people, you don't get a job right out of college as an English major, but isn't it true that later on in life it's important -- maybe I'm trying to justify my own existence here -- that you're literate, that you're a person who can understand and knows books, as opposed to being one of those business majors, where you get a great job right out of school but it might hurt you later on, I hope?

CHRISTIE: I think all of the business majors should send their mail to Andy. They can be just as literate. I think that the point is, though, that they can -- business majors too, not quite as much as engineers or as other technicians, but they have a little flexibility to move around, and they can become a basket weaver if they so desire.

LISOVICZ: Or a basket case who can't even get a job.

SERWER: Right. All right, well, duly noted, Les. Thanks a lot. Les Christie, contributing writer for CNN Money, thanks very much.

CHRISTIE: Thank you.

SERWER: OK. Ahead on IN THE MONEY, charged up. This month's blackout delivered a power surge to fuel cells stocks. We'll look at whether they've got the juice for the long haul.

And the long good-bye. Former star analyst, Jack Grubman, is out at Citigroup, but he's still on the payroll? We'll tell you why.


SERWER: When the Northeast power grid crashed last week, one building in Manhattan never lost power, and that building was the Central Park police precinct house, which happens to be powered by fuel cell technology. A lot of people think fuel cells are the way to go, not only for an alternative energy source, but also for a good investment.

Joining us now to talk about that is Sanjay Shrestha of First Albany. And before we begin, we should mention that Sanjay and First Albany have no conflict of interest with any of the companies and stocks we're going to talk about.

Sanjay, welcome to the program.


SERWER: I guess if I could...

SHRESTHA: Thanks for having me here.

SERWER: You're welcome. Could we start off where you can just sort of describe what alternative energy is? I don't think a lot of people are familiar with that.

SHRESTHA: Oh, sure, sure. When we talk about the alternative energy, it's a pretty broad space. And essentially as, you know, pretty much like a concise way, it is essentially all of the technologies that are involved in the generation, the distribution, as well as the conversion of electricity. And that includes technology ranging from fuel cells, micro turbines, solar power, as well as some technology such as superconductivity that can essentially transmit electricity in a much more efficient manner and also includes some technology that can be used for the backup solutions such flywheels and a battery-based solution.


ROMANS: This is long-term, concept-type stuff. When you start talking about investing in this space, these are areas that are volatile, stocks that move very quickly, in some cases companies that are not profitable. But it's an idea that a lot of people are very interested in. We saw a lot of these stocks fly this week.


ROMANS: Give investors a little bit of advice about how to carefully tread in this arena. SHRESTHA: Absolutely, absolutely. That's a great point. I'm glad you brought that up, because one of the things that we are going to see here a lot is going to be volatility. An investor needs to be really careful about the fact that the early-stage companies are not going to make money anytime soon.

ROMANS: Right.

SHRESTHA: And given the recent event of what just happened here, it is our opinion that the prime beneficiaries are really going to be the guys who actually have the product in the marketplace today. However, having said that, we think, you know, essentially some of these fuel cell companies, you know, do have some solid long-term business plans, do have some cash position. And we would encourage investors to capitalize actually on volatility. Do not chase the stock. Buy on the weakness and focus on the companies that have a strong cash balance and who have the right business model in place.

LISOVICZ: So, Sanjay, for the investor who doesn't have a strong stomach, is there any place that an investor can put his or her money now, where you might actually see some returns in the short term, in the next, say, couple of years?

SHRESTHA: Sure, sure. I mean, you know, within the alternative energy, there are a couple of companies that are actually pretty established and that also have some profitability today. That would include some of the companies like American Power Conversion, some other companies like C & D Technologies. Those guys provide a battery back-up solution that can protect your critical data, as well as equipment.

You know, however, I would not encourage people to chase the stocks. They have had a nice run here, given the recent events of last week. And, again, the stocks are going to be volatile, and you would potentially want to buy them cheaper.

SERWER: Sanjay, let me ask you, though -- I want to back up to this: What is alternative energy?

SHRESTHA: Sure, sure.

SERWER: Because you've got fossil fuels, you've got the sun, you've got the wind.

SHRESTHA: That's right. That's right.

SERWER: Tell me specifically what else is out there, and how viable it is?

