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On the Story

What Will Stewart Do When She's Released?; New Concerns Over Identity Theft; Pope Recovers From Latest Health Crisis

Aired February 27, 2005 - 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.


BETTY NGUYEN, CNN ANCHOR: Good morning, everyone. I'm Betty Nguyen at the CNN Center here in Atlanta. ON THE STORY is next. But first, here's a look at the headlines today.
The half brother of Saddam Hussein is captured in Iraq. During a joint Iraqi coalition operation, Saddam Hussein's half brother most recently served as personal adviser to the former dictator. He was number 36 on the U.S. military's list of 55 most wanted Iraqis.

Israeli Prime Minister Ariel Sharon today says peace efforts with Palestinians would be frozen if they do not crack down on militant groups. Now, this follows Friday's deadly suicide bombing in Israel. Sharon believe it is was perpetrated by the Palestinian militant group Islamic Jihad.

Nuclear secrets at risk. Former employees at the Los Alamos National Laboratory had potential access to classified information and nuclear material. That is according to the Energy Department's report.

It blames improper processing of department workers -- of departing works. Many of them failed to turn in their badges. Los Alamos is one of the nation's most important nuclear weapons research centers.

We will have another check of the headlines at the bottom of the hour. ON THE STORY begins right now.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalist have the inside word on the stories we covered this week. I'm Dana Bash, on the story of the president's big trip to Europe. Did he win back allies, and did he win new help in Iraq?

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: I'm Jane Arraf, on the story of the hunt for insurgents in western Iraq.

KELLY WALLACE, CNN NATIONAL CORRESPONDENT: I'm Kelly Wallace, in New York, on the story of the latest fallout from the H bomb, the Harvard bomb and president Larry Summers' talk of women, math and science.

KATHLEEN HAYS, CNN CORRESPONDENT: And I'm Kathleen Hays, on the story of Martha Stewart. Can her release from prison next week wrap up the business she left behind? Also coming up, we'll go to Rome, where our Vatican analyst Delia Gallagher has the latest on the pope, his latest health scare.

And we'll go to Los Angeles, where entertainment correspondent Brooke Anderson tells us what she'll be watching for at the Academy Awards.

Email us at ONTHESTORY@CNN.com. Now straight to Jane Arraf and the fight for western Iraq.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We've rolled in force in areas that have traditionally been insurgent strongholds.

(END VIDEO CLIP)

BASH: Lieutenant Colonel Greg Stevens (ph) of the U.S. Marine Corps talking about the new offensive against insurgents in western Iraq. And our Jane Arraf is on the story there.

Jane, you are in the Al Anbar Province . Tell us what the latest is where you are embedded there.

ARRAF: Well, it's almost nightfall. We're embedded with the Marines. And this unit is actually a reserve unit.

They are part of what they call Operation River Blitz, which is essentially an operation all the way along the Euphrates River. And the thinking on this is that basically this battle for Falluja drew a whole lot of Marine units over to Falluja, which left a lot of big empty space all of the way from Baghdad to the Syrian and Jordanian borders.

And the current thinking is that is where a lot of the insurgents are, in these cities and towns. So Marines and Iraqi forces are going in -- we're going in with them -- to isolate these cities, to try to see if they can find these insurgents, including, of course, Abu Musab al-Zarqawi who everybody is looking for.

WALLACE: Jane, give us a sense on the ground, in these weeks following the Iraqi election -- and of course now the results finalized in the election -- give us a sense of how much more violence we're seeing on the ground following those election results.

ARRAF: It's kind of an uneven pattern. And it's really interesting.

We came from the heart of the Sunni Triangle, where essentially the biggest cause of violence has been homemade bombs, roadside bombs, car bombs, suicide bombs. And those appear to be down. But it's not as if there seems to be a direct link with the elections.

But what happened has been really interesting. There does actually seem to be a new sense among Iraqis that, hey, maybe they can control their own destiny, that perhaps they don't have to be under occupation. And that is sort of driving a lot of the political forces.

Now, what we're seeing out here in Al Anbar Province is equally fascinating. This is an area that has not been really under control for the past two years. There is no police force in these towns. There's no fully-functioning mayors, there's no real government.

We have gone into these towns with the Marines, and the streets are eerily quiet. They are not told to stay home, but they are staying home, because they're prepared for fighting that's going to go on.

HAYS: Jane, the capture of two key allies, aides to al-Zarqawi, the Marines you are with now, is this the kind of thing that raises their spirits? Are they hopeful that they're coming at a time when maybe U.S. forces and Iraqi forces can really make some progress?

ARRAF: Well, everybody would love to say that they were the units that caught al-Zarqawi. Now, if Iraqis find him, if anyone provides information leading to his arrest, they walk away with $50 million. If the Marines find him, they don't get that money. But they would obviously get that satisfaction.

It is a bit like Saddam. And I'm sure you all remember during the Saddam watch, where Army officials were saying, "We're 24 hours away, we're 48 hours away," impossible to tell really. But they do believe that he might be perhaps in this area, that there is evidence he has been in this area. And, yes, if there is a unit of the Marines or Iraqi special forces or U.S. Special Forces or probably a combination of all of those that catch him, it is going to be a very happy day for some people.

BASH: Jane, I want to ask about the military strategy for River Blitz, which is what you're involved in. Is it the same kind of scorched earth policy that we saw in Falluja?

ARRAF: It is not. And, you know, we went back to Falluja -- I think we talked last time about this -- and found an absolutely devastated city.

Here it's a softer approach because it is not the case like Falluja, where these are towns that have been entirely taken over by insurgents. What is believed to be here in these isolated cities and towns strung out across the Euphrates River going through the desert are a series of safe houses. Perhaps some command and control that could be coordinating attacks in places like Mosul, which have been particularly volatile, but nothing like the kind of Falluja, where there were torture houses, safe houses, an entire city essentially held hostage.

So here they have been going in. And yesterday we saw Marines playing ball with some of the children. That's the reception they get in some parts of town. In other parts, there clearly is a lot of tension, but it is nothing like going in with guns blazing. They are going in to find out what's out there.

BASH: Jane, thank you so much. Before we let you go, tell us what you're going to be doing ON THE STORY in the next few days and the coming week.

ARRAF: Well, we're going to following this Operation River Blitz because this is a really interesting part of the country that we haven't really been to lately. We're going up all of the way to the Syrian border where Marine and other U.S. officials believe that there still are a fair number of foreign fighters crossing that border and coming into Iraq.

BASH: Jane, thank you very much. And stay safe.

And we're going to turn to President Bush who, of course, was in Europe this past week in meetings with Russian President Putin and others. And the war in Iraq and the war on terrorism were top issues.

More on that coming up. And remember to stay tuned to CNN for the most reliable news about your security.

And at the end of the hour, the 3-year-old Japanese princess. What's her story? And what's the talk this week of her becoming the first empress of modern Japan?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This notion that the United States is getting ready to attack Iran is simply ridiculous. Having said that, all options are on the table.

(END VIDEO CLIP)

BASH: Blunt talk in Brussels from President Bush, trying to reassure skittish Europeans that Iran is not next on the U.S. military target list, but still warning Tehran that it is always an option.

Welcome back. We're ON THE STORY.

HAYS: So what is the message here? You know, is it an option that he thinks is the option he's going to use, or is the president trying to tell us he thinks diplomacy can work?

BASH: You know, it -- Kathleen, that was really just the biggest illustration of the challenge the president had on Iran going to Europe. Because he was trying to tell the Europeans, who polls show really are freaked that they're seeing deja vu, that the president really is thinking about military options. That, look, he's not.

And he really wanted to sound like he was reaching out. He wanted to get a united voice, as you said. And he actually did get it.

He was there the next day talking with the German chancellor. They talked about the need for Iran not to have a nuclear weapon.

But at the same time, it's U.S. policy that you've got have teeth behind any diplomacy. So you can't take it off the table. But, look, the bottom line is that coming out of this on Iran, President Bush was able to say with the Europeans, most of the leaders, that they agree that Iran needs to not have a nuclear weapon. The thing that they don't agree on yet is exactly how to get there.

The U.S. is still not involved directly in the diplomatic talks. And the president has to decide right now -- and it's going to be interesting to watch -- whether or not he is going to agree with their approach, which is to give economic and other incentives or not, because it's something that he fundamentally -- philosophically really doesn't agree with.

WALLACE: Dana, talking to a couple of people, including a European reporter at the end of the trip, this reporter expressing a little bit of surprise. He said he was surprised at kind of how far the president went both in tone and in language to try and heal some rifts with his European allies. So is this style over substance, or is this a real partnership forming?

BASH: You know, that's an excellent question. It will be interesting to see what happens in the coming months.

But certainly, look, you know, Kelly, that when the president has gone abroad since the Iraq war, he has gone out with him and his aides saying, we're going to talk about what binds us, not about what divides us. But then he goes to places like, for example, Canada, you think about just a couple months ago, and the Canadians looked at him and said, wait a minute, you say you want to heal, but you don't sound like you want to heal, and you're saying the same things over and over again.

Listen to something that President Bush said in Germany. And we'll talk about it.

(BEGIN VIDEO CLIP)

BUSH: For some, September 11 was a passing moment in history. In other words, it was a terrible moment, but it passes. For me and my government, and many in the United States, it permanently changed our outlook on the world.

