NEWSROOM for August 22, 2001
Aired August 22, 2001 - 04:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: Seen in classrooms the world over, this is CNN NEWSROOM.
SHELLEY WALCOTT, CO-HOST: And welcome to your Wednesday NEWSROOM. Glad you're with us. I'm Shelley Walcott.
On today's show, the U.S. Federal Reserve hopes seven times is the charm. Here's the rundown.
First up, the Fed cuts interest rates again. We'll tell you how this could shake things up in the U.S. economy. Then in "Biz Desk," it's a phenomenon of the 1990s. We'll take a look at the rapidly rising stars known as CEOs. From highflying capitalist to economic down and out, today's "Worldview" examines the victims of recession in Argentina. And finally in "Chronicle," after three decades in the U.S. Senate, Jesse Helms decides to step down.
In an effort to keep the United States economy out of a recession, the Federal Reserve drops its short-term interest rate another quarter of a percent. This is the seventh time this year the Fed has lowered the key interest rate. It now stands at 3.5 percent, the lowest in more than seven years. The Fed hopes the rate cuts will encourage banks to lower their own interest rates, which would make money more readily available to consumers. The move Tuesday did little to ignite investor enthusiasm.
Allan Chernoff has more on the reaction from Wall Street.
ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): Instant reaction from traders at CIBC World Markets: more of the same. Another expected interest rate cut, another gloomy assessment of the economy from the central bank. Initially, some traders even called the Fed's rate cut "a non-event."
MICHAEL PALAZZI, CIBC WORLD MARKETS: It means that we are going to still trade in a pretty tight range. It looks like any sort of earnings disappointment will continue to wreak havoc on individual stocks.
CHERNOFF (voice-over): But the Fed's continuing focus on the economy's troubles did catch investors' eyes. Minutes before the Fed announcement, the Dow was up 50 points. Minutes later, it was in negative territory and kept dipping.
Wall Street had been hoping the Fed might highlight signs that the economy is responding to the interest rate-cutting campaign under way since the beginning of the year. Instead, the central bank offered more justification for its monetary policy easing, pointing to the continuing decline in corporate spending and profits. And if the Fed's medicine hasn't helped the patient, much of Wall Street fears there could be more pain coming.
ED MCMAHON, MERRILL LYNCH: We're going through September and October, normally tough times for the marketplace here. So here we've had six or seven rate cuts, we're waiting for a catalyst, but we're going into the third quarter preannouncement, so it's going to be very tricky on how the market reacts.
CHERNOFF: Semiconductor and software stocks: technology names that, in the past, have led the market higher as the Federal Reserve was easing.
Fed watchers warn it takes six to nine months for central bank interest rate cuts to work their way through the economy. Usually the stock market climbs in anticipation of an improving economy, but it's been eight months now and impatient investors are still waiting and hoping to see results.
Allan Chernoff, CNN Financial News, New York
WALCOTT: It's not just investors in markets in the U.S. that are waiting for the Federal Reserve rate cuts to have a positive impact on the economy, the entire world is depending on a U.S. recovery to get growth back on track.
Kitty Pilgrim looks at the global economy and what it may take to get it going again.
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): The world economy is clearly slowing and the answer to growth may be in a bar code. It all rests on consumers. The driver of growth for the United States, the consumer, a big reason why other economies, such as Japan and Germany, are lagging: The consumer's tight grip on the wallet.
STEPHEN ROACH, MORGAN STANLEY: In many respects, this is the first recession of the modern day era of globalization. The world is more connected than ever before, through trade flows, through financial capital flows, through globalized supply chains linking technology production platforms in Asia to American consumers.
PILGRIM: The $33 trillion world economy will grow just 2 percent this year after hitting a 17-year high just last year. So, in nine months, the world has gone from boom to bust. Recognizing the problem was the first step. CLARK WINTER, CITIGROUP PRIVATE BANK: The U.S. recognized the problem as being one of economic slowdown and moved to act, and the Europeans thought they had inflation and acted rather to fight inflation. I think they missed the boat and their timing was off.
PILGRIM: Global equities have been falling like a stone in the last year. Germany, the UK, France, Hong Kong, Singapore, Korea, Japan and Brazil, all posting double-digit losses. And worries over Argentina defaulting on $128 billion in public debt -- many fear a contagion sell-off if Argentina does not get extra help from the IMF.
