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Aired January 3, 2002 - 18:00   ET


ANNOUNCER: This is Lou Dobbs' MONEYLINE, for Thursday, January 3. Sitting in for Lou Dobbs, Jan Hopkins.

JAN HOPKINS, GUEST HOST: Good evening, everyone. For the first time in several weeks, an anthrax scare hits the nation's capital. And for the second time, the intended recipient was Senate Majority Leader Tom Daschle. Today, a letter containing a powdery substance was found at one of Daschle's offices at the U.S. Capitol. Initial tests suggest the powder is harmless, and the FBI now believes it is a hoax.

Another letter sent to Senator Daschle more than two months ago contained a potent form of anthrax. It caused hundreds of government employees to take antibiotics, and closed down the Senate Hart building. That building remains closed tonight, while undergoing further anthrax tests.

In the war in Afghanistan, U.S. warplanes struck an al Qaeda compound in eastern Afghanistan today. The area has been popular with fleeing al Qaeda fighters trying to regroup. The Pentagon says there is still a lot more work to be done.


DONALD RUMSFELD, DEFENSE SECRETARY: We do want to capture Osama bin Laden and Omar and the al Qaeda and Taliban leadership. We're working on it. But even if we were to capture them tomorrow, our job would still be far from over.


HOPKINS: Rumsfeld says he does not intend to authorize negotiations that would free any of the roughly 1,500 Taliban fighters holed up in Helmand province. Those fighters are thought to be protecting Mullah Mohammed Omar, and are trying to negotiate a surrender with the Afghan government.

The Pentagon says great care is being taken to prepare facilities to receive prisoners at the U.S. Naval base in Guantanamo Bay, Cuba. Defense Secretary Rumsfeld says some of the prisoners are dangerous, and he wants to make sure there is no repeat of the prisoner uprising in Mazar-e Sharif. And meanwhile, in the Afghan capital of Kabul, about 250 Taliban prisoners were released by the new interim government today. Security Ministry officials called it a gesture of national reconciliation.

For more on those prisoners of war, and the hunt for Mullah Mohammed Omar, we're joined by Bob Franken at the Pentagon. So Bob, what is the latest there?

BOB FRANKEN, CNN CORRESPONDENT: Well, first of all, talking about the transfer of some of the prisoners, some of them the most dangerous ones to Guantanamo Bay in Cuba. Of course, that's so isolated. It is that little pocket of Cuba that the United States has controlled over the Cuban government's objections for so long, but the detention facility is being built there, a very much of a maximum security facility.


RUMSFELD: What we can do is our best. And we plan to transport them. And we plan to use the necessary amount of constraint so that those individuals do not kill Americans in transport or in Guantanamo Bay, Cuba.


FRANKEN: And as matter of fact, if they run out of room in Guantanamo Bay, Cuba, they are saying that there could be other facilities, other prisons that might be used for some of these detainees in bases in the United States.

Now, there are of course two fugitives still out there, two major fugitives out there, Osama bin Laden, his whereabouts unknown, and, as you pointed our earlier, Jan, there are all the reports of a possible negotiation about the fate of Mullah Omar, the supreme leader of the Taliban, now deposed head of the government in Afghanistan. And the secretary of defense makes it very, very clear that there's really little room to negotiate.


RUMSFELD: We are not in the business of authorizing any kind of negotiations which would let people like that go. Now, do we control every -- manage every single aspect of who talks to whom, with respect to these various types of discussions? Of course we don't. We give our advice, we give out counsel. I know that the interim government is right in the same sheet of music with us with respect to this.


FRANKEN: And to emphasize the fact that the Pentagon argues that the war is anything but over, there was the announcement of another bombing run, after all, a bombing run on an al Qaeda facility, according to the Pentagon, in the eastern part of the country, near the Pakistan border. Among other things, it was the site of raids that go back as far as 1988, when the Clinton Defense Department aimed cruise missiles at it in a failed attempt to get Osama bin Laden -- Jan.

HOPKINS: Bob, we understand that there's decision that could be coming very soon about what to do with the American Taliban, John Walker. What do you hear about that?

FRANKEN: Well, the key is the American John Walker. Most lawyers argue that there's little choice, that he really will have to be turned over to civilian authorities and be tried in the civilian courts in the United States, in contrast to those on whose side he fought, the Taliban and the al Qaeda, who could come under the president's order for military tribunals. It's just a question of when in the minds of just about most legal authorities. When the decision will be made after recommendations from Rumsfeld and of course the attorney general, the president will then decide when he should be turned over. At the moment, he is being kept on a U.S. ship off the coast of Afghanistan.

HOPKINS: Thanks, Bob Franken at the Pentagon.

President Bush has invited interim Afghan leader Hamid Karzai to Washington. The president is still on vacation in Texas. And Kelly Wallace is there, as well -- Kelly.

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: Hello, Jan. Well, that invitation was extended to Hamid Karzai back in December, just shortly after Karzai was sworn as the new head of that Afghan interim government. White House officials say no date has been set for this visit. It may come as early as February, and it will mark the first official visit by an Afghan head of state to Washington in almost 40 years.

U.S. officials say the visit also shows the administration's commitment to helping Afghanistan rebuild, following the military campaign, and the United States' commitment to working with Karzai and other leaders to keep together this interim government, and of course six months later to put together another multi-ethnic government which will rule Afghanistan in the future, Jan.