Now, those two attitudes cause us sometimes to talk past each other. And I plead guilty at times. And -- but as this conversation goes on, I want you to remember that point of view.

(END VIDEO CLIP)

BASH: Kelly, to me, this most illustrates what you were trying to get at, which is the president -- that was during a forum with business leaders, there were only -- it was only open to cameras for five minutes. The question had nothing to do with that. He just got it in there.

Wanted to make the point that the problem has been that the U.S. just sees the world differently since 9/11, and that that is probably -- it's not personal. It's just a difference in perspective, and they have to understand that.

HAYS: What about Bush -- President Bush and President Putin? Because many people in the west are more and more concerned, backtracking on democracy. We've got a little snippet of what they said publicly, but a lot of questions about what was said privately.

BASH: This was the best theater probably of the whole trip. It was President Bush standing next to President Putin. All eyes were on President Bush to see how far he would go, and, of course, how far President Putin would go in this whole question of Russia backsliding on democracy.

Let's listen to that.

(BEGIN VIDEO CLIP)

BUSH: I think it's very important that -- that all nations understand the great values inherent in democracy, rule of law and protection of minorities, viable political debate.

VLADIMIR PUTIN, RUSSIAN PRESIDENT (through translator): Russia has made its choice in favor of democracy 14 years ago independently without any pressure from outside. It made that decision in the interest of itself and interest of its people.

(END VIDEO CLIP)

BASH: So this press conference between the two of them turned into sort of a seminar on democracy. Some in the United States, conservatives, for example, didn't think that perhaps President Bush was tough enough on President Putin in public. Maybe he was a little bit too easy on him. Others say that, look, he went further than he ever had before. But the key question is what President Bush said to him in private.

They had a one-on-one conversation, no staff there, just their translators. And it went a lot longer than was expected. And a senior aide said that the president came out and sort of wiped his brow and said it was intense and he was tough on him.

So the question is what he said and whether or not he did give him some private deadlines to really start to turn things around, freedoms of the press, control in the Kremlin, and things like that. What the White House says is, look for markers. May the president is going to Moscow, June he's going to meet with him again. See what happens then.

WALLACE: Dana, are you picking up, though, privately when you talk to sources about what President Bush said to President Putin in that private meeting? Because no doubt the White House felt enormous pressure going into this meeting.

A lot of questions about how the president just four years ago said he looked into Putin's soul and thought he was trustworthy. How much -- do you have a sense of how much pressure and how tough President Bush was on President Putin privately? BASH: You know, Kelly, what's so interesting about that is, because there really was no one else in that meeting for more than an hour, certainly senior aides are saying that they got from the president that it wasn't heated, but perhaps that the two -- that he was tough on him and sort of perhaps said to him that he expects him to take some steps. But no one really knows how tough he was. The assumption is that he was kind of tough, but no one really knows.

HAYS: Things are certainly going to heat up again this week perhaps on the Social Security. While these Congress people who had to go out, talk to their constituents, they're back. What's the latest on the Social Security reform?

BASH: This past week was really crucial. Because, as you said, members of Congress were out there talking to their constituents. The president is going out, hitting two more states this week.

The question is, are they going to start to actually form a compromise? They're going to have to do something. And will the president going out and continuing to travel make a difference or not?

We're going to find out. But certainly talking to members of Congress who were out this week, they said they definitely heard an earful from both sides on this whole topic.

WALLACE: Well, the president getting credit for raising the issue of Social Security. Something else he should get credit for: match-making, putting together the diplomatic dream team of his father, Former President Bush, and former President Clinton. I'm back on that.

And also, the Summers storm. The Harvard University president, Larry Summers, the uproar over women and science.

We'll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We vote no!

UNIDENTIFIED FEMALE: We vote no!

UNIDENTIFIED MALE: We vote no!

(END VIDEO CLIP)

WALLACE: "We vote no," the protesters were chanting, as in no confidence in Harvard University president Larry Summers. The other side was shouting, "Lay off Larry."

In the latest round of what has moved way beyond the Harvard campus to becoming a national debate over Larry Summers and his comments, suggesting there are issues of "intrinsic aptitude" that determine why fewer women than men excel in math and science. Welcome back. I'm Kelly Wallace. And we are ON THE STORY.

BASH: And Kelly, this is like the story that will not go away, right? I mean, this happened probably about two months ago it seems like. The question is now, what does it mean for Larry Summers? Is he going to survive?

WALLACE: Well, you're right, it is a story that does not seem to go away. It seems to be that he is OK for now. The Harvard corporation, we should note, which hired him, could fire him, and right now is standing behind Larry Summers.

He did an interview over the weekend in Saturday's "New York Times," and he says all of this has him kind of questioning or pondering his own style, that sometime he can be kind of tough and challenging and raising questions almost like in a graduate-style seminar, and maybe he needs to rethink things. We know from this article he has been talking to former President Bill Clinton for some advice, and also former adviser to many presidents, David Gergen.

So right now it seems he's OK. But some faculty members say at next month's meeting they are going to try to put a vote of no confidence on the docket and see where it goes from there.

HAYS: And, of course, this is a man who's long known for his academic brilliance. Brilliant economist, but not so long on diplomacy.

But let's get to the heart of the issue that has really been stirred up now, women versus men when it comes to our innate abilities, as he put it. Kelly, what did you -- what did you dig up this week?

WALLACE: Well, and that is the issue. And also -- great minds think alike -- the cover of this week's news magazine, "TIME" Magazine. And the quote is "The Math Myth: The Real Truth About Women's Brains and the Gender Gap in Science."

Again, this has really sparked a nationwide debate. Are there intrinsic aptitude differences between men and women when it comes to, let's say, math and science?

When you look at this week's "TIME" Magazine, the scientists saying there are some differences, scientific differences between our brains. Women tend to use -- and I'm no great scientist, I should point out. But women -- good in math, but not great in science.

But women tend to use more parts of their brain and connecting parts of the brain. Men tend to sort of utilize one section of their brain more than any others.

What you have found, women, men -- even women debating and disagreeing about this is really true. And then if it is true, what can be done about it?

There are some liberal women groups who say, no, there are not differences. It all comes down to bias and opportunity and discrimination. If we teach women just like we teach men, given the same opportunities, they can succeed.

Other women I talk to say, no, there are some differences. And women then gravitate to the areas they are better skilled in and do a better job in. Men move in areas where they're better at. But it is a debate that doesn't seem to be going away just yet.

HAYS: Well, let's look at a story where we can talk about people coming together. I mean, this is another big story you're on. This is not about divisiveness. This is about a surprising show of unity.

(BEGIN VIDEOTAPE)

WALLACE: Maybe there is no bigger message than this: that two former political rivals can put aside their differences and do something both Democrats and Republicans can support.

(voice-over): The warmth between the ex presidents was evident last month at the White House.

BUSH: I'm honored to be standing here with two former presidents.

WALLACE: But you could also see the bond months earlier in the smiles at the World War II dedication ceremony and in the words at the opening of President Clinton's library.

GEORGE HERBERT WALKER BUSH, FMR. PRESIDENT OF THE UNITED STATES: Simply put, he was a natural. And he made it look too easy. And oh how I hated him for that.

WALLACE: And something else happens between members of that very exclusive club, only four living members now, the ex presidents, says Jack Valenti, longtime aide to President Johnson.

JACK VALENTI, FMR. AIDE TO PRESIDENT JOHNSON: And only they understand the problems, the pressures, the disappointments and sometimes triumphs that presidents deal with.

(END VIDEOTAPE)

WALLACE: And oh how rare it is. A story that both Democrats and Republicans can be smiling about. This, the diplomatic dream team, 43, the current president, having 41 and 42 go together to visit and tour the tsunami-ravaged areas.

And picking up from aides the two are getting along fabulously. We're told that in their private time, their free time, they talked about global politics, their families, sports. They are talking so much, one reporter said that they seem to be finishing each other sentences. So a fast friendship definitely has been formed.

BASH: You know, Kelly, I interviewed both presidents the morning that President Bush appointed them and said that they were going to be doing this. And all I kept thinking looking at them was President Bush saying, "My dog Millie knows more about foreign policy than this guy."

And all of the things that were, you know, so raw during the '02 campaign and looking at how well they got along. But as sort of they're in this -- they're in this unique club. And I assume that's part of it here.

WALLACE: That's right. Because we also said, "Where did the bitterness go?"

BASH: Right.

WALLACE: And as you point out, there was bitterness. Two things happened.

It is sort of when you get out of the White House, there are so few people who know what it is like to be there. So you form this bond.

Both men also very nice, likable men. And also, we're told that there was a friendship that even formed when Vice President Bush -- when he was vice president, and Bill Clinton was Arkansas's governor, he was visiting Kennebunkport with Chelsea. Chelsea asked the vice president, "Where is the bathroom?" and the vice president directed her. So they seem to have a relationship that preceded that campaign of 1992.

HAYS: Well, when everyone asks, "Can't we just get along," here's an example of people finally doing that.

Now from politics to money. The markets went way up and way down this week. Meanwhile, stockholders hope Martha Stewart's release from prison next week will plump up their bottom line.

