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On the Story

Rumsfeld Warns Prisoner-Abuse Scandal May Deepen; Bush Decries Abuse on U.S., Arabic Media; America Loses "Friends"

Aired May 08, 2004 - 10:00   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.


THOMAS ROBERTS, CNN ANCHOR: From the CNN Center, good morning, everybody. I'm Thomas Roberts. In the news this hour:
Thomas Hamill is waking up in his own bed today. The former hostage returned home to Macon, Mississippi, early this morning, one week after escaping from his captors this Iraq. At the family's request, homecoming celebrations have been low key. That is, at least for now.

The U.S. military has filed charges against Private First Class Lynndie England. She's one of the soldiers seen in various photos with naked Iraqi prisoners. England, who is pregnant, is currently at Fort Bragg in North Carolina. She is the seventh soldier charged in the abuse scandal.

And the Coast Guard is searching for a woman who's missing after the boat she was in capsized on a Massachusetts river. Four other people from the boat died. A teen managed to swim to safety and then alert police. The boat sank in the Taunton River. That's near Rhode Island.

Those are the stories for -- the top stories this morning. I'm Thomas Roberts. ON THE STORY begins right now.

DANA BASH, CNN WHITE HOUSE CORRESPODNENT: Welcome to CNN's ON THE STORY where the journalists have the inside word on the stories we covered this week.

I'm Dana Bash, ON THE STORY of mistreatment of Iraqi prisoners had the president and his administration working hard to control the damage.

OCTAVIA NASR, CNN SENIOR EDITOR FOR ARAB AFFAIRS: I'm Octavia Nasr, ON THE STORY of how the pictures and the administration's words rolled across the Arab world.

ELAINE QUIJANO, CNN CORRESPONDENT: : And I'm Elaine Quijano, ON THE STORY of how the scandal turned up the heat on Defense Secretary Donald Rumsfeld, including calls for him to quit.

KATHLEEN HAYS, CNNfn CORRESPONDENT: And I'm Kathleen Hays, ON THE STORY of how new signals from the economy, including another jump in jobs, are affecting the market. Also, coming up, new hints that interest rates are going back up. What does that mean for buying houses, cars, and what does it mean for your 401(k)?

We're going to go live to New Orleans to check in with our producer following the John Kerry campaign.

And did you lose some "Friends" this week? Correspondent Sibila Vargas is on that story.

So e-mail us onthestory@cnn.com.

Now to Dana, and the president and the prisoners.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: People in Iraq must understand that I view those practices as abhorrent. They must also understand that what took place in that prison does not represent America that I know.

(END VIDEO CLIP)

BASH: President Bush Wednesday speaking on Arab television about the Iraqi prisoner-abuse scandal, which of course raced across the world, and its impact is still being measured internationally, at the White House and on the campaign trail.

NASR: Dana, my question to you is this: the Arab media look at this and say, This is a confused administration. They're not sure if they should apologize, not apologize. They're not sending a clear message to the Arab world.

How's it seen from your vantagepoint?

BASH Well, I can just tell you what it was like to cover the president this week.

This was the week that the president came out on the campaign trail. He had a big bus tour at the beginning of the week and at the end of the week. At the beginning, I was with him. We were in Ohio and Michigan. He rolled through, he had seven stops. Of course, defended the war in Iraq, which is part of his standard stump speech. Did not say one word about the Iraqi-prisoner issue. In fact, he was going to allow reporters on his bus. That didn't happen, at least the traveling press corps. He had some local reporters, but no cameras near where a reporter could ask a question. He wanted to stay on message -- the campaign message that they had planned.

Well, by the end of the week, yesterday, the president again was on a bus tour. Every stop he talked about it, just to show the way the week transpired and how they felt that the president needed to get out on this and talk about it.

Now his critics, obviously, would say, it shows how slow they were. HAYS: Well, but talk about slow -- I think a lot of people find it just hard to believe that the president of the United States said he learned about this on television. Credible?

BASH: Well, apparently they say -- they say that he did, and that was really one of the most interesting things to watch in the Bush White House this week, was the targeted leak of the fact that the president, in a private meeting with his defense secretary, basically slapped him on the wrist and said, Why did I find out about these pictures? Why did I find about the fact that there was a classified report that detailed, catalogued these abuses -- all of that he found out about, he said, on television.

It's so highly unusual for this White House, for the president who says that he -- you know, he prides himself on loyalty -- to get this out there.

Now, the question is why did they do it? First of all, because he was legitimately angry because he didn't know about this. And second of all, you know, this is a president who is running on leadership and wants -- and there was -- certainly seemed to be an attempt to separate him from this issue, to show that he didn't know about it, and therefore he might not be culpable. Of course, you heard in these hearings yesterday, you know, the many, many times the buck stops here, where does it stop? So it's a tough situation for them.

QUIJANO: Switching back to the campaign trail, what was that like? A bus? What was that situation like for you, Dana Bash?

BASH: Well...

QUIJANO: (UNINTELLIGIBLE)

BASH: Yes, well, it's funny because the White House really wanted to sort of -- six months out. I mean, this is quite unusual for a candidate to get on this kind of bus tour. It was 25-bus motorcade or buscade going through -- going through these Midwestern states, very important states for the president. Michigan is one that he won (sic). Ohio is one that he has to win -- excuse me, Michigan is one that he lost, but still won the presidency. Ohio he has to win. So that's part of the reason why they wanted to stay on message there.

But this is an attempt for them to get him out, to get him out among the people, to -- you know, at every stop he made clear that he wanted to take off his jacket, and he's glad he's not in Washington anymore. It shows how quickly and how early they want to get him out and have these pictures of him outside the Rose Garden, off Air Force One, somebody who is not sort of stuck inside the bubble of the presidency.

NASR: Now, we heard the defense secretary yesterday say that the worst is yet to come. More pictures, more video. How much of a distraction is this going to be for this political tour and campaign?

BASH: Well, you saw yesterday what a distraction it was. I mean, the fact that the president did had to talk about it at every stop. The fact that -- look, I mean, the sound byte that we all used was him talking about it, not him talking about the fact that, Kathleen, the job numbers were tremendous yesterday. That's what they were waiting for. So, you know, it's a distraction in that sense.

It's also -- you talked to people privately in the White House, they say, it's also a distraction for what they're trying to do in Iraq. Obviously, not just in terms of the perception, but they need to be focused on the fact that the transition that they're working on is just little bit more than a month away. So that's a big problem for them inside.

But this is -- this is something that they are -- know that they have to deal with, and the president is going to continue to deal with this.

HAYS: Well, and reporters are going to keep hammering. There's -- the questions have only started, right? Aren't there are all kinds of things that are going to be raised, and questions that have yet to be answered.

BASH: Questions that have yet to be answered, and, frankly, might not be answered.

You know, you watch -- being in the press briefing room this week, it was -- -- it was -- number -- there were a number of questions that we asked constantly that we didn't have answers to. For example, when did the president -- first, not just about the pictures, but when did he first find out that the abuses potentially could have existed? Well, they think it was January, around the time that they put this release out, this press release out at U.S. Central Command, that it was an informal meeting with the defense secretary and the chief of staff, Andy Card. But the question is, you know, were there notes taken? Were there -- were there actions? Did the president said, Keep me updated on that. They don't know the answers.

HAYS: Dana, does this show that they somehow didn't get, initially, how serious this would be and what an explosive story? If they didn't take notes, if they can't remember...

BASH: Well, you know, you heard Donald Rumsfeld essentially say yesterday that he didn't brief the president the way he would have had he had the details that he had. You know, he said, the president was blindsided. I was blindsided. We were all blindsided.

So -- so, yes, you know, their defense is that had we known the details, we would have been more aggressive and try to get out in front of this. But they simply didn't know about the details. But in terms of the way they're dealing with it, the interesting thing was the difference and the change, if you will, in the president's -- from what he said, Octavia, on Arab television, talking about the fact that he thought it was abhorrent, but he didn't apologize. And the very next day, just to show, again, the evolution this week -- the next day, they had some damage control for their initial attempt to damage control, because he came out, standing next to King Abdullah of Jordan. Specifically, the symbolism there couldn't have been more apparent. With an Arab leader, somebody who, you know, is an important player in that region, saying finally, I'm sorry.

NASR: And, of course, every picture and every word about the prisoner-abuse story were heard and seen in the Arab world. I'll be right back on that story after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: I told him I was sorry for the humiliation suffered by the Iraqi prisoners and the humiliation suffered by their families. I told him I was equally sorry that the -- that people -- that seen those pictures didn't understand the true nature and heart of America.

(END VIDEO CLIP)

NASR: President Bush on Thursday finally using the small but powerful word, sorry. There were other words, of course, but it was the sorry that had the most impact in the Arab media and the Arab world.

Welcome back. We're ON THE STORY.

HAYS: Octavia, but, you know, the sorry seemed to come in dribs and drabs. You know, starting with Condi Rice at the beginning of the week, and then the president still equivocating in those interviews. How does the Arab world feel about that?

NASR: The Arab media -- and remember, I watch Arab television constantly as part of my job. I read Arab newspapers online and also off-line. And I talk to a lot of media executives in the Arab world.

People were confused, I'm hearing. People were not sure. Is this administration apologizing? Is this administration sorry, first of all? They put out the generals on Arab TV. Then, as you said, Condoleezza Rice on Arab TV. That didn't work. Then the president. Albeit, he said it indirectly to the King Abdullah of Jordan, but they still took it as apology. And then, of course, yesterday Rumsfeld's testimony; that had a huge play on Arab media.

