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Lou Dobbs Tonight

Pentagon Ordering Thousands More Troops for Duty in Iraq Next Year; Republicans Outraged Over Leaked Democratic Memo

Aired November 05, 2003 - 18:00   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.


LOU DOBBS, HOST: Good evening. Tonight, a leaked Democratic memo about pre-war intelligence on Iraq has set off a storm of protests from Republicans on Capitol Hill. Senator Jay Rockefeller is the ranking Democrat on the Select Committee on Intelligence, and he joins me tonight.
Republicans are celebrating gubernatorial victories in Kentucky and Mississippi. Do those victories suggest the Democrats are in trouble in the South? Senior political analyst Bill Schneider will give us his assessment.

And New York's attorney general, Eliot Spitzer, has the mutual fund industry in his regulatory and prosecutorial sights after his successful crackdown on Wall Street corruption. The New York attorney general joins me tonight as well.

And in our special report tonight, "Wasted Minds, Failing Schools," why school vouchers and school choice may really mean parents have no choice at all in our public schools.

Tonight, the Pentagon is ordering thousands of additional active duty National Guard and Reserve troops to prepare for duty in Iraq early next year. The military is preparing to send many more troops to Iraq than originally planned because other nations have failed to contribute as many soldiers as the Pentagon and the White House had hoped. Defense Secretary Donald Rumsfeld is expected to make a final decision this week on which units will be sent to Iraq.

Senior Pentagon correspondent Jamie McIntyre now with the report -- Jamie.

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT: Well, Lou, we've been told those decisions have pretty much been made. In fact, the failure of the United States to get a significant number of additional troops from other countries will mean, according to sources, that some Marines who just returned from Iraq in September will have to go back sometime next year.

The Pentagon has worked out the details of this rotation plan, which was announced in general terms a couple of months ago. But now all of the specifics have been worked out. It will be announced tomorrow here in the Pentagon briefing room.

According to sources, among the troops that will be going to Iraq is the 1st Cavalry Division from Fort. Hood, Texas, which pretty much knew it was going to deploy, and the 1st Infantry Division from Germany. Again, no surprise there. But the Marines were added to the plan in recent weeks, according to sources, as it was fine-tuned.

General Peter Pace, the vice chairman of the Joint Chiefs, told Congress today that the U.S. troops now in Iraq all serving one-year tours won't be replaced one for one. In fact, the overall number of U.S. troops is expected to drop by 30,000 to about 100,000.

(BEGIN VIDEO CLIP)

GEN. PETER PACE, VICE CHAIRMAN, JOINT CHIEFS: So we look at projections for security requirements in Iraq and total capabilities of non-Iraqi coalition, Iraqi coalition and U.S., we think that the spike in need for ground troops will in fact continue to go down, that it is not a new plateau.

(END VIDEO CLIP)

MCINTYRE: Now, as you said, there was a lot of concern that they would have to send a large number of additional troops because they didn't get that multinational division. But now it turns out that the Pentagon has decided that the 101st Airborne Division, which was supposed to be replaced by those international troops, will be replaced by a smaller force because it's in the relatively safe area in the north, which has been relatively stable. The Pentagon has tweaked the plan in other ways, as I said, adding some Marines, adding a few more reservists, and they say that overall, it's not a significantly bigger number than they originally planned to send.

DOBBS: Jamie, moving the 1st Cav to Iraq leaves no division in the United States and reserve, does it?

MCINTYRE: Well, there's no division that's just standing around ready to go. However, there are divisions that could be activated in case of an emergency. Again, these troops aren't leaving immediately. And in the case if something were to happen, they could keep all of the troops who are there even longer.

DOBBS: Jamie, is there a mounting sense of frustration at the Pentagon that not only are there new challenges in Iraq, but that the forced deployment and forced level simply is not adequate to meet the global strategy of either this administration or the previous?

MCINTYRE: Well, there's certainly a raging debate about that. And you can get people to argue it pretty strongly on either side. Defense Secretary Rumsfeld has continued to insist that, after they review everything, if they need more troops, they will come to Congress and ask for an increase in the strength.

It's something that the Army chief of staff, particularly the new Army chief of staff, General Shumaker, is looking at as well. And people are anxiously awaiting to see what conclusion he's come to. He has hinted, by the way, he does think the Army needs to be bigger.

DOBBS: General Shumaker obviously one of the most highly regarded generals in the Pentagon after returning to service. Jamie McIntyre, our senior Pentagon correspondent, as always, thank you.

Senator John McCain today strongly criticized the Pentagon for the way it's handled the issue of troop deployments in Iraq. Senator McCain said the United States does not have enough troops in Iraq to meet our military objectives.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: There does not appear to be a strategy behind our current force levels in Iraq other than to preserve the illusion that we have sufficient forces in place to meet our objectives.

(END VIDEO CLIP)

DOBBS: And Senator McCain was not suggesting a withdrawal of U.S. troops, rather the addition of troops. He said a premature military draw down in Iraq, as apparently envisioned by the Pentagon right now, would encourage, in his view, terrorists and endanger American leadership in the world.

Tonight, a political battle on Capitol Hill after the leak of a Democratic memo calling for an investigation into White House motives for the war against Saddam Hussein. The Republicans say that memo is a Democratic attack plan to embarrass the president before the election next year. The Democrats say the memo was simply written by a staff member and was not approved nor shared with members of the Intelligence Committee.

Kitty Pilgrim reports from Washington.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Republicans are outraged over the leaked Democratic memo that sought ways to reveal President Bush's, "dubious motives" on the war in Iraq.

SEN. JON KYL (R), ARIZONA: I never saw the kind of blatant partisan politics emerge that has apparently emerged, as revealed in this memorandum.

SEN. KIT BOND (R), MISSOURI: This memo suggests that there is, at least at the staff level, a Democratic game plan to make the intelligence committee a focal point for the 2004 presidential debates.

SEN. TRENT LOTT (R), MISSISSIPPI: It shouldn't be about the blame game. It shouldn't be about politics. It shouldn't be about trying to find a way to blame it on the president or the vice president or anybody else.

PILGRIM: There is no question, the memo is political. It states, "Our plan is as follows: pull the majority along as far as we can on issues that may lead to major new disclosures regarding improper or questionable conduct by administration officials. We are having some success in that regard." Senator Rockefeller said the draft memo leaked to the press was written by staff and was likely taken from a wastebasket or computer.

SEN. JAY ROCKEFELLER (D), WEST VIRGINIA: I do regret the impression -- most sincerely regret the impression that the draft memo has apparently given some of my Republican colleagues.

PILGRIM: But it refueled calls for the independent commission.

SEN. JOHN CORZINE (D), NEW JERSEY: This whole discussion, this leaked memo today, which only reinforces my own view that we need an independent bipartisan commission, because it is now becoming a political debate about whether there's politics inside the intelligence committee.

(END VIDEOTAPE)

PILGRIM: The memo suggested, "Pulling the trigger on an independent investigation," but it suggested the best time to do so would probably be next year, in the election year -- Lou.

DOBBS: Kitty, thank you very much. Kitty Pilgrim reporting tonight from Washington.

Later here, I'll be talking with the senior Democrat on the Select Senate Intelligence Committee. Senator Jay Rockefeller will join me.

Meanwhile, the White House today said it hopes that no one is trying to play politics with the issue of pre-war intelligence. Senior White House correspondent John King has that story -- John.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: And Lou, in this debate over the leaked Democratic memo, the White House certainly sees an opportunity to at least, for a day or two, maybe three, turn the spotlight elsewhere. It is this White House that has been criticized, mostly by Democrats, but at times by Republicans as well, for not being more forthcoming and turning over to Congress the information it wants about what the president knew, what the intelligence said before he decided to go to war in Iraq.

Today, in the White House briefing room, Press Secretary Scott McClellan said negotiations with the committee continues and that the White House hopes to cooperate. And as you noted, he says he hopes nowhere here is maneuvering for partisan gain.

(BEGIN VIDEO CLIP)

SCOTT MCLELLAN, WHITE HOUSE PRESS SECRETARY: We want to be helpful in their efforts to review the intelligent relating to Iraq. That's exactly what we planned to continue doing. Again, I just am not seeing that specific memo.

I've seen news reports. But we would hope that people are not prying to politicize an issue of such importance.

(END VIDEO CLIP)

KING: Of course Democrats say, that is disingenuous to the nth degree. They say it is Republicans in the Congress who have been political in defending this administration and refusing to press for more information from this administration. So you have the White House now saying it hopes the Democrats aren't playing politics, you have the Democrats say the Republicans and the White house are already stonewalling or playing politics.

So Lou, the debate over who is to blame continues, as does the debate over what this White House will provide in terms of information to the committee about the pre-war intelligence -- Lou.

DOBBS: John, one has to infer, however, that this memo would give the White House a significant basis for constraining the amount of information they would share with Chairman -- Senator Pat Roberts' committee.

KING: It will fall now on what Senator Roberts says because he's such a widely respected Republican. Certainly, the White House could now say, why should we give up something that will then become a political football? Why should we give up something when the Democratic staffers are already saying they plan to make it into a political manifesto for the campaign to come?

Many here at the White House saying how this plays out from here on out will depend on what the Republicans on the committee, not the Democrats, demand now of this White House.

DOBBS: John, thank you very much. John King, senior White House correspondent.

Coming up next: Democratic presidential front-runner, Howard Dean, the Confederate flag, and a controversy that has members of the Democratic Party demanding an apology. Senior political analyst Bill Schneider will join us with the story.

And that leak exposes a Democratic plan to target the administration. Senator Jay Rockefeller, the ranking Democrat on the Senate Intelligence Committee, joins me.

And "Wasted Minds," our special report, are failing schools. Tonight, the value of vouchers. Are they part of the solution or part of the problem?

Peter Viles will report, and two leading national experts on education will be here to face off on the issue. Please stay with us.

(COMMERCIAL BREAK)

DOBBS: The front-runner in the race for the Democratic presidential nomination has run into controversy in the South. Former Vermont Governor Howard Dean tried to score some populace points, talking about the Confederate flag. But tonight it's only causing him anguish.

