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CNN Live At Daybreak

Court Day for Scooter Libby; Michael Brown's E-Mails

Aired November 03, 2005 - 06:00   ET

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


KELLY WALLACE, CNN CORRESPONDENT: It is Thursday, November 3, court day for "Scooter" Libby. The vice president's former chief of staff formally answers the charges filed against him in the CIA leak case.
Also, President Bush leaves the business of Washington behind just briefly, as he travels to Argentina this morning for a Latin American summit. We'll take a closer look at what is on his agenda.

And as New Orleans was flooding, former FEMA Director Michael Brown had some other things on his mind. You will not believe what he was e-mailing to his staff. We'll tell you all about it.

Good morning, everyone.

I'm Kelly Wallace in today for Carol Costello.

Thanks so much for working up with us.

We will have much more on "Scooter" Libby's day in court in just a moment.

Also ahead, if you're working up in Philly this morning, it's going to be another day of tough commutes, as the transit workers strike enters its fourth day.

And it was a royal night at the White House. Celebrating the visit of Prince Charles and Camilla, Duchess of Cornwall. We'll tell you all about that.

But first, these stories now in the news.

Pakistani government and intelligence sources say they've arrested two suspected al Qaeda members. It happened in the southwestern city of Quetta this week following a shoot-out that left a third suspect dead. One of the suspects is a Pakistani. The other's nationality wasn't given.

The Pentagon says a suspected terrorist who escaped from U.S. troops in Afghanistan is a senior al Qaeda operative. Omar al-Farouq escaped from the U.S. detention camp in Bagram in July with three other prisoners. The suspects' identities weren't released at the time.

Late night violence lights up the Paris suburbs with fire. Rioters clashing with police in the streets for a seventh straight night. The violence began last week when two youths were electrocuted while trying to escape a police checkpoint.

To the Forecast Center now and Jacqui Jeras -- good morning again, Jacqui.

What is it looking like for most of us today?

(WEATHER REPORT)

WALLACE: And our top story this half hour, "Scooter" Libby heading to court today to answer charges brought by Special Prosecutor Patrick Fitzgerald. Libby was indicted last week on charges of obstruction of justice, perjury and making false statements.

CNN national correspondent Bob Franken has been following every aspect of this case.

He joins us from Washington with more -- and, Bob, you know, arraignments are typically routine. But there's really nothing routine today with a White House official now who has resigned being arraigned on these charges.

BOB FRANKEN, CNN NATIONAL CORRESPONDENT: And not at that level, the chief of staff of the vice president, until last Friday, and a situation where there are so many questions still unanswered.

"Scooter" Libby is facing charges, not the underlying law, the one that began this investigation, that would have made it illegal under certain circumstances to publicly identify an undercover agent. He is charged with lying during the investigation, lying in the form of obstruction of justice, perjury and making false statements to investigators.

Altogether there's a theoretical 30 year prison term involved, although that is, as I said, theoretical. But this is just the very first legal step. It's the arraignment, the official entering of a plea. We're told that we can expect a not guilty plea from "Scooter" Libby and then the procedures will be set up for the continuing legal action.

Now, there are a lot of unanswered questions, the big one being Karl Rove, the president's deputy chief of staff and, of course, his chief political adviser as long as the president has had a political career. The independent counsel -- we used to call him that. A big mistake there. It's the special prosecutor -- is still investigating Rove to see if he also committed acts of lying before the grand jury.

But there are some extenuating circumstances called to his attention, so that investigation remains open.

And, also, the questions remain about what role the vice president might have played in all this. There were no indications in the indictments that were handed down by the special prosecutor, Patrick Fitzgerald.

We're expecting that Fitzgerald is going to be here today. And very sadly for Lewis "Scooter" Libby, he will be here, too -- Kelly. WALLACE: And, Bob, are we expecting to hear any comments from Libby or his attorney following his arraignment this morning?

FRANKEN: Well, so far we've heard no, but that hasn't stopped us from trying before.

WALLACE: You will be trying, that's for sure.

And, Bob, one other question for you.

What about "Scooter" Libby trying to get a new attorney as his case now enters this criminal phase?

FRANKEN: Well, there's quite a bit of discussion about that. Nothing that we can really pin down. His current lawyer, Joseph Tate, is more known in the anti-trust field and that type of thing. And we're being told by a variety of people that Libby is at least exploring whether he can find somebody who is more involved in the specialties that are taking place here, somebody who is more a white collar criminal lawyer, that type of thing.

We're also told that some friends of his are starting a legal defense fund.

WALLACE: All right, Bob, we'll be watching your reports on AMERICAN MORNING and throughout the day on CNN.