QUIJANO: Yes, I wanted to get into that a little more, Octavia. I mean, an extraordinary moment for Defense Secretary Rumsfeld to actually offer his deepest apologies to the Iraqi people, because it was just on Tuesday and even Wednesday he was sort of offering a roundabout way, using passive language to say an apology is there for anyone who suffered -- for, you know, anyone who's abused.

But to come out in that direct way, how did that play out? And also, Secretary Rumsfeld saying, Look, the difference between us and other countries, is that we will expose our dirty laundry, in a sense. We will expose our mistakes in this way, and this is a lesson in democracy that other countries can learn from.

NASR: Right, and judging by the way the media, the Arab media handled it, it was -- they saw it as a lesson in democracy. You know, secretary of defense testifying, answering tough questions, being grilled on tough issues, being asked about resigning or quitting or being fired.

Now, here's what I got out of this. One very interesting quote here of someone saying, here's a defense secretary saying I'm sorry. The buck stops here. I am to blame. Why is he still in charge?

BASH: Octavia, what about the fact that the King of Jordan not only was standing next to the president -- excuse me -- but also, essentially, gave him an assist, saying that he believes that America doesn't stand for that.

How much of an impact did that have?

NASR: That has a huge impact, but has always the case. The Arab media, when you watch it, to them, that was not biggest story. The biggest story remains the Israeli-Palestinian issue. So this was a distraction, just like it was a distraction in this country as you were reporting earlier. To them, this was just a side issue, this abuse story. The Middle East is used to hearing about stories of abuse in prisoners under dictatorships and so forth. This is widespread. So that's not new.

What's new in this is the Arab media were waiting for this meeting between the King Abdullah and President Bush. They were waiting for signs: where the Middle East peace process is going to head from here. Where does the U.S. stand in all this? And coming out of that meeting, what President Bush said as far as he good advice from the king, that he's committed to peace in the Middle East, that there are no guarantees on the final agreement on middle east peace. All these were seen as positive signs back in the Arab world.

Now, media observers caution us, they say, wait a minute. Don't jump to conclusions yet. These are good words. Let's look at the deeds and see if they're going to match those words.

HAYS: So, update us a little bit more, because since you touched on the Israel-Palestine issue, what happened this week? Prime Minister Sharon, his own Likud party, seeming to reject his call for at least some of the settlers to leave Gaza. In terms of where that side of the story stands this week in the Middle East, how is that being viewed?

NASR: Well, that is not being viewed positively as far as the Arab media are concerned.

You have to understand, that's the whole point of the peace process, you know? You have a conflict. You know, years of conflict. This is not new. The Israel and the Arabs are enemies, except for some countries that have signed peace agreements with Israel, such as Egypt and Jordan, and those who have economic or cultural ties, such as Tunisia. This is very important.

Now, the Gaza pullout and the right of refugees to return, this is a huge issue. Arab media is treating it -- they're treating it this way, they're saying, if Israel doesn't allow all these Palestinians that live as refugees in refugee camps scattered all over the Middle East, this is not good news. And, in a way, they're applauding the Likud party for not passing -- for not agreeing to this at this point.

QUIJANO: Octavia, getting back to Secretary Rumsfeld -- because I covered the Pentagon this week. There was a lot of talk about them wanting to set the record straight as much as possible with reporters about this not being representative, the photographs that have emerged, the disturbing photographs of the prison abuses at the Abu Ghraib prison. They were so insistent, and, in fact, one senior Pentagon official said, I would sit down with you for two hours to discuss this, about how this is really just the actions of a few.

How much longer do you think these images will continue to play out in the Arab media? I mean, is this something that we could be seeing, you know, for months to come?

NASR: I have a feeling -- and again, judging by what I'm reading and what I'm seeing, this story is not going anywhere. And I have to tell you, hearing Rumsfeld yesterday say that the worst is yet to come, I have a feeling the worst is yet to come. We're hearing that there are tapes of these abuses circling around and might be available to media outlets very soon.

The Arab media have been reporting for months that there are cases of abuse in Iraqi jails by U.S. military personnel. So to them, this is a huge story. And I don't think it's going to go anywhere any time soon.

HAYS: Octavia, a quick final question quickly. Is there a danger of a backlash in the Middle East against the United States from this? I mean, beyond what we've had.

NASR: That's always the case, you know?

Again, this is not a new story. This is just an extra in the Middle East. There's outrage, there's anger against U.S. policies towards the Middle East, and the Arab world. So this is only adding to the fuel.

A backlash? We'll watch, we'll monitor or we'll see what's going to happen.

HAYS: And what else is ahead for you ON THE STORY this week, Octavia?

NASR: Oh, definitely, those tapes and more photos. That's what we're going to looking for. I expect something to show up sometime soon.

And then, the reaction to that, that's going to be my biggest story next week.

HAYS: OK, we'll be looking forward to that.

Just ahead, millions turn the channel from the prisoner abuse to "Friends." We'll talk to CNN entertainment correspondent Sibila Vargas coming up.

(COMMERCIAL BREAK)

(AUDIO/VIDEO GAP)

SIBILA VARGAS, CNN ENTERTAINMENT CORRESPONDENT: ...I mean, everything about them, Joey and his how you doing, guys started kind of acting that way and talking that way. The home decor, Monica's beautiful purple room. People at Lowe's say that because of "Friends," people started asking for (UNINTELLIGIBLE) with brighter colors, more eclectic styles. And even the fact that they used to drink and have coffee at Central Perk. If you look around nowadays, you see people at Starbucks drinking coffee and just hanging out there all day.

So they were not only a reflection of society, but I think in a lot of ways they made the culture.

HAYS: Sibila, you know, it's interesting to me, "Friends" proved something that I think is largely true about TV, with all due respect to all the brilliant people in television, that lots of times you just try something, you know? You throw it against the wall and you see if it sticks.

They didn't know when they started with the six relatively unknown actors that they were going to have the chemistry, the huge hit they ended up with.

VARGAS: They had absolutely no idea.

Morna Kauffman (ph), David Crane (ph) were very successful in the fact they have these six actors from out of nowhere. They had no idea. I mean, Courtney Cox was actually the only one that, you know, was a known name. But they got these guys. They didn't have the diva attitude, and they had tremendous chemistry. Everything they did, they did together. They were friends on the set, they were friends off of the set. They even negotiated their million-dollar-per-episode deal together, which is unheard of.

If you really think about it, Jennifer Aniston, she was emerging as a star. She could have easily had, you know, decided to negotiate her contract alone and said, I'm going to go for mine, and I'm going to get millions of dollars and let the other ones do what -- you know, what they do.

But they didn't. They really stuck together, and I think that was just -- I think that was actually one of their secrets, one of the secrets to the success. I think the reason that they resonated was that they were so close and we were able to see that.

QUIJANO: And Sibila, the idea that this chemistry, then, 10 years later lasted so that the advertising, by the end of the finale -- wasn't it like Super Bowl proportions for the ad revenue that they were able to generate for this final episode?

VARGAS: Unheard of. Two million dollars per 30 second -- I mean, a reported $2 million per 30 seconds of ad time. That is Super Bowl prices. It was just amazing. I mean, that just goes -- well, the thing is, with so much competition and so many viewing choices, advertisers are looking for that event, an event like the Super Bowl. So a finale would draw a lot of people, and especially a finale for "Friends." And I think that's probably why they were able to get such incredible money.

BASH: And Sibila, it's not just the finale, right? I mean, I read somewhere that people who are advertising really, really focused on "Friends" because of its obviously popularity, but also because of its time slot. It was the bounce into the weekend. Anybody who wanted anything to happen on the weekend wanted to advertise in "Friends."

VARGAS: Absolutely. And, you know, and it goes beyond advertising. If you look at all the other shows, "Access Hollywood," VH-1. They had their special "Access Friends" -- you know, friends on -- you know, "Friends on Friends." All of kinds of opportunities presented for so many -- not just advertisers, but for other entertainment unites.

HAYS: And speaking of movies and bouncing into weekends -- you know, this new "Van Helsing" picture coming up, Hugh Jackman, you know, who's just been delighting a lot of fans, a real hunk in the lead, resurrecting the old monster pictures and tie-ins.

Tell us about that, because they're hoping for a lot of big bucks on that one, for NBC and Universal.

VARGAS: Oh, a lot of money: $170 million. I mean, that's -- you know, back in the day when we were -- "Waterworld" came out in 1995, people raised eyebrows. You know, it was $100 million.

(CROSSTALK)

VARGAS: What's that?

BASH: We found out they should have.

VARGAS: Exactly.

And, you know, a lot of is riding on a movie like this. I mean, if you spend $170 million, you've got a lot to prove. But what they do now is they're --- they have to put tie-ins. For instance, "Van Helsing" with -- I think it's with Carl's Jr. or McDonald's, they have the Van Helsing dolls. You've got your action figures, you've got your fast-food freebies. You've got the DVDs, the video games. You have to have some way to absorb those costs and make sure that people go out to see your movie.

I recently went to the Van Helsing Fortress Dracula, the new attraction at Universal Studios, which was a lot of fun. It was a lot of -- it was very scary, but it actually got me interested in the movie.

QUIJANO: Another movie some people may be looking forward to, the Mary Kate and Ashley -- not that (UNINTELLIGIBLE) -- Mary Kate and Ashley, the twins, the Olsen twins coming out. They're all grown up now. What are they? Eighteen or something? So there's a lot of anticipation about that, because we're all so used to seeing them on the small screen. But the big screen is another story, isn't it, Sibila?

VARGAS: Well, people are very excited about this. I mean, they're about to turn 18 next month. And this is their coming-out movie. They want to transition into adulthood. People are very excited about it. They're extremely excited.

The question is how are their fans going to receive them? I mean, we've grown up with them. They've been working since they were 9 months old and they've got -- a lot of people -- I mean, a lot of people are aware they're an empire. These girls have -- I mean, they're worth an estimated $150 million each.

