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Are Senators Inside Traders?

Aired April 03, 2004 - 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, America's financial capitol, this is IN THE MONEY.
JACK CAFFERTY, HOST: Welcome to IN THE MONEY. I'm Jack Lafferty. Coming up on today's program more carrot, less stick. America's popularity way down around the world. We'll find out if taking a softer approach would actually boost U.S. power and influence?

And capital gains on Capitol Hill. A new study found that when senators play the stock market, they do better than the rest of us. Gee, there's a surprise. We will look whether or not they know something we don't.

And money magnets, researchers say that counties with casinos have more personal bankruptcies, see if you take a gamble just by living near gambling.

Joining me today a couple of the IN THE MONEY veterans, CNN Correspondent Christine Romans is with us and "Fortune" magazine Editor-At-Large Andy Serwer.

At long last, the jobs are coming.

ANDY SERWER, EDITOR-AT-LARGE, "FORTUNE": Hallelujah!

CAFFERTY: Here come the jobs. They finally got a jobs report for the month of March that there's reason to celebrate.

SERWER: Biggest number in four years almost going back to April of 2000. That would be the Clinton administration, Christine.

CHRISTINE ROMANS, CNN CORRESPONDENT: Yeehaa!

SERWER: Don't think that Dubya does not notice that. And really this will put the Democrats on the defensive. Is it an aberration? We will find out.

ROMANS: What I think is sort of funny that the administration has been on message about the most important thing; it's not jobs growth, or payroll, it is about the unemployment. Well, the unemployment rate rose a little bit.

CAFFERTY: Yes, what's up with that? How does that work?

SERWER: That means more than 308,000 people joined the pool of people looking for work.

CAFFERTY: All right.

ROMANS: Yes, people who had just stop looking for jobs now think well, maybe it's time to go back out there and try to get something.

CAFFERTY: Of course, it is a bit of a double edged sword. The bond market immediately sold off big time on that jobs news. If interest rates begin to rise, although they're at very low levels and probably can rise some without it being detrimental to the economy. But if they rise enough, people stop refinancing, stop buying cars, stop financing all sorts of stuff and that could act as a drag on the economy.

ROMANS: I mean we're a long way (UNINTELLIGIBLE)

CAFFERTY: We are a long way.

SERWER: Right, yes. I mean it has to be.

The other thing though, is you have to wonder about these government statistics. Come on, you know they are surveying 50,000 families here, and then extrapolating. You have to wonder about this. Still, I guess it's good news.

CAFFERTY: For now it is, I guess, as a matter of fact.

Moving on to other things, America is known around the world for its big heartedness and at times bull headedness. Admired for spreading its resources around and criticized for throwing its weight around.

These days American popularity is down. That could have serious consequences for this country's foreign policy. Joseph Nye has some ideas about trying a different approach. He's the dean of John F. Kennedy School of Government at Harvard University. And the author of the new book "Soft Power: The Means to Success in World Politics"

Mr. Nye, it is nice to have you with us. Thanks for joining us.

JOSEPH NYE, HARVARD UNIVERSITY: Thank you. Nice to be with you.

CAFFERTY: What do you mean by the phrase, "soft power"?

NYE: Soft power is your ability to get what you want through attraction, rather than coercion. You can change other people by carrots or sticks, but you can also do it by attracting them, getting them to want what you want.

And we have not been doing as well as we should be in that dimension in recent years.

SERWER: Mr. Nye, you suggested we are spending 400 times more on hard power than soft power. I guess that means military power. But what can we really do? I mean, one thing that happened in the Cold War, people gravitated towards us, but was it really conscious stuff? Or were people seeing Hollywood movies and liking America?

NYE: Well, Hollywood helps but the government budget also makes a difference. If you look at the Cold War we had twice as many people involved in the Voice of America broadcasting, so forth, as we do today.

When the Cold War ended Americans wanted a peace dividend, and they cut back on our spending in the areas of international exchanges, contacts with other people, broadcasting. In fact, if you look at what we spend on this whole area today, it's about the same as Britain or France. Yet we are five times their size. So if we were just to increase the amount we spend in this area to 1 percent of the Defense budget it would mean quadrupling or budget in this area.

ROMANS: What do we do? What does the United States do to burnish its image a bit? Just this week four American civilians were dragged out of burning vehicles in Fallujah, and dragged through the streets to cheering Iraqis.

You have folks around the rest of the world who frankly sometimes like it when the U.S. looks like it's down and getting kicked.

NYE: I think that's always a problem. We are the big kid on the block. There's a bit of resentment of the big kid. It also depends how we act. If we are seen as arrogant, others will hate us. If we are seen as humble and cooperative with others, we are more likely to get support from others.

Basically, in a war on terrorism you can never attract an Osama bin Laden or Al Qaeda or the extremists, that's where your hard power has to come in. But what you are trying to do is attract the moderates or middle. That's where the soft power comes in to prevent them from being recruited by the hard-liners.

CAFFERTY: What is it that tends to blind the rest of the world to what we do in this country? For 200 years this has been the most successful economic and governmental experiment that mankind has ever known. Why doesn't that get through to a lot of people elsewhere in the world?

NYE: It's interesting. If you look at some polls in my book it shows that American culture, the American economy, American technology still are quite popular.

What is really been the cause of the rise in anti-Americanism in the last few years has been American foreign policy. We have become quite unpopular because of our foreign policy appearing to be arrogant or unilateral. But our culture and economy is still are attractive.

SERWER: Mr. Nye, putting you on the spot a little bit here. Would you be suggesting perhaps then that going into Afghanistan was the correct use of hard power, but maybe Iraq was not? Would that be a case where we should have only used soft power?

NYE: I think going into Afghanistan was absolutely right. There is no way you will attract Al Qaeda or the Taliban government. We had to use our hard power there.

Going into Iraq, we weren't going to attract Saddam Hussein, but the way we went about it meant that others thought we were acting arrogantly without consulting others. We did not build the broad coalition that President Bush's father did in 1991. If we had taken a little bit more time, worked a bit more with others, been more attentive to our soft power going in, we would have more support in trying to reconstruct Iraq today.

ROMANS: Is there more time for that or is it too late to try to build support for what the United States is already, frankly, right in the middle of, and can't really turn back?

NYE: Well, we lost eight months. If in May of 2003 after we had our military victory, we had invited in the U.N. and others, we would have had that kind of help last summer. Now the administration has turned to the U.N. They're trying to get Kofi Annan to help them out. But basically, in the meantime, a lot of people have said you broke it, you own it.

CAFFERTY: At the end of the day, though, it doesn't really come down to whether or not we have a solution in Iraq? If that becomes a modestly successful democratic enterprise, where the people enjoy an economy that will support the families, where they have freedoms they didn't enjoy under the Saddam Hussein regime, doesn't that vindicate everything we have done? If it does not work out that way, it almost doesn't matter, does it?

NYE: If the United States wants to recover its soft power or attractiveness in the Islamic world we have to make sure Iraq is a better place than when we found it. We have to leave it better than being a failed state and a haven for terrorists. If we do that and move forward, put more pressure on the Arab/Israeli peace process, I think we can recover a lot of our soft power.

SERWER: You mentioned Voice of America, what else specifically can we do? Are you talking about propaganda? What other kinds of ideas?

NYE: One idea, for example, is more exchange programs. If we cut back on student visas, we are actually shooting ourselves in the foot. There are about half a million foreign students who come to the United States every year and go home with American ideas in their head. That's a great investment in our soft power.

But we now have a visa process which is cutting back on a lot of those students, particularly from the places where we need it most, in the Islamic world.

CAFFERTY: All right. We will have to leave it there, Mr. Nye. Appreciate you being on IN THE MONEY. Joseph Nye is the dean of the Harvard school of government, the John F. Kennedy Harvard School of Government, and author of the book "Soft Power: The Means To Success in the World Politick".

Thank you very much for joining us. NYE: Nice to be with you.

CAFFERTY: Coming up next, on IN THE MONEY, as we continue, left of the dial, the new liberal radio network made its debut this week. Find out if people turning it on or tuning it out?

Later, 57 varieties with one message, see how Heinz is trying to keep politics away from its ketchup.

And betting the house, a new study says a casino in your county could mean bankruptcy in your future. We'll check the odds of that happening a IN THE MONEY continues.

(COMMERCIAL BREAK)

ROMANS: The so-called liberal radio network launched this week in several major cities. While some people focus on the network's political bent, others are asking a more direct question, will it make any money? Joining us from Washington, D.C. to talk about that is the CEO of Air America, Mark Walsh.

Welcome to the program. Are you going to make any money?

MARK WALSH, CEO, AIR AMERICA: That's our job and that's our plan, although, we do expect to lose money for the first couple of years. Our business plan is funded for us to be able to grow this business. So by year three we expect some positive cash flow. Good stuff does not happen overnight, as your viewers know.

CAFFERTY: When you look at the political landscape, this country is more polarized than it has been in a long time. Does that work to your advantage at this point?

WALSH: Well, in division is media opportunity. Over 50 percent of America did not vote for the sitting president and they have a lot of issues that they would like to hear talked about that they do not hear talked about today on the right-wing spew that is mostly what talk radio is about.