HOPKINS: Kelly, is the president preparing to make the economy part of his agenda when he returns to Washington?

WALLACE: He certainly is. With the military campaign winding down just a bit in Afghanistan, aides say he's going to be focusing right after the new year on domestic issues, what they call the two E's, education and the economy.

And it appears his first priority will be the economy. The last time we saw the president, in fact, was Monday. He's going to hit the road on Saturday, heading to California and Oregon. He is going to be talking about the economy, trying to push lawmakers to pass, Jan, what the White House is now calling the economic security plan, that is a plan to help laid off workers and also give a boost to the economy. Though, recall, what we were calling an economic stimulus package back in December, it was stalled in the Senate. The president is going to use this trip Saturday. His aides also hitting the Sunday talk shows over the weekend. The president also to meet with his economic team on Monday. This renewed push, Jan, comes as some polls show Americans are more concerned about the economy and the recession and unemployment than they are about terrorism, and it also comes as Democrats and Republicans are starting to jockey a bit in advance of the November congressional elections. So, look for the president to talk quite a bit about the economy in the days ahead. Back to you.

HOPKINS: Thanks. Kelly Wallace with the president in Texas.

U.S. airstrikes hit an al Qaeda compound in Tora Bora. And, the hunt for Mullah Omar intensifies. Here with his perspective is CNN military analyst General David Grange. So, David, the war seems to be winding down, but General Rumsfeld keeps reminding us that it's not over?

GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: No, I don't think it's winding down, Jan. I think that you have the civil war aspects of the Taliban versus anti-Taliban, that Northern Alliance, Eastern Alliance, Southern Alliance against the Taliban. That part may be phasing down somewhat.

But remember, with the momentum of the anti-Taliban forces, there are many bypassed Taliban units. And a lot of them were negotiated -- there was negotiations made not to fight, not necessarily to surrender. So you still have these elements around the area that could get fired up again and do some type of action.

And so there's a lot of pockets of resistance, people who have been doing their own thing throughout the country, and that's going to cause continued operations by not only the United States but its allies and hopefully some of the anti-Taliban forces as well.

HOPKINS: Well, and still the search for Mullah Omar and also Osama bin Laden, what are the particular challenges now in that hunt?

GRANGE: Well, there are a little bit different, I think, because you have Omar being an Afghan individual himself and a former leader, and probably a leader of some of the hard-core Talibans that's left. There's a lot of sense maybe that he doesn't want -- people don't want to betray him, even for a reward. And so, he's one of the -- one of the friends, locals of the country. He's a citizen of that country.

Where you have bin Laden, he's a foreigner. He's a mercenary, he's terrorist leader that used Afghanistan as a sanctuary. So I don't think the people are as fond of bin Laden. Those that support this Taliban cause, the al Qaeda cause, they would -- it would be easier for them to turn him in. So it may be that bin Laden may not be in the area. He may be in Pakistan, as many people have analyzed. But I think Omar probably still is in Afghanistan.

HOPKINS: What information do you think that the U.S. is getting from some of the prisoners?

GRANGE: Well, three kinds of information probably coming out. You have the tactical intelligence coming out from the military interrogators, and that's probably real-time information that they can put together to hit targets immediately, or for future operations. But it's tactical. It's right there in Afghanistan, it's during this campaign right there in the area of operations.

Then you have the FBI obtaining information, that's probably for forensics, for evidence for past attacks against the United States of America or its property and people, like the USS Cole, like the September 11 attacks. So the FBI is getting information on that, as well as information that may thwart future attacks on the homeland of the United States of America.

Then you got the Central Intelligence Agency obtaining information that's more global in nature and how to connect the dots and put information together to form intelligence for strikes elsewhere in the world against terrorist organizations.

And so, they're getting information I think three different types, used by three different entities there, but these people are putting forth some information, because they probably trained in these camps, and so either trained for a future operation, they trained for an operation that's already been conducted. So they have some kind of activity, some knowledge of this terrorist network, and so as you piece that together, you get some kind of targeting in the future.

HOPKINS: Thanks very much, General David Grange. Thanks for joining us.

GRANGE: My pleasure. Thank you.

HOPKINS: A solid rally on Wall Street today, stocks gaining ground for the second trading day of the new year. Chip sector leading today's advance. Blue chips closing at the highest level since late August. Dow Industrials gaining almost 100 points, 98. And the Nasdaq closed back above 2,000, surging 34 points. That's more than 3 percent. The S&P 500 adding 10 points. We'll have more later.

And still to come, we'll continue to update America's war against terrorism. We'll also tell you what the government is doing to stop some Internet companies from preying on Americans' fears of bioterrorism.

The winter storm in the South is snarling traffic and air travel, and there may be more to come. We'll have a live report. And we'll tell you how car-makers plan to top those 0 percent financing deals, and drive business forward in the new year.


HOPKINS: Another anthrax scare in Washington today. A part of the U.S. Capitol building was shut down when Senator Tom Daschle received a letter containing a suspicious powder. Initial tests proved negative for anthrax, but more tests are being conducted. Jonathan Aiken is in Washington with the latest -- Jonathan. JONATHAN AIKEN, CNN CORRESPONDENT: Well, that's right, Jan. Certainly, scare is the operative word on Capitol Hill today, as staffers in the Capitol office of Senate Majority Leader Tom Daschle found a suspicious letter addressed to the senator.


