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On the Story

Looking at Media-Created News Celebrities and Global Oil Markets

Aired March 20, 2005 - 10:30   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.


TONY HARRIS, CNN ANCHOR: And good morning, everyone. I'm Tony Harris in the CNN Center in Atlanta. ON THE STORY continues in a moment, but first, headlines now in the news. The Terri Schiavo drama continues. Both the house and senate plan to convene this afternoon to draft legislation that would make it easier for Schiavo's parents to plead in federal court for the reinsertion of Schiavo's feeding tube. The severely brain damaged Schiavo was disconnected from the feeding tube on Friday.
The suspect in the death of Jessica Lunsford, a 9-year-old Florida girl who disappeared three weeks ago, was in court today. John Couey, looking haggard and nervous, said he understood the rights and charges against him. Couey, a sex offender, has confessed to killing Lunsford.

Pope John Paul II made his first appearance at the Vatican since leaving a hospital in Rome. The 84-year-old pontiff waved briefly to crowds gathered in St. Peter's Square for Palm Sunday, but today was the first day in the pope's 27-year papacy that he did not preside over the beginning of the Easter week services. That's what's making news. I'm Tony Harris. More news at the top of the hour. Now back to "On the Story."

(BEGIN VIDEO CLIP)

ASHLEY SMITH: I hope that you will respect my need to rest, and to focus my immediate attention on helping legal authorities proceed with their various investigations. My role was really very small in the grand scheme of things.

(END VIDEO CLIP)

KELLY WALLACE, CNN NATIONAL CORRESPONDENT: And that, of course, someone who's really become a household name. Ashley Smith, the heroine of the aftermath of the Atlanta shootings making a polite, leave me alone request this week. Her celebrity is a lesson of how hot the public spotlight can burn. Welcome back. I'm Kelly Wallace. We're ON THE STORY. I want to let everyone know we're going to get to Jane Arraf in western Iraq in just a minute.

KATHLEEN HAYS, CNN CORRESPONDENT: But, you know, she has already got a PR firm lined up behind her, so clearly someone said, you know, Ashley, you are sitting on a very important juncture in your life. You know, you can do something with this, run with this, make some money, and she's bit the hook.

WALLACE: Well, yeah, she had a lawyer. We saw that lawyer with her when she came out on that Sunday night. She hired a public relations company and not doing interviews, but an executive there said yes, we are fielding lots of calls because they're getting calls we understand from movie proposals, book deals, even interestingly enough, a hostage training company that has contacted her because basically said everything she did, she did right in terms of negotiating release if you've become a hostage. The sense is fielding calls. It'll be interesting to see what she ultimately decides to do.

ROSS: And because this has happened so much in the past with -- in these types of cases where people become the instant celebrity due to media attention, in part, I know you took a look this week at that very issue. Let's have a look at a story that you filed about the pitfalls of becoming a media celebrity.

(BEGIN VIDEOTAPE)

WALLACE: She didn't want to become another Amber Frey, who told most of her story about her relationship with convicted murderer Scott Peterson well before her book came out. Or another Jessica Lynch, whose book was in print months after her rescue in Iraq. Another risk of Smith's newfound celebrity, unwelcome scrutiny of her troubled past which includes some minor brushes with the law.

UNKNOWN: Ashley is learning firsthand that becoming a celebrity can be difficult. Fame has its downsides.

WALLACE: And there is another risk for Ashley Smith, the chance another big story will overshadow hers.

UNKNOWN: In a month, there will be somebody else who did an amazing courageous act in Colorado or California or Wyoming.

(END VIDEOTAPE)

WALLACE: And what you're picking up from people, also, they say another thing is time is a bit crucial here. You know, the sooner she does a book or a movie or does that big interview with Barbara Starr or Barbara Walters, then the more likely she can capitalize on all the buzz.

HAYS: But I think one of the reasons this woman has appeal, besides the fact that you point so well, to be in this hostage situation and say just the right thing, she has a checkered past. She's not a perfect person. And her story is, the way she tells it, that this is what reached out to Brian Nichols, a man who obviously now has a horrible past and future in front of him. And the fact that she picked up the book, the book "The Purpose Driven Life." I hadn't, wasn't really aware of it. Now we're all aware of it.

