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Democrats See Issue in Sliding Stock Market; Bush Expresses Confidence in O'Neill; Congress Works on Corporate Responsibility Bill

Aired July 22, 2002 - 16:00   ET


JUDY WOODRUFF, CNN ANCHOR: I'm Judy Woodruff in Washington. A new week on Wall Street, but the results are so grimly familiar. The latest on the market swings and the political impact of an uncertain stock market.

JOHN KING, CNN WHITE HOUSE CORRESPONDENT: I'm John King at the White House. The president weighs in on Wall Street and delivers a vote of confidence for a key member of his cabinet.

BILL SCHNEIDER, CNN SENIOR POLITICAL ANALYST: I'm Bill Schneider. Democrats see political gold in the stumbling stock market. But as any investor will tell you, timing the market can be a dangerous game.

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: I'm Jonathan Karl on Capitol Hill. Work continues on a corporate responsibility bill. I'll have a progress report and the latest on proposals to get even tougher on corporate misconduct.

WOODRUFF: Thank you for joining us. We are standing by at this hour for a court hearing in the Samantha Runnion murder case. We plan to carry the hearing live when it happens near the bottom of the hour.

But first, we begin with the focus of attention from Washington to Main Street and that is, the struggling stock markets. President Bush was on the road today but like so many people here in Washington, and all over the country, he had one eye on Wall Street. What the president saw can be described as simply more of the same. We will have more on the day's market action in just a few minutes. But for more on what the president had to say about Wall Street and the economy, let's turn to our John King at the White House -- John.

KING: Well, Judy in the intensifying political debate over the stock market and the overall economy, President Bush was asked today quite unusual, asked today about rumors, pressure, that he should have Secretary Paul O'Neill of the Treasury step down or force him out of the government. Mr. Bush saying no way. He says he has full confidence in the secretary. He also says that some trying to make a scapegoat of the secretary.

The president joking those who criticize Secretary O'Neill as the market goes down better give him credit as the market goes up. And the president predicted it will. He was quite optimistic today. From the Bush perspective, the most important thing to rebuilding confidence in the markets is for Congress to pass that corporate corruption legislation and pass it now.


(voice-over): The president's take is that better days are just ahead.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Well, I'm not a stock broker or a stock picker. But I do believe that the fundamentals for economic growth are real. And I believe Congress is going to get a bill that will help take some of the uncertainty out of the market.

KING: The WorldCom bankruptcy filing and another uneasy day on Wall Street only added to the administration's urgency and the president's challenge in predicting rebound.

BUSH: People will be buying in the market based upon the value and what's happening is, is corporate earnings are improving so that the price earnings ratios are improving. And I believe people are going to come back into the market.

KING: Homeland security was the focus in Illinois but the trick brought a key promise from House Speaker Dennis Hastert to get corporate responsibility legislation to the president by the end of the week. The number one White House priority is to convince investors and voters Washington is cracking down on corrupt CEOs and imposing strict new rules on corporate accounting.

BILL McINTURFF, GOP POLLSTER: The markets continue to drop, consumer confidence is going to drop. If consumer confidence drops, the president's ratings will drop, right direction, the country will drop and then eventually could affect the overall economy. Then we are facing a very different election scenario than the one we face today for the Republican Party.

KING: The president's initial preference was the House approach to corporate reform. But a Senate measure creating a more powerful board to oversee the accounting industry, passed by vote of 97-0 and administration aides are telling House leaders Mr. Bush's priority now is fast action.


KING: Those aides, we are told, top White House aides, telling House Republicans pass a bill, get it to the president as soon as possible. Accept the Senate provisions if you have to and then if you find something wrong with it, go back and revisit the issue next year, not now. The president wants that bill here, hopefully Judy, within the next week to 10 days.

WOODRUFF: John, any surprise around the White House that the president was so specific today about what's going to happen to stocks.

KING: No, they say this president is going to be an optimist. They understand and have listened to the criticism from within the Republican party. They have seen a criticism from past administrations in the newspapers. The president should not be talking so specifically about the up and down of the market. Aides here say this is what President Bush wants it say that he wants to be an optimist and he simply is going to do this. Remember, he did this early in the administration as well and was criticized. This president is going to speak his mind.

