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Wal-Mart Faces Large Opposition For New York Store; Outlook for Martha Stewart's Company Discussed
Aired February 26, 2005 - 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.
ANDREA KOPPEL, CNN CORRESPONDENT: Hello, I'm Andrea Koppel at the CNN center in Atlanta. IN THE MONEY begins in a moment. But first, a check of the headlines now in the news. Police in Wichita, Kansas, announced today they have arrested the man that they believe is the BTK serial killer. The suspect that you see there on your screen is 59-year-old Dennis Rader. He was taken in to custody during a routine traffic stop, but police aren't saying much else about their case. BTK is linked to 10 killings between 1974 and 1991.
Police and volunteers are searching again today for the 9-year- old Florida girl, Jessica Lunsford. She was last seen in her bedroom three days ago. Police admit they have few clues. There was no forced entry and the house was not disturbed. A $25,000 reward for information is being offered by the Atlanta Braves' pitcher, Mike Hampton and his wife. The couple also live in Homosassa, Florida, where the girl lived. I'm Andrea Koppel at CNN center in Atlanta. We'll have more news for you 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 IN THE MONEY. I'm Jack Cafferty. Coming up on today's program, the face behind the mask. When Iran and America look at each other, they both see a monster. Find out how misconceptions are messing with diplomacy.
Plus, speaking with the enemy. The U.S. is reportedly holding some back channel talks with the insurgents in Iraq. That's according to published reports. We'll see if the talking can work where the fighting so far has not.
And going anywhere fast. Amtrak's in money trouble again. So what's new? This could be the end of the line this time, though. We'll look at why it's so hard to make a profit off big-ticket transportation. Joining me today, a couple of IN THE MONEY veterans, CNN correspondent Susan Lisovicz and "Fortune" magazine editor at large Andy Serwer. So they're the biggest company in the world, the biggest employer in the United States, but they're not going to be hiring anybody in New York City soon. They said no thank you in the big apple for Wal-Mart.
ANDREW SERWER, "FORTUNE" MAGAZINE: Yes. Wal-Mart was going to set up a store in Queens, Jack and apparently there's just too much local opposition and the developer Bernata (ph) said we just don't want to even get involved in this. But here's the irony. New York City has Home Depot. They've got Kmart. They've got Targets. None of them unionized. When Wal-Mart tries to go in, people start raising a raucous. They're the biggest, they're a target, but they haven't been very good at public relations.
SUSAN LISOVICZ, CNN CORRESPONDENT: Yes and which is why you and I did an interview with the company's CEO a month ago, Lee Scott. Wal- Mart recognizes that being number one, being so big, attracts a lot of attention. I think a line was drawn in the sand. It was the biggest opposition to a single store in the city's history.
A couple funny things have happened with Wal-Mart. One is that it reached a critical mass. It used to grow in these back woods areas. But then it started going into bigger cities. The other thing is that China, with all the trade agreements in the last 10 years, so much manufacturing has gone offshore, that it's, again, Wal-Mart has been a target for that and so you're seeing that kind of public opposition now.
CAFFERTY: You mention their image, though, and their image is rooted in a couple of things -- they don't pay very well and they don't offer very many benefits and there are class action lawsuits pending against them for all kind of horrible things that allegedly they've done to employees including locking the doors, forcing people to work off the books, et cetera, et cetera. So their image is not very good but there's a reason.
SERWER: Well, I think that's right. There's definitely truth to that stuff and the company would acknowledge that itself. But you know, they used to just try to deflect and not deal with it, say we don't even care about that stuff. But it's interesting. When you point out Susan, they're actually moving into blue states, New York, California. There's a lot of media there and people are paying attention and the level has gotten raised much much higher. And now they have to cope. And it's very difficult, very difficult for them to change like that.
LISOVICZ: And there's a recognition that you get things cheaply, but something's got to give, right?
CAFFERTY: Sure, there's no free lunch. All right. More to come on this story, maybe, not. Maybe they're out of New York forever and all time.
On to other things, the old feud between Iran and the United States of course has two sides. Whichever one you're on, the other guy doesn't look very good. From Tehran's point of view, the United States is an arrogant bully, obsessed with their small country. And to Washington, Iran is a pipsqueak with a goliath complex and a nuclear game plan. But neither country is as simple of course as the stereotype suggests. And getting a clear view of the other side has never mattered perhaps more than it does right now. So we're going to try to bust some misconceptions and CNN's analyst Ken Pollack is here to help. He's the author of the new book, "The Persian Puzzle, the Conflict Between Iran and America." He's also with the Brookings Institute in Washington, D.C. Ken, nice to see you. KEN POLLACK, SABAN CENTER FOR MIDDLE EAST POLICY: Thanks Jack. Good to be here.
CAFFERTY: So the president goes to Europe this week and he says we absolutely, categorically do not have any plans to attack Iran. Having said that, all options are on the table. Can you translate what he meant by that because I'm still scratching my head a little bit.
POLLACK: I think what the president was trying to say is I'm not planning to attack Iran now and I'm not really thinking about attacking Iran tomorrow, but in term of kind of general theory, sure I might want to do that at sometime in the future but it won't be soon.
LISOVICZ: Ken, I'm curious. Is there either side that has an upper hand? Obviously, the United States is stretched thin with its operations in Iraq and Afghanistan. The president was in Europe to mend fences if you will with our longtime allies. Diplomacy has to be the only way it would seem, rather than military options. Or do you disagree?
POLLACK: I absolutely agree with that, Susan. I'll put it this way, I think right now -- to get to your first question, right now, you'd have to say that the Iranians have a bit of an upper hand. They are progress on their nuclear program. They're doing pretty much what they want to. The status quo favors them and the status quo is always a big advantage. What the United States has going for us is that right now we've got two things. One, the Iranians are very, very concerned about their economy. Not in the short term. At the moment, oil prices are high. They're not doing too badly. Over the longer term, they recognize they have a huge problem. They have an enormous number of young people. They've got a million new people coming into the work force every year and they've got an economy that's creating about 400,000 jobs a year. That's creating tremendous pressure on the government, undermining the popularity of the government.
In addition, you've now got European countries who, for the first time in 12 or 15 years, are finally waking up to the fact that the Iranians really are trying to acquire a nuclear weapons capability and that is also giving the United States some leverage, because finally the Europeans are willing to come to us and say, OK, we take the Iranians seriously, let's figure out a way to deal with them.
SERWER: Ken, I want to talk about understanding Iran. We have a long history of misunderstanding that country. The CIA obviously totally missed the boat with the overthrow of the shah years ago. What about this theory that Iran was the birthplace of fundamentalist Islam with Ayatollah Khomeini and now today you are seeing the death of fundamentalist Islam with all these new young people who are more secular. Any truth to that?
POLLACK: I think there is some truth to both of those statements. Obviously you can't say that it is truly the birthplace. There are Islamic philosophers who go back to other parts of the Arab world before Iran. But it is certainly the case that the Ayatollah Khomeini leading the Islamic revolution in Iran in 1978 fundamentally changed the Middle East. And the bin Ladens of the world, the Zawaris of the world, even though in many cases they hate Shia and of course Iran is mostly a Shia nation and the Ayatollah was a Shia, they all do look to that model. They all do look to exactly what Khomeini did and say, "that's what we want to do in our homeland." So there is that element. And you're also right, that as many of the senior ayatollahs who broke with Khomeini warned at the time of the revolution, it was a mistake for the clerics to take over the reins of government because all that would do is turn the people against religion and you are seeing that right now in Iran. It is one of the biggest problems that this regime is grappling with, the fact that its mismanagement of Iran's political and economic systems is turning people away from Islam, which of course was the whole goal of the revolution.
CAFFERTY: One of the options that's been suggested as a way to deal with the country Ken, is to simply fertilize the seeds of discontent inside Iran and wait for some sort of revolution to foment against the mullahs that run the country. Barring that, the other two options seem to be some sort of sanctions program. Yet you've got Russia saying we fully intend to continue to help Iran with their nuclear ambitions or some sort of military option. How do you see the future of the relationship between Iran and not just the United States, but the rest of the western world unfolding here?
POLLACK: I actually -- I take some real heart from the president's most recent trip. I think you need to give the Bush administration credit. For the first time, they are saying exactly the right thing. They went over to Europe, the president, Condi, Don Rumsfeld, they listened or at least pretended to listen, which is all that you need in many cases in diplomacy and they're saying we want to take into account what the Europeans are saying.
That creates the potential for the U.S. and Europe to work together to lay out for the Iranians two very different paths and again it's still going to take a lot of work to get the Bush administration to accept this. But what the Europeans are basically saying is look, we say to the Iranians you got two different ways to go. You can keep trying to develop nuclear weapons, support terrorism. If that is the case, we will sanction you. We will put ever greater pressure on this fragile economy you have that you're so worried about.