Senior political analyst Bill Schneider has the report.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): Aren't Republicans supposed to be the party with the problem on the Confederate flag issue? They're not alone anymore, not since Howard Dean took up the issue last February.

DEAN: White folks in the South who drive with Confederate flags decals in the back ought to be voting with us and not them.

SCHNEIDER: Last week, Dean, who is nobody's idea of a good old boy, told the "Des Moines Register," "I still want to be the candidate for guys with Confederate flags in their pickup trucks." The Confederate flag is a symbol of inclusiveness? No. It's a symbol of racism and slavery.

In Tuesday night's debate, when a young African-American voter said he was extremely offended by that remark, Dean refused to back down.

DEAN: I make no apologies for reaching out to poor white people.

SCHNEIDER: That drew an immediate rebuke from a black candidate...

DEAN: Most poor southern whites don't wear Confederate flags. And you ought not try to stereotype that.

SCHNEIDER: And a southern white candidate.

JOHN EDWARDS (D-NC), PRESIDENTIAL CANDIDATE: Let me tell you, the last thing we need in the South is somebody like you coming down and telling us what we need to do.

SCHNEIDER: Edwards found a word to characterize Dean's southern strategy.

EDWARDS: It is condescending.

SCHNEIDER: Many Democrats were left to conclude Dean just doesn't get it. Today he got it. Sort of.

DEAN: Many of the people in the African-American community have supported what I have said over the past few days because they understand what this is about. But some have not. And to those, I deeply regret the pain that I may have caused.

Many of those supporters -- many of our white supporters have understood. But to those who do not, I regret the pain that I have caused.

SCHNEIDER: Was that an apology to those who he claims didn't understand what he was trying to say? Al Sharpton's response? I'll take it as an apology.

SHARPTON: I told him in private he must apologize. He said he wouldn't. Maybe at midnight the lord spoke to him.

(END VIDEOTAPE)

SCHNEIDER: In September, Dean said, "I'm the only white politician that ever talks about race in front of white audiences." Not very well, apparently -- Lou.

DOBBS: Bill, let's turn to those elections in the South last night. Two Democratic -- well, two Republican governors elected. Does that suggest the Democrats have considerable problems in South extending into the presidential election a year from now?

SCHNEIDER: Well, people have been talking about Democratic problems in the South for a long time. And as of last night, they got bigger, because both of the states had Democratic governors and they now will have Republican governors, or will very shortly as a result of last night's election.

Haley Barbour got elected governor of Mississippi, beating the incumbent Democrat. And incumbent Democrat who could not run for a third term in Kentucky will be succeeded by Ernie Fletcher, a Republican congressman. So that just continues the surge, the Republican tidal wave, really. You'll remember in 2000, George Bush won every single southern state.

DOBBS: Bill, thank you. And as you say, the surge, if you can call it with that, with three elections and the recall election in California, Arnold Schwarzenegger also winning. Bill Schneider, thank you very much.

Schwarzenegger will be sworn into office, by the way, in less than two weeks. The governor-elect of California will take over from Gray Davis on November 17th. A small gathering of about 7,500 people, if you can call that a small gathering, will receive tickets to the event. It's being paid for by private donations. The Schwarzenegger inaugural committee does not plan to host any galas or balls saying, "It is important to strike the right balance in light of the state's budget crisis."

Our quote tonight is on a source of controversy in California and across the Southwest. That is the debate over whether illegal aliens should have access to health care and other benefits. And we quote, "We need initiatives that provide opportunities and facilitate access to health care and education services for all those who share our border. Without this, it is impossible to think about the path to greater integration and shared prosperity."

That not from a border state governor. From Mexican President Vicente Fox, who today talked to law makers in New Mexico. He is on a three-state tour, including Texas and Arizona, campaigning for greater rights for Mexican immigrants and Mexican illegal aliens.

Just ahead here: New York's attorney general, Eliot Spitzer, has made some enemies on Wall Street. He's also made some friends. He's taking on the mutual fund industry. His friends tend to be investors. Eliot Spitzer joins me next. And "Wasted Minds," our special report tonight on our failing schools. Tonight, a controversial program that uses public money to send children to private schools. Peter Viles will report. Two leading national education experts will be here to debate the issue of choice in our face-off.

Please stay with us.

(COMMERCIAL BREAK)

DOBBS: The New York Stock Exchange interim chairman, John Reed, today stole the spotlight from stocks. The market didn't require much to steal the spotlight. The Dow down 18 points, the S&P down just more than a point.

Reed today unveiled his long-awaited plan to reform New York Stock Exchange management and governance following the outrage over former Chairman Richard Grasso's multi-million-dollar pay package. Christine Romans is here now with the story -- Christine.

CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, he asked the whole board to resign. He's replacing it with a smaller board to take its place. This is what it looks like.

He named eight new board members: Madeleine Albright, TIA (ph), (UNINTELLIGIBLE) from the whole board, and then six new addition. He said he'd accept the resignation of the rest of the old board because it didn't do its job.

Reed's plan has no fundamental changes to the in-house regulation or the specialist system. It creates a separate 20-member non-voting board of Wall Street executives, members, and specialists to advise the exchange and sit on some committees.

Now, several state treasurers say the reforms do not go deep enough. (UNINTELLIGIBLE) Sean Harrigan (ph) called it woefully inadequate because it doesn't give investors a strong voice on the board. And then he also mentioned there's this regulation issue.

Also, New York's controller said there was significant questions about the regulatory framework. And the SEC said this proposal is just the first step in a longer reform of the market structure of the New York Stock Exchange.

DOBBS: And here is the document from John Reed, interim chairman. Here is -- I don't know if you could see this. I don't know which camera to point it out.

This would be the news simplified hard-hitting regulatory- reformed, improved, more efficient market diagram of the New York Stock Exchange. A page upon page of what looks, to me, to be not much that addresses the fact that five specialist firms committed, well, an outrage.

ROMANS: John Reed says he's going to put this new board together and they can handle any of these other structural changes that may or may not need to be made at the New York Stock Exchange.

DOBBS: It sounds like John Reed just wants to get out of Dodge on this one.

ROMANS: He's not going to stick around. And this is his job. He's going to try to redo this thing. But he says that he has said several times that he's looking forward to retirement again.

DOBBS: Well, I think a number of people at the New York Exchange should be looking forward to retirement, given their performance of late in governance.

Christine Romans, thank you very much.

ROMANS: You're welcome.

DOBBS: Appreciate it.

Government regulators this week said they've uncovered widespread abuses in the mutual fund industry. At congressional hearings, investigators revealed how some fund managers allowed a few wealthy clients to profit from illegal trades. All, of course, at the expense of other investors.

The mutual fund investigation was first launched by New York's attorney general, Eliot Spitzer, a man who certainly has not shied from the spotlight since taking office four years ago, nor has he shirked his duties in protecting investors.

Bill Tucker is here with the story -- Bill.

BILL TUCKER, CNN CORRESPONDENT: No, he hasn't, Lou. In fact, Attorney General Spitzer just last week went so far as to say he thought heads should roll at the SEC, as a matter of fact. While SEC Chairman Bill Donaldson dismisses the remarks, at least one head has already rolled.

(BEGIN VIDEOTAPE)

TUCKER (voice-over): The head of the Securities and Exchange Commission's (UNINTELLIGIBLE) office out, resigning under criticism for his mishandling of a tip of alleged wrongdoing at Putnam Investments. Lawrence Lasser (ph), CEO of Putnam Investments, out after 18 years. Richard Strong, the founder of the Strong Funds, off the board which manages its mutual funds. Prudential Securities under investigation by the NASD for alleged mutual fund trading violations.

In all, roughly three dozen people have been fired or suspended as a result of the mutual fund scandal, and numerous mutual fund companies are reviewing their policies and practices regarding market timing in late trading.

UNIDENTIFIED MALE: I for one would award Eliot Spitzer the mutual fund shareholder's medal of honor for what -- for the service he's performed for fund investors. TUCKER: Spitzer has said he wants to work hand in glove with the SEC, but so far he's managed to run a couple of steps in front of the regulators. It is not certain whether the mutual fund companies will refund all of the moneys to investors, though Attorney General Spitzer says he will pursue the refunds. It is certain there will be mutual fund reform legislation.

SEN. SUSAN COLLINS (R), MAINE: We do have to be careful not to do an overreaction, but I think we also need to remember that mutual funds have always been promoted as the safe haven for the small investor.

(END VIDEOTAPE)

TUCKER: And today in the Senate, legislation was introduced which would require three-quarters of mutual fund directors and the chairman of a funds board be independent. And, Lou, you can be certain that more reform bills will be followed.

DOBBS: And apparently much needed.

TUCKER: Indeed.

DOBBS: Bill Tucker, thank you.

When we continue, New York's attorney general, Eliot Spitzer, will be here to talk about his efforts to change the way Wall Street works, his efforts to protect investors.

And Senator Jay Rockefeller will be here to talk about a leaked Democratic memo that calls for some response on the part of Republicans on the Hill. And Republican senators today certainly obliged.

Stay with us. John Rockefeller, New York's attorney general, Eliot Spitzer, next.

(COMMERCIAL BREAK)

DOBBS: Our next guest has single-handedly changed the way Wall Street does business. His investigation into the conflict between research and investment banking and brokerage ushered in drastic changes at some of the nation's biggest firms. He now has his sights set on the mutual fund industry, and he has started a chain of change there as well. New York's attorney general, Eliot Spitzer, is with me now.

Good to have you with us.

ELIOT SPITZER, NEW YORK ATTORNEY GENERAL: Always good to be here, Lou, thank you.

DOBBS: The testimony before Congress now, your investigation, mutual fund industry, first, you've accomplished a lot already in terms of the mutual fund industry. But we all thought if there was anything left for widows and orphans in the investment world it was mutual funds. This is startling by any definition.

SPITZER: Lou, I think that is what is so distressing about this. For years, the industry had said, we are pure, and we had believed it. Every time we turn over a rock in the mutual fund industry these days, we are seeing vermin crawl out that are appalling. Late trading, timing by those in the executive boardroom, billions of dollars every year being scraped off that should be going into the pockets of investors. Instead, ending up in the hands of the executives. It's crazy and it's wrong.