Also coming up, our Vatican analyst, Delia Gallagher, and how the latest health scare has prompted new questions about papal resignation.

And in Hollywood, Brooke Anderson is on the story of tonight's Academy Awards.

All coming up. Plus, a check on what's making news right now.

(COMMERCIAL BREAK)

NGUYEN: Good morning, everyone. I'm Betty Nguyen at the CNN Center in Atlanta. ON THE STORY continues in just a moment. But first, here's a check of the headlines right now in the news.

One day after the Vatican said the pope was too ill to appear at his hospital window, Pope John Paul did just that. He is still recovering from throat surgery. We'll of course, have a live report from Rome in about 10 minutes from now.

Meantime, the search continues in central Florida for Jessica Lunsford, the 9-year-old girl last seen Wednesday night. The Citrus County sheriff says it could be an abduction, but he is not ruling anything out. He adds torrential rains are complicating those search efforts.

Well, some call it a work of art; others ask why? The Gates is going away, closing after 16 days in New York's Central Park. The French artists who put up the $20 million to build it say it exceeded their wildest dreams. Made the park colorful.

Another check of the headlines and the day's top stories at the top of the hour right here on CNN LIVE SUNDAY. Now it's back to ON THE STORY.

(BEGIN VIDEO CLIP)

MARTHA STEWART, FOUNDER, MARTHA STEWART LIVING OMNIMEDIA: I would like to be back as early in March as possible in order to plant the new spring garden and to truly get things growing again.

(END VIDEO CLIP)

HAYS: Martha Stewart before she went to prison, predicting what she'll do when she gets out, possibly next week. And we're not just talking flowers and vegetables, of course, but also growing back her image and her business.

Welcome back. I'm Kathleen Hays. We're ON THE STORY.

WALLACE: Kathleen, one of our favorite stories on this show, Martha, Martha, Martha. And everyone is sort of predicting that she may become even wealthier, even more popular, even more famous when she gets out of prison than before she left.

HAYS: Well, Kelly, she is potentially one of the big comeback kid stories of the decade, the century, I don't know.

This is a woman who went to jail for five months for lying about a stock sale. That's still being appealed. But she decided, "No, I'm just going to get this over with."

At that point her stock market -- her stock price started rallying in her company, Martha Stewart Living Omnimedia. She's done the crime. She's paid for it. She's coming back full speed ahead. She'll be writing a column for her magazine, "Martha Stewart Living," next month. Two TV shows she's ready to go.

So people in the company, a lot of investors seem to have pretty high hopes for this.

BASH: So I want to ask you: is this an issue of no publicity being bad publicity, or any publicity being good, or whatever the phrase is? Or is it just that she didn't do anything that egregious when it comes to the company?

HAYS: If you look at -- if you compare her to any of the corporate crooks we've seen, you really can't. She didn't lie about her own company. She didn't steal money from her shareholders. She made a mistake that she has paid for.

And I think when people -- the people who are optimistic about Martha Stewart figured that people will forgive her. And her fans, of course, have stood behind her all the while.

There are a lot of challenges for the company now. Again, they are launching this new version of "The Apprentice." But that will go to her company's bottom line. That will go to Martha's bottom line. But a new daily syndicated show. They say they've already got a lot of licensing arrangements set up.

The stock, though, it's so interesting. It is at its all-time high again. It's quadrupled since last summer. I spoke to a fellow who trades at -- down at the New York Stock Exchange and he said he wouldn't buy it at these levels. He thinks the good news is already in the company.

But another interesting nugget, apparently, her lawyers even talking to the Securities and Exchange Commission about settling some insider trading charges that are pending and possibly, in this agreement, allowing Martha Stewart to come back as CEO of her company.

WALLACE: So interesting. We'll be watching. That will dominate the headlines this week, Kathleen.

But tell us about something else that was dominating the headlines last week. A -- mixed messages coming from the stock market, it seems.

HAYS: Well, you know, the market went on quite a ride last week. And of course, the first thing that really hit it hard on Tuesday was there was a report from the Central Bank of South Korea, speaking about diversifying out of dollars.

That hit the dollar very hard. But the dollar's been on the ropes for awhile. Oil prices shot up. These are two big concerns for the stock market.

By the end of the week, though, South Korea had kind of said, "Look, we're just thinking of some minor adjustments, No. 1." And even though oil prices stayed above $51 a barrel, oil stocks rallied because people realized for the oil companies these higher oil prices mean strong profits.

So at the end of the week, the stock market managed to -- got a gain.

BASH: Big Brother. There's a story this week that really affects everybody, which is the whole question of privacy and whether or not you have any. And it seems that we don't have any. Everybody -- there are companies that know everything there is to know about us, and they're selling it.

HAYS: And they're making money on it, exactly.

BASH: Right. HAYS: Isn't it interesting how these stories snow ball? First, we had ChoicePoint, you know, the data miner. It has information on consumers that it sold a potential employer, an insurance company, even the federal government.

They inadvertently sold information on, what, 150,000, some people say maybe even 500,000 of their -- the people in their database.

Then, of course, this week at the end of the week we find out that Bank of America lost some computer tapes that has credit card information on about 1.2 million people. Many of them are federal government employees.

They say, "Well, we just think the tapes were lost." Some people are concerned that maybe they could have been stolen, say, at an airport by a baggage handler. No proof on that. The investigation going on. They say don't worry yet.

But Paris Hilton, her little sidestep, you know, little device where she e-mails and everything, was either hacked or someone just figured out her password and put her information and phone numbers, her private e-mails all over the Internet.

WALLACE: So Kathleen, we never thought, could we learn anything from Paris Hilton, did we? Well, maybe we could.

But a question for you, quickly. What are some tips for all of us in terms of protecting our identity and not becoming a victim of identity theft?

HAYS: There's not always a lot you can do. Write your legislator. Congress is going to start looking at this question of how to regulate it. And why are they selling our information any way?

Beyond that, always check your credit reports, check your credit card. Anything fishy turns up, you have to call your bank, you have to call your credit card company. One of the credit -- you know, one of the credit reporters, the credit checkers, because you -- we're all vulnerable now. And as more of these things happen, I think the worries are obviously growing.

WALLACE: And be sure to tear up as much as you can.

HAYS: Shred.

BASH: Shred.

WALLACE: Shred, shred, shred.

All right. Well, tens of millions of people around the world this week have been following another story: reports concerning the health of Pope John Paul II. We're back on that story with our Vatican analyst, Delia Gallagher, right after this. Don't go away.

(COMMERCIAL BREAK) (BEGIN VIDEO CLIP)

CARDINAL EDWARD EGAN, NEW YORK ARCHDIOCESE: He's a prisoner of illness that has been stalking his path for many, many years. An illness that has given us an opportunity to admire the courage and the strength and the commitment of the successor of St. Peter.

(END VIDEO CLIP)

BASH: Cardinal Edward Egan of the New York Archdiocese, celebrating a mass Friday morning to pray for the pope.

Welcome back. We're ON THE STORY.

And the latest health crisis for Pope John Paul II came on Thursday when doctors had to insert a breathing tube into his windpipe. And joining you us now in Rome is CNN Vatican analyst Delia Gallagher.

And Delia, we saw the pope for the first time today since then, right? And what did you see?

DELIA GALLAGHER, CNN VATICAN ANALYST: Well, I'll tell you, it was an amazing surprise this morning. I saw hardened journalists who had been following this pope for 26 years who were surprised to see him, because the Vatican had led us to believe that we wouldn't be seeing him this morning.

And the headlines in all the Italian papers were "Pope Misses the Angelus for the First Time in 26 Years."

And in almost an act of pure theater, after the prayers in St. Peter's Square, you see the camera pan to the window of the Gemelli Hospital and the drapes start moving. And people are saying, is he going to show up? And there he is.

And not only that but when he does show up at the window, he gives the blessing and then he puts his hand to the throat as if to say, you know, "Sorry, I can't speak. I got this tracheotomy."

So it was it was a very important and very surprising moment this morning at the Vatican.

BASH: Quite surprising and amazing. This man is so strong. Tell us about what his prospects now are with this tracheotomy. Can they take it out? Is this something that will be permanently with him? How does it affect his health overall?

GALLAGHER: Yes. Well, they don't know at the moment. You know, it's really day-by-day, basically. They have to see how he recovers. Presumably, it would have to be taken out at some point, and he'd be brought back to the Vatican.

But the thing that everyone is wondering about is whether he will have his voice back. It's very important that the pope is able to use his voice. But even if he doesn't, and this is what speculation is now, you know, the pope comes back and he can't speak. Well, he's still the pope. And as long as he can gesture, as long as he can move his head, as long as he's still alive, he will continue to be the pope at the helm of the church.

So there's a lot of debate right now, but it's really a wait and see how he recovers from this.

When I was talking to a few of the cardinals yesterday, they're mostly concerned just for the pope's health in itself, more than the guidance of the church, because of course, everyone has great affection for this man.

And so I think really the eyes of the world are just looking to see how he will recover personally, even more than the church.

The Catholic Church is used to popes who have been bed ridden. For example, there's Pius VII in the 1800's. Stendhal wrote about him. He said, you know, he was bed ridden and Stendhal was in Rome at the time.

