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U.S. Forces Poised to Push into Falluja; SEC Investigates Brokerage Fees
Aired November 08, 2004 - 10:32 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.
RICK SANCHEZ, CNN ANCHOR: Thousands of U.S. and Iraqi troops are poised for all-out urban combat in Falluja. Already there are reports of heavy fighting on the outskirts of the city. Warplanes have been hammering insurgent targets overnight. Forces have reportedly secured two bridges. They've also seized a hospital. Iraq's interim prime minister, Ayad Allawi, has ordered a curfew and early today said the insurgents do not want a peaceful settlement. We are all over that and we'll take you there.
Back here in the U.S., Governor James McGreevey of New Jersey will tell the state goodbye today. About three hours from now McGreevey will deliver a farewell address in Trenton. Aides say the governor will likely highlight his accomplishments. In August McGreevey decided to resign after admitting he is gay and that he had an extramarital affair with a man. McGreevey leaves office one week from today.
CNN will carry that address live starting at 1:30 p.m. Eastern.
Also Scott Peterson and much of the country anxiously await a verdict in his double murder trial. Jurors are set to resume deliberations next hour. So far they've asked to see multiple pieces of evidence including some pictures and the boat prosecutors say that Peterson used to dispose of his wife's body.
And motorists feeling a little less pain at the pump. Regular self-serve gas prices fell nearly $0.03 per gallon in the past two weeks. The average cost a gallon, $2.01. Analysts say a drop in crude oil prices is fueling this price drop, and that prices should continue to decline in the near future.
DARYN KAGAN, CNN ANCHOR: As we appear on the verge of a major offensive on the northern city of Falluja in Iraq, we want to bring in Ken Pollack, a director of research at the Brookings Institution to look at Iraq and also what could be next, Iran.
Ken, good morning, thanks for being here with us.
KEN POLLACK, CNN ANALYST: Daryn, good to be here.
KAGAN: Why this time around? Why take two -- different than six months ago when U.S. tried to go in back in April and had to turn back?
POLLACK: Well, in April the operation wasn't set. The U.S. went in on the spur of the moment because the death of those four contractors. The Marines had not had time to plan the operation, as a result there was a lot of bloodshed, there was a lot of resistance from the Iraqis. This time around the administration feels like they've laid the groundwork, they've tried all the other options and now it's time to actually take down the city.
KAGAN: This is a big test for Iraqi leader Ayad Allawi as he tries to lead his country toward elections. How is he doing so far in trying to come off as a strong leader?
Well, he certainly convinced the Iraqis that he is a strong leader, that he's willing to use force which is certainly something that they respect. Ayad's problem -- Allawi's problem is the fact that the Iraqis have been looking to him to deliver on a whole bunch of different things.
First, security, in terms of day-to-day security. Second, the provision of basic services, and third, jobs. And the problem is all of those things are really beyond Allawi's ability to control them, really only the United States can deliver on those three things. And so far, as a result, he has not measured up to the standards of the very high bar that the Iraqis have set for him.
KAGAN: We're looking at some new pictures which are just coming in showing Allawi meeting with Iraqi forces and military personnel. How does this work and how is this working, these operations, where the Iraqi military works alongside the U.S. military?
POLLACK: Well, so far it has mostly been going well. At least recently, Daryn, because the U.S. military changed its tactics. Rather than simply sending the Iraqi forces in on their own, they weren't trained, they weren't prepared, they weren't ready and couldn't handle those missions, instead the U.S. has been working with better-trained, smaller units of Iraqis in conjunction with U.S. forces, making sure that the Iraqis are never in a situation where they're on their own or facing more resistance than they can handle. As a result, they've been succeeding in much smaller pieces of the operation. That's good for the Iraqis. It's also good for U.S. forces.
KAGAN: And, of course, this is all leading up trying to set up this country for elections. Will it really be possible for Iraq to have fair elections as early as January?
POLLACK: Well, honestly, that, of course, is the $64, 000 question, Daryn. No one knows the answer to that. The assault on Falluja is necessary to see that there are successful elections, but it's not sufficient. The assault on Falluja can go brilliantly well and we can still have terrible elections come January.
The other problem, is, of course, that while a successful assault on Falluja and some of the other cities might pacify them temporarily, enough to have the elections, there's no guarantee that it will succeed in pacifying these towns for the long term, which is an economic and a political process totally divorced from the military.
KAGAN: Well, let's look at next door neighbors, Iran. Iran and the European Union coming to a provisional agreement about Iran's nuclear problem. This is -- program, a problem for the rest of the world. How huge is this problem and what does the U.S. do about it?