So we think there's a media opportunity not just to spew back but through comedy, through conversation, through content and through information to make something that is really entertainment, and entertainment that advertisers want to use to reach the ears of the listeners that they care about.

SERWER: A right-wing spew, huh? OK, we gotcha.

You know it is interesting, with all these labels that Jack is talking about, FOX, for instance, does not call itself a conservative network, it calls itself fair and balanced. You guys are out there. You are calling yourself liberal. Do you think that's really going to work? Do you think people like to go around with a big sign on their head that says, "liberal"? I listen to "liberal" radio?

WALSH: Do you think people like to go around pretending that they are fair and balanced when they listen to FOX? SERWER: It confuses me, I don't know why they don't say they're conservative. Why do you think that is?

WALSH: Well, why don't you ask them, when you have some of their guys on?

SERWER: We will, but go ahead you answer it.

WALSH: Let me suggest to you, that the listeners to Rush Limbaugh call themselves dittoheads -- Dittoheads? Which to me the fascinating thing about it is that it implies that they don't think.

We want people to think for themselves. Now, you may suggest that having a liberal badge on our product implies a lack of thinking on our viewers.

SERWER: No.

WALSH: In fact, what we suggest is that our programming is about trying to show what's the truth, unveiling the misstatements and the lack of frankness that is going on, on the right-wing radio every day.

CAFFERTY: At the end of the day, though, success in broadcasting, be it radio or television, is measured by eyeballs, in the case of TV, or ears in the case of radio. You talk about the right-wing radio. The stuff succeeds because millions of people choose to listen to it.

Liberal radio has been tried in the past, and they have not found that same appetite in the listening public as the so-called conservatives have.

What do you do about that discrepancy?

WALSH: Jack, first I'm a big fan of yours. I have been watching you over two decades.

CAFFERTY: You are not that old.

(LAUGHTER)

WALSH: Yes, I am that old.

ROMANS: Butter him up. Butter him up.

WALSH: Yes, I am that old, but you're not.

So the point is, that prior efforts that you reference with Governor Mario Cuomo, Alan Dershowitz and Jim Hightower; they were sort of islands of sanity in a broadcasting day that had a lot more right-wing on it.

And radio, as you know, is not a destination-listening medium. Television is a destination-viewing medium. That's why we have a full broadcast day and we leased or bought the stations that we're on. You know when you push button five, or whatever it is on your dashboard, you will know you are going to an environment that is about liberal radio. It is about progressive talk. The idea of having different types of shows, so Mario Cuomo and then Rush Limbaugh, that's conflicting programming on the radio airwaves, we think that's one of the reasons for the past failure.

ROMANS: Mark, let's talk about the personalities you have. Because Rush Limbaugh is a radio guy. Bill O'Reilly a media guy for years and years. You have an actor, a comedian, a rapper; how is that going to help you or hurt you?

WALSH: Well, I noticed that you called Bill O'Reilly a media guy, for years and years. He was the host of a Hollywood talk show. He had no radio experience.

Let me suggest to you that we do have a lot of radio experience at our business. We have both on air and off air hosts and talent, and advisers, programming guys, who will help us do the actual business of radio.

A second point you referenced it before, Rush Limbaugh is a great entertainer. Whether he calls himself that or not, that's up to him. I'm a big fan. I listen to Rush a lot. He's a great entertainer and very good at radio. We try to make sure we have people that can advise the TV-oriented or comedic talent to get better at the actual business of radio.

The final point I'll make is that a lot of our comedic talent is about stand-up comics. And comics that are stand up comics have to establish a relationship with the audience right away. We are about entertainment and relationship with our visitors and our listeners.

Once again, to Jack's point to begin with, hopefully to show advertisers that these are ears that matter and they will buy products that advertisers want them to.

CAFFERTY: The other thing advertisers are interested in is penetration. And right now, you don't have a lot. I assume it's growing. What kind of penetration do you have to achieve in order to become profitable?

WALSH: We are going to -- as of April 15th we will be in all four, the four largest media markets in America, New York, L.A., San Francisco and Chicago. We are also in Portland, Oregon, now and XM Radio Network.

I think you will expect from us another five or 10 announcements over the next few months in major markets. If you add up the four largest markets we are in, or soon to be in, New York, L.A., Chicago and San Francisco, that's about 22 percent of American households; almost a quarter of American households, which puts us in the lineup to get some of the network advertising buys in the radio business.

But my final point, and an important one, is that 75 to 80 percent of the advertising revenue in radio is local in nature. We have local sales forces in each of our markets, working the streets, talking to local advertisers trying to drive that revenue. ROMANS: Air America, Mark Welsh, best of luck to you. Thanks for dropping by today.

WALSH: Thank you.

ROMANS: More ahead on IN THE MONEY, after the break, no relish for politics, find out why Heinz is trying to put some distance between its products and Mrs. John Kerry.

And later, beating Wall Street from inside the Beltway; find out about a study that finds what happens when senators play the stock market.

Also coming up, Masters of Disaster. Find out about the college that is offering a masters degree in -- yep -- video gaming.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ROMANS: The verdict is in, in the Tyco trial. Let's go to Greg Clarkin, now for the very latest.

GREG CLARKIN, CNN CORRESPONDENT: Thanks, Christine.

A mistrial has been declared in the Tyco case. Now, this the case that found former CEO Dennis Kozlowski and former CFO Mark Swartz on trial for the last six months. They stood accused of looting Tyco of more than $600 million. They both defendants were facing 24 counts ranging from conspiracy to securities fraud to grand larceny.

Now a mistrial, earlier this week, was requested by the defense, that was turned down. All these mistrial requests really centering on one juror; juror No. 4, a 79-year-old woman who earlier this week found herself in the headlines when she allegedly made a gesture that was construed in being in sympathy with the defense team.

Now, the efforts for a mistrial by the defense team, after that incident, were turned down by the judge. But we have found out that this juror, juror No. 4, had received what is being termed a coercive letter.

She was summoned into the judge's chamber, as were the defense team and prosecutors, for about an hour-long meeting. At the conclusion of the meeting the judge deemed and ruled that a mistrial would be granted because of the pressure put on this one particular juror.

So, he assembled court, called it to order, thanked the jury extensively for their service, also went on to say it was a shame they could not come to some conclusion at this particular point after six months of this trial, which had gone on much longer than anybody anticipated. And then a mistrial was declared.

As for what is next, the Robert Morganthau, the D.A. here in New York City, has said they will look to retry this case as soon as possible. Defense lawyers both saying that they fully expect to retry this case. Legal experts saying next time around you may get a much more directed, much more focused case by prosecutors. Not the lengthy six-month presentation that this jury sat through.

The next key date to keep in mind, here, May 7; the is when Judge Michael Orbus will have the parties back in his chambers and they will decide what the next legal date, the next legal step will be.

That's it from here. Back to you.

(END VIDEOTAPE)

SERWER: Some of the most vigorous campaigning right now is not going on in the presidential race but in the boardroom at H.J. Heinz. That is because the ketchup and pickle giant wants to distance itself from any possible connection to John Kerry's run for president.

Some conservative groups have been trying to launch a boycott against Heinz products because of Teresa Heinz is an heiress to part of the Heinz family fortune, And John Kerry's wife as well.

Now the company has sent out letters to radio and TV talk shows across the country announcing that Heinz is not sending money to John Kerry, who is Democratic presidential nominee.

That's about as controversial as it gets for Heinz, which over the last year has been a relatively rock-solid performer and steady market performer. H.J. Heinz is our stock of the week.

I will do a big public service for this Pittsburgh company. They have nothing to do with John Kerry. I mean, they really don't have anything to do. It's just ketchup. It's red. You put it on hamburgers and French fries.

ROMANS: It is also green and purple. That was the biggest controversy for H.J. for the last couple of years.

SERWER: That flopped.

CAFFERTY: And she, despite being an heiress to the Heinz fortune, has nothing to do with the running the company. She is not on the board, she do does have a job there. She does not work in the warehouse, she doesn't do any of that stuff.

ROMANS: I know she's trying to be more Kerry than Heinz these days, isn't she? Isn't she now known as Teresa Heinz-Kerry? Before that she was just Teresa Heinz?

SERWER: That's right. She is connected to the foundation, and there is that one connection. That was about 4 percent of the foundation, plus her holdings. Again, nothing to do with the company.

This company was run by Tony O'Reilly, the great Irishman for many years, he turned it over to a guy named William Johnson, who by the way, is the son of Tiger Johnson, the coach of the Cincinnati Bengals. Is that American enough for you? CAFFERTY: Man, I had no idea.

SERWER: That's pretty American, red, white, blue; you know, it's not a liberal Democratic conspiracy.

CAFFERTY: He probably got the contract to put the ketchup on the hot dogs out there where the Bengals play?

SERWER: Except they have the Steelers in the hometown. It is all a big mess there.

CAFFERTY: So, do you buy the stock? This is one of those stocks, like you said, rock solid, it performs year in and year out unless the American consumer quits eating ketchup, they will be around.

SERWER: Yes, this stock has sort of been a mediocre one over the years, Jack. And food stocks get hot every once in a while. It has not done that well. But it's like you're suggesting, over time it's probably a good thing to own. Why not, right?

ROMANS: OK. All right, a little ketchup on our buns I guess.