WOODRUFF: Thanks, John. Meanwhile on Capitol Hill, the push to complete the corporate misconduct bill kept some members of Congress working through the weekend. Standing by with more on that, is CNN's Jonathan Karl. Jonathan, where does that stand?

KARL: Well, congressional Republicans, as you heard John King say, are hearing the pressure, feeling the pressure from the White House. The president's made it very clear he wants this bill passed by August. This is the last week the House Republicans have to negotiate with the Senate to get this thing done. And Judy, you remember all we were hearing from the House Republicans that were negotiating this just a week ago about how this bill has serious flaws.

Well, now Republicans are tell me that they are looking for just a few face saving measures that would actually toughen this bill so they can come out of this conference negotiation and (UNINTELLIGIBLE) work to make this tougher on corporate misconduct.

Among the things the Republicans are now pushing for in this last couple of days of negotiations are one, to increase the penalties for corporate fraud, increase them from the 10 years that the Senate talked about to 20 years. This has already passed in the House. They'll push to get that out of committee. I imagine Democrats over here on the Senate will go along with that. Another thing that they want to do is they want to set up a fund with fines that corporations pay for misconduct. Use those fines as a fund to help give money back to defrauded investors and employees.

That would also enable the Republicans to say they worked to get something out of this that will not simply punish the corporate wrong doers but do something to help those that actually suffered as a result of their actions.

But, Judy, as for some of those more significant changes they were talking about like doing something to weaken that corporate accounting board, the independent accounting board, bringing it into the SEC, Republicans have all but given up on any efforts really to make significant changes in that area. They are right now looking for some changes that actually will make this bill tougher than what the Senate passed.

WOODRUFF: Looks like they may be done by Thursday. Thanks, John. As the markets are struggling, there is growing political criticism of the president and his party. Democrats say they see a chance to turn the stock losses into political gains. The question is history repeating itself. Here is Bill Schneider.


SCHNEIDER (voice-over): 1992, a Bush is president. Good war record but the economy is in trouble. Democrats have their issue. 2002, a son of a Bush is president. Good war record but the stock market's in trouble. Have Democrats got their issue back? They think so.

AL GORE, FORMER VICE PRESIDENT: They ought to wake up and realize that the Bush Cheney economic policy is a total catastrophe for America and tear it up and start all over again.

SCHNEIDER: Well, now hold on. It's the stock market that's tanking, not the economy. Does a bear market mean a bad economy? Not always. As an economist once said, the stock market has forecast nine of the last five recessions. Instead of the stock market dragging the economy down, President Bush hopes the economy will pull the stock market up. Do Democrats have a plan to do that? Sure. Two things.

SEN. JOHN EDWARDS (D), NORTH CAROLINA: We can do that by getting the Federal budget back in a disciplined state, which it is not right now.

SCHNEIDER: By doing what? Cutting spending, rolling back the tax cut? Democrats aren't saying. What else can they do to get the market up?

EDWARDS: We can do that by doing something about corporate responsibility.

SCHNEIDER: Democrats may have a winner there.

GOV. HOWARD DEAN (D), VERMONT: Republicans have essentially engaged in a permissiveness towards corporate misdeeds.

SCHNEIDER: Democrats can tout a strong record on the economy. As Al Gore said this weekend: "I don't care what anybody says. I think Bill Clinton and I did a damn good job." But the public still thinks the Republicans do a better job improving the economy. So have the Democrats got the economic issues back? The answer is, not yet.


SCHNEIDER: It won't be 1992 unless the stock market drags the economy down. So, before you predict the election, you have to predict what's doing to happen with the stock market. Good luck with that.

WOODRUFF: Indeed. Thanks, Bill.

For more on attempts to make political gains from sliding stocks, let's turn to political analyst Ron Brownstein of the "Los Angeles Times." He is on the road today in Miami. Ron, among other things, you have been following Dick Gephardt around. Are the Democrats going to be able to make an issue out of this economy, this stock market slide?