DOBBS: The mutual fund industry is huge, by any definition.

SPITZER: Correct.

DOBBS: How expansive will your investigation be? How large an involvement do you expect there to be on the part of the industry in this...

SPITZER: We are -- I think what we are seeing right now is having described or defined particular types of issues, the late trading, the self-dealing, the timing issues. Every fund complex, and the mutual fund companies themselves, they are now properly going through rigorous self-examination, coming back to us and to the SEC and confessing their sins. And they are saying, this is what we have found, these are the problems.

We have subpoenas that have blanketed the industry. The SEC has likewise done the same. We are finding impropriety based on impropriety piled on top of each other. There's a lot of bad stuff there, but the industry is finally going through the sort of self- examination it should have been going through on a full-time basis.

DOBBS: Almost two years ago, December 2, Enron, goes bankrupt.

SPITZER: Right.

DOBBS: The worst corruption scandal in corporate history in this country.

SPITZER: Right.

DOBBS: What in the world is it going to take for people to wake up?

SPITZER: You know, Lou, I keep asking myself that question. When this latest set of revelations about the mutual fund industry has been pouring forth out into the public, I keep saying to myself, What will it take to get executives and people to wake up to the fact they have a fiduciary duty. They've got to be honest, straightforward. It's not their money. They're taking money from the folks who have given to them, have entrusted it to them to invest it wisely and fairly. They're just failing in that duty and it's a shameful thing. But it just keeps going.

DOBBS: Where do you go next with your investigation? SPITZER: Well, we are going company by company. We have broker dealers, trust companies, mutual funds, hedge funds all involved in various trading schemes that we are investigating. We already have two felony pleas, two guilty pleas, another felony case pending, many criminal and civil cases that will be announced in the months to come.

And hopefully, at the end of the day, we will get a template for reform -- governance reform in the mutual fund industry so that we will finally get boards of directors there who will protect investors, which they have not been doing.

DOBBS: Amongst the issues that you brought to light in the Wall Street investigation and subsequent settlement, the roll of IPOs.

SPITZER: Right.

DOBBS: Does that also pertain to the mutual fund industry?

SPITZER: We are pursuing that issue. There have been allegations, they have been brought to my attention that the allocation of hot stocks has also been used in the mutual fund context. We need to see how that has played out, where that's gone wrong.

Last year, as you referred to, the use of hot stocks as bait, essentially, candy that was doled out to executives to get them bring business to the investment banks. They had the spinning what was a horrendous problem. We banded that in the global deal that was finalized, actually just signed by the judge just last week. It's an ongoing issue.

DOBBS: You -- you have been quoted as saying heads should roll at the SEC. One did, as Bill Tucker just reported. Should others?

SPITZER: You know, I don't want to create an adversarial relationship with the SEC.

DOBBS: I think you've done that.

(CROSSTALK)

DOBBS: If I may, you said that you've created a very healthy adversarial relationship because neither the Wall Street settlement would have occurred without your initiative, if I may compliment you...

(CROSSTALK)

DOBBS: And the mutual fund investigation we know wouldn't have occurred without you because the SEC declined to act on a whistleblower's information.

SPITZER: Let me say this. I will leave it to Bill Donaldson. I have respect for him. Steve Cutler, a great friend, colleague, chief of enforcement. They're now doing what they should be doing and we're working together. I have had the same frustration others have had. I wish that those who have a responsibility would have been there sooner. Going forward, we're working together. And I'm glad that we're making progress.

DOBBS: And you're making nice.

SPITZER: I'm trying.

DOBBS: I have the greatest respect as well for the chairman of the SEC, for Mr. Cutler as well. But the fact is, the problems continue. The oversight...

SPITZER: Well, let me say this. I agree with you. I think that there have been failures. I think that the industry failed to police itself, the SROs, whether it's the stock exchange or others, completely failed. Our regulators have failed.

DOBBS: Well, let's talk about that.

The New York Stock Exchange. This document, this proxy to the Big Board's members today comes out.

SPITZER: Right.

DOBBS: I mean -- again, I'm bowing to put this out. I mean, it is, to me mindboggling that John Reed, the interim chairman, thinks that this is a solution for governance.

SPITZER: Right. I want to read it carefully.

Let me say this. I have been as critical of the Exchange for the past months as anybody. I have said repeatedly -- and I believe this -- they failed as a regulatory organization. They are the primary defenders of the integrity of the marketplace. They didn't do it. So we've got to completely restructure what goes on there.

DOBBS: Are you going to get involved in the investigation, the SEC's...

SPITZER: I will look at what they have proposed. I will see the SEC reaction, pass my own -- pass on it. And yes, I will be involved if I think I can play a constructive role.

DOBBS: And total damages in the mutual fund?

SPITZER: Billions of dollars. Billions and billions of dollars.

DOBBS: Will you seek reparations?

SPITZER: Oh, absolutely. We have already begun. There will be billions of dollars that will go back to investors by the end of this process. We will do our best to make sure everybody is made whole. It was a scandal that is still unfolding.

DOBBS: Eliot Spitzer, New York's attorney general, thanks for being with us.

SPITZER: Thank you, Lou.

DOBBS: Coming up next here, Senator John Rockefeller, the ranking Democratic on the Intelligence Committee joins us. We'll be talking about the controversial memo that leaked to the media, to discuss politics and policy in Iraq as well. Senator Rockefeller joins us next from Capitol Hill.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: My next guest is at the center of a controversy over a leaked memo from Democrats on the Senate Intelligence Committee.

Senator Jay Rockefeller is the ranking Democrat on that committee and join us tonight from Washington.

Senator, good to have you with us.

SEN. JAY ROCKEFELLER (D), WEST VIRGINIA: Thank you, Lou.

DOBBS: This memo set off a firestorm, partisan politics on the Senate Intelligence Committee, Republicans outraged. Why did this happen? How did this happen?

ROCKEFELLER: First of all, it's so minuscule in the effects of what we do here on Intelligence Committee that both Pat Roberts and I are determined to not really get into it and to bring our committee together, as it should be, as we both have been trying to keep it. And to give encouragement not only to the committee, but also to the Intelligence Committee all over the world because we're in a dangerous time when our young men and women are, you know, overseas being shot and wounded.

DOBBS: Absolutely.

ROCKEFELLER: So, I mean, I understand your question. But I want you to understand the context in which I put it and that is that it's a grain of sand compared to the work of the committee and the work of intelligence.

DOBBS: I would take that point. But at the same time, this grain of sand has left the chairman of the committee, Pat Roberts, Senator Roberts saying, it's sort of like a personal slap in the face after you worked over time to come up with what we think is going to be a very good report on how to improve our capabilities at a time when your committee is trying to win the confidence and the support of the White House to provide documents.

Don't you think this memo has undercut that effort?

ROCKEFELLER: No, I don't. I think the memo will pass very quickly unless, you know, groups and some will, on the right, you know, push it. But, you know, there are differences, Pat, between members of the Intelligence Committee. Pat and I -- I mean Lou. Pat and I have our differences.

DOBBS: Right.

ROCKEFELLER: And one of them is the scope of the investigation. But that will be worked out. He thinks that we should be looking at just the state of intelligence, pre-war, leading up to the war, and I think it should be looking at the use of intelligence by the policymakers which is, in fact, mandated on us by the charter which created us.

So, you know, that's an argument. It's a legitimate argument. We'll work it out.

DOBBS: Right.

ROCKEFELLER: And we'll stay together while we do.

DOBBS: Senator, did you order the drafting of this memo?

ROCKEFELLER: No, I didn't.

DOBBS: Do you know who did?

ROCKEFELLER: No. I mean, it wasn't ordered. It was simply -- look, I have three people who work for me and, you know, you work in any office situation -- I'm sure this happens to you -- your people write you options or suggestions of something they didn't think you did well or you did do well. And they write you a memo just to you, nobody else sees it, nobody on the committee saw it, nobody outside the committee saw it until somebody delivered it to the press and now everybody's seen it. It's called "a thank." (ph) But, you know, to me it really isn't that big.

DOBBS: It was -- we have said the press here as well a leak. We should give credit to Sean Hannity at Fox, to whom it was leaked.

Do you disavow the thrust of this memo? Do you disavow...

ROCKEFELLER: I disavow nothing. I mean, you know, the thrust of the option informal draft memo, which went to nobody, the three people who wrote it and myself for whom they work, reflects frustration that I have and that other members on my side of the committee and maybe on the other side of the committee that we're not doing a full investigation. And that is that we have to not only look at intelligence itself, was it adequate, did it lead us to where we wanted to go, why was it that all of a sudden atomic activity, nuclear activity went from sort of dormant to reconstituted? How did that happen? We have to look at that.

But then we also have to look at, how is that intelligence taken by the executive branch of government? How is it used? Was it manipulated? Was it shaped? And we need to know those things. I don't start out with any preconceptions that it was shaped, but we need to know that.

DOBBS: Obviously, the memorandum suggests there is some prejudgment if you will, that there's a need for an independent investigation. I have to tell you Senator, I found it amusing that Senator Corzine of New Jersey was wanting to create a new commission because he thinks there's too much politics about politics on your committee which I thought was a wonderful way to capture the absurdity.

ROCKEFELLER: But there's an extension on that and that is that that shows that it was an innocent memo, because I voted against the Corzine amendment to create a new committee because I think Pat Roberts and my committee should be doing that and we have jurisdiction for it.

DOBBS: It is remarkable, because obviously, no one is so naive as to think there are not politics and consideration as even as our -- as the U.S. Senate weighs very significant, profound issues here. But at the same time, you and Senator Pat Roberts, who is highly regarded, as are you, there was the appearance, at least, that you two who working well together. Is this going to be disruptive to that? For example, Senator Hagel, Chuck Hagel, of Nebraska, Senator Pat Roberts, two people who have acted with obvious bipartisan interest, nonpartisan interest, do you think that this memorandum will, end that?

ROCKEFELLER: No, I don't at all. That's the whole point I'm trying to make. In fact, one of the -- I won't obviously give his name -- but one of the Republican members of the committee who spoke critical of me this morning we talked tonight and he said, you know, Jay, I observed you over the last company of years and you have been totally bipartisan, totally helpful and totally pro-committee were.