SERWER: All right. We will take a break. Coming up, U.S. Senators get a nice Capitol Hill office and a six-year term, and they also may be getting a leg up on the stock market. We'll check the results of an interesting study.

And betting on black may leave a lot of people in the red. We will look at the possible connection between casinos and personal bankruptcy. Stay tuned.

(COMMERCIAL BREAK)

CAFFERTY: You may think corporate executives get the sweetest deals when it comes to investing in the stock market, that's the wrong answer. A new studies says the biggest winners when it comes to investing are some of our elected leaders. Joining us with details on the story is Alan Ziobrowski of Georgia State University Robinson's School of Business, joins us today from Atlanta, Georgia.

So, let's see, the United States Senate outperformed the average investor by about 12 percent a year.

ALAN ZIOBROWKSI, GEORGIA STATE UNIVERSITY: That's right.

CAFFERTY: That's not insignificant. Why does that happen?

ZIOBROWSKI: The study does not go into the notion of whether or not -- how they obtained their gains, but I don't think one needs to use their imagination too far to realized that there's privileged information the rest of us just don't have.

CAFFERTY: You are suggesting they would take advantage of this information in order to acquire personal gain?

SERWER: Jack is shocked.

CAFFERTY: Shocking.

ZIOBROWSKI: As crazy as that sounds, I think that's what we are suggesting.

ROMANS: It could be just that they are smarter than the average public, maybe.

CAFFERTY: I doubt that.

ZIOBROWSKI: That's very difficult to argue because one of the things we do in this test is to benchmark our results against corporate executives who trade stock of their own companies. And nobody could know more before their companies than these guys do, and senators outperform them. It's hard to argue that they're that smart.

SERWER: I read your report and some Senate disclosure forms. I think what you have done is raised a lot of interesting questions. When you look at science of this it's not a slam dunk, is it?

You look at the disclosure forms it can be a family member who trades, also your time period is not that long.

And so are you really certain that this would hold up to statistical scrutiny?

ZIOBROWSKI: Yes, we really are. I guess the key issue is it's not so much of a question of how long but how many data points. We looked at some 6,000 transactions. So, with a population that large, it's clear to do some statistical analysis that are pretty strong.

CAFFERTY: What about the regulatory agencies that are designed to oversee the levelness of the playing field?

If members of the Senate can outperform the rest of the investing community by 12 percent based on information they have that the rest of us don't, why doesn't the SEC know about this, do something about it?

Or is this just one of those little perks that goes along with being inside the beltway?

ZIOBROWSKI: I guess technically the answer to that question is if you have to ask the SEC. But the truth of the matter, as far as we can determine there is no law against this. If they pick up some information in the course of their normal business dealings, there is nothing that says they can't trade stocks.

ROMANS: It's not necessarily a surprise. We were joking but how we were shocked that they outperform the rest of the market. But remember Hillary Clinton and the cattle futures, as long as there has been power and prestige in Washington, there have been people have been able to get something extra out of it, after all they are not paid very much money. ZIOBROWSKI: That's true. One of the examples we give in the papers, if of course, the famous LBJ example of his media company and what he did with the SEC. So, this is something that has been going on for a long time.

SERWER: When you look at the Senate disclosure forms, it shows that a senator would own a security and then not own it anymore. Sell it.

They don't have the date of sale during the year, though, do they?

ZIOBROWSKI: Yes, they put in -- they have to declare the day and again roughly the amount and the name of the company they bought. So, we have the exact date they made the transaction.

SERWER: But it's difficult for you to have gotten this information. The disclosure here is not what it should be, don't you think?

ZIOBROWSKI: It's horrible. And it's also intimidating because when you request to see these forms, and to get a copy, you have to give your name, and you have to give your organization, a lot of other things which certainly makes you wonder if the issue is public disclosure why are they asking you for all that information if you want to look at the forms.

SERWER: You are just a taxpayer, right?

ZIOBROWSKI: That's right.

ROMANS: If I were running for Congress, you would think I wouldn't want to get nailed, you know, making more money than anybody else on some kind of an inside tip or anything. You'd think that senators and congressmen in this country would be squeaky clean, wouldn't you?

ZIOBROWSKI: I guess that's the presumption. But, again, history would say otherwise. Certainly, there have been a number of people -- the LBJ case is a classic example of where that does not hold.

LISOVICZ: Did not mean to put you on the spot about the integrity of the elected officials in this country.

Alan Ziobrowski, thank you so much for joining us today.

ZIOBROWSKI: Thank you.

ROMANS: When IN THE MONEY continues, holding them and folding them.

Do more casinos mean more bankruptcies?

And playing video games in class will get new trouble but not at USC.

We'll explain just ahead.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: In the music industry he is known as the ear. Clive Davis founder and CEO of J Records is the driving force behind many successful artists, including Whitney Houston, Carlos Santana and Alicia Keys.

CLIVE DAVIS, CEO, J RECORDS: The key to the business is really success ratio. So, you've got to be very careful before you sign an artist, before you take on a that kind of responsibility. So often you find those throwing 10 up against the wall, bragging about the one that is successful.

UNIDENTIFIED MALE: Recently the more than 36-year music veteran was named chairman and CEO of BMJ America, but again was back on top at Arista Records after being ousted four years ago.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

SERWER: All right if the new study is right people are more likely to gamble until it hurts if there's a casino down the road. Researchers found counties with legalized gambling have twice as many personal bankruptcies as counties that don't. That runs contrary to other surveys and to claims from the gaming industry.

Alexandria Marks covered this story for "Christian Science Monitor" where she's a staff writer and she joins us now.

Welcome, Alexandria.

ALEXANDRIA MARKS, "CHRISTIAN SCIENCE MONITOR": Thank you.

SERWER: Explain to us your story.

MARKS: Well, it's kind of interesting that there's been this long brewing controversy about what social impacts having gambling in a county have. And people who are in the gaming industry, AKA the gambling industry, they try to call themselves the gaming industry to get away from all the connotations with gambling. But they say, look, you know there is no tie. You can have, you know, casinos, you can have lots of video lotteries, but you won't find a direct tie with personal bankruptcies. On the other hand there are a lot of anti- gambling activists and also researchers who say that is not the case. If you look at the actual data and go county by county, you find that personal bankruptcies in counties that have casinos are 100 percent higher. At the same time what's interesting is that business bankruptcies are 35 percent lower.

You know, Alexandria, for me, I grew up in the quad cities, in Iowa, Illinois, and Mississippi River, in 1989 they started riverboat gambling. And it used to be before 1989 you'd drive into town and there was a big bill board with Buffalo Bill, and it said welcome QCA home Of buffalo Bill. Now it says welcome to the QCA do you have a gambling problem? And it has Gamble Anon or whatever on the bottom.

Is this because people are gambling their money away or because boats and casinos bring in lower-wage jobs and you've got people working around the clock, and it just sort tears apart the fiber of the community?

MARKS: That's one of the key issues. They figure about 125 Americans gamble. About 80 percent of them have no problem at all. It's entertainment, they go out. About 7.5 million have a serious gambling problem. You know, they are compulsive gamblers. Another 15 million are at risk for that kind of problem. When a casino comes to town, the problems which maybe latent, suddenly begin to manifest themselves. So that you do have -- it does have an economic impact. At the same time it brings in jobs, a lot of cities require these casinos to buy all their goods from local vendors. So, it can have a positive economic effect at the same time. So it's really hard to tell.

I mean, the crime rate is another thing I get a charge out of in terms of this debate, but the people who are in favor of casinos will say, look, you bring a casino in, your crime rate goes down and it does. But the actual amount of crime goes up. But because when you are doing the crime rate you calculate visitors into the city, it brings the actual rate down.

Does that make sense? You have a casino, you have all these people come into the county. So it's one of those debates, and personal bankruptcy is another thing, it's very hard to pin down. That's what is going on. A lot of researchers are saying let's find out for sure what impact it has. And so this study of Creighton University, they looked at counties in 1990 that did not have casinos, and then -- and compared them with counties that did, and then did the same snapshot in 1999. And I thought the findings were pretty stunning.

CAFFERTY: What are they going to do about this?

People are gamble whether it's on horses or dogs or a dice game at the corner or whatever.

MARKS: The Internet now.

CAFFERTY: Not everybody who drinks becomes an alcoholic, but some people do. Not everybody who smokes gets lung cancer, but some people do. Not everyone who gambles declares bankruptcy.

Is there a solution here or is this just a social debate without an answer?

MARKS: Well, you know, obviously, you know, the sign you see in the Quad Cities when you walk in -- when drive into the cities, do you have a gambling problem?

There's an effort under way within the gaming industry itself to promote responsible gambling. And a lot of state governments, when they sanctioned casino gambling, they will also have a certain percentage of resources that will go towards like Gambling Anonymous -- not Gambling Anonymous, but programs to help problem gamblers. So, that goes on. It's an issue of personal responsibility, but also there's sort of larger social issue. When that story ran, I got e- mails from people, thank you. Everybody says they're great. You know, casinos are great for the local economy, but my grandmother sat at the slot machines and gambled away. There's a lot of heartache that you can't just measure. That's out there, too.

Is there a solution? I don't know.