WALLACE: Well, and this is one way you can sort of measure how hot her story is right now, because this book, "The Purpose Driven Life," we checked, was number 72 on amazon.com. That was before the world heard of Ashley Smith. After she told her story earlier in the week, it jumped to number two and it is still there. So clearly, there's a lot of attention to her, to her story.

What's interesting is how much will her story be one for a religious audience or more of a spiritual audience, or will it have mass audience appeal. And people think because of her troubled past, because of a comeback story, because of her courage, that likely will have more mass appeal than a religious or spiritual audience.

STARR: Lots of developments to come in this. And we're all still ON THE STORY. We'll be hoping to go to Jane Arraf in Iraq after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I am concerned about the price of energy. I'm concerned about what it means to the average American family when they see the price of gasoline going up.

(END VIDEO CLIP)

HAYS: President Bush on Wednesday, as average Americans as well as investors and manufacturers and the big car companies all reacted to record oil prices. Welcome back. I'm Kathleen Hays. We're ON THE STORY.

WALLACE: Kathleen, we talked about it last week, of course. Oil prices going up and up. OPEC steps in, increases oil production, but...

HAYS: Market laughs in OPEC's face. The day after. I couldn't believe it. When I got up Thursday morning the day after the Wednesday meeting, I start reading the wires and checking what's going on, the price is already heading higher. And that day, oil, price of crude oil per barrel, traded up to $57.60 intraday. It didn't close there but still, it's just a sign that traders said OPEC cannot fix this problem for us.

WALLACE: What's the problem then?

HAYS: The problem is different from the past. And I had a very interesting conversation with a trader down at the NYMEX this week, Joe Terranova who's with NBF Clearing Corp. It's one of the big, big trading firms down at the NYMEX. And he said what's really striking in the market right now is how the market works, is you buy oil now. You buy it a year from now, you buy it two years from now in the futures market. That's what futures markets are for.

In the past, let's say when Iraq invaded Kuwait, and oil prices spiked higher. What you saw in the futures market was for the oil contracts, purchases in the next few months, a very high price and then it gradually came down as people said, oh, well, this oil price spike is going away. Right now, it's those forward contracts that are moving up faster than the contracts for the near term. In other words, traders are saying this isn't like the old oil price spikes. This is demand-driven problem. STARR: And Kathleen, when you say demand-driven, how much are Americans not maybe aware or paying attention to what is being talked about in the oil market, which is that demand is coming from China and I believe India?

HAYS: Well, think about it. It isn't just that we have a fixed level of demand. Our demand grows every year. But now we have Chinese demand getting bigger every year. It was underestimated this year. People keep thinking that hot Chinese economy has to cool off. India is now demanding more. But let's don't forget Iraq. Let's don't forget the story you were talking to us about, the suicide bomber. That is another thing.

People figured that with the disruption in the oil market, something that disrupts the flow of supplies that area already tight, then you could see one of these really big spikes up. That kind of supply shock on top of the demand-driven side.

STARR: So, are there any estimates yet or is it too early what the summer driving season's going to be, how much it's going to cost people to fill their tank?

HAYS: The forecast we had gotten was for about $2.15, but sources I talked to say, you know what, the government often underestimates that. It'll probably be more like $2.30 a gallon. So that's getting a bit pricy. Sixty dollars a barrel for oil, people say that's easily in sight. And again, if we had some kind of major disruption, people aren't looking for that, you could see $80 a barrel at least for a while. And this is the thing that would flow through, pun intended, to gas prices.

WALLACE: Something else that made major news this week, Bernie Ebbers of WorldCom, a verdict comes in, and this is a first of these big allegations of corporate wrongdoing cases, and it was guilty.

HAYS: The big fish to fry, the big fish for the prosecution to get. And they did. And remember, you know, Michael Jackson's a big trial in the news, right? It's sex. It's easy for people to follow. These white-collar crime trials are very, very difficult for jurors. It's tedious. There's so much information. This is very, very tough.

