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CNN IN THE MONEY

WorldCom, Tyco Cases in New York Courts; Impact of Upcoming Iraqi Election Discussed

Aired January 22, 2005 - 13:00   ET

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


ROB MARCIANO, CNN METEOROLOGIST: Here's the main band of moisture that is heading into some seriously cold air. It's now snowing in New York City up through White Plains, about to start snowing in Hartford. It's been snowing the last couple of hours in Philly and D.C. We will see a low intensify here off the coast, really tap into some warm water out there and that will really start to pile up the snow in places like New York City, where 14 to 20 inches of snow expected by tomorrow night, actually, by tomorrow morning, Boston, 18 to 24 inches. It could be more in spots, Philadelphia, 10 to 15 inches, Baltimore and D.C. getting into the act with 8 to 10 inches of snow.
Coastal flooding also a problem with this storm as winds will be very very strong and with the cold temperatures, wind chills will feel even colder than the actual temperatures, which are right now in the teens, 16 degrees in New York, 11 degrees in Boston, 19 degrees in D.C. and they're not really going to warm up all that much overnight. Temperatures will hold in the teens. And you factor in the winds, wind chills will be dangerous. They'll be below zero for much of the night tonight and winds could gust to 60 miles an hour in spots.

Nine in Chicago, 16 degrees in St. Louis for an overnight low tonight. And that cold air getting all the way down to the deep south as well. We'll watch this storm as it tracks through the northeast, Fredricka. It is intensifying and a huge amount of snow is expected across the northeastern corridor of the country. Back to you.

FREDRICKA WHITFIELD, CNN CORRESPONDENT: Brr, bundle up everywhere, thanks, Rob. I'm Fredricka Whitfield at the CNN center in Atlanta. More news and weather at the bottom of the hour. IN THE MONEY begins right now.

ANNOUNCER: From New York City, America's financial capital, this is IN THE MONEY.

JACK CAFFERTY, CNN ANCHOR, IN THE MONEY: Welcome to the program. I'm Jack Cafferty. Coming up on today's edition on IN THE MONEY, democracy the rough draft. Iraq's elections just around the corner. See what has to happen after the votes are counted to make the country safe.

Plus, hold the freedom fries. Condi Rice will need to start thinking like a diplomat if she's going to rebuild America's alliances. We'll find out if she's got what it takes.

And get smart. The former bosses of WorldCom and Tyco are finally facing court action. See what the Wall Street scandals can teach us and whether we're really learning anything at all. Joining me today, a couple of IN THE MONEY veterans, CNN correspondent Susan Lisovicz and "Fortune" magazine editor at large, Andy Serwer.

So all the pomp and circumstance of the inauguration of a president of the United States -- and it is quite a big deal to watch and get caught up in. It will probably be called the freedom speech, that address he made from the capitol steps. He talked about advancing the cause of freedom and democracy around the world. He didn't mention the war in Iraq. He didn't mention terrorism and he didn't pay a whole lot of attention to domestic issues. But if I were Iran or North Korea, I'd be reading between the lines, because I think there might have been a warning in there for folks like that.

ANDREW SERWER, "FORTUNE" MAGAZINE: Yeah, I think he's saying, I'm going to continue the path and we're going to pursue you guys. It's sort of the axis of evil still exists. We're going to be going after you. We put you on notice. I find the whole inauguration process kind of a little over the top. I think George Washington -- we were talking about this earlier, Jack. His second speech was about what, 30 seconds long?

CAFFERTY: Yep.

SERWER: And you know, there are 11 balls. What is it, the national association of diet soda makers has a ball? Stop it. Just get on with the business of running the government.

CAFFERTY: Where's your patriotic spirit for God's sake?

SERWER: Hey, it left today.

SUSAN LISOVICZ, CNN CORRESPONDENT: For those who are counting, William Safire, who always does this kind of thing, said that freedom, free, liberty, was enunciated by the president 49 times and he ranks it.

SERWER: Say 50.

LISOVICZ: He ranks it as one of the top five second-term inaugural speeches, even ahead of Thomas Jefferson. But I thought the key line, to speak of what you were talking about, the survival of liberty in our land increasingly depends on the success of liberty in other lands. I mean he really laid down the gauntlet and you can talk all you want about Social Security or an amendment on gay marriage, it's really about foreign policy.

SERWER: The number one speech of the second term of all time was George Washington with the really short one.

CAFFERTY: And the best part of this inauguration is we don't have another one for four more years. All right. Imagine caring enough about voting for your next president to risk your life for it. In parts of Iraq right now, they don't have to imagine. Insurgents there are hoping violence will scare voters away from the polls in next weekend's election. But what follows the vote could wind up being even more important than the results itself. To help us look ahead on what may happen in Iraq after the voting is over, we're joined from Washington by Phebe Marr. She's a senior fellow at the U.S. Institute of Peace and a retired professor who specializes in modern Iraq. Phebe, welcome to the broadcast. Nice to have you with us.