SHRESTHA: Well, that's a great question.

SERWER: And nuclear, of course.

SHRESTHA: That's a great question. And the most important thing here is fuel cells do hold a lot of potential.

SERWER: And how do those work, just so we can understand it?

SHRESTHA: Absolutely. Essentially nothing more than a chemical reaction. Instead of burning a fuel, you have electricity going in. There's an electrolyte that splits into an electron, which electron is essentially electricity, and that gives you the power.

SERWER: Is it viable?

SHRESTHA: It is viable, but we need a significant subsidy from the government, because the way we see it is the most important thing for any early-stage industry to be a commercial viability, we've got to talk about the economics. That's the key driver. And right now, these technologies are not economical.

ROMANS: If you're bold -- if you're really bold and you want to take a very long-term look at it...


ROMANS: ... what names are in the fuel cell arena?

SHRESTHA: I would definitely take a look at a company called FuelCell Energy, symbol FCEL. I do like their long-term business model. And I would also take a look at another company called Quantum Technology, symbol QTWW. That company is not the prime beneficiary of the recent event. However, I like that company, because that's probably going to be one of the first fuel cell companies to get to profit.

LISOVICZ: But, Sanjay, is it only because of the capital investment that Detroit is not embracing this? I mean, we've just been talking about these higher gasoline prices, which are really hurting a lot of Americans. Is it just Detroit's reluctance to invest that's really holding this technology back?

SHRESTHA: Well, I think obviously it's a little bit of that. But then, again, we've heard a lot of talk about how we need the backup solution and how we need to do something about the forward- thinking technology. But we really haven't seen some clear path from the government's side to really provide some sort of a clear incentive.

LISOVICZ: Sometimes it takes a disaster to...

SHRESTHA: That's right. That's right.

LISOVICZ: ... in fact, create something better. Do you think that blackout that was the worst in the nation...

SHRESTHA: That's absolutely right.

LISOVICZ: ... the situation that was called for -- or needed?

SHRESTHA: Well, essentially, this blackout, as you guys know, it's bigger than the 1965 blackout, and we hope that it certainly sends a message, a wake-up call to Washington and they would essentially start to provide some clear incentive program whereby this technology is going to be cost-competitive with the existing solution, potentially driving a mass adoption and bringing in the economics of scale, and whereby we can start talking about fuel cells as a viable industry instead of a concept.

ROMANS: Sanjay Shrestha of First Albany, thanks so much for joining us today.

SHRESTHA: Thank you so much.

ROMANS: Very interesting stuff.

Just ahead, he can't trade stocks anymore, but former Solomon Smith Barney analyst Jack Grubman is still getting a nice paycheck. Find out how much and why coming up.

And we'll get some of your e-mails and ask the e-mail question of the week. Our address is

But, before we go to the break, Andy has got a quick lesson on hedge funds in this week's edition of "Fortune Fundamentals."


SERWER: Today, we're talking hedge funds. Hedge funds sound dark and mysterious, and while these investment funds are secretive, they really aren't that complicated.

Originally, a hedge fund was a pot of money run by a manager who made hedged investments. For instance, a fund's manager would invest in stocks of companies he was bullish on, say airline stocks, and short stocks of companies that he was bearish on, say technology stocks.

This kind of strategy is supposed to work well in both an up and a down market. Lately, the number of hedge funds has grown tremendously, and many of them don't actually hedge.

Today, the term "hedge fund" has become a catch-all phrase that describes any unregulated investment fund, where a money manager takes a cut of any gains on top of an annual fee.

Unlike mutual funds, hedge funds are generally not regulated. Usually, the minimum investment in a hedge fund is at least hundreds of thousands of dollars, and you must be qualified -- make that rich -- to play.



LISOVICZ: Who says crime doesn't pay? Certainly not Jack Grubman. Grubman is the former Solomon Smith Barney stock analyst, who made all of those questionable buy ratings on companies like WorldCom. As part of a settlement related to those calls, Grubman had to pay $15 million and was barred from the securities industry for life.

But all of that isn't stopping Citigroup from paying Grubman a hefty salary. Grubman is still getting about $200,000 a year from his former company, the money part of Grubman's severance package. All Grubman has to do to keep collecting is to promise to help Citigroup defend itself against a series of shareholder lawsuits.

