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CNN Wolf Blitzer Reports

In a Surprise Move, Fed Cuts Interest Rates by Half a Point

Aired April 18, 2001 - 20:00   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.
WOLF BLITZER, CNN ANCHOR: Tonight: the Federal Reserve pulls a rabbit out of its hat, and the markets applaud. We'll have a live report from CNN's once-and-future-king of financial news, Lou Dobbs.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: There was no progress on the issue of returning the airplane.

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BLITZER: The United States and China, in a standoff over their standoff. We'll get an update.

He calls Janet Reno's justice department -- quote -- "the sword and shield for the Clinton administration's crimes and abuses." David Limbaugh, best-selling author of "Absolute Power," will face off with Lanny Davis, former White House special counsel.

Good evening. I'm Wolf Blitzer reporting tonight from Washington.

If anyone was in any doubt, Federal Reserve Chairman Alan Greenspan has once again proven that when he speaks, the markets listen. Seemingly out of the blue, the Fed cut a key interest rate by half a percent, the fourth cut this year. The stock markets rallied big time, although if the recent past is a prelude to the future, profit seekers might start selling tomorrow, reversing some of the dramatic gains.

Still, investors are hoping today's rally represents a turning point, and that's our top story.

(BEGIN VIDEOTAPE)

BLITZER (voice-over): Wall Street had not expected another move on interest rates before the Fed's meeting next month. Markets reacted swiftly with a power house rally. At the closing bell, the Dow had soared almost 400 points to more than 10615, up almost 4 percent, its third-strongest one-day point gain ever. The Nasdaq jumped 156 points, closing at 2079, up 8 percent.

Why the surprise move from Alan Greenspan and his colleagues at the Fed? MARK ZANDI, ECONOMY.COM: Clearly, they're very worried that the risks of recession are very high. There is a good chance that this economy will slip away into a downturn, and so they're acting very aggressively in an effort to forestall a possible recession.

BLITZER: Investors were already encouraged by earlier news that some corporate giants, including Intel, General Motors, and CNN parent company AOL Time Warner beat profit forecasts. Though overall profits are still expected to post their worst quarter in a decade.

The Fed explained its move, citing slow business investment, eroding corporate profits, and the recent stock market slide, all of which combined to threaten consumer confidence.

DIANE SWONK, ECONOMIST: This is not a Fed panicking. This is a Fed hedging our downside, willing to stimulate growth, no matter what the inflation situation is.

(END VIDEOTAPE)

BLITZER: For more on the Fed's move and Wall Street's exuberant reaction, I'm joined now from New York by the former anchor of "MONEYLINE," and starting May 14th, the next anchor of "MONEYLINE," CNN's Lou Dobbs.

Lou, welcome back to CNN. Good to see you on the "MONEYLINE" set in New York.

LOU DOBBS, FINANCIAL JOURNALIST: Good to see you, Wolf. Good to be with you.

BLITZER: Thank you. Now, let's get right to the issue at hand: The fact that Alan Greenspan and the Fed cut the interest rate surprisingly another half a point -- does that suggest that they're worried the economy is in worse shape than a lot of other people may have thought?

DOBBS: I think that we're going to have to wait and see, frankly, on that. No one really knows what the Fed is thinking, but it is clear with this rate cut that they saw enough weakness in the economy to justify the move.

With this move, Wolf, interestingly enough -- you were talking about history. We have now seen a greater rate reduction than we saw a rate increase in '99 and 2000, and it's been condensed. We have had four rate decreases over the course of the past four months, two of those, intermeeting rate cuts, which suggest the urgency with which the Fed is now dealing with a slowing economy, and a market that has been in a tailspin for, arguably, much too long.

BLITZER: Do you agree that, as a lot of analysts are suggesting, that profit seekers might see some -- might signal some reverses tomorrow in the markets, seeking to try to get that quick profit?