And in this case, basically, the jury had to decide whether or not they were going to believe Scott Sullivan, the chief financial officer who right before he was going to go trial pled guilty and is cooperating with the prosecution, the main witness, the main evidence against Bernie Ebbers, the CEO that built this little telecom company in Mississippi up to one of the biggest in the country, in the world.

In the end, the jury said they could not buy the story that a man like Bernie Ebbers didn't know about all this accounting fraud. They figured that he knew the books were being cooked, he gave it his approval, not just his tacit approval, because he was worried about the company going down and he was worried about his personal fortune going down. But the story now is, though, Ken Lay, Enron, be nervous.

STARR: Probably so. Yeah. We'll be watching that one. WALLACE: I bet they're watching very closely.

STARR: But you from Wall Street and the economic world, and me from the Pentagon, oddly enough, you and I followed one of the same stories this week. And that was the president's proposal to name Paul Wolfowitz, the number two man at the Pentagon, the deputy secretary of defense, to head the World Bank, and a very controversial nomination throughout the world economic community.

HAYS: He is not an economist. He's not a financial guy. He's not a development economist kind of guy. And that's typically the kind of person you put in one of these positions. There were editorials, there were all kinds of questions about this.

I did have kind of an off the cuff conversation with someone who watches the military sales industry very closely in this country and he said, what kind of signal does it send to developing countries where the United States has tried to get them not to spend the precious money on building up their arms to put someone like Wolfowitz at the head of the world bank? Very critical.

STARR: And one of the most interesting signals, as well, is we learned that Paul Wolfowitz made phone contact, if you will, with Bono, the head of U2.

WALLACE: That says it all. That says it all.

STARR: One of the people who's one one of the most high profile in international development and perhaps Mr. Wolfowitz thinking he certainly needed Bono's...

HAYS: He needs all the help he can get.

STARR: ... Bono's support. Well, Kathleen, thank you. And Kathleen is going to be hosting a live one-hour CNN radio program on Social Security with lawmakers, economists, and journalists on Wednesday afternoon 3 p.m. Eastern. We're hosting more of ON THE STORY after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

U.S. MARINE CAPTAIN FRANK DIORIO: People here are probably facing what people in Baghdad faced two years ago. So as we continue, I realize it takes time.

(END VIDEO CLIP)

WALLACE: That was U.S. Marine Captain Frank Diorio saying that western Iraq lags behind Baghdad by two years, that U.S. forces there are fighting the worst of the insurgency. Welcome back. We are "On the Story," and joining us on the telephone is Jane Arraf coming to us from western Iraq. Jane, great to have you. Give us a sense of the morale of the troops you are with as we now approach this two-year anniversary mark of the war. ARRAF: You know, the morale is pretty good. And I have to say that from the vantage point of a bunker that I was in, not long ago, overnight last night, in the early hours, I was in a bunker, surrounded by sandbags with the mortar men and some of these mortar guys had been in OIF1 as they refer to it, Operation Iraqi Freedom, two years ago. Some of them were brand new, but across the board, they all believed that they were doing some good by being there.

And I have to tell you, that place we were at that we've just come from is perhaps one of the strangest in Iraq at the moment. It is right next to a border town, right on the Syrian border. Marines don't go in anymore unless they're raiding the place. It has been taken over, they say, by insurgents, by foreign fighters crossing over, by criminal gangs. It really is a surreal atmosphere and much different from the rest of Iraq, and perhaps that's why morale is so high there.

STARR: Jane, as you say, some of the troops are now doing their second tour of duty in Iraq. A second full year of being in a combat zone. Is this something that is being discussed by these young soldiers, these young troops? Do they feel still the sense of difficulty that they may have felt the first time around, or are they more acclimated, would you say, to the situation and the stress and the tension?

ARRAF: You know, Barbara, it is really interesting. There are a couple of things that have changed dramatically for them, and one are the living conditions. Two years ago, they went for two months without a shower. Now you go into the worst of these bases and unless there's a battle raging around them and it's a patrol base, they have showers and they have Internet, no matter how slow, and they have telephones, and they have food and water, and all those things that they did not take for granted two years ago.

