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On the Story

Economists Worried About Stock Market's Performance; Body Found in Florida Believed to Be 13-Year-Old Missing Girl

Aired April 17, 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.


KATHLEEN HAYS, CNN CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we covered this week. I'm Kathleen Hays, on the story of a free fall in the stock market this week and big new worries about the economy.
SUSAN CANDIOTTI, CNN CORRESPONDENT: I'm Susan Candiotti, on the story of new heartbreak in Florida over the apparent murder of a missing 13-year-old girl.

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: I'm Elizabeth Cohen in Atlanta, on the story of a new worry about flu, and mixed signals on whether the government should lift the ban on silicone breast implants.

ELAINE QUIJANO, CNN CORRESPONDENT: And I'm Elaine Quijano, on the story of how President Bush said this week he first learned of new passport and boarder security proposals by reading the newspaper. We'll also talk about next week's 10th anniversary of the Oklahoma City bombing. We'll go to Baghdad, where Jane Arraf is on the story of new attacks against civilians and U.S. forces, and new delays in forming the new Iraqi government. We'll talk to our Vatican analyst, Delia Gallagher, about the voting for the new pope set to start tomorrow. E-mail us at onthestory@cnn.com.

First up, Susan Candiotti, on what seems to be the murder, apparent murder of yet another Florida girl. Susan, bring us up to speed. What is the latest in the investigation?

CANDIOTTI: Elaine, some very sad new details emerging about what happened to 13-year-old Sarah Lunde. You'll remember that they found a body yesterday that they strongly believe is Sarah Lunde.

And what we have learned is this. Law enforcement sources tell us that the killer apparently tried to weigh down her body in the water. Now, sources are not saying exactly what way they tried to do that, what method they used. That is something that for now they want to keep under wraps, because, they say, it is something that for now only the killer knows. So they don't want to talk about it publicly as yet. We still do not know the exact cause of death. Initial results of the autopsy are not yet available.

COHEN: Susan, this is the second time in just the past few weeks that we have heard about a horrible story like this coming out of the state of Florida. What's going on? CANDIOTTI: Well, and both similar in so many ways. In both cases, the case of Jessica Lunsford, who went missing back in February and now Sarah Lunde in Ruskin, Florida -- both towns only about 100 miles away -- very sad, because in both cases everyone said it was out of character for these little girls to simply disappear. Also in both cases, you had 24 sex offenders registered in small towns. In the case of Ruskin, where Sarah Lunde disappeared, only about a population of 8,000, 12,000 there, but there are no studies to draw any kind of a correlation between why these things tend to happen any more so in small towns than they are in urban areas.

HAYS: And of course, these things bring out all kinds of emotion, great sadness, anger, sometimes fingers are pointed. The mother was gone for the weekend when this little girl was abducted, and as you say apparently murdered. What are you picking up as you walk the streets and talk to people, Susan?

CANDIOTTI: Well, there is great sadness there when I was there for several days. Obviously, the mother upset. She was away for the weekend with friends outside of the county. It's not clear who was in charge back at home. Sarah Lunde's 17-year-old brother crossed paths with Sarah when she returned from a weekend church retreat about 9:00 Saturday night, but then he went out and didn't come home until about 4:00 in the morning, when he said the door was wide open. We heard a heartwrenching story from the mother of Sarah Lunde's best friend, who said that when her daughter and Sarah returned home from that church outing, that Sarah had wanted to stay overnight at the little girl's house, but her mom had said, gosh, you know, you were just here last weekend and we're kind of tired, maybe another time. And now sadly the mother feels, she said, partially to blame. If only she had allowed her to stay over at the house. Naturally, no one could have predicted what happened.

QUIJANO: Susan, we know that obviously the emotions are still very fresh, because as you mentioned, this is the second time in just recent weeks that we have been hearing about a case like this. And we understand that joining in the search is the father of Jessica Lunsford. Tell us about that.

CANDIOTTI: That's right, Mark Lunsford. And he said, you know, this was so close by, I had to come and lend a hand. And as a matter of fact, when they found the body apparently of Sarah, the police relatives asked Mark Lunsford to go over to the family's house to help them work their way through this very, very difficult situation. And in this case, Sarah Lunde's case already, and Jessica Lunsford's case, already we're talking about parents and others in communities trying to urge change on the political front, trying to get new laws passed to keep tighter controls on sex offenders. We don't know who is responsible in Sarah Lunde's disappearance, but in Jessica Lunsford, a convicted sex offender has allegedly confessed to police.

COHEN: Susan, you've now spent a lot of time in Sarah Lunde's hometown. Tell us, what kind of a community is it?

CANDIOTTI: Very close knit. Everybody seems to know everybody, when you walk around town. And so that's why a situation like this, as in many small towns, it is like the death of someone in your family even if you are not related to the child in question here. And that's what we're finding here.

HAYS: Suspects? What about what the police are telling you?

CANDIOTTI: Well, it is not clear whether they are zeroing in on any one person. However, police have repeatedly said that they are paying special attention or close attention to a man by the name of David Onstott. He was an on-again/off-again boyfriend of Sarah Lunde's mother, who, coincidentally, was at the home, according to Sarah's brother, in the wee hours of the morning Sunday. Went into the house. Apparently took out a bottle of beer, and then left. He's already in custody on unrelated charges. And apparently he's not going anywhere for now, but police are stressing they are not calling him a suspect at this time.

QUIJANO: And Susan, I know we'll be monitoring church service in her neighborhood, and we continue to monitor that.

But on another story, this week marks the 10th anniversary of the Oklahoma City bombing, and this is a story I know you covered quite extensively. What are your thoughts going into this week?

CANDIOTTI: In many ways it seems like only yesterday when it happened. Hard to imagine that it has been 10 years. And when you cover a story like this, you come to know many of the families. It has changed obviously a lot of lives in many different ways. Marriages broken, lives broken, and in this case you also see that it is difficult for the families ever since September 11th happened, many of the Oklahoma City victims feel in some ways that America has forgotten about their tragedy. Tomorrow, certainly, because of all the memorial services, America will be reminded about this again.

COHEN: Susan, we'll be following both the Oklahoma City and the Sarah Lunde story in the coming days.

Now, up next, I'm on the story of a new flu scare and new confusion about breast implants.

Still ahead, Delia Gallagher in Rome. Can the cardinals maintain their secrecy when the voting begins tomorrow?

And at the end of the hour, our "What's Her Story?" segment on the woman leading the first shuttle mission since the Columbia disaster in 2003.

ANNOUNCER: Elizabeth Cohen is a CNN medical correspondent. She joined CNN in 1991. Earlier, she worked as a newspaper reporter in Washington and Albany. She has a masters degree in public health.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

DR. JULIE GERBERDING, DIRECTOR, CDC: We're not taking any chances. And we're doing everything we can to make sure that there's no threat to human health.

(END VIDEO CLIP)

COHEN: Dr. Julie Gerberding, director of the Centers for Disease Control and Prevention last week, again facing questions about the danger of the flu, but this time after the discovery that samples of the 1957 Asian flu virus that killed at least a million people back then had been sent around the world just recently. She continues to say that the risk is low that the virus will spread, but authorities are trying to find the samples and destroy them.

CANDIOTTI: You know, Elizabeth, how in the world could something like this happen? Are we talking about sloppiness, inexperience? Are heads going to roll?

COHEN: Well, you know, originally, it sort of seemed like it might be sloppiness, Susan. I mean,that was kind of the feeling that we were getting, but then Julie Gerberding came out that afternoon and said that it was actually a deliberate decision by a lab in Cincinnati. They decided to send that sample out as part of a test.

Now, the test was legit. The way that it works is that labs around the world need to be accredited, and once a year they are sent a panel of microbes, and they are told, you know, we're not going to tell you what they are; you tell us what they are. But they are supposed to send out relatively innocuous things. They're not supposed to send out a virus that killed more than a million people. And anyone born after 1968 would have no immunity to this virus. And many people born before 1968 would have no immunity.

But basically, the answer is that this lab deliberately sent it out. Dr. Gerberding said it's very easy to manipulate it in the lab, it's very easy to grow it. So basically for convenience reasons, it was sent out.

QUIJANO: And Elizabeth, health officials are saying that the risks associated with this are low, but really, is that true? What are the risks?

COHEN: Well, they say that the risks associated with this sort of mishap that's gone on here are low, because these labs are used to dealing with dangerous microbes. They handle them all the time. They have not seen anyone get the Asian flu. I mean, these samples were sent out as early as last September, and if they were going to infect anyone, one might say it would have already happened, and they haven't seen any Asian flu in any place around the world.