And he said everybody in Rome is talking about the health of the pope, and these discussions are terrible. You know, they're even talking about his surgery and the details of his surgery.

And here we are, you know, 200 years later. We're still talking about the health of the pope.

So the church is able to work through these crises. It has for many years. And I don't think that the cardinals at the Vatican are too worried about the day-to-day running of the church but more concerned about the health of the pope from a personal point of view.

WALLACE: Picking up on that, Delia, you talk about a little bit of debate concerning the pope's health, where he goes from here. Is there any real discussion that seems to have any legs about possibility down the road of a resignation? Or is that totally out of the question?

GALLAGHER: There's discussion, absolutely. It is allowed for in the canons of the Catholic Church. That's their law book. And the pope can resign, so long as he is with his mental faculties. He decides to do it. Nobody can make him do it.

So we heard a couple of days ago Cardinal Sodano, the secretary of the state, who said we'll leave that up to the conscience of the pope, because if there's anybody that knows the church and loves the church and knows what's best for it, it's this pope.

So that is an open question whether he will resign or not. However, knowing this pope and knowing his -- his extreme devotions to the papacy, it seems very unlikely that he would choose to resign.

He just doesn't see it as a job from which you design. This is a paternal thing. This is a vocation for him. He's the father of the church. So you know, you don't resign from fatherhood is his idea. And so I think it's highly unlikely.

HAYS: Delia Gallagher, thank you so much for that. We will be talking to you again ON THE STORY.

Coming up, Oscar night. CNN's Brooke Anderson will be on that story after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

HILARY SWANK, BEST ACTRESS NOMINEE: Annette is such an inspiration to me.

ANNETTE BENING, BEST ACTRESS NOMINEE: She's fantastic.

SWANK: She is -- you know, I had the opportunity to meet her. And she's so generous and lovely.

BENING: I love the movie, "Million Dollar Baby."

SWANK: So many other great performance this is year and to just talk about us is just unfair to them.

BENING: Whatever happens.

(END VIDEO CLIP)

BASH: Best Actress nominees Annette Bening and Hilary Swank making nice, being remarkably gracious.

Welcome back. We're ON THE STORY, and our best hope to preview what movie fans will be seeing tonight is, of course, our entertainment correspondent, Brooke Anderson.

And Brooke, Annette Bening and Hilary Swank have been up for this prize before. What do you think? What are the odds right now? For Swank, maybe?

BROOKE ANDERSON, CNN ENTERTAINMENT CORRESPONDENT: I think Swank is going to come home with Oscar No. 2 tonight, Dana.

And you're right, you know, first of all, I'm going to knock out the first couple of boxing cliches. We're going to hear a lot of them tonight. But it is a heavyweight rematch. They've been here before in 2000. Swank actually upset Bening that year. Bening was favored.

But all the critics are telling me it is Swank's time yet again for "Million Dollar Baby." And if you've seen the movie, it is tremendous. It is a heartbreaking performance. She does a great job, as well as Clint Eastwood and Morgan Freeman, her co-stars.

WALLACE: Brooke, without giving away the ending or anything about "Million Dollar Baby," you know it is controversial. And it does touch on some controversial issues. How are critics talking about this and reacting about will the controversy help "Million Dollar Baby" in terms of Best Picture and Best Director, or could it hurt the movie?

ANDERSON: There is a controversy at the end, you're right, Kelly. And I do not want to give it away for those people who haven't seen the movie, but Oscar voters vote primarily on the merit of the film. They don't really take controversy into account. So it's not really going to hurt or help "Million Dollar Baby" at this point.

"Million Dollar Baby" up for seven Oscars. So you know, it is going to have some success. A lot of people think it will take home Best Picture, the biggie.

HAYS: Another controversy, a bit, around Chris Rock, the comedian who is going to be emceeing the Oscars. I saw him on the Jay Leno show earlier in the week. I think he's a little bit nervous about this. This is a really big deal.

ANDERSON: This is a big deal, Kathleen, his first time hosting the Oscars. And yes, there is a so-called controversy.

You know, he's not a guy to follow the mainstream traditions of, say, Billy Crystal, Steve Martin, Bob Hope. He's a little bit different.

Recently he said that no black straight men watch the Oscars. And boy, that threw everyone, you know, into a tizzy. Many took offense to that. Well, Oscar telecast producer Gil Cates told us, he came to his defense and he said, hey, Chris Rock is a comedian. This is his shtick. He's doing his thing. Don't take these jokes too seriously.

And interestingly enough, no one is above a little bit of practice. You say he seemed a little bit nervous. He's been all over the comedy club scene here in L.A., practicing his material. A couple of my friends were out last weekend at a comedy club, and lo and behold, Chris Rock takes the stage, a surprise appearance. And they said he did a pretty good job. It was pretty funny.

So we hope he has success tonight. And a clear strategy by the Academy here to bring in younger viewers to the telecast.

BASH: That's right. And no matter what the controversy, we certainly heard a lot of news about this. And that was one of -- that's been one of the issues is that the decline in audience of the Oscars.

ANDERSON: Absolutely, Dana.

BASH: So perhaps this was not an accident. Let's talk about Best Actor. Jamie Foxx seems to be certainly the leader going into tonight?

ANDERSON: Jamie Foxx will most likely take home the Best Actor prize for "Ray." He's also up for Best Supporting Actor for "Collateral." A tremendous year for him.

And he has been campaigning, which is pretty important for the Oscars. He's made himself so assessable leading up to the Oscars. He's having the time of his life. And he has told us time and time again he is along for the ride. This is an amazing year for him, an amazing time.

And he hopes that this Oscar nomination ensures that he won't ever have to do another film like "Booty Call."

WALLACE: Brooke, you know, we talked to you the night of the Grammys. We said we envied you that night. We envy you even more, because so much is the acting but also what the stars are wearing. Are you picking up any trends that we will be seeing on the red carpet tonight?

ANDERSON: It's hard to say, Kelly. Let me fill you in on a little -- a little secret here.

This morning the celebrities are probably waking up about now, and they say, "I'm feeling pink chiffon today," or "I'm feeling black satin today" or big earrings or small earrings or what not.

Well, their stylists hoard, of course, numerous, numerous options for them. And so they -- a lot of them decide today. And here I am. You're watching me looking at Pamela Dennis, a friend of mine. She's a designer. Some of her gowns.

She tells me she works and works and works right up until the telecast. And then she puts on her pajamas, gets with her family, crosses her fingers and just hopes she sees her gowns on that red carpet, which is a fashion runway. So it's a bit of a nail biter for everybody.

HAYS: I've got to quickly ask but Best Director. Martin Scorsese has been nominated how many times?

ANDERSON: Five.

HAYS: Has he finally one for "Aviator," or is it Clint Eastwood for "Million Dollar Baby?"

ANDERSON: This is his fifth nomination. Never won. Never won. And he's considered one of the greatest directors of the '80s and '90s. So if he wins, the Oscar voters could be rewarding him for all of his work.

Scorsese told me that "The Aviator" was a labor of love for him. He loved the story. He loved the script.

And get this: he has a fear of flying. Yet, he overcame that to do this movie, all about aviation. And you know, if he wins, great for him. But Oscar voters, on the other hand, do love Eastwood. And they rewarded him for "Unforgiven," and more than a decade ago, both with Best Director and Best Picture. And they could reward him again. We'll see tonight.

BASH: Just very quickly, you mentioned Jamie Foxx campaigning earlier. Does that help? Does that really work? ANDERSON: It does help. The Oscar voters see who's out there. They see who really cares. Virginia Madsen, another one who's been very accessible, been all over town. I had her here in studio. And she could not have been more gracious.

You know, she's been toiling in obscurity for about a decade, and this has really put her back in the forefront, upped her profile.

And you know, she was so cute. Had on a Juicy jacket and said, "People are giving me clothes to wear. I can't believe it. Here I am." And that really does matter. People see who really wants it and who cares, and the Oscar voters take that into account.

WALLACE: What a fun night it's going to be. Thanks, Brooke. Good luck.

ANDERSON: Thank you.

WALLACE: We'll be watching your reports including at the very glamorous "Vanity Fair" party. We can't wait to see your reports from that.

And we are back ON THE STORY right after this. Stay with us.

(BEGIN VIDEO CLIP)

ANNOUNCER: A young Japanese princess was back in the headlines this week. What's her story? More when we return.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ANNOUNCER: Princess Aiko? What's her story? New questions this week whether 3-year-old princess will one day become the first empress of modern Japan. She's the only child of Crown Prince Naruhito and Princess Masako.

Her father apologized this week for hinting that his wife's illness was caused by pressure to produce a male heir. No sons have been born into the imperial family for a generation, prompting the government to reconsider the imperial law that prevents women from ascending to the thrown.

At his 45th birthday celebration this week, the father said, "Whatever becomes of Aiko's status in the future, I hope that she will be raised to be a fine person."

(END VIDEO CLIP)

HAYS: Thanks so much to all of my colleagues, and thank you for watching ON THE STORY. We'll be back next week.

Up next on CNN, "CNN LIVE SUNDAY." At 11:30 a.m. Eastern, 8:30 Pacific, "RELIABLE SOURCES." And at 12 noon Eastern, 9 a.m. Pacific, "LATE EDITION WITH WOLF BLITZER." Among Wolf's guests, Senator Arlen Specter, chairman of the judiciary committee.

