Return to Transcripts main page

American Morning

When Will Troops Come Home?; FEMA Under Fire Again

Aired April 27, 2006 - 08:00   ET

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

MILES O'BRIEN, CNN ANCHOR: When will they come home? The Pentagon does have a plan to reduce the troop count in Iraq, but a lot is riding on the success of that struggling Iraqi government.
SOLEDAD O'BRIEN, CNN ANCHOR: FEMA under fire again. Now a call for FEMA to be abolished and replaced with a brand new emergency agency.

M. O'BRIEN: A lot of political gas over surging energy prices. The oil companies in political people's crosshairs and maybe some tax breaks are on the line.

And what about those oil profits? We're talking billions and billions, and that's just one quarter, while all of us are griping about rising gas prices.

S. O'BRIEN: And then Snoop, snatched up rapper Snoop Dogg and others arrested in London, all part of an airport brawl. We've got a live report ahead on this AMERICAN MORNING.

M. O'BRIEN: Good morning to you.

I'm Miles O'Brien.

I'm sure that was a misunderstanding with the Snoop, don't you think?

S. O'BRIEN: I don't know of anybody who's got a 30-person entourage.

M. O'BRIEN: That is -- that's an entourage for your entourage.

ANDY SERWER, "FORTUNE" MAGAZINE: Yes.

S. O'BRIEN: Maybe it wasn't -- exactly.

Maybe it wasn't a brawl. Maybe it was just a big fiesta. Who knows?

M. O'BRIEN: Yes, right.

S. O'BRIEN: We're going to talk about that story coming up.

But our first story this morning is FEMA, under constant criticism, you'll recall, after Hurricane Katrina. Well, now a key Senate committee is calling for the agency to be torn down and rebuilt. That call coming with hurricane season just five short weeks away.

CNN homeland security correspondent Jeanne Meserve live for us in Washington this morning -- hey, Jeanne, good morning.

JEANNE MESERVE, CNN CORRESPONDENT: Good morning, Soledad.

FEMA is in shambles, beyond repair and should be abolished -- that's the conclusion of Senators Susan Collins and Joseph Lieberman after 22 hearings into the Katrina response, according to congressional sources.

They believe a totally new organization should be created within the Department of Homeland Security which would handle both preparedness and response to natural as well as manmade catastrophes.

Unlike FEMA, the new National Preparedness and Response Authority would be a distinct entity within DHS, like the U.S. Coast Guard and the Secret Service.

The director, in a disaster, would have a direct line of communication to the White House, comparable to the relationship between the president and the joint chiefs.

And in response to a hail of criticism over the qualifications of former FEMA Director Michael Brown, the senators say it should be required that the top staff in the new agency have significant experience in crisis management -- Soledad.

S. O'BRIEN: What exactly are Senators Collins and Lieberman saying about the call to remove FEMA from DHS altogether, which, of course, as you know, many people have said would be a great idea.

MESERVE: They will say that is a bad idea. They think that that could create new problems, new duplication. They think what's needed is better integration, better use of the resources within the Department of Homeland Security. What they appear to be trying to do is create an agency like the old FEMA, that combines preparedness and response, but giving it more muscle, both within the Department of Homeland Security and across the government overall -- Soledad.

S. O'BRIEN: Jeanne Meserve for us this morning in Washington.

Jeanne, thanks.

MESERVE: You bet.

S. O'BRIEN: Coming up in the next hour of AMERICAN MORNING, we're going to talk about the plan with a former regulation director of FEMA, a guy who helped in the responses to Hurricanes Irene and Floyd and Dennis, as well.

Also, CNN is going to have live coverage of the FEMA report announcement in Washington. That starts at 10:00 a.m. Eastern time -- Miles.

M. O'BRIEN: Time to gauge gas prices across the country. AAA's daily fuel report has an average gallon of regular right now at $2.92. That's up $0.42 from last month's average and $0.70 from a year ago.

It is an election year, so lawmakers want you to know they are -- you -- they are feeling your pain at the pump.