You know he said one thing on the floor, maybe that's what his job was, and I don't really care. But the point was that he thinks I'm fair. And I know I'm fair. You don't play politics with intelligence. You can play politics with other things, but you cannot do it with the intelligence and the armed forces and the security of our nation. You cannot do it. You don't even consider doing it.

DOBBS: So, while not disavowing the memo should your Democratic staff on the select committee be taking that as a straightforward admonition?

ROCKEFELLER: No. Because they -- you know, I don't back way from anything on this, Lou, because of the fact that their job is to service me with ideas and thoughts and strategies and options. They work for me, exclusively for me, the memo is drafted exclusively for me by them and went to nobody else in the entire world until it was handed over to the gentleman that you mentioned.

And then, of course you know, it blew up. Those things happen in the Senate. We've all been around long enough to know that they come and they go. Pat Roberts and I will stay together. We both care profoundly about the intelligence and the security policy and safety of our troops. DOBBS: Senator Jay Rockefeller, we thank you for being with us here this evening.

ROCKEFELLER: Thank you, Lou. Thanks a lot.

DOBBS: We want to hear from you on the topic in tonight's poll. The question is, "what is your reaction to the Democratic memo seeking to politicize the pre-war intelligence issue? Outrage, politics as usual." Two reasonable choices. Cast your vote at cnn.com/lou. We'll have the results for you a little later, here.

Coming up next, wasted minds: our failing schools, our special report tonight. The risks and the rewards of school vouchers, public money used for private education. Peter Viles will report and two national leading experts face off on the issue of school choice. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Tonight, the debate over school vouchers, giving parents the option of using public money to send their children to private schools. The Supreme Court ruled last year that such programs do not violate the constitutional separation of church and state. Yet these programs remain rare, their success mixed and often controversial. Peter Vials reports.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): Urban Day School in Milwaukee, a so-called voucher school, bringing high expectations to a low-income neighborhood and to parents like Aretha Adams.

ARETHA ADAMS, MOTHER: It's much better because her grades is up, better than it was. And hopefully, she will be making the honor roll this year.

VILES: History indicates these kids are more likely to graduate high school than kids in Milwaukee's public schools.

GEOFFREY LOWRY, PRES. URBAN DAY SCHOOL: We really work with our kids to get them to understand that how to overcome obstacles so that when they go to high school they actually graduate.

UNIDENTIFIED FEMALE: Let's look at our words.

LOWRY: We graduate over 90 percent of our kids in last 36 years that Urban Day's been in existence.

VILES: Milwaukee is a leader in a national movement, but that movement is tiny. Of the 5 and million American children in grade school or high school, 5.1 million attend private schools, but only 15,000 to 30,000, depending on which advocacy group does the math, go to private schools using public money. Voucher programs weaken public schools, because they skim off the most motivated students and the most active parent parents. RICHARD KAHLENBERG, CENTURY FOUNDATION: What bothers me most about vouchers is that we will end up sighing a small number of motivated families leave the public school system and the public school students left behind are going to be even worse off.

VILES: Most private schools are not required to give standardized tests so it's hard to gauge performance of voucher schools. But surveys usually show that inner city parents want the option.

BRUCE FULLER, UC BERKELEY: There's no question that the support for vouchers is strongest along low income parents faced with dangerous or mediocre schools. You go out to white suburban areas and the political support for vouchers is very low.

VILES (on camera): At the heart of this voucher debate is the issue of fairness. Private schools are expensive, this one in Manhattan, tuition tops out at $20,000 a year. Which means that in many American cities, poor children are trapped in bad schools. Peter Viles, CNN, New York.

(END VIDEOTAPE)

DOBBS: In tonight's face-off, arguing in favor of school vouchers, Nina Reese, deputy undersecretary for innovation and improvement, U.S. Department of Education. She says federal, state and local funds should focus on the needs of children, no matter the school setting.

Arguing against that voucher program, Nancy Keenan. She's education policy director at the People for the American Way. She says vouchers don't improve teacher quality, lessening class size, nor do they get parents more involved in their schools.

Thank you both for being here.

Let me turn, first if I may, to you, Nancy.

Vouchers, why have they not in your judgment, offered a solution?

NANCY KEENAN, EDUCATION POLICY DIRECTOR PEOPLE FOR THE AMERICAN WAY: I think there's a couple reasons, Lou. One, they don't work. We find that as indicated by the earlier report, most of our children are in public schools and for those children who are there trying to meet high standards and be accountable, they don't work in most cases. Vouchers do not. Secondly, they're not publicly accountable for public dollars and I think that is a big issue for taxpayers and parents in the country.

DOBBS: Nina, your response?

NINA REES, DEPUTY UNDERSECRETARY U.S. DEPARTMENT OF EDUCATION: Well, in our view, in places where we have had choice programs in please like Milwaukee, Cleveland, the state of Florida. We have actually noticed marked improvements in academic achievement among students who are benefiting from the programs. But more importantly we're also noticing that the over all academic achievement in public schools seems to be edge proving whenever there is a robust competition between public and private schools.

The fact of matter is until we have a broad-based program that we study carefully we're not going to actually be able to answer a lot of the questions that the critics have been asking us and that's why it's so important for Congress to enact a choice program here in the District of Columbia, where we can study the progress of students on an annual basis and answer all of the questions that people for the American Way and other individuals have had in the past.

DOBBS: Nancy, turn to you if I may. Let me ask you, minority children, poor children those in urban centers who do not have an opportunity for the same education as many people in many young people in suburban, how can we deny them that opportunity?

Lou, it's not about denying them opportunity. We support public school choice where you have magnet schools and all sorts of opportunity within the public system with public dollars. I think the point that this privatization of public schools actually enhances the learning for these children is a bogus argument. The fact is, there is no voucher program in Seattle, in Los Angeles, in Portland, in Birmingham, up in Baltimore, and those children are learning in our public schools and doing very well. So to say that the competition causes improvement in our public schools, nothing proven there. Again I think a bogus argument.

REES: The reason why these programs don't exist in the cities is because you have education unions and a lot of lobbying organizations that have been opposing them over the years. By in large when you look at polling data, the level of support among minorities and among low income parents especially school districts that don't have a lot of quality public schools for these programs is extremely high. But unfortunately the voices of these individuals are not being heard. Most of them not elected, are not elected officials or are not registered voters and unfortunately a lot of individuals like folks from people for the American Way are not giving them the opportunity to exercise their position options.

DOBBS: Nancy go ahead.

KEENAN: Let's get this straight. The fact of the matter is across the country, states and parents have voted against implementation of voucher programs.

REES: That is so not true.

KEENAN: It is when the legislature imposes it, much like Congress is trying to do now with D.C., impose it on the people. Minority parents in fact most recent poll and (UNINTELLIGIBLE) poll shows that literally opposition to vouchers has gone up to 60 percent in this country. They want lower class sighs, better prepared teachers they want those programs like the sage program in Milwaukee funded. Those are the kinds of things that people are saying they rather done that divert public money to private institutions. REES: I don't think -- there's nothing more unAmerican than forcing a low income parent to send their children to a low-performing school. I think when it comes to the question of individual rights and liberties people for the American Way has for so long been fighting for individual rights and opportunities it's extremely disappointing to have people like people for the American Way opposing giving opportunities for parents to send their kids to better schools.

DOBBS: Nancy, you have the closing thought.

KEENAN: Well, what's interesting if we're going to spend public dollars on private schools, then there should be public accountability for those dollars both for academic accountability and for our taxpayer fiscal accountability. And I don't think that exists right now with any voucher program in the country.

REES: The public dollars ought to raise achievement of the students, currently they're not getting that in public schools they're attending.

DOBBS: I appreciate you both attending here. And I hope you will come back soon as we explore whether school choice is about choice at all and examine the role of vouchers in that very important issue. Thank you very much for being here.

REES: Thank you.

KEENAN: Thank you.

DOBBS: Coming up next we'll share some of "Your Thoughts" including whether you think the media's living up to our responsibility to inform the public about the war in Iraq. Please stay with us.

(COMMERCIAL BREAK)

DOBBS: The results of "Tonight's Poll." The question, what is your reaction to the Democratic memo to politicizee the prewar intelligence issue. Three percent of you said outraged. 97 percent said politics as usual.

Now for a look at some of "Your Thoughts." Many wrote in about our poll question last night asking whether the media was doing a good job of informing you about the reality in Iraq.

From Paso Robles, California, "I think the media is representing the reality and news of Iraq. The Bush administration can only criticize because it does not meet their selected perspective. That is not the media's fault." That from Richard Zenobio.

From San Antonio, Texas, "The truth hurts, but we need to hear it. This is a little more important than CBS not showing a stupid miniseries or Scott Peterson's telephone calls to his mistress, or Rosie O'Donnell's lawsuit, don't you think?" M.A. Villa, we certainly agree. And from York, Maine, "Dear Lou, if losing a soldier a day is deemed by our president as proof of winning the war on terror in Iraq, does that mean that by losing a job a day in the U.S. we are winning an economic recovery?"

From Pickens, Mississippi, "After the debate last evening I find myself removing names from a list of possible candidates for president. Being from the south, Howard Dean's offensive statement about confederate flags give the south and all its citizens a bad name." That from Jim.

And on our series "Wasted Minds," from Vicksburg, Michigan. "Putting more money into schools is every politicians answer. Why not try a little discipline and let the teachers teach!" And that from Joel Ulsh.

And from Amherst, Virginia, "Lou, you and staff really are doing an outstanding service regarding all the issues: illegal aliens, corporate corruption, Iraq/Afghan war, wounded Americans, education, you name it! I never miss your show, the best on TV."

We love hearing from you. E-mail us at loudobbs@cnn.com.

And finally tonight the Voyager I Space Probe is making history. More than 8 billion miles from planet Earth. Voyager one is the first man made object to reach the edge of the solar system. It will eventually journey to the star next door but, that milestone won't be reach for another 40,000 years. Voyager I, by the way was launched back in 1977 along with it's twin voyager II, to see out information on Jupiter and Saturn.

That's our show for tonight thanks for being with us. For all of us here, good night from New York. "ANDERSON COOPER 360" is next.

