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Lou Dobbs Moneyline

Encore Presentation: Special Holiday Edition, Life After 9-11

Aired January 01, 2002 - 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.
ANNOUNCER: This is a special holiday edition of LOU DOBBS' MONEYLINE.

JAN HOPKINS, HOST: Good evening and welcome to this special edition of MONEYLINE. I'm Jan Hopkins in for Lou Dobbs.

Tonight, we take a look at life after September 11. The tragedy has had a profound effect on every aspect of our lives, from our sense of security to the health of our economy. Tonight, we will address a host of topics, among them, fighting terrorism and the outlook for our economy.

That's where we begin, with a look at our economy and the stock market at the end of 2001. Joining me to talk about this and more, Todd Eberhard of Eberhard Investment Associates, Robert Barbera, the chief economist at Hoenig Group, and Hugh Johnson, chief investment officer of First Albany.

Welcome to all of you. And I'm going to bring in the economist first with the question of is the worst behind us?

ROBERT BARBERA, THE HOENIG GROUP: Yes, I think that, unfortunately, a recession that had already taken hold was made worse with the attacks, obviously, in corporations in a big way, capitulated to the reality of recession. So we saw an extraordinary wave of firing, about a million people in three months.

Now I don't think we'll see outright economy growth in the first quarter, but that whoosh and that real pounding of firings that captured us in October, November, and I would guess December I think is going to be behind us. And so, the worst quarter of activity, I think, is history.

HOPKINS: And Hugh Johnson, let's bring you in. Is the worst over for the market as well?

HUGH JOHNSON, FIRST ALBANY: Oh, I clearly think so. I think the worst was over on September 21, when we saw the market bottom. Since then, we've not only seen the market go up, but I think importantly, we've seen investors migrate to the so-called bull market sectors, like technology and consumer cyclicals. And I think the market's essentially sending us a signal. And the signal is that we're going to get that recovery again, maybe not in the first quarter, but in the first two quarters of next year, we're start to see a recover. So I think this is a bull market and it could last a long, long time.

HOPKINS: Let's bring in Todd Eberhard. What have you got?

TODD EBERHARD, EBERHARD INVESTMENT ASSOCIATES: How do you follow that? I mean, that's the best news you hear, but I agree actually with both, because I think you are going to see a recovery. '02, I think, will be the time -- will it be the first quarter or second quarter? Probably not. Towards into the second, into the third quarter, I think a little later, because I think it's going to take time for the consumers who have lost jobs, to get back to some work and start spending money, which I think can drive this economy back out in a slow curve, not a "V" curve.

HOPKINS: But we've had false starts this year in 2001?

EBERHARD: Right.

HOPKINS: How do we know that this isn't a false start, right?

EBERHARD: Well, you know, there's first off, no way to know. And an economist could tell you that, I'm sure. But the reality is in '01, we had a declining economy or slowing economy. And then all of a sudden, the terrorist attacks occurred, which I think all it did was pushed out that slowing economy and got it down to the bottom faster than we could have on our own, in a terrible way, but it did so. And then we have to build back from that. And '02 is a build back period, but it's going to be slow and it's going to be choppy. It's not going to be a straight up number.

So I think you have to be careful with that, as well, not to look at it as just as a constant rise.

HOPKINS: Let's bring Hugh Johnson back into the picture. Hugh, you think that investors are convinced that things are going to be better? And if don't start seeing some proof of that, then the market's in jeopardy?

JOHNSON: I think -- well, a little bit of jeopardy. But if you don't see a recovery in the economy, and probably more importantly in earnings. And I mean you need to see companies start to tell us that sequentially their earnings are getting better. If you don't see that recovery in earnings, then they may lose patience. It may turn into another false start, but I kind of doubt it this time.

You know, there's just so much stimulus in the pipeline, I think the odds really say to me that we're going to get a recovery in the economy and earnings. And the Index of Leading Economic Indicators, among other leading indicators, seem to be pointing in that direction. So yeah maybe a false start, but I kind of doubt it.

BARBERA: I think not even a false start. An analogy we might think back is the '90-'91 experience. If you remember in early 1991, we had the response to the innovation of Kuwait. The war went well. It went quickly. And there was some enthusiasm about not just better economic times and end of recession, but a V-shaped recovery. We had a big sell-off in the bond market. We had a... HOPKINS: Economy that goes down quickly, but then comes back quickly.

BARBERA: Right. And we were -- people were then enthusiastic about the notion that the recession would end and we'd have a strong recovery. You had a selloff in the bond market. Economically sensitive stocks outperformed.

Now it turned out that the recession did end. OK, but that the recovery was tepid. We got a resumption of bond rally. We got a change in the leadership within the stock market because recovery yes, but not a strong one, not a traditional V.

And if you asked me a little more than, you know, is the worst behind us? Yes, but is it the V recovery that right now is embedded in the bond market and has a lot of the cyclical stocks doing very well, I don't think so. So I think we can see a change in the mix within the context of the worst being behind us.

HOPKINS: And so, what will we feel? Will it feel better? Will it feel that the economy has really turned? Or will it not feel very much different from what it is now?

BARBERA: If you think back to late September and early October, it's hard to imagine it can feel worse than it felt then. And I think that has a lot to do with...