National correspondent Bob Franken reporting from Washington.

Well, security is tight this morning in Mar del Plata, Argentina as leaders from around the region arrive for the Summit of the Americas. President Bush leaves later today to attend the event.

The main focus of the meeting will be job creation. The president expected to push his free trade agenda.

Here's a quick snapshot of the president's trip.

As we mentioned, he'll leave this morning for Mar del Plata for the two day meeting. From there, it's on to Brasilia, Brazil on Saturday. Then he heads to Panama City, Panama on Sunday.

He is expected to meet with each country's president during his visit and he heads back to Washington on Monday.

We'll get many more details about the trip just after the half hour when we talk with Juan Carlos Lopez from CNN Espanol.

Well, staying in Washington now, the Senate got back to business after the showdown with Republicans over prewar intelligence on Iraq. A potentially divisive issue still facing senators is the president's latest Supreme Court nominee.

But as Ed Henry reports, Judge Samuel Alito appears to be making some hard way in lining up some key support.

(BEGIN VIDEO TAPE)

ED HENRY, CNN CORRESPONDENT (voice-over): After meeting with Judge Samuel Alito, a key moderate Democrat suggested he does not believe a filibuster would be justified.

SEN. BEN NELSON (D), NEBRASKA: But at this point in time, I have a comfort level that I'm satisfied with, that he wants to go to the bench without a political agenda.

HENRY: That's significant because Ben Nelson is a member of the bipartisan gang of 14 moderates who earlier this year prevented a nuclear showdown over judicial nominees.

His comments followed Tuesday's declaration by a Republican member of the gang, who flatly said Alito should not be blocked.

SEN. MIKE DEWINE (R), OHIO: It's hard for me to envision that anyone would think about filibustering this nominee.

HENRY: Alito's schedule was packed, with no less than seven closed-door meetings, a full court press from a White House that was much more cautious about Harriet Miers' visits to the Hill.

In addition to the positive words from Nelson, the nominee won the vote of a maverick Republican.

SEN. CHUCK HAGEL (R), NEBRASKA: I will enthusiastically endorse and support the judge's nomination. I think the president says has chosen wisely.

HENRY: The momentum for Alito comes despite the heightened tension in the Senate, after Democrats forced the chamber into secret session to highlight allegations the Bush administration manipulated intelligence in the buildup to the war in Iraq.

SEN. BILL FRIST (R-TN), SENATE MAJORITY LEADER: It means from now on, for the next year-and-a-half, I can't trust Senator Reid.

HENRY: Democrat Dick Durbin insists both parties can get along and any talk of a filibuster is premature. But after meeting with Alito, Durbin made clear he still has reservations about the nomination.

SEN. DICK DURBIN (D-IL), MINORITY WHIP: This is such a critical vacancy. This is not just another Supreme Court vacancy. In a closely divided court, this is the swing vote.

HENRY (on camera): Democrats privately say they're keeping their powder dry for now on Alito, focusing instead on Iraq, where they believe the administration is vulnerable.

Ed Henry, CNN, Capitol Hill.

(END VIDEO TAPE)

WALLACE: Now to the controversy following the government's response to hurricane Katrina.

House lawmakers continue bashing former FEMA Director Mike Brown. While hurricane Katrina raged, Brown's man on the ground in New Orleans sent desperate e-mails. "Situation critical," "hotels kicking people out," "thousands in the street with no food or water."

Well, now we are learning from FEMA internal e-mails that Brown's response was "Thanks for the update. Anything specific I need to do or tweak?"

Four days after the storm struck, President Bush assured Brown, "You're doing a heck of a job, Brownie."

House investigators had to pry the e-mails out of homeland security.

On another matter, a FEMA spokeswoman advised Brown, "Roll up your sleeves. Even the president rolled up his sleeves. You need to look more hard-working."

Brown resigned two weeks after hurricane Katrina hit. He is still getting paid his $150,000 salary. And we should tell you, there has been no comment so far from FEMA or former FEMA Director Mike Brown to these internal e-mails.

"USA Today" reporting that FEMA credit cards got a heavy workout in the wake of hurricane Katrina. Among the many items in a $12 million shopping spree, just these items add up to about $2 million. We're talking about heart defibrillators for hurricane shelters, veterinary supplies, boats and trailers for search and rescue work in New Orleans, and boots. Government inspectors also found that a federal employee swooped into an Atlanta guitar store, spending $17,000 on audio mixers, microphones, speakers and amplifiers. And the government looking into all of that.

Still to come this half hour on DAYBREAK, if you haven't bought that ticket home for Thanksgiving, it might be too late to steal a deal. We'll tell you about that.

