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AMERICAN MORNING

Reports: Blasts Heard in Fallujah, Iraq; 90-Second Tips: Interest Rates

Aired April 28, 2004 - 07:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


BILL HEMMER, CNN ANCHOR: We'll talk to Senator Biden in a moment.
Also this half-hour, how can you best prepare for a rise in interest rates? The Fed chair hinting that could happen soon, maybe this spring, perhaps this summer. David Bach back with us, "90-Second Tips," mapping out money strategies for you in the event that rates should change. So, we'll get to that as well, Soledad.

O'BRIEN: It looks like it's going to happen, doesn't it? All right. Let's get right to our top stories this morning.

The U.S. envoy to Iraq, Lakhdar Brahimi, says a transitional government should be chosen in Iraq one month earlier than the scheduled handover date, as Bill was just mentioning. Ambassador Brahimi says the caretaker government needs some time to get ready to lead the country. Brahimi told the Security Council yesterday that the government should assume full sovereignty on June 30, not limited powers.

More deaths have been reported in southern Thailand, where the Islamic separatists are battling police. At least 98 people were killed today in coordinated attacks on 15 police stations. A deadly standoff followed at a mosque in the region. Thailand is predominantly Buddhist, but its southern provinces are roughly 80 percent Muslim.

United Nations offices are closed in Syria today following a car bombing in Damascus. Four people were killed yesterday after a group of terrorists set off a bomb in the capital city's diplomatic quarter. An empty U.N. office appears to have been the target. Americans have been urged to stay home.

It will be another day of closed-door testimony in Kobe Bryant's sexual assault case. The judge is telling lawyers he wants to hear arguments on topics other than the sexual history of Kobe Bryant's accusers -- accuser, rather. More than two dozen witnesses have been questioned about the woman's lifestyle. Bryant must wait until mid- May for a judge to decide whether a jury should even hear evidence on her sexual past.

(WEATHER BREAK)

HEMMER: Iraqi sheikhs heading toward Fallujah ,where U.S. Marines and Sunni Muslim insurgents have been locked in that on again/off again urban fight for about three weeks running. U.S. warplanes and artillery hit insurgent targets in the city again last night. A large arms cache was destroyed, lighting up the night sky there.

A Pentagon official says those strikes were not the beginning of a new push against insurgents. So, then the question today: What is the U.S. military's strategy?

Also getting reports, at this hour in fact, that fighting has resumed in Fallujah. There is not a whole lot of detail. Word and information coming out of that besieged town is quite difficult to come by. We'll follow that story for you.

And as we watch that out of Fallujah, to the Pentagon and Barbara Starr, who has been talking to a number of people and her sources there.

Good morning -- Barbara. What do you know?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Good morning to you, Bill.

Well, as you say, every reason to believe that the fighting in Fallujah is simply going to continue.

Now, the U.S. strategy officially remains unchanged. The firefight that the world watched unfold in Fallujah last night, officials say, was not the end of the cease-fire. Officially, that was a response by the Marines to being attacked at their defensive positions. So, the strategy officially remains to work with the city leaders of Fallujah to try and restore the peace.

But the weapons turn-in program by the insurgents has not worked out. The prospect for joint patrols beginning tomorrow between Iraq -- with Iraqi and U.S. forces is problematic. There is great concern that the Iraqis are simply not ready for that.

So, what is the reality? Well, here is a view from one Marine on the ground on the front lines.

(BEGIN VIDEO CLIP)

CAPT. DOUGLAS ZEMBEC, COMMANDER, E-COMPANY, 2-1 MARINES: We've been playing patty cake with these insurgents. We have not begun to do offensive operations, and the world will see that when we do.

(END VIDEO CLIP)

STARR: So, the Marines, of course, on the front lines remain extremely frustrated. They are sitting there taking fire, returning fire.

The Bush administration is still hopeful the talks will work out. But, Bill, behind the scenes here at the Pentagon, tremendous concern. They know they cannot let this go on forever. They can't let the Marines just sit on the outskirts of Fallujah without somebody making a decision how to proceed. Two options on the table: either peace breaks out in Fallujah, which seems highly doubtful, or somebody gives the order for an all-out assault into the city -- Bill.

HEMMER: Barbara Starr from the Pentagon, thanks for that -- Soledad.