FRANCIS FREISINGER, MERRILL LYNCH: If we don't get a strong package in the next week or two, the chances for deterioration are significant. And Argentina represents around a fifth of all emerging market debt, so a problem there is a problem for all emerging markets.
PILGRIM (on camera): The world is unusually dependent on the U.S. economy right now. By IMF standards, the United States accounts for some 20 percent of the world's economy. So now more than ever, the entire world is watching the Fed and waiting for recovery.
Kitty Pilgrim, CNN Financial News, New York.
WALCOTT: Bill Gates, Jeff Bezos, Michael Dell, these are some of the folk heroes of the new economy. The risks they have undertaken and the rewards they have reaped make them role models for many in the field of business. In fact, some are calling this phenomenon CEO worship. So in the World Series of business are these guys the ultimate all-stars?
Susan Lisovicz fills us in.
SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): In the 1990s, CEO stars rose faster than the Nasdaq, the folk heroes of a new economy. Bill Gates topped most admired lists, even after being branded a predatory monopolist.
Michael Dell spawned a legion of loyal Dellionaires. Jeff Bezos named "TIME" man of the year, even though Amazon never made a dime. Some old economy names also emerged as stars: Jack Welch of GE got a book advance that rivaled the Pope's. The cult of the CEO may seem like a distinctly modern development, but historian Nancy Koehn says recent corporate stars have plenty of predecessors.
NANCY KOEHN, HARVARD BUSINESS SCHOOL: Henry Heinz was the ketchup king. The pickle king was certainly a celebrity, in Pittsburgh and nationally. Andrew Carnegie had a lot of attention focused on him, much of it positive. George Eastman, who helped found the Kodak company and invent the Kodak camera, was a very popular, important man.
And J.P. Morgan, who was very much like Warren Buffet, Bill Gates today.
LISOVICZ: CEO worship isn't a new phenomenon. Experts say it flourishes along with the economy.
TOM STEWART, "FORTUNE": This is really a function of economic good times. People are happy, people are wealthy. CEOs are reporting good earnings. It's easy to look like a genius in a bull market, and we tend to celebrate genius.
LISOVICZ: But what happens when bull turns to bear, as this "Fortune" cover put it, "uh-oh." The recent stars are now under siege: Blamed for over investing in high-tech, blasted by regulators for using fuzzy math in reporting earnings, criticized by investors as history's longest expansion hit a wall. Stars of the past came under siege as well when their own boom came to a crashing end.
STEWART: By the end of the 30s, Ford was an isolated man attacked. Ford became "an enemy of the people," if I can put that in quotes. And his reputation was really low by the time he ended his career.
LISOVICZ: Despite all the tough questions for today's CEOs, public opinion has not yet turned against them. Perhaps that's because unemployment remains low. It may be just a matter of time.
KOEHN: It will be very interesting to see how the CEOs position and specific individual status and stature changes over the next three or four years as the society, workers, managers, investors, families come to terms with the lessons of this second chapter of the information revolution, the dot-com implosion. I think we are going to see a filtering not only of business practices, but of who we admire and for what reasons we admire them.
LISOVICZ: And after the loss of nearly $4 trillion in market value, no one can blame investors for asking this of America's star CEOs: Show us you can shine in bad times as well as good.
Susan Lisovicz, CNN Financial News, New York.
WALCOTT: They say the family that plays together stays together, and this couldn't be more true for one family of race car enthusiasts who turned their love of the track into a family business.
David George reports on how the Watkins clan motored their way into the NASCAR big leagues.
DAVID GEORGE, CNN CORRESPONDENT (voice-over): NASCAR racing is one of the highest rated sports on television, second only to the NFL. Just two of NASCAR`s many series, Winston Cup and Busch Grand National, drew about 9 million fans last year to tracks across the country. Barely a year ago, Mark Watkins, a railroad worker, was one of those fans. His son Josh dreamed of one day becoming a driver and the two shared a bigger dream, a team of their own. Mark decided the only thing stopping them was money.
MARK WATKINS, BIG FAN RACING: I knew that financially there was no way that I could put together a team.
GEORGE: A car costs $40,000, an engine $40,000 more. Sponsors pay millions for a piece of the action, but Mark Watkins didn`t have any sponsors, until he got an idea.