So, what can they do about it, though? And who stands to lose as the crunch goes on?

Congressional correspondent Andrea Koppel joining us live now with more on this. And the parties are sort of squaring off, aren't they -- Andrea, in the face of these rising prices?

ANDREA KOPPEL, CNN CORRESPONDENT: Absolutely, Miles.

The blame game continues with the Democrats within 15 seats of reclaiming the majority in the House. Both sides are pointing the finger, the Republicans trying to minimize the political fallout. In fact, today, look for the Senate to introduce an amendment to offer consumers, basically taxpayers, a $100 rebate to try to minimize that, basically, the rising prices.

But they're also going to include a provision to open up the Alaskan wilderness to drilling. That's going to be a tough one to get through, because both Democrats and moderate Republicans have opposed it in the past.

On the Democratic side, they're going to be releasing a top 10 list, Miles, of the worst votes the Republicans have had on gas prices -- Miles.

M. O'BRIEN: All right, we're going see the chairman of the Fed today on the Hill.

Is he apt to be grilled about gas prices and what the administration is or is not doing?

KOPPEL: Absolutely. When this hearing was initially set with Ben Bernanke -- and it's the first time that he'll appear before the Joint Economic Committee here -- they were going to be talking about what you would expect, just the economy in general. But now you can expect this very, very finely focused questioning to be on rising gas prices, consumer confidence, whether or not we can expect interest rates to rise -- Miles.

M. O'BRIEN: It will be a fine how do you do on Capitol Hill for Mr. Bernanke.

All right, thank you very much, Andrea Koppel, on the Hill for us.

In a few moments, I'll ask the American Petroleum Institute's chief economist about all this fury over gas prices and we'll have him explain how these profits can be so high -- Soledad.

S. O'BRIEN: Yes, kind of a welcome, Mr. Bernanke.

M. O'BRIEN: Yes. S. O'BRIEN: It's nice to have you.

Optimistically speaking, there could, could be fewer U.S. troops in Iraq by the end of the year. That is, as the top commander in Iraq puts it, and I'm quoting here, "that is if conditions permit." And, of course, that's a very big if.

CNN's senior Pentagon correspondent Jamie McIntyre takes a look.

(BEGIN VIDEO TAPE)

JAMIE MCINTYRE, CNN SENIOR MILITARY AFFAIRS CORRESPONDENT (voice- over): For months, the U.S. military has been quietly planning for a possible reduction of U.S. troop levels in Iraq, by 30,000, or even more, by the end of this year.

UNIDENTIFIED MALE: Hey, boys, go ahead.

MCINTYRE: Now CNN has learned that plans drawn up by the top U.S. general in Iraq, George Casey, called for the current force of 15 brigades, roughly 130,000 troops, to be cut to 10 brigades, or about 100,000 troops, if conditions permit.

Officials familiar with the planning tell CNN the reduction would be accomplished by simply not replacing some U.S. troops who are scheduled to rotate home over the next eight months. But General Casey is not ready to recommend that plan until Iraq's fledgling military improves and the new prime minister gets his government up and running.

GEN. GEORGE CASEY, U.S. ARMY: We are seeing the situation a little clearer, I would say. And -- and the clearer I see it, the -- the better I can make my recommendations. MCINTYRE: Sources say there's an even more optimistic option that would further reduce U.S. troops by another 25,000, leaving a force of 75,000 Americans in Iraq by the start of 2007. But that's based on a rosy and unlikely best case scenario.

The Pentagon insists any draw down will be up to military commanders and not influenced by political factors, such as the upcoming midterm elections in Congress.

DONALD RUMSFELD, SECRETARY OF DEFENSE: The question of our force levels here will depend on conditions on the ground and discussions with the Iraqi government, which will evolve over time.

MCINTYRE: Sources say eventually the U.S. plans to consolidate its troops in a small number of heavily fortified super bases in places like Baghdad, Tallil, and Balad, to lower their profile and get them out of the line of fire.