Now, these samples were sent to more than 4,000 labs. Is it possible that someone caught the Asian flu from it and they just haven't detected it? That's possible. But the mechanisms they have out there to detect the flu are really pretty good and pretty sensitive, and they haven't caught -- no one appears to have caught the flu from it yet.

They were supposed to do this test and destroy it, and if they didn't destroy it immediately, they certainly have been told to destroy it by now.

HAYS: Well, there is, Elizabeth, a risk (UNINTELLIGIBLE) people they couldn't avoid, but there is another story you covered this week that is talking about a different kind of risk, one that women have to deliberately take on. Let's take a look at a woman who you spoke to and what she said about breast implants.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I liked my implants. And my husband loved my implants. I would have liked to have kept my implants. I certainly wouldn't have removed them for any reason other than they were killing me.

(END VIDEO CLIP)

HAYS: Other reason that they were killing her. It's amazing. And you can look at it one way, why do women even consider breast implants, but they do, and the FDA this week saying yes to one kind of breast implant, no to another. Tell us the story.

COHEN: Right. It was actually an FDA advisory committee that recommended that one company be allowed to market its silicone breast implants, but told another company that they shouldn't be allowed to market theirs.

Now, the difference is, these are two different kinds of implants. And this advisory committee felt that one of the products had a low enough rupture rate that it was worth being allowed -- it was worth putting them on the market. But they felt that the other company just didn't have data that was good enough, and they said that their product shouldn't be allowed to go on the market.

And many people felt this was sort of a mixed message, but sort of the bottom line here is that silicone breast implants went off the general market about 13 years ago because of concerns about ruptures and because of concerns about infections, and now this one company may be able to put them back on. But they are really going to have to warn women about what the risks are, and they also are going to have to follow up on these women, which will be very different. They will have to keep track of them to see how they do.

But this advisory committee felt that the rupture rates were low enough that they should be allowed to put these back on the market.

CANDIOTTI: So, Elizabeth, how are consumers -- how are women supposed to sort these things out and figure out which way they should go? To whom should they talk about it?

COHEN: It is going to be a tough decision. I mean, some -- most women, of course, get these simply because they want larger breasts. Some women get them because their breasts have been removed, because they had cancer.

But let's just say a woman who wants them for cosmetic reasons; she's going to really need to look at that data and say, well, maybe they were low rupture rates, but how many years did they study these women for? Really, they studied them for several years, but they didn't study them for decades. And presumably, if you get these implants, let's say you're 30 years old, you're going to have them in you for a very long time. And they haven't been studied for decades and decades.

So what the FDA is trying to do these days more and more is to put some of that responsibility on the consumer, and say, well, we'll approve this, but the consumer should be told that they are going to have to really weigh these decisions carefully with the help of their doctor.

HAYS: I guess that's part of the ownership society. Now we own the risk of medical devices, too.

Well, from the medical beat to religion, and the secret deliberations of the cardinals to choose one of their own as the next pope. We're back on the story with Vatican analyst Delia Gallagher right after this.

(COMMERCIAL BREAK)

HAYS: The ritual and pageantry at the Vatican continues this week. Masses remembering the former pope. Tomorrow, a change as cardinals look forward and begin the other ritual of meeting and voting in secret on a successor to Pope John Paul II.

Welcome back. We're ON THE STORY. And joining us now, overlooking St. Peter's, our Vatican analyst, Delia Gallagher. Delia, it's great to see you again on the story.

You were taken on a tour of the Sistine Chapel. Take us there, and how that is setting up the cardinals for the conclave that begins tomorrow.

DELIA GALLAGHER, CNN VATICAN ANALYST: Well, you know, it was really amazing yesterday to see the Sistine Chapel. This sort of Renaissance ancient chapel that had been modernized for the conclave. They have set up really sort of conference tables facing each other on either side of the chapel on a raised platform. And underneath that platform, they have the anti-bugging devices, the jamming devices for cell phone use, so the cardinals will not be able to use their cell phones in the chapel.

The cardinals will process in seeing this litany of saints, and then the doors will be closed from the outside, so they can't get out. They need to knock if they want to get out. And they are inside for the deliberations. They hand-write their choice of candidate on little slips of paper. A very formal ceremony, to bring it up to the altar and deposit it into these chalices, and then the counting begins.

The stoves are off in the back to the left hand side, and they have added a new stove to kind of help push the smoke up this time, because of course one of the concerns of the journalists who are here watching the smoke -- and you can see the cloudy gray day behind me -- it will probably be like that tomorrow -- is will we be able to tell if it's black or white. And so they've added this sort of new smoke enhancer, as it were, to help push up that smoke and allow people on the outside -- it happened in 1978, the smoke came out and it was sort of gray. And they said, well, we're not sure. And this time, they have also added the ringing of the bells from St. Peter's, at the time that the pope is elected. So we'll be sure to be able to make that call.

CANDIOTTI: And Delia, I understand if anyone leaks any information, they could be excommunicated from the church. But I also wanted to find out about these odds makers. Are they actually having a field day out there in Rome?

GALLAGHER: Well, yes, of course. Everybody is rife with speculation at the moment. And you know, the idea of secrecy, of course, is to help the cardinals keep their own reserve, as it were, about who the candidates should be, because the press is just putting all kinds of names out there. But the cardinals are talking to us. They finished their general congregations, but all last week they were coming out of those meetings and sort of saying hello and giving a chat, but not mentioning any names. And I think you will be surprised to know that even in those congregations, even in those meetings they're not talking names yet.

So tonight, they are moving into their residence, the Casa Santa Marta, and for the first time they will all be sitting together at a dinner, and probably some names will come up. But there's a lot of reserve even within the College of Cardinals to start mentioning names.

So actually, we think that a lot of that is going to happen once they get into the Sistine Chapel and see how the first votes go. Then they will understand what are the directions. Because you remember that some of these cardinals don't know each other. There are the ones who have worked in Rome, they know who they want, they're forming little alliances. But there are many other cardinals from around the world who are not familiar with this process or with one another. They will have to wait until they get in tomorrow to see how the voting goes.

COHEN: And Delia, tell us about the debate. We've all heard a lot about will the papacy be returned to Italy. What's the debate about having a pope who would be from Italy versus from another part of the world?

GALLAGHER: Well, yes, of course. I mean, there are 58 European cardinals, and the Italians are a big block of that, and there is a sort of movement to keep the papacy -- to bring it back to Rome, as it were, since John Paul II was from Poland. And you can kind of look at two cardinals that we're talking about right now. One is Cardinal Ratzinger, who, although he is a German, is considered almost a Roman, because he worked very closely with John Paul II in the congregation for a doctorate here, and is considered the sort of conservative candidate at the moment.

And then to balance him is Cardinal Tettamanzi, who is the archbishop of Milan and the Italian candidate, a bit more moderate, and might be able to get the support of the Italians.

So I think in the first instance, we will see the Italians trying to rally around. But let's remember, they need the support of the Latin Americans and of the North Americans, as well. So those votes are going to be crucial to decide whether the papacy will remain in Italy.

QUIJANO: Well, Delia, one story that you covered in recent days was the call by many to scrap the usual rules and rush forward to make John Paul II a saint. Let's listen to your report on that.

(BEGIN VIDEO CLIP)

GALLAGHER (voice-over): "Saint now," they chanted. A remarkable, even stunning outburst of emotion taking place at the funeral of Pope John Paul II. To many, the late pontiff did lead the kind of life required for sainthood.

UNIDENTIFIED FEMALE: How many hearts has he changed, I mean, that we haven't seen?

UNIDENTIFIED FEMALE: He had worked miracles in the heart of each one.

GALLAGHER: Elevation to sainthood requires more than just evidence of a holy life. There must also be two miracles attributed to the pope after his death. For example, someone whose prayers to the late pontiff resulted in healing that can't be explained by science.

Certainly, those waiting at the doorstep of St. Peter's have cast their ballots.

I asked these teenagers from Sicily if the pope should be made a saint.

CROWD: Si!

(END VIDEOTAPE)

GALLAGHER: Well, you can see that there is great popular support here. Almost as if the pope really is already a saint for most of the people. There are people that are still coming to pray at his tomb and say to us, we don't know whether to pray to him or for him. You know, to him as a saint, or for him that he's in heaven. So certainly a huge movement. And something that the next pope will have to take into account, because he might have to just push that process ahead on the fast track, as it were, something which John Paul II himself did, and make that pope a saint.