POLLACK: Well, it's certainly a big problem. Iran is moving smartly toward a nuclear capability. They've made no bones about it. They have announced all the different steps that they're taking while they continue to claim it's purely for civilian purposes. This new agreement is potentially very hopeful but the problem here is that for 15 years the Europeans have never been willing to really hold the Iranians' feet to the fire. So we should obviously wait, see what the Europeans come up with.
But going into it, I have to say, I'm skeptical because the Europeans have never been really willing to get tough with the Iranians, that chances are they've not only gotten half a load (ph) from the Iranians, that will hold them for maybe six months and then we'll be right back where we started from.
KAGAN: Yes. And when we do, we'll have you back. Hopefully long before then. Ken Pollack from Brookings, thank you.
POLLACK: Thank you.
SANCHEZ: This offensive is very important for the White House and the Bush administration. We take you now there where administration officials have held an informal briefing. We understand just moments ago and CNN's White House correspondent Suzanne Malveaux attended this so-called gaggle just minutes ago. It's basically where you get the news before it becomes news, right, Suzanne?
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Somewhat of a preview of the news, if you will. Rick, we understand, of course, this is President Bush's first full week back at the White House since the election. Of course he had a very important weekend, a long weekend at Camp David. That is where senior administration officials say he brought two books with him, one with a list of White House senior staff, the other with cabinet members.
The president told us that he was going to take a look at possible changes. Well, we learned this morning in that gaggle that, in fact, he asked his chief of staff, Andy Card, to stay on for a second term. That Card, in fact, agreed that he would do that. It's very important
Also with him that weekend was national security adviser Condoleezza Rice. Still a lot of questions and speculation about her future. But the president, of course, is a man who wants to keep those who are close to him close by.
Now, Scott McClellan just moments ago talked about the president's priorities. First and foremost, when Congress returns next week they're going to have to deal with pushing forward on appropriations bills as well as intelligence reform. And to give you a sense of the president's priorities, just take a look at his schedule later this week. That is when he's going to be hosting the U.S.'s closest ally, British Prime Minister Tony Blair, at the White House.
The two of them will have a joint press availability. What we expect to come out of that, of course, is that the two of them are trying to encourage greater international support for Iraq, specifically important because of those January elections coming up, and again, of course, putting Middle East peace in the center of the table.
SANCHEZ: Suzanne, I wonder about the president in this situation in Falluja, whether he's going to be in contact or perhaps I should ask, how much will he be in contact with Pentagon officials and I suppose Donald Rumsfeld throughout the course of the day?
MALVEAUX: Well, Rick, he has already been in contact with Secretary Rumsfeld. Early this morning he had a meeting where he was briefed about the situation in Falluja. We are told that, of course, he's aware of all the developments. This is something that is ongoing. We expect, of course, that it's going to intensify and escalate as the week goes on. We also expect that it is something that is going to be front and center with his meeting with Blair later in the week.
SANCHEZ: All right. Suzanne Malveaux following developments there at the White House for us. Thank you so much, Suzanne -- Daryn.
KAGAN: Well, about half the country is pleased with who's going to be to be in the White House the next four years. Half not so happy but so unhappy that you would move out of the country?
SANCHEZ: Yes. Well, you've heard the old saying, if you can't stand the heat, then just get out of the kitchen. Now the phrase is taking on some new meaning for some disgruntled Democrats.
KAGAN: We'll talk about that, still to come.
(COMMERCIAL BREAK)
SANCHEZ: Welcome back, everyone. I'm Rick Sanchez here with my buddy Daryn Kagan.
KAGAN: Yes, you know the markets not so perky today.
SANCHEZ: No, but they've been perky all last week.
KAGAN: We had plenty of perkiness but kind of Monday morning blahs. Rhonda Schaffler here to tell us more about that.
(STOCK MARKET REPORT)
SANCHEZ: Also on Wall Street on this day, an investigation of some of the nation's best-known brokerage firms and the stock prices they charged some of their customers. According to "The New York Times," the Securities and Exchange Commission suspects some customers may have been overcharged by at least pennies a share. But the cost could impact something priceless, investor trust. CNN's financial news reporter Allan Chernoff is joining us now with some of the details and the significance of this particular report -- Allan.
ALLAN CHERNOFF, CNN SR. BUSINESS CORRESPONDENT: Well, Rick, the issue is whether investors are getting the best price available when they buy and sell stock. CNN has confirmed from a source familiar with the investigation that the Securities and Exchange Commission has been looking into exactly how brokerage firms execute customer orders from Nasdaq stocks at the open of trading.
Now the SEC's examinations office looked at trades from the past four years and found that sometimes brokers were actually putting their own interests ahead of their clients. Among the brokerage firms targeted here, Morgan Stanley, Merrill Lynch, Charles Schwab, Ameritrade and E*TRADE.