UNIDENTIFIED MALE: We found a letter that had a threatening note inside and a powdery substance inside of the letter. They conducted an analysis of the substance with bio tickets. Both of those tickets came out negative. So while we don't know exactly what the substance is, what we do know is that the substance is not hazardous.


AIKEN: So they don't know what it is, but they do know it won't hurt you, for now.

Now, Daschle's office is somewhat off the tourist path of the Capitol. As the majority leader of the Senate, he has access to a suite of offices. You see the map there. These offices located just off the Senate floor, and it was there that this letter was found. Hazardous materials crews, hazmat crews coming quickly, they managed to secure the office. And we should tell you, too, Jan, the staff didn't open the letter, and Senator Daschle wasn't present when it was found, so there really was no danger to all concerned.

But whether it is a hoax or not, the incident does raise some question about the screening process that's used for lawmakers' mail. Since the anthrax letters were sent to Senators Daschle, Leahy, NBC News, the "New York Post" back on October, all the mail bound for the Capitol is now sent to facilities either in Ohio or in New Jersey to be irradiated.

And then, it goes through a second automated process, just a few miles from the Capitol building. That's where slits are made in the corners of envelopes, and the item itself is shaken to see if there's anything inside. Lieutenant Dan Nichols with the Capitol Police who we saw just a moment ago tells us the letter went through all the steps in the screening process, but he really wouldn't elaborate how a letter with any kind of powder could have gotten through.

As for the letter itself, it's now being examined at the Army biological warfare labs in Fort Detrick, Maryland, that is where the anthrax letter to Senator Patrick Leahy was sent for examination. And the whole thing, Jan, is now a criminal investigation in the hands of the FBI.

HOPKINS: Well, the FBI and the Postal Inspection Service are planning to increase a reward to find out who's responsible for all of this, right?

AIKEN: Indeed. The timing of this is unusual. The Postal Service and the FBI are working now with plans to increase the reward that's been on offer for some time to see who's behind these anthrax letters back in October and some of the other hoaxes that have taken place since. They average more than a dozen a week.

The plan is to take the reward that's currently at $1.25 million and up the ante to $2 million. This will be done probably within the next several weeks.

At the same time, the Postal Inspection Service is also going to be sending out postcards to people who live in Hamilton township, New Jersey -- this is the area that surrounds Trenton, New Jersey, this is the area around -- let's refresh our memories now -- where all these letters that had anthrax in them back in October, the ones to Tom Brokaw, "The New York Post" and the two senators -- all of them had Trenton, New Jersey postmarks, all of them came through a processing center in Hamilton township, New Jersey.

The idea is to send these postcards out, Jan, try to shake the tree a little, jog the memory of people who may have seen something, may have remembered something out the ordinary or unusual as they stopped to mail a letter, anything that they think would give them a clue as to what's going on, because frankly the trail has grown a bit cold.

HOPKINS: Interesting. Jonathan Aiken in Washington.

The anthrax attacks have left Americans afraid of a bioterrorism attack. Some Internet sites have been offering products they claim will protect against biological warfare. But there is no scientific proof that the products work. Now the government is warning that those Web sites should stop promoting the products. Bruce Francis has the story.


BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): While the search continues for the perpetrator of the deadly anthrax attacks, the Federal Trade Commission is cracking down on a second wave of illegal activity, Web sites that are exploiting consumer fears. The FTC has sent out warning letters to Web sites selling non-FDA approved dietary supplements, cures or treatments for biological agents, and sites selling and making unlawful claims for protective gear like gas masks and air filters.

HOWARD BEALES, FEDERAL TRADE COMMISSION: I mean, there is a lot of worthless product that we tried to pursue in various kinds of Internet sweeps, and in a sense that's not different here. What's different is the attempt to take advantage of people's very real fears at the moment.

FRANCIS: The results so far? After turning up some 200 sites, the agency sent out 121 warning letters. Twenty-five have eliminated the offending claims. The rest could face potential prosecution.

The current investigation included attorneys general from 30 states, the FDA and even the Environmental Protection Agency, which recently ordered two companies to stop selling pesticides for anthrax. Homeland Security Plus of Arizona has since removed the products from its Web site. Legitimate businesses like say they are careful to stick to product specs. CEO Randy Acton says he welcomes closer scrutiny of the business.

RANDY ACTON, CEO, US-CAV.COM: This is a time when people need to know what the protection will offer and not be fooled or scammed into buying something that in a very critical time in their life possibly it's not going to perform for them.


FRANCIS: The FTC says that it can impose civil fines of up to $11,000 per count, and it can force offending sites to pay back consumers. And most sites under investigation have until next week to respond -- Jan.

HOPKINS: What can consumers do?

FRANCIS: Make sure that you know who you're buying for, and if you see anything that says "this will protect you against anthrax" -- everything, don't buy it. Nothing can do that.

HOPKINS: Consumer beware, basically.

FRANCIS: Absolutely.

HOPKINS: Coming up next, we'll update the hunt for Mullah Mohammed Omar.

We'll also have a live report from South Carolina, where a winter storm continues to wreak havoc.

And snow or no snow, it's been a very warm winter. We'll tell you how it has affected the economy.

And Argentina formally stops paying its debt. We'll tell you what Eduardo Duhalde plans to do, when MONEYLINE continues.