HAYS: Well, you know, that's really something to think about kids working since they're nine months old. I can barely get my 13- year-old to clean up her room.

Sibila Vargas, thanks so much for updating us on all these great stories.

What's ON THE STORY for you in coming days?

VARGAS: Well, as you know, summer's here and we've got a lot of big movies. " Troy" coming up, "Shrek." Just a plethora -- "Spiderman 2." Steven Spielberg is working with Tom Hanks again, on "The Terminal." So I'll be following that very closely.

HAYS: OK. We're going to be looking forward to watching that.

The hottest show in town on Friday, of course, wasn't really "Van Helsing" or "A New York Minute." It was the latest jobs report! I'm back on that story after a check on what's making headlines at this hour.

ROBERTS: Good morning from CNN Center. A quick look at the headlines now.

President Bush says the abuse of Iraqi detainees was the wrongdoing of a few soldiers and will not deter the U.S. from its mission in Iraq. The president's comments came in his weekly radio address.

(BEGIN AUDIO CLIP)

BUSH: We will learn all the facts and determine the full extent of these abuses. Those involved will be identified; they will answer for their actions. All prison operations in Iraq will be thoroughly reviewed to make certain that similar, disgraceful incidents are never repeated.

(END AUDIO CLIP)

ROBERTS: The president also said the mission in Iraq will continue.

Well, Thomas Hamill, he flew home to Mississippi today from Germany. Hamill, a civilian truck driver, escaped last Sunday after three weeks as a hostage in Iraq. A planned celebration in his hometown of Macon, Mississippi, has been put on hold at his request.

Army PFC Lynndie England has been charged with assaulting Iraqi detainees on many occasion, and conspiring to mistreat them. The female soldier, who appears in some of the abuse photos, has been charged with four court martial offenses. She's now on duty at Fort Bragg, North Carolina.

A German teenager is under arrest this morning for his alleged involvement with the Sasser computer worm. The high school student is suspected of infecting millions of computers around the world. The Sasser worm disrupted computers in banks, hospitals as well as government offices.

And those are the top stories at this hour. I'm Thomas Roberts. ON THE STORY is going to be back with you after a quick break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: I need to stay in the office to make sure that we don't ruin the incentives and don't stop the momentum of economic growth by failed Washington, D.C. policies.

(END VIDEO CLIP)

HAYS: President Bush in Kalamazoo, Michigan, running on his economic record, and it may be a bit easier, maybe a lot easier after new numbers out Friday show jobs are increasing, up another 288,000 in April.

Welcome back. We're ON THE STORY.

QUIJANO: Kathleen, you know what's so interesting? The Bush administration was so gung-ho when the March numbers came out. And they made it clear -- you know, they put Karen Hughes, talking to John King, saying, This is a sign the economy is turning around. Things are really turning around.

Is it? I mean, are things really looking that way?

HAYS: It looks much more that way. Now that we've had two months in a row of strong gains -- and these gains were not just, like, in one sector of the economy. They were across the board.

Wages are growing at a rate that looks respectable again. Everybody says, of course, it has to hold up. But now there's much more of an expectation that it will. We're even seeing the manufacturing jobs turning the corner. And Dana, you know how important that is in the election. BASH: Absolutely, especially where he was this week. The president was in Michigan; he was in Ohio. I mean, they lost probably the most manufacturing jobs there since he's been in office.

But Kathleen, I mean, just from your perspective watching Washington and watching the administration, like you were saying, Elaine, what -- how amazing to watch this -- what should have been a red-letter day for this administration -- the president was very excited just watching him walk out of the White House yesterday, and they didn't really get a lot of play out of it.

HAYS: They were really drowned out. Drowned out, certainly -- by a number of things. It wasn't just Rumsfeld's testimony. It wasn't just the prisoner-abuse scandal story, et cetera. It's also the fact that other things happened this week.

And so if you were looking at the markets, on Tuesday, the Federal Reserve met. They made it very clear, we're going to raise rates. They made it very clear, one of the things they're really watching is the labor market. They say they're going to move slowly, at a measured pace. But if jobs are strong two months in a row, if we're really turning the corner, that brings that up. So that caused the stock market a lot of trouble.

You know, interestingly enough, Dana, by Friday, when people were talking about why the market sold off on a day of great jobs news, it wasn't just because they think interest rates are coming sooner rather than later. It's also because of the situation in Washington, in Iraq. People are confused about what it means for domestic politics and what it means for the global political situation and therefore, the global economy.

QUIJANO: So interest rates creeping up. What does that mean for homebuyers? Bad news (UNINTELLIGIBLE)

HAYS: Well, you know what? Well, it's certainly -- you know, there's a silver lining.

Let me give you the cloud first. The cloud first is that mortgage rates are jumping up pretty quickly. Because we watched the stock market, but there's something called the bond market, and that's what really determines where interest rates are going. And long-term rates are rising, mortgage rates rising. They're probably up now around 6.25 percent. Just a couple weeks they were still under 6. And they're probably due to go higher.

The little silver lining, I guess, is that as mortgage rates climb, then people -- the mortgage -- the monthly payment gets higher, maybe people can't afford to pay the same price. So maybe some of those hot markets will at least start leveling off. So maybe that's the good news for potential homebuyers.

BASH: Kathleen, let's get some consumer advice for you. If people are watching and listening to what you're saying about the markets versus interest rates and so forth, what do you do?

HAYS: OK. Refinance your home if you haven't already, and you have interest. If you thinking of locking in a mortgage, do that.

In terms of your stock -- your stock investments, your mutual funds, your 401(k) -- look and see where the balance of your stuff is. There's something called interest-sensitive cyclical stocks. They go up when the economy's not -- when interest rates aren't rising, excuse me.

But think about homebuilders. Think about financial stocks. When rates are low and falling, they do better. Rates rising is going to hurts them. You want to go over to something like consumer staples, they call it, household products. Think of deodorant. Think of cereal. Think of stuff like that. Think of safe drug stocks.

But another interesting wrinkle is technology, because people say if the economy is doing so well, that businesses are hiring, they're probably going to do more investing. They're going to buy computers. They're going to software. And that could even, ultimately, be a boost to some of the tech stocks.

QUIJANO: Let me ask you quickly, what about gas prices? Where do they stand now?

HAYS: You know, $40 a barrel. We haven't seen oil up $40 a barrel since Iraq invaded Kuwait in 1990.

QUIJANO: Why?

HAYS: A number of things going on.

Certainly, there's the instability in the Middle East. There was an attack on Saudi offices -- oil offices, and I think a lot of people -- experts think that those oil fields throughout the Middle East are vulnerable.

Also, gasoline prices climbing -- what? They're up to $1.87 a gallon, and that has a lot to do with the summer-driving season, the switch-over to the refineries and all the different kind of gas formulas.

But people don't really see too much relief. If anything, they think there's more (UNINTELLIGIBLE). That could be bad for consumers. We'll see how it plays out.

BASH: Well, obviously, as we've talking about, every course and economic development ripples across the surface of the political pond these days. We're going to check in our producer following the Kerry campaign in a minute, Sasha Johnson.

We're back ON THE STORY after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: As president, I will not be the last to know what is going on in my command. (END VIDEO CLIP)

BASH: Democratic presidential candidate John Kerry this week reacting to the Iraq prisoner-abuse scandal.

Welcome back. We're ON THE STORY.

And keeping watch on the Kerry campaign is CNN's senior producer, Sasha Johnson.

And Sasha, I heard Senator Kerry say this week that he was a navy captain, and when he was, he always took responsibility for things. How much of a political opening does Senator Kerry and his campaign see here in this Iraqi prisoner-abuse scandal?

SASHA JOHNSON, CNN SENIOR PRODUCER: Well, they are sort of walking a fine line, because they do see a political opportunity here, but they also recognize that this is a very, very serious issue.

But what they did do this week finally, I guess, by Thursday and at the beginning of an education speech in California, is he did come out and he said, Look, if I were commander in chief, I would take responsibility for what happens in my administration. The buck stops with me. I'm the one that's going to be accountable. Nobody else in my administration would be. Therefore, emphasizing the fact that Kerry thinks that President Bush hasn't done these things up until now.

His aides also point out that in their polling and in their focus groups, they're also seeing that people don't think that President Bush has a plan for Iraq, that they don't really have it together over there. And so they really do see this Iraqi prisoners situation as an -- yet another example yet again of how they don't -- the Bush administration really doesn't have a plan. So they do see this as a great opening to emphasize John Kerry's strength.

HAYS: Well, you know, Sasha, we were just talking about how frustrating it was for the Bush team to get this great jobs news in a week when they had the really bad Iraq news. And I'm guessing for John Kerry, it's -- you know, it's through the looking glass. It's the flip side. He's going to make hay out of the Iraq news, and he's got to be just so frustrated in a way that it looks like the economy is doing better. I mean, he0 was going to run on jobs. How do you run on jobs if jobs are growing?

JOHNSON: Well, the Kerry campaign is saying, Look, take a step back. These numbers are good. He did put out a statement saying, Yes, any good news for the economy is good news for the American people.

But, at the same time, if you take a bigger-picture look at what the Bush economy is, you know, the president lost millions of jobs. He's the first president since Herbert Hoover to lose jobs in an administration. Kerry yesterday at a speech to the Democratic Leadership Council in Phoenix emphasized all the jobs that were created under the Clinton administration, and therefore that's what would happen if Kerry were president.

So it's really emphasizing the bigger picture of job loss as opposed to focusing in on specific numbers.

QUIJANO: Sasha, what about John Kerry's overall visibility? Because we've seen ads by President Bush. We've seen that we haven't seen as much of him. Is there some concerted effort now that we're six months out to see him more publicly than we have?