Merrill, Charles Schwab and Ameritrade had no comment. We still haven't heard back, we put calls into Morgan Stanley and E*TRADE.
Now the investigation looked at firms filling a volume order from their own inventory even if a better price might actually be available in the open marketplace. Also, paying for order flow. That means market makers paying to receive an order and then executing it even if, again, a better price might be available elsewhere.
For individual investors, as you said, this might amount just to pennies per trade, but certainly that can add up for the Wall Street's firms' bottom lines. And it appears this is the latest potential scandal confronting Wall Street and whether firms in fact are putting their profits ahead of the interests of their customers -- Rick.
SANCHEZ: Allan Chernoff watching that for us. We thank you, Allan.
KAGAN: Well, some disgruntled citizens saying they have had enough.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: What really terrifies me I think about America right now is our -- just our foreign policy and the fact that I don't think anybody in the world is with us.
(END VIDEO CLIP)
SANCHEZ: Still to come, going to extreme lengths over politics and America's direction.
KAGAN: And this is what we're working on for next hour.
(COMMERCIAL BREAK)
SANCHEZ: We have a chance to take you to the area of Falluja where this offensive that we have been telling you about may be now taking place. For a clearer picture of this, Jane Arraf is standing by now. She has been able to join us by phone.
Jane, what is the situation there now? JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: Rick, we're just on the northeastern outskirts of the city. And I'm here with an Army unit watching air strikes on the city of Falluja. These particular air strikes had been called in by the Army to target suspected safe houses and other insurgent strongholds in parts of the city.
Just behind us they have been firing mortar at the same sort of targets. Now this has been going on for some hours. We're now in the battle position. The full battle has not yet started in this part of the city. But what they're trying to do is get rid of some of the insurgent strongholds, to be able to move further in if that does happen, and to be able to flush out some of the insurgents for other efforts by the Marines.
This is mostly a Marine operation with support from the Army and important support from Iraqi forces as well. With this unit that I'm with, there are also Iraqi special forces, Iraqi commandos and they have been told this is a battle, a fight for the future of Iraq -- Rick.
SANCHEZ: We hear from some of the doctors in that hospital that was taken over earlier today that there may still be some 30 percent of the population of Falluja in their homes or around the city. How big of an obstacle, how big of a problem is this going to be for U.S. troops from your reporting, Jane?
ARRAF: Rick, it's a worrying numbers, 30 percent would be quite a substantial part of an estimated 300,000 population. And it has mystified some as to why they wouldn't have left. Possibly they're intimidated by some of the insurgents but there's also a feeling among Iraqis that whatever happens happens and they're putting their faith in God.
It is an obstacle because this is an extremely controversial mission. And Iraqis are watching this very carefully, not just Iraqis on the streets in the rest of the country, but Iraqi officials as well.
As for the military, they are making very clear, they are going in there and they are not going to sustain a lot of American casualties. They are using air strikes. They are using tanks. They're using heavy firepower that will let them get in with the city of the insurgency and get out again with minimal casualties on their part and hopefully minimal civilian casualties.
But it is expected there will certainly be some.
SANCHEZ: It is widely reported here in the States that the United States Marines have now taken those two bridges over the Euphrates River. Would you explain to us the significance of those two particular bridges, if you would, Jane?
ARRAF: Well, those bridges would control access. And part of the entire effort has been an attempt to create blocking positions, to stop insurgents from leaving if they do flee the city, to stop any movement at all, in fact. What we have seen is the city encircled, we had a visit from the commanding general of the 1st Marine Division, he's General Richard McTanskey (ph) who told us that he thought this was the greatest concentration of firepower on Earth right now, ringed around Falluja, waiting to go in if that happens.
And we're seeing smoke rising in front of us right now. It's pitch dark here. The attack was to have happened after dark. Now, again, the full battle has not yet begun but there is smoke rising in front of us from one of the strikes. And there is sporadic firing going on -- Rick.
SANCHEZ: We should share with our viewers that some of the pictures that we're sharing with you now at home are pictures that we have just received here at CNN within the better part of the last half hour. We have been showing you those pictures.
Jane, if you're still with us, there's another issue that has come up. In fact, Falluja has been called the "City of Mosques." I understand there are some 200 mosques in this city. I would imagine that's a very delicate issue for some of the Marines going into that area.
ARRAF: It's so delicate, Rick, that the Iraqi forces are going to be going in. They're not leaving that to Americans. That would be even more inflammatory than it already is. And as you mentioned, you're absolutely right, it is known as the "City of Mosques." It's a very conservative city. It was an irritant to Saddam Hussein. These are fiercely independent people. This is not a city that has any love for Americans or American forces.