WATKINS: One day it popped in my head that maybe there would be enough people on the Internet who were NASCAR fans who would like to donate or put in just a small amount of money, and if we could create enough volume we could actually buy a car, maybe go out and run a few races.
GEORGE: Watkins set up a home page and advertised on eBay and pretty soon, people like "Grumpy" Wadding were buying shares at $50 and $100 each.
BILL "GRUMPY" WADDING, BIG FAN RACING INVESTOR: I bought one for myself, then I bought one for my wife and then my stepdaughter got involved with it.
GEORGE: The money literally poured in, a total of $100,000 and counting. In return, each owner got a share in the car and a rubber duck, the team mascot.
MARDY LINDLEY, NASCAR DRIVER: We didn`t know how well it would take off, and man, it just come in so fast and it enabled us to come to our first Busch race here in less than six months of work.
GEORGE: Here is Indianapolis Raceway Park. The Busch circuit is NASCAR`s minor league, but it is NASCAR nonetheless. Today`s race, the Kroger 200. On a bright day in early August, the Big Fan Team is ready for the big time.
But the day did not go smoothly for fans of Big Fan Racing. Number 89 didn't even make it through the pre-race <20:20:20> practice.
WATKINS: We were running real well, you know, as far as practice. We were close to the top 10 in practice, and it`s just one of those racing things. We had a valve break on it.
GEORGE: Big Fan Racing didn`t have an extra motor, standard equipment for teams with big bucks sponsors. Big Fan`s backers chalked this one up to experience and vowed to stick with their fan- financed approach to racing.
David, George, CNN, Indianapolis Raceway Park.
(END VIDEOTAPE) WALCOTT: Our business news continues now in "Worldview." Find out how a Chinese company is hitting it big making baseball memorabilia. Meantime, the economy is striking out in Argentina and workers are struggling to make ends meet. We'll dig into the daily grind.
But first, time to celebrate an anniversary. On August 22 in 1864, the Geneva Convention for the protection of the wounded laid the foundation for the International Red Cross.
RUDI BAKHTIAR, CO-HOST: Do you know somebody who has donated blood during a blood drive? Chances are good they gave it to the Red Cross, a humanitarian organization with a global mission. The agency promotes humanitarian principles and values, provides disaster response, fosters disaster preparedness and promotes health and care in the community. You may have seen Red Cross workers in the news helping out during earthquakes, floods or droughts.
Kathy Nellis has more on the history and mission of this organization.
(BEGIN VIDEO TAPE)
KATHY NELLIS, CNN CORRESPONDENT (voice-over): The International Red Cross is part of a humanitarian movement with its roots in 19th century war-torn Europe. Henri Dunant, a young Swiss businessman, wrote about the horrors of war, describing a battlefield in Italy where 40,000 troops were killed or wounded and left without help in 1859. A few years later, the International Committee of the Red Cross was born. On its heels came the Geneva conventions, international treaties designed to protect injured war victims and prisoners of war.
(on camera): The convention adopted a red cross on a white ground as an emblem so that ambulances, hospitals, doctors and nurses could be identified on the battlefield. The Red Cross flag is simply the Swiss flag with the colors reversed.
(voice-over): The International Red Cross is a neutral organization with a humanitarian mission: To protect the lives and dignity of victims of war and disaster. Workers distribute food and medicine and provide help to those left homeless, hungry or hurt.
There are 176 members that make up the League of Red Cross and Red Crescent societies headquartered in Geneva, Switzerland. Today, the sign of the Red Cross is a symbol of compassion and help worldwide.
Kathy Nellis, CNN reporting.
WALCOTT: Argentina is a country in crisis. After boosting one of the strongest economies in all of South America, the nation is now in the middle of a deep recession. It's an ironic twist for many who live there. Back in the 1940s, thousands fled there from Spain and other European countries to escape World War II and to start a better life. Today, Argentina is home to about 37 million people, but many are thinking about returning to their homelands to find work. Unemployment is up to 16 percent and jobs, even for the well educated, are becoming harder and harder to find. That makes simply making ends meet difficult.
And as Harris Whitbeck reports, there is little relief in sight.
HARRIS WHITBECK, CNN CORRESPONDENT (voice-over): Julio Villa and his wife Karina ply the stalls at a Saturday market on the outskirts of Buenos Aires, looking for bargains. Both are unemployed, and they've been forced to change their way of life due to the Argentinian economic crisis.