PHEBE MARR, U.S. INSTIT. OF PEACE: Nice to be here.

CAFFERTY: A lot of the people looking at this say it's little more than a prelude to a civil war in Iraq. How do you see these elections?

MARR: Well, that would be the worst case scenario but I'm a little more optimistic than that, certainly. What's going to have to happen after the election, when the assembly convenes -- of course, they're going to have to put together a government and the people who are elected are going to have to demonstrate ability to compromise and dialogue. Otherwise, indeed it could slip into something close to civil war.

LISOVICZ: OK, so Phebe what kind of compromises are reasonable between the Shias, Sunnis and the Kurds?

MARR: Well, I think the insurgency is going to focus their minds powerfully. It's going to be out there as something that could happen to them if they don't compromise. There are three essential issues. One is the whole issue of how much self-rule for the Kurds and over what territory. Will Kirkuk, for example, be included in the Kurdish regional government or not? A second one is going to be how much religion in the new state. Will the Shia Islamic law be the law of the state or part of the law of the state? And, of course, a third issue is going to be how to bring in moderate Sunnis and give them some sense that they're part of the new government.

SERWER: Phebe, I don't want to sound pessimistic, but isn't it inevitable that ultimately some sort of strong man takes over this country, forms a totalitarian government and the only way to be legitimate would be to be anti-U.S.?

MARR: Well, anti-U.S. ideas are certainly going to play a role. I don't think we should be -- have any illusions about that. No one wants a continuing occupation and that may be the theme, which everybody plays to get some unity. But let me say that while the strong man idea seems, you know, doable, where is the strong man going to come from? The real problem in Iraq today is that there's no army. There's no security force, except us, the U.S. So even if a quote/unquote strong man came, what is he going to lead with? In fact, the absence of an army may be the strongest argument you can produce for saying that we can't see a strong man emerging anytime soon. So those folks who gather in parliament really better discover compromise and pragmatism.

CAFFERTY: Is it realistic to expect that these elections next Sunday and the formation of a parliament are going to somehow overcome hundreds and hundreds of years of out and out hatred among the Kurds, the Sunnis and Shia? These people haven't liked each other for 1,000 years, maybe more. What makes anybody think because they're going to go and stick some ballots in a box that suddenly that stuff is going to go away and they're going to be able to get along? I find that hard to believe.

MARR: Well, let me just say right from the outset that my experience in Iraq is not the Shia and Sunnis and Kurds and Arabs hate one another. In fact, they've gotten along personally for many years. It's a political issue. It's power and who's in the government. But to, to be fair about it, of course an election isn't going to solve those problems. These key problems that I've mentioned are going to have to be dealt with.

If they can't deal with them by talking and by compromises, then in fact, it's going to slip into a civil war. But, in fact, they have been able to compromise on several issues. The Shia have been able to curb (INAUDIBLE). The Kurds have been able to curb their extremists on the issue of Kirkuk. The thing is not going to happen overnight. And I suspect that the writing of this constitution is going to take much longer than we suspect.

LISOVICZ: You know, you mentioned that Iraq has no army. There was an interesting exchange between the secretary of state nominee, Condoleezza Rice, and Senator Joe Biden a few days ago where there was the question as to how many -- how much Iraqi security had been trained. And there was a big difference in numbers. I think Senator Biden said there was 4,000 as opposed to over 100,000. Do you think that the Bush administration is going to try to improve that post- election?

MARR: They have to improve it or this experiment in Iraq isn't going to go anywhere. Incidentally, the numbers of trained is sort of false. Because you can train people, you can give them equipment and so on. But the question is, are they going to be able to perform under fire? Are they going to be loyal to the new government or are they going to fade into the woodwork when they have to confront insurgents? So it's a little less a matter of whether they've gone through a three-week or a six-week course, as it is whether they have the loyalty to the new government, whether they're willing to stand up against insurgents among their own people. That's a much more nebulous and difficult question.

CAFFERTY: There's a theory - we're almost out of time here, that it won't take very long after the election before the Americans are asked to leave Iraq. Do you see that happening? And if so, how soon and under what circumstances?

MARR: Well, that's going to be a very interesting question. The Kurds -- 20 percent of the population do not, and I repeat, do not, want to see the Americans leave. Clearly, many of the Sunnis do. And so the Shia are going to be the key. My feeling is that the Shia ultimately want to see us get out, but not before they are able in fact, to run a government.

The question is whether they're going to ask us to set up a timetable. I would be watching to see whether they ask for some kind of a timetable after they get in. But then they have to take responsibility for security and that's not going to be easy without an army.

CAFFERTY: It's going to be an interesting few weeks and months ahead. Phebe Marr, senior follow at the U.S. Institute of Peace, thank you very much for your insights. Nice to have you on the program.

MARR: Thank you very much.

CAFFERTY: When we come back, how do you say "kiss and make up" in French? I could tell you but I won't. Condoleezza Rice has some work to do if she's going to repair America's alliances. We'll look at whether she's the right person for that job.