On the other hand, the enemy is so much different. Then it was Iraqi soldiers in uniform, and you knew who the enemy was. Now they're telling us at the base we were at, it's as if they're fighting ghosts. They blend into the population. They dart behind alleys. They attack from ambulances, from mosques. It's very hard to tell where they've come from. But one young marine said to us that he didn't mind being there the second time around because that way, at least, his kids wouldn't have to come back for Operation Iraqi Freedom 23 or 24 a few years down the road. They still...

HAYS: Jane, what is the military strategy now? if they're fighting ghosts, if they go someplace like this border town where it's really them against the insurgents, there's no border guards left, there's no Iraqi forces left, it seems, what is their strategy now? it seems like it's very difficult to have one.

ARRAF: Their strategy really seems to be keep the insurgents off their feet. Essentially, the border town near the Syrian border, and there are a couple of them, but this particular one, the major border crossing, they believe has a safe haven for insurgents due to a couple of things. The battle in Fallujah pushed insurgents and foreign fighters out of Fallujah and back up west, and foreign fighters are still coming across and they are settling in this town.

They believe if they can get a handle on that town, then they can make an impact on the rest of Iraq all the way along the Euphrates River. However, having said that, it's very difficult without Iraqi police but one of the things that they have noticed, they say, is that the local population is more willing to help them. They call in on a hotline and say there are insurgents in front of me, insurgents in my neighborhood and say that never happened before. They're trying to drive a wedge between the insurgency and the local people.

WALLACE: Many miles away from where you are in Baghdad, it certainly was rather historic this week, the first meeting of the 275- member of the national assembly. Give us a sense what you're picking up. Because it seems like there's still a lot of wrangling going on for the Shias, the Kurds, the Sunnis to come together and form some government.

ARRAF: Well, they do seem to be inching closer. The people that I speak with in Baghdad from here say that they are close to reaching a settlement that will put a government together, because they fully realize that they have to come up with something no matter how perfect. Iraqis are getting very impatient.

And you know, one of the interesting things, particularly in this area and Al-Anbar Province in the Sunni Triangle, hardly anyone voted in many of these cities. In Husayba on the border, for instance, four people came out to vote at a polling station. Four out of a city of 110,000. That's the level of intimidation there. But still, if you talk to a lot of these people, the fact that they didn't vote doesn't stop them from expecting and demanding an Iraqi government that will do something for them. So there's a lot of pressure there.

STARR: So Jane, two years later, you have been there really since day one. What's your assessment at this point two years later? Has the tipping point been breached? Are things really now at least gradually getting on the road to progress in Iraq?

ARRAF: I see a lot of signs of progress, perhaps the way that you would only see signs of progress if you were on ground level. In the big picture, every day we read about suicide bombs, about attacks, about people dying, and there is all of that. And it is every time it happens a setback, no matter where it happens or how little or how big the attacks are.

But on the ground, what you see are these small signs of progress. A town where more Iraqi police are coming to work. A town where all of a sudden, there's a hospital that's functioning, that has more electricity than it used to. These are really small things, it seems, in the big picture but the things, as you know, that are so important to peoples lives.

And when you add all that up, it does mean, I think, that things are going forward but very slowly and there are still so many obstacles and so many dangers that the jury is still out as to whether the country will stabilize any time in the next couple of years.

STARR: Well, Jane, as always, as we always say to you, please, travel safe and we'll be back with more ON THE STORY.

STARR: A Northern Ireland woman is speaking out against the IRA. What's her story? More when we return.

(COMMERCIAL BREAK)

(BEGIN VIDEO TAPE)

STARR: Catherine McCartney, what's her story? Catherine and her four sisters are taking on the IRA for the murder of their brother. Robert McCartney was beaten and stabbed in a bar fight allegedly by members of the Irish Republican Army. This week, his sisters came to Washington for a call for the end of the IRA's violence and intimidation of witnesses.

MCCARTNEY: We pressed upon the president the importance of getting justice for Robert. And he said that he was a hundred percent behind our campaign.

STARR: The sisters hope U.S. pressure will prompt witnesses to break their silence and give evidence to police.

(END VIDEO TAPE)

WALLACE: And thanks to my fabulous colleagues, and thanks to you for watching ON THE STORY. We'll be back next week. We want you to know we are awaiting a live news conference from the parents of Terri Schiavo. You see there Terri Schiavo's mother speaking. Let's listen in.