"Before," he says, "one was able to say, OK, I'll spend this amount. Now, one says, I've got this amount and that is all I can spend."
Hilda Martinez agrees. She works as a maid in a private home, making about $125 a week, barely enough to support her unemployed husband and son.
"I have to look for whatever is cheaper," she says, "I can't go to a regular supermarket or butcher shop, because I can't afford it."
The middle class that for a while was burgeoning in Argentina has been hit the hardest by the three-year-long recession, spurred by too much government spending and a drop in exports. Standards of living have eroded.
(on camera): The crisis has gone beyond decreasing the amounts people can spend on daily needs like food and clothing. Its effects are now more far-reaching. Many young people are having to reinvent the futures they had envisioned.
Muni, 40 years old, was once a promising actor at the National Theater in Buenos Aires. The Saturday market is now his stage.
"Now I'm playing a market vendor," he says, interrupting himself to demonstrate.
But life in today's Buenos Aires is not play for Muni, who must feed his wife and four children on less than $500 a month he makes selling potatoes. His dream of bringing classical characters to life in theater has been put on hold.
"Culture is not a priority now," he says, "people have to think about putting food on their table before considering going to the theater."
And nobody knows when the eroding lifestyle of the Argentinian middle class might improve.
Harris Whitbeck, CNN, Buenos Aires.
BAKHTIAR: Do your favorite sports stars seem larger than life? Well, it's no wonder. With their fame and fortune many have taken on celebrity status in the United States and around the world. But now a company has found a way to cut them down to size. In fact, its versions of sports stars are smaller than life, much smaller.
Tom Rinaldi explains.
TOM RINALDI, CNN CORRESPONDENT (voice-over): Forget free agency. Disregard realignment. Yawn at the home run race. Does baseball have something bigger, now?
It started with one, grew to a few, and now full-on phenom. Welcome to Bobblehead nation.
RINALDI: A little over a pound, a little less than foot, they can fill stadiums as well as, well, Big Mac can. When Alexander Global Promotions created its first Bobblehead in 1999 -- no, Barry, it wasn't you, it was Willie Mays -- they had no idea their factory in China would be making upwards of a million in a month this summer, nor that the dolls would resell for hundreds of dollars on eBay.
UNIDENTIFIED MALE: It's very cool. I mean, it looks just like him. Sorry, Edgar
UNIDENTIFIED MALE: They've done a really great job of making them resemble the players.
MALCOLM ALEXANDER, ALEXANDER GLOBAL PROMOTIONS: We've had players trying to modify the dolls, which would like their butt raised and bubbled a little bit. We've had players wanting their arms a little more cut or buff. But the overall impression is: This is fabulous.
RINALDI (on camera): Can anybody really find any reason why a curiosity becomes a craze? What is it about these figures that creates such a frenzy? Well, one thing is for sure. The players and the coaches who model for them, they don't know.
LOU PINIELLA, MANAGER, SEATTLE MARINERS: What is it, Bobbleheads?
JOHN OLERUD, SEATTLE MARINERS: Oh, my gosh, so what are we going to do with this?
EDGAR MARTINEZ, SEATTLE MARINERS: This is the first time I've seen this. They've done me with the beard and everything.
UNIDENTIFIED PLAYER, SEATTLE MARINERS That looks more like Sylvester Stallone than it does Edgar Martinez. Rocky with a hat on, I guess.
OLERUD: I don't know. I would say that there should be a smile on this doll.
PINIELLA: I hope I'm a little better looking than this Bobblehead doll. Outside of that, I don't really have much to say.
RINALDI (voice-over): From a media perspective, Bobbleheads can be very helpful. Joe, should you have really picked seven Yankees as All-Stars? Mike, have you forgiven Roger Clemens yet? Hey, Junior, how about that interview?
Bobbleheads are branching out, basketball, boxing, pigs, who knows? But when the heads stops bobbing, there must be enormous psychic weight to bear alone on the field, isolated on the bench, simple in the stands, knowing that you could become tomorrow's Cabbage Patch Kid or Beanie Baby. Just enjoy it for now, right? Right.
In Seattle, I'm Tom Rinaldi.
(BEGIN ASK CNN)
ADAM PILLARD, BLACK RIVER FALLS, WISCONSIN: Hi, my name is Adam, I'm from Black River Falls, Wisconsin. My question is: How are golf balls made?