Plus, snake eyes and bifocals. Find out what a new study says about the elderly and gambling and risk.

And the fun way to throw out the trash. Discover waste paper basketball online. You get everything here on IN THE MONEY. That's our fun site of the week. We'll be back in a minute.

(COMMERCIAL BREAK)

CAFFERTY: Despite tough questioning this week from the U.S. Senate Foreign Relations Committee, Condoleezza Rice is expected to be confirmed easily as secretary of state by the full Senate next week. Rice will have some big problems to solve when she takes up her new job. Topping the list, improving America's reputation abroad and tackling the Arab/Israeli conflict. Joining us today to talk about whether she's up that job is David Rothkopf. He's the scholar at the Carnegie Center for International Peace. His upcoming back is called "Running the World." It's about the inner circle of people who make foreign policy. David, welcome to the broadcast.

DAVID ROTHKOPF, CARNEGIE CENTER FOR INTL. PEACE: My pleasure.

CAFFERTY: You feel like she'll be a better secretary of state than she was national security adviser. Explain what you mean by that.

ROTHKOPF: Well, I think she's got a few things going for her. One is, she's built a four-year relationship with the president that is as close or closer than any of her other predecessors have ever had. So when she talks to a foreign leader, they know she's speaking for the president. That's not a benefit that Powell had during his past couple of years.

She's also got the ability to play that kind of inside hand in the bureaucratic games that happen inside any government. When Donald Rumsfeld tries to do an end-run around the State Department and she calls President Bush, I think she's likely to get a different reaction than Powell did. I also think this administration knows that it needs to rebuild or work on the alliances that are central to American foreign policy and have been for a long time. And she's putting together a team there that suggests that working on those alliances is going to be one of her top priorities. So I think the trends are moving in a direction that she could be more influential and even more effective than Powell.

SERWER: Yeah, you know, David, it's interesting to me. And the Democrats have been somewhat critical or very critical of her, saying she's too close to the president. She's a Russian expert. She's got a tough act to follow. Taking a step back, isn't she eminently qualified for this position? And criticizing her to the degree that some are just becomes partisan?

ROTHKOPF: I'm a Democrat. I have to agree with you. I think here's a woman who for four years was national security adviser, who was an aide to the president of the United States during the biggest moment in our foreign policy history and played a key role in terms of orchestrating how we managed the downfall of the Soviet Union and she's done a fairly competent job during the course of those four years. The president's allowed to pick his people. I think that this postponing her nomination and some of this opposition is a little bit of Washington kabuki theater.

LISOVICZ: Despite the fact that she's eminently qualified, David, she's got a lot of work to do. Thomas Friedman (ph) wrote a column a couple days ago that said Europe was the biggest blue state in the world. And Europe is mad at the U.S. for everything, including the weak dollar, which is hurting them collectively, economically. How do you think she's going to handle this? And has she done anything so far indicated that it's on her agenda?

ROTHKOPF: Well, I think that's absolutely right. I would bet that over the course of the next year or two, it's more likely that we have tensions with our allies over economic issues than over issues like Iraq. I think if the dollar keeps sliding, that's a main street issue across Europe and Asia. And it's going to be a real problem building alliances with people who are that angry at us.

The fact that she picked Bob Zellick (ph), who is a former U.S. T.R. and former undersecretary of state for economic affairs to be her deputy, a guy with real strong trans-Atlantic ties and then she picked as her number three guy, former ambassador to NATO, suggests she knows she's got her work cut out for her and that these kind of economic issues are going to have much more prominence in the second term than they did in the first.

CAFFERTY: As a practical matter, though, how much does it really matter whether or not we rebuild these alliances with Europe today or tomorrow or next week or maybe never? Economically, yeah, there are lots of ties between them and us, the dollar, the euro, the trade and all of that. But as far as getting them on board America's foreign policy, does it really matter at this point?

ROTHKOPF: Well, it does because every action has a reaction. And if you alienate them in terms of one aspect of our foreign policy, it's just going to make it that much harder for you on other issues. Obviously when you've got relations, as we do, with the EU on hundreds of levels, some of them are going to be positive and some of them are going to negative at any one time. But a lot of them are thorny.

And frankly if we're going to go and try and achieve objectives like growing our economy or we're going to try and achieve objectives like advancing liberty around the world, which the president talked about yesterday, we can't do it alone. And that means we've got to put more focus on these things, as we, frankly, have for almost all of U.S. modern foreign policy history. This notion of interacting with these alliances and the global community was born after the second World War and it was created by us.

SERWER: David, let me ask you a question now. Leaving Europe aside, the biggest foreign policy issue facing the United States is engaging radical Islam and engaging is a difficult word because basically we're fighting radical Islam. How is she going to engage radical Islam? Are there any carrots? We know about the sticks. What's going to be the strategy?