DOBBS: I think, as in all markets, anything is possible. I think the more likely scenario here, Wolf, is that we will see investors returning to this market seeking value, looking for opportunity in the months out ahead.

You talked about Intel, you talked about AOL, and other companies that are now talking about an upturn in the second half, or at least stabilized conditions, in terms of their relevant sectors in this economy. That is very bullish news. It is not sufficient news or forecast, for investors to say: "I'm going to get back into momentum investing," because that would be a sure path to perdition.

But we are seeing value investors move back into this market. We are starting to see prudent investing, and I suspect that we are going to see with -- quarter-to-quarter, we're going to see some fairly good, not outstanding, by any measure, but fairly good earnings reports start rolling in, in the third quarter. And being compared to what, obviously, were weak quarters in the year previous.

BLITZER: These kinds of cuts: How can they be translated into improving the economy in the short term?

DOBBS: Well, you will hear a number of economists and analysts suggest to you that the real impact here is that suddenly money will be available, that the cost of credit will decline, and we will see more houses bought and so forth. The first -- and all of that is actually very true.

But I think the most immediate and perhaps even the most important part of these rate cuts, and today's in particular, is that it boosts consumer confidence. Through all of the travail of the past year, from the market highs of a little more than a year ago to a slowdown in the fourth quarter of last year in terms of the economy, the consumer has stayed the course.

We've seen, of course, some slippage in terms of manufacturing, five months of declining industrial production, an uptick in the most recent month. We have seen however, car sales remain surprisingly strong. Home sales remain surprisingly strong in this environment. The consumer's confidence has to be restored over the short term by moves like this by the Fed.

BLITZER: Lou Dobbs, returning to CNN May 14th to anchor "MONEYLINE." Thanks again for joining us. We hope you'll be a frequent visitor on this program as well.

DOBBS: Wolf, I will be delighted, and I am so anxious to get back to work, I can't tell you.

BLITZER: Our viewers are ready for you, Lou. Thanks for joining us.

DOBBS: Thank you.

BLITZER: Meanwhile, there was other news today. A meeting meant to hash out their differences has left the United States and China even more at odds. Let's go live to CNN State Department correspondent, Andrea Koppel.

Andrea, that first meeting did not go well, but I take it there is word tonight of a second meeting?

ANDREA KOPPEL, CNN CORRESPONDENT: That's correct, Wolf. That meeting, State Department officials tell CNN, is scheduled to begin shortly. At least, their understanding is that it's going to begin shortly with the U.S. ambassador to China, at the foreign ministry, with senior Chinese foreign ministry officials.

The message from Ambassador Prueher to the Chinese is that talks must begin immediately on that EP-3 surveillance plane, the one that the Chinese have had now since April 1st.

Earlier today -- earlier on Wednesday, rather, in China, the U.S. delegation that sat down with Chinese officials basically walked out in frustration. They said the meeting was a bust. It lasted for 2 1/2 hours, it was testy, and the Chinese refused to discuss the surveillance plane, one of the top U.S. concerns, trying to get back that plane and trying to repair it.

The Chinese, basically digging in their heels. But according to one senior State Department official, Wolf, who is very experienced in negotiating with the Chinese, he said often day two can be different from day one.

BLITZER: Andrea, half a world away in the Middle East, more fighting today between the Israelis and the Palestinians. Very briefly, I take it there was a different U.S. reaction today than yesterday.

KOPPEL: Well, certainly the words "excessive" and "disproportion" were not used by the State Department. That was -- those were the words chosen by Secretary of State Powell yesterday, describing the Israeli response to the Palestinian mortar attacks. That's when the Israeli IDF went into Palestinian territory and appeared to indicate that they were going to stay there for some time. But then by the end of the day, they withdrew, following Secretary Powell's statement.

Now, having said that, the State Department is still standing firm, saying the violence needs to end. It's urging all sides, the Israelis, Palestinians, and Hezbollah to step down and resume normal relations.