SERWER: I want to talk to you about the statistics. I'm always on the lookout for these things. You have to dig very deeply. I'm familiar with the Foxwoods Casino, Mashantucket Pequot up there Connecticut. I don't have a problem by the way. I just want to make that clear.

MARKS: How familiar are you?

SERWER: It's a depressed area. You're talking about a part of Connecticut, not a lot of jobs at all. The casino is like on the shining hill there, they created a lot of wealth for the Indian tribe. The surrounding area is still poor, OK.

I'm wondering, aren't these casinos in poor rural areas where there might be a lot of bankruptcies any way? Have you really delved into this?

MARKS: That's one of the things the people in the gaming industry, AKA gambling industry, will argue is that if you look at these communities that they had higher rates of bankruptcy even before the casinos came in. Some of the studies done try to account for that. And still found increased rates of personal bankruptcies. So, you know, that is a factor. There are many variables that deal -- that are a result that cause these personal bankruptcies. A lot of the of people in the gaming industry, will also say, look it's the credit card companies. It's easy credit (UNINTELLIGIBLE).

If you 7-year-old, you know is on some mailing list, he could easy get an advertisement for credit. Easy credit, less stigma having to do with -- it used to be declaring personal bankruptcy was just scandalous. Now there's less social stigma while business bankruptcies which are a small percentage of the bankruptcies in the United States, they went from 63,000 a year to about 37,000 a year in the decade of the '90s, personal bankruptcies soared from 770,000 to 1.2 million. So, there's something going on. A lot of people say, look, during that same decade you had this huge expansion of casino gambling. But it's obviously complicated social phenomenon.

SERWER: All right, Alexandria, we will have to leave it at that. Thank you. Obviously, a huge business. Alexandria Marks, staff writer for "Christian Science Monitor."

Time for us to make the ad sales department happy. After the break, how to get credit for a jiggling a joy stick. Find out about a college where you can do your homework while playing video games. Oh, come on. Here's another reason to get in front of the computer, send us an e-mail and tell what's on your mind. Our address is inthemoney@cnn.com.

First though Susan Lisovicz, makes a cameo appearance for this week's edition of MONEY AND FAMILY.

(BEGIN VIDEO CLIP)

SUSAN LISOVICZ, CNN CORRESPONDENT: April 15th is right around the corner. If you have not filed your taxes, yet you may want to get started now. The IRS recently came out with a list of ways to avoid problems during tax time by following a few simple rules, you could save yourself both time and money.

Your first tip is to avoid procrastination. Don't put the taxes off until the last minute. The more of a rush you are in to get them done the more likely you are to make mistakes. Second, organize your tax records by making files for your records and receipts you can save yourself some hassle. Start now by filing last year's income statements, deductions or tax credit items. 3rd, if you have Internet access, visit the IRS online at irs.gov. You can easily access tax forms, publications and instructions on filing your return and check out legal information and frequently ask questions about filing your taxes.

Next week more tips to make tax time a little less taxing. I'm Susan Lisovicz for "Money and Family."

(END VIDEO CLIP)

SERWER: This is the kind of news parents sending their kids to college want to hear. A leading video game company is donating millions of dollars to the University of California, yes, that USC, so it can create a masters program in video game programming. Unbelievable.

Joining us now for more on this latest innovation, can we call that an American education, is our Webmaster Allen Wastler.

ALLEN WASTLER, MONEY.COM: Working on my graduate degree in video games. Yes, majoring in "Grand Theft Auto".

SERWER: Wow. "Grand Theft Auto" is amazing.

WASTLER: With a minor in -- it sounds crazy at first, OK? Video games, you are going to college to studio video games. But Electronic Arts one of the bigger names in the business feels it is worth plowing 8 million dollars into the thing. When you look at the money involved, it makes sense. Video games last year, they took in about $10 billion. So, comparison's sake, let's see. How much did movies take in domestically, about $10 billion. Think about all the film schools out there.

SERWER: At USC.

(CROSSTALK)

ROMANS: Does Electronic Arts have trouble finding good programmers?

Is that why they are doing it.

WASTLER: They are ramping up and trying to get more and more titles. And part of the business is throw a bunch of titles and see what sticks. A successful title will make $200 million for "Grand Theft Auto" franchise the latest installment. That's like a mega hit move, some are not going to do so well. So, you want to have enough developers, programmers and coders throwing that kind of stuff in there.

ROMANS: Not as frivolous as it looks.

SERWER: EA is very successful company too.

WASTLER: It gets very complicated quick very quick. Video games, now the big thing is you want to be able to respond to what do you and you don't want have predictable -- if I go that way, he will shoot me if I go this way, I will bump into that. You want some sort of unpredictability. It takes complicated programming to get that into a computer program where it is acting like a human being.

SERWER: Kind of like this show, Jack, unpredictability.

CAFFERTY: Who knows where else the applications for those ideas could be down the road either. I mean, somebody could come up with some new idea's and technology for video games and it could be applied to (UNINTELLIGIBLE).

WASTLER: A lot of it goes -- they are working now on hardware in video games where you connect it to your body and you sort of play like that.

SERWER: You know what I saw that was really cool, everyone complains how it makes everybody a couch potato. They had a bike, a stationary bike where pedaling like this and you were in the game. So you were exercising while you were in the game, which I thought was cool.

CAFFERTY: Let's get this over to something I can understand, dogs.

WASTLER: Dogs were in the news this week. The University of Wisconsin situation, we spent a lot of time watching the dog go around. Studying this week how people pick dogs. Well, an old favor of yours, Jack, people who look like their dogs.

CAFFERTY: This is hilarious.

(CROSSTALK)

WASTLER: So close it's kind of scary.

CAFFERTY: It is scary.

SERWER: Holy smoke look at those.

ROMANS: Have you ever watched people walking their dogs in Manhattan and you can't believe how they look like their dogs.

SERWER: And they grow to look like their dogs as they get older. They grow to like each other. Jack, let's get your dog on the show.

CAFFERTY: Well, my dog is a funny looking old yellow terrier. More hair than I do.

(CROSSTALK)

CAFFERTY: Any ways, that is a fun site. I have been on it. Check it out. Thanks Allen.

We are headed into the home stretch on IN THE MONEY. Up next, we'll get your thoughts on how the government it treating wounded veterans. Most of you don't think they are doing enough. You can tell us what you think about just about anything. You can e-mail us at inthemoney@cnn.com. Jake Novak (ph), one of our producers will actually answer your mail. And if you don't like his response on the e-mail, he'll come out to your house and discuss the issue with you in person. We'll be back after this.

(COMMERCIAL BREAK)

CAFFERTY: Time to check the answers to our question about whether the government is doing enough for our wounded veterans.

Tom wrote this, "No! Our vets need better, care, longer recuperation time and more money. When this administration won't allow the caskets of our dead troops from Iraq to be shown on TV you see how it really feels about the armed forces." I'm not sure that is exactly accurate. I think they may not want to have those pictures on television. I'm not sure their feelings about the armed forces have anything to do with that.

Any ways, James wrote this, "The government is not doing enough. But I'm sure if everyone serving in Congress was forced to do real military service than things would be done quite differently." Touche.

And Sarah wrote, "Of course we're not doing enough, but hey, if we won't even fess up to how much more money this war will cost us, then we're not admit how many people are getting hurt in it."

Our e-mail question for this week has to do with the jury system. Does the American jury system need fixing?

You can let us know how you think you would go about repairing it, if in fact, it's in need of repair. Send us your answers to inthemoney@cnn.com. Check out our show page on the Web at money.com/inthemoney. That's where you will find the address for the fun site of the week and other interesting little notes about this program.

(CROSSTALK)

WASTLER: Maybe juror number four will write in and answer the question.

CAFFERTY: What a shame that is. Maybe she's right, and maybe the other 11 are wrong. But what a shame that is. How much it cost the taxpayers to try that case. They are going to have to do it again.

SERWER: You can blame the prosecution too. I don't think that was a slam dunk the way they presented it. They went on and on and on. They made perhaps more complicated than it should have been.

ROMANS: For six months, the other 11 jurors, 12 juror altogether and the alternates I guess. Six months of their lives, now the whole thing all for nothing.

CAFFERTY: You know what the worst part of all is?

We will get so tired of seeing juror number four when she makes herself public, and starts...

ROMANS: And you've heard how the bookers of every major media organization is out there trying like crazy...

SERWER: A reality show! With juror number four.

(CROSSTALK)

CAFFERTY: All right. Well, we'll have to find out whether they will put that thing on trial again.

What do you think?

SERWER: Retry it definitely.

(CROSSTALK)

CAFFERTY: All right. That's it. Thanks for joining us for this edition of IN THE MONEY. Thanks to our gang around here. CNN correspondent, Christine Romans, who is always welcome at this address. "Fortune" magazine editor at large, Andy Serwer, who's been at this address ever since I have, since we started this thing. And money.com managing editor Allen Wastler who goes back to CNNfn with yours truly. We rode the range together over there a long time ago. Another story for another day.