ROTHKOPF: Well, I think rather than characterizing engaging radical Islam, perhaps you ought to look at it as addressing the systemic and social problems that exist across the middle east. What she's going to have to do is say, the middle east is a broad set of interlocking problems, including Arab and Israeli issues, Iraq, Afghanistan, Iran and nukes, the price of oil, Saudi Arabia and Pakistani stability and so forth, and they're all interlocking. And that we need to come up with an approach that's not some kind of one- button approach. Let's solve Iraq and everything else will get worked out, but that help us to deal with a region that frankly is socially dysfunctional, that's left a lot of its people behind, and that has what alienated them to the point that they are now turning not just against the United States, but against their own societies and systems of law. That's a big job and I think at the end of day, that's the job on which she and this administration are going to be graded on.

LISOVICZ: To that point, Dr. Rice is expected to be doing a lot more traveling than Colin Powell. In fact, as I read it, she has signed up for Tony Blair's conference, Palestinian conference in March.

ROTHKOPF: Well, she's going to have to be out there. She's going to have to build relationships. It's been a while since the secretary of state was seen as somebody who is especially close to the president. And it's been a while since it's been seen that the United States has had a focus other than Iraq. And she's going to have to go out there and she is going to have to demonstrate that that's the case or she's not going to rebuild credibility. Without credibility, the relationships and the discussions are going to be kind of vacuous.

SERWER: All right. We're going to have to leave it there. David Rothkopf is the visiting scholar at the Carnegie Center of International Peace and the author of the upcoming book "Running the World." Thank you for your insights.

ROTHKOPF: Thank you.

SERWER: Coming up after the break, something to Yahoo! about. Find out why those people who talked up the dotcom boom might not have been so wrong after all.

Also ahead, the street sweeper. We'll look at how Eliot Spitzer's move to clean up Wall Street is playing out, both for investors and for him.

And don't miss this, waste paper basketball, without all that picking up after it's over. Try out your pitching finger on our fun site of the week.

(COMMERCIAL BREAK)

LISOVICZ: Now let's take a look at the week's top stories in our "Money Minute." Lower Manhattan is once again the scene of two of the biggest corporate scandal trials. Jury selection under way in former WorldCom chief Bernie Ebbers' trial on charges he engineered $11 billion worth of accounting fraud.

Jury selection is also underway in the retrial of former Tyco CEO Dennis Kozlowski and former Chief Financial Officer Mark Schwarz. Their first trial on charges they looted money from the company ended in a mistrial.

Thanks to falling energy prices, overall consumer prices fell slightly last month. But if you take out the volatile energy and food prices, inflation actually rose by 0.2 percent.

And the sweet ride is over for Krispy Kreme's Scott Livengood. The Krispy Kreme board finally ousted him as the company continues to struggle with Federal securities investigations and allegations of bogus sales figures.

SERWER: Who is that walking with the CEO of Krispy Kreme there? A boost in online advertising gave Yahoo! a shot in the arm this week. The company posted a higher fourth quarter profit than Wall Street was expecting. Yahoo! says more mainstream companies than ever before are now comfortable advertising their products online. But Yahoo! is still struggling to prove that it's more than just a cyber billboard for advertisers and that remains its challenge going forward. Yahoo! shares are trading near their 52-week high. But is it a good bet now? That makes Yahoo! our stock of the week.

You know, Terry Semmell (ph) was named CEO of this company in the spring of 2001. Terry used to work here. Of course we don't hold that against you.

CAFFERTY: It's OK Terry.

SERWER: I don't know if this guy is just a genius or just a master of good timing because when he came there, the stock was in single digits. I think it got down to 4. It's now at 35. I think he has had some credibility on Wall Street. But also, a ship came and took that stock and moved it forward.

LISOVICZ: Do you think timing was also to play because online advertising was something new. Everybody was trying to figure out is this important and I think a lot of big companies like automobile companies, travel, financial services, are advertising online. They think it's very important. And where are they going? Well, they're going to Yahoo! if you look at their results. CAFFERTY: This sort of legitimizes the whole idea of the Internet. Now you've got blue chip companies saying, this is an important place, just like the TV buys, the newspaper buys, the magazine buys. But it happened all a sudden, it seemed like. You couldn't read these kinds of results from any of these companies as recently as even a year ago.

SERWER: It will be interesting to see which companies actually get hurt. I think maybe newspapers are getting hurt the most. The other thing is, it's not a really mature business yet. There's fraud involved. In other words, sometimes advertisers pay companies like Yahoo! by the number of clicks they get. Competitors start hiring people to click on the ads, which makes cost goes up for a company advertising on these sites. So there's a lot of things still sort of -- I've talked to CEOs who encounter this problem. So it's still a little rough and ready, although it clearly is maturing, I think.

LISOVICZ: And Yahoo! raised its financial outlook. EBay didn't, which also came out the same week with its results.

CAFFERTY: We shall see.