Or you can do the right thing and under that circumstance, we will reward you. We'll bring you into the WTO. We'll give you aid, trade, investment, everything you need to stabilize your economy. I think that would be a very, very powerful set of incentives for the Iranians if we can get over our own hurdles and do it.
In the meantime, a nuclear Iran, how dangerous is that, with this unrest among the people, with it possibly unstable government, how do you assess it?
POLLACK: Honestly, Susan, that's the $64,000 question and we just don't know the answer to it. I'll put it this way, from my own perspective, I think the world would be a much better place if Iran did not have nuclear weapons. This is a very aggressive, anti- American regime that has pursued policies with supporting terrorism that has used terrorism against the U.S., has tried to destabilize or overthrow very stable governments in the Middle East. If these guys get nuclear weapons, we're just not certain what they would do.
That said, I think you also need to moderate that. I am not nearly as concerned as the Iranians getting nuclear weapon as I had with someone like Saddam Hussein because the Iranians, believe it or not, have actually, even though they are anti-American, aggressive, and even murderous, they've shown a degree of restraint and a degree of rationality and prudence in their decision-making that you don't necessarily see with someone like a Saddam Hussein or a Kim Jong-Il for that matter.
CAFFERTY: So there is some small comfort to be taken from the situation in Iran.
POLLACK: Small comfort.
CAFFERTY: Ken, thanks. It's nice to have you with us. We got to leave it there. Ken Pollack wrote "The Persian Puzzle," which is all about the United States and Iran. He's a CNN analyst and he's with the Saban Center for Middle East Studies at the Brookings Institute. Good to see you. Thank you.
POLLACK: Thank you Jack.
CAFFERTY: All right. When we come back, waging war, talking peace. We'll hear about a report of secret moves to shut down Iraq's insurgents with conversation. Plus you can forget that recipe for a cake with a file in it. Martha Stewart is due to get out of the joint next weekend. See how that's playing on Wall Street.
Also ahead, still working on the railroad. Amtrak's in deep financial trouble. Where have I heard this before? This time, though it might not get out of the hole. Find out why America's train system isn't working despite those ticket prices.
(COMMERCIAL BREAK)
CAFFERTY: "We will not negotiate with terrorists." That's been the Bush administration mantra throughout the war on terror and the war in Iraq. This week, "Time" magazine has a report that claims that U.S. officials have been holding back channel talks with some insurgent negotiators. The Pentagon says there are no talks and no negotiations. So what's really going on? Let's try to find out. Here with us today, "Time" magazine State Department correspondent Elaine Shannon. She is one of the writers of that story that suggests that there are some talks going on. Elaine, welcome to the broadcast. Nice to have you with us.
ELAINE SHANNON, TIME MAGAZINE: Thank you.
CAFFERTY: So somebody's not telling the truth here. The Pentagon says absolutely not. It's not happening. I guess the question is, does "Time" stand by its story? I assume you do?
SHANNON: We do and we called both the Pentagon and the State Department before that story ran. The State Department said we don't negotiate with terrorists as you just heard. But they said we do talk to disgruntled Baathists, disgruntled tribal leaders, Sunnis, people who boycotted the elections. So talk, negotiate --
CAFFERTY: Semantics.
SHANNON: Nationalist, terrorist. I think it's clear from the people that (INAUDIBLE) our Baghdad bureau chief talked to, people, some of whom are on the record, is that the military intelligence, military civil affairs, and some diplomats were talking to some nationalists, who were under arms --
LISOVICZ: OK. So Elaine --
SHANNON: Not hard core Zarqawi style terrorists.
LISOVICZ: If there are talks going on right now, Elaine, how big of a deal is that given the administration's prior statements?
SHANNON: Well, it's interesting, and if you want to know what's going on the ground in Iraq, I think you should read the story. It's not -- the story says it is too soon for optimism. We don't know where talking to each other is going to lead, but it does describe a scene in which some people from the insurgency come into the green zone. They go to a room controlled by the U.S. military. U.S. military people ask them, listen to their grievances and then ask them for names of people, leaders in the insurgency and they're try to get information about who is important in the insurgency. Who is influential, how big is it? And also trying to hear out these folks to see if there's any chance that they might come in from the cold.
SERWER: Elaine, are we misreading the Baathists or are there misconceptions in the sense that perhaps they could ultimately be more friendly than the Shia in the sense that they'd be looking for a secular government?
SHANNON: Well, I don't think it's our choice. But even before the Iraqi election, there were people -- it's stated, other places who were saying, you just wait, the Sunnis, some of them will come in, because a lot of them do not want to fight forever. They don't want to fight today. They want to have a stable community and they want to have some power and we think -- at least we hope -- that the Shias will give them seats at the table. And so there may be elements that will come in and that will lay down their arms. The interesting model in this story is that some people are modeling themselves on the IRA and Sinn Fein, the above-ground arm of the IRA.
CAFFERTY: Freedom-fighter in other words that kind of thing?
SHANNON: Yes and as somebody from the Pentagon pointed out to my colleague, Doug Waller, U.S. talked to certain Italians during World War II to try to split them off from Hitler.
CAFFERTY: Sure.
SHANNON: The U.S. talked to China a lot, tried to split it off from the Soviet Union during the cold war. Here in our cities, policemen talk to gang members. The FBI talks to hate groups and now they're talking to radical Islamists, if they can find them to try to figure out who's going on, maybe get some information, maybe get somebody who's a rival of somebody else to tell them something in order to save lives.
CAFFERTY: I don't mean to interrupt you, but why do you suppose the Pentagon is so quick and so adamant to deny that any of this is going on? I mean it seems to me that tactically it's probably not a bad idea and particularly if you can get people to come in, give you information that might advance the effort. Why is the Pentagon so reluctant to say, yeah, we're having -- we're talking to people, I mean, it happens?
SHANNON: Well, that's exactly what they said to Doug Waller. And so I don't know who the Pentagon is. There are a lot of folks over there. There are people I talked to who said this isn't happening. But I was absolutely convinced by Nick Ware's (p) reporting, including the people from both sides that he talked to, pretty much on the record, and then he went back over what he was going to say with them and they said yeah, that's right.
LISOVICZ: Elaine what can you tell us about the insurgents? Is it a cohesive group or is it a number of different forces, all with different agendas?
SHANNON: That's what -- the latter is what the U.S. people who are focusing on this seem to think, that there are thousands of people who are under arms. Some are under arms all the time. Some are under arms some of the time. Some people specialize in logistics or would let an armed group use their property to hide arms in, things like that. Various numbers are given. The DIA and CIA numbers differ, according to Rumsfeld's recent testimony. And those numbers are classified he said, but the Iraqi intelligence, we are told, estimates there are 40,000 men under arms all the time and another 200,000 under arms sometime or helping in some way, so there have got to be factions and there have got to be rivalries.
SERWER: Elaine, just 10 seconds, the percentage that are foreigners, any way of figuring that out?
SHANNON: I'm sure everybody's trying and I think that there's not a hard answer. How would there be? But I think it's relatively small and a small group, as we have seen, can do immense damage and mess up everything. But the good news is at least according to some of our sources both in Baghdad and here, is that some Iraqis who are sympathetic to the nationalist insurgency are really angry at the foreign fighters because they're so murderous. They are killing so many Iraqis and they're coming in and giving information.
SERWER: It sounds like a fascinating story. Elaine Shannon is the State Department correspondent with "Time" magazine. Thanks.
Coming up after the back, you can bet she packs a neat suitcase. Martha Stewart's on schedule to get out of prison next week. Find out if her old company's welcoming her back. Plus, see what happens when you cross a coffee table with a cargo plane. We'll look at the business genius of Howard Hughes, creating of the spruce goose.
And the bunnies are back -- in honor of this weekend's Academy Awards, we'll revisit a fun site favorite.
(COMMERCIAL BREAK)
LISOVICZ: Now let's take a look at the week's top stories in our money minute. Higher oil prices hit the markets hard this week. Colder temperatures one reason crude oil jumped over the $50 a barrel level and hit a four-month high. Oil prices are also about 50 percent higher than where they were a year ago. You'll see it in your heating bill.
Former Enron CEO Ken Lay and Chairman Jeff Skilling will finally go to trial in January of next year. Lay and Skilling will be tried in Federal court, along with former chief accounting officer Richard Causey. Skilling and Causey each face dozen of charges of conspiracy, insider trading and fraud. Lay is facing only a handful of charges for conspiracy and fraud.
And if you're a senior citizen, still working -- join the club! The Labor Department says the number of employed Americans who are 75 and older grew from about 650,000 in 1994 to about 1 million last year. That number is expected to rise as the baby boom generation ages.
SERWER: All right, Martha Stewart gets out of prison this coming week. Some people are only interested in her upcoming starring role on a new version of "The Apprentice." But Wall Street is also looking at the future of her company, Martha Stewart Living Omnimedia. Shares of the company's stock have almost tripled over the past year. And even a weak quarterly earnings report on Wednesday didn't slow things down. And Martha is now battling to return as CEO. That makes Martha Stewart Living Omnimedia our stock of the week. There are a couple of unassailable facts here. This woman is immensely popular. We can't get enough information about her.