HOPKINS: In the war against terrorism the Pentagon says U.S. warplanes attacked an al Qaeda compound in eastern Afghanistan near the Pakistani border. It included a training camp and caves. Meanwhile, the Pentagon says careful preparation are being made for high security prisoners at the U.S. naval base at Guantanamo Bay, Cuba. Some if the prisoners will be sent from the U.S. detention center at Kandahar Airport.

In Kabul, the interim government released more than 250 prisoners, some of them had been held captive by Northern Alliance troops for several years, others were captured during the recent offensive. We'll have more on the war against terrorism in just a moment.

Man has made to the moon, but astronauts can't venture to distant planets. The reason is it would require much more propulsion power and time. Scientists are now looking into a futuristic technology, that could lead to interplanetary missions, and significantly improve cancer treatments to boot. Fred Katayama travelled to Huntsville, Alabama for the story.

And we'll have that story in just a moment. It's been a strong month for auto sales, capping off an otherwise disappointing year. General Motors gained more than seven percent for the month compared to a year ago. But for the year, sales dropped off more than one percent. Ford also saw an increase in December sales, but for the year sales were down six percent. Chrysler sales jumped six percent in December thanks to strong truck sales, but for the year Chrysler sales were down 10 percent. It was a solid day for auto stocks, General Motors, Ford Daimler-Chrysler all higher on the session.

General Motors is launching a new sales drive. The world's largest automaker is turning to big cash rebates to lure consumers into showrooms. GM is now offering $2,002 dollar rebates on 2002 and 2001 models. The cash incentives replaced GM's zero percent financing program, which expired yesterday. That new rebate plan signals the need for deep price cuts to maintain strong auto sales despite a weak economy. Top U.S. rivals, Ford Motor and Daimler-Chrysler are expected to match GM's deals in order to stay competitive.

For the outlook of auto sales and a look at the newest models, let's go to Casey Wian, he reports from the Los Angeles auto show.

CASEY WIAN, CNN CORRESPONDENT (voice-over): Lincoln started the auto industry's first international show of the year with a tribute to its past, and a glimpse at its future. This Lincoln Continental concept car has retro suicide doors, and design elements it plans for future models.

VICTOR DOOLAN, FORD PREMIER AUTO GROUP: I think in a few year's time, you'll remember this car. And say, yes, I've seen that before and that's the new direction -- so its a great directional concept car, but not an absolute.

WIAN: Also on display, Chrysler's new Crossfire. It's the first German built Chrysler since the 1998 Daimler-Chrysler merger. Maserati returns to America with the 2002 Spider. It's first U.S. offering in 10 years. And continuing the trend of car companies with modern versions of classics is the new mini, a sport version powered by BMW technology.

New products aside, the biggest concern at this year's LA auto show is last year's sales. Zero percent financing offers by us auto makers helped the industry post its second best sales year ever in 2001, but at what cost? The industry is already bracing for a sharp sales drop this year and an even steeper decline in profits.

ROB LUTZ, CHAIRMAN, GM NORTH AMERICA: Competition and capacity have increased, pricing has actually decreased so much that it has started to affect margins. Quality has increased to the point where it's barely a differentiater between brands anymore. It has become much, much harder to make money in this business. WIAN: The big question now is will GM's new $2,002 cash back rebate program spread throughout the industry, and become this year's version of zero percent financing.

(on camera): So far, only Chrysler has responded saying it will not match GM's offer. Meanwhile, JD Power and Associates projects U.S. auto sales this year will fall eight percent to about 15. (UNINTELLIGIBLE) in units -- Jan

HOPKINS: So I guess the question is when sales start dropping, will Chrysler and the others decide that they do have to lower those prices with the rebates.

WIAN: Who knows, they held off when GM came out with the zero percent financing offer a few months ago. Chrysler says it's not going to for now, but if a lot of customers start flocking to GM showrooms, you might see them change their minds.

HOPKINS: But trucks are the part of the market that's doing the best, right?

WIAN: That's what my understand, absolutely. I think Ford came out with sales numbers showing its truck, was the top seller in the U.S. Trucks continue to be strong, and a lot -- also the SUV category continues to be strong. Lots of automakers are introducing SUVs that you wouldn't expect.

HOPKINS: Thanks very much. Casey Wian in Los Angeles.

And now let's turn to the story about scientists looking into a futuristic technology that could lead to interplanetary missions and significantly improve cancer treatments, as well. Fred Katayama has that story from Huntsville, Alabama.

FRED KATAYAMA, CNN CORRESPONDENT: It fueled the speedy Starship Enterprise. It's anti-matter and in the real world, NASA scientists are pursuing it for its potential in propulsion. Its explosive energy would enable journeys into deep space. So concentrated, a kernel of it would fuel the main engines of the space shuttle.

UNIDENTIFIED MALE: We have an equivalent amount of energy in just one gram or about a raisin-size worth of anti-matter.

KATAYAMA: That energy would slash the travel time to Mars and back from roughly two years, to a few weeks. Matter is the material that occupies space, it's made of atoms comprising protons, neutrons and electrons. For every matter, there's anti-matter, particles that possess the opposite charge. When particles touch anti-particles, they annihilate each other, producing kinetic energy.

GEORGE SCHMIDT, NASA MARSHALL SPACE FLIGHT CTR: The amount of energy that you get from the anti-particle particle annihilation is about 10 billion times that of chemical combustion.