HAYS: Let's talk about the pragmatic aspect of this. When you talk to people in Rome, when you talk to people, you know, so intimately part of the church, did they feel like the death of John Paul, this extreme reverence, this focus now on the next pope, is going to give the Catholic Church a boost? Is it something they hope to capitalize on? GALLAGHER: Well, I think that's exactly the feeling, and is one of the concerns for the College of Cardinals in choosing another candidate. They now have huge shoes to fill, as it were. The immense popularity of John Paul II is going to be very difficult to follow, and they will need a candidate who is not only sort of strong on the issues within the church, but will be able to carry out this sort of charismatic mission, if you will, of John Paul II. And so that's definitely going to be one of the elements that the cardinals have to take into account, and that requires a close knowledge of these cardinals and how they are personality-wise.

Many are them are very good, very charismatic men, but of course a lot of them are sort of official types, you know. So I think that that is going to be one of the characteristics that they will get to sort of further on down the line. First they're going to look at the major issues within the church, within the world, sort of the ideas of engaging with culture, how do they continue to spread Catholicism throughout the world. But certainly, the personality of the next pope is going to be very important.

HAYS: Thank you, Delia. I know you will be able to assess all that out for us. We'll be watching you on the story in coming days, hoping you will translate the smoke quickly. And of course, thanks to Susan Candiotti for joining us from Miami.

Coming up, I'll be talking about why the markets saw their worst week in two years.

Jane Arraf is on the story in Baghdad -- new violence, new delays in forming a new government.

And Elaine Quijano on President Bush making his pitch to D.C. and the Congress this week.

Plus, a check on what's making news right now. That's all coming up, all ON THE STORY.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JOHN SNOW, SECRETARY OF THE TREASURY: Fundamentals of the global economy remain strong. Of course, the United States is continuing to be lead the industrialized world.

(END VIDEO CLIP)

HAYS: Very bullish talk from U.S. Treasury Secretary John Snow yesterday. However, he point-blank refused to talk about the very bearish week on Wall Street, as stocks plunged and brought a new chorus of questions about the strength of the economic recovery.

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

QUIJANO: So, Kathleen, what is the situation? What happened? So many people saw what happened in the past few days and said, is this the start of, you know, is this a sign of things to come?

HAYS: Well, of course, it is logical to worry, because the stock market to a certain extent is discounting the future. And if you took this past week in the stock market at face value, you'd say, well, the stock market might be telling us there's a recession coming.

Now, most economists say, no, no, no, no, that's not what's happening, but there was just a piling on of bad news, and in particular Thursday afternoon, after the closing bell, IBM, big blue chip, big tech bellwether, came out with disappointing earnings. The next day, more bad news on the economy.

I think what really set people back on their heels was at midweek, the March retail sales report, a very important measure of the consumer, very disappointing number. It was supposed to be pretty healthy. Instead, we saw the consumer sagging, and that got people really starting to wonder what's going on.

COHEN: Now, gas prices have continued to grow and grow, as all of us know. Is there any feeling, Kathleen, that they have just gotten so high that they are really beginning to put a squeeze on consumers' ability to spend money on other things?

HAYS: Absolutely. And I think that was another reason why this was a worrisome week, a worrisome retail sales report, a worrisome drop in consumer sentiment on Friday, a worrisome drop in industrial production. Because high energy prices hit businesses, too. And it especially hits them if the consumer doesn't buy the stuff those businesses produce.

So people are saying, sure, gas prices -- we just showed you $2.67 a gallon. That was probably out in California. That has to have hurt consumers, at least in the lower end of the spending spectrum, and maybe across the spectrum.

Some relief on that front. Crude oil prices did come down this week, but because people don't expect a big tumble right now I think there's definitely a worry that gas prices will continue to weigh on the consumer.

QUIJANO: It is interesting, because we're going to hear President Bush in the coming week talk about energy and gas prices. Of course, the White House is very mindful of that. Approval ratings for the president are down. These gas prices are up. So they are very concerned about that. And we're talking about energy, but wanted to ask you also about the situation on Wall Street itself. You were talking about bad news starting off the week, with some bad news about traders, and that may be rattling some nerves on Wall Street, as well.

HAYS: Perhaps. I think this is a case of just basic confidence maybe not in the direction of the economy, and whether or not you should invest your money overall, or whether or not your job is secure. And that's the kind of worry you have when you see economic reports looking soft and the stock market looking soft.

But it's a worry about, are you getting a fair shake as an investor? There was an indictment of 15 traders on criminal charges, of basically playing for the house, trading for the house, specialists who are in charge of keeping the market efficient by buying stocks and selling stocks when those orders come in, people using that position to, again, make a trade, buy a stock for their company ahead of the stock order you put in.

Now, maybe on each trade it was only a matter of pennies or dollars, but over time this adds up. Again, there are criminal charges against 15 traders, five more with civil charges.

Also, the New York Stock Exchange agreed to a big cash settlement. They agreed to be auditing themselves every two years. But I think the question remains if the New York Stock Exchange, its program of monitoring itself, if it's strict enough, if it's tough enough on this kind of thing, if this sort of fraudulent activity is coming out.

COHEN: Kathleen, we were talking about gas prices just a few minutes ago. There is one company that, it seems, has managed to figure out a way around these rising prices. Tell us about that company.

HAYS: Southwest Airlines, which of course is a success story in so many ways, right, because they were one of the original discount carriers, they remained profitable when so many big companies haven't. They hedged. They went in the futures market. They locked in a price, a long-term price for lower cost of oil, of jet fuel. They actually were helped in their profit statement.

I want to add, though, that given all this bad news on Wall Street, I want to point out that many people are saying, we are not heading toward recession, the market will come back, the economy is on a solid footing. I attended a speech by a former Fed governor this week, Larry Myers, very upbeat. He thinks things are in good shape. It remains to be seen. It was a tough week. But don't be Chicken Little, you know, don't jump out the window yet, because maybe things will turn around.

But it's a good time to watch and be watching your investments, as well.

QUIJANO: Well, we know you'll be watching. All right, thanks, Kathleen.

From business to Baghdad. Jane Arraf has the latest on new violence and new frustration reaching political compromise. We're back on that story after this.

(COMMERCIAL BREAK)

HAYS: Smoke over the Baghdad skyline again this week. A new upsurge of violence roaring back. Attacks on both civilians and U.S. forces. Among the victims, the long-awaited announcement of the new Iraqi government delayed again.

Welcome back. We're ON THE STORY. Joining us now from Iraq, senior Baghdad correspondent, Jane Arraf.

Jane, put this in perspective. A fresh wave of violence. Sometimes it seems though like it never stops.

JANE ARRAF, CNN SR. BAGHDAD CORRESPONDENT: That's true, it does seem like that sometimes. But you know, behind me right now I'm hearing sirens, and I have come to realize that that doesn't actually mean there's an attack. It could just mean that the police don't want to stop for the lights. I guess what it boils down to is even though the attacks are going on, and every time -- when you wake up in the morning, by the end of the day there's a list of attacks here and across the country, that doesn't actually mean that things aren't progressing. And what I have seen as I have traveled south and to the north and been lucky enough to get out of here is that it's not quite as black and white as all that.

COHEN: Well, Jane, you say it's not quite as black and white as all that. Tell us some of the shades of gray that you're seeing.

ARRAF: An awful lot of them. I guess here in Baghdad, one of the things that is really quite remarkable is you can have a terrible, horrific suicide bomb in one part of this city -- and the city is huge. We're talking more than five million people. But at the same time, we were in an art gallery yesterday, covering a story of an election of artists. And beautiful morning, one of the very few days of spring, what passes for spring in Baghdad. There were people who had come out, thought not too much about it, and braved whatever dangers there might be to have an election in the garden of a gallery.

Things are going on. And if you didn't know there was a suicide bomb across town, you would think the city is perfectly normal. That's one of the shades of gray.

The other shade of gray is even know, for instance, there are policeman being killed almost every day, you still see people lining up to join the police. In fact, in the south we heard from young men all over that they wanted to be police. They wanted jobs. It's much more encouraging on ground level, when we get out there and talk to people and find out what their hopes and dreams and fears are, than it may seem looking at it from a distance.

QUIJANO: And Jane, at the same time, we're starting to hear about the story about an American aid worker who's killed, someone that I believe you profiled. Tell us about that

ARRAF: That is very sad news. It was Marla Ruzicka, who was an absolutely amazing woman. I wish everyone could have known her. As it is, there have been so many people who have been touched by the work that she did.

Now, this is -- I first got to know Marla in Afghanistan a few years ago, when she essentially pitched with an aid organization. This young California girl, who was wandering around, and she basically started her own aid agency, her own non-governmental agency. She came to Baghdad. She said she saw these scenes, all these signs of suffering, and she thought, well, you can be sad and you can be depressed, or you can actually go and do something about it. And what Marla did every day that she was here was she used this incredible talent she had for making friends, to go and knock on doors endlessly. Doors in the military. She went to Capitol Hill and harangued congressmen. And in the end, what she did was she created an organization, and she helped get an appropriation in Congress to help victims of violence here, civilian victims who had -- who had relatives killed or property destroyed by the war here.