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


Aired February 27, 2005 - 10:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BETTY NGUYEN, CNN ANCHOR: Good morning, everyone. I'm Betty Nguyen at the CNN Center here in Atlanta. ON THE STORY is next. But first, here's a look at the headlines today.
The half brother of Saddam Hussein is captured in Iraq. During a joint Iraqi coalition operation, Saddam Hussein's half brother most recently served as personal adviser to the former dictator. He was number 36 on the U.S. military's list of 55 most wanted Iraqis.

Israeli Prime Minister Ariel Sharon today says peace efforts with Palestinians would be frozen if they do not crack down on militant groups. Now, this follows Friday's deadly suicide bombing in Israel. Sharon believe it is was perpetrated by the Palestinian militant group Islamic Jihad.

Nuclear secrets at risk. Former employees at the Los Alamos National Laboratory had potential access to classified information and nuclear material. That is according to the Energy Department's report.

It blames improper processing of department workers -- of departing works. Many of them failed to turn in their badges. Los Alamos is one of the nation's most important nuclear weapons research centers.

We will have another check of the headlines at the bottom of the hour. ON THE STORY begins right now.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalist have the inside word on the stories we covered this week. I'm Dana Bash, on the story of the president's big trip to Europe. Did he win back allies, and did he win new help in Iraq?

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: I'm Jane Arraf, on the story of the hunt for insurgents in western Iraq.

KELLY WALLACE, CNN NATIONAL CORRESPONDENT: I'm Kelly Wallace, in New York, on the story of the latest fallout from the H bomb, the Harvard bomb and president Larry Summers' talk of women, math and science.

KATHLEEN HAYS, CNN CORRESPONDENT: And I'm Kathleen Hays, on the story of Martha Stewart. Can her release from prison next week wrap up the business she left behind? Also coming up, we'll go to Rome, where our Vatican analyst Delia Gallagher has the latest on the pope, his latest health scare.

And we'll go to Los Angeles, where entertainment correspondent Brooke Anderson tells us what she'll be watching for at the Academy Awards.

Email us at ONTHESTORY@CNN.com. Now straight to Jane Arraf and the fight for western Iraq.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We've rolled in force in areas that have traditionally been insurgent strongholds.

(END VIDEO CLIP)

BASH: Lieutenant Colonel Greg Stevens (ph) of the U.S. Marine Corps talking about the new offensive against insurgents in western Iraq. And our Jane Arraf is on the story there.

Jane, you are in the Al Anbar Province . Tell us what the latest is where you are embedded there.

ARRAF: Well, it's almost nightfall. We're embedded with the Marines. And this unit is actually a reserve unit.

They are part of what they call Operation River Blitz, which is essentially an operation all the way along the Euphrates River. And the thinking on this is that basically this battle for Falluja drew a whole lot of Marine units over to Falluja, which left a lot of big empty space all of the way from Baghdad to the Syrian and Jordanian borders.

And the current thinking is that is where a lot of the insurgents are, in these cities and towns. So Marines and Iraqi forces are going in -- we're going in with them -- to isolate these cities, to try to see if they can find these insurgents, including, of course, Abu Musab al-Zarqawi who everybody is looking for.

WALLACE: Jane, give us a sense on the ground, in these weeks following the Iraqi election -- and of course now the results finalized in the election -- give us a sense of how much more violence we're seeing on the ground following those election results.

ARRAF: It's kind of an uneven pattern. And it's really interesting.

We came from the heart of the Sunni Triangle, where essentially the biggest cause of violence has been homemade bombs, roadside bombs, car bombs, suicide bombs. And those appear to be down. But it's not as if there seems to be a direct link with the elections.

But what happened has been really interesting. There does actually seem to be a new sense among Iraqis that, hey, maybe they can control their own destiny, that perhaps they don't have to be under occupation. And that is sort of driving a lot of the political forces.

Now, what we're seeing out here in Al Anbar Province is equally fascinating. This is an area that has not been really under control for the past two years. There is no police force in these towns. There's no fully-functioning mayors, there's no real government.

We have gone into these towns with the Marines, and the streets are eerily quiet. They are not told to stay home, but they are staying home, because they're prepared for fighting that's going to go on.

HAYS: Jane, the capture of two key allies, aides to al-Zarqawi, the Marines you are with now, is this the kind of thing that raises their spirits? Are they hopeful that they're coming at a time when maybe U.S. forces and Iraqi forces can really make some progress?

ARRAF: Well, everybody would love to say that they were the units that caught al-Zarqawi. Now, if Iraqis find him, if anyone provides information leading to his arrest, they walk away with $50 million. If the Marines find him, they don't get that money. But they would obviously get that satisfaction.

It is a bit like Saddam. And I'm sure you all remember during the Saddam watch, where Army officials were saying, "We're 24 hours away, we're 48 hours away," impossible to tell really. But they do believe that he might be perhaps in this area, that there is evidence he has been in this area. And, yes, if there is a unit of the Marines or Iraqi special forces or U.S. Special Forces or probably a combination of all of those that catch him, it is going to be a very happy day for some people.

BASH: Jane, I want to ask about the military strategy for River Blitz, which is what you're involved in. Is it the same kind of scorched earth policy that we saw in Falluja?

ARRAF: It is not. And, you know, we went back to Falluja -- I think we talked last time about this -- and found an absolutely devastated city.

Here it's a softer approach because it is not the case like Falluja, where these are towns that have been entirely taken over by insurgents. What is believed to be here in these isolated cities and towns strung out across the Euphrates River going through the desert are a series of safe houses. Perhaps some command and control that could be coordinating attacks in places like Mosul, which have been particularly volatile, but nothing like the kind of Falluja, where there were torture houses, safe houses, an entire city essentially held hostage.

So here they have been going in. And yesterday we saw Marines playing ball with some of the children. That's the reception they get in some parts of town. In other parts, there clearly is a lot of tension, but it is nothing like going in with guns blazing. They are going in to find out what's out there.

BASH: Jane, thank you so much. Before we let you go, tell us what you're going to be doing ON THE STORY in the next few days and the coming week.

ARRAF: Well, we're going to following this Operation River Blitz because this is a really interesting part of the country that we haven't really been to lately. We're going up all of the way to the Syrian border where Marine and other U.S. officials believe that there still are a fair number of foreign fighters crossing that border and coming into Iraq.

BASH: Jane, thank you very much. And stay safe.

And we're going to turn to President Bush who, of course, was in Europe this past week in meetings with Russian President Putin and others. And the war in Iraq and the war on terrorism were top issues.

More on that coming up. And remember to stay tuned to CNN for the most reliable news about your security.

And at the end of the hour, the 3-year-old Japanese princess. What's her story? And what's the talk this week of her becoming the first empress of modern Japan?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This notion that the United States is getting ready to attack Iran is simply ridiculous. Having said that, all options are on the table.

(END VIDEO CLIP)

BASH: Blunt talk in Brussels from President Bush, trying to reassure skittish Europeans that Iran is not next on the U.S. military target list, but still warning Tehran that it is always an option.

Welcome back. We're ON THE STORY.

HAYS: So what is the message here? You know, is it an option that he thinks is the option he's going to use, or is the president trying to tell us he thinks diplomacy can work?

BASH: You know, it -- Kathleen, that was really just the biggest illustration of the challenge the president had on Iran going to Europe. Because he was trying to tell the Europeans, who polls show really are freaked that they're seeing deja vu, that the president really is thinking about military options. That, look, he's not.

And he really wanted to sound like he was reaching out. He wanted to get a united voice, as you said. And he actually did get it.

He was there the next day talking with the German chancellor. They talked about the need for Iran not to have a nuclear weapon.

But at the same time, it's U.S. policy that you've got have teeth behind any diplomacy. So you can't take it off the table. But, look, the bottom line is that coming out of this on Iran, President Bush was able to say with the Europeans, most of the leaders, that they agree that Iran needs to not have a nuclear weapon. The thing that they don't agree on yet is exactly how to get there.

The U.S. is still not involved directly in the diplomatic talks. And the president has to decide right now -- and it's going to be interesting to watch -- whether or not he is going to agree with their approach, which is to give economic and other incentives or not, because it's something that he fundamentally -- philosophically really doesn't agree with.

WALLACE: Dana, talking to a couple of people, including a European reporter at the end of the trip, this reporter expressing a little bit of surprise. He said he was surprised at kind of how far the president went both in tone and in language to try and heal some rifts with his European allies. So is this style over substance, or is this a real partnership forming?

BASH: You know, that's an excellent question. It will be interesting to see what happens in the coming months.

But certainly, look, you know, Kelly, that when the president has gone abroad since the Iraq war, he has gone out with him and his aides saying, we're going to talk about what binds us, not about what divides us. But then he goes to places like, for example, Canada, you think about just a couple months ago, and the Canadians looked at him and said, wait a minute, you say you want to heal, but you don't sound like you want to heal, and you're saying the same things over and over again.

Listen to something that President Bush said in Germany. And we'll talk about it.

(BEGIN VIDEO CLIP)

BUSH: For some, September 11 was a passing moment in history. In other words, it was a terrible moment, but it passes. For me and my government, and many in the United States, it permanently changed our outlook on the world.