LISOVICZ: She's controversial.
SERWER: She's controversial. The other unassailable fact is the stock of her company is not connect to reality. It's not at all. The company reported $7 million loss in the latest quarter. There are a lot of questions about the magazine. She doesn't have a TV show. We don't know how it's going to do. It's probably going to be a hit, but I would not chase this stock at $36.
CAFFERTY: There's a huge question, whether she'll even be able to come back and run it. There's still a pending insider trading investigation against her at the SEC and one of the things they've said is huh-uh, you're not going to be the CEO. You're not going to be the president. You're not going to have anything to do with running the place. Now technically on paper, that's one thing. She's Martha Stewart, what, she's billed as a senior creative -- SERWER: ... creative --
CAFFERTY: But I mean there is technically some question whether or not she's even going to be involved in the corner office.
LISOVICZ: The fact is, she's largest single private shareholder so she's always going to have an impact on the company. But her comeback is so different from other comebacks. Like say Mike Milliken who also went to prison, right? Mike Milliken has redeemed himself, big philanthropist, working quietly behind the scenes. Martha Stewart, I would bet you, is going to be an enormous success because she is good at what she does.
But it goes back to your original question, when you are tied to the fate of a single person, long term, it's a problem. And it's certainly played out in that stock. Coming back now -- you know, the same day that the company reported those losses, hit a 52-week high, the stock.
ANDY SERWER, "FORTUNE" MAGAZINE: The magazine is getting long in the tooth, there's no question about that and hasn't been doing well. There's a lot of new competition out there. I think the TV show is going to be a hit. And even if the SEC cuts a deal with her, Jack, and lets her become CEO, she won't be CEO for a couple years. She's going to have to face some sort of probation period. I believe that the show will be a hit. I really do. Donald Trump doesn't have much of a personality either and I don't think Martha does.
CAFFERTY: Donald Trump hasn't gone off to Federal prison for lying to authorities. He's not under indictment. What is this a role model for young people to want to grow up and be like Martha Stewart, so you can form your own company, reach a certain level of success, become arrogant to the point that you don't have to account to anybody in the outside world in terms of regulators and people in law enforcement. You can lie to authorities with impunity, but if you get caught, you can go to prison for five months. Then you can come home and be under house arrest for five months.
LISOVICZ: And be even more successful.
CAFFERTY: Then you can be under probation. But I mean...
SERWER: It's pretty obvious, Jack, that she's not going to invite you over during her five-month probation period in her home.
LISOVICZ: It's funny because I went to the press conference when they unveiled that Mark Burnett new series and I asked that very question, what kind of -- she's in prison.
CAFFERTY: What's the message here?
LISOVICZ: Yes. And they said -- this is the response. There are millions of Americans who feel that Martha got a raw deal.
SERWER: Now, look, this is the case in point. We're going on way too long because we're talking about Martha Stewart. We have to leave this thing alone.
Coming up on IN THE MONEY, lines of the times. With so many people riding trains, you think something like Amtrak would be a gold mine. Find out why it can be more like a money pit.
Also ahead, mogul air, Howard Hughes made a fortune off his turbulent relationship with TWA. We'll look at the business man who inspired the Oscar-nominated hit "The Aviator."
And a price war with Chinese video pirates. Money.com's Allen Wastler will tell us how Warner Brothers is using a new trick to shake up the market and bootleg DVDs.
(COMMERCIAL BREAK)
ANDREA KOPPEL, CNN CORRESPONDENT: Hello, I'm Andrea Koppel at CNN center in Atlanta. IN THE MONEY continues in a moment. But first, a check of the headlines now in the news. A string of killings in the Midwest may have been solved, finally, 30 years after the first crime. Authorities in Wichita, Kansas, have arrested 59-year-old Dennis Rader as the suspect in the so-called BTK murders. That stands for bind, torture and kill, the method used on most of the victims. We'll have a live report with details at the top of the hour.
And Palestinian and Israel authorities today arrested at least seven men they believe were involved in last night's Tel Aviv nightclub bombing. The suicide attack killed four people. Authorities are still looking into claims of responsibility for the blast. We'll have a live update for you again, at the top of the hour. And I'll have all the rest of the day's top stories on CNN LIVE SATURDAY at 2:00 Eastern. We hope you'll be there. IN THE MONEY continues right now.
LISOVICZ: President Bush announced earlier this month that the White House is cutting Federal subsidies for financially strapped Amtrak later this year. The move will most likely drive Amtrak into bankruptcy. The Bush administration hopes the states will step up and create a more efficient, regionalized rail system. Will they and will it work? Here with some answers, Joseph Vranich, author of "End of the Line." He's also a former spokesperson for Amtrak. Welcome to the program.
JOSEPH VRANICH, AUTHOR, "END OF THE LINE": Hi. Glad to be here.
LISOVICZ: We're glad that you're here, too. We heard the song before. So just for the record, quickly, what are the biggest problems with Amtrak and is it really that dire?
VRANICH: It's very dire. Amtrak is losing so much money it's incredible. These long distance trains that travel across the country, they're so expensive. It's actually cheaper for the government to give those passengers free airline tickets than it is to keep their trains going. So Amtrak has bad trains and they have good trains. What I think the Bush administration is trying to do is cause a major restructuring, so that we can get rid of the ones that are truly hopeless, and resuscitate and improve the ones that we really need, like New York, Washington, LA, San Diego. Those shorter distance routes, that's where we need the trains and so we need a major shakeup here when it come to Amtrak.
CAFFERTY: What is it the Europeans know about rail travel that we can't seem to figure out over here? They don't seem to have these troubles.
VRANICH: Actually, it's an interesting question. Europeans are having the same troubles we are --
CAFFERTY: I withdraw the question. No, go ahead, I'm sorry.
VRANICH: No, that's OK. The Amtrak-style trains in Europe are actually declining in popularity. It's the commuter trains, like the ones that run into New York, Chicago, so forth where there are big increases. And why is this? It's because discount air travel is having same effect in Europe as it's having in the United States. So if we want to learn from Europe, we will begin to discontinue the long distance trains and, once again, beef up the short distance trains, which is where the market is now for trains.
SERWER: Joseph, I just want to first of all compliment you on your tie. It looks a lot like mine. It's very good stuff there. You know, Amtrak is in 48 states. I think it's not in South Dakota and in Wyoming if I'm correct. Where's some of the real boondoggles? My understanding is the train in Texas, 400 people ride the thing the whole year, things like that. Where are some of the real jokes?
VRANICH: Well, the biggest jokes are, for example, there's a train running from Orlando to -- all the way to Los Angeles. And it's so few people riding it that what it amounts to is the entire state of Texas, fewer than 400 people a day ride Amtrak.
SERWER: A day, yeah.
VRANICH: A day. And more people go through one Wal-Mart in half an hour than ride Amtrak in the whole state. Meanwhile -- here's the serious problem -- Amtrak puts million and millions of dollars into useless routes like that and yet they under invest in key facilities like the railroad tunnels in New York that Amtrak owns that handle thousands and thousands of commuters every hour. So it's a crazy system. No company would operate the way Amtrak operates.
LISOVICZ: And it is insane, obviously. Those trains had a place, those trains from, say, Florida to LA, had a place at one time...
SERWER: Before the airplane.
LISOVICZ: Before the airplane, decades ago. So what should be done? You have a unique perspective, having worked for Amtrak. Should it be privatized? Should it be regionalized? Should the states step in? Should the Federal government take over? What's your assessment?
VRANICH: Well, my recommendation is that what we do is devolve trains to regional authorities. For example, the Boston, New York, Washington trains would be much better off being run by a regional authority concerned about that area. The way to do that -- I use the word "privatize" kind of carefully because what I talk about is public/private partnerships, where the government still will need to subsidize trains, because the trains are going to continue to lose money. But as soon as we bring competition in, competition is great. It injects efficiencies. We can have trains out there carrying more people, but at a lower cost to the taxpayer so that means the bad trains go away. The good trains are run by other people, more responsible, more innovative, more imaginative, and we can get better trains on the lines where we really need them in the United States.
CAFFERTY: Is the way to get to the place you're talking about to allow Amtrak to simply go under?
VRANICH: I believe Amtrak eventually needs to disappear. I'm not in favor of action that would cause something for them to disappear immediately, because that could cause a kind of crisis that we want to stay away from. So while I support the Bush administration's desire to replace Amtrak with something better, my desire is to go just a little bit slower in making sure that the Surface Transportation Board, Federal agency, is funded properly to keep the commuter trains running in the states where we really need the trains and the Bush administration is saying, look, we're going to do the right thing. We're going to empower the Surface Transportation Board to do the right thing. And I think the Bush administration is very much on the right track and Amtrak is extremely on the wrong track.