O'BRIEN: Despite escalating violence, the U.S. remains committed to the June 30 transfer of power to the Iraqis. President Bush's choice to be the first ambassador to new Iraq is now seeking confirmation from the Senate. John Negroponte, the current U.N. ambassador, appeared yesterday before the Foreign Relations Committee and spoke about what his mission would be.

(BEGIN VIDEO CLIP)

JOHN NEGROPONTE, AMBASSADOR TO IRAQ NOMINEE: We should bear in mind that we are still in the early phase of Iraq's reconstruction and rehabilitation. The conclusion of the Coalition Provisional Authority on June 30 will mark a vital step towards realizing an independent, democratic and stable Iraq at peace with its neighbors. I see my mission as working to assist the people and the government of Iraq to achieve these noble goals.

(END VIDEO CLIP)

O'BRIEN: Delaware Senator Joseph Biden is the ranking Democrat on the committee to confirm Negroponte, and he joins us this morning from Wilmington.

Nice to see you, Senator. Thanks for being with us.

SEN. JOSEPH BIDEN (D-DE), FOREIGN RELATIONS COMMITTEE: How are you, Soledad? Thank you.

O'BRIEN: I'm great, thanks. Let's get to a lot, because we've got a lot to cover. And I actually want to start with Fallujah, which really is our top story this morning before we talk about John Negroponte. Give me a sense of how you feel it's going to end. Is it a military solution here? Or does peace break out, as we just heard Barbara Starr saying is one of the options?

BIDEN: I don't think peace breaks out, but I hope what happens is it's a negotiated solution. The fact of the matter is this is a town of 300,000 people. Sending those braves Marines into that town going house to house is going to have serious consequences in terms of their well-being, as well as the political consequences.

The administration has not arrived on a strategy for Iraq generally, let alone Fallujah. And I think you are seeing part of the -- part of that conflict playing out right now in how to proceed. Remember, they originally decided to have the 82nd Airborne pull out of there. They had Iraqi patrols in. Many of us have been saying the Iraqis were not adequately trained, not adequately prepared. But it looks like the administration is beginning to change policy, and that's hopeful.

O'BRIEN: What gives you hope, though, for a negotiated solution when you talk about so far, no weapons of any value appear to have been turned in? It doesn't look as if any of the people, the civilians inside of Fallujah, have turned over any of the insurgents who are responsible for the mauling and devastating attacks on those four American contractors. So, I guess I'm asking, why your so hopeful about that?

BIDEN: Well, let me put it this way. I think -- quite frankly, I think optimism is an occupational requirement from where I sit. So, start off by saying that the administration looks like they are making a u-turn in terms of trying to internationalize this, trying to -- acknowledging that the present Iraqi government is not one that has any real credibility, agreeing to come up with a new interim Iraqi government. That, in turn, will put in play the prospect of different people negotiating within.

Look, we can't want democracy more than the Iraqis want it. We can't want peace more than the Iraqis want it. And you've got to engage that population in a way that whether they turn over the people who killed those four contractors, at least they have to stop the insurgency in that city. And that's going to have to be a combination of the threat of force, plus a genuine notion that there is a legitimate government on the way that has the support of the rest of the world. That's the thing. I predict you're going to see this administration try to bring back somebody like Brahimi to go back into Fallujah and begin that negotiation. But an all-out attack on a town of 300,000 people with the whole world watching is going to be, it seems to me, not a pretty option.

O'BRIEN: Well, let me throw a question to you about John Negroponte. In your opening statement...

BIDEN: Excuse me.

O'BRIEN: That's OK. We've all got allergies here as well. Your question to him was, and you said in your opening statement, was going to be, has your role been specifically defined? How did he answer that question?

BIDEN: More clearly than anyone has before. He indicated that he believed that what was going to happen was, which some of us have been asking for, that he was going to be the ambassador of the United States in Iraq, but there would also be a principal U.N. representative with significant authority in Iraq after the U.N. had, and the major powers, had ratified this new government he's proposing, which essentially takes a 25-member commission now that doesn't have much legitimacy and scraps it. It puts a new acting government in place. That gets ratified by the major powers, the Security Council as well.

So, that he's not going to be the only guy in town. He is not going to be the only one making decisions, and that is a very positive first step. That will increase the legitimacy of this new Governing Council, as well as begin to spread the responsibility in a way that I believe will allow him then, if the president leads, to get NATO forces in, get Arab forces in, so we're not the only game in town there. And that ultimately is needed in order to restore security and it not be totally a U.S. operation. O'BRIEN: Senator Joseph Biden of the Senate Foreign Relations Committee joining us this morning. As always, sir, nice to see you. Thanks for joining us.