Join us tomorrow -- yes (UNINTELLIGIBLE) they asked us to leave. Join us tomorrow for another edition of IN THE MONEY, 3:00 Eastern. We're going to take a look at the jury system and talk to a legal expert who thinks maybe, maybe there's a simple way to make it work better once again. We'll see you then.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com


Aired April 3, 2004 - 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, America's financial capitol, this is IN THE MONEY.
JACK CAFFERTY, HOST: Welcome to IN THE MONEY. I'm Jack Lafferty. Coming up on today's program more carrot, less stick. America's popularity way down around the world. We'll find out if taking a softer approach would actually boost U.S. power and influence?

And capital gains on Capitol Hill. A new study found that when senators play the stock market, they do better than the rest of us. Gee, there's a surprise. We will look whether or not they know something we don't.

And money magnets, researchers say that counties with casinos have more personal bankruptcies, see if you take a gamble just by living near gambling.

Joining me today a couple of the IN THE MONEY veterans, CNN Correspondent Christine Romans is with us and "Fortune" magazine Editor-At-Large Andy Serwer.

At long last, the jobs are coming.

ANDY SERWER, EDITOR-AT-LARGE, "FORTUNE": Hallelujah!

CAFFERTY: Here come the jobs. They finally got a jobs report for the month of March that there's reason to celebrate.

SERWER: Biggest number in four years almost going back to April of 2000. That would be the Clinton administration, Christine.

CHRISTINE ROMANS, CNN CORRESPONDENT: Yeehaa!

SERWER: Don't think that Dubya does not notice that. And really this will put the Democrats on the defensive. Is it an aberration? We will find out.

ROMANS: What I think is sort of funny that the administration has been on message about the most important thing; it's not jobs growth, or payroll, it is about the unemployment. Well, the unemployment rate rose a little bit.

CAFFERTY: Yes, what's up with that? How does that work?

SERWER: That means more than 308,000 people joined the pool of people looking for work.

CAFFERTY: All right.

ROMANS: Yes, people who had just stop looking for jobs now think well, maybe it's time to go back out there and try to get something.

CAFFERTY: Of course, it is a bit of a double edged sword. The bond market immediately sold off big time on that jobs news. If interest rates begin to rise, although they're at very low levels and probably can rise some without it being detrimental to the economy. But if they rise enough, people stop refinancing, stop buying cars, stop financing all sorts of stuff and that could act as a drag on the economy.

ROMANS: I mean we're a long way (UNINTELLIGIBLE)

CAFFERTY: We are a long way.

SERWER: Right, yes. I mean it has to be.

The other thing though, is you have to wonder about these government statistics. Come on, you know they are surveying 50,000 families here, and then extrapolating. You have to wonder about this. Still, I guess it's good news.

CAFFERTY: For now it is, I guess, as a matter of fact.

Moving on to other things, America is known around the world for its big heartedness and at times bull headedness. Admired for spreading its resources around and criticized for throwing its weight around.

These days American popularity is down. That could have serious consequences for this country's foreign policy. Joseph Nye has some ideas about trying a different approach. He's the dean of John F. Kennedy School of Government at Harvard University. And the author of the new book "Soft Power: The Means to Success in World Politics"

Mr. Nye, it is nice to have you with us. Thanks for joining us.

JOSEPH NYE, HARVARD UNIVERSITY: Thank you. Nice to be with you.

CAFFERTY: What do you mean by the phrase, "soft power"?

NYE: Soft power is your ability to get what you want through attraction, rather than coercion. You can change other people by carrots or sticks, but you can also do it by attracting them, getting them to want what you want.

And we have not been doing as well as we should be in that dimension in recent years.

SERWER: Mr. Nye, you suggested we are spending 400 times more on hard power than soft power. I guess that means military power. But what can we really do? I mean, one thing that happened in the Cold War, people gravitated towards us, but was it really conscious stuff? Or were people seeing Hollywood movies and liking America?

NYE: Well, Hollywood helps but the government budget also makes a difference. If you look at the Cold War we had twice as many people involved in the Voice of America broadcasting, so forth, as we do today.

When the Cold War ended Americans wanted a peace dividend, and they cut back on our spending in the areas of international exchanges, contacts with other people, broadcasting. In fact, if you look at what we spend on this whole area today, it's about the same as Britain or France. Yet we are five times their size. So if we were just to increase the amount we spend in this area to 1 percent of the Defense budget it would mean quadrupling or budget in this area.

ROMANS: What do we do? What does the United States do to burnish its image a bit? Just this week four American civilians were dragged out of burning vehicles in Fallujah, and dragged through the streets to cheering Iraqis.

You have folks around the rest of the world who frankly sometimes like it when the U.S. looks like it's down and getting kicked.

NYE: I think that's always a problem. We are the big kid on the block. There's a bit of resentment of the big kid. It also depends how we act. If we are seen as arrogant, others will hate us. If we are seen as humble and cooperative with others, we are more likely to get support from others.

Basically, in a war on terrorism you can never attract an Osama bin Laden or Al Qaeda or the extremists, that's where your hard power has to come in. But what you are trying to do is attract the moderates or middle. That's where the soft power comes in to prevent them from being recruited by the hard-liners.

CAFFERTY: What is it that tends to blind the rest of the world to what we do in this country? For 200 years this has been the most successful economic and governmental experiment that mankind has ever known. Why doesn't that get through to a lot of people elsewhere in the world?

NYE: It's interesting. If you look at some polls in my book it shows that American culture, the American economy, American technology still are quite popular.

What is really been the cause of the rise in anti-Americanism in the last few years has been American foreign policy. We have become quite unpopular because of our foreign policy appearing to be arrogant or unilateral. But our culture and economy is still are attractive.

SERWER: Mr. Nye, putting you on the spot a little bit here. Would you be suggesting perhaps then that going into Afghanistan was the correct use of hard power, but maybe Iraq was not? Would that be a case where we should have only used soft power?

NYE: I think going into Afghanistan was absolutely right. There is no way you will attract Al Qaeda or the Taliban government. We had to use our hard power there.

Going into Iraq, we weren't going to attract Saddam Hussein, but the way we went about it meant that others thought we were acting arrogantly without consulting others. We did not build the broad coalition that President Bush's father did in 1991. If we had taken a little bit more time, worked a bit more with others, been more attentive to our soft power going in, we would have more support in trying to reconstruct Iraq today.

ROMANS: Is there more time for that or is it too late to try to build support for what the United States is already, frankly, right in the middle of, and can't really turn back?

NYE: Well, we lost eight months. If in May of 2003 after we had our military victory, we had invited in the U.N. and others, we would have had that kind of help last summer. Now the administration has turned to the U.N. They're trying to get Kofi Annan to help them out. But basically, in the meantime, a lot of people have said you broke it, you own it.

CAFFERTY: At the end of the day, though, it doesn't really come down to whether or not we have a solution in Iraq? If that becomes a modestly successful democratic enterprise, where the people enjoy an economy that will support the families, where they have freedoms they didn't enjoy under the Saddam Hussein regime, doesn't that vindicate everything we have done? If it does not work out that way, it almost doesn't matter, does it?

NYE: If the United States wants to recover its soft power or attractiveness in the Islamic world we have to make sure Iraq is a better place than when we found it. We have to leave it better than being a failed state and a haven for terrorists. If we do that and move forward, put more pressure on the Arab/Israeli peace process, I think we can recover a lot of our soft power.

SERWER: You mentioned Voice of America, what else specifically can we do? Are you talking about propaganda? What other kinds of ideas?

NYE: One idea, for example, is more exchange programs. If we cut back on student visas, we are actually shooting ourselves in the foot. There are about half a million foreign students who come to the United States every year and go home with American ideas in their head. That's a great investment in our soft power.

But we now have a visa process which is cutting back on a lot of those students, particularly from the places where we need it most, in the Islamic world.

CAFFERTY: All right. We will have to leave it there, Mr. Nye. Appreciate you being on IN THE MONEY. Joseph Nye is the dean of the Harvard school of government, the John F. Kennedy Harvard School of Government, and author of the book "Soft Power: The Means To Success in the World Politick".

Thank you very much for joining us. NYE: Nice to be with you.

CAFFERTY: Coming up next, on IN THE MONEY, as we continue, left of the dial, the new liberal radio network made its debut this week. Find out if people turning it on or tuning it out?

Later, 57 varieties with one message, see how Heinz is trying to keep politics away from its ketchup.

And betting the house, a new study says a casino in your county could mean bankruptcy in your future. We'll check the odds of that happening a IN THE MONEY continues.

(COMMERCIAL BREAK)

ROMANS: The so-called liberal radio network launched this week in several major cities. While some people focus on the network's political bent, others are asking a more direct question, will it make any money? Joining us from Washington, D.C. to talk about that is the CEO of Air America, Mark Walsh.

Welcome to the program. Are you going to make any money?

MARK WALSH, CEO, AIR AMERICA: That's our job and that's our plan, although, we do expect to lose money for the first couple of years. Our business plan is funded for us to be able to grow this business. So by year three we expect some positive cash flow. Good stuff does not happen overnight, as your viewers know.

CAFFERTY: When you look at the political landscape, this country is more polarized than it has been in a long time. Does that work to your advantage at this point?

WALSH: Well, in division is media opportunity. Over 50 percent of America did not vote for the sitting president and they have a lot of issues that they would like to hear talked about that they do not hear talked about today on the right-wing spew that is mostly what talk radio is about.