LISOVICZ: We can certainly hope that the administration will work to make some big changes in Amtrak. Joseph Vranich, former Amtrak spokesperson, author of "End of the Line." Thanks so much for joining us.
VRANICH: Glad to be here, thank you.
LISOVICZ: Lots more to come here on IN THE MONEY. Up next, business gets bigger than life with a Howard Hughes biopic up for an Oscar. We'll tell you about the real guy and how he made his money.
And rascally rabbits and Hollywood roles. Find out how these bunnies are cutting your favorite flicks down to 30 seconds flat.
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SERWER: "The Aviator" is a leading contender at this weekend's Oscars, nominated for 11 Academy Awards, including best picture. And no matter how many trophies it takes home at the end of the night, the success of the film has put the career and storied personal life of Howard Hughes back in the spotlight. Pat Broeske is the co-author of "Howard Hughes, the Untold Story." She joins us now with a closer look at this legendary tycoon. Pat, welcome. Let me ask you right off the bat, aviation, Hollywood, he did so many things. What's the common thread in his career?
PAT BROESKE, AUTHOR, "HOWARD HUGHES, THE UNTOLD STORY": The common thread is Howard Hughes' passion, Howard Hughes' passion and his great obsession for pushing the boundaries, for pushing the boundaries in the sky, for pushing the boundaries in technology, in the desert sands out towards Las Vegas, on the movie screen.
LISOVICZ: Pat, I saw "The Aviator." I thought it was a terrific movie but it also taught me so many things that I didn't know about the man if it's accurate. How would you put him in terms of aviation alone, is he up there with Lindbergh? Just put it in perspective for us.
BROESKE: Well, you know, Howard Hughes actually always felt that he was in the shadow of Charles Lindbergh, which is why he did his own around the world flight in 1938 besting Charles Lindbergh's records. But really, I think in the pantheon of aviation, Howard Hughes is really best known for his audacity, for the spruce goose, which really more or less symbolizes kind of everything that was, you know Howard's passion and, you know, "never say die" spirit. Don't forget, he's also the man who took over TWA and pushed TWA into the jet age. At the time Howard Hughes ran TWA coast-to-coast flights, you know, they were not a fact of everyday life and it was under Hughes that those things happened.
CAFFERTY: What caused him to simply drop out? He had conquered Hollywood. He had conquered business. He'd conquered aviation and then one day he was holed up on the top floor of the Desert Inn in Las Vegas, never to be seen again except by his closest confidants. Bob Mayhew (ph) was running the Vegas empire. His business interests had changed a lot by that time. What transformed him from this outgoing and larger than life man's man, into this -- this recluse, this paranoid, frightened, withdrawn human being, for the last several years of his life?
BROESKE: You know, the motion picture alludes to it, but never really completely explains what happened to Hughes. And, in fact, he suffered from something that was not diagnosed in his lifetime, so he really didn't understand what was going on. He suffered from something called OCD, or obsessive compulsive disorder. And it really is a disorder that they study today you know that people can get help for. But at the time, Hughes did not know what was wrong with him. And so as a result of thinking sometimes that he was cracking up, that there was something wrong with him, he kind of formed his own asylum, if you will. That's one of the reasons he would close himself away from the world. And toward the end in addition to his OCD, he was involved in some very, you know, some serious dependence on medications, on drugs, and that was as a result of a 1946 plane crash he was in, which is spectacularly recreated in the movie.
SERWER: Pat, leaving aside this later period in his life where he sort of lost it, does he remind you of anyone today or anyone else in American history, any other entrepreneur or businessman or leader?
BROESKE: I have from time to time seen him compared to Bill Gates on some levels. However, Bill Gates never that, I know of --
SERWER: Not as flamboyant, come on.
BROESKE: Yeah, he's -- you can fall asleep listening to and talking with Bill Gates, I think. Whereas Howard Hughes was enigmatic. He was colorful. You never knew what was going to happen with Howard Hughes. But also, he was an adventurer. And Bill Gates never climbed in the cockpit of an airplane and set a land speed record. And so in many ways, Hughes is, he's an anomaly. He's an American original. There really is no one quite like Howard Hughes.
LISOVICZ: Pat, would Howard Hughes be able to achieve all that in the times we live in now? He really was putting his family's company at risk, to say the least, to do some of these adventures. He was spending just money hand over fist on his films, on his aviation projects. With all the scrutiny that we have with the media now, do you think that would have inhibited his exploits?
BROESKE: That is a great point that you make. I think it would be very tough for Howard Hughes to lead the kind of life today that he led. However, just think, what if Howard Hughes had gotten help for his obsessive compulsive disorder? What if Howard Hughes had been able to take advantage of the computer age, which really -- it was just on the horizon when Howard Hughes passed away because his mind kind of operate like a computer. So I sometimes wonder what would have happened, you know if Hughes had been able to take advantage of certain things. Because what a mind. What -- you know, an unequaled mind.
LISOVICZ: Well, he's a fascinating figure, no doubt and you chronicle him in your book "Howard Hughes, The Untold Story." Pat Broeske, thanks so much for joining us.
BROESKE: My pleasure.
LISOVICZ: There's more to come on IN THE MONEY. Up next, beating the bootleggers by thinking like one. Find out how Warner Brothers is taking on video pirates at the cash register. If you've got something to say about a story on the show, don't keep it to yourself. Drop us a line at this e-mail address, inthemoney@cnn.com.
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CAFFERTY: The DVD market of course is one of Hollywood's most profitable cash cows. But movie piracy still cuts deeply into profits, especially in places like China. Allen Wastler is here now with a look at a new strategy to fight piracy as well as the fun site of the week. Huge problem, lots and lots of money.
ALLEN WASTLER, MONEY.COM: Huge problem. They've tried all sorts of ways. You send the police in. You sue them and do all this stuff. Well, now Warner Brothers, corporate cousins of ours, trying something a little bit different. What they're doing is they're going to release some of their hottest 125 titles, put them into the Chinese market, but price them down from where they usually do, OK, take a little hit so they're sort of price competitive with the pirated copies that are out there. It will be about $2.65 a DVD and it's a stripped down one. It doesn't get all the little extras.
SERWER: Can I get one of those?
WASTLER: Go to China.
SERWER: The fly over, the cost of the ticket --
WASTLER: Pirated copies typically cost about a buck. The difference is, one of the main ways that they do the piracy is they take the little video camera into --
CAFFERTY: The quality would be much better.
WASTLER: You're not going to get the guy standing up, going to get popcorn in the middle of the DVD and the noise and what not and they're hoping that that will put them on a price competitive level.
SERWER: The same thing happened with the music business. They had to lower prices. You can buy music online. It's cheaper to fight piracy, right?
WASTLER: What I call the Napster effect. Once it became easy to download, so that any dummy could do it and you're only paying a buck a song, it sort of took it away from the old peer to peer basis thing (ph). Now here's the danger with that. Over in China, if you make the legit DVDs available, well then maybe they -- oh, so I don't have to go into the movie theater anymore. Now I can just burn it straight and then I'll give you a good copy for a buck and you're still back where you started from. So we'll see how it works. All those things sort of trial and error. It's a new -- brave new sector.
CAFFERTY: Let's go to my favorite part of this program.
WASTLER: We got the Oscars coming up. So we said, let's go back to the bunnies. Jack Nicholson, you think of him with Oscars, right, popular favorite. Here you go folks, "The Shining" by the bunnies.
WASTLER: It's so much quicker and easier.
SERWER: It's quicker. It wasn't quite as scary.
CAFFERTY: All right, thanks, Allen. Come 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. We're inthemoney@cnn.com.
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CAFFERTY: Time now to read your answers to our question of the week about whether you think the drug companies are more interested in profit or healing. Vicky wrote, the drug companies seem to be rushing to sell us drugs before they are completely tested. Just listen to the TV ads. They warn about how each new wonder drug can cause everything from internal bleeding to breathing loss.
Nicole wrote, profit is not the only motive for the drug companies. Remember that they spend a lot of money on research knowing full well that most of their projects will never make a marketable product or profit. They also have to be able to pay to get the best research chemists to continue working for them. And my favorite is this from Richard who wrote, I don't know if profits are the only goal, but I do know that I use anti-depressants. They make me impotent, so now I have to buy Viagra. Does this make any sense?" No, Richard it probably doesn't.
SERWER: No, not really.
CAFFERTY: But we hope you're feeling better. Now for next week's e-mail question of the week. It's this, what do you think is the best way for the United States to deal with the insurgents in Iraq? Send your answers to inthemoney@CNN.com. And you should also visit our show page at money.com/inthemoney which is where you'll find the address for our fun site of the week, oh those bunnies. Thanks for joining us for this edition of program. My 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 talk about the U.S. relationship with Europe and whether European dislike for your President Bush is really the biggest issue dividing us. That's tomorrow, 3:00 Eastern time. Hope to see you then.