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





Next Year; Republicans Outraged Over Leaked Democratic Memo>


Aired November 5, 2003 - 18:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, HOST: Good evening. Tonight, a leaked Democratic memo about pre-war intelligence on Iraq has set off a storm of protests from Republicans on Capitol Hill. Senator Jay Rockefeller is the ranking Democrat on the Select Committee on Intelligence, and he joins me tonight.
Republicans are celebrating gubernatorial victories in Kentucky and Mississippi. Do those victories suggest the Democrats are in trouble in the South? Senior political analyst Bill Schneider will give us his assessment.

And New York's attorney general, Eliot Spitzer, has the mutual fund industry in his regulatory and prosecutorial sights after his successful crackdown on Wall Street corruption. The New York attorney general joins me tonight as well.

And in our special report tonight, "Wasted Minds, Failing Schools," why school vouchers and school choice may really mean parents have no choice at all in our public schools.

Tonight, the Pentagon is ordering thousands of additional active duty National Guard and Reserve troops to prepare for duty in Iraq early next year. The military is preparing to send many more troops to Iraq than originally planned because other nations have failed to contribute as many soldiers as the Pentagon and the White House had hoped. Defense Secretary Donald Rumsfeld is expected to make a final decision this week on which units will be sent to Iraq.

Senior Pentagon correspondent Jamie McIntyre now with the report -- Jamie.

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT: Well, Lou, we've been told those decisions have pretty much been made. In fact, the failure of the United States to get a significant number of additional troops from other countries will mean, according to sources, that some Marines who just returned from Iraq in September will have to go back sometime next year.

The Pentagon has worked out the details of this rotation plan, which was announced in general terms a couple of months ago. But now all of the specifics have been worked out. It will be announced tomorrow here in the Pentagon briefing room.

According to sources, among the troops that will be going to Iraq is the 1st Cavalry Division from Fort. Hood, Texas, which pretty much knew it was going to deploy, and the 1st Infantry Division from Germany. Again, no surprise there. But the Marines were added to the plan in recent weeks, according to sources, as it was fine-tuned.

General Peter Pace, the vice chairman of the Joint Chiefs, told Congress today that the U.S. troops now in Iraq all serving one-year tours won't be replaced one for one. In fact, the overall number of U.S. troops is expected to drop by 30,000 to about 100,000.

(BEGIN VIDEO CLIP)

GEN. PETER PACE, VICE CHAIRMAN, JOINT CHIEFS: So we look at projections for security requirements in Iraq and total capabilities of non-Iraqi coalition, Iraqi coalition and U.S., we think that the spike in need for ground troops will in fact continue to go down, that it is not a new plateau.

(END VIDEO CLIP)

MCINTYRE: Now, as you said, there was a lot of concern that they would have to send a large number of additional troops because they didn't get that multinational division. But now it turns out that the Pentagon has decided that the 101st Airborne Division, which was supposed to be replaced by those international troops, will be replaced by a smaller force because it's in the relatively safe area in the north, which has been relatively stable. The Pentagon has tweaked the plan in other ways, as I said, adding some Marines, adding a few more reservists, and they say that overall, it's not a significantly bigger number than they originally planned to send.

DOBBS: Jamie, moving the 1st Cav to Iraq leaves no division in the United States and reserve, does it?

MCINTYRE: Well, there's no division that's just standing around ready to go. However, there are divisions that could be activated in case of an emergency. Again, these troops aren't leaving immediately. And in the case if something were to happen, they could keep all of the troops who are there even longer.

DOBBS: Jamie, is there a mounting sense of frustration at the Pentagon that not only are there new challenges in Iraq, but that the forced deployment and forced level simply is not adequate to meet the global strategy of either this administration or the previous?

MCINTYRE: Well, there's certainly a raging debate about that. And you can get people to argue it pretty strongly on either side. Defense Secretary Rumsfeld has continued to insist that, after they review everything, if they need more troops, they will come to Congress and ask for an increase in the strength.

It's something that the Army chief of staff, particularly the new Army chief of staff, General Shumaker, is looking at as well. And people are anxiously awaiting to see what conclusion he's come to. He has hinted, by the way, he does think the Army needs to be bigger.

DOBBS: General Shumaker obviously one of the most highly regarded generals in the Pentagon after returning to service. Jamie McIntyre, our senior Pentagon correspondent, as always, thank you.

Senator John McCain today strongly criticized the Pentagon for the way it's handled the issue of troop deployments in Iraq. Senator McCain said the United States does not have enough troops in Iraq to meet our military objectives.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: There does not appear to be a strategy behind our current force levels in Iraq other than to preserve the illusion that we have sufficient forces in place to meet our objectives.

(END VIDEO CLIP)

DOBBS: And Senator McCain was not suggesting a withdrawal of U.S. troops, rather the addition of troops. He said a premature military draw down in Iraq, as apparently envisioned by the Pentagon right now, would encourage, in his view, terrorists and endanger American leadership in the world.

Tonight, a political battle on Capitol Hill after the leak of a Democratic memo calling for an investigation into White House motives for the war against Saddam Hussein. The Republicans say that memo is a Democratic attack plan to embarrass the president before the election next year. The Democrats say the memo was simply written by a staff member and was not approved nor shared with members of the Intelligence Committee.

Kitty Pilgrim reports from Washington.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Republicans are outraged over the leaked Democratic memo that sought ways to reveal President Bush's, "dubious motives" on the war in Iraq.

SEN. JON KYL (R), ARIZONA: I never saw the kind of blatant partisan politics emerge that has apparently emerged, as revealed in this memorandum.

SEN. KIT BOND (R), MISSOURI: This memo suggests that there is, at least at the staff level, a Democratic game plan to make the intelligence committee a focal point for the 2004 presidential debates.

SEN. TRENT LOTT (R), MISSISSIPPI: It shouldn't be about the blame game. It shouldn't be about politics. It shouldn't be about trying to find a way to blame it on the president or the vice president or anybody else.

PILGRIM: There is no question, the memo is political. It states, "Our plan is as follows: pull the majority along as far as we can on issues that may lead to major new disclosures regarding improper or questionable conduct by administration officials. We are having some success in that regard." Senator Rockefeller said the draft memo leaked to the press was written by staff and was likely taken from a wastebasket or computer.

SEN. JAY ROCKEFELLER (D), WEST VIRGINIA: I do regret the impression -- most sincerely regret the impression that the draft memo has apparently given some of my Republican colleagues.

PILGRIM: But it refueled calls for the independent commission.

SEN. JOHN CORZINE (D), NEW JERSEY: This whole discussion, this leaked memo today, which only reinforces my own view that we need an independent bipartisan commission, because it is now becoming a political debate about whether there's politics inside the intelligence committee.

(END VIDEOTAPE)

PILGRIM: The memo suggested, "Pulling the trigger on an independent investigation," but it suggested the best time to do so would probably be next year, in the election year -- Lou.

DOBBS: Kitty, thank you very much. Kitty Pilgrim reporting tonight from Washington.

Later here, I'll be talking with the senior Democrat on the Select Senate Intelligence Committee. Senator Jay Rockefeller will join me.

Meanwhile, the White House today said it hopes that no one is trying to play politics with the issue of pre-war intelligence. Senior White House correspondent John King has that story -- John.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: And Lou, in this debate over the leaked Democratic memo, the White House certainly sees an opportunity to at least, for a day or two, maybe three, turn the spotlight elsewhere. It is this White House that has been criticized, mostly by Democrats, but at times by Republicans as well, for not being more forthcoming and turning over to Congress the information it wants about what the president knew, what the intelligence said before he decided to go to war in Iraq.

Today, in the White House briefing room, Press Secretary Scott McClellan said negotiations with the committee continues and that the White House hopes to cooperate. And as you noted, he says he hopes nowhere here is maneuvering for partisan gain.

(BEGIN VIDEO CLIP)

SCOTT MCLELLAN, WHITE HOUSE PRESS SECRETARY: We want to be helpful in their efforts to review the intelligent relating to Iraq. That's exactly what we planned to continue doing. Again, I just am not seeing that specific memo.

I've seen news reports. But we would hope that people are not prying to politicize an issue of such importance.

(END VIDEO CLIP)

KING: Of course Democrats say, that is disingenuous to the nth degree. They say it is Republicans in the Congress who have been political in defending this administration and refusing to press for more information from this administration. So you have the White House now saying it hopes the Democrats aren't playing politics, you have the Democrats say the Republicans and the White house are already stonewalling or playing politics.

So Lou, the debate over who is to blame continues, as does the debate over what this White House will provide in terms of information to the committee about the pre-war intelligence -- Lou.

DOBBS: John, one has to infer, however, that this memo would give the White House a significant basis for constraining the amount of information they would share with Chairman -- Senator Pat Roberts' committee.

KING: It will fall now on what Senator Roberts says because he's such a widely respected Republican. Certainly, the White House could now say, why should we give up something that will then become a political football? Why should we give up something when the Democratic staffers are already saying they plan to make it into a political manifesto for the campaign to come?

Many here at the White House saying how this plays out from here on out will depend on what the Republicans on the committee, not the Democrats, demand now of this White House.

DOBBS: John, thank you very much. John King, senior White House correspondent.

Coming up next: Democratic presidential front-runner, Howard Dean, the Confederate flag, and a controversy that has members of the Democratic Party demanding an apology. Senior political analyst Bill Schneider will join us with the story.

And that leak exposes a Democratic plan to target the administration. Senator Jay Rockefeller, the ranking Democrat on the Senate Intelligence Committee, joins me.

And "Wasted Minds," our special report, are failing schools. Tonight, the value of vouchers. Are they part of the solution or part of the problem?

Peter Viles will report, and two leading national experts on education will be here to face off on the issue. Please stay with us.

(COMMERCIAL BREAK)

DOBBS: The front-runner in the race for the Democratic presidential nomination has run into controversy in the South. Former Vermont Governor Howard Dean tried to score some populace points, talking about the Confederate flag. But tonight it's only causing him anguish.

Senior political analyst Bill Schneider has the report.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): Aren't Republicans supposed to be the party with the problem on the Confederate flag issue? They're not alone anymore, not since Howard Dean took up the issue last February.