JOHNSON: Well, I think the Kerry campaign this week unveiled a record ad buy $25 million, 19 different states, two biographical ad spots that include his wife, Teresa Heinz Kerry, his daughter, Vanessa Kerry. Also people that served with him in Vietnam. So the Kerry campaign looks at this time, six months out, as a great window of opportunity to introduce their candidate to the American people.

This week, you also had Teresa Heinz Kerry on "20/20" with Barbara Walters. You had the couple sit down for an interview with Ladies Home Journal. They did a photo spread while we were in the San Bernardino Hilton the other day with Vanity Fair.

So this is definitely a time that the campaign sees that they can introduce Kerry to everybody. But they also say they have an advantage here, that because the campaign -- everything has been moved up early, that they'll also have a chance to introduce him again around the convention.

BASH: Sasha, we have to ask you about veepstakes. Senator Kerry was out with two of the potential vice presidential candidates, at least two of the -- the people we're hearing about that have a lot of buzz.

Any -- should we reading anything into that? What are they saying there behind the scenes?

JOHNSON: Well, I asked Senator Kerry whether he would pick a non-Democrat in a press conference that he had this week. And he laughed and he said, nice try. I am not going to engage in any time of speculation. I don't care what is. This is a personal decision that I'm going to make. This is going to happen in private.

We did -- he did spend a bit of time with Bill Richardson earlier in the week in Albuquerque at an education event. Tom Vilsack was at the DLC speech yesterday in Phoenix. And Kerry came back on the plane to chat with reporters yesterday, and we asked him, You know, is this kind of ironic that all the people that are, you know, of -- all this buzz is buzzing about the guys you're happen to be with them in these states.

And he said, no, no, no. It's not strategic. It just happens to be -- these states that I need to go to. But...

BASH: Suuuuuuuure.

JOHNSON: But, you know -- I know, right? Exactly.

But, you know, we know, obviously, end of May, it could happen. It could happen in June. But one senior aide that I talked to said, Look, no matter what we do, this is the next big story for our campaign.

HAYS: You know, but a nagging story. A nagging story, Sasha, that keeps coming back is Republicans questioning John Kerry's record. Some people would say it's actually a very fine record. That's what Kerry says. I read a number of stories of people who served under him, saying he was a brave, caring guy.

But there was a press conference yet again this week questioning. How is the Kerry campaign dealing with that, and do they think it's a potential liability?

JOHNSON: Well, it was really interesting this week to watch Senator Kerry respond to that. You're referring to this press conference of these Vietnam veterans that served around the same time that Kerry did. They were very critical of him, and Kerry was asked about in it a press conference. He was actually asked about it by a high school student in California. And he said, Look, these guys can criticize me all they want, but this is just politics.

It was a marked difference from when we saw Kerry actually question Vice President Cheney's lack of military service and President Bush's service in the guard a couple of weeks ago, when that whole issue about whether he threw medals or ribbons came up. And his aides said, Look, these guys that came out on Wednesday, it was an overt political attack. Our candidate is not going to come out and respond to those attacks.

But we're not going to not fight back either. So it's kind of a -- it's an interesting conundrum that they're in, because as much as they want to promote his Vietnam service -- it's a big part of his biography. They are concerned that as these sort of nagging things keep coming back, that eventually those could stick, and it could eventually be a negative.

QUIJANO: Well, Sasha Johnson, thank you. I know you had to bypass Bourbon Street to get up with us early this morning.

What's ON THE STORY for you in the coming days?

JOHNSON: Well, Senator Kerry delivers a commencement speech here in New Orleans this afternoon, and then next week he'll be out selling his health care plan in Arkansas and Florida.

I, however, am coming home to Washington.

QUIJANO: Good for you. Thanks again, Sasha.

JOHNSON: Thank you.

QUIJANO: Politics was in the air when Defense Secretary Donald Rumsfeld was grilled yesterday. I'm back on that story after this.

(BEGIN VIDEOTAPE)

ANNOUNCER: Elaine Quijano is a general-assignment correspondent in CNN's Washington bureau. She filed reports from Kuwait during the Iraq war in 2003. Before joining CNN in 2000, she worked as a reporter in Tampa and Champaign, Illinois. She graduated from the University of Illinois.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: Secretary Rumsfeld has been the secretary during two wars. And he is -- he is an important part of my Cabinet and he'll stay in my Cabinet.

(END VIDEO CLIP)

QUIJANO: President Bush standing by his man. Defense Secretary Donald Rumsfeld will stay, Mr. Bush said on Thursday.

Welcome back. We're ON THE STORY.

HAYS: I just want to know what it was like at the Pentagon this week. Because, you know, Don Rumsfeld, tough guy. Tough on everybody. Running everything and all of a sudden, the old man is on the defensive.

What did it feel like behind the scenes?

QUIJANO: Well, it was interesting, because I don't normally cover the Pentagon, but when I was there last week, it was a little bit more relaxed. Things -- people would see you in offices and sit down and talk to you.

This week, little bit of tension, Wednesday, Thursday. By Friday -- I was in there yesterday morning to try and get some information, you know, in advance of the secretary's testimony. Stood outside some of these offices for 40 minutes and it was sort of like, Well, we'll see you, we'll see you. And then all of a sudden, No. We're too busy. We're in lock-down mode. We've got to prepare, we've got to go over these timelines. We're busy right now. And, you know, it was an amazingly excited kind of atmosphere. I mean, people there definitely -- the halls, people were talking about it in the halls. There was a buzz, a sense of anticipation. And I think a lot of people were very anxious to kind of get this over with.

BASH: I have to ask you about this whole question of whether he will or won't resign. Obviously, he was very combative, saying it would be political -- you know, there are people calling for his resignation are political.

But then, when Senator Evan Bayh said if it mattered for U.S. credibility, would you resign? And he paused -- a pregnant pause -- and then said, It's possible. I immediately called somebody at the White House saying, you know, Was there an out there? Was he trying to leave an out? You know, were they trying to send a message? Was he trying to send a message at all? And my answer was absolutely not. The president, the secretary, they both say privately, publicly he's not going to resign. What are you hearing (UNINTELLIGIBLE)?

QUIJANO: Well, you know, that was a remarkable moment, and especially because the day before, Thursday -- I distinctly remember this -- an aide to Rumsfeld actually came into the office there at CNN's booth, and were just discussing things. And, you know, all this talk of resignation came up.

And the message was, No, we are firmly sticking to our position that -- you know what? We did make some mistakes; there were mistakes that had been made. But at the same time, he is the best person to kind of oversee any changes now, and the idea of resignation -- well, that's just partisan politics entering into this issue. It's not something that's going to happen. So when he said -- when he said possible -- and like you said, that pause, it was a really remarkable moment. Quite significant.

HAYS: What would it mean for the Pentagon if Rumsfeld resigned at this point? Because you think about it, there are newspapers across the country, of all political stripes, calling for his resignation. We really -- we heard that the worst yet to come. Things could get much worse. Some people say that the way Donald Rumsfeld has run this war, in terms of staffing, in terms of having detainees -- it's fine to have them off American soil, more aggressive interrogations -- that it does roll back up to him.

QUIJANO: Well, the thing about it is and what would they say -- Pentagon officials would say, is that the idea of -- obviously of accountability, responsibility, tremendously important, affecting the credibility of the U.S. across the world.

At the same time, though, when you look at the job, prosecuting two wars and having to be in charge of tremendous number of troops -- you know, 135,000 troops to stay through the end of 2005. We heard that from the pentagon this week. That's their latest projection. Remember, by this time, they had hoped to draw down the troop level to something like 115,000. Well, they are now finding things are quite complicated for them, and when you bring somebody new in -- what are you going -- I mean, in any situation, that's a difficult thing.

So, they want to maintain sort of continuity at this point.

BASH: The remarkable moment -- one of the many remarkable moments, was when Don Rumsfeld Rumsfeld came out and said, It's going to get worse. It could get worse. There are videos out there. There are more pictures.

How is the Pentagon bracing itself to handle that, if it does come out? And are they going to actually just try to get out ahead of it, because they say it's part of the mistake that they made before, was that they didn't?

QUIJANO: Well, you know, I asked that. I said, what is -- what do you do to counter some of this? And the senior Pentagon official that I talked to said, Well, I would sit down here with you for two hours and try to, you know, emphasize over and over again that this is just not who we are.

But there's a sense that there's not a whole lot that can be done that this is now, you know -- the horse is out of the barn, so to speak. And at this point, what they've been trying to do is make top military official available to the Arabic television -- language television networks and that sort of thing. And we heard Secretary Rumsfeld yesterday -- that extraordinary language actually coming out directly and saying -- offering his deepest apologies.

So, you know, we'll just have to wait and see, I think.

BASH: Well, we're going to continue following this, obviously, for a long time.

And we're going be back ON THE STORY, more ON THE STORY in a moment.

(BEGIN VIDEOTAPE)

ANNOUNCER: Europe's first female prime minister is in the news this week. Margaret Thatcher. What's her story? More after this.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ANNOUNCER: Margaret Thatcher -- what's her story? Monday marked the 25th anniversary of the beginning of Margaret Thatcher's 11-year rein as Britain's prime minister. Elected in 1979, the conservative leader is known for overhauling Britain socialized and centralized economy by privatizing gas, electricity and other utilities owned by the state. The 78-year-old is the only British prime minister to win three consecutive terms.

(END VIDEOTAPE)

HAYS: Thanks to my colleagues and happy Mother's Day to all our ON THE STORY moms and all of our moms who made us all possible.

Thanks for watching ON THE STORY. We'll be back next week.

Still ahead,, "PEOPLE IN THE NEWS," focusing this week on stars in the music world, Carly Simon and Rod Stewart.