BIDEN: Thank you, Soledad.

O'BRIEN: Appreciate it.

BIDEN: Sorry for my cold.

O'BRIEN: Oh, that's all right. Get better, sir.

HEMMER: It's about 20 minutes before the hour.

Breaking news in the world of business. It involves Comcast. It involves Disney.

Andy checks back in. He has the headline on this.

What have you found out, Drew?

ANDY SERWER, "FORTUNE" MAGAZINE: Yes, a bit of a surprise here this morning. Comcast is withdrawing its $48.4 billion bid to buy the Walt Disney Company. This just crossing the tape this morning out of Philadelphia. Comcast CEO Brian Roberts is saying it's become clear there is no interest on the part of Disney management and board in putting Comcast and Disney together. That's for sure. And that being disciplined means knowing when to walk away.

Comcast stock is up sharply on the news. Shareholders liking the fact it's not going to do the deal. Disney stock is down in pre- market trading.

And, of course, the big question is, whether Disney, after this, will this make Disney's stock go down and will that put more pressure on embattled CEO Michael Eisner? All of this remains to be seen.

O'BRIEN: How quickly do you think you see it? I mean, immediately in trading today, or is it just...

SERWER: Oh, I think the stock will probably go down today, although there are so many different possibilities, it's really unclear. Because it's going to be difficult to see how Wall Street will react. But it does put the focus clearly back on Michael Eisner. What's your plan? Now it's up to you.

HEMMER: And the news has been so negative about Disney for the past six months running. Is this a suggestion that that company is not nearly as healthy as some would like to believe? Or maybe that's what Comcast...

(CROSSTALK)

SERWER: Or maybe that it's more healthy and the stock is up, so it's too expensive for Comcast to buy. There are so many different ways of looking at this, and it's going to take several days, I think, to sort it out.

HEMMER: All right. And you will.

SERWER: And we will. We'll be following that stock.

HEMMER: Thank you, Andy.

O'BRIEN: All right, Andy, thanks.

SERWER: OK.

O'BRIEN: Well, rock legend Elton John, believe it or not, is angry with the viewers on the Fox show, "American Idol." He calls its voters, who vote on singers who are vying for pop stardom -- quote -- "incredibly racist."

Elton John is furious about last week's surprising exit of contestant Jennifer Hudson, who is seen in the middle here, if we get a shot of those three ladies, right there. Hudson is considered very considered talented. Boy, can she sing. She was voted off, believe it or not, by the viewers. Elton says it shows the voters are racist. Hudson's loss moved show host Ryan Seacrest to remind the voters that "American Idol" is a talent hunt, not a popularity contest.

Contestants compete for recording contracts on the show. And Elton John is going to be a guest judge this month.

HEMMER: That should be interesting.

O'BRIEN: Well, you know, the other theory, too, went back...

HEMMER: Sir Elton and Simon?

O'BRIEN: ... people assuming...

SERWER: Yes.

O'BRIEN: Yes, that will be great. Well, people assume that she was so great that they would, you know, sort of vote for somebody -- like, you know, you have to vote for the person you really want to win.

HEMMER: Sure, but in large measure, it is a popularity contest. I mean, they're asking the viewers to vote online and call in and, what, send a text message, et cetera?

SERWER: Also, Ruben won, right? I mean, that sort of...

HEMMER: Good point.

O'BRIEN: Right.

HEMMER: Good point.

O'BRIEN: He's black.

SERWER: It deflates that point, doesn't it? Yes. And Clay was very popular.

O'BRIEN: Right.

HEMMER: Very true.

O'BRIEN: So, who knows?

SERWER: Yes.

O'BRIEN: We'll see what Elton John says when he's actually the judge.

HEMMER: I'm all aflutter over this. That's right.

In a moment here on AMERICAN MORNING, the gathering storm in Fallujah. A series of blasts heard today after some heavy fighting late last night. Can religious leaders end that standoff? The latest on what's happening there in a moment as we get it here.

O'BRIEN: And back at home, interest rates are likely to rise. What you need to know about your mortgage before it's too late.

HEMMER: Also, one California company says it's cloning cats for a fee. Back in a moment on AMERICAN MORNING.