RON BROWNSTEIN, "LOS ANGELES TIMES": Well, they think they can. As Bill said, there are some pretty divergent strategies emerging here on each side that are becoming clear with each passing day. I think the Democratic strategy by and large is to focus on corporate accountability and that corporate accountability legislation.

The real hole for the Democrats in their message this fall, Judy, is that they don't having a broader economic message. They are not sure whether they really want to go after the tax cut, as Bill said, and that leaves them without much of an ability to articulate a counter strategy to President Bush's.

Now Bush, on the other hand, is turning up the heat on the Democrats. I think his radio address Saturday signalled what's coming from Republicans which is an argument that Bush does have a next stage economic plan, permanent tax cut. More advance trade authority and so forth and Democrats are blocking it. So the competing arguments for the fall are starting to come into shape.

WOODRUFF: Let me now ask you about a totally different story. You are in Florida. You've been watching the politics down there. Let's show our viewers this.

This is Janet Reno, of course, the former attorney general under Bill Clinton. She had a big dance party to kick off her campaign for governor today. She announces, Ron that she's officially a candidate. Is this -- she's been running into a little trouble. She isn't the choice of the Democratic establishment in the state of Florida.

Does something like this event give her any kind of boost?

BROWNSTEIN: I think it does give her some boost. But there is still some significant problems here for the Democrats with both their candidates. It was a terrific event for Janet Reno. It raised some money. More importantly it gave some energy and enthusiasm to a campaign that's been some what lacking in both. The problem is is like many Friday nights in Miami, can you go to those clubs and have a great time. You wake up the next morning you still have all of your old problems. The fact is that Janet Reno is stuck way behind Jeb Bush, with a very high name ID. I thought she gave a very lackluster speech at the state party JJ dinner Saturday night.

Her opponent, Mr. McBride, is also stuck. He is behind her in the primary. He gave, I thought a pretty lackluster speech Saturday night in the JJ dinner. So right now Democrats are in a situation where they don't seem to be able to dislodge Reno, insiders want to as the nominee, she's no closer to Jeb Bush and not really showing, I think, a lot of sign of how should would overcome that. The excitement of Friday night notwithstanding.

WOODRUFF: Are you saying the Democrats don't really have anything to spice up their campaign and make it more appealing? BROWNSTEIN: They are really stuck, I think here, Judy. They feel that Jeb Bush might be vulnerable. But it doesn't look at the moment like either one of these candidates are the one who could exploit that vulnerability.

As I said, Reno has had very, very high name ID from the beginning and has been stuck well behind Bush, which is a problem. McBride is stuck well behind Reno, and to be honest, he really hasn't proven himself to a barn burner either. He joked in his speech work last Saturday night that when he gave his first address last year, some woman came up to him at the end and said that was the most boring speech I ever heard.

Well, he did a little better, but it really wasn't a transformation, I'd say, this time. So right now they don't really seem to have anybody who can exploit what may be some vulnerabilities for Bush.

WOODRUFF: I think I heard him give that line at another Democratic event a few months ago in Florida. But we will see. All right, Ron. Thanks very much. Appreciate it.

We will return to our focus to the markets, to the economy and the power of the presidency. When we return, what will it take it bolster investor confidence? I will ask a vice chairman of Goldman Sachs.

A court hearing in Samantha Runnion murder case. We plan live coverage later in the hour. Plus New York's senior senator takes sides in the Democratic primary for governor.


WOODRUFF: In a few moments we will go on the record with Bob Hormats, the vice chairman of the investment banking firm Goldman Sachs. But first, for more on the latest developments on Wall Street, let's turn to CNN's senior market correspondent, Rhonda Schaffler. Rhonda, I don't think we've seen a day as volatile as this one lately.

SCHAFFLER: I know. We've seen so many too in the last couple of sessions. But of course that's why investors remain so nervous. This huge sell off today comes on top of the big sell off we had on Friday. On top of two back to back weeks with tremendous losses. As you alluded to Judy, the market fell some 300 points mid way through the session. The market actually rallied back into positive territory and then surrendered. Much of the early rally attempt, not closing its lows but still felt just as painful.