EBERHARD: I agree. That's psychology. And you're right. The psychology of this market is what drove it for '01 more than anything else. What will drive it out will also be psychology to some degree.

HOPKINS: And Hugh Johnson, what do you think?

JOHNSON: Well, the numbers you're going to be looking at, hopefully when you get to February, March and April, they're going to be better. That's obviously going to help consumer expectations and consumer sentiment.

So if you see employment conditions start to stabilize, if you see industrial production say stabilize, and I'm not saying rise, I'm saying stabilize, I think you see retail sales perhaps maybe start to improve a little bit, that's going to do a lot for confidence.

And when it helps confidence, I think it's going to also, to some extent, bolster investor confidence and give us that bull market. There may be, though, as Todd I believe was -- suggested, if you don't have a V-shape or strong recovery in the economy in earnings, you could have a shift from those sort of economically sensitive sectors, like technology and cyclicals, back to the safer sectors like consumer non-cyclicals. I don't see that coming, but there is a real chance of that.

HOPKINS: We're going to take a look at your thoughts on the economy in a moment.

But first, over the past few months, we've been inundated with criticism of charities, which raised money for the families of the victims of September 11. Nearly all of you who wrote in said these organizations should simply give the money you donated quickly and directly to the families of those lost.

Thanks for your feedback. The charities are now responding and we truly appreciate all your letters on the subject. And now here's a look at some of your thoughts on the economy and interest rates. Dave in Roseville, California says the key to economic well-being is job security.

He writes, "We're in a downward economic spiral until we get assurance our jobs are safe. It would be irresponsible to keep spending," he says, "with so much uncertainty, especially employment."

And with the economy so dependent on the consumer, many of you wrote in with ideas on how to stimulate spending. Gary Dowdy has a suggestion shared by many of you, "Want to spur the economy?" he asks. "Ask those credit companies to drop their interest rates."

Roberta Eckland agrees. "At a time Americans need relief the most, they're locked into exorbitant interest rates and various fees, with no way to reduce their debt load."

Andrew Russell says the problem is so acute, the government should step in to put a ceiling on those rates. He writes, "Now the Fed has cut rates to the lowest point in 40 years. Shouldn't Congress protect the consumer from the credit card companies that charge high interest rates?"

But Danielle Caestecker says that she thinks there's a better solution. "It's pretty simple. Avoid paying high interest rates -- how to avoid paying high interest rates," she says, "it's called living within your means."

Finally, on the subject of interest rates and the economy, Kerkstra writes in to say that we shouldn't forget about seniors living on fixed incomes. "It looks like the road to economic recovery goes over the backs of senior citizens with CDs and money savings."

Coming up on this special holiday MONEYLINE, we follow the terrorist money trail with an inside look how Osama bin Laden funds his vast criminal network. Plus, a look at how some terrorists cash in on coupons. And then, America takes comfort in the simpler things. MONEYLINE will be right back.

(COMMERCIAL BREAK)

HOPKINS: From drugs to diamonds, Osama bin Laden uses covert means to hide the money flow that funds his criminal network.

And as Allan Dodds Frank reports, tracking terrorist money is a very difficult process.

(BEGIN VIDEOTAPE)

ALLAN DODDS FRANK, CNN CORRESPONDENT (voice-over): Even more than religious fervor, it takes money to build and sustain terrorist networks, lots of money. For food, wages and shelter, no matter how modest, for training, weapons and communications, for transportation and support for terrorists, says the U.S. government in more than 60 countries.

So where did the money come from? Initially from Osama bin Laden's own pocket. Along with his more than 50 brothers and sisters, he inherited a portion of his father's multibillion dollar empire, the Saudi bin Laden group. His share, about $60 million.

In the early 1980's, bin Laden worked with operatives from U.S. intelligence, the Pakistani military and Arab states. They ran a wide-ranging, covert network that recruited and financed Muslim fighters to battle the Soviet army. Using the covert techniques he learned, he built his organization al Qaeda with fellow Muslim war veterans.

WILLIAM WECHSLER, FMR. NATIONAL SECURITY COUNCIL: It was this network that followed Osama bin Laden, that he kept with him when he left Afghanistan the first time, went back to Saudi Arabia, then to Sudan, and then to Afghanistan. And all during that period it built, it got more complicated and it got moved to terrorist ends.

FRANK: But he lost millions when the Bank of Credit and Commerce International, the heart of the old covert financial network, collapsed in a global money laundering scandal in 1991.

(on camera): So that year when he moved to Sudan, bin Laden set up the al Temal (ph) Ismalic Bank, which investigators believe he used to send money to al Qaeda cells around the world.

(voice-over): His organization kept a low profile, matching the images of the September 11 suspected hijackers, who stayed in cheap motels and apartments and shopped at Wal-Mart. Still, staging the attacks was not cheap.

JIMMY GURULE, U.S. TREASURY DEPT.: We're talking about, at a minimum, is in the millions of dollars to underwrite just the expenses related to this operation.

FRANK: In the Clinton administration, William Wechsler led the hunt for bin Laden's money.

WECHSLER: The money that is used for terrorism is still being raised. It's still being solicited from people throughout the Muslim world. It's still being raised under the guise of charitable organizations. It's still coming from business enterprises, some legitimate, some illegitimate.