So we think there's a media opportunity not just to spew back but through comedy, through conversation, through content and through information to make something that is really entertainment, and entertainment that advertisers want to use to reach the ears of the listeners that they care about.

SERWER: A right-wing spew, huh? OK, we gotcha.

You know it is interesting, with all these labels that Jack is talking about, FOX, for instance, does not call itself a conservative network, it calls itself fair and balanced. You guys are out there. You are calling yourself liberal. Do you think that's really going to work? Do you think people like to go around with a big sign on their head that says, "liberal"? I listen to "liberal" radio?

WALSH: Do you think people like to go around pretending that they are fair and balanced when they listen to FOX? SERWER: It confuses me, I don't know why they don't say they're conservative. Why do you think that is?

WALSH: Well, why don't you ask them, when you have some of their guys on?

SERWER: We will, but go ahead you answer it.

WALSH: Let me suggest to you, that the listeners to Rush Limbaugh call themselves dittoheads -- Dittoheads? Which to me the fascinating thing about it is that it implies that they don't think.

We want people to think for themselves. Now, you may suggest that having a liberal badge on our product implies a lack of thinking on our viewers.

SERWER: No.

WALSH: In fact, what we suggest is that our programming is about trying to show what's the truth, unveiling the misstatements and the lack of frankness that is going on, on the right-wing radio every day.

CAFFERTY: At the end of the day, though, success in broadcasting, be it radio or television, is measured by eyeballs, in the case of TV, or ears in the case of radio. You talk about the right-wing radio. The stuff succeeds because millions of people choose to listen to it.

Liberal radio has been tried in the past, and they have not found that same appetite in the listening public as the so-called conservatives have.

What do you do about that discrepancy?

WALSH: Jack, first I'm a big fan of yours. I have been watching you over two decades.

CAFFERTY: You are not that old.

(LAUGHTER)

WALSH: Yes, I am that old.

ROMANS: Butter him up. Butter him up.

WALSH: Yes, I am that old, but you're not.

So the point is, that prior efforts that you reference with Governor Mario Cuomo, Alan Dershowitz and Jim Hightower; they were sort of islands of sanity in a broadcasting day that had a lot more right-wing on it.

And radio, as you know, is not a destination-listening medium. Television is a destination-viewing medium. That's why we have a full broadcast day and we leased or bought the stations that we're on. You know when you push button five, or whatever it is on your dashboard, you will know you are going to an environment that is about liberal radio. It is about progressive talk. The idea of having different types of shows, so Mario Cuomo and then Rush Limbaugh, that's conflicting programming on the radio airwaves, we think that's one of the reasons for the past failure.

ROMANS: Mark, let's talk about the personalities you have. Because Rush Limbaugh is a radio guy. Bill O'Reilly a media guy for years and years. You have an actor, a comedian, a rapper; how is that going to help you or hurt you?

WALSH: Well, I noticed that you called Bill O'Reilly a media guy, for years and years. He was the host of a Hollywood talk show. He had no radio experience.

Let me suggest to you that we do have a lot of radio experience at our business. We have both on air and off air hosts and talent, and advisers, programming guys, who will help us do the actual business of radio.

A second point you referenced it before, Rush Limbaugh is a great entertainer. Whether he calls himself that or not, that's up to him. I'm a big fan. I listen to Rush a lot. He's a great entertainer and very good at radio. We try to make sure we have people that can advise the TV-oriented or comedic talent to get better at the actual business of radio.

The final point I'll make is that a lot of our comedic talent is about stand-up comics. And comics that are stand up comics have to establish a relationship with the audience right away. We are about entertainment and relationship with our visitors and our listeners.

Once again, to Jack's point to begin with, hopefully to show advertisers that these are ears that matter and they will buy products that advertisers want them to.

CAFFERTY: The other thing advertisers are interested in is penetration. And right now, you don't have a lot. I assume it's growing. What kind of penetration do you have to achieve in order to become profitable?

WALSH: We are going to -- as of April 15th we will be in all four, the four largest media markets in America, New York, L.A., San Francisco and Chicago. We are also in Portland, Oregon, now and XM Radio Network.

I think you will expect from us another five or 10 announcements over the next few months in major markets. If you add up the four largest markets we are in, or soon to be in, New York, L.A., Chicago and San Francisco, that's about 22 percent of American households; almost a quarter of American households, which puts us in the lineup to get some of the network advertising buys in the radio business.

But my final point, and an important one, is that 75 to 80 percent of the advertising revenue in radio is local in nature. We have local sales forces in each of our markets, working the streets, talking to local advertisers trying to drive that revenue. ROMANS: Air America, Mark Welsh, best of luck to you. Thanks for dropping by today.

WALSH: Thank you.

ROMANS: More ahead on IN THE MONEY, after the break, no relish for politics, find out why Heinz is trying to put some distance between its products and Mrs. John Kerry.

And later, beating Wall Street from inside the Beltway; find out about a study that finds what happens when senators play the stock market.

Also coming up, Masters of Disaster. Find out about the college that is offering a masters degree in -- yep -- video gaming.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ROMANS: The verdict is in, in the Tyco trial. Let's go to Greg Clarkin, now for the very latest.

GREG CLARKIN, CNN CORRESPONDENT: Thanks, Christine.

A mistrial has been declared in the Tyco case. Now, this the case that found former CEO Dennis Kozlowski and former CFO Mark Swartz on trial for the last six months. They stood accused of looting Tyco of more than $600 million. They both defendants were facing 24 counts ranging from conspiracy to securities fraud to grand larceny.

Now a mistrial, earlier this week, was requested by the defense, that was turned down. All these mistrial requests really centering on one juror; juror No. 4, a 79-year-old woman who earlier this week found herself in the headlines when she allegedly made a gesture that was construed in being in sympathy with the defense team.

Now, the efforts for a mistrial by the defense team, after that incident, were turned down by the judge. But we have found out that this juror, juror No. 4, had received what is being termed a coercive letter.

She was summoned into the judge's chamber, as were the defense team and prosecutors, for about an hour-long meeting. At the conclusion of the meeting the judge deemed and ruled that a mistrial would be granted because of the pressure put on this one particular juror.

So, he assembled court, called it to order, thanked the jury extensively for their service, also went on to say it was a shame they could not come to some conclusion at this particular point after six months of this trial, which had gone on much longer than anybody anticipated. And then a mistrial was declared.

As for what is next, the Robert Morganthau, the D.A. here in New York City, has said they will look to retry this case as soon as possible. Defense lawyers both saying that they fully expect to retry this case. Legal experts saying next time around you may get a much more directed, much more focused case by prosecutors. Not the lengthy six-month presentation that this jury sat through.

The next key date to keep in mind, here, May 7; the is when Judge Michael Orbus will have the parties back in his chambers and they will decide what the next legal date, the next legal step will be.

That's it from here. Back to you.

(END VIDEOTAPE)

SERWER: Some of the most vigorous campaigning right now is not going on in the presidential race but in the boardroom at H.J. Heinz. That is because the ketchup and pickle giant wants to distance itself from any possible connection to John Kerry's run for president.

Some conservative groups have been trying to launch a boycott against Heinz products because of Teresa Heinz is an heiress to part of the Heinz family fortune, And John Kerry's wife as well.

Now the company has sent out letters to radio and TV talk shows across the country announcing that Heinz is not sending money to John Kerry, who is Democratic presidential nominee.

That's about as controversial as it gets for Heinz, which over the last year has been a relatively rock-solid performer and steady market performer. H.J. Heinz is our stock of the week.

I will do a big public service for this Pittsburgh company. They have nothing to do with John Kerry. I mean, they really don't have anything to do. It's just ketchup. It's red. You put it on hamburgers and French fries.

ROMANS: It is also green and purple. That was the biggest controversy for H.J. for the last couple of years.

SERWER: That flopped.

CAFFERTY: And she, despite being an heiress to the Heinz fortune, has nothing to do with the running the company. She is not on the board, she do does have a job there. She does not work in the warehouse, she doesn't do any of that stuff.

ROMANS: I know she's trying to be more Kerry than Heinz these days, isn't she? Isn't she now known as Teresa Heinz-Kerry? Before that she was just Teresa Heinz?

SERWER: That's right. She is connected to the foundation, and there is that one connection. That was about 4 percent of the foundation, plus her holdings. Again, nothing to do with the company.

This company was run by Tony O'Reilly, the great Irishman for many years, he turned it over to a guy named William Johnson, who by the way, is the son of Tiger Johnson, the coach of the Cincinnati Bengals. Is that American enough for you? CAFFERTY: Man, I had no idea.

SERWER: That's pretty American, red, white, blue; you know, it's not a liberal Democratic conspiracy.

CAFFERTY: He probably got the contract to put the ketchup on the hot dogs out there where the Bengals play?

SERWER: Except they have the Steelers in the hometown. It is all a big mess there.

CAFFERTY: So, do you buy the stock? This is one of those stocks, like you said, rock solid, it performs year in and year out unless the American consumer quits eating ketchup, they will be around.

SERWER: Yes, this stock has sort of been a mediocre one over the years, Jack. And food stocks get hot every once in a while. It has not done that well. But it's like you're suggesting, over time it's probably a good thing to own. Why not, right?

ROMANS: OK. All right, a little ketchup on our buns I guess.