DEAN: White folks in the South who drive with Confederate flags decals in the back ought to be voting with us and not them.

SCHNEIDER: Last week, Dean, who is nobody's idea of a good old boy, told the "Des Moines Register," "I still want to be the candidate for guys with Confederate flags in their pickup trucks." The Confederate flag is a symbol of inclusiveness? No. It's a symbol of racism and slavery.

In Tuesday night's debate, when a young African-American voter said he was extremely offended by that remark, Dean refused to back down.

DEAN: I make no apologies for reaching out to poor white people.

SCHNEIDER: That drew an immediate rebuke from a black candidate...

DEAN: Most poor southern whites don't wear Confederate flags. And you ought not try to stereotype that.

SCHNEIDER: And a southern white candidate.

JOHN EDWARDS (D-NC), PRESIDENTIAL CANDIDATE: Let me tell you, the last thing we need in the South is somebody like you coming down and telling us what we need to do.

SCHNEIDER: Edwards found a word to characterize Dean's southern strategy.

EDWARDS: It is condescending.

SCHNEIDER: Many Democrats were left to conclude Dean just doesn't get it. Today he got it. Sort of.

DEAN: Many of the people in the African-American community have supported what I have said over the past few days because they understand what this is about. But some have not. And to those, I deeply regret the pain that I may have caused.

Many of those supporters -- many of our white supporters have understood. But to those who do not, I regret the pain that I have caused.

SCHNEIDER: Was that an apology to those who he claims didn't understand what he was trying to say? Al Sharpton's response? I'll take it as an apology.

SHARPTON: I told him in private he must apologize. He said he wouldn't. Maybe at midnight the lord spoke to him.

(END VIDEOTAPE)

SCHNEIDER: In September, Dean said, "I'm the only white politician that ever talks about race in front of white audiences." Not very well, apparently -- Lou.

DOBBS: Bill, let's turn to those elections in the South last night. Two Democratic -- well, two Republican governors elected. Does that suggest the Democrats have considerable problems in South extending into the presidential election a year from now?

SCHNEIDER: Well, people have been talking about Democratic problems in the South for a long time. And as of last night, they got bigger, because both of the states had Democratic governors and they now will have Republican governors, or will very shortly as a result of last night's election.

Haley Barbour got elected governor of Mississippi, beating the incumbent Democrat. And incumbent Democrat who could not run for a third term in Kentucky will be succeeded by Ernie Fletcher, a Republican congressman. So that just continues the surge, the Republican tidal wave, really. You'll remember in 2000, George Bush won every single southern state.

DOBBS: Bill, thank you. And as you say, the surge, if you can call it with that, with three elections and the recall election in California, Arnold Schwarzenegger also winning. Bill Schneider, thank you very much.

Schwarzenegger will be sworn into office, by the way, in less than two weeks. The governor-elect of California will take over from Gray Davis on November 17th. A small gathering of about 7,500 people, if you can call that a small gathering, will receive tickets to the event. It's being paid for by private donations. The Schwarzenegger inaugural committee does not plan to host any galas or balls saying, "It is important to strike the right balance in light of the state's budget crisis."

Our quote tonight is on a source of controversy in California and across the Southwest. That is the debate over whether illegal aliens should have access to health care and other benefits. And we quote, "We need initiatives that provide opportunities and facilitate access to health care and education services for all those who share our border. Without this, it is impossible to think about the path to greater integration and shared prosperity."

That not from a border state governor. From Mexican President Vicente Fox, who today talked to law makers in New Mexico. He is on a three-state tour, including Texas and Arizona, campaigning for greater rights for Mexican immigrants and Mexican illegal aliens.

Just ahead here: New York's attorney general, Eliot Spitzer, has made some enemies on Wall Street. He's also made some friends. He's taking on the mutual fund industry. His friends tend to be investors. Eliot Spitzer joins me next. And "Wasted Minds," our special report tonight on our failing schools. Tonight, a controversial program that uses public money to send children to private schools. Peter Viles will report. Two leading national education experts will be here to debate the issue of choice in our face-off.

Please stay with us.

(COMMERCIAL BREAK)

DOBBS: The New York Stock Exchange interim chairman, John Reed, today stole the spotlight from stocks. The market didn't require much to steal the spotlight. The Dow down 18 points, the S&P down just more than a point.

Reed today unveiled his long-awaited plan to reform New York Stock Exchange management and governance following the outrage over former Chairman Richard Grasso's multi-million-dollar pay package. Christine Romans is here now with the story -- Christine.

CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, he asked the whole board to resign. He's replacing it with a smaller board to take its place. This is what it looks like.

He named eight new board members: Madeleine Albright, TIA (ph), (UNINTELLIGIBLE) from the whole board, and then six new addition. He said he'd accept the resignation of the rest of the old board because it didn't do its job.

Reed's plan has no fundamental changes to the in-house regulation or the specialist system. It creates a separate 20-member non-voting board of Wall Street executives, members, and specialists to advise the exchange and sit on some committees.

Now, several state treasurers say the reforms do not go deep enough. (UNINTELLIGIBLE) Sean Harrigan (ph) called it woefully inadequate because it doesn't give investors a strong voice on the board. And then he also mentioned there's this regulation issue.

Also, New York's controller said there was significant questions about the regulatory framework. And the SEC said this proposal is just the first step in a longer reform of the market structure of the New York Stock Exchange.

DOBBS: And here is the document from John Reed, interim chairman. Here is -- I don't know if you could see this. I don't know which camera to point it out.

This would be the news simplified hard-hitting regulatory- reformed, improved, more efficient market diagram of the New York Stock Exchange. A page upon page of what looks, to me, to be not much that addresses the fact that five specialist firms committed, well, an outrage.

ROMANS: John Reed says he's going to put this new board together and they can handle any of these other structural changes that may or may not need to be made at the New York Stock Exchange.

DOBBS: It sounds like John Reed just wants to get out of Dodge on this one.

ROMANS: He's not going to stick around. And this is his job. He's going to try to redo this thing. But he says that he has said several times that he's looking forward to retirement again.

DOBBS: Well, I think a number of people at the New York Exchange should be looking forward to retirement, given their performance of late in governance.

Christine Romans, thank you very much.

ROMANS: You're welcome.

DOBBS: Appreciate it.

Government regulators this week said they've uncovered widespread abuses in the mutual fund industry. At congressional hearings, investigators revealed how some fund managers allowed a few wealthy clients to profit from illegal trades. All, of course, at the expense of other investors.

The mutual fund investigation was first launched by New York's attorney general, Eliot Spitzer, a man who certainly has not shied from the spotlight since taking office four years ago, nor has he shirked his duties in protecting investors.

Bill Tucker is here with the story -- Bill.

BILL TUCKER, CNN CORRESPONDENT: No, he hasn't, Lou. In fact, Attorney General Spitzer just last week went so far as to say he thought heads should roll at the SEC, as a matter of fact. While SEC Chairman Bill Donaldson dismisses the remarks, at least one head has already rolled.

(BEGIN VIDEOTAPE)

TUCKER (voice-over): The head of the Securities and Exchange Commission's (UNINTELLIGIBLE) office out, resigning under criticism for his mishandling of a tip of alleged wrongdoing at Putnam Investments. Lawrence Lasser (ph), CEO of Putnam Investments, out after 18 years. Richard Strong, the founder of the Strong Funds, off the board which manages its mutual funds. Prudential Securities under investigation by the NASD for alleged mutual fund trading violations.

In all, roughly three dozen people have been fired or suspended as a result of the mutual fund scandal, and numerous mutual fund companies are reviewing their policies and practices regarding market timing in late trading.

UNIDENTIFIED MALE: I for one would award Eliot Spitzer the mutual fund shareholder's medal of honor for what -- for the service he's performed for fund investors. TUCKER: Spitzer has said he wants to work hand in glove with the SEC, but so far he's managed to run a couple of steps in front of the regulators. It is not certain whether the mutual fund companies will refund all of the moneys to investors, though Attorney General Spitzer says he will pursue the refunds. It is certain there will be mutual fund reform legislation.

SEN. SUSAN COLLINS (R), MAINE: We do have to be careful not to do an overreaction, but I think we also need to remember that mutual funds have always been promoted as the safe haven for the small investor.

(END VIDEOTAPE)

TUCKER: And today in the Senate, legislation was introduced which would require three-quarters of mutual fund directors and the chairman of a funds board be independent. And, Lou, you can be certain that more reform bills will be followed.

DOBBS: And apparently much needed.

TUCKER: Indeed.

DOBBS: Bill Tucker, thank you.

When we continue, New York's attorney general, Eliot Spitzer, will be here to talk about his efforts to change the way Wall Street works, his efforts to protect investors.

And Senator Jay Rockefeller will be here to talk about a leaked Democratic memo that calls for some response on the part of Republicans on the Hill. And Republican senators today certainly obliged.

Stay with us. John Rockefeller, New York's attorney general, Eliot Spitzer, next.

(COMMERCIAL BREAK)

DOBBS: Our next guest has single-handedly changed the way Wall Street does business. His investigation into the conflict between research and investment banking and brokerage ushered in drastic changes at some of the nation's biggest firms. He now has his sights set on the mutual fund industry, and he has started a chain of change there as well. New York's attorney general, Eliot Spitzer, is with me now.

Good to have you with us.

ELIOT SPITZER, NEW YORK ATTORNEY GENERAL: Always good to be here, Lou, thank you.

DOBBS: The testimony before Congress now, your investigation, mutual fund industry, first, you've accomplished a lot already in terms of the mutual fund industry. But we all thought if there was anything left for widows and orphans in the investment world it was mutual funds. This is startling by any definition.

SPITZER: Lou, I think that is what is so distressing about this. For years, the industry had said, we are pure, and we had believed it. Every time we turn over a rock in the mutual fund industry these days, we are seeing vermin crawl out that are appalling. Late trading, timing by those in the executive boardroom, billions of dollars every year being scraped off that should be going into the pockets of investors. Instead, ending up in the hands of the executives. It's crazy and it's wrong.

DOBBS: The mutual fund industry is huge, by any definition.

SPITZER: Correct.