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Aired February 26, 2005 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDREA KOPPEL, CNN CORRESPONDENT: Hello, I'm Andrea Koppel at the CNN center in Atlanta. IN THE MONEY begins in a moment. But first, a check of the headlines now in the news. Police in Wichita, Kansas, announced today they have arrested the man that they believe is the BTK serial killer. The suspect that you see there on your screen is 59-year-old Dennis Rader. He was taken in to custody during a routine traffic stop, but police aren't saying much else about their case. BTK is linked to 10 killings between 1974 and 1991.
Police and volunteers are searching again today for the 9-year- old Florida girl, Jessica Lunsford. She was last seen in her bedroom three days ago. Police admit they have few clues. There was no forced entry and the house was not disturbed. A $25,000 reward for information is being offered by the Atlanta Braves' pitcher, Mike Hampton and his wife. The couple also live in Homosassa, Florida, where the girl lived. I'm Andrea Koppel at CNN center in Atlanta. We'll have more news for you 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 IN THE MONEY. I'm Jack Cafferty. Coming up on today's program, the face behind the mask. When Iran and America look at each other, they both see a monster. Find out how misconceptions are messing with diplomacy.
Plus, speaking with the enemy. The U.S. is reportedly holding some back channel talks with the insurgents in Iraq. That's according to published reports. We'll see if the talking can work where the fighting so far has not.
And going anywhere fast. Amtrak's in money trouble again. So what's new? This could be the end of the line this time, though. We'll look at why it's so hard to make a profit off big-ticket transportation. Joining me today, a couple of IN THE MONEY veterans, CNN correspondent Susan Lisovicz and "Fortune" magazine editor at large Andy Serwer. So they're the biggest company in the world, the biggest employer in the United States, but they're not going to be hiring anybody in New York City soon. They said no thank you in the big apple for Wal-Mart.
ANDREW SERWER, "FORTUNE" MAGAZINE: Yes. Wal-Mart was going to set up a store in Queens, Jack and apparently there's just too much local opposition and the developer Bernata (ph) said we just don't want to even get involved in this. But here's the irony. New York City has Home Depot. They've got Kmart. They've got Targets. None of them unionized. When Wal-Mart tries to go in, people start raising a raucous. They're the biggest, they're a target, but they haven't been very good at public relations.
SUSAN LISOVICZ, CNN CORRESPONDENT: Yes and which is why you and I did an interview with the company's CEO a month ago, Lee Scott. Wal- Mart recognizes that being number one, being so big, attracts a lot of attention. I think a line was drawn in the sand. It was the biggest opposition to a single store in the city's history.
A couple funny things have happened with Wal-Mart. One is that it reached a critical mass. It used to grow in these back woods areas. But then it started going into bigger cities. The other thing is that China, with all the trade agreements in the last 10 years, so much manufacturing has gone offshore, that it's, again, Wal-Mart has been a target for that and so you're seeing that kind of public opposition now.
CAFFERTY: You mention their image, though, and their image is rooted in a couple of things -- they don't pay very well and they don't offer very many benefits and there are class action lawsuits pending against them for all kind of horrible things that allegedly they've done to employees including locking the doors, forcing people to work off the books, et cetera, et cetera. So their image is not very good but there's a reason.
SERWER: Well, I think that's right. There's definitely truth to that stuff and the company would acknowledge that itself. But you know, they used to just try to deflect and not deal with it, say we don't even care about that stuff. But it's interesting. When you point out Susan, they're actually moving into blue states, New York, California. There's a lot of media there and people are paying attention and the level has gotten raised much much higher. And now they have to cope. And it's very difficult, very difficult for them to change like that.
LISOVICZ: And there's a recognition that you get things cheaply, but something's got to give, right?
CAFFERTY: Sure, there's no free lunch. All right. More to come on this story, maybe, not. Maybe they're out of New York forever and all time.
On to other things, the old feud between Iran and the United States of course has two sides. Whichever one you're on, the other guy doesn't look very good. From Tehran's point of view, the United States is an arrogant bully, obsessed with their small country. And to Washington, Iran is a pipsqueak with a goliath complex and a nuclear game plan. But neither country is as simple of course as the stereotype suggests. And getting a clear view of the other side has never mattered perhaps more than it does right now. So we're going to try to bust some misconceptions and CNN's analyst Ken Pollack is here to help. He's the author of the new book, "The Persian Puzzle, the Conflict Between Iran and America." He's also with the Brookings Institute in Washington, D.C. Ken, nice to see you. KEN POLLACK, SABAN CENTER FOR MIDDLE EAST POLICY: Thanks Jack. Good to be here.
CAFFERTY: So the president goes to Europe this week and he says we absolutely, categorically do not have any plans to attack Iran. Having said that, all options are on the table. Can you translate what he meant by that because I'm still scratching my head a little bit.
POLLACK: I think what the president was trying to say is I'm not planning to attack Iran now and I'm not really thinking about attacking Iran tomorrow, but in term of kind of general theory, sure I might want to do that at sometime in the future but it won't be soon.
LISOVICZ: Ken, I'm curious. Is there either side that has an upper hand? Obviously, the United States is stretched thin with its operations in Iraq and Afghanistan. The president was in Europe to mend fences if you will with our longtime allies. Diplomacy has to be the only way it would seem, rather than military options. Or do you disagree?
POLLACK: I absolutely agree with that, Susan. I'll put it this way, I think right now -- to get to your first question, right now, you'd have to say that the Iranians have a bit of an upper hand. They are progress on their nuclear program. They're doing pretty much what they want to. The status quo favors them and the status quo is always a big advantage. What the United States has going for us is that right now we've got two things. One, the Iranians are very, very concerned about their economy. Not in the short term. At the moment, oil prices are high. They're not doing too badly. Over the longer term, they recognize they have a huge problem. They have an enormous number of young people. They've got a million new people coming into the work force every year and they've got an economy that's creating about 400,000 jobs a year. That's creating tremendous pressure on the government, undermining the popularity of the government.
In addition, you've now got European countries who, for the first time in 12 or 15 years, are finally waking up to the fact that the Iranians really are trying to acquire a nuclear weapons capability and that is also giving the United States some leverage, because finally the Europeans are willing to come to us and say, OK, we take the Iranians seriously, let's figure out a way to deal with them.
SERWER: Ken, I want to talk about understanding Iran. We have a long history of misunderstanding that country. The CIA obviously totally missed the boat with the overthrow of the shah years ago. What about this theory that Iran was the birthplace of fundamentalist Islam with Ayatollah Khomeini and now today you are seeing the death of fundamentalist Islam with all these new young people who are more secular. Any truth to that?
POLLACK: I think there is some truth to both of those statements. Obviously you can't say that it is truly the birthplace. There are Islamic philosophers who go back to other parts of the Arab world before Iran. But it is certainly the case that the Ayatollah Khomeini leading the Islamic revolution in Iran in 1978 fundamentally changed the Middle East. And the bin Ladens of the world, the Zawaris of the world, even though in many cases they hate Shia and of course Iran is mostly a Shia nation and the Ayatollah was a Shia, they all do look to that model. They all do look to exactly what Khomeini did and say, "that's what we want to do in our homeland." So there is that element. And you're also right, that as many of the senior ayatollahs who broke with Khomeini warned at the time of the revolution, it was a mistake for the clerics to take over the reins of government because all that would do is turn the people against religion and you are seeing that right now in Iran. It is one of the biggest problems that this regime is grappling with, the fact that its mismanagement of Iran's political and economic systems is turning people away from Islam, which of course was the whole goal of the revolution.
CAFFERTY: One of the options that's been suggested as a way to deal with the country Ken, is to simply fertilize the seeds of discontent inside Iran and wait for some sort of revolution to foment against the mullahs that run the country. Barring that, the other two options seem to be some sort of sanctions program. Yet you've got Russia saying we fully intend to continue to help Iran with their nuclear ambitions or some sort of military option. How do you see the future of the relationship between Iran and not just the United States, but the rest of the western world unfolding here?
POLLACK: I actually -- I take some real heart from the president's most recent trip. I think you need to give the Bush administration credit. For the first time, they are saying exactly the right thing. They went over to Europe, the president, Condi, Don Rumsfeld, they listened or at least pretended to listen, which is all that you need in many cases in diplomacy and they're saying we want to take into account what the Europeans are saying.
That creates the potential for the U.S. and Europe to work together to lay out for the Iranians two very different paths and again it's still going to take a lot of work to get the Bush administration to accept this. But what the Europeans are basically saying is look, we say to the Iranians you got two different ways to go. You can keep trying to develop nuclear weapons, support terrorism. If that is the case, we will sanction you. We will put ever greater pressure on this fragile economy you have that you're so worried about.