Coming up right now, a check of the top stories.

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Aired May 8, 2004 - 10:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THOMAS ROBERTS, CNN ANCHOR: From the CNN Center, good morning, everybody. I'm Thomas Roberts. In the news this hour:
Thomas Hamill is waking up in his own bed today. The former hostage returned home to Macon, Mississippi, early this morning, one week after escaping from his captors this Iraq. At the family's request, homecoming celebrations have been low key. That is, at least for now.

The U.S. military has filed charges against Private First Class Lynndie England. She's one of the soldiers seen in various photos with naked Iraqi prisoners. England, who is pregnant, is currently at Fort Bragg in North Carolina. She is the seventh soldier charged in the abuse scandal.

And the Coast Guard is searching for a woman who's missing after the boat she was in capsized on a Massachusetts river. Four other people from the boat died. A teen managed to swim to safety and then alert police. The boat sank in the Taunton River. That's near Rhode Island.

Those are the stories for -- the top stories this morning. I'm Thomas Roberts. ON THE STORY begins right now.

DANA BASH, CNN WHITE HOUSE CORRESPODNENT: Welcome to CNN's ON THE STORY where the journalists have the inside word on the stories we covered this week.

I'm Dana Bash, ON THE STORY of mistreatment of Iraqi prisoners had the president and his administration working hard to control the damage.

OCTAVIA NASR, CNN SENIOR EDITOR FOR ARAB AFFAIRS: I'm Octavia Nasr, ON THE STORY of how the pictures and the administration's words rolled across the Arab world.

ELAINE QUIJANO, CNN CORRESPONDENT: : And I'm Elaine Quijano, ON THE STORY of how the scandal turned up the heat on Defense Secretary Donald Rumsfeld, including calls for him to quit.

KATHLEEN HAYS, CNNfn CORRESPONDENT: And I'm Kathleen Hays, ON THE STORY of how new signals from the economy, including another jump in jobs, are affecting the market. Also, coming up, new hints that interest rates are going back up. What does that mean for buying houses, cars, and what does it mean for your 401(k)?

We're going to go live to New Orleans to check in with our producer following the John Kerry campaign.

And did you lose some "Friends" this week? Correspondent Sibila Vargas is on that story.

So e-mail us onthestory@cnn.com.

Now to Dana, and the president and the prisoners.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: People in Iraq must understand that I view those practices as abhorrent. They must also understand that what took place in that prison does not represent America that I know.

(END VIDEO CLIP)

BASH: President Bush Wednesday speaking on Arab television about the Iraqi prisoner-abuse scandal, which of course raced across the world, and its impact is still being measured internationally, at the White House and on the campaign trail.

NASR: Dana, my question to you is this: the Arab media look at this and say, This is a confused administration. They're not sure if they should apologize, not apologize. They're not sending a clear message to the Arab world.

How's it seen from your vantagepoint?

BASH Well, I can just tell you what it was like to cover the president this week.

This was the week that the president came out on the campaign trail. He had a big bus tour at the beginning of the week and at the end of the week. At the beginning, I was with him. We were in Ohio and Michigan. He rolled through, he had seven stops. Of course, defended the war in Iraq, which is part of his standard stump speech. Did not say one word about the Iraqi-prisoner issue. In fact, he was going to allow reporters on his bus. That didn't happen, at least the traveling press corps. He had some local reporters, but no cameras near where a reporter could ask a question. He wanted to stay on message -- the campaign message that they had planned.

Well, by the end of the week, yesterday, the president again was on a bus tour. Every stop he talked about it, just to show the way the week transpired and how they felt that the president needed to get out on this and talk about it.

Now his critics, obviously, would say, it shows how slow they were. HAYS: Well, but talk about slow -- I think a lot of people find it just hard to believe that the president of the United States said he learned about this on television. Credible?

BASH: Well, apparently they say -- they say that he did, and that was really one of the most interesting things to watch in the Bush White House this week, was the targeted leak of the fact that the president, in a private meeting with his defense secretary, basically slapped him on the wrist and said, Why did I find out about these pictures? Why did I find about the fact that there was a classified report that detailed, catalogued these abuses -- all of that he found out about, he said, on television.

It's so highly unusual for this White House, for the president who says that he -- you know, he prides himself on loyalty -- to get this out there.

Now, the question is why did they do it? First of all, because he was legitimately angry because he didn't know about this. And second of all, you know, this is a president who is running on leadership and wants -- and there was -- certainly seemed to be an attempt to separate him from this issue, to show that he didn't know about it, and therefore he might not be culpable. Of course, you heard in these hearings yesterday, you know, the many, many times the buck stops here, where does it stop? So it's a tough situation for them.

QUIJANO: Switching back to the campaign trail, what was that like? A bus? What was that situation like for you, Dana Bash?

BASH: Well...

QUIJANO: (UNINTELLIGIBLE)

BASH: Yes, well, it's funny because the White House really wanted to sort of -- six months out. I mean, this is quite unusual for a candidate to get on this kind of bus tour. It was 25-bus motorcade or buscade going through -- going through these Midwestern states, very important states for the president. Michigan is one that he won (sic). Ohio is one that he has to win -- excuse me, Michigan is one that he lost, but still won the presidency. Ohio he has to win. So that's part of the reason why they wanted to stay on message there.

But this is an attempt for them to get him out, to get him out among the people, to -- you know, at every stop he made clear that he wanted to take off his jacket, and he's glad he's not in Washington anymore. It shows how quickly and how early they want to get him out and have these pictures of him outside the Rose Garden, off Air Force One, somebody who is not sort of stuck inside the bubble of the presidency.

NASR: Now, we heard the defense secretary yesterday say that the worst is yet to come. More pictures, more video. How much of a distraction is this going to be for this political tour and campaign?

BASH: Well, you saw yesterday what a distraction it was. I mean, the fact that the president did had to talk about it at every stop. The fact that -- look, I mean, the sound byte that we all used was him talking about it, not him talking about the fact that, Kathleen, the job numbers were tremendous yesterday. That's what they were waiting for. So, you know, it's a distraction in that sense.

It's also -- you talked to people privately in the White House, they say, it's also a distraction for what they're trying to do in Iraq. Obviously, not just in terms of the perception, but they need to be focused on the fact that the transition that they're working on is just little bit more than a month away. So that's a big problem for them inside.

But this is -- this is something that they are -- know that they have to deal with, and the president is going to continue to deal with this.

HAYS: Well, and reporters are going to keep hammering. There's -- the questions have only started, right? Aren't there are all kinds of things that are going to be raised, and questions that have yet to be answered.

BASH: Questions that have yet to be answered, and, frankly, might not be answered.

You know, you watch -- being in the press briefing room this week, it was -- -- it was -- number -- there were a number of questions that we asked constantly that we didn't have answers to. For example, when did the president -- first, not just about the pictures, but when did he first find out that the abuses potentially could have existed? Well, they think it was January, around the time that they put this release out, this press release out at U.S. Central Command, that it was an informal meeting with the defense secretary and the chief of staff, Andy Card. But the question is, you know, were there notes taken? Were there -- were there actions? Did the president said, Keep me updated on that. They don't know the answers.

HAYS: Dana, does this show that they somehow didn't get, initially, how serious this would be and what an explosive story? If they didn't take notes, if they can't remember...

BASH: Well, you know, you heard Donald Rumsfeld essentially say yesterday that he didn't brief the president the way he would have had he had the details that he had. You know, he said, the president was blindsided. I was blindsided. We were all blindsided.

So -- so, yes, you know, their defense is that had we known the details, we would have been more aggressive and try to get out in front of this. But they simply didn't know about the details. But in terms of the way they're dealing with it, the interesting thing was the difference and the change, if you will, in the president's -- from what he said, Octavia, on Arab television, talking about the fact that he thought it was abhorrent, but he didn't apologize. And the very next day, just to show, again, the evolution this week -- the next day, they had some damage control for their initial attempt to damage control, because he came out, standing next to King Abdullah of Jordan. Specifically, the symbolism there couldn't have been more apparent. With an Arab leader, somebody who, you know, is an important player in that region, saying finally, I'm sorry.

NASR: And, of course, every picture and every word about the prisoner-abuse story were heard and seen in the Arab world. I'll be right back on that story after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: I told him I was sorry for the humiliation suffered by the Iraqi prisoners and the humiliation suffered by their families. I told him I was equally sorry that the -- that people -- that seen those pictures didn't understand the true nature and heart of America.

(END VIDEO CLIP)

NASR: President Bush on Thursday finally using the small but powerful word, sorry. There were other words, of course, but it was the sorry that had the most impact in the Arab media and the Arab world.

Welcome back. We're ON THE STORY.

HAYS: Octavia, but, you know, the sorry seemed to come in dribs and drabs. You know, starting with Condi Rice at the beginning of the week, and then the president still equivocating in those interviews. How does the Arab world feel about that?

NASR: The Arab media -- and remember, I watch Arab television constantly as part of my job. I read Arab newspapers online and also off-line. And I talk to a lot of media executives in the Arab world.

People were confused, I'm hearing. People were not sure. Is this administration apologizing? Is this administration sorry, first of all? They put out the generals on Arab TV. Then, as you said, Condoleezza Rice on Arab TV. That didn't work. Then the president. Albeit, he said it indirectly to the King Abdullah of Jordan, but they still took it as apology. And then, of course, yesterday Rumsfeld's testimony; that had a huge play on Arab media.

QUIJANO: Yes, I wanted to get into that a little more, Octavia. I mean, an extraordinary moment for Defense Secretary Rumsfeld to actually offer his deepest apologies to the Iraqi people, because it was just on Tuesday and even Wednesday he was sort of offering a roundabout way, using passive language to say an apology is there for anyone who suffered -- for, you know, anyone who's abused.