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Aired March 20, 2005 - 10:30   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TONY HARRIS, CNN ANCHOR: And good morning, everyone. I'm Tony Harris in the CNN Center in Atlanta. ON THE STORY continues in a moment, but first, headlines now in the news. The Terri Schiavo drama continues. Both the house and senate plan to convene this afternoon to draft legislation that would make it easier for Schiavo's parents to plead in federal court for the reinsertion of Schiavo's feeding tube. The severely brain damaged Schiavo was disconnected from the feeding tube on Friday.
The suspect in the death of Jessica Lunsford, a 9-year-old Florida girl who disappeared three weeks ago, was in court today. John Couey, looking haggard and nervous, said he understood the rights and charges against him. Couey, a sex offender, has confessed to killing Lunsford.

Pope John Paul II made his first appearance at the Vatican since leaving a hospital in Rome. The 84-year-old pontiff waved briefly to crowds gathered in St. Peter's Square for Palm Sunday, but today was the first day in the pope's 27-year papacy that he did not preside over the beginning of the Easter week services. That's what's making news. I'm Tony Harris. More news at the top of the hour. Now back to "On the Story."

(BEGIN VIDEO CLIP)

ASHLEY SMITH: I hope that you will respect my need to rest, and to focus my immediate attention on helping legal authorities proceed with their various investigations. My role was really very small in the grand scheme of things.

(END VIDEO CLIP)

KELLY WALLACE, CNN NATIONAL CORRESPONDENT: And that, of course, someone who's really become a household name. Ashley Smith, the heroine of the aftermath of the Atlanta shootings making a polite, leave me alone request this week. Her celebrity is a lesson of how hot the public spotlight can burn. Welcome back. I'm Kelly Wallace. We're ON THE STORY. I want to let everyone know we're going to get to Jane Arraf in western Iraq in just a minute.

KATHLEEN HAYS, CNN CORRESPONDENT: But, you know, she has already got a PR firm lined up behind her, so clearly someone said, you know, Ashley, you are sitting on a very important juncture in your life. You know, you can do something with this, run with this, make some money, and she's bit the hook.

WALLACE: Well, yeah, she had a lawyer. We saw that lawyer with her when she came out on that Sunday night. She hired a public relations company and not doing interviews, but an executive there said yes, we are fielding lots of calls because they're getting calls we understand from movie proposals, book deals, even interestingly enough, a hostage training company that has contacted her because basically said everything she did, she did right in terms of negotiating release if you've become a hostage. The sense is fielding calls. It'll be interesting to see what she ultimately decides to do.

ROSS: And because this has happened so much in the past with -- in these types of cases where people become the instant celebrity due to media attention, in part, I know you took a look this week at that very issue. Let's have a look at a story that you filed about the pitfalls of becoming a media celebrity.

(BEGIN VIDEOTAPE)

WALLACE: She didn't want to become another Amber Frey, who told most of her story about her relationship with convicted murderer Scott Peterson well before her book came out. Or another Jessica Lynch, whose book was in print months after her rescue in Iraq. Another risk of Smith's newfound celebrity, unwelcome scrutiny of her troubled past which includes some minor brushes with the law.

UNKNOWN: Ashley is learning firsthand that becoming a celebrity can be difficult. Fame has its downsides.

WALLACE: And there is another risk for Ashley Smith, the chance another big story will overshadow hers.

UNKNOWN: In a month, there will be somebody else who did an amazing courageous act in Colorado or California or Wyoming.

(END VIDEOTAPE)

WALLACE: And what you're picking up from people, also, they say another thing is time is a bit crucial here. You know, the sooner she does a book or a movie or does that big interview with Barbara Starr or Barbara Walters, then the more likely she can capitalize on all the buzz.

HAYS: But I think one of the reasons this woman has appeal, besides the fact that you point so well, to be in this hostage situation and say just the right thing, she has a checkered past. She's not a perfect person. And her story is, the way she tells it, that this is what reached out to Brian Nichols, a man who obviously now has a horrible past and future in front of him. And the fact that she picked up the book, the book "The Purpose Driven Life." I hadn't, wasn't really aware of it. Now we're all aware of it.