FRANK: Contributors to charities claiming to aid Muslim refugees, in fact, may be donating to bin Laden front. Drug addicts too may contribute unwittingly, since investigators say one of his biggest sources of money is the drug trade. In recent years, the poppyfields of Afghanistan have produced as much as three-quarters of the world's opium, the base ingredient of heroin. Heroin, taxed by the Taliban and moved in caravans protected by al Qaeda gunman. TONY BLAIR, PRIME MINISTER, ENGLAND: The al Qaeda network and the Taliban regime are funded in large part on the drug's trade. 90 percent of all the heroin sold on British streets originates from Afghanistan.

FRANK: Then there's protection money. U.S. government sources believe rich Arab businessmen have succumbed to extortion by al Qaeda.

SEN JOHN KERRY (D), MASSACHUSETTS: The number of wealthy people have effectively paid protection to Osama bin Laden. Not unlike protection money to organized crime that's been paid in New York or other cities over the course of our history.

FRANK: Countries the U.S. says sponsored terrorism, among them Ira, Iran, Libya and Syria, also have leant bin Laden a hand.

KERRY: What we do know is there are contributions in kind, i.e., food, shelter, sort of support by just having a base of operations in a particular country.

FRANK: Raising money is only the beginning. Money laundering experts say bin Laden's associates exploit every avenue, including the practically paperless underground cash transfer system known as hawala. They use Islamic banks in the Middle Eastern money centers, such as Dubai, to make the transition between East and West. And the favorite places to put money, multinational banks.

DAN KARSON, KROLL ASSOCIATES: If you're dealing with sums of money that are small, you are flying well in the radar screen. You are escaping scrutiny.

FRANK: Barkley's, Bank of America, Citicrop, Credit Suisse, Credit Lyonnais, Commerce Bank and Deutsche Bank are among the money center banks that have frozen accounts. As for the bin Laden family business, it maintains close public ties with the Saudi royal family. But the privately held Saudi bin Laden group shrouds its finances in secrecy.

The family says it has had no dealings with the world's most wanted terrorist since his Saudi citizenship was revoked in 1994. But as government officials note, family ties are family ties. So doubts linger.

Allan Dodds Frank, CNN, New York.

(END VIDEOTAPE)

HOPKINS: In an effort to hunt down and cut out terrorist funding, investigators are following a money trail that runs through banks, Islamic charities, and now the corner grocery. Terrorists may be funding their operations by cashing in discount coupons.

Chris Huntington has the story.

(BEGIN VIDEOTAPE) CHRIS HUNTINGTON, CNN CORRESPONDENT (voice-over): 25 cents off Progresso soup. A dollar saved on Hefty storage bags. Up to two bucks off a pack of Eveready batteries. Nearly $200 billion worth of coupons issued each year help American shoppers save money and American companies move merchandise. Federal law enforcement officials also believe coupons may help terrorists raise cash.

KENNETH DAM, DEPUTY SECRETARY TRESURY: There have been many suggestions that one of the ways in which the terrorists are financing themselves is by coming into large quantities of coupons, a kind of thing you use in the grocery store, and turning those into ways of transferring money. We're actively investigating that possibility.

HUNTINGTON: Several investigations in the last 12 years discovered that Islamic terror groups, including the Palestinian Liberation Front, Hamas and Hezbollah ran elaborate schemes in the United States, generating close to $100 million, cashing in coupons without ever buying the underlying products.

Ben Jacobson, a former New York City police detective, led one of those investigation.

BEN JACOBSON, PEREGRINE GROUP: In the United States, terrorist cells were using coupons and they are currently using coupons. We believe that's still the same groups that were involved with the bombing of the World Trade Center the first time are still associated with this particular coupon fraud operation that operates in the New York/New Jersey area, as well as in the Midwest.

HUNTINGTON: The fraud works like this. Operatives obtain coupons in bulk, often from newspaper recyclers or through web sites. Coupons are clipped, crumpled up to make them look used, and sorted for shipping. Crooked stores, in on the scheme claiming to have sold the products, redeem the coupons with the manufacturers and collect the checks.

BUD MILLER, COUPON INFORMATION CENTER: It's usually a small operation that's highly organized, highly concentrated, working through numerous retail outlets. Just individual cases I've had, for example $87 million in Detroit, $68 million in the greater Philadelphia area, $44 million in Florida, it's a substantial amount of fraud.

HUNTINGTON: Miller tracks coupon fraud for the industry. He estimates half a billion dollars worth of coupons are fraudulently cashed in each year, roughly 10 percent of all coupon redemptions. But criminal prosecutions are sporadic. Compared to murder and narcotics, coupon fraud is regarded as nickel and dime crime.

Major coupon issuers do intercept about $100 million worth of fraud each year. But compared to the billions of dollars in new sales generated by coupons, chasing criminals is not a top priority.

CHARLES BROWN, NCH: All sponsors of coupons have to make that cost benefit analysis, the cost justification for controls versus the benefit of detection. HUNTINGTON (on camera): The average coupon worth about 75 cents. And last year, more than $250 billion were left unredeemed. That's an awful lot of paper lying around that organized criminals and possibly terrorists could convert into cash.