Or you can do the right thing and under that circumstance, we will reward you. We'll bring you into the WTO. We'll give you aid, trade, investment, everything you need to stabilize your economy. I think that would be a very, very powerful set of incentives for the Iranians if we can get over our own hurdles and do it.
In the meantime, a nuclear Iran, how dangerous is that, with this unrest among the people, with it possibly unstable government, how do you assess it?
POLLACK: Honestly, Susan, that's the $64,000 question and we just don't know the answer to it. I'll put it this way, from my own perspective, I think the world would be a much better place if Iran did not have nuclear weapons. This is a very aggressive, anti- American regime that has pursued policies with supporting terrorism that has used terrorism against the U.S., has tried to destabilize or overthrow very stable governments in the Middle East. If these guys get nuclear weapons, we're just not certain what they would do.
That said, I think you also need to moderate that. I am not nearly as concerned as the Iranians getting nuclear weapon as I had with someone like Saddam Hussein because the Iranians, believe it or not, have actually, even though they are anti-American, aggressive, and even murderous, they've shown a degree of restraint and a degree of rationality and prudence in their decision-making that you don't necessarily see with someone like a Saddam Hussein or a Kim Jong-Il for that matter.
CAFFERTY: So there is some small comfort to be taken from the situation in Iran.
POLLACK: Small comfort.
CAFFERTY: Ken, thanks. It's nice to have you with us. We got to leave it there. Ken Pollack wrote "The Persian Puzzle," which is all about the United States and Iran. He's a CNN analyst and he's with the Saban Center for Middle East Studies at the Brookings Institute. Good to see you. Thank you.
POLLACK: Thank you Jack.
CAFFERTY: All right. When we come back, waging war, talking peace. We'll hear about a report of secret moves to shut down Iraq's insurgents with conversation. Plus you can forget that recipe for a cake with a file in it. Martha Stewart is due to get out of the joint next weekend. See how that's playing on Wall Street.
Also ahead, still working on the railroad. Amtrak's in deep financial trouble. Where have I heard this before? This time, though it might not get out of the hole. Find out why America's train system isn't working despite those ticket prices.
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CAFFERTY: "We will not negotiate with terrorists." That's been the Bush administration mantra throughout the war on terror and the war in Iraq. This week, "Time" magazine has a report that claims that U.S. officials have been holding back channel talks with some insurgent negotiators. The Pentagon says there are no talks and no negotiations. So what's really going on? Let's try to find out. Here with us today, "Time" magazine State Department correspondent Elaine Shannon. She is one of the writers of that story that suggests that there are some talks going on. Elaine, welcome to the broadcast. Nice to have you with us.
ELAINE SHANNON, TIME MAGAZINE: Thank you.
CAFFERTY: So somebody's not telling the truth here. The Pentagon says absolutely not. It's not happening. I guess the question is, does "Time" stand by its story? I assume you do?
SHANNON: We do and we called both the Pentagon and the State Department before that story ran. The State Department said we don't negotiate with terrorists as you just heard. But they said we do talk to disgruntled Baathists, disgruntled tribal leaders, Sunnis, people who boycotted the elections. So talk, negotiate --
CAFFERTY: Semantics.
SHANNON: Nationalist, terrorist. I think it's clear from the people that (INAUDIBLE) our Baghdad bureau chief talked to, people, some of whom are on the record, is that the military intelligence, military civil affairs, and some diplomats were talking to some nationalists, who were under arms --
LISOVICZ: OK. So Elaine --
SHANNON: Not hard core Zarqawi style terrorists.
LISOVICZ: If there are talks going on right now, Elaine, how big of a deal is that given the administration's prior statements?
SHANNON: Well, it's interesting, and if you want to know what's going on the ground in Iraq, I think you should read the story. It's not -- the story says it is too soon for optimism. We don't know where talking to each other is going to lead, but it does describe a scene in which some people from the insurgency come into the green zone. They go to a room controlled by the U.S. military. U.S. military people ask them, listen to their grievances and then ask them for names of people, leaders in the insurgency and they're try to get information about who is important in the insurgency. Who is influential, how big is it? And also trying to hear out these folks to see if there's any chance that they might come in from the cold.
SERWER: Elaine, are we misreading the Baathists or are there misconceptions in the sense that perhaps they could ultimately be more friendly than the Shia in the sense that they'd be looking for a secular government?
SHANNON: Well, I don't think it's our choice. But even before the Iraqi election, there were people -- it's stated, other places who were saying, you just wait, the Sunnis, some of them will come in, because a lot of them do not want to fight forever. They don't want to fight today. They want to have a stable community and they want to have some power and we think -- at least we hope -- that the Shias will give them seats at the table. And so there may be elements that will come in and that will lay down their arms. The interesting model in this story is that some people are modeling themselves on the IRA and Sinn Fein, the above-ground arm of the IRA.
CAFFERTY: Freedom-fighter in other words that kind of thing?
SHANNON: Yes and as somebody from the Pentagon pointed out to my colleague, Doug Waller, U.S. talked to certain Italians during World War II to try to split them off from Hitler.
CAFFERTY: Sure.
SHANNON: The U.S. talked to China a lot, tried to split it off from the Soviet Union during the cold war. Here in our cities, policemen talk to gang members. The FBI talks to hate groups and now they're talking to radical Islamists, if they can find them to try to figure out who's going on, maybe get some information, maybe get somebody who's a rival of somebody else to tell them something in order to save lives.
CAFFERTY: I don't mean to interrupt you, but why do you suppose the Pentagon is so quick and so adamant to deny that any of this is going on? I mean it seems to me that tactically it's probably not a bad idea and particularly if you can get people to come in, give you information that might advance the effort. Why is the Pentagon so reluctant to say, yeah, we're having -- we're talking to people, I mean, it happens?
SHANNON: Well, that's exactly what they said to Doug Waller. And so I don't know who the Pentagon is. There are a lot of folks over there. There are people I talked to who said this isn't happening. But I was absolutely convinced by Nick Ware's (p) reporting, including the people from both sides that he talked to, pretty much on the record, and then he went back over what he was going to say with them and they said yeah, that's right.
LISOVICZ: Elaine what can you tell us about the insurgents? Is it a cohesive group or is it a number of different forces, all with different agendas?
SHANNON: That's what -- the latter is what the U.S. people who are focusing on this seem to think, that there are thousands of people who are under arms. Some are under arms all the time. Some are under arms some of the time. Some people specialize in logistics or would let an armed group use their property to hide arms in, things like that. Various numbers are given. The DIA and CIA numbers differ, according to Rumsfeld's recent testimony. And those numbers are classified he said, but the Iraqi intelligence, we are told, estimates there are 40,000 men under arms all the time and another 200,000 under arms sometime or helping in some way, so there have got to be factions and there have got to be rivalries.
SERWER: Elaine, just 10 seconds, the percentage that are foreigners, any way of figuring that out?
SHANNON: I'm sure everybody's trying and I think that there's not a hard answer. How would there be? But I think it's relatively small and a small group, as we have seen, can do immense damage and mess up everything. But the good news is at least according to some of our sources both in Baghdad and here, is that some Iraqis who are sympathetic to the nationalist insurgency are really angry at the foreign fighters because they're so murderous. They are killing so many Iraqis and they're coming in and giving information.
SERWER: It sounds like a fascinating story. Elaine Shannon is the State Department correspondent with "Time" magazine. Thanks.
Coming up after the back, you can bet she packs a neat suitcase. Martha Stewart's on schedule to get out of prison next week. Find out if her old company's welcoming her back. Plus, see what happens when you cross a coffee table with a cargo plane. We'll look at the business genius of Howard Hughes, creating of the spruce goose.
And the bunnies are back -- in honor of this weekend's Academy Awards, we'll revisit a fun site favorite.
(COMMERCIAL BREAK)
LISOVICZ: Now let's take a look at the week's top stories in our money minute. Higher oil prices hit the markets hard this week. Colder temperatures one reason crude oil jumped over the $50 a barrel level and hit a four-month high. Oil prices are also about 50 percent higher than where they were a year ago. You'll see it in your heating bill.
Former Enron CEO Ken Lay and Chairman Jeff Skilling will finally go to trial in January of next year. Lay and Skilling will be tried in Federal court, along with former chief accounting officer Richard Causey. Skilling and Causey each face dozen of charges of conspiracy, insider trading and fraud. Lay is facing only a handful of charges for conspiracy and fraud.
And if you're a senior citizen, still working -- join the club! The Labor Department says the number of employed Americans who are 75 and older grew from about 650,000 in 1994 to about 1 million last year. That number is expected to rise as the baby boom generation ages.
SERWER: All right, Martha Stewart gets out of prison this coming week. Some people are only interested in her upcoming starring role on a new version of "The Apprentice." But Wall Street is also looking at the future of her company, Martha Stewart Living Omnimedia. Shares of the company's stock have almost tripled over the past year. And even a weak quarterly earnings report on Wednesday didn't slow things down. And Martha is now battling to return as CEO. That makes Martha Stewart Living Omnimedia our stock of the week. There are a couple of unassailable facts here. This woman is immensely popular. We can't get enough information about her.