SERWER: I think that's right. We shall see. All right, big talk and even bigger money. The Wall Street scandals took the shine off the stock analysts. See if we've learned enough to keep the same problems from coming back again.

And later, don't break that nest egg. Check out the results of a study that looked at whether grandma goes over the line when she steps out to gamble.

Plus, get in the picture. We'll show you how when we visit our fun site of the week. And this week, it's two for one.

(COMMERCIAL BREAK)

MARCIANO: I'm Rob Marciano in the CNN weather center. We'll get back to IN THE MONEY in a moment. I want to tell you the latest on this winter storm that's barreling eastward. Heavy snow is now falling in D.C., Philly and New York City. We show you some shots earlier from Philadelphia, Lincoln Financial field, big game happening tomorrow night. Heavy snow has been falling and it's beginning to pile up at the link but the storm should be gone. They'll just have to dig out before game time tomorrow. Same deal with Pittsburgh, heavy snow, but it will be gone by tomorrow night.

Live pictures for you from New York City, Columbus circle area, where it's been snowing since about noon time at about one to two inches per hour, temperatures right now in the upper teens. Winds will pick up later on today and that will make it even more miserable. Blizzard warnings up for New York City through tomorrow morning and then for Boston tomorrow night.

These are some snow totals out of the Midwest, upwards of 8 and 9 inches and this will pale in comparison to what we're going to see across the northeast as this storm makes its way across the Ohio River valley, over the Appalachian mountains and then taps moisture from the Atlantic Ocean. And as it does so, it will really start to strengthen, 12 to 18 inches of snow likely just north of Baltimore, up through Philly New York, maybe 18 to 24 inches in Boston. Coastal flooding and dangerous wind chills. I'm Rob Marciano in the CNN weather center. Fredricka Whitfield, Jackie Jeras will be up at 2:00 p.m. with more on this storm. Right now though, back to IN THE MONEY.

LISOVICZ: As we mentioned before the break, a double feature is now showing in the Federal court system in lower Manhattan. The stars, formal WorldCom CEO Bernie Ebbers and former Tyco head Dennis Kozlowski, just two of the faces of corporate greed and corruption we've come to know and love? Well, that's a question mark there, over the past couple of years, but there are plenty more. "Newsweek's" Charles Gasparino is the author of a new book, "Blood on the Street." the sensational inside story of how Wall Street analysts duped a generation of investors and he joins us now with a look. Congratulations on the book, Charlie. Good to see you.

CHARLES GASPARINO, AUTHOR, "BLOOD ON THE STREET": Thanks for having me.

LISOVICZ: Before we talk about the contents of your book, let's talk about that drama downtown. Open and shut cases. After all, this is a retrial for Tyco and Bernie Ebbers, certainly a much anticipated trial.

GASPARINO: Right, listen, I never say a case is open and shut. It would seem, though, that in the Tyco case with Kozlowski, they have -- you know, they're retrying it, so they have a second shot. Usually the second shot works, you know what I'm saying. They know where they made mistakes. With Ebbers, you know, listen, he ran a company that was part of the biggest accounting fraud ever. It's going to be hard for him to say he didn't know anything about this stuff.

SERWER: Charlie, taking a step back and looking at this whole picture, you know the old saw, that there's nothing like a bull market to bring out the crooks and nothing like a bear market for them to get caught. I mean, what's the end result here? Has this changed the way Wall Street works, do you think?

GASPARINO: You know, I don't think so. I mean listen, every time there's a bubble and it bursts, and we catch all these alleged criminals, the government comes out with these reforms. And then Wall Street figures a way to get around it. So I mean that's why they hire all those wonderful Harvard graduates from Harvard Law School, to figure out ways to circumvent the law and so we'll see this again. I mean, my book, I basically wrote my book to tell people that this is kind of a reoccurring theme and you just better watch out.

CAFFERTY: New York's attorney general Eliot Spitzer has done with the Wall Street gang a little bit like Rudy Giuliani did with organized crime. He sort of climbed on this white horse, got himself a lot of ink and a lot of press, and some say a lot of political capital. How realistic a factor has he been in making any lasting difference on what goes on down there? GASPARINO: Well, you know, I'll tell you, there's a lot of gray hats in my book and I think Eliot Spitzer is best described as a gray hat. Listen, he's done tremendous work. He's essentially brought all this stuff to light, especially the stuff involving conflicted and fraudulent research. I mean, listen, Arthur Levitt was the SEC chairman while this was going around and did nothing. He talked a good game, but did very little. Eliot Spitzer really showed that there was fraud there.

Now the problem with Eliot is that his prescriptions I think were mostly cosmetic and yeah, he did make a name for himself exposing scandal and fraud and that's really good. But I don't really think that his reforms, you know, really did much more than provide a sort of cosmetic makeover of the situation.

LISOVICZ: Why do you say that? I mean, these were, you know, landmark settlements the biggest brokerages in the nation paid. He's also made inroads in the insurance industry.

GASPARINO: Right.