But to come out in that direct way, how did that play out? And also, Secretary Rumsfeld saying, Look, the difference between us and other countries, is that we will expose our dirty laundry, in a sense. We will expose our mistakes in this way, and this is a lesson in democracy that other countries can learn from.

NASR: Right, and judging by the way the media, the Arab media handled it, it was -- they saw it as a lesson in democracy. You know, secretary of defense testifying, answering tough questions, being grilled on tough issues, being asked about resigning or quitting or being fired.

Now, here's what I got out of this. One very interesting quote here of someone saying, here's a defense secretary saying I'm sorry. The buck stops here. I am to blame. Why is he still in charge?

BASH: Octavia, what about the fact that the King of Jordan not only was standing next to the president -- excuse me -- but also, essentially, gave him an assist, saying that he believes that America doesn't stand for that.

How much of an impact did that have?

NASR: That has a huge impact, but has always the case. The Arab media, when you watch it, to them, that was not biggest story. The biggest story remains the Israeli-Palestinian issue. So this was a distraction, just like it was a distraction in this country as you were reporting earlier. To them, this was just a side issue, this abuse story. The Middle East is used to hearing about stories of abuse in prisoners under dictatorships and so forth. This is widespread. So that's not new.

What's new in this is the Arab media were waiting for this meeting between the King Abdullah and President Bush. They were waiting for signs: where the Middle East peace process is going to head from here. Where does the U.S. stand in all this? And coming out of that meeting, what President Bush said as far as he good advice from the king, that he's committed to peace in the Middle East, that there are no guarantees on the final agreement on middle east peace. All these were seen as positive signs back in the Arab world.

Now, media observers caution us, they say, wait a minute. Don't jump to conclusions yet. These are good words. Let's look at the deeds and see if they're going to match those words.

HAYS: So, update us a little bit more, because since you touched on the Israel-Palestine issue, what happened this week? Prime Minister Sharon, his own Likud party, seeming to reject his call for at least some of the settlers to leave Gaza. In terms of where that side of the story stands this week in the Middle East, how is that being viewed?

NASR: Well, that is not being viewed positively as far as the Arab media are concerned.

You have to understand, that's the whole point of the peace process, you know? You have a conflict. You know, years of conflict. This is not new. The Israel and the Arabs are enemies, except for some countries that have signed peace agreements with Israel, such as Egypt and Jordan, and those who have economic or cultural ties, such as Tunisia. This is very important.

Now, the Gaza pullout and the right of refugees to return, this is a huge issue. Arab media is treating it -- they're treating it this way, they're saying, if Israel doesn't allow all these Palestinians that live as refugees in refugee camps scattered all over the Middle East, this is not good news. And, in a way, they're applauding the Likud party for not passing -- for not agreeing to this at this point.

QUIJANO: Octavia, getting back to Secretary Rumsfeld -- because I covered the Pentagon this week. There was a lot of talk about them wanting to set the record straight as much as possible with reporters about this not being representative, the photographs that have emerged, the disturbing photographs of the prison abuses at the Abu Ghraib prison. They were so insistent, and, in fact, one senior Pentagon official said, I would sit down with you for two hours to discuss this, about how this is really just the actions of a few.

How much longer do you think these images will continue to play out in the Arab media? I mean, is this something that we could be seeing, you know, for months to come?

NASR: I have a feeling -- and again, judging by what I'm reading and what I'm seeing, this story is not going anywhere. And I have to tell you, hearing Rumsfeld yesterday say that the worst is yet to come, I have a feeling the worst is yet to come. We're hearing that there are tapes of these abuses circling around and might be available to media outlets very soon.

The Arab media have been reporting for months that there are cases of abuse in Iraqi jails by U.S. military personnel. So to them, this is a huge story. And I don't think it's going to go anywhere any time soon.

HAYS: Octavia, a quick final question quickly. Is there a danger of a backlash in the Middle East against the United States from this? I mean, beyond what we've had.

NASR: That's always the case, you know?

Again, this is not a new story. This is just an extra in the Middle East. There's outrage, there's anger against U.S. policies towards the Middle East, and the Arab world. So this is only adding to the fuel.

A backlash? We'll watch, we'll monitor or we'll see what's going to happen.

HAYS: And what else is ahead for you ON THE STORY this week, Octavia?

NASR: Oh, definitely, those tapes and more photos. That's what we're going to looking for. I expect something to show up sometime soon.

And then, the reaction to that, that's going to be my biggest story next week.

HAYS: OK, we'll be looking forward to that.

Just ahead, millions turn the channel from the prisoner abuse to "Friends." We'll talk to CNN entertainment correspondent Sibila Vargas coming up.

(COMMERCIAL BREAK)

(AUDIO/VIDEO GAP)

SIBILA VARGAS, CNN ENTERTAINMENT CORRESPONDENT: ...I mean, everything about them, Joey and his how you doing, guys started kind of acting that way and talking that way. The home decor, Monica's beautiful purple room. People at Lowe's say that because of "Friends," people started asking for (UNINTELLIGIBLE) with brighter colors, more eclectic styles. And even the fact that they used to drink and have coffee at Central Perk. If you look around nowadays, you see people at Starbucks drinking coffee and just hanging out there all day.

So they were not only a reflection of society, but I think in a lot of ways they made the culture.

HAYS: Sibila, you know, it's interesting to me, "Friends" proved something that I think is largely true about TV, with all due respect to all the brilliant people in television, that lots of times you just try something, you know? You throw it against the wall and you see if it sticks.

They didn't know when they started with the six relatively unknown actors that they were going to have the chemistry, the huge hit they ended up with.

VARGAS: They had absolutely no idea.

Morna Kauffman (ph), David Crane (ph) were very successful in the fact they have these six actors from out of nowhere. They had no idea. I mean, Courtney Cox was actually the only one that, you know, was a known name. But they got these guys. They didn't have the diva attitude, and they had tremendous chemistry. Everything they did, they did together. They were friends on the set, they were friends off of the set. They even negotiated their million-dollar-per-episode deal together, which is unheard of.

If you really think about it, Jennifer Aniston, she was emerging as a star. She could have easily had, you know, decided to negotiate her contract alone and said, I'm going to go for mine, and I'm going to get millions of dollars and let the other ones do what -- you know, what they do.

But they didn't. They really stuck together, and I think that was just -- I think that was actually one of their secrets, one of the secrets to the success. I think the reason that they resonated was that they were so close and we were able to see that.

QUIJANO: And Sibila, the idea that this chemistry, then, 10 years later lasted so that the advertising, by the end of the finale -- wasn't it like Super Bowl proportions for the ad revenue that they were able to generate for this final episode?

VARGAS: Unheard of. Two million dollars per 30 second -- I mean, a reported $2 million per 30 seconds of ad time. That is Super Bowl prices. It was just amazing. I mean, that just goes -- well, the thing is, with so much competition and so many viewing choices, advertisers are looking for that event, an event like the Super Bowl. So a finale would draw a lot of people, and especially a finale for "Friends." And I think that's probably why they were able to get such incredible money.

BASH: And Sibila, it's not just the finale, right? I mean, I read somewhere that people who are advertising really, really focused on "Friends" because of its obviously popularity, but also because of its time slot. It was the bounce into the weekend. Anybody who wanted anything to happen on the weekend wanted to advertise in "Friends."

VARGAS: Absolutely. And, you know, and it goes beyond advertising. If you look at all the other shows, "Access Hollywood," VH-1. They had their special "Access Friends" -- you know, friends on -- you know, "Friends on Friends." All of kinds of opportunities presented for so many -- not just advertisers, but for other entertainment unites.

HAYS: And speaking of movies and bouncing into weekends -- you know, this new "Van Helsing" picture coming up, Hugh Jackman, you know, who's just been delighting a lot of fans, a real hunk in the lead, resurrecting the old monster pictures and tie-ins.

Tell us about that, because they're hoping for a lot of big bucks on that one, for NBC and Universal.

VARGAS: Oh, a lot of money: $170 million. I mean, that's -- you know, back in the day when we were -- "Waterworld" came out in 1995, people raised eyebrows. You know, it was $100 million.

(CROSSTALK)

VARGAS: What's that?

BASH: We found out they should have.

VARGAS: Exactly.

And, you know, a lot of is riding on a movie like this. I mean, if you spend $170 million, you've got a lot to prove. But what they do now is they're --- they have to put tie-ins. For instance, "Van Helsing" with -- I think it's with Carl's Jr. or McDonald's, they have the Van Helsing dolls. You've got your action figures, you've got your fast-food freebies. You've got the DVDs, the video games. You have to have some way to absorb those costs and make sure that people go out to see your movie.

I recently went to the Van Helsing Fortress Dracula, the new attraction at Universal Studios, which was a lot of fun. It was a lot of -- it was very scary, but it actually got me interested in the movie.

QUIJANO: Another movie some people may be looking forward to, the Mary Kate and Ashley -- not that (UNINTELLIGIBLE) -- Mary Kate and Ashley, the twins, the Olsen twins coming out. They're all grown up now. What are they? Eighteen or something? So there's a lot of anticipation about that, because we're all so used to seeing them on the small screen. But the big screen is another story, isn't it, Sibila?

VARGAS: Well, people are very excited about this. I mean, they're about to turn 18 next month. And this is their coming-out movie. They want to transition into adulthood. People are very excited about it. They're extremely excited.

The question is how are their fans going to receive them? I mean, we've grown up with them. They've been working since they were 9 months old and they've got -- a lot of people -- I mean, a lot of people are aware they're an empire. These girls have -- I mean, they're worth an estimated $150 million each.