Now, those two attitudes cause us sometimes to talk past each other. And I plead guilty at times. And -- but as this conversation goes on, I want you to remember that point of view.

(END VIDEO CLIP)

BASH: Kelly, to me, this most illustrates what you were trying to get at, which is the president -- that was during a forum with business leaders, there were only -- it was only open to cameras for five minutes. The question had nothing to do with that. He just got it in there.

Wanted to make the point that the problem has been that the U.S. just sees the world differently since 9/11, and that that is probably -- it's not personal. It's just a difference in perspective, and they have to understand that.

HAYS: What about Bush -- President Bush and President Putin? Because many people in the west are more and more concerned, backtracking on democracy. We've got a little snippet of what they said publicly, but a lot of questions about what was said privately.

BASH: This was the best theater probably of the whole trip. It was President Bush standing next to President Putin. All eyes were on President Bush to see how far he would go, and, of course, how far President Putin would go in this whole question of Russia backsliding on democracy.

Let's listen to that.

(BEGIN VIDEO CLIP)

BUSH: I think it's very important that -- that all nations understand the great values inherent in democracy, rule of law and protection of minorities, viable political debate.

VLADIMIR PUTIN, RUSSIAN PRESIDENT (through translator): Russia has made its choice in favor of democracy 14 years ago independently without any pressure from outside. It made that decision in the interest of itself and interest of its people.

(END VIDEO CLIP)

BASH: So this press conference between the two of them turned into sort of a seminar on democracy. Some in the United States, conservatives, for example, didn't think that perhaps President Bush was tough enough on President Putin in public. Maybe he was a little bit too easy on him. Others say that, look, he went further than he ever had before. But the key question is what President Bush said to him in private.

They had a one-on-one conversation, no staff there, just their translators. And it went a lot longer than was expected. And a senior aide said that the president came out and sort of wiped his brow and said it was intense and he was tough on him.

So the question is what he said and whether or not he did give him some private deadlines to really start to turn things around, freedoms of the press, control in the Kremlin, and things like that. What the White House says is, look for markers. May the president is going to Moscow, June he's going to meet with him again. See what happens then.

WALLACE: Dana, are you picking up, though, privately when you talk to sources about what President Bush said to President Putin in that private meeting? Because no doubt the White House felt enormous pressure going into this meeting.

A lot of questions about how the president just four years ago said he looked into Putin's soul and thought he was trustworthy. How much -- do you have a sense of how much pressure and how tough President Bush was on President Putin privately? BASH: You know, Kelly, what's so interesting about that is, because there really was no one else in that meeting for more than an hour, certainly senior aides are saying that they got from the president that it wasn't heated, but perhaps that the two -- that he was tough on him and sort of perhaps said to him that he expects him to take some steps. But no one really knows how tough he was. The assumption is that he was kind of tough, but no one really knows.

HAYS: Things are certainly going to heat up again this week perhaps on the Social Security. While these Congress people who had to go out, talk to their constituents, they're back. What's the latest on the Social Security reform?

BASH: This past week was really crucial. Because, as you said, members of Congress were out there talking to their constituents. The president is going out, hitting two more states this week.

The question is, are they going to start to actually form a compromise? They're going to have to do something. And will the president going out and continuing to travel make a difference or not?

We're going to find out. But certainly talking to members of Congress who were out this week, they said they definitely heard an earful from both sides on this whole topic.

WALLACE: Well, the president getting credit for raising the issue of Social Security. Something else he should get credit for: match-making, putting together the diplomatic dream team of his father, Former President Bush, and former President Clinton. I'm back on that.

And also, the Summers storm. The Harvard University president, Larry Summers, the uproar over women and science.

We'll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We vote no!

UNIDENTIFIED FEMALE: We vote no!

UNIDENTIFIED MALE: We vote no!

(END VIDEO CLIP)

WALLACE: "We vote no," the protesters were chanting, as in no confidence in Harvard University president Larry Summers. The other side was shouting, "Lay off Larry."

In the latest round of what has moved way beyond the Harvard campus to becoming a national debate over Larry Summers and his comments, suggesting there are issues of "intrinsic aptitude" that determine why fewer women than men excel in math and science. Welcome back. I'm Kelly Wallace. And we are ON THE STORY.

BASH: And Kelly, this is like the story that will not go away, right? I mean, this happened probably about two months ago it seems like. The question is now, what does it mean for Larry Summers? Is he going to survive?

WALLACE: Well, you're right, it is a story that does not seem to go away. It seems to be that he is OK for now. The Harvard corporation, we should note, which hired him, could fire him, and right now is standing behind Larry Summers.

He did an interview over the weekend in Saturday's "New York Times," and he says all of this has him kind of questioning or pondering his own style, that sometime he can be kind of tough and challenging and raising questions almost like in a graduate-style seminar, and maybe he needs to rethink things. We know from this article he has been talking to former President Bill Clinton for some advice, and also former adviser to many presidents, David Gergen.

So right now it seems he's OK. But some faculty members say at next month's meeting they are going to try to put a vote of no confidence on the docket and see where it goes from there.

HAYS: And, of course, this is a man who's long known for his academic brilliance. Brilliant economist, but not so long on diplomacy.

But let's get to the heart of the issue that has really been stirred up now, women versus men when it comes to our innate abilities, as he put it. Kelly, what did you -- what did you dig up this week?

WALLACE: Well, and that is the issue. And also -- great minds think alike -- the cover of this week's news magazine, "TIME" Magazine. And the quote is "The Math Myth: The Real Truth About Women's Brains and the Gender Gap in Science."

Again, this has really sparked a nationwide debate. Are there intrinsic aptitude differences between men and women when it comes to, let's say, math and science?

When you look at this week's "TIME" Magazine, the scientists saying there are some differences, scientific differences between our brains. Women tend to use -- and I'm no great scientist, I should point out. But women -- good in math, but not great in science.

But women tend to use more parts of their brain and connecting parts of the brain. Men tend to sort of utilize one section of their brain more than any others.

What you have found, women, men -- even women debating and disagreeing about this is really true. And then if it is true, what can be done about it?

There are some liberal women groups who say, no, there are not differences. It all comes down to bias and opportunity and discrimination. If we teach women just like we teach men, given the same opportunities, they can succeed.

Other women I talk to say, no, there are some differences. And women then gravitate to the areas they are better skilled in and do a better job in. Men move in areas where they're better at. But it is a debate that doesn't seem to be going away just yet.

HAYS: Well, let's look at a story where we can talk about people coming together. I mean, this is another big story you're on. This is not about divisiveness. This is about a surprising show of unity.

(BEGIN VIDEOTAPE)

WALLACE: Maybe there is no bigger message than this: that two former political rivals can put aside their differences and do something both Democrats and Republicans can support.

(voice-over): The warmth between the ex presidents was evident last month at the White House.

BUSH: I'm honored to be standing here with two former presidents.

WALLACE: But you could also see the bond months earlier in the smiles at the World War II dedication ceremony and in the words at the opening of President Clinton's library.

GEORGE HERBERT WALKER BUSH, FMR. PRESIDENT OF THE UNITED STATES: Simply put, he was a natural. And he made it look too easy. And oh how I hated him for that.

WALLACE: And something else happens between members of that very exclusive club, only four living members now, the ex presidents, says Jack Valenti, longtime aide to President Johnson.

JACK VALENTI, FMR. AIDE TO PRESIDENT JOHNSON: And only they understand the problems, the pressures, the disappointments and sometimes triumphs that presidents deal with.

(END VIDEOTAPE)

WALLACE: And oh how rare it is. A story that both Democrats and Republicans can be smiling about. This, the diplomatic dream team, 43, the current president, having 41 and 42 go together to visit and tour the tsunami-ravaged areas.

And picking up from aides the two are getting along fabulously. We're told that in their private time, their free time, they talked about global politics, their families, sports. They are talking so much, one reporter said that they seem to be finishing each other sentences. So a fast friendship definitely has been formed.

BASH: You know, Kelly, I interviewed both presidents the morning that President Bush appointed them and said that they were going to be doing this. And all I kept thinking looking at them was President Bush saying, "My dog Millie knows more about foreign policy than this guy."

And all of the things that were, you know, so raw during the '02 campaign and looking at how well they got along. But as sort of they're in this -- they're in this unique club. And I assume that's part of it here.

WALLACE: That's right. Because we also said, "Where did the bitterness go?"

BASH: Right.

WALLACE: And as you point out, there was bitterness. Two things happened.

It is sort of when you get out of the White House, there are so few people who know what it is like to be there. So you form this bond.

Both men also very nice, likable men. And also, we're told that there was a friendship that even formed when Vice President Bush -- when he was vice president, and Bill Clinton was Arkansas's governor, he was visiting Kennebunkport with Chelsea. Chelsea asked the vice president, "Where is the bathroom?" and the vice president directed her. So they seem to have a relationship that preceded that campaign of 1992.

HAYS: Well, when everyone asks, "Can't we just get along," here's an example of people finally doing that.

Now from politics to money. The markets went way up and way down this week. Meanwhile, stockholders hope Martha Stewart's release from prison next week will plump up their bottom line.

Also coming up, our Vatican analyst, Delia Gallagher, and how the latest health scare has prompted new questions about papal resignation.