LISOVICZ: What are examples where you say that really -- it's all really just the same?

GASPARINO: Right. I mean, listen, you got to read the fine print. I mean $1.4 billion was the full, I guess, tally of the research settlement. Yet a lot of it was tax deductible apparently. When I was at "The Wall Street Journal," we ran a couple stories on that. A lot of these reforms really did nothing to break the sort of connection between research and investment banking. I mean, that's the whole conflict. Analysts were being paid to essentially hype ratings because these investment banking deals were going into their salaries. That still exists. So unless you really break that connection between research and investment banking, you're going to have hyped ratings. And all you have to do is look at Fannie Mae. Listen, Wall Street is still promoting Fannie Mae after this huge accounting fraud. And a lot of that, I believe, is because of investment banking.

SERWER: Charlie, I like that point you say, that really no one has any white hats. I guess you're implying that when you say they're gray hats, because either they're bad guys or they're good guys who are using the thing for political capital. Another point I think you're making is about research and you're sort of suggesting, what's the point of it? And I think that's an excellent idea. I mean shouldn't companies simply be able to communicate to investors without having these high-paid individuals to explain it or spin it?

GASPARINO: You see, I agree with that. At some point, I mean, listen, that's what they say about journalists --

CAFFERTY: We'll ignore that.

GASPARINO: It would be nice if the analysts were not conflicted, that somehow they were providing some sort of realistic explanation of the companies they're rating. But you're not going to get that under the current system. The system just has not been changed. The analysts are still being paid essentially by the company. So that filter is not really a filter. That filter is a salesman. And I think the best thing would be for Eliot Spitzer to say, listen, every research report has to put a little disclaimer on the top, write you a big disclaimer, "this is B.S." And that, I think, would help more than anything else.

CAFFERTY: Something we can all relate to. We got Martha Stewart doing time down there in West Virginia. We got Jack Grubman and Henry Blodget, a bunch of other weasels that led us all down this garden path during the height of the stock market bubble and they're all walking around and have dinner in a nice New York restaurant and make a --

GASPARINO: Henry Blodget's a journalist now.

CAFFERTY: Well, even worse. I mean what is the message there? We talk about, they're going to get tough. They're going to clean up the environment, but they haven't done anything. These guys are all running around loose and there was no price extracted for the frauds they perpetrated.

GASPARINO: They were thrown out of the business. You have to give credit to Eliot Spitzer for making sure that Jack Grubman is no longer an analyst and Henry Blodget is no longer an analyst. So they have paid the price. They paid fines. You know, but you're right. You look at the real sort of, you look at the real penalties. They seem not to fit what they were charged with.

CAFFERTY: If you've got $100 million and have to pay a $3 million fine --

SERWER: I'll take that.

CAFFERTY: Meantime, Martha Stewart tells a fib to the prosecutors, not to excuse what she did, but she's doing time. And these -- I don't know. It's just a very mixed message.

GASPARINO: Listen, you gotta talk -- I would talk to Spitzer about that. I believe he let a lot of guys off the hook. I really believe he led Sandy Weil off the hook. Sandy Weil was the - is the chairman of Citigroup and he was involved in one of Grubman's fraudulent ratings. Yet in order to get the global settlement, that $1.4 billion thing that he keeps talking about and these cosmetic reforms, he didn't charge Sandy Weil. So I think that's a question you really should put to Eliot. I tried. He's never really given me a clear answer on that.

LISOVICZ: The one thing that we can be comforted by is that journalism's salaries just don't quite match the tens of millions that people collect downtown on Wall Street. That's right, Charlie Gasparino

CAFFERTY: But they should.

LISOVICZ: "Blood on the Street," the sensational inside story of how Wall Street analysts duped a generation of investors. Thanks for joining us, good luck with the book.

GASPARINO: Thank you.

LISOVICZ: There's more to come here on IN THE MONEY. Up next, shaking hands with the one-armed kid. We'll find out about some new research on what happens when elderly gamblers hit the casinos.

And the SUV of the skies, from mega to mini, size has turned into one of the hottest factors in product design. Allen Wastler of money.com has the long and the short of it.

(COMMERCIAL BREAK)

SERWER: It seems harmless enough. Every couple of weeks, grandma hops a bus to the casino to hit the slot machines and maybe a buffet or two. It's just a hobby, not a problem. Or is it? More and more seniors are rolling the dice and many are at risk of developing a problem, according to a new study out of the University of Pennsylvania. Here with a look is David Oslin, assistant professor of psychiatry at Penn. He is the lead author of the study. Welcome.

DR. DAVID OSLIN, UNIVERSITY OF PENNSYLVANIA: Thanks.

SERWER: One of my favorite bumper stickers down in Florida is "I'm spending my grandchildren's inheritance." What's wrong with these people going to the casino? Some people like to travel to Europe. Some people like to go to Atlantic City. I know it might not be a very attractive image of the old lady with a cigarette putting the quarters in, but you got to let people do what they want, right?