LISOVICZ: She's controversial.
SERWER: She's controversial. The other unassailable fact is the stock of her company is not connect to reality. It's not at all. The company reported $7 million loss in the latest quarter. There are a lot of questions about the magazine. She doesn't have a TV show. We don't know how it's going to do. It's probably going to be a hit, but I would not chase this stock at $36.
CAFFERTY: There's a huge question, whether she'll even be able to come back and run it. There's still a pending insider trading investigation against her at the SEC and one of the things they've said is huh-uh, you're not going to be the CEO. You're not going to be the president. You're not going to have anything to do with running the place. Now technically on paper, that's one thing. She's Martha Stewart, what, she's billed as a senior creative -- SERWER: ... creative --
CAFFERTY: But I mean there is technically some question whether or not she's even going to be involved in the corner office.
LISOVICZ: The fact is, she's largest single private shareholder so she's always going to have an impact on the company. But her comeback is so different from other comebacks. Like say Mike Milliken who also went to prison, right? Mike Milliken has redeemed himself, big philanthropist, working quietly behind the scenes. Martha Stewart, I would bet you, is going to be an enormous success because she is good at what she does.
But it goes back to your original question, when you are tied to the fate of a single person, long term, it's a problem. And it's certainly played out in that stock. Coming back now -- you know, the same day that the company reported those losses, hit a 52-week high, the stock.
ANDY SERWER, "FORTUNE" MAGAZINE: The magazine is getting long in the tooth, there's no question about that and hasn't been doing well. There's a lot of new competition out there. I think the TV show is going to be a hit. And even if the SEC cuts a deal with her, Jack, and lets her become CEO, she won't be CEO for a couple years. She's going to have to face some sort of probation period. I believe that the show will be a hit. I really do. Donald Trump doesn't have much of a personality either and I don't think Martha does.
CAFFERTY: Donald Trump hasn't gone off to Federal prison for lying to authorities. He's not under indictment. What is this a role model for young people to want to grow up and be like Martha Stewart, so you can form your own company, reach a certain level of success, become arrogant to the point that you don't have to account to anybody in the outside world in terms of regulators and people in law enforcement. You can lie to authorities with impunity, but if you get caught, you can go to prison for five months. Then you can come home and be under house arrest for five months.
LISOVICZ: And be even more successful.
CAFFERTY: Then you can be under probation. But I mean...
SERWER: It's pretty obvious, Jack, that she's not going to invite you over during her five-month probation period in her home.
LISOVICZ: It's funny because I went to the press conference when they unveiled that Mark Burnett new series and I asked that very question, what kind of -- she's in prison.
CAFFERTY: What's the message here?
LISOVICZ: Yes. And they said -- this is the response. There are millions of Americans who feel that Martha got a raw deal.
SERWER: Now, look, this is the case in point. We're going on way too long because we're talking about Martha Stewart. We have to leave this thing alone.
Coming up on IN THE MONEY, lines of the times. With so many people riding trains, you think something like Amtrak would be a gold mine. Find out why it can be more like a money pit.
Also ahead, mogul air, Howard Hughes made a fortune off his turbulent relationship with TWA. We'll look at the business man who inspired the Oscar-nominated hit "The Aviator."
And a price war with Chinese video pirates. Money.com's Allen Wastler will tell us how Warner Brothers is using a new trick to shake up the market and bootleg DVDs.
(COMMERCIAL BREAK)
ANDREA KOPPEL, CNN CORRESPONDENT: Hello, I'm Andrea Koppel at CNN center in Atlanta. IN THE MONEY continues in a moment. But first, a check of the headlines now in the news. A string of killings in the Midwest may have been solved, finally, 30 years after the first crime. Authorities in Wichita, Kansas, have arrested 59-year-old Dennis Rader as the suspect in the so-called BTK murders. That stands for bind, torture and kill, the method used on most of the victims. We'll have a live report with details at the top of the hour.
And Palestinian and Israel authorities today arrested at least seven men they believe were involved in last night's Tel Aviv nightclub bombing. The suicide attack killed four people. Authorities are still looking into claims of responsibility for the blast. We'll have a live update for you again, at the top of the hour. And I'll have all the rest of the day's top stories on CNN LIVE SATURDAY at 2:00 Eastern. We hope you'll be there. IN THE MONEY continues right now.
LISOVICZ: President Bush announced earlier this month that the White House is cutting Federal subsidies for financially strapped Amtrak later this year. The move will most likely drive Amtrak into bankruptcy. The Bush administration hopes the states will step up and create a more efficient, regionalized rail system. Will they and will it work? Here with some answers, Joseph Vranich, author of "End of the Line." He's also a former spokesperson for Amtrak. Welcome to the program.
JOSEPH VRANICH, AUTHOR, "END OF THE LINE": Hi. Glad to be here.
LISOVICZ: We're glad that you're here, too. We heard the song before. So just for the record, quickly, what are the biggest problems with Amtrak and is it really that dire?
VRANICH: It's very dire. Amtrak is losing so much money it's incredible. These long distance trains that travel across the country, they're so expensive. It's actually cheaper for the government to give those passengers free airline tickets than it is to keep their trains going. So Amtrak has bad trains and they have good trains. What I think the Bush administration is trying to do is cause a major restructuring, so that we can get rid of the ones that are truly hopeless, and resuscitate and improve the ones that we really need, like New York, Washington, LA, San Diego. Those shorter distance routes, that's where we need the trains and so we need a major shakeup here when it come to Amtrak.
CAFFERTY: What is it the Europeans know about rail travel that we can't seem to figure out over here? They don't seem to have these troubles.
VRANICH: Actually, it's an interesting question. Europeans are having the same troubles we are --
CAFFERTY: I withdraw the question. No, go ahead, I'm sorry.
VRANICH: No, that's OK. The Amtrak-style trains in Europe are actually declining in popularity. It's the commuter trains, like the ones that run into New York, Chicago, so forth where there are big increases. And why is this? It's because discount air travel is having same effect in Europe as it's having in the United States. So if we want to learn from Europe, we will begin to discontinue the long distance trains and, once again, beef up the short distance trains, which is where the market is now for trains.
SERWER: Joseph, I just want to first of all compliment you on your tie. It looks a lot like mine. It's very good stuff there. You know, Amtrak is in 48 states. I think it's not in South Dakota and in Wyoming if I'm correct. Where's some of the real boondoggles? My understanding is the train in Texas, 400 people ride the thing the whole year, things like that. Where are some of the real jokes?
VRANICH: Well, the biggest jokes are, for example, there's a train running from Orlando to -- all the way to Los Angeles. And it's so few people riding it that what it amounts to is the entire state of Texas, fewer than 400 people a day ride Amtrak.
SERWER: A day, yeah.
VRANICH: A day. And more people go through one Wal-Mart in half an hour than ride Amtrak in the whole state. Meanwhile -- here's the serious problem -- Amtrak puts million and millions of dollars into useless routes like that and yet they under invest in key facilities like the railroad tunnels in New York that Amtrak owns that handle thousands and thousands of commuters every hour. So it's a crazy system. No company would operate the way Amtrak operates.
LISOVICZ: And it is insane, obviously. Those trains had a place, those trains from, say, Florida to LA, had a place at one time...
SERWER: Before the airplane.
LISOVICZ: Before the airplane, decades ago. So what should be done? You have a unique perspective, having worked for Amtrak. Should it be privatized? Should it be regionalized? Should the states step in? Should the Federal government take over? What's your assessment?
VRANICH: Well, my recommendation is that what we do is devolve trains to regional authorities. For example, the Boston, New York, Washington trains would be much better off being run by a regional authority concerned about that area. The way to do that -- I use the word "privatize" kind of carefully because what I talk about is public/private partnerships, where the government still will need to subsidize trains, because the trains are going to continue to lose money. But as soon as we bring competition in, competition is great. It injects efficiencies. We can have trains out there carrying more people, but at a lower cost to the taxpayer so that means the bad trains go away. The good trains are run by other people, more responsible, more innovative, more imaginative, and we can get better trains on the lines where we really need them in the United States.
CAFFERTY: Is the way to get to the place you're talking about to allow Amtrak to simply go under?
VRANICH: I believe Amtrak eventually needs to disappear. I'm not in favor of action that would cause something for them to disappear immediately, because that could cause a kind of crisis that we want to stay away from. So while I support the Bush administration's desire to replace Amtrak with something better, my desire is to go just a little bit slower in making sure that the Surface Transportation Board, Federal agency, is funded properly to keep the commuter trains running in the states where we really need the trains and the Bush administration is saying, look, we're going to do the right thing. We're going to empower the Surface Transportation Board to do the right thing. And I think the Bush administration is very much on the right track and Amtrak is extremely on the wrong track.