DOBBS: How expansive will your investigation be? How large an involvement do you expect there to be on the part of the industry in this...

SPITZER: We are -- I think what we are seeing right now is having described or defined particular types of issues, the late trading, the self-dealing, the timing issues. Every fund complex, and the mutual fund companies themselves, they are now properly going through rigorous self-examination, coming back to us and to the SEC and confessing their sins. And they are saying, this is what we have found, these are the problems.

We have subpoenas that have blanketed the industry. The SEC has likewise done the same. We are finding impropriety based on impropriety piled on top of each other. There's a lot of bad stuff there, but the industry is finally going through the sort of self- examination it should have been going through on a full-time basis.

DOBBS: Almost two years ago, December 2, Enron, goes bankrupt.

SPITZER: Right.

DOBBS: The worst corruption scandal in corporate history in this country.

SPITZER: Right.

DOBBS: What in the world is it going to take for people to wake up?

SPITZER: You know, Lou, I keep asking myself that question. When this latest set of revelations about the mutual fund industry has been pouring forth out into the public, I keep saying to myself, What will it take to get executives and people to wake up to the fact they have a fiduciary duty. They've got to be honest, straightforward. It's not their money. They're taking money from the folks who have given to them, have entrusted it to them to invest it wisely and fairly. They're just failing in that duty and it's a shameful thing. But it just keeps going.

DOBBS: Where do you go next with your investigation? SPITZER: Well, we are going company by company. We have broker dealers, trust companies, mutual funds, hedge funds all involved in various trading schemes that we are investigating. We already have two felony pleas, two guilty pleas, another felony case pending, many criminal and civil cases that will be announced in the months to come.

And hopefully, at the end of the day, we will get a template for reform -- governance reform in the mutual fund industry so that we will finally get boards of directors there who will protect investors, which they have not been doing.

DOBBS: Amongst the issues that you brought to light in the Wall Street investigation and subsequent settlement, the roll of IPOs.

SPITZER: Right.

DOBBS: Does that also pertain to the mutual fund industry?

SPITZER: We are pursuing that issue. There have been allegations, they have been brought to my attention that the allocation of hot stocks has also been used in the mutual fund context. We need to see how that has played out, where that's gone wrong.

Last year, as you referred to, the use of hot stocks as bait, essentially, candy that was doled out to executives to get them bring business to the investment banks. They had the spinning what was a horrendous problem. We banded that in the global deal that was finalized, actually just signed by the judge just last week. It's an ongoing issue.

DOBBS: You -- you have been quoted as saying heads should roll at the SEC. One did, as Bill Tucker just reported. Should others?

SPITZER: You know, I don't want to create an adversarial relationship with the SEC.

DOBBS: I think you've done that.

(CROSSTALK)

DOBBS: If I may, you said that you've created a very healthy adversarial relationship because neither the Wall Street settlement would have occurred without your initiative, if I may compliment you...

(CROSSTALK)

DOBBS: And the mutual fund investigation we know wouldn't have occurred without you because the SEC declined to act on a whistleblower's information.

SPITZER: Let me say this. I will leave it to Bill Donaldson. I have respect for him. Steve Cutler, a great friend, colleague, chief of enforcement. They're now doing what they should be doing and we're working together. I have had the same frustration others have had. I wish that those who have a responsibility would have been there sooner. Going forward, we're working together. And I'm glad that we're making progress.

DOBBS: And you're making nice.

SPITZER: I'm trying.

DOBBS: I have the greatest respect as well for the chairman of the SEC, for Mr. Cutler as well. But the fact is, the problems continue. The oversight...

SPITZER: Well, let me say this. I agree with you. I think that there have been failures. I think that the industry failed to police itself, the SROs, whether it's the stock exchange or others, completely failed. Our regulators have failed.

DOBBS: Well, let's talk about that.

The New York Stock Exchange. This document, this proxy to the Big Board's members today comes out.

SPITZER: Right.

DOBBS: I mean -- again, I'm bowing to put this out. I mean, it is, to me mindboggling that John Reed, the interim chairman, thinks that this is a solution for governance.

SPITZER: Right. I want to read it carefully.

Let me say this. I have been as critical of the Exchange for the past months as anybody. I have said repeatedly -- and I believe this -- they failed as a regulatory organization. They are the primary defenders of the integrity of the marketplace. They didn't do it. So we've got to completely restructure what goes on there.

DOBBS: Are you going to get involved in the investigation, the SEC's...

SPITZER: I will look at what they have proposed. I will see the SEC reaction, pass my own -- pass on it. And yes, I will be involved if I think I can play a constructive role.

DOBBS: And total damages in the mutual fund?

SPITZER: Billions of dollars. Billions and billions of dollars.

DOBBS: Will you seek reparations?

SPITZER: Oh, absolutely. We have already begun. There will be billions of dollars that will go back to investors by the end of this process. We will do our best to make sure everybody is made whole. It was a scandal that is still unfolding.

DOBBS: Eliot Spitzer, New York's attorney general, thanks for being with us.

SPITZER: Thank you, Lou.

DOBBS: Coming up next here, Senator John Rockefeller, the ranking Democratic on the Intelligence Committee joins us. We'll be talking about the controversial memo that leaked to the media, to discuss politics and policy in Iraq as well. Senator Rockefeller joins us next from Capitol Hill.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: My next guest is at the center of a controversy over a leaked memo from Democrats on the Senate Intelligence Committee.

Senator Jay Rockefeller is the ranking Democrat on that committee and join us tonight from Washington.

Senator, good to have you with us.

SEN. JAY ROCKEFELLER (D), WEST VIRGINIA: Thank you, Lou.

DOBBS: This memo set off a firestorm, partisan politics on the Senate Intelligence Committee, Republicans outraged. Why did this happen? How did this happen?

ROCKEFELLER: First of all, it's so minuscule in the effects of what we do here on Intelligence Committee that both Pat Roberts and I are determined to not really get into it and to bring our committee together, as it should be, as we both have been trying to keep it. And to give encouragement not only to the committee, but also to the Intelligence Committee all over the world because we're in a dangerous time when our young men and women are, you know, overseas being shot and wounded.

DOBBS: Absolutely.

ROCKEFELLER: So, I mean, I understand your question. But I want you to understand the context in which I put it and that is that it's a grain of sand compared to the work of the committee and the work of intelligence.

DOBBS: I would take that point. But at the same time, this grain of sand has left the chairman of the committee, Pat Roberts, Senator Roberts saying, it's sort of like a personal slap in the face after you worked over time to come up with what we think is going to be a very good report on how to improve our capabilities at a time when your committee is trying to win the confidence and the support of the White House to provide documents.

Don't you think this memo has undercut that effort?

ROCKEFELLER: No, I don't. I think the memo will pass very quickly unless, you know, groups and some will, on the right, you know, push it. But, you know, there are differences, Pat, between members of the Intelligence Committee. Pat and I -- I mean Lou. Pat and I have our differences.

DOBBS: Right.

ROCKEFELLER: And one of them is the scope of the investigation. But that will be worked out. He thinks that we should be looking at just the state of intelligence, pre-war, leading up to the war, and I think it should be looking at the use of intelligence by the policymakers which is, in fact, mandated on us by the charter which created us.

So, you know, that's an argument. It's a legitimate argument. We'll work it out.

DOBBS: Right.

ROCKEFELLER: And we'll stay together while we do.

DOBBS: Senator, did you order the drafting of this memo?

ROCKEFELLER: No, I didn't.

DOBBS: Do you know who did?

ROCKEFELLER: No. I mean, it wasn't ordered. It was simply -- look, I have three people who work for me and, you know, you work in any office situation -- I'm sure this happens to you -- your people write you options or suggestions of something they didn't think you did well or you did do well. And they write you a memo just to you, nobody else sees it, nobody on the committee saw it, nobody outside the committee saw it until somebody delivered it to the press and now everybody's seen it. It's called "a thank." (ph) But, you know, to me it really isn't that big.

DOBBS: It was -- we have said the press here as well a leak. We should give credit to Sean Hannity at Fox, to whom it was leaked.

Do you disavow the thrust of this memo? Do you disavow...

ROCKEFELLER: I disavow nothing. I mean, you know, the thrust of the option informal draft memo, which went to nobody, the three people who wrote it and myself for whom they work, reflects frustration that I have and that other members on my side of the committee and maybe on the other side of the committee that we're not doing a full investigation. And that is that we have to not only look at intelligence itself, was it adequate, did it lead us to where we wanted to go, why was it that all of a sudden atomic activity, nuclear activity went from sort of dormant to reconstituted? How did that happen? We have to look at that.

But then we also have to look at, how is that intelligence taken by the executive branch of government? How is it used? Was it manipulated? Was it shaped? And we need to know those things. I don't start out with any preconceptions that it was shaped, but we need to know that.

DOBBS: Obviously, the memorandum suggests there is some prejudgment if you will, that there's a need for an independent investigation. I have to tell you Senator, I found it amusing that Senator Corzine of New Jersey was wanting to create a new commission because he thinks there's too much politics about politics on your committee which I thought was a wonderful way to capture the absurdity.

ROCKEFELLER: But there's an extension on that and that is that that shows that it was an innocent memo, because I voted against the Corzine amendment to create a new committee because I think Pat Roberts and my committee should be doing that and we have jurisdiction for it.

DOBBS: It is remarkable, because obviously, no one is so naive as to think there are not politics and consideration as even as our -- as the U.S. Senate weighs very significant, profound issues here. But at the same time, you and Senator Pat Roberts, who is highly regarded, as are you, there was the appearance, at least, that you two who working well together. Is this going to be disruptive to that? For example, Senator Hagel, Chuck Hagel, of Nebraska, Senator Pat Roberts, two people who have acted with obvious bipartisan interest, nonpartisan interest, do you think that this memorandum will, end that?

ROCKEFELLER: No, I don't at all. That's the whole point I'm trying to make. In fact, one of the -- I won't obviously give his name -- but one of the Republican members of the committee who spoke critical of me this morning we talked tonight and he said, you know, Jay, I observed you over the last company of years and you have been totally bipartisan, totally helpful and totally pro-committee were.