KATAYAMA: But because no one knows where to find the anti- matter, it has to be created. It's made by colliding protons at near light speed into targets made of nickel. NASA built this portable trap to store anti-matter. It hopes to use the device to someday transport the volatile material to a rocket launch site. NASA's goal: collecting one trillion particles in the trap, but that would just yield enough energy to light a 60 watt bulb for five seconds. And there's another problem: they're a pain to produce and pricey.

The world's largest producer of anti-matter, Fermi national accelerator lab makes only one billionth of a gram a year, that's one divided by a billion, and that costs nearly $80 million. At that rate, it would take a million years to produce one gram, and cost $80 quadrillion to boot. Problem is, a spacecraft would need several pounds, not grams, to travel to the nearest star.

STEPHEN HOLMES, FERMI NAT'L ACCELERATOR LAB: It's in its extreme infancy right now. There are concepts for how things might work. There's no -- it's not a technology that's going to come to maturity in the next 10 or twenty years. It's a very futuristic technology.

KATAYAMA: But today, anti-matter is being used in medical imaging systems for diagnoses, but it could hold bigger promise in treating diseases.

(on camera): Chances are, anti-matter will first be used as a medical treatment before it's used for Mars. Scientists believe it will be more effective than X-rays in killing cancerous tumors. That, they say, could be 10 to 15 years away.

TIMOTHY AKHURST, MEM SLOAN-KETTERING CANCER CTR: Anti-matter has definitely got potential in this area. When a proton meets an anti proton, it will deliver a lot more energy to the local tissue because of the annihilation that's occurring. The question is how well that can be focused, and whether we can use that to be imaged.

KATAYAMA: As for celestial bodies, that super-express trip to the red planet is science fiction for now. But scientists hope to make it fact in 50 to 100 years -- Jan.

HOPKINS: Amazing expense, though?

KATAYAMA: Yes. Quadrillion is 15 zeros following that 80.

HOPKINS: Thanks, Fred.

Argentina today formerly defaulted on its $141 billion debt. That is the largest government default ever, and it is the first move by the newly installed President Eduardo Duhalde to drag Argentina's economy out of a four year long recession. Lucia Newman is in Buenos Aires tonight. Lucia, what's the latest.

LUCIA NEWMAN, CNN CORRESPONDENT: Good evening, Jan. In less than 24 hours from now, Argentine's will know what their latest president, their fifth in just two weeks has in store for them in his bid to stop this country's economic meltdown. Now, earlier today a new economic minister was sworn in. His name is Jorge Remes Lenicov. He is a respected economist, very close to president Eduardo Duhalde, and he is considered to be a pragmatist. At this moment, he is putting the final touches on a new economic rescue plan, which will be announced tomorrow. One of the main things that's expected to be announced is a devaluation of the Argentine peso, something in the order of 30 percent in fact. He is also expected to announce the end of Argentina's policy of convertibility. That means pegging the Argentine peso, its national currency, to the U.S. dollar.

Now, the big question now is who is going to bear the main burden of these changes, especially the devaluation. Will it be the working class, which is clamoring for jobs, for employment, the middle, which is deeply indebted in U.S. dollars, or the banking community, which wants its money, and this in a country which is clearly bankrupt -- Jan.

HOPKINS: But it does seem that it would be the people with the loans, including the backers that are hurt the most by a devaluation, right?

NEWMAN: Yes, they will be. But remember that the middle class, which is a large part of Argentina, of the population of Argentina, albeit it's been impoverished over the last two years, is deeply indebted as well in U.S. dollars. They stand to lose everything, unless some system is put into place that will allow them to pay back their money over a longer period of time.

All the details of this plan, of course, are what people are waiting to hear. And the banking community is being asked to be more understanding, to bear -- also to help bear the burden, but this isn't something that usually happens -- Jan.

HOPKINS: Thanks very much, Lucia Newman. I assume that we'll hear from you again tomorrow.

Coming up on MONEYLINE, Special Forces step up the hunt for Taliban leader, Mullah Omar. We'll bring you the latest. And an update on a southern snowstorm standing travelers, backing up highways and keeping kids and workers home for the day. A new twist on global warming -- a look at the economic impact from the change in weather patterns. MONEYLINE will be right back.


HOPKINS: Now for the latest on the war against terrorism. The FBI believes a letter containing a powdery substance, sent to Senate Majority Leader Tom Daschle, is likely a hoax. Capitol police say initial tests show the powder is not harmful. The letter was sent to Daschle's office in the Capitol Building.

Government sources say the Pentagon is close to recommending American Taliban fighter, John Walker, be turned over to U.S. law enforcement. Walker is among eight detainees being held aboard a U.S. warship in the Arabian Sea.

An attorney for an Arab-American secret service agent and the pilot of an American Airlines plane traded barbs (ph) today. An attorney for the secret service agent says the pilot was -- quote -- "unable to see past his client's ethnicity." The agent was attempting to fly to Texas to join President Bush's security detail when he was removed over security concerns. The pilot filed a formal complaint against the secret service, accusing the agents of misproper conduct.

A steady stream of snow continues to fall in parts of the southern United States. Snow and ice have turned driving into a nightmare. Thousands of air travelers have been stranded. Some states could see as much as a foot of snow before the storm ends. Sean Callebs is in the thick of in Columbia, South Carolina. So, Sean, what's going on there tonight?