BLITZER: Andrea Koppel at the State Department, thank you very much.

Up next: eight years ago tomorrow, federal agents stormed a religious cult's compound near Waco, Texas. A best-selling book charges that was just one instance of rampant abuse and corruption within the Clinton administration and its justice department.

Author David Limbaugh, brother of radio's Rush, squares off with former White House special counsel Lanny Davis.

And later: the Mississippi River turns into a lake. We'll look at the Midwest flooding.

(COMMERCIAL BREAK)

BLITZER: Welcome back. In tonight's leading edge, NASA plans to test a new type of space plane. The XF43-A will be able to fly at seven times the speed of sound. The XF3-A uses what's called a scramjet engine to scoop up air and mix it with hydrogen to create thrust without using rockets.

NASA is counting down for tomorrow afternoon's launch of the space shuttle Endeavor. An international team will deliver and attach a giant robotic arm to the international space station. The arm will be used to help complete construction of the station.

A panel appointed by the pentagon says the Marine Corp's troubled V-22 Osprey needs repair and redesign work before returning to flight. The Osprey can take off like a helicopter and fly like a plane. The Marines grounded the Osprey because of two fatal crashes last year.

Up next, we'll have David Limbaugh and Lanny Davis on the Clinton, Reno Justice Department. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back. He charges the Clinton Administration was permeated by corruption, and that Janet Reno's Justice Department was used to shield its abuses, and to wage war against its enemies.

Joining me here in Washington, David Limbaugh, he's Rush's brother and the author of the best-selling book, "Absolute Power." And, joining me from Cocoa Beach, Florida, a staunch defender of President Clinton, he became an expert in scandal management: former White House special counsel Lanny Davis.

Thanks to both of you for joining us.

And David, let me begin with you and your book which is now the number three best-seller in "The New York Times". Among other things you say this, and let me read a brief excerpt from the book, "Janet Reno dedicated the awesome enforcement power of the Justice Department to protect and defend President Clinton's multiple crimes and abuses of power. She prostituted justice into a base political arm of the administration."

As you know, the White House right behind us, there were lot of people in the White House that didn't like Janet Reno. They thought she was much too fast with her calls for independent councils, one of which Ken Starr led to his impeachment.

DAVID LIMBAUGH, POLITICAL COMMENTATOR: Yes, and that's true. It's a mixed blessing, I mean, Janet Reno did some things to disappoint Clinton. I admit, she's an enigma. She appointed an independent counsel, that is she recommended the appointment of an independent counsel on travelgate, filegate and Whitewater. And I don't deny that and I'll concede that. And I concede certain things that she did do correctly when she exercised proper judgment in the book. And I admit that she was a nightmare for Bill Clinton on a few minor things, but just because she did a few good things doesn't exonerate her on from the bad things she did, and that's what my book focuses on.

BLITZER: And the worst thing that she did in a nutshell, very briefly?

LIMBAUGH: Well, she turned the Justice Department into a private law firm for President Clinton and to exceed to his personal demands. It allowed justice to be used as a tool for Bill Clinton. The worse scandal though, was the campaign finance scandal where she refused to appoint an independent council despite the recommendation of four people under her, including Charles Labella and Louis Freeh.

BLITZER: What about that, Lanny Davis? Charles Labella and Louis Freeh did want her to call for an independent council, yet she resisted all those appeals.

LANNY DAVIS, FORMER CLINTON SPECIAL COUNSEL: Well, first of all, I hope we can distinguish characterizations and accusations from facts. Mr. Limbaugh, who I'm told is a very intelligent man, and his brother, while I disagree with, has been very cordial to me isn't yet talking about facts. He's talking about his own opinions and his characterizations, so on the independent counsel appointment issue, if Mr. Limbaugh disagrees with the way the independent council reads, then we need a new Independent Counsel Act.