LISOVICZ: We can certainly hope that the administration will work to make some big changes in Amtrak. Joseph Vranich, former Amtrak spokesperson, author of "End of the Line." Thanks so much for joining us.
VRANICH: Glad to be here, thank you.
LISOVICZ: Lots more to come here on IN THE MONEY. Up next, business gets bigger than life with a Howard Hughes biopic up for an Oscar. We'll tell you about the real guy and how he made his money.
And rascally rabbits and Hollywood roles. Find out how these bunnies are cutting your favorite flicks down to 30 seconds flat.
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SERWER: "The Aviator" is a leading contender at this weekend's Oscars, nominated for 11 Academy Awards, including best picture. And no matter how many trophies it takes home at the end of the night, the success of the film has put the career and storied personal life of Howard Hughes back in the spotlight. Pat Broeske is the co-author of "Howard Hughes, the Untold Story." She joins us now with a closer look at this legendary tycoon. Pat, welcome. Let me ask you right off the bat, aviation, Hollywood, he did so many things. What's the common thread in his career?
PAT BROESKE, AUTHOR, "HOWARD HUGHES, THE UNTOLD STORY": The common thread is Howard Hughes' passion, Howard Hughes' passion and his great obsession for pushing the boundaries, for pushing the boundaries in the sky, for pushing the boundaries in technology, in the desert sands out towards Las Vegas, on the movie screen.
LISOVICZ: Pat, I saw "The Aviator." I thought it was a terrific movie but it also taught me so many things that I didn't know about the man if it's accurate. How would you put him in terms of aviation alone, is he up there with Lindbergh? Just put it in perspective for us.
BROESKE: Well, you know, Howard Hughes actually always felt that he was in the shadow of Charles Lindbergh, which is why he did his own around the world flight in 1938 besting Charles Lindbergh's records. But really, I think in the pantheon of aviation, Howard Hughes is really best known for his audacity, for the spruce goose, which really more or less symbolizes kind of everything that was, you know Howard's passion and, you know, "never say die" spirit. Don't forget, he's also the man who took over TWA and pushed TWA into the jet age. At the time Howard Hughes ran TWA coast-to-coast flights, you know, they were not a fact of everyday life and it was under Hughes that those things happened.
CAFFERTY: What caused him to simply drop out? He had conquered Hollywood. He had conquered business. He'd conquered aviation and then one day he was holed up on the top floor of the Desert Inn in Las Vegas, never to be seen again except by his closest confidants. Bob Mayhew (ph) was running the Vegas empire. His business interests had changed a lot by that time. What transformed him from this outgoing and larger than life man's man, into this -- this recluse, this paranoid, frightened, withdrawn human being, for the last several years of his life?
BROESKE: You know, the motion picture alludes to it, but never really completely explains what happened to Hughes. And, in fact, he suffered from something that was not diagnosed in his lifetime, so he really didn't understand what was going on. He suffered from something called OCD, or obsessive compulsive disorder. And it really is a disorder that they study today you know that people can get help for. But at the time, Hughes did not know what was wrong with him. And so as a result of thinking sometimes that he was cracking up, that there was something wrong with him, he kind of formed his own asylum, if you will. That's one of the reasons he would close himself away from the world. And toward the end in addition to his OCD, he was involved in some very, you know, some serious dependence on medications, on drugs, and that was as a result of a 1946 plane crash he was in, which is spectacularly recreated in the movie.
SERWER: Pat, leaving aside this later period in his life where he sort of lost it, does he remind you of anyone today or anyone else in American history, any other entrepreneur or businessman or leader?
BROESKE: I have from time to time seen him compared to Bill Gates on some levels. However, Bill Gates never that, I know of --
SERWER: Not as flamboyant, come on.
BROESKE: Yeah, he's -- you can fall asleep listening to and talking with Bill Gates, I think. Whereas Howard Hughes was enigmatic. He was colorful. You never knew what was going to happen with Howard Hughes. But also, he was an adventurer. And Bill Gates never climbed in the cockpit of an airplane and set a land speed record. And so in many ways, Hughes is, he's an anomaly. He's an American original. There really is no one quite like Howard Hughes.
LISOVICZ: Pat, would Howard Hughes be able to achieve all that in the times we live in now? He really was putting his family's company at risk, to say the least, to do some of these adventures. He was spending just money hand over fist on his films, on his aviation projects. With all the scrutiny that we have with the media now, do you think that would have inhibited his exploits?
BROESKE: That is a great point that you make. I think it would be very tough for Howard Hughes to lead the kind of life today that he led. However, just think, what if Howard Hughes had gotten help for his obsessive compulsive disorder? What if Howard Hughes had been able to take advantage of the computer age, which really -- it was just on the horizon when Howard Hughes passed away because his mind kind of operate like a computer. So I sometimes wonder what would have happened, you know if Hughes had been able to take advantage of certain things. Because what a mind. What -- you know, an unequaled mind.
LISOVICZ: Well, he's a fascinating figure, no doubt and you chronicle him in your book "Howard Hughes, The Untold Story." Pat Broeske, thanks so much for joining us.
BROESKE: My pleasure.
LISOVICZ: There's more to come on IN THE MONEY. Up next, beating the bootleggers by thinking like one. Find out how Warner Brothers is taking on video pirates at the cash register. If you've got something to say about a story on the show, don't keep it to yourself. Drop us a line at this e-mail address, inthemoney@cnn.com.
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CAFFERTY: The DVD market of course is one of Hollywood's most profitable cash cows. But movie piracy still cuts deeply into profits, especially in places like China. Allen Wastler is here now with a look at a new strategy to fight piracy as well as the fun site of the week. Huge problem, lots and lots of money.
ALLEN WASTLER, MONEY.COM: Huge problem. They've tried all sorts of ways. You send the police in. You sue them and do all this stuff. Well, now Warner Brothers, corporate cousins of ours, trying something a little bit different. What they're doing is they're going to release some of their hottest 125 titles, put them into the Chinese market, but price them down from where they usually do, OK, take a little hit so they're sort of price competitive with the pirated copies that are out there. It will be about $2.65 a DVD and it's a stripped down one. It doesn't get all the little extras.
SERWER: Can I get one of those?
WASTLER: Go to China.
SERWER: The fly over, the cost of the ticket --
WASTLER: Pirated copies typically cost about a buck. The difference is, one of the main ways that they do the piracy is they take the little video camera into --
CAFFERTY: The quality would be much better.
WASTLER: You're not going to get the guy standing up, going to get popcorn in the middle of the DVD and the noise and what not and they're hoping that that will put them on a price competitive level.
SERWER: The same thing happened with the music business. They had to lower prices. You can buy music online. It's cheaper to fight piracy, right?
WASTLER: What I call the Napster effect. Once it became easy to download, so that any dummy could do it and you're only paying a buck a song, it sort of took it away from the old peer to peer basis thing (ph). Now here's the danger with that. Over in China, if you make the legit DVDs available, well then maybe they -- oh, so I don't have to go into the movie theater anymore. Now I can just burn it straight and then I'll give you a good copy for a buck and you're still back where you started from. So we'll see how it works. All those things sort of trial and error. It's a new -- brave new sector.
CAFFERTY: Let's go to my favorite part of this program.
WASTLER: We got the Oscars coming up. So we said, let's go back to the bunnies. Jack Nicholson, you think of him with Oscars, right, popular favorite. Here you go folks, "The Shining" by the bunnies.
WASTLER: It's so much quicker and easier.
SERWER: It's quicker. It wasn't quite as scary.
CAFFERTY: All right, thanks, Allen. Come 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. We're inthemoney@cnn.com.
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CAFFERTY: Time now to read your answers to our question of the week about whether you think the drug companies are more interested in profit or healing. Vicky wrote, the drug companies seem to be rushing to sell us drugs before they are completely tested. Just listen to the TV ads. They warn about how each new wonder drug can cause everything from internal bleeding to breathing loss.
Nicole wrote, profit is not the only motive for the drug companies. Remember that they spend a lot of money on research knowing full well that most of their projects will never make a marketable product or profit. They also have to be able to pay to get the best research chemists to continue working for them. And my favorite is this from Richard who wrote, I don't know if profits are the only goal, but I do know that I use anti-depressants. They make me impotent, so now I have to buy Viagra. Does this make any sense?" No, Richard it probably doesn't.
SERWER: No, not really.
CAFFERTY: But we hope you're feeling better. Now for next week's e-mail question of the week. It's this, what do you think is the best way for the United States to deal with the insurgents in Iraq? Send your answers to inthemoney@CNN.com. And you should also visit our show page at money.com/inthemoney which is where you'll find the address for our fun site of the week, oh those bunnies. Thanks for joining us for this edition of program. My 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 talk about the U.S. relationship with Europe and whether European dislike for your President Bush is really the biggest issue dividing us. That's tomorrow, 3:00 Eastern time. Hope to see you then.
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