Chris Huntington, CNN Financial News, New York.

(END VIDEOTAPE)

HOPKINS: Next as bioterrorism fears grip the nation, biotechnology companies are experiencing a boost in business. And the nation's reservists are being tapped for action. Look at the potential impact on corporate America. Plus, rethinking safety precautions in skyscrapers. Could parachutes be the answer? We'll take a look when MONEYLINE continues.

(COMMERCIAL BREAK)

HOPKINS: Fears of bioterrorism have made biotech companies hot again. The industry is expected to benefit from a wave of government defense spending.

Casey Wian has the story from San Diego, California.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): This device, resembling a beefed up personal computer, may become one of the newest weapons in the war against bioterrorism. It analyzes DNA on the head of a microchip.

KIERAN GALLAHUE, PRESIDENT, NANOGEN: The application of bioterrorism is the ability to detect the presence of certain organisms. And by using a microchip, you can potentially speed that application. You can also potentially look for multiple organisms at the same time, because you may not know what you're looking for.

WIAN: Nanogen says its machine can perform accurate tests that now take three hours in 16 seconds. It's working on portable models for military and other government uses. Another San Diego area company, Ibis Therapeutics, is developing both sensors to detect and drugs to treat infectious diseases.

UNIDENTIFIED MALE: It's very apparent to us and very apparent to the government that there's an extraordinary sense of urgency to advance the technology faster.

WIAN: Stocks of companies working on bioterrorism defense have rallied in recent weeks, even though government spending remains modest. The biggest chunk, $140 million this year, comes from the Defense Advanced Research Projects Agency. Previous DARPA research led to the creation of the Internet.

(on camera): DARPA says it has not requested or received additional money for biotech research since the September 11 terrorist attack or the anthrax outbreaks that have followed, but the industry is expecting more money soon.

MARK MANORE, NEEDMAN & CO.: The companies have been getting small seed grants from the government at this point, probably as a first step of a multilayer or multipart transaction that will happen in the future. It's usually the way that it works.

WIAN: In California, many biotech companies are preparing for the future by hiring. The state was expect to add 70,000 biotech jobs this decade, even before September 11.

Casey Wian, CNN Financial News, San Diego, California.

(END VIDEOTAPE)

HOPKINS: There are always industries that will prosper in times of war and those that will suffer from the situation.

Joining me once again to talk about that and other things, Todd Eberhard of Eberhard Investment Associates, Robert Barbera, the chief economist at Hoenig Group, and Hugh Johnson, the chief investment officer of First Albany.

Welcome back to all of you. And Todd, should investors be thinking about their portfolios differently, as we sit here today?

EBERHARD: Well, I think if you look back at '01 and the performance that occurred for the average investor out there, there obviously was -- they were very disappointed in what happened, especially coming off the number of years you had such fantastic growth in the markets.

So I think every point, at every point, especially in going into a new year, you should review your portfolio and see where you're weighted and see adjustments you may want to make.

That puts aside the tax law selling you probably hopefully did at year-end. But in '02, I think you have to be a little different than you've been before. You're no longer, in my opinion, looking at sectors. You're looking at specific stocks.

And that means when you're looking at year-end and '01, we had GE performing very well in coming back. Home Depot, which our stocks have happened to like. Those are things that performed well towards the latter part of '01 and probably will continue to perform well into '02. You may want to hold onto those, but other ones you might want to bounce of your portfolio, and really review it and look at it with your financial professional, and review what's right for you, especially in this risky environment that we're having these days.

HOPKINS: Hugh Johnson, what do you say to investors in this kind of climate? Investors that have had some very difficult time and undoubtedly losses?

JOHNSON: Well, probably one of the reasons they've had difficult times, or the reason that I see most prominently, is that they weren't diversified. So you may want to make some shifts for 2002, versus 2001 in the portfolio. You might want to, for example, shift a little bit of your weighting from the so-called safer sectors, like health care, which includes drugs, non-cyclicals like household products and food stocks. That worked well, say, in the first quarters of 2001.

And you might want to be more on the kinds of stocks that Todd mentioned, consumer cyclical stocks like Home Depot, a stock like General Electric are more economically sensitive. But don't make those shifts at the expense of being diversified among all the 10 sectors of the market. We've learned that's very dangerous.

EBERHARD: I think that's a very valid point, if I may, because you do want to remain diversified. And if one thing, if you learned nothing else, as you are a new investor or investor who has been doing it for a while, the only thing that protected you in this market environment in general going back in '01 and 2000 was diversification, which brought your assets across all the boards of the markets.

HOPKINS: One of the things that people tend to own is some bonds. Is that an area that will continue to do as well as it has in the past, or not?

BARBERA: Actually, I think the striking thing about 2001 was that long-term bonds did nothing. I began the year believing that it was going to be a recession, that profits were going to suffer, that the unemployment rate was going to go up a lot, and that the Fed was going to ease dramatically. And I have to admit that I'm flabbergasted that having gotten all those things right, bonds didn't do what I said they were going to do. They did nothing. You clipped -- you basically clipped the coupon, but you didn't really get a rally in bonds.

HOPKINS: On the other hand, savers saw their savings rate decline. Is that likely to get better in the coming years?