The reading of that act says -- I didn't interrupt you, David -- the reading of the act says that you have to have evidence of a specific crime or actual conflict of interest by the attorney general. Now, Mr. Limbaugh well knows that if the Justice Department existing now agrees with his assessment of campaign finance crimes by Mr. Clinton's associates then Attorney General Ashcroft can go ahead and indict. But as far as I'm concerned there was no evidence of crimes, and that's why her decision on not appointing independent council was the correct one.

BLITZER: All right.

LIMBAUGH: There's unambiguous evidence of crimes, and I will talk about the facts and I talk about nothing but facts in my book, very few opinions. I pepper a few in there just for good measure.

Bill Clinton knowingly raised millions of dollars of foreign campaign contributions, knowing he was doing it. So did Al Gore. Al Gore dialed for hard dollars in the White House, knowing that these monies would be used -- be contributed to hard money accounts. There was controlling legal authority. The independent counsel statute was triggered, because these crimes were committed. There wasn't even any debate about it.

In fact, when I heard Janet Reno talking before the Congress, I was incredulous. What are you talking about, Mrs. Reno? I mean, Orrin Hatch was incredulous. He wanted to like this woman. But she -- Lanny, it really wasn't even close in these cases. DAVIS: You haven't...

LIMBAUGH: He promoted...

BLITZER: Go ahead.

DAVIS: You haven't responded to my challenge, because I don't think you can. If you're right, then John Ashcroft can indict -- let me finish -- Your accusations aren't evidence, they're accusations. Let's have John Ashcroft's Justice Department indict.

The reason they won't is because you don't have evidence. You only have accusations, and then you have to accuse the Bush Justice Department of being in a plot with the Democrats. I don't think you're going to do that, David.

LIMBAUGH: No, but remember, you're the one who wants us to be discriminating in what we say. I'm not asking for an indictment. I'm asking merely for an investigation, and of course, she had a conflict of interests. It pertained to her boss and her vice president, who were above her and had her job at their disposal.

(CROSSTALK)

BLITZER: Let him finish.

LIMBAUGH: Ashcroft will investigate the evidence and if it warrants the appointment of an independent counsel or pursuing it, he may do it. I bet you they won't do it, any way, because they move on -- want to move on. It's a totally different issue...

DAVIS: Why?

LIMBAUGH: And that will not vindicate...

DAVIS: Why?

LIMBAUGH: ...any more than Robert Ray have vindicated Hillary when he chose not to prosecute her before a DC jury in Washington.

DAVIS: Let me remind you that Ken Starr disagrees with Mr. Limbaugh, Robert Ray disagrees, now he's accusing John Ashcroft of not going after the Clinton White House. In the world of David Limbaugh, everybody is against the Limbaugh view and nobody who disagrees has any facts, including now John Ashcroft, who is going to let it move on, despite Mr. Limbaugh's view that he ought to do something.

LIMBAUGH: I didn't say that.

BLITZER: Hold on!

DAVIS: No evidence at all of any crime. Maybe that's the truth.

BLITZER: Hold on one second. David, hold on. The point that Lanny Davis is making that if, in fact, the president, the Attorney General Janet Reno and Bill Clinton committed all these crimes, couldn't John Ashcroft if he wanted to -- he's the new Attorney General -- open up an investigation?

LIMBAUGH: Absolutely, but it's way too early to determine whether he's going to or not. But if he doesn't, that won't be proof that he doesn't believe crimes were committed.

DAVIS: What will it be proof of, David?

LIMBAUGH: It will be proof...

(CROSSTALK)

LIMBAUGH: I don't state more than the facts allow in my book. I let the evidence speak for itself. And I'm asking you not to, too. If he chooses not to open up an investigation, he may have reasons outside the legality, he may just decide it's not politically wise to get back into it. George Bush...

DAVIS: That may be one reason, David. I'll grant you that. Another reason...