There was an air strike, an accidental strike during the '91 Gulf War that killed dozens of people in the marketplace and people there still have very strong memories. It is also a magnet for insurgents. Military officials believe that it's a command and control center for the insurgency in other parts of Iraq.
But you combine that with the fact that these are fiercely nationalistic people and it is very conservative place, that it's in the Sunni heartland and it becomes a very difficult site.
SANCHEZ: We have a map up now. If you would stay with us for just a moment, Jane, so our viewers can be brought up to date. You see the Euphrates River, that's that blue line there on the left of your map. That red star you see right at the tip of that peninsula is where that hospital was taken today.
And then you see also those two bridges, those are the white lines that are intersecting the Euphrates River. Let's talk for just a moment about that star you see there, that cross you see there that represents that hospital. Interviews with some of the people there at the hospital, some of the doctors and others, are saying that a lot of the people there were Arab fighters.
Would you explain to us, Jane, what percentage of the people in this city as opposed to residents who are Iraqis who lived there before, are not Iraqis, are, in fact, people who have come in from other places and how are Iraqis and U.S. forces going to be able to distinguish one from the other?
ARRAF: That is a problem, Rick. You're absolutely right. And this has been the problem all along in coming to grips with this insurgency. Americans cannot distinguish. That's why they've had to build up from the ground Iraqi forces after they dissolved the army and other security operations. And it's really the Iraqis who do that.
It is a multilevel problem. Falluja is not just a hotbed for the insurgency, it is a symbol. Right now if you want fight Americans anywhere in the world, Falluja is the battleground. That's why they say they've seen insurgents actually streaming into the city before the battle started because they are fighting to the death.
Now, some of these are foreign fighters, it's not known how many. There's an estimated 12,00 to 3,000 insurgents total. And probably a small number of them are foreigners, probably fewer than was first believed. But they've increasingly found that foreign fighters are working together with Iraqis and it has created a very effective insurgency.
SANCHEZ: I was listening to Prime Minister Allawi's speech earlier today. He said that he's planning to effectively close down the borders with both Syria and Jordan, where, one would expect, a lot of these folks have been coming in from. How difficult would that be because obviously it's one thing to say it, it's quite another to actually be able to execute it?
ARRAF: Rick, I'm not sure if you're still with me. But what they would be talking about is closing their side of the border which would mean that no one could exit Iraq into Iran or Syria, no Iranians or Syrians could cross the border into Iraq because the Iraqis have closed it on their side.
Now, having said that, one of the huge problems in Iraq has been that the thousands of people securing the border melted away. They were essentially fired after the war, Iraqi security forces. And it has been a real struggle getting forces back to secure those borders.
Even if you close the legal border crossings, these borders are quite porous. It literally has been going on for centuries and it's very easy for people to smuggle themselves across as well.
But certainly that's a sign that there is intense anger on the part of some officials, Iraqis as well. What they see is meddling in Iraqi affairs, and not only that, fueling fire that could lead here to civil war -- Rick.
SANCHEZ: I'm just thinking as I'm hearing you talk about these Arab fighters, how one would perhaps be able to distinguish them from some of the Iraqis. Wouldn't their speech pattern be different, the way that they speak and would not the Iraqi fighters then going in with the Americans be able to tell them apart? ARRAF: The Iraqis would, as would neighbors and people around them. But the problem is, that insurgents, foreign fighters, have been intimidating the local population. If you value your life, if a foreign fighter comes to you and says he needs to use your rooftop, you're probably not going to risk your family and say that he can't. So that's a huge problem.
As for the Iraqi forces, we're still not talking about great numbers of them. We're talking about a few thousand. That is essentially the sum total of the Iraqi forces that they're drawing on right now. They feel that's enough but it's certainly not enough to fan out in a city and find these people.
And again, when we're talking about foreign fighters we are probably talking at some of the most committed of the insurgents. They have come here for a reason. They've come here to kill Americans. They have come here to kill Iraqi security forces and they will come here and fight to the death. There is really nothing that will stop that part of the insurgency unless they're killed, is the feeling here.
And that is what they're prepared to do and that is why the Iraqis and the Americans are calling this a battle to end all battles in Iraq, is what they that it will indeed end this insurgency.
SANCHEZ: That's certainly a unique perspective. Jane Arraf, reporting to us live by phone there as this offensive seems to be under way or begin -- at least the very beginnings of what makes for a ground assault in the area of Falluja and some very important information, comprehensive report, I should say, from Jane.
KAGAN: Yes. We have our Karl Penhaul in Falluja. Also a Pentagon briefing expected to take place at 2:00 p.m. Eastern, 11:00 a.m. Pacific. You will see that live right here on CNN.