She was absolutely astounding. She was killed yesterday as she was driving to the airport. There was an explosion, a car bomb that went off. She was only 29 years old. And she was an absolutely phenomenal person who decided that she was going to make a difference, and despite the risks she came here, and in the short time she was here, she really did make a difference.

HAYS: Well, and it's -- you paint a very inspiring picture. Thank you for bringing that to us, Jane.

On a more pragmatic, less dramatic note, what about what's going on with the cabinet formation for new Iraqi government? Maybe it is good news that things are calm enough that we have kind of lost track of some of the politics, but it is certainly an important milestone that keeps getting delayed.

ARRAF: It is a milestone, and it has been delayed, I guess partly because this is all new. And I'm sure there is some similarities with Washington politics, but absolutely nothing is simple in putting this government together.

Part of it is that there are different factions. Part of it is that there are people who are feeling that they have power for the first time, groups feeling that they have power for the first time. And they want to get the best possible deal. And we all know what that's like.

Now, it is creating a bit of a problem, because when you go out in Baghdad and in other cities and you ask people, well, what do you think of that new government, they say, well, we're not there yet. Where is it? Why don't we have a government? Why aren't they giving us electricity? There's a bit of impatience out there. But we're told that in a week or two, it will be pinned down. All those positions will be filled, and then they'll start the ball rolling for a constitution, and yet more elections. It is seemingly a never- ending process.

QUIJANO: I know you'll be keeping tabs on that. Thanks, Jane. And what's on the story for you in the coming days?

ARRAF: Well, we're putting together some stories on an amazing visit to the southern marshes. These are the marsh Arabs, and they live essentially the same way that they have for thousands of years. We're talking fishing in the reeds, reed houses. But the really funny thing is, when you talk to them, they say we don't want the marshes, we want real houses. Yeah, these reed houses are great, but the women particularly, they want houses with floors and electricity, which is understandable. So we're delving into that a bit.

QUIJANO: That sounds fascinating. Thanks again, Jane.

Coming up, President Bush on border security, Social Security and how to get his message across the plate.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I got a decision to make today. Do I go with the fast ball or a slider?

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: When I first read that in the newspaper, about the need to have passports, particularly the day crossings that take place, about a million, for example, in the state of Texas, and I said, what's going on here?

(END VIDEO CLIP)

QUIJANO: What's going on here is the president telling newspaper editors that he does read the newspaper after all, and that he was out of the loop on at least one anti-terrorism plan to require Americans coming home from Mexico and Canada to show a passport.

Welcome back. I'm Elaine Quijano. We're ON THE STORY.

COHEN: Elaine, it's sort of puzzling. If indeed the president did learn about these new rules by reading the newspaper, why would he admit that?

QUIJANO: Well, it's an interesting question. Certainly had a lot of people scratching their heads. I mean, the idea of him saying this to, of all people, a group of newspaper editors just really made people stunned. But the answer to that I don't know. We don't know exactly what sort of the reason was for him saying that. But you know, he did basically say that he's aware of the issue. Of course, he's a former governor of Texas, a border state. And so there was a lot of surprise when he basically said, I read this proposal put forth by our Department of Homeland Security, I read about this in the newspaper. But at the same time, he said, look, I have also asked DHS to look into this. I think there's some flexibility there. That's not necessarily the way we need to go, but so he's looking into it, but initially that did catch a lot of people by surprise.

HAYS: Yeah. And I had already been e-mailed by my husband, make sure your passport is up to date, because...

QUIJANO: That's right.

HAYS: ... this is going to be tougher in the future.

Is the president in touch with Social Security and what's going on? We keep hearing about this tour. We're going to cities, we're making progress. Democrats have their arms folded, saying, you're not really making hey with this politically. Is the president -- is he in touch with reality, or is he just trying to talk this up by talking it, making it true that people are getting on his Social Security bandwagon?

QUIJANO: Well, yeah, that's exactly the case. There isn't really a lot of movement to be had in terms of this issue. And the administration's argument is, look, we're still early in the process. We're educating the American people. Polls are showing that Americans do think this is a significant issue. At the same time, though, you have the opposition saying, well, those same polls are also showing they don't like your idea about these private accounts, these personal accounts that the president wants to carve out of Social Security.

But you know, the president's response is, if you have got some ideas, you better bring them to the table. In fact, he talked about that to a group earlier last week, and I believe we have some sound. Let's take a listen to what he said.

(BEGIN VIDEO CLIP)

BUSH: I imagine there are some people fearful in Washington, D.C. about maybe laying out an interesting idea, that one of the political parties will get all over them for laying it out. If I have anything to do with it, there will be political -- there will be political amnesty for people bringing good ideas forward.

(END VIDEO CLIP)

QUIJANO: And so President Bush basically reiterating, look, Democrats, you cannot just sit there and say no, no, no, to these personal accounts without bringing something to the table.

And the question is, when is the president going to start getting specific and talk about things other than the personal accounts, talk about what he's willing to rule in, rule out? All of that? The answer, they're not saying publicly yet. They really don't want to go there at this point. Again, they're in the middle of this 60-day administrative blitz, as they call it. They said that they were going to have administration officials blanketing the country. That's where they are at right now. President Bush is going to head to a couple of states this coming week, in fact, to try and sell those ideas.

HAYS: (UNINTELLIGIBLE) a message on the ball he throws out with the pitches or something.

COHEN: Elaine, how did the president deal with the whole situation this week with Tom DeLay? Did he try to distance himself from DeLay, did he defend him?

QUIJANO: Well, it's interesting. That's another topic that the White House is watching very closely, because of course, politically, they need help on these domestic issues. They want to move his agenda forward. They recognize they are going to need every single vote on some of these politically sensitive issues, like Social Security.

So what you are hearing out of the White House really is that really they are standing by DeLay. White House spokesman, Scott McClellan saying, you know, last week, that the president has confidence in Tom DeLay, that they look forward to working with him on a number of issues, that they worked with him on issues in the past. But of course, at the same time, you even have some GOP lawmakers now who are starting to say, I have got constituents who are coming to me for the first time saying, what about this Tom DeLay person? Of course, all these allegations swirling about him taking trips paid for by lobbyists. So there are some rumblings, but the White House anyway publicly standing by him.

HAYS: So what is the mood, though, in Washington about this, inside the Beltway? Because Tom DeLay, of course, keeps saying, look, lots of people take trips. And maybe it turns out it was paid for by a group that they didn't know about. And other people made that kind of mistake. Other people put family members on payrolls. I didn't hide it. It was done honestly.

Is there nervousness among the Democrats or again, in the hallowed halls of Congress, that this is going to put more and more focus on the practices of people who also will look maybe not so great?

QUIJANO: Well, certainly, from Tom DeLay's camp, what we're hearing is that this is the Democrats' agenda, and that there are certain elements within the media that are singling him out for behavior that they say is perfectly acceptable in Washington and if not commonplace. But there is a sense, at least among Republicans, as I mentioned, Democrats certainly sensing that there is trouble here for Tom DeLay, but at this particular point, you know, the word out of the DeLay camp is, you know, we're sort of riding this out, that this is unfairly singling him out in Washington.

COHEN: Elaine, President Bush made an appearance on a baseball diamond this week. How did he do? Did he strike them out? How did it go?

QUIJANO: It went really well, according to by all accounts. I was not there, but this was in essence really a major deal for people in Washington, an enormous moment. President Bush heralding the return of baseball to Washington at the Nationals game. A tremendous moment there, you saw the president's pitch. We're told he was practicing for some time. Looks like it paid off.

HAYS: Sure did. Don't want to look wimpy out there on the diamond.

We're back ON THE STORY right after this.

ANNOUNCER: An astronaut prepares to blast off into space. What's her story? More when we return.

(COMMERCIAL BREAK)

ANNOUNCER: Eileen Collins. What's her story? She'll command the seven-person crew into space next month on the shuttle Discovery. It's the first shuttle mission since the Columbia disaster in 2003.

(BEGIN VIDEO CLIP)

EILEEN COLLINS, ASTRONAUT: For me, to not (UNINTELLIGIBLE) -- I just -- I probably couldn't live with myself afterward.

(END VIDEO CLIP)

ANNOUNCER: The Discovery will deliver supplies to the International Space Station. Collins says the mission will also prepare for future trips to the moon a Mars.

A mother of two, Collins was among the first women accepted into the Air Force and trained as a pilot. In 1999, she was the first woman to command a space mission. She dates her interest in flying back to summer camp in Elmira, New York, where she watched glider plane soar into the sky.