BARBERA: Well, the bond yield if you take it at face value is saying this dramatic Fed ease is quite temporary, and that the bond is the anchor, the fund rate is the tail, and the fund rate is going to come back up. Now, my guess is that's not quite right, that in fact the decline for the economy and the pressure it's putting on prices is going to allow for long-term interest rates to come down some in 2002.

HOPKINS: And more time to re-finance mortgages?

BARBERA: Right, which will provide additional help for the economy. So actually I think bonds will do OK in 2002, because the ease is in place and there's room for a bull market flattening, essentially.

HOPKINS: Let's actually talk about housing a little bit. Hugh, housing has done really well, and that's part of the reason that would have helped people if they were diversified in housing as well as stocks and bonds?

JOHNSON: Yeah. It's done well, and I don't see any reason why it's not going to do well in a recovery. In other words, we actually had a little bit of a softening if you look at housing starts, a little bit of a softening if you look at prices. But certainly not what you would call recessionary conditions, so if the economy starts to recover, say, second, third quarter, I think housing starts will work their way back up some. Say, the 1.6 million unit rate from 1.55 million unit rate, so roughly numbers of that sort.

HOPKINS: And Todd what do you think about that?

EBERHARD: Well, it's interesting, you make a valid point here, which is it really didn't suffer too much. I mean, we had these things hold up exceptionally well, which you normally would have started to see at the end of '01, a selling off or a decrease in the value of these vehicles, and it didn't happen so much.

BARBERA: I think that's obviously the good news and the bad news. I mean, the traditional post-war experience is housing falls by 50 percent, you know, 1.6 million units becomes 800,000 units. And then it comes flying up in the recovery. The good news is, it didn't happen. The bad news is, you can't look at that as the engine in 2002, because what didn't go down isn't going to go up much.

HOPKINS: Very good point. Thanks very much, Bob Barbera and Todd Eberhard and Hugh Johnson.

After the break, high-tech workers holding visas who are out of work may soon find themselves out of the country. And a special training camp to fight terrorism sees a jump in business. We'll take you there for an inside look.

Plus, airport security is a hot topic in Washington and beyond. We'll take a look at the cutting-edge technologies available to fight terrorism.

(COMMERCIAL BREAK)

HOPKINS: High-tech workers in the country on special visas are facing difficult times. Many are out of work as a result of the recent economic slowdown. And since September 11, President Bush has made it clear that visa violators will be tracked down, which means H- 1B visa holders out of work may be deported. Fred Katayama has the story.

(BEGIN VIDEOTAPE)

FRED KATAYAMA, CNN CORRESPONDENT (voice-over): High tech companies couldn't hire enough skilled, foreign workers during the dot-com boom. But now, many are laying off holders of the so-called H-1B visa as the economy slows further. And following the terrorist attacks, Congress' focus has moved to economic and national security. So the half million H-1Bs and their employers could face tighter scrutiny.

Colorado Congressman Tom Tancredo has proposed rolling back H-1B admission to 65,000 from the current cap of 195,000 and cutting that back further if the jobless rate rises. He argues American workers should get preference in hiring. Immigration backers say that would hurt the U.S. economy because it would force companies to move work overseas.

Missouri Senator Christopher Bond wants employers who lay off H- 1B workers to immediately notify immigration authorities, a step some employers ignore or risk a stiff penalty.

SEN CHRISTOPHER BOND (R), MISSOURI: This does not make it foolproof, but it's the best check we have to make sure we know that people who come into the United States for a specific purpose don't stay here for other purposes.

KATAYAMA: None of the hijackers involved in the World Trade Center attacks was an H-1B visa holder, but immigration critics say some would have made good candidates because they were highly skilled.

MARK KIRKORIAN, CENTER FOR IMMIGRATION STUDIES: Immigration control is indistinguishable. You can't tighten up on one element of immigration control or the immigration system, without fixing it overall because a potential terrorist or other kind of bad guy will simply probe for weaknesses.

KATAYAMA: Many laid off H-1B workers don't go home. They pump gas, work at stores and perform odd jobs while they look for new high tech jobs.

(on camera): But so far, the Immigration and Naturalization Service has no plans to tinker with its H-1B program. And it still has policy on just how long H-1B holders can stay once they become jobless. And it's considering a 60-day grace period to give laid off workers time to find another job or pack up and go home.

Fred Katayama, CNN Financial News, New York.

(END VIDEOTAPE)

HOPKINS: Just days after the September 11 attacks, President Bush authorized the call-up of up to 50,000 reservists and National Guardsmen. Thousands of them were called to duty in service that could last up to two years, putting financial pressure on those who are self-employed. Susan Lisovicz has the story.

(BEGIN VIDEOTAPE)

MARK LOSACK, CHIROPRACTOR: Go ahead and swing your feet around.

SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): Chiropractor Mark Losack has spent five years building up his practice in southern California. As a Marine reservist, a call to active duty would cut his pay in half.

LOSACK: I'll be able to pay my bills and still maintain a little bit of a savings investing type of program. But again, I just won't be out of debt as quickly as I would have liked to have been.

LISOVICZ: Federal law requires that employers hire reservists back at comparable pay if they're called up into service. Some big companies such as Xerox, United Technologies, and Wal-Mart have recently gone beyond that, closing the gap between military and civilian pay for at least part of the duration.