And speaking of travel, you might be seeing fewer and fewer of those similar regional jets in the future. We'll tell you why.

But first, here's a look at what else is making news this Thursday morning, November 3rd.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

WALTER UPDEGRAVE, SENIOR EDITOR, "MONEY": Basically, going long or selling short are just two different ways of investing in stock. Most investors go long when they buy a stock. They plan to hold it for the long-term and they hope that it will go up in price and that's how they make a profit.

On the other hand, if you see a stock that you think may go down in value, then you may want to sell it short. Now, what that means is that you borrow shares of that stock from your broker and you sell them, even though you don't own them. So, for example, if the stock is selling for $20 and you think it will go down, you would sell that stock at $20 a share and then maybe you would buy it back later at $10 a share and replace it and you'd have a $10 profit.

(END VIDEO CLIP)

(STOCK MARKET REPORT)

WALLACE: And welcome back.

Your news, money, weather and sports.

It's about 15 minutes after the hour and here is what is all new this morning.

Lewis "Scooter" Libby will stand before a judge this morning to hear criminal charges that could, could eventually put him behind bars. Libby will be arraigned on five counts of lying and obstruction of justice in the CIA leak case. He is expected to plead not guilty.

In money, an analysis in "USA Today" shows Thanksgiving air fares are up 15 percent they're. Experts say during holiday week, travelers can expect to face sharply higher fares, fewer options and virtually no bargains at all.

In culture, the Radio City Rockettes joined the musicians' strike just one day before their holiday spectacular was set to debut. But Radio City says the dancers will be back on stage with recorded music for tonight's show.

In sports, free agent outfielder Matt Lawton is the latest to face a steroid suspension. He'll have to sit out the first 10 games of next season. Lawton is the twelfth major leaguer suspended since the new steroid policy went into effect.

What's your weather looking like for this Thursday?

Jacqui Jeras has all the answers -- hi, Jacqui.

JERAS: Hey, Kelly.

(WEATHER REPORT)

WALLACE: More news now to tell you about.

Virgin Atlantic Airlines preparing for the possible spread of bird flu. The company has ordered a stockpile of the anti-viral drug Tamiflu. Tamiflu may be used to treat the virus, but the airline will have to wait a while before they get the drug. The world's lone supplier has outstanding orders from several countries, including the United States.

Well, there is good news for those of you who are tired of flying on those cramped regional jets. Aren't you tired of those? It seems the 50-seat jets are now on their way out due to soaring expenses and larger, roomier models.

Delta's Comair has lots of 50-seaters, but the company is expected to soon start taking some of the planes out of service.

"USA Today" travel reporter Ben Mutzabaugh is live in Washington, D.C. with more.

Ben, always good to see you.

Thanks for being here.

BEN MUTZABAUGH, "USA TODAY": Oh, it's always a pleasure.

WALLACE: So, overall, tell us again why these 50-seaters are going on their way out. It's not just because many of us just don't like to be on them, is it?

MUTZABAUGH: No. But that is a reason. Business travelers and, hey, even leisure travelers, don't like these planes. They're really, really tiny. And if we're going 40 minutes, I think we're fine with it. If we're going three hours, not so good. But there is another reason the airlines are getting rid of them, and that's because given the fuel costs today and the market -- the new market environment that they're in today, as opposed to 14 years ago when these planes were rolled out, they're just really hard to make money on right now.

So they're looking at some different alternatives. And that involves, A, just getting rid of some of these planes to bring about a reduction in capacity in the United States, which has helped lead to those higher air fares for Thanksgiving travel you were talking about a little earlier. And, also, it's allowing the airlines to move some of these planes where they make more sense, but get rid of them in other places.

WALLACE: But that's -- I wanted to ask you, how will this impact, you know, all of us when we are going to the airport? Are we going to have fewer options now and higher prices as they get rid of these 50-seaters?

MUTZABAUGH: Unfortunately that's generally going to be the case. There are some markets where demand is really strong and you probably -- in those markets, you won't see a significant cut in flights or fewer options. But there are some cities -- and although these cities aren't yet necessarily on the chopping block, in cities like Birmingham, Alabama; Greensboro, North Carolina; Albany, New York; these are the types of cities that over the past decade-and-a-half have enjoyed a huge surge in the number of flights and the frequency of flights as major hubs. And, of course, that's been great for travelers in those cities. Not only did it give them more options, it also brought down fares.

But now we're starting to see the pendulum swing back in the other direction. And it's now becoming less of a buyer's market than we've been used to here in the past 10 years or so.