BILL MORGAN, SENIOR VICE PRESIDENT, R&D, TITLEIST GOLF BALLS: Golf balls are made using a variety of techniques that are common to both rubber and plastics processing. The three most popular techniques are: Compression molding, injection molding and casting.
To compression mold a golf ball, two half shells or cups of cover material are formed and assembled around the golf ball core. They are then placed into a hot mold where the cover material is melted so that it bonds to the core, and the two cover halves are joined together, at the same time the dimples are formed in the ball.
In injection molding, the core is placed in a cold mold and hot plastic is injected around the core.
The newest technique for making golf balls, casting, involves using two different liquids, which are then mixed together, and then react to form a solid cover material. This liquid is poured, or cast, into open molds, and then the core is carefully placed and centered inside the liquid material and held until the cover material forms a solid.
(END ASK CNN)
WALCOTT: A leading senator in foreign affairs and one of the most conservative Republicans in Congress may be stepping out of the limelight soon. North Carolina Senator Jesse Helms is expected to announce his retirement. Helms, who turns 80 in October, has had a variety of health problems in recent years.
Jonathan Karl reports on the mark that Jesse Helms has made in the U.S. Senate. (BEGIN VIDEOTAPE)
JONATHAN KARL, CNN CORRESPONDENT (voice-over): Jesse Helms, patron saint to conservatives, prince of darkness to liberals. During his three-decade Senate career, Helms carried the flag for the right on some of the noisiest ideological conflicts of his time: abortion, school prayer, flag burning, affirmative action and gay rights.
Helms' trademark feistiness came through in the late 1980s, when the National Endowment for the Arts faced his wrath for funding controversial artists, like Robert Mapplethorpe.
SEN. JESSE HELMS (R), NORTH CAROLINA: Now, if artist want to go into the men's room and write dirty words on the wall, let them furnish their own crayons. Let them furnish their own wall, but don't ask the taxpayers to support it.
KARL: A perennial top target of the Democratic Party, Helms won five bruising Senate campaigns, never softening his rhetoric, even as his state's political center of gravity drifted to the left.
In his 1984 race against then Governor Jim Hunt, Helms spent $14 million, making it at the time the most expensive Senate campaign ever. In his next campaign, Helms was accused of inflaming racial tensions with an ad attacking Democrat Harvey Gantt over affirmative action.
(BEGIN VIDEO CLIP, HELMS CAMPAIGN AD)
You needed that job, and you were the best qualified. But they had to give it to a minority.
(END VIDEO CLIP)
KARL: It was when Ronald Reagan's sputtering presidential campaign came to North Carolina in 1976 that Helms first established himself as a conservative hero. By helping the a struggling Reagan win his first ever presidential primary, many conservatives believe Helms set off a chain reaction that paved the way for a White House win four years later.
What most attracted Helms to Reagan was his tough talk against communism. Always the cold warrior, Helms even took aim at Reagan's State Department after the downing a Korean Airlines plane in 1983 by the Soviet Union. It was vintage Helms.
HELMS: Well, I hope that this will convince our State Department to stop being so namby-pamby about the Soviet Union.
KARL: Helms kept up his anti-communist crusade long after the fall of the Soviet Union, working to tighten the trade embargo against Cuba.
HELMS: I want you fellows to -- and ladies, to deliver a message to Cuba for me. Farewell, Fidel! KARL: It was as chairman if the Foreign Relations Committee that Helms made his mark, often in surprising ways. An ardent critic of the United Nations, Helms nevertheless became the first U.S. senator to address the U.N. Security Council.
HELMS: It may very well be that some of the things that I feel obliged to say will not meet with your immediate approval, if ever.
KARL: He drafted a bill paying U.S. dues owed to the U.N., in exchange for reforms. The deal broke a longstanding political stalemate, earning Helms the praise of liberal democrat Joe Biden.
SEN. JOSEPH BIDEN (D), DELAWARE: Just as only Nixon could go to China, only Helms could fix the U.N. And that's true. That is absolutely, positively true.
KARL: Helms, who turns 80 in October, has a nerve condition in his feet that requires him to use a motorized scooter to get around. Earlier this year he addressed the question of when he'd retire by quoting an ailing Winston Churchill's answer to the same question.
HELMS: Young fellow, not until I am a great deal worse, or the country is a great deal better.
WALCOTT: And that wraps up today's show. We'll see you back here tomorrow.
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