And the volume is very, very heavy. There's a lot of activity right now and we saw that last week as well. What's different here is, you know, investors got used to the fact that look, the market sells off sharply like it did on Friday. And then perhaps there should be a little bit of buying in the next session and there wasn't. The Dow closing below 8,000. We're looking at the market rolling back in time trading at levels we haven't seen since '97, '98, Judy. WOODRUFF: Rhonda, I heard you say in the analysis right as the markets were closing that people are getting out of mutual funds. What does that say to us?

SCHAFFLER: Well, it's funny. You can read this both ways and they are doing that. We've seen several weeks now of people pulling money out of mutual funds and in fact in June, one of the mutual fund tracking companies, Lipper, said that people were putting money in bonds. That's a sign of safety.

Now, some people who watch the markets say eventually the selling gets exhausted. People who want out of the market are doing that. They will get to a point where there is nothing left to get out and other people will decide I'm in for long-term. Some people will say, we're getting closer to the bottom.

But keep in mind this has been a very hard market for people to get a read on. It's telling you investors are nervous and they don't want to be in stocks right now, those that are pulling their money out.

WOODRUFF: And just quickly, Rhonda, the effect of the WorldCom bankruptcy announcement?

SCHAFFLER: You know, it is interesting, we knew this was going to happen. It was widely expected. But it's yet another huge corporation in America that people bought shares in that now has to file for Chapter 11. So that particular stock moves up a couple of pennies. It's trading at 14 cents right now. Telecom stocks under a lot of pressure today, a lot of that had to do with another telecom company BellSouth that came out with some disappointing earnings.

And people are nervous about the telecom sector in general. They talk about this bubble bursting because there was a lot of debt taken on by these telecom companies and now we found out not enough demand for their services.

WOODRUFF: Thank you. Rhonda, appreciate it. With me now, is Bob Hormats, the vice chairman at Goldman Sachs International. Bob Hormats, is the president right, President Bush right when he said that the corporate profits are improving. There are values in the market and that investors will go after those?

BOB HORMATS, CHAIRMAN, GOLDMAN SACHS INTERNATIONAL: I think he is right, the economy looks like it's getting better. There's a good chance that corporate profits are going to look better over a period of time. And there clearly are opportunities in this kind of market. But of course investors are nervous about accounting issues. They're nervous about whether the growth of the economy is sustainable. So there are an awful lot of concerns on the minds of investors and many have been burned. So they're not anxious to get back in quickly.

WOODRUFF: If somebody were to ask you, have we seen the bottom yet, what would you say. HORMATS: I'll say, I don't know. It's very hard to identify the bottom. There's a very volatile market out there. And picking the bottom, identifying the turn is awfully hard to do.

WOODRUFF: What is going to make -- what is going to make a difference in this market? Is it a matter of consumer confidence or what?

HORMATS: I think several things are going to be important. One, it's very important that consumer confidence hold up because consumers are a very important part of the future growth outlook for the economy. Second, investors have to have confidence in corporate earnings statements that they are accurate and that they are transparent.

Three, I think, they have to see corporate profits begin to pick up because that will also help confidence and four, I think they want it see Washington take action against people who violated the law. They also want it see good legislation but not legislation that overreacts that over regulates.

WOODRUFF: A lot of questions out there Bob Hormats about whether President Bush has the strongest economic team in place given the uncertainties. What do you think?

HORMATS: I think it as good economic team. There are a lot of very respected people on the team. It is very hard in this environment to turn confidence around and confidence depends a lot more on the markets, on the private sector, on improvements and corporate accounting and transparency and the SEC and the Justice Department than it does on the economic team per se.

WOODRUFF: You were quoted today in "New York Times" as saying quote, "we desperately need someone the business community, the financial community, the press and the public can look to as the lead economic spokesman." It sounds like you are saying, they need to get someone else in there.

HORMATS: Not so much someone else in there. I think they have to identify from within the group they have someone who can be visible on these issues, on a regular basis much as Don Rumsfeld is on military issues, someone who can go before the public, meet with the financial community, meet with investors, meet with average citizens and explain to them what's going on in the economy and explain to them...

WOODRUFF: What do you think that should be?

HORMATS: I think that it really is up to the president. The past it's normally been the Treasury secretary and I think the Treasury secretary could do it. Often, however, presidents have chosen people other than the Treasury secretary, people from within the White House, chairman of the Council of Economic Advisers.