HAYS: Thanks to all my stellar colleagues, and thank you for watching ON THE STORY. We'll be back next week. Hope to see you then. Straight ahead, a check on what's making news right now on "CNN LIVE SUNDAY."

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 April 17, 2005 - 10:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KATHLEEN HAYS, CNN CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we covered this week. I'm Kathleen Hays, on the story of a free fall in the stock market this week and big new worries about the economy.
SUSAN CANDIOTTI, CNN CORRESPONDENT: I'm Susan Candiotti, on the story of new heartbreak in Florida over the apparent murder of a missing 13-year-old girl.

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: I'm Elizabeth Cohen in Atlanta, on the story of a new worry about flu, and mixed signals on whether the government should lift the ban on silicone breast implants.

ELAINE QUIJANO, CNN CORRESPONDENT: And I'm Elaine Quijano, on the story of how President Bush said this week he first learned of new passport and boarder security proposals by reading the newspaper. We'll also talk about next week's 10th anniversary of the Oklahoma City bombing. We'll go to Baghdad, where Jane Arraf is on the story of new attacks against civilians and U.S. forces, and new delays in forming the new Iraqi government. We'll talk to our Vatican analyst, Delia Gallagher, about the voting for the new pope set to start tomorrow. E-mail us at onthestory@cnn.com.

First up, Susan Candiotti, on what seems to be the murder, apparent murder of yet another Florida girl. Susan, bring us up to speed. What is the latest in the investigation?

CANDIOTTI: Elaine, some very sad new details emerging about what happened to 13-year-old Sarah Lunde. You'll remember that they found a body yesterday that they strongly believe is Sarah Lunde.

And what we have learned is this. Law enforcement sources tell us that the killer apparently tried to weigh down her body in the water. Now, sources are not saying exactly what way they tried to do that, what method they used. That is something that for now they want to keep under wraps, because, they say, it is something that for now only the killer knows. So they don't want to talk about it publicly as yet. We still do not know the exact cause of death. Initial results of the autopsy are not yet available.

COHEN: Susan, this is the second time in just the past few weeks that we have heard about a horrible story like this coming out of the state of Florida. What's going on? CANDIOTTI: Well, and both similar in so many ways. In both cases, the case of Jessica Lunsford, who went missing back in February and now Sarah Lunde in Ruskin, Florida -- both towns only about 100 miles away -- very sad, because in both cases everyone said it was out of character for these little girls to simply disappear. Also in both cases, you had 24 sex offenders registered in small towns. In the case of Ruskin, where Sarah Lunde disappeared, only about a population of 8,000, 12,000 there, but there are no studies to draw any kind of a correlation between why these things tend to happen any more so in small towns than they are in urban areas.

HAYS: And of course, these things bring out all kinds of emotion, great sadness, anger, sometimes fingers are pointed. The mother was gone for the weekend when this little girl was abducted, and as you say apparently murdered. What are you picking up as you walk the streets and talk to people, Susan?

CANDIOTTI: Well, there is great sadness there when I was there for several days. Obviously, the mother upset. She was away for the weekend with friends outside of the county. It's not clear who was in charge back at home. Sarah Lunde's 17-year-old brother crossed paths with Sarah when she returned from a weekend church retreat about 9:00 Saturday night, but then he went out and didn't come home until about 4:00 in the morning, when he said the door was wide open. We heard a heartwrenching story from the mother of Sarah Lunde's best friend, who said that when her daughter and Sarah returned home from that church outing, that Sarah had wanted to stay overnight at the little girl's house, but her mom had said, gosh, you know, you were just here last weekend and we're kind of tired, maybe another time. And now sadly the mother feels, she said, partially to blame. If only she had allowed her to stay over at the house. Naturally, no one could have predicted what happened.

QUIJANO: Susan, we know that obviously the emotions are still very fresh, because as you mentioned, this is the second time in just recent weeks that we have been hearing about a case like this. And we understand that joining in the search is the father of Jessica Lunsford. Tell us about that.

CANDIOTTI: That's right, Mark Lunsford. And he said, you know, this was so close by, I had to come and lend a hand. And as a matter of fact, when they found the body apparently of Sarah, the police relatives asked Mark Lunsford to go over to the family's house to help them work their way through this very, very difficult situation. And in this case, Sarah Lunde's case already, and Jessica Lunsford's case, already we're talking about parents and others in communities trying to urge change on the political front, trying to get new laws passed to keep tighter controls on sex offenders. We don't know who is responsible in Sarah Lunde's disappearance, but in Jessica Lunsford, a convicted sex offender has allegedly confessed to police.

COHEN: Susan, you've now spent a lot of time in Sarah Lunde's hometown. Tell us, what kind of a community is it?

CANDIOTTI: Very close knit. Everybody seems to know everybody, when you walk around town. And so that's why a situation like this, as in many small towns, it is like the death of someone in your family even if you are not related to the child in question here. And that's what we're finding here.

HAYS: Suspects? What about what the police are telling you?

CANDIOTTI: Well, it is not clear whether they are zeroing in on any one person. However, police have repeatedly said that they are paying special attention or close attention to a man by the name of David Onstott. He was an on-again/off-again boyfriend of Sarah Lunde's mother, who, coincidentally, was at the home, according to Sarah's brother, in the wee hours of the morning Sunday. Went into the house. Apparently took out a bottle of beer, and then left. He's already in custody on unrelated charges. And apparently he's not going anywhere for now, but police are stressing they are not calling him a suspect at this time.

QUIJANO: And Susan, I know we'll be monitoring church service in her neighborhood, and we continue to monitor that.

But on another story, this week marks the 10th anniversary of the Oklahoma City bombing, and this is a story I know you covered quite extensively. What are your thoughts going into this week?

CANDIOTTI: In many ways it seems like only yesterday when it happened. Hard to imagine that it has been 10 years. And when you cover a story like this, you come to know many of the families. It has changed obviously a lot of lives in many different ways. Marriages broken, lives broken, and in this case you also see that it is difficult for the families ever since September 11th happened, many of the Oklahoma City victims feel in some ways that America has forgotten about their tragedy. Tomorrow, certainly, because of all the memorial services, America will be reminded about this again.

COHEN: Susan, we'll be following both the Oklahoma City and the Sarah Lunde story in the coming days.

Now, up next, I'm on the story of a new flu scare and new confusion about breast implants.

Still ahead, Delia Gallagher in Rome. Can the cardinals maintain their secrecy when the voting begins tomorrow?

And at the end of the hour, our "What's Her Story?" segment on the woman leading the first shuttle mission since the Columbia disaster in 2003.

ANNOUNCER: Elizabeth Cohen is a CNN medical correspondent. She joined CNN in 1991. Earlier, she worked as a newspaper reporter in Washington and Albany. She has a masters degree in public health.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

DR. JULIE GERBERDING, DIRECTOR, CDC: We're not taking any chances. And we're doing everything we can to make sure that there's no threat to human health.

(END VIDEO CLIP)

COHEN: Dr. Julie Gerberding, director of the Centers for Disease Control and Prevention last week, again facing questions about the danger of the flu, but this time after the discovery that samples of the 1957 Asian flu virus that killed at least a million people back then had been sent around the world just recently. She continues to say that the risk is low that the virus will spread, but authorities are trying to find the samples and destroy them.

CANDIOTTI: You know, Elizabeth, how in the world could something like this happen? Are we talking about sloppiness, inexperience? Are heads going to roll?

COHEN: Well, you know, originally, it sort of seemed like it might be sloppiness, Susan. I mean,that was kind of the feeling that we were getting, but then Julie Gerberding came out that afternoon and said that it was actually a deliberate decision by a lab in Cincinnati. They decided to send that sample out as part of a test.

Now, the test was legit. The way that it works is that labs around the world need to be accredited, and once a year they are sent a panel of microbes, and they are told, you know, we're not going to tell you what they are; you tell us what they are. But they are supposed to send out relatively innocuous things. They're not supposed to send out a virus that killed more than a million people. And anyone born after 1968 would have no immunity to this virus. And many people born before 1968 would have no immunity.

But basically, the answer is that this lab deliberately sent it out. Dr. Gerberding said it's very easy to manipulate it in the lab, it's very easy to grow it. So basically for convenience reasons, it was sent out.

QUIJANO: And Elizabeth, health officials are saying that the risks associated with this are low, but really, is that true? What are the risks?

COHEN: Well, they say that the risks associated with this sort of mishap that's gone on here are low, because these labs are used to dealing with dangerous microbes. They handle them all the time. They have not seen anyone get the Asian flu. I mean, these samples were sent out as early as last September, and if they were going to infect anyone, one might say it would have already happened, and they haven't seen any Asian flu in any place around the world.