Right now, a quick break. A lot more news after this.
(COMMERCIAL BREAK)
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Aired November 8, 2004 - 10:32 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICK SANCHEZ, CNN ANCHOR: Thousands of U.S. and Iraqi troops are poised for all-out urban combat in Falluja. Already there are reports of heavy fighting on the outskirts of the city. Warplanes have been hammering insurgent targets overnight. Forces have reportedly secured two bridges. They've also seized a hospital. Iraq's interim prime minister, Ayad Allawi, has ordered a curfew and early today said the insurgents do not want a peaceful settlement. We are all over that and we'll take you there.
Back here in the U.S., Governor James McGreevey of New Jersey will tell the state goodbye today. About three hours from now McGreevey will deliver a farewell address in Trenton. Aides say the governor will likely highlight his accomplishments. In August McGreevey decided to resign after admitting he is gay and that he had an extramarital affair with a man. McGreevey leaves office one week from today.
CNN will carry that address live starting at 1:30 p.m. Eastern.
Also Scott Peterson and much of the country anxiously await a verdict in his double murder trial. Jurors are set to resume deliberations next hour. So far they've asked to see multiple pieces of evidence including some pictures and the boat prosecutors say that Peterson used to dispose of his wife's body.
And motorists feeling a little less pain at the pump. Regular self-serve gas prices fell nearly $0.03 per gallon in the past two weeks. The average cost a gallon, $2.01. Analysts say a drop in crude oil prices is fueling this price drop, and that prices should continue to decline in the near future.
DARYN KAGAN, CNN ANCHOR: As we appear on the verge of a major offensive on the northern city of Falluja in Iraq, we want to bring in Ken Pollack, a director of research at the Brookings Institution to look at Iraq and also what could be next, Iran.
Ken, good morning, thanks for being here with us.
KEN POLLACK, CNN ANALYST: Daryn, good to be here.
KAGAN: Why this time around? Why take two -- different than six months ago when U.S. tried to go in back in April and had to turn back?
POLLACK: Well, in April the operation wasn't set. The U.S. went in on the spur of the moment because the death of those four contractors. The Marines had not had time to plan the operation, as a result there was a lot of bloodshed, there was a lot of resistance from the Iraqis. This time around the administration feels like they've laid the groundwork, they've tried all the other options and now it's time to actually take down the city.
KAGAN: This is a big test for Iraqi leader Ayad Allawi as he tries to lead his country toward elections. How is he doing so far in trying to come off as a strong leader?
Well, he certainly convinced the Iraqis that he is a strong leader, that he's willing to use force which is certainly something that they respect. Ayad's problem -- Allawi's problem is the fact that the Iraqis have been looking to him to deliver on a whole bunch of different things.
First, security, in terms of day-to-day security. Second, the provision of basic services, and third, jobs. And the problem is all of those things are really beyond Allawi's ability to control them, really only the United States can deliver on those three things. And so far, as a result, he has not measured up to the standards of the very high bar that the Iraqis have set for him.
KAGAN: We're looking at some new pictures which are just coming in showing Allawi meeting with Iraqi forces and military personnel. How does this work and how is this working, these operations, where the Iraqi military works alongside the U.S. military?
POLLACK: Well, so far it has mostly been going well. At least recently, Daryn, because the U.S. military changed its tactics. Rather than simply sending the Iraqi forces in on their own, they weren't trained, they weren't prepared, they weren't ready and couldn't handle those missions, instead the U.S. has been working with better-trained, smaller units of Iraqis in conjunction with U.S. forces, making sure that the Iraqis are never in a situation where they're on their own or facing more resistance than they can handle. As a result, they've been succeeding in much smaller pieces of the operation. That's good for the Iraqis. It's also good for U.S. forces.
KAGAN: And, of course, this is all leading up trying to set up this country for elections. Will it really be possible for Iraq to have fair elections as early as January?
POLLACK: Well, honestly, that, of course, is the $64, 000 question, Daryn. No one knows the answer to that. The assault on Falluja is necessary to see that there are successful elections, but it's not sufficient. The assault on Falluja can go brilliantly well and we can still have terrible elections come January.
The other problem, is, of course, that while a successful assault on Falluja and some of the other cities might pacify them temporarily, enough to have the elections, there's no guarantee that it will succeed in pacifying these towns for the long term, which is an economic and a political process totally divorced from the military.
KAGAN: Well, let's look at next door neighbors, Iran. Iran and the European Union coming to a provisional agreement about Iran's nuclear problem. This is -- program, a problem for the rest of the world. How huge is this problem and what does the U.S. do about it?