But ideally, it should be the secretary, and I think Secretary O'Neill would do a very good job of it. But it is important that it be done on a fairly regular basis so that there is some individual who is clearly designated to play that role by the president.

WOODRUFF: But do you find it strange they haven't picked somebody like that yet?

HORMATS: I do find it a little puzzling they haven't picked someone like that in view of the fact that other administrations, both Republicans and Democrats have designated such people. Bob Rubin was one. Jim Baker was another. Don Regan was another. Even Alan Greenspan during the Ford administration played that role when he was chairman of the Council of Economic Advisers. And people like Rumsfeld have played that admirably on defense issues.

So finding within the administration someone to do that, and I think Secretary O'Neill would do a good job of it. But it needs the White House to identify the person then and put him out there.

WOODRUFF: Bob Hormats talking with us. Just ahead, the suspect in the murder of the 5-year-old California girl gets ready for a court appearance. We'll have the latest.

And later, some celebrities are choosing sides in the Tennessee Senate race. We'll tell you who has the backing of country music star, Hank Williams Junior.


WOODRUFF: Checking our "inside politics newscycle": Troubled telecommunications giant, WorldCom, filed for Chapter 11 bankruptcy protection today. It is the largest bankruptcy filing in U.S. history. Despite WorldCom's problems, the company's CEO says service will not be interrupted and WorldCom will emerge as a strong competitor.

The father of Mike Spann wants to speak before the sentencing of Taliban-American John Walker Lindh. Johnny Spann has made the request to a Federal court. Mike Spann was the CIA agent killed during an uprising at an Afghan prison where Walker Lindh was being held. Johnny Spann says Walker Lindh was part of a conspiracy to kill his son.

In Orange County, California, accused child killer Alejandro Avila is to appear before a judge this hour via video conference from the county jail. Charges against Avila are expected to be read just moments from now. His arraignment is now scheduled for late August. Avila is the suspect in the kidnapping and murder of 5-year old Samantha Runnion.

Avila's court appearance is in Santa Anna, California. CNN's Rusty Dornin is there. Rusty, why would Avila be in jail and not in the courtroom for this?

RUSTY DORNIN, CNN CORRESPONDENT: Well, apparently this is a common practice in Orange County. It's not particularly for security reasons or anything. It's just a matter of procedure that he's actually at the jail and then the courthouse procedure in Santa Anna or here at the courthouse. So he will be, the arraignment will take place by video conferencing from what we understand. He has been assigned a public defender and she will ask for an extension until August 23 before he enters a plea, but he will have the charges announced against him and we have the criminal complaint.

There are four counts. The first has to do with the kidnapping of 5-year old Samantha Runnion who was snatched from her yard one week ago today. Counts two and three deal with the sexual assault of the young girl, and count four with her strangulation and her murder.

So, Judy, right now, also the district attorney here is deciding whether he's going to pursue the death penalty. He plans on talking with Samantha Runnion's family as well as Avila's attorney.

WOODRUFF: And just quickly, Rusty, why the delay in the charges, in stating the charges?

DORNIN: It's not in stating the charges. It's actually in his entering a plea, I think, at this point. The public defender was just assigned to Mr. Avila. It may have to do with that procedure. But the charges will be stated. It's just he won't enter a plea.

WOODRUFF: OK. Thanks for clarifying that, Rusty Dornin, at the courthouse there in Orange County.

And now let's turn now to CNN's legal analyst Jeffrey Toobin in New York with his thoughts on the Alejandro Avila arraignment.

Jeffrey, is this fairly routine, then, that the charges will be read and they just don't want to enter a plea for several weeks?

JEFFREY TOOBIN, CNN LEGAL ANALYST: With the new lawyer, it's not that uncommon. But it does serve the lawyer's interests, which is, very simply, delay.

There is such white hot interest in this case and such outrage at this horrible crime, anything that can move this process more slowly is something that the defense is going to want to do. And the formal entry of a plea is something that you can put off. The main reason you have an arraignment is to deal with the question of bail. Here, it is completely clear that he ain't going anywhere. So the fact that the arraignment is put off for a month really has no legal significance, except just pushing the whole trial back.