SEAN CALLEBS, CNN CORRESPONDENT: Well, Jan, as idyllic as it looks, with the snow sort of glistening from the streetlights behind me, the holiday tree still up here, the driving situation here in South Carolina very treacherous. In fact, within the past couple of hours, Governor Jim Hodges of South Carolina has declared an emergency situation here in South Carolina.

As you can see, the snow has tapered off significantly, now just spitting somewhat. But the big concern, they have spent the day trying to get the upper hand on the highways, the major roads in and around the state. They feel they have done that, but the snow has turned to slush. It is getting colder. They expect that it's going to freeze in the next couple of hours, making driving conditions just horrific out here.

Black ice, and let's face it, people in the south just aren't used to driving in these kind of conditions. The governor told me there have been 1,400 traffic accidents in South Carolina since it began snowing yesterday. And that's not just the end of it. As you mentioned, thousands of air travelers stranded chiefly in Atlanta's Hartsfield Airport, the busiest airport in the U.S. Delta alone canceled more than 300 flights.

And many people from Texas on through the Carolinas, up into Virginia, concerned about the possibility of snowed in, made a run on grocery stores over the past 24 hours, loading up on staples like milk, water and bread.

Without question, three or four inches of snow in the south is huge news, and once again just shows us that it doesn't take a lot of snow and ice, Jan, to completely shut down a major southern city.

HOPKINS: There just isn't the equipment to take care of it. Is that part of the problem?

That is the problem. The governor said that himself. There is not enough equipment, and people simply don't know how to drive in these kinds of conditions. We have seen people fishtail, and the roads were not terrible out here for people who have been experiencing driving in snow, ice and what not.

There are a certain number of snowplows, salt trucks and trucks being used to spread sand. They have been working around the clock, chiefly working on the interstates and the major roads. They feel like they've got some of those under control, but they are concerned now as the temperature is going to drop that this slush is going to freeze, and they expect the number of traffic accidents and fender benders to pick up.

HOPKINS: Thanks, Sean Callebs, Columbia, South Carolina.

Despite the snow in the south this week, and the snow in Buffalo last week, the weather has this winter been warmer than usual. In fact, 2001 was one of the hottest years on record. And the weather has had an effect on the economy, as Kitty Pilgrim reports.


KITTY PILGRIM, CNN CORRESPONDENT (voice-over): If the weather in the last few months seems crazy, you are right. In November, six states hit all-time highs and 27 others recorded temperatures far above normal.

For the economy, that was a good thing. Economic forecasts were adjusted as building activity could continue longer than usual in such states as Minnesota, Wisconsin, Michigan, Iowa and Illinois. Economists estimate it could add $15 billion in construction spending for the quarter, but that calculation isn't easy.

WILLIAM DUDLEY, GOLDMAN SACHS: We know how much construction activity typically drops in the fourth quarter. What we don't have a good sense of is how much that drop will be lessened if the weather is warmer by, you know, a given magnitude.

PILGRIM: Last year was the second hottest ever, and this year, scientists are forecasting an El Nino warming of the Central Pacific Ocean, which could make it even hotter. Eight of the hottest years on record have occurred in the 1990s, the warmest being 1998. Four of the next hottest years were in the 1980s.

JEFFREY SCHULTZ, WEATHER 2000: As hot as they were, they are only going to be surpassed. Global projections are for anywhere for 5 to 7 degrees.

PILGRIM: While scientists worry about the melting of the Polar ice cap, and the snows of Kilimanjaro, economists think about who might buy mittens in January, or put a new deck on the house in October, probably a lot harder to predict.

ROBERT DICLEMENTE, SALOMON SMITH BARNEY: I think what generally happens in that case is that it makes it difficult to make judgments about the underlying situation in the economy, not just for investors, but for policy makers who have to try to sort out the underlying strength of the economy apart from the weather.


PILGRIM: Economic forecasts are seasonally adjusted, and economists complain that the seasonal adjustments do not reflect the current extremes. As a result, that economic data looks choppy pretty much all of the time now, and that further reinforces their classic caveat, one month does not make a trend -- Jan.

HOPKINS: And this is kind of wacky weather, but it is all in the same ballgame...

PILGRIM: It's all related.

HOPKINS: ... basically.

PILGRIM: But (UNINTELLIGIBLE) weather is part the disturbance in the global weather system that we have been seeing now for quite some time.

HOPKINS: Just one advantage, I guess, is smaller heating bills.

PILGRIM: That is one of the pluses.

HOPKINS: OK. Kitty Pilgrim.

Coming up on MONEYLINE, expect price hikes from Federal Express. We'll tell you why. And some market insights from the largest, single investor in the United States -- we'll be right back.

ANNOUNCER: Next, Jan talks with Carl McCall, New York State comptroller.


HOPKINS: On Wall Street today, stocks higher for the second session of the New Year. Technology shares leading the rally lifted by bullish analyst calls, and investors paid attention. The Dow gaining almost 100 points; the Nasdaq jumping 65; the S&P 500 up 10.

For complete market coverage, Christine Romans is at the New York Stock Exchange, and Greg Clarkin is at the Nasdaq Marketsite -- let's begin with Christine.

CHRISTINE ROMANS, CNN NEW YORK STOCK EXCHANGE: Jan, another solid advance for the Dow. It's been a pretty good year so far. The Dow at a four-month high led by some of these Big Board techs that did very nicely here today.