POLLACK: Well, it's certainly a big problem. Iran is moving smartly toward a nuclear capability. They've made no bones about it. They have announced all the different steps that they're taking while they continue to claim it's purely for civilian purposes. This new agreement is potentially very hopeful but the problem here is that for 15 years the Europeans have never been willing to really hold the Iranians' feet to the fire. So we should obviously wait, see what the Europeans come up with.
But going into it, I have to say, I'm skeptical because the Europeans have never been really willing to get tough with the Iranians, that chances are they've not only gotten half a load (ph) from the Iranians, that will hold them for maybe six months and then we'll be right back where we started from.
KAGAN: Yes. And when we do, we'll have you back. Hopefully long before then. Ken Pollack from Brookings, thank you.
POLLACK: Thank you.
SANCHEZ: This offensive is very important for the White House and the Bush administration. We take you now there where administration officials have held an informal briefing. We understand just moments ago and CNN's White House correspondent Suzanne Malveaux attended this so-called gaggle just minutes ago. It's basically where you get the news before it becomes news, right, Suzanne?
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Somewhat of a preview of the news, if you will. Rick, we understand, of course, this is President Bush's first full week back at the White House since the election. Of course he had a very important weekend, a long weekend at Camp David. That is where senior administration officials say he brought two books with him, one with a list of White House senior staff, the other with cabinet members.
The president told us that he was going to take a look at possible changes. Well, we learned this morning in that gaggle that, in fact, he asked his chief of staff, Andy Card, to stay on for a second term. That Card, in fact, agreed that he would do that. It's very important
Also with him that weekend was national security adviser Condoleezza Rice. Still a lot of questions and speculation about her future. But the president, of course, is a man who wants to keep those who are close to him close by.
Now, Scott McClellan just moments ago talked about the president's priorities. First and foremost, when Congress returns next week they're going to have to deal with pushing forward on appropriations bills as well as intelligence reform. And to give you a sense of the president's priorities, just take a look at his schedule later this week. That is when he's going to be hosting the U.S.'s closest ally, British Prime Minister Tony Blair, at the White House.
The two of them will have a joint press availability. What we expect to come out of that, of course, is that the two of them are trying to encourage greater international support for Iraq, specifically important because of those January elections coming up, and again, of course, putting Middle East peace in the center of the table.
SANCHEZ: Suzanne, I wonder about the president in this situation in Falluja, whether he's going to be in contact or perhaps I should ask, how much will he be in contact with Pentagon officials and I suppose Donald Rumsfeld throughout the course of the day?
MALVEAUX: Well, Rick, he has already been in contact with Secretary Rumsfeld. Early this morning he had a meeting where he was briefed about the situation in Falluja. We are told that, of course, he's aware of all the developments. This is something that is ongoing. We expect, of course, that it's going to intensify and escalate as the week goes on. We also expect that it is something that is going to be front and center with his meeting with Blair later in the week.
SANCHEZ: All right. Suzanne Malveaux following developments there at the White House for us. Thank you so much, Suzanne -- Daryn.
KAGAN: Well, about half the country is pleased with who's going to be to be in the White House the next four years. Half not so happy but so unhappy that you would move out of the country?
SANCHEZ: Yes. Well, you've heard the old saying, if you can't stand the heat, then just get out of the kitchen. Now the phrase is taking on some new meaning for some disgruntled Democrats.
KAGAN: We'll talk about that, still to come.
(COMMERCIAL BREAK)
SANCHEZ: Welcome back, everyone. I'm Rick Sanchez here with my buddy Daryn Kagan.
KAGAN: Yes, you know the markets not so perky today.
SANCHEZ: No, but they've been perky all last week.
KAGAN: We had plenty of perkiness but kind of Monday morning blahs. Rhonda Schaffler here to tell us more about that.
(STOCK MARKET REPORT)
SANCHEZ: Also on Wall Street on this day, an investigation of some of the nation's best-known brokerage firms and the stock prices they charged some of their customers. According to "The New York Times," the Securities and Exchange Commission suspects some customers may have been overcharged by at least pennies a share. But the cost could impact something priceless, investor trust. CNN's financial news reporter Allan Chernoff is joining us now with some of the details and the significance of this particular report -- Allan.
ALLAN CHERNOFF, CNN SR. BUSINESS CORRESPONDENT: Well, Rick, the issue is whether investors are getting the best price available when they buy and sell stock. CNN has confirmed from a source familiar with the investigation that the Securities and Exchange Commission has been looking into exactly how brokerage firms execute customer orders from Nasdaq stocks at the open of trading.
Now the SEC's examinations office looked at trades from the past four years and found that sometimes brokers were actually putting their own interests ahead of their clients. Among the brokerage firms targeted here, Morgan Stanley, Merrill Lynch, Charles Schwab, Ameritrade and E*TRADE.