WOODRUFF: Do you have a sense of how strong the charges are at this point?

TOOBIN: Boy, I really don't.

I hear the -- I heard the sheriff on Paula Zahn's show this morning saying he's 100 percent certain. Obviously, one area that the prosecutors have been looking into is DNA evidence. If, in fact, Samantha Runnion's DNA is found in Avila's car, in his home, on his clothing, that will be extremely devastating evidence. So, I just think everybody has got to keep an open mind, but, obviously, the prosecutors and the police seem awfully confident of this one. WOODRUFF: All right, Jeffrey Toobin, reporting for us from New York, thanks very much.

Al Gore repeats some tough criticism. Up next: Gore uses the "L" word to describe White House policies on the economy.


WOODRUFF: With us now: Betsy Hart of the Scripps Howard News Service and Maria Echaveste. She's former Clinton White House deputy chief of staff.

Betsy, to you first. Al Gore said over the weekend, among other things, that George Bush should scrap his economic team, scrap his economic plan and start all over again.

I'm going to interrupt myself right now, because I'm told that, in Orange County, California, in Santa Ana, the judge who is hearing the case against the man accused of killing 5-year-old Samantha Runnion is presiding. So we will go to that courtroom.


JUDGE: ... discuss with your client his right to be physically present here at the courthouse?


JUDGE: OK. And is he willing to go forward with a video arraignment today?

DEFENSE ATTORNEY: Yes, he is, Your Honor.

JUDGE: OK. And has he signed a written consent to that effect?

DEFENSE ATTORNEY: No, he has not signed a written consent, but he's given me oral consent.

JUDGE: OK, I'll cover that with him when he appears.

Let's go ahead and do the arraignment on the Alejandro Avila matter.


JUDGE: Good afternoon, sir. Is your true name Alejandro Avila?


JUDGE: Is it spelled Avila?


JUDGE: And what is your date of birth?

AVILA: 3-13-75. JUDGE: 3-13?

AVILA: 75.

JUDGE: You do have the right to be physically here at the courthouse this afternoon. Are you willing to proceed in this fashion by way of video camera?


JUDGE: OK. Counsel joins?


JUDGE: You're charged here, Mr. Avila, with several felony counts. In count one, you're charged kidnapping. That's a felony. In count two, you're charged with forcible lewd conduct upon a child under the age of 14. That's filed as a felony. Count three is identical. You're charged with a forcible lewd act on a child under 14. That's also filed as a felony. In count four, you are charged with murder of Samantha Runnion.

And it is alleged that, during the commission of the kidnapping, you committed the murder. That is a special circumstance in the case. Also, it is further alleged that the murder took place during the course of the forcible lewd conduct or lewd act upon the child.

Does the DA wish to be heard as to bail?

DISTRICT ATTORNEY: Your Honor, we wish to be heard as to bail. We would request no bail at this time. But, also, regarding the arraignment, counts two and three are not exactly identical. There are specified body parts alleged in each.


And, Ms. Meese (ph), did you wish to be heard as to your client's bail status?

DEFENSE ATTORNEY: No, Your Honor. We will submit.


On this type of case, in light of the fact that this is special circumstances, the court will set no bail. And that's in conformity with Rule 4 of the Uniform Bail Schedule.

And what is your pleasure today on debates on this case?

DEFENSE ATTORNEY: Your Honor, have we been formally appointed?

JUDGE: The PD has been appointed.

DEFENSE ATTORNEY: Thank you, Your Honor. We will accept the appointment. At this time, we would like to continue the arraignment to the date of August 23. Mr. Avila, you're entitled to be arraigned today and have a preliminary hearing within 10 court days of today's date. By going to the date of August 23, we need your waiver, your permission to do so. Do you agree?


DEFENSE ATTORNEY: Counsel joins.

DISTRICT ATTORNEY: Your Honor, I'm sorry. We would ask for an another date, if possible. That's almost a month away.

DEFENSE ATTORNEY: I think, with the amount of evidence in this case, Your Honor, we have not received any discovery as of today's date. The office need to put together its team. I think 30 days in this type of case is reasonable. And we are requesting the date of August 23.