SERWER: All right. We will take a break. Coming up, U.S. Senators get a nice Capitol Hill office and a six-year term, and they also may be getting a leg up on the stock market. We'll check the results of an interesting study.

And betting on black may leave a lot of people in the red. We will look at the possible connection between casinos and personal bankruptcy. Stay tuned.

(COMMERCIAL BREAK)

CAFFERTY: You may think corporate executives get the sweetest deals when it comes to investing in the stock market, that's the wrong answer. A new studies says the biggest winners when it comes to investing are some of our elected leaders. Joining us with details on the story is Alan Ziobrowski of Georgia State University Robinson's School of Business, joins us today from Atlanta, Georgia.

So, let's see, the United States Senate outperformed the average investor by about 12 percent a year.

ALAN ZIOBROWKSI, GEORGIA STATE UNIVERSITY: That's right.

CAFFERTY: That's not insignificant. Why does that happen?

ZIOBROWSKI: The study does not go into the notion of whether or not -- how they obtained their gains, but I don't think one needs to use their imagination too far to realized that there's privileged information the rest of us just don't have.

CAFFERTY: You are suggesting they would take advantage of this information in order to acquire personal gain?

SERWER: Jack is shocked.

CAFFERTY: Shocking.

ZIOBROWSKI: As crazy as that sounds, I think that's what we are suggesting.

ROMANS: It could be just that they are smarter than the average public, maybe.

CAFFERTY: I doubt that.

ZIOBROWSKI: That's very difficult to argue because one of the things we do in this test is to benchmark our results against corporate executives who trade stock of their own companies. And nobody could know more before their companies than these guys do, and senators outperform them. It's hard to argue that they're that smart.

SERWER: I read your report and some Senate disclosure forms. I think what you have done is raised a lot of interesting questions. When you look at science of this it's not a slam dunk, is it?

You look at the disclosure forms it can be a family member who trades, also your time period is not that long.

And so are you really certain that this would hold up to statistical scrutiny?

ZIOBROWSKI: Yes, we really are. I guess the key issue is it's not so much of a question of how long but how many data points. We looked at some 6,000 transactions. So, with a population that large, it's clear to do some statistical analysis that are pretty strong.

CAFFERTY: What about the regulatory agencies that are designed to oversee the levelness of the playing field?

If members of the Senate can outperform the rest of the investing community by 12 percent based on information they have that the rest of us don't, why doesn't the SEC know about this, do something about it?

Or is this just one of those little perks that goes along with being inside the beltway?

ZIOBROWSKI: I guess technically the answer to that question is if you have to ask the SEC. But the truth of the matter, as far as we can determine there is no law against this. If they pick up some information in the course of their normal business dealings, there is nothing that says they can't trade stocks.

ROMANS: It's not necessarily a surprise. We were joking but how we were shocked that they outperform the rest of the market. But remember Hillary Clinton and the cattle futures, as long as there has been power and prestige in Washington, there have been people have been able to get something extra out of it, after all they are not paid very much money. ZIOBROWSKI: That's true. One of the examples we give in the papers, if of course, the famous LBJ example of his media company and what he did with the SEC. So, this is something that has been going on for a long time.

SERWER: When you look at the Senate disclosure forms, it shows that a senator would own a security and then not own it anymore. Sell it.

They don't have the date of sale during the year, though, do they?

ZIOBROWSKI: Yes, they put in -- they have to declare the day and again roughly the amount and the name of the company they bought. So, we have the exact date they made the transaction.

SERWER: But it's difficult for you to have gotten this information. The disclosure here is not what it should be, don't you think?

ZIOBROWSKI: It's horrible. And it's also intimidating because when you request to see these forms, and to get a copy, you have to give your name, and you have to give your organization, a lot of other things which certainly makes you wonder if the issue is public disclosure why are they asking you for all that information if you want to look at the forms.

SERWER: You are just a taxpayer, right?

ZIOBROWSKI: That's right.

ROMANS: If I were running for Congress, you would think I wouldn't want to get nailed, you know, making more money than anybody else on some kind of an inside tip or anything. You'd think that senators and congressmen in this country would be squeaky clean, wouldn't you?

ZIOBROWSKI: I guess that's the presumption. But, again, history would say otherwise. Certainly, there have been a number of people -- the LBJ case is a classic example of where that does not hold.

LISOVICZ: Did not mean to put you on the spot about the integrity of the elected officials in this country.

Alan Ziobrowski, thank you so much for joining us today.

ZIOBROWSKI: Thank you.

ROMANS: When IN THE MONEY continues, holding them and folding them.

Do more casinos mean more bankruptcies?

And playing video games in class will get new trouble but not at USC.

We'll explain just ahead.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: In the music industry he is known as the ear. Clive Davis founder and CEO of J Records is the driving force behind many successful artists, including Whitney Houston, Carlos Santana and Alicia Keys.

CLIVE DAVIS, CEO, J RECORDS: The key to the business is really success ratio. So, you've got to be very careful before you sign an artist, before you take on a that kind of responsibility. So often you find those throwing 10 up against the wall, bragging about the one that is successful.

UNIDENTIFIED MALE: Recently the more than 36-year music veteran was named chairman and CEO of BMJ America, but again was back on top at Arista Records after being ousted four years ago.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

SERWER: All right if the new study is right people are more likely to gamble until it hurts if there's a casino down the road. Researchers found counties with legalized gambling have twice as many personal bankruptcies as counties that don't. That runs contrary to other surveys and to claims from the gaming industry.

Alexandria Marks covered this story for "Christian Science Monitor" where she's a staff writer and she joins us now.

Welcome, Alexandria.

ALEXANDRIA MARKS, "CHRISTIAN SCIENCE MONITOR": Thank you.

SERWER: Explain to us your story.

MARKS: Well, it's kind of interesting that there's been this long brewing controversy about what social impacts having gambling in a county have. And people who are in the gaming industry, AKA the gambling industry, they try to call themselves the gaming industry to get away from all the connotations with gambling. But they say, look, you know there is no tie. You can have, you know, casinos, you can have lots of video lotteries, but you won't find a direct tie with personal bankruptcies. On the other hand there are a lot of anti- gambling activists and also researchers who say that is not the case. If you look at the actual data and go county by county, you find that personal bankruptcies in counties that have casinos are 100 percent higher. At the same time what's interesting is that business bankruptcies are 35 percent lower.

You know, Alexandria, for me, I grew up in the quad cities, in Iowa, Illinois, and Mississippi River, in 1989 they started riverboat gambling. And it used to be before 1989 you'd drive into town and there was a big bill board with Buffalo Bill, and it said welcome QCA home Of buffalo Bill. Now it says welcome to the QCA do you have a gambling problem? And it has Gamble Anon or whatever on the bottom.

Is this because people are gambling their money away or because boats and casinos bring in lower-wage jobs and you've got people working around the clock, and it just sort tears apart the fiber of the community?

MARKS: That's one of the key issues. They figure about 125 Americans gamble. About 80 percent of them have no problem at all. It's entertainment, they go out. About 7.5 million have a serious gambling problem. You know, they are compulsive gamblers. Another 15 million are at risk for that kind of problem. When a casino comes to town, the problems which maybe latent, suddenly begin to manifest themselves. So that you do have -- it does have an economic impact. At the same time it brings in jobs, a lot of cities require these casinos to buy all their goods from local vendors. So, it can have a positive economic effect at the same time. So it's really hard to tell.

I mean, the crime rate is another thing I get a charge out of in terms of this debate, but the people who are in favor of casinos will say, look, you bring a casino in, your crime rate goes down and it does. But the actual amount of crime goes up. But because when you are doing the crime rate you calculate visitors into the city, it brings the actual rate down.

Does that make sense? You have a casino, you have all these people come into the county. So it's one of those debates, and personal bankruptcy is another thing, it's very hard to pin down. That's what is going on. A lot of researchers are saying let's find out for sure what impact it has. And so this study of Creighton University, they looked at counties in 1990 that did not have casinos, and then -- and compared them with counties that did, and then did the same snapshot in 1999. And I thought the findings were pretty stunning.

CAFFERTY: What are they going to do about this?

People are gamble whether it's on horses or dogs or a dice game at the corner or whatever.

MARKS: The Internet now.

CAFFERTY: Not everybody who drinks becomes an alcoholic, but some people do. Not everybody who smokes gets lung cancer, but some people do. Not everyone who gambles declares bankruptcy.

Is there a solution here or is this just a social debate without an answer?

MARKS: Well, you know, obviously, you know, the sign you see in the Quad Cities when you walk in -- when drive into the cities, do you have a gambling problem?

There's an effort under way within the gaming industry itself to promote responsible gambling. And a lot of state governments, when they sanctioned casino gambling, they will also have a certain percentage of resources that will go towards like Gambling Anonymous -- not Gambling Anonymous, but programs to help problem gamblers. So, that goes on. It's an issue of personal responsibility, but also there's sort of larger social issue. When that story ran, I got e- mails from people, thank you. Everybody says they're great. You know, casinos are great for the local economy, but my grandmother sat at the slot machines and gambled away. There's a lot of heartache that you can't just measure. That's out there, too.

Is there a solution? I don't know.