(on camera): But there is no safety net for reservists who are self-employed. The Small Business Administration does provide a special disaster loan for reservists, but that only covers capital for necessary obligations, and does not cover lost income.

JAY SPIEGEL, RESERVE OFFICERS ASSOCIATION: We saw in the aftermath of the Persian Gulf War, many medical practices were destroyed. The bulk of military medical force structure is in the reserves. And when those folks get called up, their patients continue to need medical care. And they'll go seek it somewhere else.

LISOVICZ (voice-over): Reservist and ophthalmologist Lawrence Ginger says financial hardship is a second priority. His father was an infantryman who landed on Omaha Beach on D-Day.

LAWRENCE GINGER, OPHTHALMOLOGIST: My father did his part and my grandfather did his part. And it was just something that I thought was the right thing to do.

LISOVICZ: Ginger says some of his competitors have volunteered to work in his office as their own way of sacrifice during this time of need.

Susan Lisovicz, CNN Financial News, New York.

(END VIDEOTAPE)

HOPKINS: Because of the recent terrorist events, security is foremost in the minds of the traveling public, as well as most corporate leaders. But the challenge of keeping employees and property safe is often made more difficult because of little or no standards for private security companies.

Tim O'Brien looks at the insecurity of corporate safety.

(BEGIN VIDEOTAPE)

TIM O'BRIEN, CNN CORRESPONDENT (voice-over): The September 11 terrorism has been horrific for New York and the country, but it has been a boon for the risk management and security industry.

RICH MAURER, AMERICAN SOCIETY OF INDUSTRIAL SECURITY: I hate to say that, but it has been good for the industry, but it's been good for the awareness of the country.

O'BRIEN: Pete Lambert's company, Blackhawk Security, was doing $7 million in business before September 11. It's up to $10 million now. And Lambert says he's now turning down jobs because he doesn't have enough security guards to fill them, even though the requirements are minimal.

PETE LAMBERT, BLACKHAWK SECURITY: In the District of Columbia and in Maryland, to be unarmed security guard requires zero training. An armed guard in Maryland only requires eight hours of training.

O'BRIEN: Is that scary?

LAMBERT: It's very scary. You know, you're putting guns on people out there that don't have a clue.

O'BRIEN: Nationwide, 10 states have no regulation of the security industry at all. Take that, add long hours and low wages, and it should not be surprising that some security guards pose risks of their own.

RICK HERNANDEZ, INTER-CON SECURITY: A real issue within the industry is background screening of personnel. Now we've heard a lot about that in the news. And I think it kind of underscores the -- what I refer to as the deplorable kind of services that have been provided from different companies.

O'BRIEN: The FBI will run background checks on security guard applications, but only if required by state law. Most states do not require FBI background checks. And station guards alone won't do it.

HERNANDEZ: I think just kind of willy-nilly throwing guards at the front gate, or people in the lobby is not a good approach.

O'BRIEN: Security professionals say we'll see more high tech access controls and more emphasis on incorporating security in building design.

(on camera): But even all that won't guarantee real security. Industry leaders acknowledge while business is booming, it is not necessarily getting any better. And with regulation ranging from little to none, it is buyer beware.

Tim O'Brien, CNN Financial News, Washington.

(END VIDEOTAPE)

HOPKINS: Coming up on this special holiday edition of MONEYLINE, as airlines beef up security, new technology makes air travel safer and more secure. Plus, a company specializing in defeating terrorists, an inside look at their counterterror training camp. MONEYLINE will be right back.

(COMMERCIAL BREAK)

HOPKINS: As the nation responds to terrorism, airport security dominates the minds of travelers and lawmakers alike. Security companies are now looking for new technology to make our skies as safe as possible.

Allan Chernoff has that report.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): Now in production, the first generation of walk-through scanners designed to detect any whiff of explosive. The Sentinel from New Jersey-based Barringer Technologies and the Entry Scan from Ion Track Instruments of Massachusetts blow air on passengers, then analyze that air for traces of explosives.

PAUL EISENBRAUN, ISI: There has not been any real device at any of the security checkpoints that has the capability to detect any explosives on people. And there have been terrorist incidents where bombs have been smuggled on board aircraft by people who have had the bombs on their body.

CHERNOFF: The two companies are awaiting approval of the products from the Federal Aviation Administration.

This new generation of airport security technology is designed to go well beyond the detection of metal objects. It is intended to find explosives of any type.

KENNETH WOOD, BARRINGER TECHNOLOGIES: You need a multitude of technologies, a system of technologies, to provide as total a solution as you can to contraband your terrorist threat.

CHERNOFF: Cyterra Corporation in Waltham, Massachusetts plans to use its new ground radar technology, which the military uses to find land mines in the airport to scan passengers for weapons. Responding to fears of chemical or biological terror, Cyterra has developed buttons that can detect, though not protect you, from such agents.

DAVID FINE, CYTERRA: You wear this badge. The badge is kept in a facility, maybe in a train station or in an aircraft. It's analyzed at the end of flight or once a week. And it tells whether there has been an exposure.