HAYS: Well, you know, that's really something to think about kids working since they're nine months old. I can barely get my 13- year-old to clean up her room.

Sibila Vargas, thanks so much for updating us on all these great stories.

What's ON THE STORY for you in coming days?

VARGAS: Well, as you know, summer's here and we've got a lot of big movies. " Troy" coming up, "Shrek." Just a plethora -- "Spiderman 2." Steven Spielberg is working with Tom Hanks again, on "The Terminal." So I'll be following that very closely.

HAYS: OK. We're going to be looking forward to watching that.

The hottest show in town on Friday, of course, wasn't really "Van Helsing" or "A New York Minute." It was the latest jobs report! I'm back on that story after a check on what's making headlines at this hour.

ROBERTS: Good morning from CNN Center. A quick look at the headlines now.

President Bush says the abuse of Iraqi detainees was the wrongdoing of a few soldiers and will not deter the U.S. from its mission in Iraq. The president's comments came in his weekly radio address.

(BEGIN AUDIO CLIP)

BUSH: We will learn all the facts and determine the full extent of these abuses. Those involved will be identified; they will answer for their actions. All prison operations in Iraq will be thoroughly reviewed to make certain that similar, disgraceful incidents are never repeated.

(END AUDIO CLIP)

ROBERTS: The president also said the mission in Iraq will continue.

Well, Thomas Hamill, he flew home to Mississippi today from Germany. Hamill, a civilian truck driver, escaped last Sunday after three weeks as a hostage in Iraq. A planned celebration in his hometown of Macon, Mississippi, has been put on hold at his request.

Army PFC Lynndie England has been charged with assaulting Iraqi detainees on many occasion, and conspiring to mistreat them. The female soldier, who appears in some of the abuse photos, has been charged with four court martial offenses. She's now on duty at Fort Bragg, North Carolina.

A German teenager is under arrest this morning for his alleged involvement with the Sasser computer worm. The high school student is suspected of infecting millions of computers around the world. The Sasser worm disrupted computers in banks, hospitals as well as government offices.

And those are the top stories at this hour. I'm Thomas Roberts. ON THE STORY is going to be back with you after a quick break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: I need to stay in the office to make sure that we don't ruin the incentives and don't stop the momentum of economic growth by failed Washington, D.C. policies.

(END VIDEO CLIP)

HAYS: President Bush in Kalamazoo, Michigan, running on his economic record, and it may be a bit easier, maybe a lot easier after new numbers out Friday show jobs are increasing, up another 288,000 in April.

Welcome back. We're ON THE STORY.

QUIJANO: Kathleen, you know what's so interesting? The Bush administration was so gung-ho when the March numbers came out. And they made it clear -- you know, they put Karen Hughes, talking to John King, saying, This is a sign the economy is turning around. Things are really turning around.

Is it? I mean, are things really looking that way?

HAYS: It looks much more that way. Now that we've had two months in a row of strong gains -- and these gains were not just, like, in one sector of the economy. They were across the board.

Wages are growing at a rate that looks respectable again. Everybody says, of course, it has to hold up. But now there's much more of an expectation that it will. We're even seeing the manufacturing jobs turning the corner. And Dana, you know how important that is in the election. BASH: Absolutely, especially where he was this week. The president was in Michigan; he was in Ohio. I mean, they lost probably the most manufacturing jobs there since he's been in office.

But Kathleen, I mean, just from your perspective watching Washington and watching the administration, like you were saying, Elaine, what -- how amazing to watch this -- what should have been a red-letter day for this administration -- the president was very excited just watching him walk out of the White House yesterday, and they didn't really get a lot of play out of it.

HAYS: They were really drowned out. Drowned out, certainly -- by a number of things. It wasn't just Rumsfeld's testimony. It wasn't just the prisoner-abuse scandal story, et cetera. It's also the fact that other things happened this week.

And so if you were looking at the markets, on Tuesday, the Federal Reserve met. They made it very clear, we're going to raise rates. They made it very clear, one of the things they're really watching is the labor market. They say they're going to move slowly, at a measured pace. But if jobs are strong two months in a row, if we're really turning the corner, that brings that up. So that caused the stock market a lot of trouble.

You know, interestingly enough, Dana, by Friday, when people were talking about why the market sold off on a day of great jobs news, it wasn't just because they think interest rates are coming sooner rather than later. It's also because of the situation in Washington, in Iraq. People are confused about what it means for domestic politics and what it means for the global political situation and therefore, the global economy.

QUIJANO: So interest rates creeping up. What does that mean for homebuyers? Bad news (UNINTELLIGIBLE)

HAYS: Well, you know what? Well, it's certainly -- you know, there's a silver lining.

Let me give you the cloud first. The cloud first is that mortgage rates are jumping up pretty quickly. Because we watched the stock market, but there's something called the bond market, and that's what really determines where interest rates are going. And long-term rates are rising, mortgage rates rising. They're probably up now around 6.25 percent. Just a couple weeks they were still under 6. And they're probably due to go higher.

The little silver lining, I guess, is that as mortgage rates climb, then people -- the mortgage -- the monthly payment gets higher, maybe people can't afford to pay the same price. So maybe some of those hot markets will at least start leveling off. So maybe that's the good news for potential homebuyers.

BASH: Kathleen, let's get some consumer advice for you. If people are watching and listening to what you're saying about the markets versus interest rates and so forth, what do you do?

HAYS: OK. Refinance your home if you haven't already, and you have interest. If you thinking of locking in a mortgage, do that.

In terms of your stock -- your stock investments, your mutual funds, your 401(k) -- look and see where the balance of your stuff is. There's something called interest-sensitive cyclical stocks. They go up when the economy's not -- when interest rates aren't rising, excuse me.

But think about homebuilders. Think about financial stocks. When rates are low and falling, they do better. Rates rising is going to hurts them. You want to go over to something like consumer staples, they call it, household products. Think of deodorant. Think of cereal. Think of stuff like that. Think of safe drug stocks.

But another interesting wrinkle is technology, because people say if the economy is doing so well, that businesses are hiring, they're probably going to do more investing. They're going to buy computers. They're going to software. And that could even, ultimately, be a boost to some of the tech stocks.

QUIJANO: Let me ask you quickly, what about gas prices? Where do they stand now?

HAYS: You know, $40 a barrel. We haven't seen oil up $40 a barrel since Iraq invaded Kuwait in 1990.

QUIJANO: Why?

HAYS: A number of things going on.

Certainly, there's the instability in the Middle East. There was an attack on Saudi offices -- oil offices, and I think a lot of people -- experts think that those oil fields throughout the Middle East are vulnerable.

Also, gasoline prices climbing -- what? They're up to $1.87 a gallon, and that has a lot to do with the summer-driving season, the switch-over to the refineries and all the different kind of gas formulas.

But people don't really see too much relief. If anything, they think there's more (UNINTELLIGIBLE). That could be bad for consumers. We'll see how it plays out.

BASH: Well, obviously, as we've talking about, every course and economic development ripples across the surface of the political pond these days. We're going to check in our producer following the Kerry campaign in a minute, Sasha Johnson.

We're back ON THE STORY after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: As president, I will not be the last to know what is going on in my command. (END VIDEO CLIP)

BASH: Democratic presidential candidate John Kerry this week reacting to the Iraq prisoner-abuse scandal.

Welcome back. We're ON THE STORY.

And keeping watch on the Kerry campaign is CNN's senior producer, Sasha Johnson.

And Sasha, I heard Senator Kerry say this week that he was a navy captain, and when he was, he always took responsibility for things. How much of a political opening does Senator Kerry and his campaign see here in this Iraqi prisoner-abuse scandal?

SASHA JOHNSON, CNN SENIOR PRODUCER: Well, they are sort of walking a fine line, because they do see a political opportunity here, but they also recognize that this is a very, very serious issue.

But what they did do this week finally, I guess, by Thursday and at the beginning of an education speech in California, is he did come out and he said, Look, if I were commander in chief, I would take responsibility for what happens in my administration. The buck stops with me. I'm the one that's going to be accountable. Nobody else in my administration would be. Therefore, emphasizing the fact that Kerry thinks that President Bush hasn't done these things up until now.

His aides also point out that in their polling and in their focus groups, they're also seeing that people don't think that President Bush has a plan for Iraq, that they don't really have it together over there. And so they really do see this Iraqi prisoners situation as an -- yet another example yet again of how they don't -- the Bush administration really doesn't have a plan. So they do see this as a great opening to emphasize John Kerry's strength.

HAYS: Well, you know, Sasha, we were just talking about how frustrating it was for the Bush team to get this great jobs news in a week when they had the really bad Iraq news. And I'm guessing for John Kerry, it's -- you know, it's through the looking glass. It's the flip side. He's going to make hay out of the Iraq news, and he's got to be just so frustrated in a way that it looks like the economy is doing better. I mean, he0 was going to run on jobs. How do you run on jobs if jobs are growing?

JOHNSON: Well, the Kerry campaign is saying, Look, take a step back. These numbers are good. He did put out a statement saying, Yes, any good news for the economy is good news for the American people.

But, at the same time, if you take a bigger-picture look at what the Bush economy is, you know, the president lost millions of jobs. He's the first president since Herbert Hoover to lose jobs in an administration. Kerry yesterday at a speech to the Democratic Leadership Council in Phoenix emphasized all the jobs that were created under the Clinton administration, and therefore that's what would happen if Kerry were president.

So it's really emphasizing the bigger picture of job loss as opposed to focusing in on specific numbers.

QUIJANO: Sasha, what about John Kerry's overall visibility? Because we've seen ads by President Bush. We've seen that we haven't seen as much of him. Is there some concerted effort now that we're six months out to see him more publicly than we have?