(COMMERCIAL BREAK)

HEMMER: All right, welcome back.

When Alan Greenspan talks, we know the world listens. The Fed chairman suggesting last week that interest rates are ready to rise. Industry experts expect that sooner rather than later. What does it mean for you? That's what we're talking about this morning with David Bach, our resident personal finance contributor. His latest best- seller is "The Automatic Millionaire." David is here with some "90- Second Tips" for getting ready for higher interest rates.

Good morning to you.

DAVID BACH, CNN PERSONAL FINANCE CONTRIBUTOR: Good morning, Bill.

HEMMER: So, the Fed chair was talking last week. What was the signal that you heard?

BACH: Well, there are two things. One, he said he doesn't have to raise rates right away, but that it's reasonable to expect rates could rise. It doesn't have to rise a lot, but they could rise.

HEMMER: So, he's portending.

BACH: So, he's doing what he always does, which is not saying exactly where he's going, but the market has already reacted. The 10- year treasury, which is really the indicator of where rates are going, the 10-year treasury has already moved up. So, there's already a predictor in the marketplace that rates are going to be moving up in the short term, and realistically in the long term, too.

HEMMER: All right. Many times Alan Greenspan doesn't speak in English. But we're going to speak in English today.

BACH: Right.

HEMMER: When rates go up, how are individuals affected here in the U.S.?

BACH: The obvious thing is our mortgage. You know, this is what costs us the most money is our mortgage payment. So, if you have a mortgage, and also credit card debt, when interest rates rise, the cost to borrow money goes up.

So, for instance, let's take a look at your mortgage. Right now, if rates go up -- we have a little chart here that will show you. It just shows you that if you have, for instance, an adjustable rate mortgage, how much it changes. So, let's say your rate is 5.5 percent right now on a $250,000 mortgage. Well, your payment would be $1,419. But if rates go up just 1 percent to 6.5 percent, you can see there that now the mortgage is going to $1,580.

So, as rates move up, the cost to own your home, the exact same home, can rise, especially if your rate is not fixed. And so, this affects all of us because the expense of our home goes up. And then we also worry, well, will the price of home values drop?

HEMMER: So, you're paying more money. So, if you want to avoid that, what do you do? What's your advice?

BACH: Obvious. No. 1, lock in rates now on your mortgage. OK, stop waiting. If you are considering, should I lock in my rate? Yes. Lock in your rate. Look at a 30-year mortgage or a 15-year mortgage, because, folks, we're at a 42-year low. We were at a 46-year low on interest rates. Now, we've bumped up a little. So right now, we're at a 42-year low. No reason to wait. Lock in rates.

If you have an adjustable rate mortgage, and that may be like one of these mortgages where your rate is fixed for a year or three years or five years, either again, refinance to a fixed rate or look and find out, when is my rate coming due? Because if your rate is coming due in the next six months, you want to know, well, how much will it adjust if rates moved up?

HEMMER: And those who delay are going to pay a price, as you've said many times. Other than mortgages, what else is affected by this?

BACH: Credit cards. So, if you're got a credit card today, let's say it's 15 or 20 percent, which most people have, when you get your junk mail this week there are all types of offers right now that say transfer your debt to us for 0 percent interest. Many of these credit card companies are still offering 0 percent interest for six months to a year. So, you know what? Take advantage of that. Move your debt. Lock in 0 percent interest right now, because they're not going to be offering that in six month.

HEMMER: So, that's on a credit card. Investments?

BACH: All right, investments, we've got to look at, what should you buy, and what should you avoid? So, when rates are moving up, you have to be very careful.

So, some good investments when rates are moving up that are safe, very short-term investments: money market accounts, CDs, short-term treasuries, low-duration bond funds -- those are bond funds that buy short-term investments -- and inflation bonds. We talked about it the last time I was on the show. I-bonds, these are bonds that if inflation moves up, the interest rate moves up so you are protected. And also TIPS, which are treasury-inflation protected securities.

HEMMER: If you want to be more conservative on the investment side, where do you go now?

BACH: You look at doing what's called laddering treasuries or laddering bonds. And that's where you buy a one-year, two-year, three-year, four-year, five-year bond, for instance. You are getting a little bit higher rate as you go farther out on what we call the duration curve. And that means that when the bond comes due every year, you just move that bond. So, when your bond comes due, you go and buy a six-year bond. Very conservative approach for people that say, I don't know where rates are going, and what should I do?