CHERNOFF: To best protect the public from chemical or biological agents, experts say the air in any building or even aircraft would have to be tested and filtered. On sight terrorist board, a device intended to neutralize impurities in the air by using electric shocks.

(on camera): The FAA is in charge of approving and purchasing new security equipment for airports. And it's still waiting to find out how much money will be budgeted for such devices in the aftermath of the attacks. Experts say it will take plenty of money and years to deploy new equipment. They say the best immediate response is to improve operation of existing equipment, an effort well under way at the nation's airports.

Allan Chernoff, CNN Financial News, New York.

(END VIDEOTAPE)

HOPKINS: Across the country, law enforcement agencies prepare for the possibility of terrorist attacks. One company offers serious training designed to combat terror, using specialized drills and real- life situations.

Bruce Francis takes us inside.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: And ladies and gentlemen, welcome aboard Spirit Airlines flight 844 with nonstop service to Fort Lauderdale, Florida.

BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): It starts with a familiar, even comforting routine, but then it soon looks like the scenario all of us dread.

UNIDENTIFIED MALE: Everybody in your seats. Get in your seats. Let her go. Get on the ground. Get on the ground. Put your hands behind your back. Police, everyone stay down.

FRANCIS: Welcome to counter terror camp. In a Spirit Airlines hangar in Detroit, former law enforcement and special forces officers are training S.W.A.T. teams and flight crews. This morning's exercise is a demonstration of the pepper ball, an air gun that shoots high- powered pellets of a powder that causes victims to cough and choke. The advantage? Unlike bullets, pepper balls won't damage a plane.

ANTHONY ZARINNIA, SPIRIT AIRLINES PILOT: Would I feel safer with one on board? I might.

UNIDENTIFIED MALE: You're my doorman?

UNIDENTIFIED: Yes, sure.

UNIDENTIFIED MALE: You know how to work it?

FRANCIS: In this drill, Detroit area special forces officers train for a hostage rescue using a special assault vehicle.

UNIDENTIFIED MALE: Go, go, go. Freeze. Get down.

FRANCIS (on camera): Believe it or not, before September 11, the company that runs these training camps did most of its business overseas. That's about to change.

(voice-over): At least that's what Bill Spaulding hopes. He runs the Teal Team, training consultants who are largely former special forces officers. The counter terror camp is run in conjunction with U.S. cavalry, a company that sells equipment to police departments.

BILL SPAULDING, PRESIDENT, THE TEAL TEAM: It's taken several major, major attacks on our soil before the people realize hey, it is happening here. So now that it's happened, we're to prepare for it.

FRANCIS: That preparation is costly. Drills like these cost $1,500 per trainee. And so far, most law enforcement agencies rely on internal training programs. But in these days of redefined priorities, training that was too expensive before September 11 may get a closer look now.

UNIDENTIFIED MALE: Flight attendants are under control.

FRANCIS: Bruce Francis, CNN Financial News, Detroit.

(END VIDEOTAPE) HOPKINS: The attacks on the World Trade Center raising fears among many who work in skyscrapers. Companies are now selling parachutes to workers in high-rise buildings, pitching those parachutes as life preservers.

Steve Young has the story.

(BEGIN VIDEOTAPE)

STEVE YOUNG, CNN CORRESPONDENT (voice-over): No one who watched will ever forget the horror of seeing dozens or more people jump from the World Trade Center catastrophe, which is why a Michigan company is racing to ship an $800 last ditch skyscraper parachute. The chute opens much faster than sports parachutes. It's more stable, but can't be steered, which means you could slam into the skyscraper you just fled or another nearby.

UNIDENTIFIED MALE: This line's attached to the building or wherever you're dropping from.

YOUNG: The design work started before September 11 with modification the chute used by acrobatic pilots, but it wasn't clear if there was a big enough market.

Orders are now pouring in. And other companies are racing to catch up to ExecutiveChute, who's product and training video became available this week.

JOHN RIVERS, EXECUTIVECHUTE: This is an option of last resort. It's kind of like putting on a life preserver if you're on a cruise ship. It's something you hope you never have to use.

YOUNG: ExecutiveChute was first urged to develop its device by lawyer John Larkin. His company ensures high-rise buildings. He works in the Chicago skyscraper.

JOHN LARKIN, ATTORNEY: I will keep it on the back of my door. And you know, God forbid, I hope I never have to use it. And I don't think I will.

YOUNG: Is it sensible or reckless? One member of the Parachute Industry Association says diving out of a skyscraper is at least as risky as the dangerous sport of so-called base jumping from the top of buildings, bridges, and cliffs.

(on camera): But the association's president says, would I give chutes to my mom and dad if they were in a burning building with no other escape? You bet.

Steve Young, CNN Financial News, New York.

(END VIDEOTAPE)

HOPKINS: The issue of personal safety and security has, of course, been something we have all been thinking about lately. And many of you who wrote to us have been particularly critical of security at airports.

Pamela Szymanski says, "The root of the problem, airlines have been cutting corners for just too many years." Her solution? They have to "suck up the costs of fixing the problems." Of course, past experience tells us those charges will swiftly be passed on to passengers. Some airlines are already adding a surcharge to the price of a ticket.