JUDGE: What date are you suggesting, counsel? The 23rd is a Friday.

DISTRICT ATTORNEY: Your Honor, if we could set a -- I would suggest August 2. If we need additional time for another pretrial, we could certainly accommodate the defense. We are currently working on discovery in an attempt to provide all the discovery documents as expeditiously as we possibly can.


You meant arraignment, right, not pretrial?

DISTRICT ATTORNEY: I'm sorry. Arraignment, correct.

JUDGE: Counsel?

DEFENSE ATTORNEY: Your Honor, we normally, on all vertico (ph) cases, we go for at least two weeks. And that would be less than two weeks. Once again, our office is requesting the date of August 23.


The court will set the continued arraignment for August 9. All parties are ordered to appear on that day, no bail to remain on the case.

Is there anything else that we need to discuss?

DISTRICT ATTORNEY: No from the people, Your Honor.

JUDGE: Anything else from the public defender?


JUDGE: That will be the order of the court. Thank you.

DEFENSE ATTORNEY: Thank you. WOODRUFF: Well, there you have it: charges read against Alejandro Avila in the kidnapping and murder of 5-year-old Samantha Runnion.

Joining me now from New York: CNN legal analyst Jeffrey Toobin.

The attorney for Mr. Avila wanted this postponed, the plea postponed until late August. But the judge said, no, it's going to be August the 9th, which is just about three weeks from now.

TOOBIN: Right.

Well, you saw the back-and-forth there. The prosecution wants to move this case quickly. The defense wants to try to put it on a slower boat. I think that doesn't really matter much, the two weeks there. All that is is the arraignment, where he will formally enter a not-guilty plea. And then they will set a preliminary hearing. This case is certainly months away from any sort of resolution, unless, of course, there's some sort kind of plea.

WOODRUFF: Jeffrey, any surprise to the charges that were read by the judge, starting with kidnapping, and then he described forcible lewd conduct upon a child, and then the same thing upon a child under 14, and then the murder?

TOOBIN: The only thing that's really significant about the charges is that count four is murder with special circumstances, the special circumstances being the fact that the murder was allegedly committed during the lewd conduct and during the kidnapping.

What special circumstances means is that this case is eligible for the death penalty. It means that the prosecution, if it wants to, can ask for the death penalty. Special circumstances doesn't mean they have to do it. But they couldn't ask for the death penalty if they didn't charge special circumstances.

WOODRUFF: All right, Jeffrey Toobin, our legal analyst, with me from New York -- thank you, Jeffrey.

And our coverage of this story will continue.

INSIDE POLITICS will be right back.


WOODRUFF: With us once again: Betsy Hart, Maria Echaveste.

Betsy, I was going to ask you about Vice President Gore's comments over the weekend. He basically said that President Bush should scrap his economic team, scrap his policy, and start all over again.

BETSY HART, SCRIPPS HOWARD NEWS SERVICE: Well, I think that what tells us, more than anything else, is that Al Gore is running for president. He Clinton and former secretary of the treasury, Mr. Rubin, have all been very critical of what's going on economically. And I think, in many ways, they are talking down the economy in the hopes of helping Democrats' chances. They have also suggested that clearly there is some ethical problems in the Bush administration and this has suddenly caused these CEOs to jump to do all kinds of terrible things that they would never have done under the ethics guidance of the Clinton administration, apparently.

I think that is very partisan and very unfortunate, especially is such turbulent economic times.

MARIA ECHAVESTE, FORMER CLINTON DEPUTY CHIEF OF STAFF: I think it's amazing that you're saying talking down the economy. There's no position of power. As former president, former secretary of treasury


HART: Certainly not moral standing that...

ECHAVESTE: There is certainly one thing going on here. There isn't a strong economic voice on behalf of the Bush administration out there trying to reassure investors that the economy is on sound footing and that the market, in fact, is worthy of investment.

And that point is certainly no less than various folks in Wall Street and elsewhere have said, "Bush, you have got to." Bush is the only one out there talking. And that's not helping.