EMC topping the list, up 12 percent -- the most active stock here at the Big Board. Analysts upbeat on EMC, betting that names like names like it and IBM will benefit from a better economy this year. IBM, part of the Dow, up more than 2. Advance Micro Devices is a top rival to Intel in the PC processor market. As Intel soared today, so did AMD and other chips, including Big Board tech leader, Micron -- up strongly on active volume for a second day in a row.

Other Big Board movers including Continental Airlines, its December load factor crept up. Merrill thinks this airline is going to lose less money in the quarter than they once thought. Dow Chemical warned on its quarter, but it didn't matter. The whole sector rallied on hopes that the economy and basic chemicals are going to turn in '02. Meanwhile, Kmart fell more -- this is at least the lowest price in 20 years. Worries, pessimism continue about the company's earnings viability. And Halliburton, this one hurt -- continuing to get hurt on concerns about Halliburton's exposure to asbestos claims. This one at a 10-year low.

Jan, not only did this overall rally of the market continue here today, but it was an anniversary of sorts. Remember, a year ago today was when the Fed began cutting interest rates; 11 interest rate cuts later, and the Dow Jones Industrial average 500 or so points below where it started -- Jan.

HOPKINS: Oh, it didn't have a positive effect on the markets, right?

ROMANS: Not yet, at least.

HOPKINS: Christine Romans. Let's go to the Nasdaq. That composite index was up more than 3 percent on the session. It closed back above 2000, and Greg Clarkin is there. He can tell us what's the reason for the rally -- Greg.

GREG CLARKIN, CNN NASDAQ MARKETSITE: Well, Jan, I'll tell you, for the second straight day, we saw the rally centered around the semiconductor stocks. One of the catalysts today was a very bullish call on Intel out of J.P. Morgan. Basically the analysts there saying, buy that stock ahead of the company's earnings report, which will be released in mid-month.

But take a look at some of the numbers today on the Nasdaq. You saw very good volume; 2.2 billion shares traded, so significant numbers in terms of volume. Advancing issues beat declining issues by about a 5 to 3 margin. The chip stocks, up 8.2 percent. The next best performing group, the networkers, they were up 5.3 percent.

Now, here is how Intel and some of the other big names did on the day. Intel shares soaring up 7.6 percent. Cisco Systems, it was also the beneficiary of some kind words out of Wall Street. In this case, it was the Morgan Stanley analyst saying that Cisco is gaining significant market share. That stock rose about 8 percent. Oracle was up about 9-and-a-half percent, and Dell Computer taking on $1.53.

So all in all, just a very broad, broad-based rally here today, Jan. And you know, the "Stock Trader's Almanac" says that historically January is the best month for the Nasdaq. It on average gains about 4.3 percent. These first two trading sessions of the New Year, it's up 4.8 percent already.

HOPKINS: Wow! Thanks -- Greg Clarkin at the Nasdaq.

In tonight's corporate news, Federal Express is adding extra fees for air shipments to residential addresses. That will add 20 percent to some deliveries. The extra charge is in addition to an increase in basic shipping charges. UPS will also start charging more for customers who live in hard-to-reach locations. More layoff announcements today: United Airlines saying that it will close five reservation centers and cut another 900 jobs. United has already cut 19,000 jobs since September 11.

PacifiCare Health Systems is cutting 1,300 jobs, about 15 percent of its workforce. And struggling credit card issuer, Providian Financial, is slashing another 800 jobs. That is an 11 percent workforce reduction since October.

There are 161,000 layoffs announced in December. And the outplacement firm of Challenger, Gray & Christmas is reporting more than two million announced job cuts last year. It is the largest yearly downsizing on record.

Tomorrow, we'll receive the government's unemployment report for December.

My next guest could be considered one of the world's biggest equity investors. New York State comptroller, Carl McCall, manages the New York State pension fund, currently worth more than $110 billion. He joins us now to talk about the markets, the rebuilding of New York City after 9/11, and the controversy over Enron.


HOPKINS: 110 billion, but it's not your money.

MCCALL: It's not my money, but it's the money that takes care of the pensions of about a million public employees in New York. So there are a lot of people out there who depend upon my decisions.

HOPKINS: The market has started the year off very well.


HOPKINS: What do you think about the market...


MCCALL: Well, I am very pleased. I am, you know, I'm sort of guardedly optimistic about the future. I think there are a lot of good signs. I think that we have seen, for instance, the manufacturing index that came out yesterday showed that for two months in a row, manufacturing is on the increase. That means more production and more new orders.

I think at the same time we see where the market is. It's gotten over the lows of late September. It's back at the levels where it was before 9/11. And you know, historically, Jan, if you just look at what's happened in the market, we've had two years now -- two consecutive years of 10 percent declines. Last time that happened was 1973, '74. But it's been 60 years, you know, since we had three consecutive years, where we went -- we had a 10 percent decline.

So history is on our side. I think it's going to bounce back, and I think that most people, mostly analysts that we talk to, and most of our managers think that by the second quarter of this year, we will begin to see the market really moving up, hopefully, in a significant way.

HOPKINS: One of the things that a lot of people learned in the last couple of years is diversify your portfolio.

MCCALL: That's right.

HOPKINS: And one of the things that you are doing is encouraging your fund, and also other states, to invest and rebuilding lower Manhattan.