(CROSSTALK)

Another reason may be, everybody is right and you are wrong. Is that possible?

LIMBAUGH: Lanny, that's so absurd.

DAVIS: Is that possible?

LIMBAUGH: Same debate tricks (UNINTELLIGIBLE) but I want to be respectful. But, you're talking about what other people have done, what Ashcroft has done, what we need to focus on is the crimes Bill Clinton and Al Gore committed right in front of our faces and Janet Reno refused...

BLITZER: We have only a little time, David, and I want to ask your opinion. Looking ahead, the pardons Marc Rich others, is there evidence as far as you know, having looked into it of criminal conduct on the part of Bill Clinton that warrants opening up an investigation by the Justice Department, not just leaving it to Mary Jo White, the U.S. Attorney of the Southern District of New York?

LIMBAUGH: As to those pardons, no, I would be irresponsible if I were to say, there is evidence that should lead to an indictment. I think that she...

BLITZER: You would have prosecuted her?

LIMBAUGH: I don't know if I do or not. I have confidence in John Ashcroft, he comes to my state. He's an honorable man, and he'll monitor what she does. And is she -- I think it's great that Bush and Ashcroft are giving a Democrat a chance, when a lot of people were attacking her. I think that's excellent, and if she finds evidence that warrants an investigation or further -- investigation or prosecution, I assume she's going forward. I'm going to give her the benefit of the doubt. But I can't say. DAVIS: Very, very briefly.

BLITZER: Very briefly, Lanny, go ahead. We only have a few seconds.

DAVIS: Janet Reno left office with an approval over 70 percent because of her integrity and independence; she appointed 7 independent counsels.

Secondly, her programs reduce crime.

And thirdly, accusations in a book that don't amount to due process, indictment, and conviction by a jury of your peers -- the American people know the difference between accusation and evidence, and if John Ashcroft...

(CROSSTALK)

DAVIS: There's no evidence, David, that's the main stay.

BLITZER: Lanny Davis, we have to leave it there. But, David Limbaugh, how stunned are you, if at all, by the success of your book?

LIMBAUGH: I'm just gratified and humbled by the success of it.

BLITZER: Number 3 coming up at the "New York Times" best-seller list. "Absolute Power" the name of the book. Unfortunately, we've got to leave it right there. We're out of time. Thanks for making the trip here.

LIMBAUGH: Lanny, I'll brainwash you later, buddy.

DAVIS: Give my best to your brother, David.

BLITZER: Thanks to both of you.

Ahead, we'll have the latest on those who spend their days and nights watching the river. And Mississippi voters speak out and some plan to walk out in protest of the state flag.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Topping other news today, in the Midwest, the rising Mississippi River is again forcing residents to flee its banks. Today, the governor of Iowa issued a disaster declaration for 10 counties bordering the river. It's been rising about a foot a day, and is expected to crest at near record levels.

The U.S. Supreme Court has issued new guidelines for Congressional redistricting. The court ruled today, that a district can be drawn to satisfy political rather than racial motives. This 5- 4 ruling gives states a roadmap to drawing boundaries that acknowledge race.

The Bush administration is toughening arsenic standards for drinking water. President Bush drew heavy criticism from environmentalists when the EPA killed a Clinton administration standard that would have lowered arsenic in drinking water, the EPA said more review was needed. Today, it announced new standards will be enacted within nine months.

And, updating a story we told you about last night, the vote on Mississippi's century-old flag could spark economic sanctions. The NAACP says it will decide next month whether to lead a boycott of the state. By a nearly two-to-one margin yesterday, Mississippi voters chose to keep the state's controversial flag with its Confederate emblem.

Please stay with CNN throughout the night. First lady Laura Bush is Larry King's guest at the top of the hour. Up next, Greta Van Susteren. Thanks very much for watching. I'm Wolf Blitzer in Washington.

"THE POINT WITH GRETA VAN SUSTEREN" begins right now.

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