JOHNSON: Well, I think the Kerry campaign this week unveiled a record ad buy $25 million, 19 different states, two biographical ad spots that include his wife, Teresa Heinz Kerry, his daughter, Vanessa Kerry. Also people that served with him in Vietnam. So the Kerry campaign looks at this time, six months out, as a great window of opportunity to introduce their candidate to the American people.

This week, you also had Teresa Heinz Kerry on "20/20" with Barbara Walters. You had the couple sit down for an interview with Ladies Home Journal. They did a photo spread while we were in the San Bernardino Hilton the other day with Vanity Fair.

So this is definitely a time that the campaign sees that they can introduce Kerry to everybody. But they also say they have an advantage here, that because the campaign -- everything has been moved up early, that they'll also have a chance to introduce him again around the convention.

BASH: Sasha, we have to ask you about veepstakes. Senator Kerry was out with two of the potential vice presidential candidates, at least two of the -- the people we're hearing about that have a lot of buzz.

Any -- should we reading anything into that? What are they saying there behind the scenes?

JOHNSON: Well, I asked Senator Kerry whether he would pick a non-Democrat in a press conference that he had this week. And he laughed and he said, nice try. I am not going to engage in any time of speculation. I don't care what is. This is a personal decision that I'm going to make. This is going to happen in private.

We did -- he did spend a bit of time with Bill Richardson earlier in the week in Albuquerque at an education event. Tom Vilsack was at the DLC speech yesterday in Phoenix. And Kerry came back on the plane to chat with reporters yesterday, and we asked him, You know, is this kind of ironic that all the people that are, you know, of -- all this buzz is buzzing about the guys you're happen to be with them in these states.

And he said, no, no, no. It's not strategic. It just happens to be -- these states that I need to go to. But...

BASH: Suuuuuuuure.

JOHNSON: But, you know -- I know, right? Exactly.

But, you know, we know, obviously, end of May, it could happen. It could happen in June. But one senior aide that I talked to said, Look, no matter what we do, this is the next big story for our campaign.

HAYS: You know, but a nagging story. A nagging story, Sasha, that keeps coming back is Republicans questioning John Kerry's record. Some people would say it's actually a very fine record. That's what Kerry says. I read a number of stories of people who served under him, saying he was a brave, caring guy.

But there was a press conference yet again this week questioning. How is the Kerry campaign dealing with that, and do they think it's a potential liability?

JOHNSON: Well, it was really interesting this week to watch Senator Kerry respond to that. You're referring to this press conference of these Vietnam veterans that served around the same time that Kerry did. They were very critical of him, and Kerry was asked about in it a press conference. He was actually asked about it by a high school student in California. And he said, Look, these guys can criticize me all they want, but this is just politics.

It was a marked difference from when we saw Kerry actually question Vice President Cheney's lack of military service and President Bush's service in the guard a couple of weeks ago, when that whole issue about whether he threw medals or ribbons came up. And his aides said, Look, these guys that came out on Wednesday, it was an overt political attack. Our candidate is not going to come out and respond to those attacks.

But we're not going to not fight back either. So it's kind of a -- it's an interesting conundrum that they're in, because as much as they want to promote his Vietnam service -- it's a big part of his biography. They are concerned that as these sort of nagging things keep coming back, that eventually those could stick, and it could eventually be a negative.

QUIJANO: Well, Sasha Johnson, thank you. I know you had to bypass Bourbon Street to get up with us early this morning.

What's ON THE STORY for you in the coming days?

JOHNSON: Well, Senator Kerry delivers a commencement speech here in New Orleans this afternoon, and then next week he'll be out selling his health care plan in Arkansas and Florida.

I, however, am coming home to Washington.

QUIJANO: Good for you. Thanks again, Sasha.

JOHNSON: Thank you.

QUIJANO: Politics was in the air when Defense Secretary Donald Rumsfeld was grilled yesterday. I'm back on that story after this.

(BEGIN VIDEOTAPE)

ANNOUNCER: Elaine Quijano is a general-assignment correspondent in CNN's Washington bureau. She filed reports from Kuwait during the Iraq war in 2003. Before joining CNN in 2000, she worked as a reporter in Tampa and Champaign, Illinois. She graduated from the University of Illinois.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: Secretary Rumsfeld has been the secretary during two wars. And he is -- he is an important part of my Cabinet and he'll stay in my Cabinet.

(END VIDEO CLIP)

QUIJANO: President Bush standing by his man. Defense Secretary Donald Rumsfeld will stay, Mr. Bush said on Thursday.

Welcome back. We're ON THE STORY.

HAYS: I just want to know what it was like at the Pentagon this week. Because, you know, Don Rumsfeld, tough guy. Tough on everybody. Running everything and all of a sudden, the old man is on the defensive.

What did it feel like behind the scenes?

QUIJANO: Well, it was interesting, because I don't normally cover the Pentagon, but when I was there last week, it was a little bit more relaxed. Things -- people would see you in offices and sit down and talk to you.

This week, little bit of tension, Wednesday, Thursday. By Friday -- I was in there yesterday morning to try and get some information, you know, in advance of the secretary's testimony. Stood outside some of these offices for 40 minutes and it was sort of like, Well, we'll see you, we'll see you. And then all of a sudden, No. We're too busy. We're in lock-down mode. We've got to prepare, we've got to go over these timelines. We're busy right now. And, you know, it was an amazingly excited kind of atmosphere. I mean, people there definitely -- the halls, people were talking about it in the halls. There was a buzz, a sense of anticipation. And I think a lot of people were very anxious to kind of get this over with.

BASH: I have to ask you about this whole question of whether he will or won't resign. Obviously, he was very combative, saying it would be political -- you know, there are people calling for his resignation are political.

But then, when Senator Evan Bayh said if it mattered for U.S. credibility, would you resign? And he paused -- a pregnant pause -- and then said, It's possible. I immediately called somebody at the White House saying, you know, Was there an out there? Was he trying to leave an out? You know, were they trying to send a message? Was he trying to send a message at all? And my answer was absolutely not. The president, the secretary, they both say privately, publicly he's not going to resign. What are you hearing (UNINTELLIGIBLE)?

QUIJANO: Well, you know, that was a remarkable moment, and especially because the day before, Thursday -- I distinctly remember this -- an aide to Rumsfeld actually came into the office there at CNN's booth, and were just discussing things. And, you know, all this talk of resignation came up.

And the message was, No, we are firmly sticking to our position that -- you know what? We did make some mistakes; there were mistakes that had been made. But at the same time, he is the best person to kind of oversee any changes now, and the idea of resignation -- well, that's just partisan politics entering into this issue. It's not something that's going to happen. So when he said -- when he said possible -- and like you said, that pause, it was a really remarkable moment. Quite significant.

HAYS: What would it mean for the Pentagon if Rumsfeld resigned at this point? Because you think about it, there are newspapers across the country, of all political stripes, calling for his resignation. We really -- we heard that the worst yet to come. Things could get much worse. Some people say that the way Donald Rumsfeld has run this war, in terms of staffing, in terms of having detainees -- it's fine to have them off American soil, more aggressive interrogations -- that it does roll back up to him.

QUIJANO: Well, the thing about it is and what would they say -- Pentagon officials would say, is that the idea of -- obviously of accountability, responsibility, tremendously important, affecting the credibility of the U.S. across the world.

At the same time, though, when you look at the job, prosecuting two wars and having to be in charge of tremendous number of troops -- you know, 135,000 troops to stay through the end of 2005. We heard that from the pentagon this week. That's their latest projection. Remember, by this time, they had hoped to draw down the troop level to something like 115,000. Well, they are now finding things are quite complicated for them, and when you bring somebody new in -- what are you going -- I mean, in any situation, that's a difficult thing.

So, they want to maintain sort of continuity at this point.

BASH: The remarkable moment -- one of the many remarkable moments, was when Don Rumsfeld Rumsfeld came out and said, It's going to get worse. It could get worse. There are videos out there. There are more pictures.

How is the Pentagon bracing itself to handle that, if it does come out? And are they going to actually just try to get out ahead of it, because they say it's part of the mistake that they made before, was that they didn't?

QUIJANO: Well, you know, I asked that. I said, what is -- what do you do to counter some of this? And the senior Pentagon official that I talked to said, Well, I would sit down here with you for two hours and try to, you know, emphasize over and over again that this is just not who we are.

But there's a sense that there's not a whole lot that can be done that this is now, you know -- the horse is out of the barn, so to speak. And at this point, what they've been trying to do is make top military official available to the Arabic television -- language television networks and that sort of thing. And we heard Secretary Rumsfeld yesterday -- that extraordinary language actually coming out directly and saying -- offering his deepest apologies.

So, you know, we'll just have to wait and see, I think.

BASH: Well, we're going to continue following this, obviously, for a long time.

And we're going be back ON THE STORY, more ON THE STORY in a moment.

(BEGIN VIDEOTAPE)

ANNOUNCER: Europe's first female prime minister is in the news this week. Margaret Thatcher. What's her story? More after this.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ANNOUNCER: Margaret Thatcher -- what's her story? Monday marked the 25th anniversary of the beginning of Margaret Thatcher's 11-year rein as Britain's prime minister. Elected in 1979, the conservative leader is known for overhauling Britain socialized and centralized economy by privatizing gas, electricity and other utilities owned by the state. The 78-year-old is the only British prime minister to win three consecutive terms.

(END VIDEOTAPE)

HAYS: Thanks to my colleagues and happy Mother's Day to all our ON THE STORY moms and all of our moms who made us all possible.

Thanks for watching ON THE STORY. We'll be back next week.

Still ahead,, "PEOPLE IN THE NEWS," focusing this week on stars in the music world, Carly Simon and Rod Stewart.

Coming up right now, a check of the top stories.

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