And in Hollywood, Brooke Anderson is on the story of tonight's Academy Awards.

All coming up. Plus, a check on what's making news right now.

(COMMERCIAL BREAK)

NGUYEN: Good morning, everyone. I'm Betty Nguyen at the CNN Center in Atlanta. ON THE STORY continues in just a moment. But first, here's a check of the headlines right now in the news.

One day after the Vatican said the pope was too ill to appear at his hospital window, Pope John Paul did just that. He is still recovering from throat surgery. We'll of course, have a live report from Rome in about 10 minutes from now.

Meantime, the search continues in central Florida for Jessica Lunsford, the 9-year-old girl last seen Wednesday night. The Citrus County sheriff says it could be an abduction, but he is not ruling anything out. He adds torrential rains are complicating those search efforts.

Well, some call it a work of art; others ask why? The Gates is going away, closing after 16 days in New York's Central Park. The French artists who put up the $20 million to build it say it exceeded their wildest dreams. Made the park colorful.

Another check of the headlines and the day's top stories at the top of the hour right here on CNN LIVE SUNDAY. Now it's back to ON THE STORY.

(BEGIN VIDEO CLIP)

MARTHA STEWART, FOUNDER, MARTHA STEWART LIVING OMNIMEDIA: I would like to be back as early in March as possible in order to plant the new spring garden and to truly get things growing again.

(END VIDEO CLIP)

HAYS: Martha Stewart before she went to prison, predicting what she'll do when she gets out, possibly next week. And we're not just talking flowers and vegetables, of course, but also growing back her image and her business.

Welcome back. I'm Kathleen Hays. We're ON THE STORY.

WALLACE: Kathleen, one of our favorite stories on this show, Martha, Martha, Martha. And everyone is sort of predicting that she may become even wealthier, even more popular, even more famous when she gets out of prison than before she left.

HAYS: Well, Kelly, she is potentially one of the big comeback kid stories of the decade, the century, I don't know.

This is a woman who went to jail for five months for lying about a stock sale. That's still being appealed. But she decided, "No, I'm just going to get this over with."

At that point her stock market -- her stock price started rallying in her company, Martha Stewart Living Omnimedia. She's done the crime. She's paid for it. She's coming back full speed ahead. She'll be writing a column for her magazine, "Martha Stewart Living," next month. Two TV shows she's ready to go.

So people in the company, a lot of investors seem to have pretty high hopes for this.

BASH: So I want to ask you: is this an issue of no publicity being bad publicity, or any publicity being good, or whatever the phrase is? Or is it just that she didn't do anything that egregious when it comes to the company?

HAYS: If you look at -- if you compare her to any of the corporate crooks we've seen, you really can't. She didn't lie about her own company. She didn't steal money from her shareholders. She made a mistake that she has paid for.

And I think when people -- the people who are optimistic about Martha Stewart figured that people will forgive her. And her fans, of course, have stood behind her all the while.

There are a lot of challenges for the company now. Again, they are launching this new version of "The Apprentice." But that will go to her company's bottom line. That will go to Martha's bottom line. But a new daily syndicated show. They say they've already got a lot of licensing arrangements set up.

The stock, though, it's so interesting. It is at its all-time high again. It's quadrupled since last summer. I spoke to a fellow who trades at -- down at the New York Stock Exchange and he said he wouldn't buy it at these levels. He thinks the good news is already in the company.

But another interesting nugget, apparently, her lawyers even talking to the Securities and Exchange Commission about settling some insider trading charges that are pending and possibly, in this agreement, allowing Martha Stewart to come back as CEO of her company.

WALLACE: So interesting. We'll be watching. That will dominate the headlines this week, Kathleen.

But tell us about something else that was dominating the headlines last week. A -- mixed messages coming from the stock market, it seems.

HAYS: Well, you know, the market went on quite a ride last week. And of course, the first thing that really hit it hard on Tuesday was there was a report from the Central Bank of South Korea, speaking about diversifying out of dollars.

That hit the dollar very hard. But the dollar's been on the ropes for awhile. Oil prices shot up. These are two big concerns for the stock market.

By the end of the week, though, South Korea had kind of said, "Look, we're just thinking of some minor adjustments, No. 1." And even though oil prices stayed above $51 a barrel, oil stocks rallied because people realized for the oil companies these higher oil prices mean strong profits.

So at the end of the week, the stock market managed to -- got a gain.

BASH: Big Brother. There's a story this week that really affects everybody, which is the whole question of privacy and whether or not you have any. And it seems that we don't have any. Everybody -- there are companies that know everything there is to know about us, and they're selling it.

HAYS: And they're making money on it, exactly.

BASH: Right. HAYS: Isn't it interesting how these stories snow ball? First, we had ChoicePoint, you know, the data miner. It has information on consumers that it sold a potential employer, an insurance company, even the federal government.

They inadvertently sold information on, what, 150,000, some people say maybe even 500,000 of their -- the people in their database.

Then, of course, this week at the end of the week we find out that Bank of America lost some computer tapes that has credit card information on about 1.2 million people. Many of them are federal government employees.

They say, "Well, we just think the tapes were lost." Some people are concerned that maybe they could have been stolen, say, at an airport by a baggage handler. No proof on that. The investigation going on. They say don't worry yet.

But Paris Hilton, her little sidestep, you know, little device where she e-mails and everything, was either hacked or someone just figured out her password and put her information and phone numbers, her private e-mails all over the Internet.

WALLACE: So Kathleen, we never thought, could we learn anything from Paris Hilton, did we? Well, maybe we could.

But a question for you, quickly. What are some tips for all of us in terms of protecting our identity and not becoming a victim of identity theft?

HAYS: There's not always a lot you can do. Write your legislator. Congress is going to start looking at this question of how to regulate it. And why are they selling our information any way?

Beyond that, always check your credit reports, check your credit card. Anything fishy turns up, you have to call your bank, you have to call your credit card company. One of the credit -- you know, one of the credit reporters, the credit checkers, because you -- we're all vulnerable now. And as more of these things happen, I think the worries are obviously growing.

WALLACE: And be sure to tear up as much as you can.

HAYS: Shred.

BASH: Shred.

WALLACE: Shred, shred, shred.

All right. Well, tens of millions of people around the world this week have been following another story: reports concerning the health of Pope John Paul II. We're back on that story with our Vatican analyst, Delia Gallagher, right after this. Don't go away.

(COMMERCIAL BREAK) (BEGIN VIDEO CLIP)

CARDINAL EDWARD EGAN, NEW YORK ARCHDIOCESE: He's a prisoner of illness that has been stalking his path for many, many years. An illness that has given us an opportunity to admire the courage and the strength and the commitment of the successor of St. Peter.

(END VIDEO CLIP)

BASH: Cardinal Edward Egan of the New York Archdiocese, celebrating a mass Friday morning to pray for the pope.

Welcome back. We're ON THE STORY.

And the latest health crisis for Pope John Paul II came on Thursday when doctors had to insert a breathing tube into his windpipe. And joining you us now in Rome is CNN Vatican analyst Delia Gallagher.

And Delia, we saw the pope for the first time today since then, right? And what did you see?

DELIA GALLAGHER, CNN VATICAN ANALYST: Well, I'll tell you, it was an amazing surprise this morning. I saw hardened journalists who had been following this pope for 26 years who were surprised to see him, because the Vatican had led us to believe that we wouldn't be seeing him this morning.

And the headlines in all the Italian papers were "Pope Misses the Angelus for the First Time in 26 Years."

And in almost an act of pure theater, after the prayers in St. Peter's Square, you see the camera pan to the window of the Gemelli Hospital and the drapes start moving. And people are saying, is he going to show up? And there he is.

And not only that but when he does show up at the window, he gives the blessing and then he puts his hand to the throat as if to say, you know, "Sorry, I can't speak. I got this tracheotomy."

So it was it was a very important and very surprising moment this morning at the Vatican.

BASH: Quite surprising and amazing. This man is so strong. Tell us about what his prospects now are with this tracheotomy. Can they take it out? Is this something that will be permanently with him? How does it affect his health overall?

GALLAGHER: Yes. Well, they don't know at the moment. You know, it's really day-by-day, basically. They have to see how he recovers. Presumably, it would have to be taken out at some point, and he'd be brought back to the Vatican.

But the thing that everyone is wondering about is whether he will have his voice back. It's very important that the pope is able to use his voice. But even if he doesn't, and this is what speculation is now, you know, the pope comes back and he can't speak. Well, he's still the pope. And as long as he can gesture, as long as he can move his head, as long as he's still alive, he will continue to be the pope at the helm of the church.

So there's a lot of debate right now, but it's really a wait and see how he recovers from this.

When I was talking to a few of the cardinals yesterday, they're mostly concerned just for the pope's health in itself, more than the guidance of the church, because of course, everyone has great affection for this man.

And so I think really the eyes of the world are just looking to see how he will recover personally, even more than the church.

The Catholic Church is used to popes who have been bed ridden. For example, there's Pius VII in the 1800's. Stendhal wrote about him. He said, you know, he was bed ridden and Stendhal was in Rome at the time.

And he said everybody in Rome is talking about the health of the pope, and these discussions are terrible. You know, they're even talking about his surgery and the details of his surgery.