Now, these samples were sent to more than 4,000 labs. Is it possible that someone caught the Asian flu from it and they just haven't detected it? That's possible. But the mechanisms they have out there to detect the flu are really pretty good and pretty sensitive, and they haven't caught -- no one appears to have caught the flu from it yet.

They were supposed to do this test and destroy it, and if they didn't destroy it immediately, they certainly have been told to destroy it by now.

HAYS: Well, there is, Elizabeth, a risk (UNINTELLIGIBLE) people they couldn't avoid, but there is another story you covered this week that is talking about a different kind of risk, one that women have to deliberately take on. Let's take a look at a woman who you spoke to and what she said about breast implants.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I liked my implants. And my husband loved my implants. I would have liked to have kept my implants. I certainly wouldn't have removed them for any reason other than they were killing me.

(END VIDEO CLIP)

HAYS: Other reason that they were killing her. It's amazing. And you can look at it one way, why do women even consider breast implants, but they do, and the FDA this week saying yes to one kind of breast implant, no to another. Tell us the story.

COHEN: Right. It was actually an FDA advisory committee that recommended that one company be allowed to market its silicone breast implants, but told another company that they shouldn't be allowed to market theirs.

Now, the difference is, these are two different kinds of implants. And this advisory committee felt that one of the products had a low enough rupture rate that it was worth being allowed -- it was worth putting them on the market. But they felt that the other company just didn't have data that was good enough, and they said that their product shouldn't be allowed to go on the market.

And many people felt this was sort of a mixed message, but sort of the bottom line here is that silicone breast implants went off the general market about 13 years ago because of concerns about ruptures and because of concerns about infections, and now this one company may be able to put them back on. But they are really going to have to warn women about what the risks are, and they also are going to have to follow up on these women, which will be very different. They will have to keep track of them to see how they do.

But this advisory committee felt that the rupture rates were low enough that they should be allowed to put these back on the market.

CANDIOTTI: So, Elizabeth, how are consumers -- how are women supposed to sort these things out and figure out which way they should go? To whom should they talk about it?

COHEN: It is going to be a tough decision. I mean, some -- most women, of course, get these simply because they want larger breasts. Some women get them because their breasts have been removed, because they had cancer.

But let's just say a woman who wants them for cosmetic reasons; she's going to really need to look at that data and say, well, maybe they were low rupture rates, but how many years did they study these women for? Really, they studied them for several years, but they didn't study them for decades. And presumably, if you get these implants, let's say you're 30 years old, you're going to have them in you for a very long time. And they haven't been studied for decades and decades.

So what the FDA is trying to do these days more and more is to put some of that responsibility on the consumer, and say, well, we'll approve this, but the consumer should be told that they are going to have to really weigh these decisions carefully with the help of their doctor.

HAYS: I guess that's part of the ownership society. Now we own the risk of medical devices, too.

Well, from the medical beat to religion, and the secret deliberations of the cardinals to choose one of their own as the next pope. We're back on the story with Vatican analyst Delia Gallagher right after this.

(COMMERCIAL BREAK)

HAYS: The ritual and pageantry at the Vatican continues this week. Masses remembering the former pope. Tomorrow, a change as cardinals look forward and begin the other ritual of meeting and voting in secret on a successor to Pope John Paul II.

Welcome back. We're ON THE STORY. And joining us now, overlooking St. Peter's, our Vatican analyst, Delia Gallagher. Delia, it's great to see you again on the story.

You were taken on a tour of the Sistine Chapel. Take us there, and how that is setting up the cardinals for the conclave that begins tomorrow.

DELIA GALLAGHER, CNN VATICAN ANALYST: Well, you know, it was really amazing yesterday to see the Sistine Chapel. This sort of Renaissance ancient chapel that had been modernized for the conclave. They have set up really sort of conference tables facing each other on either side of the chapel on a raised platform. And underneath that platform, they have the anti-bugging devices, the jamming devices for cell phone use, so the cardinals will not be able to use their cell phones in the chapel.

The cardinals will process in seeing this litany of saints, and then the doors will be closed from the outside, so they can't get out. They need to knock if they want to get out. And they are inside for the deliberations. They hand-write their choice of candidate on little slips of paper. A very formal ceremony, to bring it up to the altar and deposit it into these chalices, and then the counting begins.

The stoves are off in the back to the left hand side, and they have added a new stove to kind of help push the smoke up this time, because of course one of the concerns of the journalists who are here watching the smoke -- and you can see the cloudy gray day behind me -- it will probably be like that tomorrow -- is will we be able to tell if it's black or white. And so they've added this sort of new smoke enhancer, as it were, to help push up that smoke and allow people on the outside -- it happened in 1978, the smoke came out and it was sort of gray. And they said, well, we're not sure. And this time, they have also added the ringing of the bells from St. Peter's, at the time that the pope is elected. So we'll be sure to be able to make that call.

CANDIOTTI: And Delia, I understand if anyone leaks any information, they could be excommunicated from the church. But I also wanted to find out about these odds makers. Are they actually having a field day out there in Rome?

GALLAGHER: Well, yes, of course. Everybody is rife with speculation at the moment. And you know, the idea of secrecy, of course, is to help the cardinals keep their own reserve, as it were, about who the candidates should be, because the press is just putting all kinds of names out there. But the cardinals are talking to us. They finished their general congregations, but all last week they were coming out of those meetings and sort of saying hello and giving a chat, but not mentioning any names. And I think you will be surprised to know that even in those congregations, even in those meetings they're not talking names yet.

So tonight, they are moving into their residence, the Casa Santa Marta, and for the first time they will all be sitting together at a dinner, and probably some names will come up. But there's a lot of reserve even within the College of Cardinals to start mentioning names.

So actually, we think that a lot of that is going to happen once they get into the Sistine Chapel and see how the first votes go. Then they will understand what are the directions. Because you remember that some of these cardinals don't know each other. There are the ones who have worked in Rome, they know who they want, they're forming little alliances. But there are many other cardinals from around the world who are not familiar with this process or with one another. They will have to wait until they get in tomorrow to see how the voting goes.

COHEN: And Delia, tell us about the debate. We've all heard a lot about will the papacy be returned to Italy. What's the debate about having a pope who would be from Italy versus from another part of the world?

GALLAGHER: Well, yes, of course. I mean, there are 58 European cardinals, and the Italians are a big block of that, and there is a sort of movement to keep the papacy -- to bring it back to Rome, as it were, since John Paul II was from Poland. And you can kind of look at two cardinals that we're talking about right now. One is Cardinal Ratzinger, who, although he is a German, is considered almost a Roman, because he worked very closely with John Paul II in the congregation for a doctorate here, and is considered the sort of conservative candidate at the moment.

And then to balance him is Cardinal Tettamanzi, who is the archbishop of Milan and the Italian candidate, a bit more moderate, and might be able to get the support of the Italians.

So I think in the first instance, we will see the Italians trying to rally around. But let's remember, they need the support of the Latin Americans and of the North Americans, as well. So those votes are going to be crucial to decide whether the papacy will remain in Italy.

QUIJANO: Well, Delia, one story that you covered in recent days was the call by many to scrap the usual rules and rush forward to make John Paul II a saint. Let's listen to your report on that.

(BEGIN VIDEO CLIP)

GALLAGHER (voice-over): "Saint now," they chanted. A remarkable, even stunning outburst of emotion taking place at the funeral of Pope John Paul II. To many, the late pontiff did lead the kind of life required for sainthood.

UNIDENTIFIED FEMALE: How many hearts has he changed, I mean, that we haven't seen?

UNIDENTIFIED FEMALE: He had worked miracles in the heart of each one.

GALLAGHER: Elevation to sainthood requires more than just evidence of a holy life. There must also be two miracles attributed to the pope after his death. For example, someone whose prayers to the late pontiff resulted in healing that can't be explained by science.

Certainly, those waiting at the doorstep of St. Peter's have cast their ballots.

I asked these teenagers from Sicily if the pope should be made a saint.

CROWD: Si!

(END VIDEOTAPE)

GALLAGHER: Well, you can see that there is great popular support here. Almost as if the pope really is already a saint for most of the people. There are people that are still coming to pray at his tomb and say to us, we don't know whether to pray to him or for him. You know, to him as a saint, or for him that he's in heaven. So certainly a huge movement. And something that the next pope will have to take into account, because he might have to just push that process ahead on the fast track, as it were, something which John Paul II himself did, and make that pope a saint.