Merrill, Charles Schwab and Ameritrade had no comment. We still haven't heard back, we put calls into Morgan Stanley and E*TRADE.
Now the investigation looked at firms filling a volume order from their own inventory even if a better price might actually be available in the open marketplace. Also, paying for order flow. That means market makers paying to receive an order and then executing it even if, again, a better price might be available elsewhere.
For individual investors, as you said, this might amount just to pennies per trade, but certainly that can add up for the Wall Street's firms' bottom lines. And it appears this is the latest potential scandal confronting Wall Street and whether firms in fact are putting their profits ahead of the interests of their customers -- Rick.
SANCHEZ: Allan Chernoff watching that for us. We thank you, Allan.
KAGAN: Well, some disgruntled citizens saying they have had enough.
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UNIDENTIFIED MALE: What really terrifies me I think about America right now is our -- just our foreign policy and the fact that I don't think anybody in the world is with us.
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SANCHEZ: Still to come, going to extreme lengths over politics and America's direction.
KAGAN: And this is what we're working on for next hour.
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SANCHEZ: We have a chance to take you to the area of Falluja where this offensive that we have been telling you about may be now taking place. For a clearer picture of this, Jane Arraf is standing by now. She has been able to join us by phone.
Jane, what is the situation there now? JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: Rick, we're just on the northeastern outskirts of the city. And I'm here with an Army unit watching air strikes on the city of Falluja. These particular air strikes had been called in by the Army to target suspected safe houses and other insurgent strongholds in parts of the city.
Just behind us they have been firing mortar at the same sort of targets. Now this has been going on for some hours. We're now in the battle position. The full battle has not yet started in this part of the city. But what they're trying to do is get rid of some of the insurgent strongholds, to be able to move further in if that does happen, and to be able to flush out some of the insurgents for other efforts by the Marines.
This is mostly a Marine operation with support from the Army and important support from Iraqi forces as well. With this unit that I'm with, there are also Iraqi special forces, Iraqi commandos and they have been told this is a battle, a fight for the future of Iraq -- Rick.
SANCHEZ: We hear from some of the doctors in that hospital that was taken over earlier today that there may still be some 30 percent of the population of Falluja in their homes or around the city. How big of an obstacle, how big of a problem is this going to be for U.S. troops from your reporting, Jane?
ARRAF: Rick, it's a worrying numbers, 30 percent would be quite a substantial part of an estimated 300,000 population. And it has mystified some as to why they wouldn't have left. Possibly they're intimidated by some of the insurgents but there's also a feeling among Iraqis that whatever happens happens and they're putting their faith in God.
It is an obstacle because this is an extremely controversial mission. And Iraqis are watching this very carefully, not just Iraqis on the streets in the rest of the country, but Iraqi officials as well.
As for the military, they are making very clear, they are going in there and they are not going to sustain a lot of American casualties. They are using air strikes. They are using tanks. They're using heavy firepower that will let them get in with the city of the insurgency and get out again with minimal casualties on their part and hopefully minimal civilian casualties.
But it is expected there will certainly be some.
SANCHEZ: It is widely reported here in the States that the United States Marines have now taken those two bridges over the Euphrates River. Would you explain to us the significance of those two particular bridges, if you would, Jane?
ARRAF: Well, those bridges would control access. And part of the entire effort has been an attempt to create blocking positions, to stop insurgents from leaving if they do flee the city, to stop any movement at all, in fact. What we have seen is the city encircled, we had a visit from the commanding general of the 1st Marine Division, he's General Richard McTanskey (ph) who told us that he thought this was the greatest concentration of firepower on Earth right now, ringed around Falluja, waiting to go in if that happens.
And we're seeing smoke rising in front of us right now. It's pitch dark here. The attack was to have happened after dark. Now, again, the full battle has not yet begun but there is smoke rising in front of us from one of the strikes. And there is sporadic firing going on -- Rick.
SANCHEZ: We should share with our viewers that some of the pictures that we're sharing with you now at home are pictures that we have just received here at CNN within the better part of the last half hour. We have been showing you those pictures.
Jane, if you're still with us, there's another issue that has come up. In fact, Falluja has been called the "City of Mosques." I understand there are some 200 mosques in this city. I would imagine that's a very delicate issue for some of the Marines going into that area.
ARRAF: It's so delicate, Rick, that the Iraqi forces are going to be going in. They're not leaving that to Americans. That would be even more inflammatory than it already is. And as you mentioned, you're absolutely right, it is known as the "City of Mosques." It's a very conservative city. It was an irritant to Saddam Hussein. These are fiercely independent people. This is not a city that has any love for Americans or American forces.