WALLACE: Well, and this is one way you can sort of measure how hot her story is right now, because this book, "The Purpose Driven Life," we checked, was number 72 on amazon.com. That was before the world heard of Ashley Smith. After she told her story earlier in the week, it jumped to number two and it is still there. So clearly, there's a lot of attention to her, to her story.

What's interesting is how much will her story be one for a religious audience or more of a spiritual audience, or will it have mass audience appeal. And people think because of her troubled past, because of a comeback story, because of her courage, that likely will have more mass appeal than a religious or spiritual audience.

STARR: Lots of developments to come in this. And we're all still ON THE STORY. We'll be hoping to go to Jane Arraf in Iraq after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I am concerned about the price of energy. I'm concerned about what it means to the average American family when they see the price of gasoline going up.

(END VIDEO CLIP)

HAYS: President Bush on Wednesday, as average Americans as well as investors and manufacturers and the big car companies all reacted to record oil prices. Welcome back. I'm Kathleen Hays. We're ON THE STORY.

WALLACE: Kathleen, we talked about it last week, of course. Oil prices going up and up. OPEC steps in, increases oil production, but...

HAYS: Market laughs in OPEC's face. The day after. I couldn't believe it. When I got up Thursday morning the day after the Wednesday meeting, I start reading the wires and checking what's going on, the price is already heading higher. And that day, oil, price of crude oil per barrel, traded up to $57.60 intraday. It didn't close there but still, it's just a sign that traders said OPEC cannot fix this problem for us.

WALLACE: What's the problem then?

HAYS: The problem is different from the past. And I had a very interesting conversation with a trader down at the NYMEX this week, Joe Terranova who's with NBF Clearing Corp. It's one of the big, big trading firms down at the NYMEX. And he said what's really striking in the market right now is how the market works, is you buy oil now. You buy it a year from now, you buy it two years from now in the futures market. That's what futures markets are for.

In the past, let's say when Iraq invaded Kuwait, and oil prices spiked higher. What you saw in the futures market was for the oil contracts, purchases in the next few months, a very high price and then it gradually came down as people said, oh, well, this oil price spike is going away. Right now, it's those forward contracts that are moving up faster than the contracts for the near term. In other words, traders are saying this isn't like the old oil price spikes. This is demand-driven problem. STARR: And Kathleen, when you say demand-driven, how much are Americans not maybe aware or paying attention to what is being talked about in the oil market, which is that demand is coming from China and I believe India?

HAYS: Well, think about it. It isn't just that we have a fixed level of demand. Our demand grows every year. But now we have Chinese demand getting bigger every year. It was underestimated this year. People keep thinking that hot Chinese economy has to cool off. India is now demanding more. But let's don't forget Iraq. Let's don't forget the story you were talking to us about, the suicide bomber. That is another thing.

People figured that with the disruption in the oil market, something that disrupts the flow of supplies that area already tight, then you could see one of these really big spikes up. That kind of supply shock on top of the demand-driven side.

STARR: So, are there any estimates yet or is it too early what the summer driving season's going to be, how much it's going to cost people to fill their tank?

HAYS: The forecast we had gotten was for about $2.15, but sources I talked to say, you know what, the government often underestimates that. It'll probably be more like $2.30 a gallon. So that's getting a bit pricy. Sixty dollars a barrel for oil, people say that's easily in sight. And again, if we had some kind of major disruption, people aren't looking for that, you could see $80 a barrel at least for a while. And this is the thing that would flow through, pun intended, to gas prices.

WALLACE: Something else that made major news this week, Bernie Ebbers of WorldCom, a verdict comes in, and this is a first of these big allegations of corporate wrongdoing cases, and it was guilty.

HAYS: The big fish to fry, the big fish for the prosecution to get. And they did. And remember, you know, Michael Jackson's a big trial in the news, right? It's sex. It's easy for people to follow. These white-collar crime trials are very, very difficult for jurors. It's tedious. There's so much information. This is very, very tough.