HAYS: Let's talk about the pragmatic aspect of this. When you talk to people in Rome, when you talk to people, you know, so intimately part of the church, did they feel like the death of John Paul, this extreme reverence, this focus now on the next pope, is going to give the Catholic Church a boost? Is it something they hope to capitalize on? GALLAGHER: Well, I think that's exactly the feeling, and is one of the concerns for the College of Cardinals in choosing another candidate. They now have huge shoes to fill, as it were. The immense popularity of John Paul II is going to be very difficult to follow, and they will need a candidate who is not only sort of strong on the issues within the church, but will be able to carry out this sort of charismatic mission, if you will, of John Paul II. And so that's definitely going to be one of the elements that the cardinals have to take into account, and that requires a close knowledge of these cardinals and how they are personality-wise.

Many are them are very good, very charismatic men, but of course a lot of them are sort of official types, you know. So I think that that is going to be one of the characteristics that they will get to sort of further on down the line. First they're going to look at the major issues within the church, within the world, sort of the ideas of engaging with culture, how do they continue to spread Catholicism throughout the world. But certainly, the personality of the next pope is going to be very important.

HAYS: Thank you, Delia. I know you will be able to assess all that out for us. We'll be watching you on the story in coming days, hoping you will translate the smoke quickly. And of course, thanks to Susan Candiotti for joining us from Miami.

Coming up, I'll be talking about why the markets saw their worst week in two years.

Jane Arraf is on the story in Baghdad -- new violence, new delays in forming a new government.

And Elaine Quijano on President Bush making his pitch to D.C. and the Congress this week.

Plus, a check on what's making news right now. That's all coming up, all ON THE STORY.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JOHN SNOW, SECRETARY OF THE TREASURY: Fundamentals of the global economy remain strong. Of course, the United States is continuing to be lead the industrialized world.

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HAYS: Very bullish talk from U.S. Treasury Secretary John Snow yesterday. However, he point-blank refused to talk about the very bearish week on Wall Street, as stocks plunged and brought a new chorus of questions about the strength of the economic recovery.

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

QUIJANO: So, Kathleen, what is the situation? What happened? So many people saw what happened in the past few days and said, is this the start of, you know, is this a sign of things to come?

HAYS: Well, of course, it is logical to worry, because the stock market to a certain extent is discounting the future. And if you took this past week in the stock market at face value, you'd say, well, the stock market might be telling us there's a recession coming.

Now, most economists say, no, no, no, no, that's not what's happening, but there was just a piling on of bad news, and in particular Thursday afternoon, after the closing bell, IBM, big blue chip, big tech bellwether, came out with disappointing earnings. The next day, more bad news on the economy.

I think what really set people back on their heels was at midweek, the March retail sales report, a very important measure of the consumer, very disappointing number. It was supposed to be pretty healthy. Instead, we saw the consumer sagging, and that got people really starting to wonder what's going on.

COHEN: Now, gas prices have continued to grow and grow, as all of us know. Is there any feeling, Kathleen, that they have just gotten so high that they are really beginning to put a squeeze on consumers' ability to spend money on other things?

HAYS: Absolutely. And I think that was another reason why this was a worrisome week, a worrisome retail sales report, a worrisome drop in consumer sentiment on Friday, a worrisome drop in industrial production. Because high energy prices hit businesses, too. And it especially hits them if the consumer doesn't buy the stuff those businesses produce.

So people are saying, sure, gas prices -- we just showed you $2.67 a gallon. That was probably out in California. That has to have hurt consumers, at least in the lower end of the spending spectrum, and maybe across the spectrum.

Some relief on that front. Crude oil prices did come down this week, but because people don't expect a big tumble right now I think there's definitely a worry that gas prices will continue to weigh on the consumer.

QUIJANO: It is interesting, because we're going to hear President Bush in the coming week talk about energy and gas prices. Of course, the White House is very mindful of that. Approval ratings for the president are down. These gas prices are up. So they are very concerned about that. And we're talking about energy, but wanted to ask you also about the situation on Wall Street itself. You were talking about bad news starting off the week, with some bad news about traders, and that may be rattling some nerves on Wall Street, as well.

HAYS: Perhaps. I think this is a case of just basic confidence maybe not in the direction of the economy, and whether or not you should invest your money overall, or whether or not your job is secure. And that's the kind of worry you have when you see economic reports looking soft and the stock market looking soft.

But it's a worry about, are you getting a fair shake as an investor? There was an indictment of 15 traders on criminal charges, of basically playing for the house, trading for the house, specialists who are in charge of keeping the market efficient by buying stocks and selling stocks when those orders come in, people using that position to, again, make a trade, buy a stock for their company ahead of the stock order you put in.

Now, maybe on each trade it was only a matter of pennies or dollars, but over time this adds up. Again, there are criminal charges against 15 traders, five more with civil charges.

Also, the New York Stock Exchange agreed to a big cash settlement. They agreed to be auditing themselves every two years. But I think the question remains if the New York Stock Exchange, its program of monitoring itself, if it's strict enough, if it's tough enough on this kind of thing, if this sort of fraudulent activity is coming out.

COHEN: Kathleen, we were talking about gas prices just a few minutes ago. There is one company that, it seems, has managed to figure out a way around these rising prices. Tell us about that company.

HAYS: Southwest Airlines, which of course is a success story in so many ways, right, because they were one of the original discount carriers, they remained profitable when so many big companies haven't. They hedged. They went in the futures market. They locked in a price, a long-term price for lower cost of oil, of jet fuel. They actually were helped in their profit statement.

I want to add, though, that given all this bad news on Wall Street, I want to point out that many people are saying, we are not heading toward recession, the market will come back, the economy is on a solid footing. I attended a speech by a former Fed governor this week, Larry Myers, very upbeat. He thinks things are in good shape. It remains to be seen. It was a tough week. But don't be Chicken Little, you know, don't jump out the window yet, because maybe things will turn around.

But it's a good time to watch and be watching your investments, as well.

QUIJANO: Well, we know you'll be watching. All right, thanks, Kathleen.

From business to Baghdad. Jane Arraf has the latest on new violence and new frustration reaching political compromise. We're back on that story after this.

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HAYS: Smoke over the Baghdad skyline again this week. A new upsurge of violence roaring back. Attacks on both civilians and U.S. forces. Among the victims, the long-awaited announcement of the new Iraqi government delayed again.

Welcome back. We're ON THE STORY. Joining us now from Iraq, senior Baghdad correspondent, Jane Arraf.

Jane, put this in perspective. A fresh wave of violence. Sometimes it seems though like it never stops.

JANE ARRAF, CNN SR. BAGHDAD CORRESPONDENT: That's true, it does seem like that sometimes. But you know, behind me right now I'm hearing sirens, and I have come to realize that that doesn't actually mean there's an attack. It could just mean that the police don't want to stop for the lights. I guess what it boils down to is even though the attacks are going on, and every time -- when you wake up in the morning, by the end of the day there's a list of attacks here and across the country, that doesn't actually mean that things aren't progressing. And what I have seen as I have traveled south and to the north and been lucky enough to get out of here is that it's not quite as black and white as all that.

COHEN: Well, Jane, you say it's not quite as black and white as all that. Tell us some of the shades of gray that you're seeing.

ARRAF: An awful lot of them. I guess here in Baghdad, one of the things that is really quite remarkable is you can have a terrible, horrific suicide bomb in one part of this city -- and the city is huge. We're talking more than five million people. But at the same time, we were in an art gallery yesterday, covering a story of an election of artists. And beautiful morning, one of the very few days of spring, what passes for spring in Baghdad. There were people who had come out, thought not too much about it, and braved whatever dangers there might be to have an election in the garden of a gallery.

Things are going on. And if you didn't know there was a suicide bomb across town, you would think the city is perfectly normal. That's one of the shades of gray.

The other shade of gray is even know, for instance, there are policeman being killed almost every day, you still see people lining up to join the police. In fact, in the south we heard from young men all over that they wanted to be police. They wanted jobs. It's much more encouraging on ground level, when we get out there and talk to people and find out what their hopes and dreams and fears are, than it may seem looking at it from a distance.

QUIJANO: And Jane, at the same time, we're starting to hear about the story about an American aid worker who's killed, someone that I believe you profiled. Tell us about that

ARRAF: That is very sad news. It was Marla Ruzicka, who was an absolutely amazing woman. I wish everyone could have known her. As it is, there have been so many people who have been touched by the work that she did.

Now, this is -- I first got to know Marla in Afghanistan a few years ago, when she essentially pitched with an aid organization. This young California girl, who was wandering around, and she basically started her own aid agency, her own non-governmental agency. She came to Baghdad. She said she saw these scenes, all these signs of suffering, and she thought, well, you can be sad and you can be depressed, or you can actually go and do something about it. And what Marla did every day that she was here was she used this incredible talent she had for making friends, to go and knock on doors endlessly. Doors in the military. She went to Capitol Hill and harangued congressmen. And in the end, what she did was she created an organization, and she helped get an appropriation in Congress to help victims of violence here, civilian victims who had -- who had relatives killed or property destroyed by the war here.