MCCALL: Yes. Well, not only lower Manhattan. We have a big responsibility to really rebuild the infrastructure of this country. So I have been meeting with other people like myself, other pension fund managers, and we've been encouraged by Felix Wellington (ph), who has a concept that at a time of recession, this is when you invest. You invest in the infrastructure. You create jobs. You create economic opportunities.

So Phil Angelides, who is the treasurer of the state of California, he and I have pulled together pension fund managers from about 20 other states. And we're looking at opportunities to take our public pension funds and invest them in infrastructure development projects. In order to do this, we'd like some help from the federal government in terms of either federal guarantees or other credit enhancements, so that these will be prudent investments for us.

HOPKINS: So you'd be providing the financing?

MCCALL: We would be providing the financing for infrastructure development projects that will create a lot of jobs and could really help boost the economy at this particular time.

HOPKINS: You look at what's going on in the economy in New York. The new mayor, Mayor Bloomberg, says that maybe there's going to be a $4 billion shortfall. You think it could be more than that.

MCCALL: It could be more than that. This year, this fiscal year, which will end in June, there will be a slight surplus. But next year, it doesn't look good, about a $4.7 billion deficit, and over $4 billion there in the succeeding year.

So things really don't look good for the city. You know, the city had a great opportunity over the last several years with record surpluses. They didn't listen to my advice, which was to put more money in reserve and pay down debt. That hasn't been done, so we don't have much in terms of reserves to fall back on, and also the debt service costs are really increasing. It's now about 16 percent of revenue goes to pay debt service, and by the year 2005, that will be up to 19 percent.

So the city didn't take advantage of the opportunities it had. Its spending over the last several years was three times the rate of inflation. So we really don't have a lot to fall back on. And Mayor Bloomberg is going to have a tough job, and we hope, at the state level, to help him manage the finances of the city. But I think he has set the right tone. He is prepared to make tough decisions, and that we must do.

HOPKINS: Enron, the pension fund lost...

MCCALL: About $58 million, and this was not good. You know, Enron was touted by...

HOPKINS: You have sued them.

MCCALL: We are suing them, because obviously there were some terrible things that happened in terms of the management of this company, the oversight of this company by the audit and accounting firm. Something went wrong here. Everybody lost money on Enron. As I said, our losses, we at one time owned 4.6 million shares of Enron. Most institutional investors bought it. It was considered to be a well managed, very solid company.

Now, we know something went wrong, and I think we -- I was encouraged by the news today that Senator Lieberman is going to head a Senate inquiry investigation of just what happened at Enron. We need to find out, because investors like myself, we have to have confidence that when we invest in a company that is so highly regarded, and yet that company in a very short time absolutely collapses. Something went wrong, and we've got to find out what happened to make sure that these kinds of things don't happen in the future.

HOPKINS: Thanks, Carl McCall...

MCCALL: Good to be here.

HOPKINS: ... comptroller of New York State -- thanks.

"WOLF BLITZER REPORTS" begins in a few minutes. For a preview, let's go to John King in Washington -- John.

JOHN KING, CNN WASHINGTON: Thanks, Jan. Here in the war room tonight, we'll try to answer these questions: Is the war in Afghanistan just beginning? Can the United States help build a new Afghanistan? Or is that a fool's errand? We'll go live to Afghanistan and to the Pentagon, and I'll speak with retired General George Joulwan, former NATO supreme commander, Gary Dempsey of the CATO Institute, and James Steinberg. He was deputy national security adviser in the Clinton White House -- Jan.

HOPKINS: Thanks, John.

Coming up next, we'll look at your email, and a report on the economy that could move the markets tomorrow.


HOPKINS: Tomorrow, we'll get the employment report for December. Economists expect the unemployment rate to rise to 5.8 percent, a level not seen since 1995. They expect 155,000 jobs were lost in the economy. Senate majority leader, Tom Daschle, will give a speech on the U.S. economy to the Center for National Policy in Washington.

And Argentina's new president, Eduardo Duhalde, is expected to present his new economic plans.

Now, for a look at your thoughts: Alex Silverman, who wrote to say he was troubled by an email that we talked about yesterday. It was written by viewer Tom Austin. Mr. Austin commented on what he called irresponsible tax cuts for the richly employed.

Alex Silverman writes: "To impose heavy taxes on the ones who produce wealth for the sake of the ones who don't is not a 'stimulating' activity. Mr. Austin wants to punish those who have wealth; the more you have, the more you'll be punished via taxation. If anything stunts production more than punishing those who do the producing, I would be frightened to hear of such a policy."

On the subject of the U.S. economy, viewer Jim Hoover writes: "I have supported Mr. Bush after September 11th in our endeavors against terrorism. What I don't like is his continued effort to turn our country into a platocraphy -- plutocracy: bailouts for airlines, but none for laid off airlines employees, more large tax breaks for business, but few for workers. Let's address the problems of the people. Don't keep pouring money into public coffers. Put money in the hands of people who will spend it."

And some positive words regarding the president's fight against terrorism -- a viewer writes that "The U.S.-India partnership seems to be working. President Bush needs to continue to pursue to the end his 'no nonsense' approach to terrorism worldwide."

Email us, and please your name and address.

That's MONEYLINE for this Thursday evening -- thanks for joining us. I am Jan Hopkins for Lou Dobbs -- good night from New York. "WOLF BLITZER REPORTS" begins right now.




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