Norman Herald in Oregon writes to say that he has 36 years of military and civilian air service and says making baggage screeners federal employees is simply not the answer. He writes, "Who do you think will end up being hired to fill those new federal service jobs?" Norman asks. "Have you ever seen anyone do a better job just because he or she got a pay raise?"

Some of you seem more than willing to let the government look over your shoulder in the interest of greater personal safety and security. Florence and David Becker say, "Times have changed. If we find one terrorist bank account, it's worth it."

Hector Boterro in Miami arguing honest citizens have nothing to fear from scrutiny. Writing, "If the government wants to look at my banking transactions, they're welcome to it."

And Chris Moore writes, "Let's get someone to propose better solutions, instead of suggesting we just stick our heads in the sand."

Coming up on this special edition of MONEYLINE, mounting troubles at the nation's postal service. Anthrax, of course, tops the list. We'll have the story.

Then, finding comfort in the traditional. Norman Rockwell making a comeback. That's next.

(COMMERCIAL BREAK)

HOPKINS: The United States Postal Service was losing money even before the events of September 11, but those attacks, coupled with the recent anthrax threat, have some wondering if the post office will ever recover.

Hillary Lane has the story.

(BEGIN VIDEOTAPE)

HILLARY LANE, CNN CORRESPONDENT (voice-over): From door the door, street to street, state to state, there's a timelessness to the mailman. The country's had a postal service in some form since 1672. Today, this quasi government agency employs nearly 900,000 workers, delivering 680 million pieces of mail a day. It's an inflexible giant, lumbering along in a far more nimble world. Snail mail, unable to compete with the fax machine, e-mail.

Even in the package business, the younger upstarts, such as Federal Express and UPS now deliver the vast majority of packages, especially for businesses. GENE DEL POLITO, ASSN. FOR POSTAL COMMERCE: They can go in there and negotiate very, very favorable rates, much more favorable than the Postal Service is able to offer them.

LANE: The anthrax scare has made matters even worse. Unions representing postal employees are now suing to close mail facilities where anthrax fears worker absenteeism, adding to concerns about the safety of the mail.

The Postal Service gets just one percent of its budget from the U.S. Treasury. Its revenues come from stamp sales and other mailing services, but adding a few pennies to the price of delivery isn't enough to payoff the service's $11 billion in debt.

And the bleeding continues. Losses in the most recent fiscal year, an estimated $1.5 billion. Since September 11, the service has lost $150 million a week. First, planes were grounded, then came a slowdown in volume and an increase in security. A bill in the U.S. House proposes extensive changes to the postal system, giving it more independence in pricing and contracting out services. In the words of one postal commissioner, "Everything's on the table."

GEORGE OMAS, POSTAL RATE COMMISSION: I said to Senator Thompson that I thought that maybe some consideration should be given that the Postal Service do what they do best. And that's do the last mile, the delivery. And that maybe the processing and things that they can't get a grip on should be something that they should contract out.

LANE: Surviving as a smaller, swifter service behind the scenes, but maintaining the familiar face out front.

Hillary Lane for CNN, New York.

(END VIDEOTAPE)

HOPKINS: Bomb threats, anthrax scares and worries over airline safety have many Americans searching for the simpler things in life. As a result, Americana is popping up everywhere.

Kitty Pilgrim has the story.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): A sweet picture, but look again. The juxtaposition of nurture and menace speaks clearly in this Norman Rockwellesque ad for "The New York Times."

An exhibit of Norman Rockwell paintings is drawing record crowds at the Guggenheim Museum.

UNIDENTIFIED FEMALE: I get the feeling that right now, that Americans have become most aware of what they risk losing in that everydayness, if life changes too dramatically. And so suddenly, as we look at what -- at the small things that matter, Rockwell comes to mind because that's what he was a master of for six decades. PILGRIM: Family, war, country, civil order, all with humble, human touch, a simple version of life. American art experts like Gavin Spanierman are not surprised by the new connection America is making to Rockwell in these troubled times, with themes of family and simplicity.

Spanierman points to the bucolic simplicity of Winslow Homer after the Civil War as a similar pattern. Yet, he says, Rockwell always implied the presence of world events in his paintings.

GAVIN SPANIERMAN, SPANIERMAN GALLERY: Besides that wonderful storyline, there's always this sort of presence of an outside -- obvious presence of an outside world, you know. It's not a snapshot. It's a -- it is part of a much greater whole. And that's what I think he conveys so well.

PILGRIM: Advertising executives say their clients are opting for a kinder and gentler message, but a modern version. Ads that emphasize camaraderie and connection, like this Mitsubishi ad.

DONNY DEUTSCH, CHMN., CEO, DEUTSCH, INC.: What will last is not Norman. You're not going to see Norman Rockwell in advertising, but feel good messages, family messages. And I think that's across all medias, not just advertising. That's just what the doctor ordered right now.

PILGRIM: The era of edgy, demanding, abrasive may be over in both art and its commercial application advertising. If it doesn't feel good these days, many are saying it just isn't going to sell.

Kitty Pilgrim, CNN Financial News, New York.

(END VIDEOTAPE)

HOPKINS: That's it for this special holiday edition of MONEYLINE. Thanks for joining us. I'm Jan Hopkins in for Lou Dobbs. Good night from New York. Have a great holiday.

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