(on camera): There's a good reason no one at the Pentagon will publicly discuss troop cuts. That's because if things don't improve in Iraq, those plans may have to be put on hold. And even with cuts, it's likely a large number of U.S. troops will remain in Iraq for years to come. Jamie McIntyre, CNN, the Pentagon.

(END VIDEO TAPE)

M. O'BRIEN: The deputy White House chief of staff, Karl Rove, back on the stand in the CIA leak investigation. It's the fifth time he's appeared before the grand jury in this case.

AMERICAN MORNING'S Bob Franken has the job of keeping track of all this for us -- hello, Bob.

BOB FRANKEN, CNN NATIONAL CORRESPONDENT: It's a bad job, but somebody has to do it.

M. O'BRIEN: Yes.

FRANKEN: And the cliche about needing a scorecard applies here. Karl Rove has been a principal figure in this investigation since the beginning. And now he is a familiar person to appear at the courthouse. This is the fifth, as you pointed out. He was questioned about some testimony that has gone on between the last appearance six months ago and this one, specifically, testimony from Viveca Novak, who was a "Time" magazine reporter who testified she had talked to Rove's attorney. That raised some questions about inconsistencies in Rove's earlier testimony.

I hope you're staying up with me here.

In any case, Rove is in this legal limbo, trying to find out whether he will be indicted. The special prosecutor has let it be known that he hasn't decided yet whether Rove will be indicted.

And, of course, we know that "Scooter" Libby, who was the vice president's chief of staff, has been indicted. He is going through all kinds of legal maneuvering. They're pointing to a trial at the beginning of next year, so we know that this is going to stretch out a bit.

What's going to occur, when is it going to occur, the special prosecutor is going through his usual no comment phase, so we watch and wait and wait and wait.

M. O'BRIEN: You know, you mentioned this limbo. There is no limitation on how long the grand jury can continue this. And another grand jury could pick it up, right?

FRANKEN: Yes. We may be finding out the true definition of infinity. This could go on forever. But obviously it has not. But as long as it is going on, as long as there's all this uncertainty, there certainly ends up being a contentious cloud over the White House.

M. O'BRIEN: Bob Franken in Washington.

Thank you very much -- Soledad.

S. O'BRIEN: It's time for a check of the forecast, nine minutes past the hour.

Let's get right to Reynolds Wolf.

He's in for Chad today -- hey, Reynolds, good morning again.

REYNOLDS WOLF, CNN METEOROLOGIST: Hey, Soledad.

(WEATHER REPORT)

M. O'BRIEN: Coming up on the program, oil companies say it's not their fault if gas prices are sky high.

So who's to blame? We love to blame somebody, don't we?

We're going to ask...

S. O'BRIEN: You've got to blame somebody.

M. O'BRIEN: Somebody's got to take it.

Well, we're going to put an economist on the stand, the witness stand, so to speak, and see what he has to say. He represents the oil industry.

Also, farshisel (ph). He's in some...

S. O'BRIEN: That's a nice outfit.

M. O'BRIEN: ... some frisel (ph). Which one...

S. O'BRIEN: Snoop is on the left.

M. O'BRIEN: Hey, Snoop is on the left there?

S. O'BRIEN: Um-hmm.

M. O'BRIEN: Because who's the guy on the right there? Is that part of...

S. O'BRIEN: A member of the posse.

M. O'BRIEN: ... the entourage of 30 strong.

Anyway, he gets in the dog house, if you will, when -- I hope he got some gold plated bracelets.

S. O'BRIEN: Maybe the jail house.

M. O'BRIEN: Anyway, if you want to learn more about it, you are barking up the right tree, so stay with us.

S. O'BRIEN: Oh, enough. Enough.

Also, what is more brutal than back pain? If you suffer from it, you're not alone. We've got some tips on preventing it in our health series for people in their 30s and their 40s and their 50s. That's ahead on AMERICAN MORNING.

We're back in a moment.