ROMANS: If you run a business that likes to save money and doesn't worry about jinxes, have we got a deal for you. The Enron building in downtown Houston is going up for sale. A New York real estate firm will be accepting sealed bids on the 50-story tower until mid-September.

Some of the proceeds from the sale will be used to pay off the bankrupt energy trader's massive debts. But don't expect the building to fetch a huge price. The commercial real estate market in Houston is already very weak.

SERWER: Yes. I mean, it's just -- I want to go back to the Grubman thing for a second.

ROMANS: All right.

SERWER: Let's take them one by one. I mean, you know, you create -- it's a great job. You create a mess, then you get fired, then you get paid to fix it up. I've got to figure out how to do that.

LISOVICZ: Well, this is different than a golden parachute. Let's be clear on that.

ROMANS: And...

SERWER: That's right.

ROMANS: And the company also forgave a $13 million loan -- I think -- and another $3 million loan. When all of this is said and done, then they'll talk about forgiving that one, too. They're forgiving a loan.

SERWER: Right.

LISOVICZ: Citigroup the parent company of Solomon Smith Barney needs Jack Grubman to defend itself.


SERWER: But what I don't understand is, how can you be barred for life and then get paid $200,000 a year?

ROMANS: Right.

LISOVICZ: And he's not doing brokerage calls.

ROMANS: No, that's true.


ROMANS: And sitting...

SERWER: Oh, I didn't get it.

ROMANS: And sitting in a Citigroup office. I mean, Citigroup also had to give him an office.

SERWER: Right.

ROMANS: You know, that's another part of it, too. But, yes, it's a very...

LISOVICZ: Where is Eliot Spitzer on this?

SERWER: Hey, speaking of offices, though, this Enron building thing, it's funny, 13 percent vacancy rate in Houston, and they're trying to sell this sucker. And, you know, there are other problems. The Chevron Building down there is empty, too, so you've got a lot of empty space.

LISOVICZ: They call them see-thru buildings in Houston, when the last recession, when the oil went bust, and you could -- these tall skyscrapers, and you could see through them, because nobody was there -- no people, no office equipment.

SERWER: Right.

LISOVICZ: And that's what they're having...


SERWER: Silicone Valley's rate is worse, though. It's 21 percent. But the real story down in Houston with Enron is Lee Fastow, Andy Fastow's wife...


SERWER: ... whose trial is about to start on the Superbowl, and the lawyers had to move it because it would be too much of a distraction...

ROMANS: Traffic.

SERWER: ... to traffic, they couldn't have hotel rooms.

ROMANS: It's two circuses. Think about it. You've got the Superbowl and you've got...

SERWER: I'd want to have my trial during the Superbowl to distract people, so they wouldn't pay any attention to it.

LISOVICZ: I think the best news, though, is that there is going to be some legal proceedings finally happening.

SERWER: Yes, that's a good point. And the Superbowl, too, so we can really have some fun.

LISOVICZ: OK, let's go to e-mail now, because our viewers have a lot to say. We got a lot of letters about -- not surprisingly -- the Northeast blackout.

But one e-mail from a 17-year-old may have been the most memorable. Sidney in California wrote: "The main objective of terrorism is to evoke fear. I know we say we are winning the war on terror, but my first thought when I heard about the blackout in New York was, 'It's happening again.'"

And certainly, there were a lot of us who thought the same thing, too.

Commenting on the rising number of Americans behind bars, Mary in Seattle wrote: "The new privatization of the prison system makes good financial sense for these businesses. The prison companies benefit, other companies get a ready-made workforce, and other companies can sell prisoner-made products and label them, 'Made in America.'"

That's putting a spin on things.


LISOVICZ: And now it's time for our e-mail question of the week. Do you think the U.S. should send more troops to Iraq, keep the force about same, or pull out altogether? Send your answers and any other comments to

And that's all for this edition of IN THE MONEY. Thanks again to our panel this week, Christine Romans from CNN Financial News and Andy Serwer of "Fortune" magazine. Have a great weekend.


In Early Release For Some Prisoners; Northwest Airline Filling Holes In Pension Fund With Something Other Than Money>

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