And in this case, basically, the jury had to decide whether or not they were going to believe Scott Sullivan, the chief financial officer who right before he was going to go trial pled guilty and is cooperating with the prosecution, the main witness, the main evidence against Bernie Ebbers, the CEO that built this little telecom company in Mississippi up to one of the biggest in the country, in the world.

In the end, the jury said they could not buy the story that a man like Bernie Ebbers didn't know about all this accounting fraud. They figured that he knew the books were being cooked, he gave it his approval, not just his tacit approval, because he was worried about the company going down and he was worried about his personal fortune going down. But the story now is, though, Ken Lay, Enron, be nervous.

STARR: Probably so. Yeah. We'll be watching that one. WALLACE: I bet they're watching very closely.

STARR: But you from Wall Street and the economic world, and me from the Pentagon, oddly enough, you and I followed one of the same stories this week. And that was the president's proposal to name Paul Wolfowitz, the number two man at the Pentagon, the deputy secretary of defense, to head the World Bank, and a very controversial nomination throughout the world economic community.

HAYS: He is not an economist. He's not a financial guy. He's not a development economist kind of guy. And that's typically the kind of person you put in one of these positions. There were editorials, there were all kinds of questions about this.

I did have kind of an off the cuff conversation with someone who watches the military sales industry very closely in this country and he said, what kind of signal does it send to developing countries where the United States has tried to get them not to spend the precious money on building up their arms to put someone like Wolfowitz at the head of the world bank? Very critical.

STARR: And one of the most interesting signals, as well, is we learned that Paul Wolfowitz made phone contact, if you will, with Bono, the head of U2.

WALLACE: That says it all. That says it all.

STARR: One of the people who's one one of the most high profile in international development and perhaps Mr. Wolfowitz thinking he certainly needed Bono's...

HAYS: He needs all the help he can get.

STARR: ... Bono's support. Well, Kathleen, thank you. And Kathleen is going to be hosting a live one-hour CNN radio program on Social Security with lawmakers, economists, and journalists on Wednesday afternoon 3 p.m. Eastern. We're hosting more of ON THE STORY after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

U.S. MARINE CAPTAIN FRANK DIORIO: People here are probably facing what people in Baghdad faced two years ago. So as we continue, I realize it takes time.

(END VIDEO CLIP)

WALLACE: That was U.S. Marine Captain Frank Diorio saying that western Iraq lags behind Baghdad by two years, that U.S. forces there are fighting the worst of the insurgency. Welcome back. We are "On the Story," and joining us on the telephone is Jane Arraf coming to us from western Iraq. Jane, great to have you. Give us a sense of the morale of the troops you are with as we now approach this two-year anniversary mark of the war. ARRAF: You know, the morale is pretty good. And I have to say that from the vantage point of a bunker that I was in, not long ago, overnight last night, in the early hours, I was in a bunker, surrounded by sandbags with the mortar men and some of these mortar guys had been in OIF1 as they refer to it, Operation Iraqi Freedom, two years ago. Some of them were brand new, but across the board, they all believed that they were doing some good by being there.

And I have to tell you, that place we were at that we've just come from is perhaps one of the strangest in Iraq at the moment. It is right next to a border town, right on the Syrian border. Marines don't go in anymore unless they're raiding the place. It has been taken over, they say, by insurgents, by foreign fighters crossing over, by criminal gangs. It really is a surreal atmosphere and much different from the rest of Iraq, and perhaps that's why morale is so high there.

STARR: Jane, as you say, some of the troops are now doing their second tour of duty in Iraq. A second full year of being in a combat zone. Is this something that is being discussed by these young soldiers, these young troops? Do they feel still the sense of difficulty that they may have felt the first time around, or are they more acclimated, would you say, to the situation and the stress and the tension?

ARRAF: You know, Barbara, it is really interesting. There are a couple of things that have changed dramatically for them, and one are the living conditions. Two years ago, they went for two months without a shower. Now you go into the worst of these bases and unless there's a battle raging around them and it's a patrol base, they have showers and they have Internet, no matter how slow, and they have telephones, and they have food and water, and all those things that they did not take for granted two years ago.