OSLIN: Well, I think what we found was that there was a large segment of the population that were doing exactly that. They were having fun and they were gambling at levels that I actually wouldn't be concerned terribly about. I think the problem here is that we found another segment, about 11 percent that were really gambling at rates that were potentially putting them at harm.

CAFFERTY: You define compulsive gamblers though of any age, any nationality, any sex, any et cetera, et cetera. Did you find a significantly higher number of compulsive or at-risk gamblers among the elderly than you would have found in any other segment of the population that gamble?

OSLIN: Typically, a lot of the literature has suggested that the rates of compulsive gambling are about 1 or 2 percent. And these primary care patients that we surveyed, we found about 11 percent were at risk. I think the concern here, from my perspective, from the elderly is that a lot of these folks are on fixed incomes, just Social Security or other pensions and they may be making decisions that are -- affect other domains of their life, that are not relevant to younger adults.

LISOVICZ: You know, professor, I went to your fine state a few months ago to do a story on how Pennsylvania has approved racinos, racetracks that also have slot machines. And I remember talking to a number of people there and at many racetracks, there are people of a certain age who tend to frequent racetracks. A lot of the older men said that they would now bring their wives so that the two of them could spend the day at the racino. My point is, is that the casino industry really reaches out to them, to lure them in.

OSLIN: Yeah, we actually didn't look at marketing practices. I think it doesn't take too much of a scientist to go to the casino and see that a lot of the clientele there are seniors. There's free buses, free lunches, free drinks, often offered to some of these folks. But, again, for most of these seniors, it actually is a good outlet for them, a place to have some fun. It's the smaller 11 percent that we would be concerned about.

SERWER: David, think it's important for our viewers to know that Jack Cafferty knows when "to hold 'em and knows when to fold 'em." because he comes from Nevada. I just thought I'd just get that in there. I couldn't resist. I'm sorry.

CAFFERTY: It's not Nevada.

SERWER: Nevada. OK, I'll never be allowed in the state, I'm sure. Have they seen any real problems among seniors in terms of, say, bankruptcy or suicide or alcoholism coming out of this problem that you see.

OSLIN: I think there's a lot of anecdotal evidence. We actually did this study because here wasn't a lot of literature and we wanted to first get a handle on the extent of the issue. I was somewhat surprised actually that it was 11 percent who are at this at-risk level. Even in this kind of relatively small sample of 800 people, we did actually see that folks of minorities, folks of mental health problems, such as binge drinking and social cognitive impairment were much more likely to be in this at risk group of problem gamblers and that's somewhat disturbing to us.

CAFFERTY: What are the chances of success at intervention with these people? They are retired. They have worked their entire life. They are likely to tell someone who tries to get in the middle of this, look, I worked all my life. This is my retirement money and if I want to put it in a slot machine, it's nobody's business but my own. But there are economic implications for the rest of us. Is there a way to get at this problem by somehow interceding and getting them in the Gamblers Anonymous or some program that could help alleviate the problem?

OSLIN: Yeah, I think we've got a long ways to go to kind of understand that. I mean there's not actually a lot of interventions that have been developed specifically for older adults. We, again, got into this actually for the very similar concern that are seniors kind of exchanging lottery tickets for their medications? And then, in essence, putting an extra burden on the health care system.

LISOVICZ: Professor, would you see any benefit to a sort of public information campaign what we've seen in the tobacco and spirits industries, public information just that we see all the time, maybe to curb or beware of the dangers or the consequences of too much gambling? OSLIN: It's a good idea. You know, we'd have to think about how well it would be received and how well that it would work. We, again, we don't have much evidence at all of what to do about this issue. We don't have any studies that suggest that prevention measures work in this group or what the level of intervention would be needed to address the issue.

LISOVICZ: Your study is most interesting and hopefully there will be a lot of follow up on it. David Oslin, assistant professor of psychiatry at the University of Pennsylvania, thanks for joining us.

OSLIN: Thank you.

LISOVICZ: Coming up, crunch time, we'll show you a trash can basketball game that's so easy, they even smoosh up the paper for you and we're practically paperless here at IN THE MONEY. Send us an e- mail and tell us what's on your mind. The address, inthemoney@cnn.com.

(COMMERCIAL BREAK)

CAFFERTY: It says here in front of me size has always mattered in the business world. I didn't write that. Someone else did. But bigger may not be better in the 21st century. Joining us to talk about that and to offer us two, not one, but fun sites this week is web master Allen Wastler.

ALLEN WASTLER, MONEY.COM: We had a week sort of extremes here in the last 10 days or so. You had Apple come out with its new iPod, a little teeny, tiny little player OK and a stripped-down Mac, even getting tinier. And then all our cell phones are tiny, tiny, tiny.

CAFFERTY: Mine's smaller, right.

WASTLER: And then, at the other end of the spectrum, we have the Europeans come out with the big honking airplane, OK, the A-380. This bad boy if you shoved a bunch of people in, made everybody sit real close like that, you could fit 840 people in there.