There was an air strike, an accidental strike during the '91 Gulf War that killed dozens of people in the marketplace and people there still have very strong memories. It is also a magnet for insurgents. Military officials believe that it's a command and control center for the insurgency in other parts of Iraq.
But you combine that with the fact that these are fiercely nationalistic people and it is very conservative place, that it's in the Sunni heartland and it becomes a very difficult site.
SANCHEZ: We have a map up now. If you would stay with us for just a moment, Jane, so our viewers can be brought up to date. You see the Euphrates River, that's that blue line there on the left of your map. That red star you see right at the tip of that peninsula is where that hospital was taken today.
And then you see also those two bridges, those are the white lines that are intersecting the Euphrates River. Let's talk for just a moment about that star you see there, that cross you see there that represents that hospital. Interviews with some of the people there at the hospital, some of the doctors and others, are saying that a lot of the people there were Arab fighters.
Would you explain to us, Jane, what percentage of the people in this city as opposed to residents who are Iraqis who lived there before, are not Iraqis, are, in fact, people who have come in from other places and how are Iraqis and U.S. forces going to be able to distinguish one from the other?
ARRAF: That is a problem, Rick. You're absolutely right. And this has been the problem all along in coming to grips with this insurgency. Americans cannot distinguish. That's why they've had to build up from the ground Iraqi forces after they dissolved the army and other security operations. And it's really the Iraqis who do that.
It is a multilevel problem. Falluja is not just a hotbed for the insurgency, it is a symbol. Right now if you want fight Americans anywhere in the world, Falluja is the battleground. That's why they say they've seen insurgents actually streaming into the city before the battle started because they are fighting to the death.
Now, some of these are foreign fighters, it's not known how many. There's an estimated 12,00 to 3,000 insurgents total. And probably a small number of them are foreigners, probably fewer than was first believed. But they've increasingly found that foreign fighters are working together with Iraqis and it has created a very effective insurgency.
SANCHEZ: I was listening to Prime Minister Allawi's speech earlier today. He said that he's planning to effectively close down the borders with both Syria and Jordan, where, one would expect, a lot of these folks have been coming in from. How difficult would that be because obviously it's one thing to say it, it's quite another to actually be able to execute it?
ARRAF: Rick, I'm not sure if you're still with me. But what they would be talking about is closing their side of the border which would mean that no one could exit Iraq into Iran or Syria, no Iranians or Syrians could cross the border into Iraq because the Iraqis have closed it on their side.
Now, having said that, one of the huge problems in Iraq has been that the thousands of people securing the border melted away. They were essentially fired after the war, Iraqi security forces. And it has been a real struggle getting forces back to secure those borders.
Even if you close the legal border crossings, these borders are quite porous. It literally has been going on for centuries and it's very easy for people to smuggle themselves across as well.
But certainly that's a sign that there is intense anger on the part of some officials, Iraqis as well. What they see is meddling in Iraqi affairs, and not only that, fueling fire that could lead here to civil war -- Rick.
SANCHEZ: I'm just thinking as I'm hearing you talk about these Arab fighters, how one would perhaps be able to distinguish them from some of the Iraqis. Wouldn't their speech pattern be different, the way that they speak and would not the Iraqi fighters then going in with the Americans be able to tell them apart? ARRAF: The Iraqis would, as would neighbors and people around them. But the problem is, that insurgents, foreign fighters, have been intimidating the local population. If you value your life, if a foreign fighter comes to you and says he needs to use your rooftop, you're probably not going to risk your family and say that he can't. So that's a huge problem.
As for the Iraqi forces, we're still not talking about great numbers of them. We're talking about a few thousand. That is essentially the sum total of the Iraqi forces that they're drawing on right now. They feel that's enough but it's certainly not enough to fan out in a city and find these people.
And again, when we're talking about foreign fighters we are probably talking at some of the most committed of the insurgents. They have come here for a reason. They've come here to kill Americans. They have come here to kill Iraqi security forces and they will come here and fight to the death. There is really nothing that will stop that part of the insurgency unless they're killed, is the feeling here.
And that is what they're prepared to do and that is why the Iraqis and the Americans are calling this a battle to end all battles in Iraq, is what they that it will indeed end this insurgency.
SANCHEZ: That's certainly a unique perspective. Jane Arraf, reporting to us live by phone there as this offensive seems to be under way or begin -- at least the very beginnings of what makes for a ground assault in the area of Falluja and some very important information, comprehensive report, I should say, from Jane.
KAGAN: Yes. We have our Karl Penhaul in Falluja. Also a Pentagon briefing expected to take place at 2:00 p.m. Eastern, 11:00 a.m. Pacific. You will see that live right here on CNN.
Right now, a quick break. A lot more news after this.
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