(COMMERCIAL BREAK)

M. O'BRIEN: As gas prices and our tempers rise, we're all getting pretty deep into the blame game, aren't we? And quite frequently at the top of our list, big oil. But big oil says it's misunderstood.

Take a look at a full page ad that appeared in yesterday's "USA Today." A lot of fine print here, but essentially what it goes into, as you look at that dollar sliced up, is what it costs -- there you go -- on a percentage basis, what it costs to bring you that oil to your gas pump. It is pretty amazing what it takes to get that gasoline into your tank, if you really start to think about it, as Andy Serwer has been pointing out.

John Felmy is the chief economist for the American Petroleum Institute.

That's a group that represents big oil.

And he joins us now from Washington.

John, I hope we don't -- we're not going to have an economics lesson here, because I didn't do so well on that in college.

But It's good to have you with us.

First of all...

JOHN FELMY, AMERICAN PETROLEUM INSTITUTE: Good morning.

M. O'BRIEN: ... let's talk about the ad and what the ad, the gist of the ad. And what you're talking about here is the cost that is involved.

What's the point you're trying to make?

FELMY: The point is we're trying to tell consumers what's going on with gasoline prices. You know, we face an unfortunate problem, that everybody knows the price of gasoline but nobody knows what goes into it. They don't know that crude oil yesterday cost $1.71 or that they're paying $0.46, on average, in taxes. Higher in New York, of course.

And so they just see the prices going up and down and wonder why. And that gives politicians an opportunity for a lot of rhetoric.

M. O'BRIEN: All right, so, the price goes up.

Why is the price up so dramatically?

FELMY: A couple of fundamental factors. First of all, crude oil prices are up dramatically over the last couple of months.

Second, we've had to introduce new, low sulfur gasoline this year.

And, finally, we're switching from one additive, MTBE, to ethanol. And that's a higher cost production process, along with ethanol being very expensive.

M. O'BRIEN: OK, let's -- let -- help me understand this, because as I freely admitted, I had some problems with economics. I want to go to a graphic here comparing crude oil prices and their change over a year's time. OK, in 2005, it was $51 a barrel. Now it's $71 and change, a 39 percent increase.

Advance now to the profit picture here and the profits, if you combine all those big companies together, the average expected growth in profits is 27 percent.

Now, if, in fact, the price that we are paying is reflected purely on the fact that your costs have increased, wouldn't the profit stay the same?

FELMY: Well, profits increased for several reasons.

First of all, we've had many companies that have merged and so they are much larger. So in an absolute sense, they're -- the earnings are bigger just by mathematics.

M. O'BRIEN: No, we're not talking about gross. We're talking about the net profit, though.

FELMY: Well, no, I'm talking about net profits.

M. O'BRIEN: All right.

FELMY: So they are much bigger than what they were because you have combined two companies.

Second of all, because of the companies combined, you had mass cost cutting and so that's gone to the bottom line.

And, finally, because they're selling record or near record amounts of product, if you're able to manage your business base well, you get increased earnings.

M. O'BRIEN: OK, but what I'm -- what I'm saying is when the argument is we're just passing on the cost to you, that shouldn't, by virtue of that, if you're just passing along the cost, should not change the profit picture, right?

FELMY: Well, those other things still come into play. You have managing your business properly in the sense of reducing your costs and selling more. So it's a combination of a lot of factors. But getting back again to that dollar bill, you know, what it did show is that our profit rate, it was $0.085 on the dollar. And that's slightly above the all industry average, which is $0.077. So we're a little bit like Lake Woebegone's children, being above average.

M. O'BRIEN: Let me ask you this. You mentioned the consolidation being an advantage. There's a lot of people in Congress who would tell you just the opposite. As a matter of fact, let's listen to one of them.

(BEGIN VIDEO CLIP)

SEN. CHARLES SCHUMER (D), NEW YORK: We've got to look very seriously at breaking up the oil companies. This did not happen when there were 15 or 20 oil companies, because you'd find good old- fashioned American competition would work. You'd always find two or three of those 20 who said I'm going to try to increase my market share by keeping the price down.