And here we are, you know, 200 years later. We're still talking about the health of the pope.

So the church is able to work through these crises. It has for many years. And I don't think that the cardinals at the Vatican are too worried about the day-to-day running of the church but more concerned about the health of the pope from a personal point of view.

WALLACE: Picking up on that, Delia, you talk about a little bit of debate concerning the pope's health, where he goes from here. Is there any real discussion that seems to have any legs about possibility down the road of a resignation? Or is that totally out of the question?

GALLAGHER: There's discussion, absolutely. It is allowed for in the canons of the Catholic Church. That's their law book. And the pope can resign, so long as he is with his mental faculties. He decides to do it. Nobody can make him do it.

So we heard a couple of days ago Cardinal Sodano, the secretary of the state, who said we'll leave that up to the conscience of the pope, because if there's anybody that knows the church and loves the church and knows what's best for it, it's this pope.

So that is an open question whether he will resign or not. However, knowing this pope and knowing his -- his extreme devotions to the papacy, it seems very unlikely that he would choose to resign.

He just doesn't see it as a job from which you design. This is a paternal thing. This is a vocation for him. He's the father of the church. So you know, you don't resign from fatherhood is his idea. And so I think it's highly unlikely.

HAYS: Delia Gallagher, thank you so much for that. We will be talking to you again ON THE STORY.

Coming up, Oscar night. CNN's Brooke Anderson will be on that story after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

HILARY SWANK, BEST ACTRESS NOMINEE: Annette is such an inspiration to me.

ANNETTE BENING, BEST ACTRESS NOMINEE: She's fantastic.

SWANK: She is -- you know, I had the opportunity to meet her. And she's so generous and lovely.

BENING: I love the movie, "Million Dollar Baby."

SWANK: So many other great performance this is year and to just talk about us is just unfair to them.

BENING: Whatever happens.

(END VIDEO CLIP)

BASH: Best Actress nominees Annette Bening and Hilary Swank making nice, being remarkably gracious.

Welcome back. We're ON THE STORY, and our best hope to preview what movie fans will be seeing tonight is, of course, our entertainment correspondent, Brooke Anderson.

And Brooke, Annette Bening and Hilary Swank have been up for this prize before. What do you think? What are the odds right now? For Swank, maybe?

BROOKE ANDERSON, CNN ENTERTAINMENT CORRESPONDENT: I think Swank is going to come home with Oscar No. 2 tonight, Dana.

And you're right, you know, first of all, I'm going to knock out the first couple of boxing cliches. We're going to hear a lot of them tonight. But it is a heavyweight rematch. They've been here before in 2000. Swank actually upset Bening that year. Bening was favored.

But all the critics are telling me it is Swank's time yet again for "Million Dollar Baby." And if you've seen the movie, it is tremendous. It is a heartbreaking performance. She does a great job, as well as Clint Eastwood and Morgan Freeman, her co-stars.

WALLACE: Brooke, without giving away the ending or anything about "Million Dollar Baby," you know it is controversial. And it does touch on some controversial issues. How are critics talking about this and reacting about will the controversy help "Million Dollar Baby" in terms of Best Picture and Best Director, or could it hurt the movie?

ANDERSON: There is a controversy at the end, you're right, Kelly. And I do not want to give it away for those people who haven't seen the movie, but Oscar voters vote primarily on the merit of the film. They don't really take controversy into account. So it's not really going to hurt or help "Million Dollar Baby" at this point.

"Million Dollar Baby" up for seven Oscars. So you know, it is going to have some success. A lot of people think it will take home Best Picture, the biggie.

HAYS: Another controversy, a bit, around Chris Rock, the comedian who is going to be emceeing the Oscars. I saw him on the Jay Leno show earlier in the week. I think he's a little bit nervous about this. This is a really big deal.

ANDERSON: This is a big deal, Kathleen, his first time hosting the Oscars. And yes, there is a so-called controversy.

You know, he's not a guy to follow the mainstream traditions of, say, Billy Crystal, Steve Martin, Bob Hope. He's a little bit different.

Recently he said that no black straight men watch the Oscars. And boy, that threw everyone, you know, into a tizzy. Many took offense to that. Well, Oscar telecast producer Gil Cates told us, he came to his defense and he said, hey, Chris Rock is a comedian. This is his shtick. He's doing his thing. Don't take these jokes too seriously.

And interestingly enough, no one is above a little bit of practice. You say he seemed a little bit nervous. He's been all over the comedy club scene here in L.A., practicing his material. A couple of my friends were out last weekend at a comedy club, and lo and behold, Chris Rock takes the stage, a surprise appearance. And they said he did a pretty good job. It was pretty funny.

So we hope he has success tonight. And a clear strategy by the Academy here to bring in younger viewers to the telecast.

BASH: That's right. And no matter what the controversy, we certainly heard a lot of news about this. And that was one of -- that's been one of the issues is that the decline in audience of the Oscars.

ANDERSON: Absolutely, Dana.

BASH: So perhaps this was not an accident. Let's talk about Best Actor. Jamie Foxx seems to be certainly the leader going into tonight?

ANDERSON: Jamie Foxx will most likely take home the Best Actor prize for "Ray." He's also up for Best Supporting Actor for "Collateral." A tremendous year for him.

And he has been campaigning, which is pretty important for the Oscars. He's made himself so assessable leading up to the Oscars. He's having the time of his life. And he has told us time and time again he is along for the ride. This is an amazing year for him, an amazing time.

And he hopes that this Oscar nomination ensures that he won't ever have to do another film like "Booty Call."

WALLACE: Brooke, you know, we talked to you the night of the Grammys. We said we envied you that night. We envy you even more, because so much is the acting but also what the stars are wearing. Are you picking up any trends that we will be seeing on the red carpet tonight?

ANDERSON: It's hard to say, Kelly. Let me fill you in on a little -- a little secret here.

This morning the celebrities are probably waking up about now, and they say, "I'm feeling pink chiffon today," or "I'm feeling black satin today" or big earrings or small earrings or what not.

Well, their stylists hoard, of course, numerous, numerous options for them. And so they -- a lot of them decide today. And here I am. You're watching me looking at Pamela Dennis, a friend of mine. She's a designer. Some of her gowns.

She tells me she works and works and works right up until the telecast. And then she puts on her pajamas, gets with her family, crosses her fingers and just hopes she sees her gowns on that red carpet, which is a fashion runway. So it's a bit of a nail biter for everybody.

HAYS: I've got to quickly ask but Best Director. Martin Scorsese has been nominated how many times?

ANDERSON: Five.

HAYS: Has he finally one for "Aviator," or is it Clint Eastwood for "Million Dollar Baby?"

ANDERSON: This is his fifth nomination. Never won. Never won. And he's considered one of the greatest directors of the '80s and '90s. So if he wins, the Oscar voters could be rewarding him for all of his work.

Scorsese told me that "The Aviator" was a labor of love for him. He loved the story. He loved the script.

And get this: he has a fear of flying. Yet, he overcame that to do this movie, all about aviation. And you know, if he wins, great for him. But Oscar voters, on the other hand, do love Eastwood. And they rewarded him for "Unforgiven," and more than a decade ago, both with Best Director and Best Picture. And they could reward him again. We'll see tonight.

BASH: Just very quickly, you mentioned Jamie Foxx campaigning earlier. Does that help? Does that really work? ANDERSON: It does help. The Oscar voters see who's out there. They see who really cares. Virginia Madsen, another one who's been very accessible, been all over town. I had her here in studio. And she could not have been more gracious.

You know, she's been toiling in obscurity for about a decade, and this has really put her back in the forefront, upped her profile.

And you know, she was so cute. Had on a Juicy jacket and said, "People are giving me clothes to wear. I can't believe it. Here I am." And that really does matter. People see who really wants it and who cares, and the Oscar voters take that into account.

WALLACE: What a fun night it's going to be. Thanks, Brooke. Good luck.

ANDERSON: Thank you.

WALLACE: We'll be watching your reports including at the very glamorous "Vanity Fair" party. We can't wait to see your reports from that.

And we are back ON THE STORY right after this. Stay with us.

(BEGIN VIDEO CLIP)

ANNOUNCER: A young Japanese princess was back in the headlines this week. What's her story? More when we return.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ANNOUNCER: Princess Aiko? What's her story? New questions this week whether 3-year-old princess will one day become the first empress of modern Japan. She's the only child of Crown Prince Naruhito and Princess Masako.

Her father apologized this week for hinting that his wife's illness was caused by pressure to produce a male heir. No sons have been born into the imperial family for a generation, prompting the government to reconsider the imperial law that prevents women from ascending to the thrown.

At his 45th birthday celebration this week, the father said, "Whatever becomes of Aiko's status in the future, I hope that she will be raised to be a fine person."

(END VIDEO CLIP)

HAYS: Thanks so much to all of my colleagues, and thank you for watching ON THE STORY. We'll be back next week.

Up next on CNN, "CNN LIVE SUNDAY." At 11:30 a.m. Eastern, 8:30 Pacific, "RELIABLE SOURCES." And at 12 noon Eastern, 9 a.m. Pacific, "LATE EDITION WITH WOLF BLITZER." Among Wolf's guests, Senator Arlen Specter, chairman of the judiciary committee.

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