You know he said one thing on the floor, maybe that's what his job was, and I don't really care. But the point was that he thinks I'm fair. And I know I'm fair. You don't play politics with intelligence. You can play politics with other things, but you cannot do it with the intelligence and the armed forces and the security of our nation. You cannot do it. You don't even consider doing it.

DOBBS: So, while not disavowing the memo should your Democratic staff on the select committee be taking that as a straightforward admonition?

ROCKEFELLER: No. Because they -- you know, I don't back way from anything on this, Lou, because of the fact that their job is to service me with ideas and thoughts and strategies and options. They work for me, exclusively for me, the memo is drafted exclusively for me by them and went to nobody else in the entire world until it was handed over to the gentleman that you mentioned.

And then, of course you know, it blew up. Those things happen in the Senate. We've all been around long enough to know that they come and they go. Pat Roberts and I will stay together. We both care profoundly about the intelligence and the security policy and safety of our troops. DOBBS: Senator Jay Rockefeller, we thank you for being with us here this evening.

ROCKEFELLER: Thank you, Lou. Thanks a lot.

DOBBS: We want to hear from you on the topic in tonight's poll. The question is, "what is your reaction to the Democratic memo seeking to politicize the pre-war intelligence issue? Outrage, politics as usual." Two reasonable choices. Cast your vote at cnn.com/lou. We'll have the results for you a little later, here.

Coming up next, wasted minds: our failing schools, our special report tonight. The risks and the rewards of school vouchers, public money used for private education. Peter Viles will report and two national leading experts face off on the issue of school choice. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Tonight, the debate over school vouchers, giving parents the option of using public money to send their children to private schools. The Supreme Court ruled last year that such programs do not violate the constitutional separation of church and state. Yet these programs remain rare, their success mixed and often controversial. Peter Vials reports.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): Urban Day School in Milwaukee, a so-called voucher school, bringing high expectations to a low-income neighborhood and to parents like Aretha Adams.

ARETHA ADAMS, MOTHER: It's much better because her grades is up, better than it was. And hopefully, she will be making the honor roll this year.

VILES: History indicates these kids are more likely to graduate high school than kids in Milwaukee's public schools.

GEOFFREY LOWRY, PRES. URBAN DAY SCHOOL: We really work with our kids to get them to understand that how to overcome obstacles so that when they go to high school they actually graduate.

UNIDENTIFIED FEMALE: Let's look at our words.

LOWRY: We graduate over 90 percent of our kids in last 36 years that Urban Day's been in existence.

VILES: Milwaukee is a leader in a national movement, but that movement is tiny. Of the 5 and million American children in grade school or high school, 5.1 million attend private schools, but only 15,000 to 30,000, depending on which advocacy group does the math, go to private schools using public money. Voucher programs weaken public schools, because they skim off the most motivated students and the most active parent parents. RICHARD KAHLENBERG, CENTURY FOUNDATION: What bothers me most about vouchers is that we will end up sighing a small number of motivated families leave the public school system and the public school students left behind are going to be even worse off.

VILES: Most private schools are not required to give standardized tests so it's hard to gauge performance of voucher schools. But surveys usually show that inner city parents want the option.

BRUCE FULLER, UC BERKELEY: There's no question that the support for vouchers is strongest along low income parents faced with dangerous or mediocre schools. You go out to white suburban areas and the political support for vouchers is very low.

VILES (on camera): At the heart of this voucher debate is the issue of fairness. Private schools are expensive, this one in Manhattan, tuition tops out at $20,000 a year. Which means that in many American cities, poor children are trapped in bad schools. Peter Viles, CNN, New York.

(END VIDEOTAPE)

DOBBS: In tonight's face-off, arguing in favor of school vouchers, Nina Reese, deputy undersecretary for innovation and improvement, U.S. Department of Education. She says federal, state and local funds should focus on the needs of children, no matter the school setting.

Arguing against that voucher program, Nancy Keenan. She's education policy director at the People for the American Way. She says vouchers don't improve teacher quality, lessening class size, nor do they get parents more involved in their schools.

Thank you both for being here.

Let me turn, first if I may, to you, Nancy.

Vouchers, why have they not in your judgment, offered a solution?

NANCY KEENAN, EDUCATION POLICY DIRECTOR PEOPLE FOR THE AMERICAN WAY: I think there's a couple reasons, Lou. One, they don't work. We find that as indicated by the earlier report, most of our children are in public schools and for those children who are there trying to meet high standards and be accountable, they don't work in most cases. Vouchers do not. Secondly, they're not publicly accountable for public dollars and I think that is a big issue for taxpayers and parents in the country.

DOBBS: Nina, your response?

NINA REES, DEPUTY UNDERSECRETARY U.S. DEPARTMENT OF EDUCATION: Well, in our view, in places where we have had choice programs in please like Milwaukee, Cleveland, the state of Florida. We have actually noticed marked improvements in academic achievement among students who are benefiting from the programs. But more importantly we're also noticing that the over all academic achievement in public schools seems to be edge proving whenever there is a robust competition between public and private schools.

The fact of matter is until we have a broad-based program that we study carefully we're not going to actually be able to answer a lot of the questions that the critics have been asking us and that's why it's so important for Congress to enact a choice program here in the District of Columbia, where we can study the progress of students on an annual basis and answer all of the questions that people for the American Way and other individuals have had in the past.

DOBBS: Nancy, turn to you if I may. Let me ask you, minority children, poor children those in urban centers who do not have an opportunity for the same education as many people in many young people in suburban, how can we deny them that opportunity?

Lou, it's not about denying them opportunity. We support public school choice where you have magnet schools and all sorts of opportunity within the public system with public dollars. I think the point that this privatization of public schools actually enhances the learning for these children is a bogus argument. The fact is, there is no voucher program in Seattle, in Los Angeles, in Portland, in Birmingham, up in Baltimore, and those children are learning in our public schools and doing very well. So to say that the competition causes improvement in our public schools, nothing proven there. Again I think a bogus argument.

REES: The reason why these programs don't exist in the cities is because you have education unions and a lot of lobbying organizations that have been opposing them over the years. By in large when you look at polling data, the level of support among minorities and among low income parents especially school districts that don't have a lot of quality public schools for these programs is extremely high. But unfortunately the voices of these individuals are not being heard. Most of them not elected, are not elected officials or are not registered voters and unfortunately a lot of individuals like folks from people for the American Way are not giving them the opportunity to exercise their position options.

DOBBS: Nancy go ahead.

KEENAN: Let's get this straight. The fact of the matter is across the country, states and parents have voted against implementation of voucher programs.

REES: That is so not true.

KEENAN: It is when the legislature imposes it, much like Congress is trying to do now with D.C., impose it on the people. Minority parents in fact most recent poll and (UNINTELLIGIBLE) poll shows that literally opposition to vouchers has gone up to 60 percent in this country. They want lower class sighs, better prepared teachers they want those programs like the sage program in Milwaukee funded. Those are the kinds of things that people are saying they rather done that divert public money to private institutions. REES: I don't think -- there's nothing more unAmerican than forcing a low income parent to send their children to a low-performing school. I think when it comes to the question of individual rights and liberties people for the American Way has for so long been fighting for individual rights and opportunities it's extremely disappointing to have people like people for the American Way opposing giving opportunities for parents to send their kids to better schools.

DOBBS: Nancy, you have the closing thought.

KEENAN: Well, what's interesting if we're going to spend public dollars on private schools, then there should be public accountability for those dollars both for academic accountability and for our taxpayer fiscal accountability. And I don't think that exists right now with any voucher program in the country.

REES: The public dollars ought to raise achievement of the students, currently they're not getting that in public schools they're attending.

DOBBS: I appreciate you both attending here. And I hope you will come back soon as we explore whether school choice is about choice at all and examine the role of vouchers in that very important issue. Thank you very much for being here.

REES: Thank you.

KEENAN: Thank you.

DOBBS: Coming up next we'll share some of "Your Thoughts" including whether you think the media's living up to our responsibility to inform the public about the war in Iraq. Please stay with us.

(COMMERCIAL BREAK)

DOBBS: The results of "Tonight's Poll." The question, what is your reaction to the Democratic memo to politicizee the prewar intelligence issue. Three percent of you said outraged. 97 percent said politics as usual.

Now for a look at some of "Your Thoughts." Many wrote in about our poll question last night asking whether the media was doing a good job of informing you about the reality in Iraq.

From Paso Robles, California, "I think the media is representing the reality and news of Iraq. The Bush administration can only criticize because it does not meet their selected perspective. That is not the media's fault." That from Richard Zenobio.

From San Antonio, Texas, "The truth hurts, but we need to hear it. This is a little more important than CBS not showing a stupid miniseries or Scott Peterson's telephone calls to his mistress, or Rosie O'Donnell's lawsuit, don't you think?" M.A. Villa, we certainly agree. And from York, Maine, "Dear Lou, if losing a soldier a day is deemed by our president as proof of winning the war on terror in Iraq, does that mean that by losing a job a day in the U.S. we are winning an economic recovery?"

From Pickens, Mississippi, "After the debate last evening I find myself removing names from a list of possible candidates for president. Being from the south, Howard Dean's offensive statement about confederate flags give the south and all its citizens a bad name." That from Jim.

And on our series "Wasted Minds," from Vicksburg, Michigan. "Putting more money into schools is every politicians answer. Why not try a little discipline and let the teachers teach!" And that from Joel Ulsh.

And from Amherst, Virginia, "Lou, you and staff really are doing an outstanding service regarding all the issues: illegal aliens, corporate corruption, Iraq/Afghan war, wounded Americans, education, you name it! I never miss your show, the best on TV."

We love hearing from you. E-mail us at loudobbs@cnn.com.

And finally tonight the Voyager I Space Probe is making history. More than 8 billion miles from planet Earth. Voyager one is the first man made object to reach the edge of the solar system. It will eventually journey to the star next door but, that milestone won't be reach for another 40,000 years. Voyager I, by the way was launched back in 1977 along with it's twin voyager II, to see out information on Jupiter and Saturn.

That's our show for tonight thanks for being with us. For all of us here, good night from New York. "ANDERSON COOPER 360" is next.

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Next Year; Republicans Outraged Over Leaked Democratic Memo>