When you have five, they're all very happy to keep the price high and there's no competition.

(END VIDEO CLIP)

M. O'BRIEN: All right, that's Senator Schumer, and that's part of economics that I do remember. Competition is usually good and usually leads to better prices.

FELMY: Absolutely. Competition is very good and that's what we have in our industry. You have dozens of refiners competing for your business, hundreds of thousands of stations competing for your business, hundreds of thousands of producers.

No, there's a lot of competition in the industry.

This is just unfortunate political rhetoric...

M. O'BRIEN: But, no, no...

FELMY: If you compare our...

M. O'BRIEN: Is it -- is it really true that fewer companies is better for prices? Do you really believe that?

FELMY: As long as they're competitors, yes. Look at Intel and AMD. There's only two competitors in that industry and they're fierce competitors. So, no, there's plenty of competition in our industry.

M. O'BRIEN: John Felmy is the chief economist for the American Petroleum Institute.

Thanks for coming on the program, sir.

FELMY: My pleasure.

Thank you for having me. M. O'BRIEN: All right -- Soledad.

S. O'BRIEN: Fewer better for competition, Andy?

M. O'BRIEN: I'm still scratching my head on that one.

SERWER: Well, yes...

M. O'BRIEN: Yes.

SERWER: ... that's a little different. But, you know...

S. O'BRIEN: I only took...

SERWER: ... you don't necessarily need...

S. O'BRIEN: EC-10 but that's...

SERWER: You don't necessarily -- but his point is you don't need 12. I mean it's -- you can't say that 12 is necessarily better than five. I mean that's how I would have responded.

M. O'BRIEN: What's the right number?

SERWER: Right. That's how I would have responded. But that's not my job.

S. O'BRIEN: What have you got coming up?

M. O'BRIEN: You do have a job to do.

SERWER: My job is...

M. O'BRIEN: You do have a job.

SERWER: ... to tell you about Exxon's profits, which just came out, staying on topic here.

Plus, how about this -- CEOs and executives who only get paid a dollar a year? Take note, Lee Raymond of Exxon. He got paid a lot more than that.

Coming up on AMERICAN MORNING.

(COMMERCIAL BREAK)

M. O'BRIEN: You know, I was listening to American Top 40. He's not doing it. Casey is not on it...

(CROSSTALK)

S. O'BRIEN: He retired.

SERWER: I used to listen to that on weekends growing up. I remember that.

M. O'BRIEN: It's different.

SERWER: I loved that.

M. O'BRIEN: It's not the same...

S. O'BRIEN: He's got a great voice.

SERWER: I loved it. He does.

M. O'BRIEN: I'm sorry, it's, you know...

SERWER: Scooby Doo?

S. O'BRIEN: Yes.

SERWER: Right? Shaggy?

M. O'BRIEN: This one goes out to so and so, who's trying to get his girlfriend...

S. O'BRIEN: Yes.

M. O'BRIEN: Back.

SERWER: Did you know he was Shaggy, though, on "Scooby Doo?"

M. O'BRIEN: He was Shaggy?

S. O'BRIEN: Yes.

SERWER: Yes, he was.

S. O'BRIEN: Yes.

M. O'BRIEN: Man.

S. O'BRIEN: Yes, of course he was.

SERWER: Yes.

M. O'BRIEN: Anyway, happy birthday to them all.

Is a theme park with a religious bent being holier than thou? Lawmakers in Florida are trying to decide if a place called The Holy Land Experience should or should not pay county taxes.

The park is in the land of the mouse, but not a Disney property. Check out Harrod's Temple, the Jesus Tomb. You can grab a communion cracker at the concession stand.

S. O'BRIEN: That's a joke, isn't it?

M. O'BRIEN: No, I think that's true. I think that's exactly how it works. And the Orange County tax office says that does not mean -- look it, there's the tomb -- it does not mean it's exempt from paying local taxes. The tax exemption, has, however, passed the house and now the park operators are praying that it gets by the Senate.