LISOVICZ: And their iPods.

WASTLER: All right. And if you strip it down to your business class, your first class, your economy class, it's more like 550, OK?

CAFFERTY: Somebody said you could park 70 automobiles, 70 on the wings of that airplane, not that you'd do that, but it would hold that many.

WASTLER: It brings up all sorts of questions about, well, in the technological area, Apple -- yeah, size seems to be key here. But the airline industry at this point, you got to ask, is size, are they going the right direction there, that big? Now Richard Branson, whose Virgin Airlines has already ordered six of these bad boys, OK, he says that what he's going to do is sort of change the market a little bit. He's going to put casino tables in the airline so people can gamble. All the old folks can gamble on the airplane now too and also private double beds. During the press conference he said this means there's two ways to get lucky on my planes. Mr. Branson said that. I did not.

CAFFERTY: He's an interesting fellow, isn't he?

WASTLER: He certainly is. But you got to wonder, in the size play, while the technology side, getting smaller does sort of open up more revenue areas, for the airlines do you have the airports that are big enough to land this big honking huge thing?

LISOVICZ: JFK is going to have to do some major renovations.

WASTLER: And there's some airports are saying, yeah, sure, we can land that, this, that and the other. But you haven't talked to the residents and whether or not they want the big honking thing over there. Also, you have to ask, are there that many people that want to board this essentially ocean liner in the sky and just go riding in and go play on it.

SERWER: On the other hand, no one wants a huge iPod. You know, they're on the right track --

WASTLER: When iPod first came out, a lot of songs on it.

CAFFERTY: All right.

LISOVICZ: Twisted.

CAFFERTY: Let's do the fun stuff.

WASTLER: Let's do the important stuff now.

CAFFERTY: What size is it? Very good.

WASTLER: Today, we were talking about wasting time. Think about wasting time. Here we got the garbage pail shoot for you. Everybody does this in the office. Now you can do it.

SERWER: This is the real deal.

WASTLER: The key is, notice there's a fan on the side. You got to play the fan. See the curve there. But if you don't play the fan, OK, you're going to miss. Look at that --

LISOVICZ: 3 for 3.

WASTLER: Play the fan, play the fan, do not miss the fan. There you go.

CAFFERTY: We had marathon sessions of this at channel 4 here in New York City, not on the Internet, but I mean in the new room. And we used to bet sums of money on -- on waste paper basketball.

SERWER: And you were the big winner, right?

CAFFERTY: That's why I'm here.

WASTLER: If that's too much exertion for people and they just want to like space out, we got another fun site where you just - Andy let's grab the hookah pipe and we'll get back and just check it out.

LISOVICZ: How exotic.

SERWER: Oh, little Jefferson Airplane.

WASTLER: All this is on one computer screen. If you touch your mouse it just takes you --

SERWER: down the rabbit hole, dude. Sign me up, you know? Wow.

WASTLRE: All right. There you go. Two ways.

CAFFERTY: Thanks, dude. All right. Coming up next on IN THE MONEY, it's time to hear from you as we read some of your e-mails from the past week. You can send us an e-mail right now, too. We're at inthemoney@CNN.com. Back in a flash.

(COMMERCIAL BREAK)

CAFFERTY: Time to read your answers to our question about whether you're going to be looking for a new job this year. Gloria writes, from Las Vegas, Nevada, Andy.

SERWER: Sorry --

CAFFERTY: I won't be looking for a new job because I'm a teacher and I'll never get the same health benefits on another job. If I were younger though, I'd do like many of the younger teachers here in Vegas do and moonlight in the casinos where you get paid more to bilk the adults of today than educate the leaders of tomorrow. I like it.

Luke writes this, I won't be looking for a job this year, because I'm in the U.S. Air Force. I have guaranteed wages and benefits for at least another 10 years and I also have a job with a purpose. I wonder how many people have that today?

Dan in Phoenix writes, I'll be looking for a new job because my boss is an insufferable control freak who criticizes me constantly. I know to work for someone much more warm and fuzzy. Does Jack need an assistant?

LISOVICZ: That describes Jack perfectly.

SERWER: Bad move.

WASTLER: Cruising for a bruising there.

CAFFERTY: Time now for next week's e-mail question of the week, which is as follows: will the Iraqi elections accomplish anything? Send your answers to inthemoney@cnn.com. We'll read some of them next week. You should also visit our show page at money.com/inthemoney which is where you'll find the address of our two fun sites of this week.

Meantime, thank you for joining us for this edition of the broadcast. Our thanks to CNN correspondent Susan Lisovicz, "Fortune" magazine editor at large Andy Serwer and money.com managing editor Allen Wastler. Join us tomorrow at 3:00 Eastern time, when we'll look at how more Americans are growing dissatisfied with the way things are going at the war on Iraq. That's tomorrow at 3:00 and we hope to 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


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