HEMMER: We call it "90-Second Tips" for a reason. We're almost out of time. What do you avoid when it comes to investments?

BACH: You avoid long-term bonds, and you avoid long-term bond funds because when rates move up, the value of these bonds drop. You also avoid long-term munis. These are things over 10 years, long-term CDs and especially preferred stocks that are B rated. Because, again, when rates move up, the value of these investments drop.

HEMMER: Thank you, David. Good to see you.

BACH: Thank you.

HEMMER: David Bach with us today. Also, you can hear David Bach's nationally-syndicated radio show Saturday afternoons on Sirius satellite radio, and he's here every Wednesday on Americans with tips on how to improve your financial life. Good to see you, as always.

BACH: Thank you.

HEMMER: Until next week -- Soledad.

O'BRIEN: Still to come this morning, amid continued unrest, are there no easy answers in Fallujah? A look at that ahead as AMERICAN MORNING continues.

(COMMERCIAL BREAK)

O'BRIEN: Look at those pictures. More sights and sounds, of course, from Fallujah amid the standoff between the U.S. Marines and the Iraqi insurgents there. And, of course, there are new reports this morning as well of fighting in Fallujah, not an easy solution in sight.

And that brings us right to Jack and the question of the day, of course.

Good morning again.

JACK CAFFERTY, CNN ANCHOR: Hi, Soledad.

The options on the table so far are not very attractive in Fallujah. Negotiating with the insurgents and the cease-fires don't seem to be getting it done. Nobody seems to be in a hurry to disarm. And that leaves the coalition forces with basically two choices. One, a ground assault, which is every commander's nightmare. That's house- to-house, street-to-street fighting that would increase American casualties. Or an air assault, which would save American lives, but increase the number of Iraqi civilian casualties, because the insurgents, being the gutless wonders that they are, are hiding in the civilian population in mosques, riding around in ambulances and using women and children as protection.

What's the answer to the situation in Fallujah? Hundreds of e- mails already. A big response.

D.W. writes from Crescent City, California: "We should back off. The loss of lives isn't worth it. Will it matter in 10 years if we back off? It certainly will matter to the families of the dead soldiers and civilians if we insist on going in. Let it be a lesson to choose our fights more carefully."

Elizabeth in Toronto: "You cannot afford to lose this fight, both from a tactical standpoint, but more importantly from an image standpoint. The Iraqis respect toughness more than fairness. You must win this."

Mike in Columbus, Mississippi" "Evacuate the city of all those that remember Hiroshima, and then show them what it was like."

And Sarah writes from Kansas City, Kansas: "From the big sister of a Marine fighting in Fallujah, I think they need to go in and get the bad guys out. I pray every day for the safety of our men and women in Iraq and around the world. But if house-to-house combat in Fallujah is what's necessary, then they need to do it. The Marines know their jobs, and they will get it done. Theo, we love and miss you, and we're very proud of you."

HEMMER: Wow!

O'BRIEN: Wow!

CAFFERTY: AM@CNN.com.

O'BRIEN: Interesting to really hear the -- you know, across the board answers.

CAFFERTY: Tough, tough situation. And it's exactly what -- remember what Saddam Hussein said? We'll fight you in the cities. O'BRIEN: Right.

HEMMER: Any general you talk to that looks at this situation from half a world away, or even there for that matter, they will consistently say that there are a number of men inside that town who have a death wish, and they will fight to the death. They have a desire to die for what they believe in their cause. But I think that second e-mail goes to the point. Ultimately, the Marines can win this battle. I don't think there's any question.

CAFFERTY: Well, no, there has never been a question about that.

HEMMER: The question is the aftermath and what comes?

CAFFERTY: And at what price? How many lives do you sacrifice for that town?

O'BRIEN: But the price of a cease-fire is, and many are saying that the insurgents are regrouping, getting good rest, because, of course, nobody is attacking them.

CAFFERTY: Well, yes, of course. They are fortifying. Can you spell quagmire? I mean, this is a giant mess over there.

HEMMER: We'll see. (UNINTELLIGIBLE), but we'll see.

Jack, in a moment here, the Supreme Court is set to consider the very essence of American justice; today, in fact. Who can have access to the courts in the war on terror? That question in a moment at the top of the hour as we continue here on AMERICAN MORNING.

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