WALLACE: Which is bad for us. Give us a sense, also, Ben, as you're talking about, what impact this could have on the airline industry in general.

MUTZABAUGH: Well, I think one of the things we're going to see with that is we're going to see new jets coming on that -- there are still going to be some similar regional jets. There are some 70- and 100-seat models that are still going to make service viable to small and medium sized cities. There probably won't be as many of them.

But this will ultimately help with profitability and ultimately, as passengers, we're going to like these newer, roomier models a little bit better than the older ones. So we may be a little happier, although we'll probably have to pay a few more dollars for it.

WALLACE: Exactly.

And, Ben, you know, I want to ask you, with your expertise here, what's your best advice right now for anybody who still hasn't planned their Thanksgiving travel? What should they do? Stay home?

MUTZABAUGH: Well, that may be what you have to do if you can't find a good fare. Consider alternative airports, even if you have to drive an hour or two once you get there. Think of a rental car portion as maybe another connection or, really, fly in Thursday morning, fly back on Thursday afternoon, really be flexible with your travel dates.

But it is going to be, for most people, a really tough deal to find right now if you're still looking for Thanksgiving travel.

WALLACE: Be flexible and do your homework, right, Ben?

MUTZABAUGH: Exactly.

WALLACE: Ben Mutzabaugh, "USA Today" travel reporter.

Thanks for being here.

Always good to see you.

MUTZABAUGH: Likewise.

WALLACE: We appreciate it.

So this question for you, will the stock market be naughty or nice to investors this holiday season?

Carrie Lee has all the answers. She'll tell us what needs to happen to keep the Grinch from stealing Christmas.

But first, we want to say good morning to Philadelphia, where commuters there are entering day four of a transit strike, hoping, hoping there is a deal some time soon. We'll have a live report later this hour.

DAYBREAK will be right back. (COMMERCIAL BREAK)

(STOCK MARKET REPORT)

WALLACE: Well, stocks have been stuck in neutral, you can say, for most of the year.

But Carrie Lee joining us now to tell us what needs to happen for us to see that traditional year end rally.

What needs to happen -- Carrie?

CARRIE LEE, CNN CORRESPONDENT: Well, we know it hasn't been a great year for stocks, Kelly. The Dow Jones industrials down about 3 percent so far this year. The S&P pretty much flat. But October is over and investors are now hoping for a year end rally, the bulls are, anyway.

Now, October is actually known as a jinx month, one of the worst on Wall Street for the months. The crashes of 1929 and 1987 both happened in October. But November and December are the two strongest months for stocks.

So will we see a strong year end this time around? Well, a couple of things need to happen.

First, a strong jobs report, coming tomorrow, would certainly help. Expectations are for an increase of more than 100,000 jobs. Some analysts, though, are worried about lingering efforts from hurricane Katrina.

And, of course, there's also the Fed. Earlier this week, Alan Greenspan and company raised interest rates for the 12th time in a row. And the indication that the rate hikes are nearing an end would likely also give stocks a boost.

But, of course, for that to happen, inflation needs to be under control, which means energy prices would have to start falling, or at least stop rising.

Finally, investors will be rooting for a Santa Claus rally. The markets traditionally do rally the last few days of the year, as investors buy before the new year.

Now, if you're planning to buy a stock or a mutual fund before the end of the year, you need to check and see what the tax implications might be.

Kelly, you can buy a fund at year end and get taxed on all of the transactions for the whole year. So not all funds work that way, some do. You might want to wait until 2006.

WALLACE: You have to be careful.

What about confidence? Do we have any sense of consumer confidence and, of course, how that will play a role in any movements on the stock market?

LEE: You know, the big thing for consumer confidence has been energy prices. A lot of people are worried about the home heating bills. Now, we did get a pretty solid weekly inventory report, as far as crude oil concerned. The greater the stocks we have, the inventory levels, that is, the better things are.

So we'll see what happens. But so far this morning futures are looking pretty flat for today.

WALLACE: All right. And tomorrow we're switching gears a bit. We're going to ask you about your marathon training.

LEE: Really?

WALLACE: Everyone, Carrie Lee running...

LEE: Oh, I'm so flattered. Thank you.

WALLACE: ... in the New York City Marathon. We will get the inside story about how she's preparing for tomorrow.

LEE: I'll tell you all about it.

WALLACE: All right, Carrie, thanks so much.

LEE: Thanks.

WALLACE: We look forward to that.

Well, south of the border, way south of the border, President Bush heading to Argentina for the Summit of the Americas. We will discuss what is on his agenda.

DAYBREAK continues in just a moment.

Don't go away.

(COMMERCIAL BREAK)

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