On the other hand, the enemy is so much different. Then it was Iraqi soldiers in uniform, and you knew who the enemy was. Now they're telling us at the base we were at, it's as if they're fighting ghosts. They blend into the population. They dart behind alleys. They attack from ambulances, from mosques. It's very hard to tell where they've come from. But one young marine said to us that he didn't mind being there the second time around because that way, at least, his kids wouldn't have to come back for Operation Iraqi Freedom 23 or 24 a few years down the road. They still...

HAYS: Jane, what is the military strategy now? if they're fighting ghosts, if they go someplace like this border town where it's really them against the insurgents, there's no border guards left, there's no Iraqi forces left, it seems, what is their strategy now? it seems like it's very difficult to have one.

ARRAF: Their strategy really seems to be keep the insurgents off their feet. Essentially, the border town near the Syrian border, and there are a couple of them, but this particular one, the major border crossing, they believe has a safe haven for insurgents due to a couple of things. The battle in Fallujah pushed insurgents and foreign fighters out of Fallujah and back up west, and foreign fighters are still coming across and they are settling in this town.

They believe if they can get a handle on that town, then they can make an impact on the rest of Iraq all the way along the Euphrates River. However, having said that, it's very difficult without Iraqi police but one of the things that they have noticed, they say, is that the local population is more willing to help them. They call in on a hotline and say there are insurgents in front of me, insurgents in my neighborhood and say that never happened before. They're trying to drive a wedge between the insurgency and the local people.

WALLACE: Many miles away from where you are in Baghdad, it certainly was rather historic this week, the first meeting of the 275- member of the national assembly. Give us a sense what you're picking up. Because it seems like there's still a lot of wrangling going on for the Shias, the Kurds, the Sunnis to come together and form some government.

ARRAF: Well, they do seem to be inching closer. The people that I speak with in Baghdad from here say that they are close to reaching a settlement that will put a government together, because they fully realize that they have to come up with something no matter how perfect. Iraqis are getting very impatient.

And you know, one of the interesting things, particularly in this area and Al-Anbar Province in the Sunni Triangle, hardly anyone voted in many of these cities. In Husayba on the border, for instance, four people came out to vote at a polling station. Four out of a city of 110,000. That's the level of intimidation there. But still, if you talk to a lot of these people, the fact that they didn't vote doesn't stop them from expecting and demanding an Iraqi government that will do something for them. So there's a lot of pressure there.

STARR: So Jane, two years later, you have been there really since day one. What's your assessment at this point two years later? Has the tipping point been breached? Are things really now at least gradually getting on the road to progress in Iraq?

ARRAF: I see a lot of signs of progress, perhaps the way that you would only see signs of progress if you were on ground level. In the big picture, every day we read about suicide bombs, about attacks, about people dying, and there is all of that. And it is every time it happens a setback, no matter where it happens or how little or how big the attacks are.

But on the ground, what you see are these small signs of progress. A town where more Iraqi police are coming to work. A town where all of a sudden, there's a hospital that's functioning, that has more electricity than it used to. These are really small things, it seems, in the big picture but the things, as you know, that are so important to peoples lives.

And when you add all that up, it does mean, I think, that things are going forward but very slowly and there are still so many obstacles and so many dangers that the jury is still out as to whether the country will stabilize any time in the next couple of years.

STARR: Well, Jane, as always, as we always say to you, please, travel safe and we'll be back with more ON THE STORY.

STARR: A Northern Ireland woman is speaking out against the IRA. What's her story? More when we return.

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STARR: Catherine McCartney, what's her story? Catherine and her four sisters are taking on the IRA for the murder of their brother. Robert McCartney was beaten and stabbed in a bar fight allegedly by members of the Irish Republican Army. This week, his sisters came to Washington for a call for the end of the IRA's violence and intimidation of witnesses.

MCCARTNEY: We pressed upon the president the importance of getting justice for Robert. And he said that he was a hundred percent behind our campaign.

STARR: The sisters hope U.S. pressure will prompt witnesses to break their silence and give evidence to police.

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WALLACE: And thanks to my fabulous colleagues, and thanks to you for watching ON THE STORY. We'll be back next week. We want you to know we are awaiting a live news conference from the parents of Terri Schiavo. You see there Terri Schiavo's mother speaking. Let's listen in.

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