She was absolutely astounding. She was killed yesterday as she was driving to the airport. There was an explosion, a car bomb that went off. She was only 29 years old. And she was an absolutely phenomenal person who decided that she was going to make a difference, and despite the risks she came here, and in the short time she was here, she really did make a difference.

HAYS: Well, and it's -- you paint a very inspiring picture. Thank you for bringing that to us, Jane.

On a more pragmatic, less dramatic note, what about what's going on with the cabinet formation for new Iraqi government? Maybe it is good news that things are calm enough that we have kind of lost track of some of the politics, but it is certainly an important milestone that keeps getting delayed.

ARRAF: It is a milestone, and it has been delayed, I guess partly because this is all new. And I'm sure there is some similarities with Washington politics, but absolutely nothing is simple in putting this government together.

Part of it is that there are different factions. Part of it is that there are people who are feeling that they have power for the first time, groups feeling that they have power for the first time. And they want to get the best possible deal. And we all know what that's like.

Now, it is creating a bit of a problem, because when you go out in Baghdad and in other cities and you ask people, well, what do you think of that new government, they say, well, we're not there yet. Where is it? Why don't we have a government? Why aren't they giving us electricity? There's a bit of impatience out there. But we're told that in a week or two, it will be pinned down. All those positions will be filled, and then they'll start the ball rolling for a constitution, and yet more elections. It is seemingly a never- ending process.

QUIJANO: I know you'll be keeping tabs on that. Thanks, Jane. And what's on the story for you in the coming days?

ARRAF: Well, we're putting together some stories on an amazing visit to the southern marshes. These are the marsh Arabs, and they live essentially the same way that they have for thousands of years. We're talking fishing in the reeds, reed houses. But the really funny thing is, when you talk to them, they say we don't want the marshes, we want real houses. Yeah, these reed houses are great, but the women particularly, they want houses with floors and electricity, which is understandable. So we're delving into that a bit.

QUIJANO: That sounds fascinating. Thanks again, Jane.

Coming up, President Bush on border security, Social Security and how to get his message across the plate.

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GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I got a decision to make today. Do I go with the fast ball or a slider?

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BUSH: When I first read that in the newspaper, about the need to have passports, particularly the day crossings that take place, about a million, for example, in the state of Texas, and I said, what's going on here?

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QUIJANO: What's going on here is the president telling newspaper editors that he does read the newspaper after all, and that he was out of the loop on at least one anti-terrorism plan to require Americans coming home from Mexico and Canada to show a passport.

Welcome back. I'm Elaine Quijano. We're ON THE STORY.

COHEN: Elaine, it's sort of puzzling. If indeed the president did learn about these new rules by reading the newspaper, why would he admit that?

QUIJANO: Well, it's an interesting question. Certainly had a lot of people scratching their heads. I mean, the idea of him saying this to, of all people, a group of newspaper editors just really made people stunned. But the answer to that I don't know. We don't know exactly what sort of the reason was for him saying that. But you know, he did basically say that he's aware of the issue. Of course, he's a former governor of Texas, a border state. And so there was a lot of surprise when he basically said, I read this proposal put forth by our Department of Homeland Security, I read about this in the newspaper. But at the same time, he said, look, I have also asked DHS to look into this. I think there's some flexibility there. That's not necessarily the way we need to go, but so he's looking into it, but initially that did catch a lot of people by surprise.

HAYS: Yeah. And I had already been e-mailed by my husband, make sure your passport is up to date, because...

QUIJANO: That's right.

HAYS: ... this is going to be tougher in the future.

Is the president in touch with Social Security and what's going on? We keep hearing about this tour. We're going to cities, we're making progress. Democrats have their arms folded, saying, you're not really making hey with this politically. Is the president -- is he in touch with reality, or is he just trying to talk this up by talking it, making it true that people are getting on his Social Security bandwagon?

QUIJANO: Well, yeah, that's exactly the case. There isn't really a lot of movement to be had in terms of this issue. And the administration's argument is, look, we're still early in the process. We're educating the American people. Polls are showing that Americans do think this is a significant issue. At the same time, though, you have the opposition saying, well, those same polls are also showing they don't like your idea about these private accounts, these personal accounts that the president wants to carve out of Social Security.

But you know, the president's response is, if you have got some ideas, you better bring them to the table. In fact, he talked about that to a group earlier last week, and I believe we have some sound. Let's take a listen to what he said.

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BUSH: I imagine there are some people fearful in Washington, D.C. about maybe laying out an interesting idea, that one of the political parties will get all over them for laying it out. If I have anything to do with it, there will be political -- there will be political amnesty for people bringing good ideas forward.

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QUIJANO: And so President Bush basically reiterating, look, Democrats, you cannot just sit there and say no, no, no, to these personal accounts without bringing something to the table.

And the question is, when is the president going to start getting specific and talk about things other than the personal accounts, talk about what he's willing to rule in, rule out? All of that? The answer, they're not saying publicly yet. They really don't want to go there at this point. Again, they're in the middle of this 60-day administrative blitz, as they call it. They said that they were going to have administration officials blanketing the country. That's where they are at right now. President Bush is going to head to a couple of states this coming week, in fact, to try and sell those ideas.

HAYS: (UNINTELLIGIBLE) a message on the ball he throws out with the pitches or something.

COHEN: Elaine, how did the president deal with the whole situation this week with Tom DeLay? Did he try to distance himself from DeLay, did he defend him?

QUIJANO: Well, it's interesting. That's another topic that the White House is watching very closely, because of course, politically, they need help on these domestic issues. They want to move his agenda forward. They recognize they are going to need every single vote on some of these politically sensitive issues, like Social Security.

So what you are hearing out of the White House really is that really they are standing by DeLay. White House spokesman, Scott McClellan saying, you know, last week, that the president has confidence in Tom DeLay, that they look forward to working with him on a number of issues, that they worked with him on issues in the past. But of course, at the same time, you even have some GOP lawmakers now who are starting to say, I have got constituents who are coming to me for the first time saying, what about this Tom DeLay person? Of course, all these allegations swirling about him taking trips paid for by lobbyists. So there are some rumblings, but the White House anyway publicly standing by him.

HAYS: So what is the mood, though, in Washington about this, inside the Beltway? Because Tom DeLay, of course, keeps saying, look, lots of people take trips. And maybe it turns out it was paid for by a group that they didn't know about. And other people made that kind of mistake. Other people put family members on payrolls. I didn't hide it. It was done honestly.

Is there nervousness among the Democrats or again, in the hallowed halls of Congress, that this is going to put more and more focus on the practices of people who also will look maybe not so great?

QUIJANO: Well, certainly, from Tom DeLay's camp, what we're hearing is that this is the Democrats' agenda, and that there are certain elements within the media that are singling him out for behavior that they say is perfectly acceptable in Washington and if not commonplace. But there is a sense, at least among Republicans, as I mentioned, Democrats certainly sensing that there is trouble here for Tom DeLay, but at this particular point, you know, the word out of the DeLay camp is, you know, we're sort of riding this out, that this is unfairly singling him out in Washington.

COHEN: Elaine, President Bush made an appearance on a baseball diamond this week. How did he do? Did he strike them out? How did it go?

QUIJANO: It went really well, according to by all accounts. I was not there, but this was in essence really a major deal for people in Washington, an enormous moment. President Bush heralding the return of baseball to Washington at the Nationals game. A tremendous moment there, you saw the president's pitch. We're told he was practicing for some time. Looks like it paid off.

HAYS: Sure did. Don't want to look wimpy out there on the diamond.

We're back ON THE STORY right after this.

ANNOUNCER: An astronaut prepares to blast off into space. What's her story? More when we return.

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ANNOUNCER: Eileen Collins. What's her story? She'll command the seven-person crew into space next month on the shuttle Discovery. It's the first shuttle mission since the Columbia disaster in 2003.

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EILEEN COLLINS, ASTRONAUT: For me, to not (UNINTELLIGIBLE) -- I just -- I probably couldn't live with myself afterward.

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ANNOUNCER: The Discovery will deliver supplies to the International Space Station. Collins says the mission will also prepare for future trips to the moon a Mars.

A mother of two, Collins was among the first women accepted into the Air Force and trained as a pilot. In 1999, she was the first woman to command a space mission. She dates her interest in flying back to summer camp in Elmira, New York, where she watched glider plane soar into the sky.

HAYS: Thanks to all my stellar colleagues, and thank you for watching ON THE STORY. We'll be back next week. Hope to see you then. Straight ahead, a check on what's making news right now on "CNN LIVE SUNDAY."

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