We'll keep you updated.

S. O'BRIEN: Pray hard.

M. O'BRIEN: Yes.

S. O'BRIEN: We've been talking about the big old CEO salaries. There are some people who actually have gone the opposite...

SERWER: Yes.

S. O'BRIEN: Tell us about that.

SERWER: Taking too little, or just a little bit.

S. O'BRIEN: Or maybe just enough.

SERWER: Or just a dollar. Just enough.

First of all, Soledad, I want to report on Exxon's profits. We've been mentioning that this morning. Just crossing the tape -- $8.4 billion in the first quarter. And what's interesting to me is that Wall Street was expecting $9.2 billion. They reported a lot less. And you wonder, you know, what have...

S. O'BRIEN: Where is the other...

SERWER: Yes. I mean was some stuff...

S. O'BRIEN: ... .8?

SERWER: ... sort of put aside? They're not supposed to do that. It's very illegal.

M. O'BRIEN: Yes.

SERWER: Of course, Exxon wouldn't do that. But it's funny that there was that much of a difference.

Dollar a year man was an expression going back to when your parents were growing up. It had to do with someone on Wall Street or in business going to work for the government for a dollar a year just to help out and do public service. But there's a new kind of dollar a year man. These are people in business in the private sector who are doing this, well, just because they can.

S. O'BRIEN: They're millionaires.

SERWER: They're millionaires. And here are people who make a dollar a year. Those are the Google guys, plus Eric Schmidt, who is their CEO now. Then Richard Kinder Morgan. That is the big natural gas pipeline company that used to actually be part of Enron. Richard Kinder owns 19 percent of that company.

Then there's Steve Jobs. Yes, he's doing quite well at Apple. He owns a lot of stock.

S. O'BRIEN: What do you need besides some black pants and black (UNINTELLIGIBLE)...

(CROSSTALK)

M. O'BRIEN: A closet full of them.

SERWER: Jeffrey Katzenberg and Roger Enrico, a former Pepsi executive, also at DreamWorks.

Now, OK, yes, these guys own tons of stock in their companies, so they don't need it. But we should point out there are also executives who own tons of stock in their companies and get paid millions of dollars. So our hats off to these guys a little bit.

Warren Buffett, by the way, $100,000 a year, he pays himself. That's a...

S. O'BRIEN: That's about it.

SERWER: Is that greedy? That's not greedy. That's OK.

M. O'BRIEN: That's like grounding air (ph) money for him.

SERWER: Yes, that's a...

M. O'BRIEN: That's like on the -- the change on his dresser.

SERWER: Right.

Let's talk about Apple Computer, speaking of Steve Jobs.

They have a new initiative out to recycle their computers. And, actually, Apple was a little bit behind the curve. Disposing computers -- disposing of computers -- look at that, a good throw...

M. O'BRIEN: Wow! Good.

SERWER: ... is actually a tricky business because they are toxic. They have lead, cadmium, toxic metals, also bromide flame retardants, I am told, and they take up landfill space. Now Apple is recycling them, much like Dell and H.P. had done.

So, getting some good marks there from the environmentalists.

M. O'BRIEN: All right.

S. O'BRIEN: Good. It's about time.

SERWER: Exactly.

M. O'BRIEN: Thank you, Andy.

SERWER: Thanks. M. O'BRIEN: In a bit, we're going to go live to London. Snoop Dogg in a little bit of trouble there, arrested at the airport. We'll tell you why.

And later, a suit that is supposed to be wash and wear. Just throw it in the wash, throw it in the drier, put it on again. You can kiss your dry cleaning bills good-bye. Really?

SERWER: Oh, baby.

M. O'BRIEN: Oh, baby.

Carson Kressley of the "Queer Eye for the Straight Guy" will join us for an assessment of how the suits look on us. Andy and I are going to try these on. That lies ahead on AMERICAN MORNING. You're not going to want to miss this.

SERWER: No.

(COMMERCIAL BREAK)

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