SERWER: I want to talk to you about the statistics. I'm always on the lookout for these things. You have to dig very deeply. I'm familiar with the Foxwoods Casino, Mashantucket Pequot up there Connecticut. I don't have a problem by the way. I just want to make that clear.

MARKS: How familiar are you?

SERWER: It's a depressed area. You're talking about a part of Connecticut, not a lot of jobs at all. The casino is like on the shining hill there, they created a lot of wealth for the Indian tribe. The surrounding area is still poor, OK.

I'm wondering, aren't these casinos in poor rural areas where there might be a lot of bankruptcies any way? Have you really delved into this?

MARKS: That's one of the things the people in the gaming industry, AKA gambling industry, will argue is that if you look at these communities that they had higher rates of bankruptcy even before the casinos came in. Some of the studies done try to account for that. And still found increased rates of personal bankruptcies. So, you know, that is a factor. There are many variables that deal -- that are a result that cause these personal bankruptcies. A lot of the of people in the gaming industry, will also say, look it's the credit card companies. It's easy credit (UNINTELLIGIBLE).

If you 7-year-old, you know is on some mailing list, he could easy get an advertisement for credit. Easy credit, less stigma having to do with -- it used to be declaring personal bankruptcy was just scandalous. Now there's less social stigma while business bankruptcies which are a small percentage of the bankruptcies in the United States, they went from 63,000 a year to about 37,000 a year in the decade of the '90s, personal bankruptcies soared from 770,000 to 1.2 million. So, there's something going on. A lot of people say, look, during that same decade you had this huge expansion of casino gambling. But it's obviously complicated social phenomenon.

SERWER: All right, Alexandria, we will have to leave it at that. Thank you. Obviously, a huge business. Alexandria Marks, staff writer for "Christian Science Monitor."

Time for us to make the ad sales department happy. After the break, how to get credit for a jiggling a joy stick. Find out about a college where you can do your homework while playing video games. Oh, come on. Here's another reason to get in front of the computer, send us an e-mail and tell what's on your mind. Our address is inthemoney@cnn.com.

First though Susan Lisovicz, makes a cameo appearance for this week's edition of MONEY AND FAMILY.

(BEGIN VIDEO CLIP)

SUSAN LISOVICZ, CNN CORRESPONDENT: April 15th is right around the corner. If you have not filed your taxes, yet you may want to get started now. The IRS recently came out with a list of ways to avoid problems during tax time by following a few simple rules, you could save yourself both time and money.

Your first tip is to avoid procrastination. Don't put the taxes off until the last minute. The more of a rush you are in to get them done the more likely you are to make mistakes. Second, organize your tax records by making files for your records and receipts you can save yourself some hassle. Start now by filing last year's income statements, deductions or tax credit items. 3rd, if you have Internet access, visit the IRS online at irs.gov. You can easily access tax forms, publications and instructions on filing your return and check out legal information and frequently ask questions about filing your taxes.

Next week more tips to make tax time a little less taxing. I'm Susan Lisovicz for "Money and Family."

(END VIDEO CLIP)

SERWER: This is the kind of news parents sending their kids to college want to hear. A leading video game company is donating millions of dollars to the University of California, yes, that USC, so it can create a masters program in video game programming. Unbelievable.

Joining us now for more on this latest innovation, can we call that an American education, is our Webmaster Allen Wastler.

ALLEN WASTLER, MONEY.COM: Working on my graduate degree in video games. Yes, majoring in "Grand Theft Auto".

SERWER: Wow. "Grand Theft Auto" is amazing.

WASTLER: With a minor in -- it sounds crazy at first, OK? Video games, you are going to college to studio video games. But Electronic Arts one of the bigger names in the business feels it is worth plowing 8 million dollars into the thing. When you look at the money involved, it makes sense. Video games last year, they took in about $10 billion. So, comparison's sake, let's see. How much did movies take in domestically, about $10 billion. Think about all the film schools out there.

SERWER: At USC.

(CROSSTALK)

ROMANS: Does Electronic Arts have trouble finding good programmers?

Is that why they are doing it.

WASTLER: They are ramping up and trying to get more and more titles. And part of the business is throw a bunch of titles and see what sticks. A successful title will make $200 million for "Grand Theft Auto" franchise the latest installment. That's like a mega hit move, some are not going to do so well. So, you want to have enough developers, programmers and coders throwing that kind of stuff in there.

ROMANS: Not as frivolous as it looks.

SERWER: EA is very successful company too.

WASTLER: It gets very complicated quick very quick. Video games, now the big thing is you want to be able to respond to what do you and you don't want have predictable -- if I go that way, he will shoot me if I go this way, I will bump into that. You want some sort of unpredictability. It takes complicated programming to get that into a computer program where it is acting like a human being.

SERWER: Kind of like this show, Jack, unpredictability.

CAFFERTY: Who knows where else the applications for those ideas could be down the road either. I mean, somebody could come up with some new idea's and technology for video games and it could be applied to (UNINTELLIGIBLE).

WASTLER: A lot of it goes -- they are working now on hardware in video games where you connect it to your body and you sort of play like that.

SERWER: You know what I saw that was really cool, everyone complains how it makes everybody a couch potato. They had a bike, a stationary bike where pedaling like this and you were in the game. So you were exercising while you were in the game, which I thought was cool.

CAFFERTY: Let's get this over to something I can understand, dogs.

WASTLER: Dogs were in the news this week. The University of Wisconsin situation, we spent a lot of time watching the dog go around. Studying this week how people pick dogs. Well, an old favor of yours, Jack, people who look like their dogs.

CAFFERTY: This is hilarious.

(CROSSTALK)

WASTLER: So close it's kind of scary.

CAFFERTY: It is scary.

SERWER: Holy smoke look at those.

ROMANS: Have you ever watched people walking their dogs in Manhattan and you can't believe how they look like their dogs.

SERWER: And they grow to look like their dogs as they get older. They grow to like each other. Jack, let's get your dog on the show.

CAFFERTY: Well, my dog is a funny looking old yellow terrier. More hair than I do.

(CROSSTALK)

CAFFERTY: Any ways, that is a fun site. I have been on it. Check it out. Thanks Allen.

We are headed into the home stretch on IN THE MONEY. Up next, we'll get your thoughts on how the government it treating wounded veterans. Most of you don't think they are doing enough. You can tell us what you think about just about anything. You can e-mail us at inthemoney@cnn.com. Jake Novak (ph), one of our producers will actually answer your mail. And if you don't like his response on the e-mail, he'll come out to your house and discuss the issue with you in person. We'll be back after this.

(COMMERCIAL BREAK)

CAFFERTY: Time to check the answers to our question about whether the government is doing enough for our wounded veterans.

Tom wrote this, "No! Our vets need better, care, longer recuperation time and more money. When this administration won't allow the caskets of our dead troops from Iraq to be shown on TV you see how it really feels about the armed forces." I'm not sure that is exactly accurate. I think they may not want to have those pictures on television. I'm not sure their feelings about the armed forces have anything to do with that.

Any ways, James wrote this, "The government is not doing enough. But I'm sure if everyone serving in Congress was forced to do real military service than things would be done quite differently." Touche.

And Sarah wrote, "Of course we're not doing enough, but hey, if we won't even fess up to how much more money this war will cost us, then we're not admit how many people are getting hurt in it."

Our e-mail question for this week has to do with the jury system. Does the American jury system need fixing?

You can let us know how you think you would go about repairing it, if in fact, it's in need of repair. Send us your answers to inthemoney@cnn.com. Check out our show page on the Web at money.com/inthemoney. That's where you will find the address for the fun site of the week and other interesting little notes about this program.

(CROSSTALK)

WASTLER: Maybe juror number four will write in and answer the question.

CAFFERTY: What a shame that is. Maybe she's right, and maybe the other 11 are wrong. But what a shame that is. How much it cost the taxpayers to try that case. They are going to have to do it again.

SERWER: You can blame the prosecution too. I don't think that was a slam dunk the way they presented it. They went on and on and on. They made perhaps more complicated than it should have been.

ROMANS: For six months, the other 11 jurors, 12 juror altogether and the alternates I guess. Six months of their lives, now the whole thing all for nothing.

CAFFERTY: You know what the worst part of all is?

We will get so tired of seeing juror number four when she makes herself public, and starts...

ROMANS: And you've heard how the bookers of every major media organization is out there trying like crazy...

SERWER: A reality show! With juror number four.

(CROSSTALK)

CAFFERTY: All right. Well, we'll have to find out whether they will put that thing on trial again.

What do you think?

SERWER: Retry it definitely.

(CROSSTALK)

CAFFERTY: All right. That's it. Thanks for joining us for this edition of IN THE MONEY. Thanks to our gang around here. CNN correspondent, Christine Romans, who is always welcome at this address. "Fortune" magazine editor at large, Andy Serwer, who's been at this address ever since I have, since we started this thing. And money.com managing editor Allen Wastler who goes back to CNNfn with yours truly. We rode the range together over there a long time ago. Another story for another day.

Join us tomorrow -- yes (UNINTELLIGIBLE) they asked us to leave. Join us tomorrow for another edition of IN THE MONEY, 3:00 Eastern. We're going to take a look at the jury system and talk to a legal expert who thinks maybe, maybe there's a simple way to make it work better once again. We'll see you then.

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