WOODRUFF: I was just going to say, some of this has boiled down to criticism of the treasury secretary, to Paul O'Neill, saying, "Why isn't he saying more?" The president himself defended his treasury secretary today.

He said -- quote -- "I have all the confidence in the world in Secretary of the Treasury O'Neill. And I understand one newspaper was calling for his scalp, but you know that's Washington D.C. That's what happens in that town."

ECHAVESTE: Well, what's certainly going on is, even "The Washington Post" this morning said that Bush's economic plan is not working, that the numbers don't add up, whether it's the tax cut passed last year.

HART: Well, and "The Washington Post" is not exactly


HART: ... of straight talk.

ECHAVESTE: The point is that investors don't feel confident. And this is a time -- whatever the people did last -- whatever Bush did over the last year and a half, he has a crisis on his hand right now. And if he doesn't manage it, we are going to be in for more trouble.

HART: Maria, I don't entirely disagree with you. And I'm no big fan of the treasury secretary's either.

But when it comes to what is actually going on in the economy, the fundamentals are extraordinary, whether you talk about employment, factory inventories, growth rates, etcetera. And I have seen President Bush out there trying to talk this up. What it gets drowned out by is sort of the trauma of the stock market. And then some of these things become what has been now dubbed irrational depression or irrational fear about the stock market.

And I think some of that is taking place. So there's a lot of things going on here. I don't think that, for a former president, and vice president who is running for election to the top office, to so beat up on the economy and to accuse George Bush, as if somehow he could control this, is at all fair or appropriate.

ECHAVESTE: Well, look, a president doesn't control everything that goes on in an economy. We certainly know that.

HART: Yes.

ECHAVESTE: But there are things that you can do. There are steps that you can take. And those steps are not being taken.

HART: And he did try huge tax cuts. That did not get passed. And that is something that Congress could take up that would spur this economy right now in...

ECHAVESTE: You're calling for more tax cuts?

HART: Absolutely.

ECHAVESTE: After the disaster we have right now?

HART: Absolutely. You want to get a rise in the stock market, that's how to do it.

WOODRUFF: Very quickly, Homeland Security Department: Congress is rushing to get this passed, at the administration's request. Republican Senator Fred Thompson of Tennessee says -- quote -- "The symbolic value of getting this done by September 11 is outweighed by the need to get it done right." Who is right here?


HART: What they should do is appoint Rudy Giuliani to be secretary of this new department. Forget Tom Ridge. He's out of his league. And I guarantee you that would restore a lot of confidence. Whether that's done before or after September 11, get Rudy on the job. That will get the stock market up.

ECHAVESTE: The fact is that it's going to get done before September 11. And we are go to rue the day, because they won't get it right. And we are going to spend the next 10 years trying to fix it. And we are not going to be any more safer as a result of rushing to judgment. But symbolism is nine tenths of reality.

WOODRUFF: We have got to leave it there.

Maria Echaveste, Betsy Hart, good to see you both.

HART: Thank you.

ECHAVESTE: Thank you.

WOODRUFF: Thanks for coming in this Monday.

When we come back, the economy and the Oval Office: How should the president react when the markets have problems? We will hear what Jeff Greenfield has to say about that in his "Bite of the Apple."


WOODRUFF: In today's "Bite of the Apple," our Jeff Greenfield keys in on the Oval Office and the economy.

Hi, Jeff.

You've been thinking about what we often hear that this president learned from the fate of the last President Bush and how that may be a kind of trap.

JEFF GREENFIELD, CNN SR. ANALYST: We've heard for years that Bush 43, George W. Bush, has said the one thing he learned about his father's defeat is that, if you have political capital, use it. The last thing you want to do is to be seen to be standing on the sidelines when the country is going through a tough time. That was in reference to the economy back in '90 and '91.

So, almost from the beginning of the inaugural, this administration has put the president out there in the country talking about everything, from the tax cuts to security after 9/11, to the economy. The problem is that there's an implicit message in that that the president can do something, in the sense of pushing a button or pulling a lever.

And particularly given the 24-hour news channel environment, to see a president up talking about the economy while that message on the lower left-hand corner of the screen is giving exactly the most discouraging message possible I think creates a link between the idea that the president has to do something and the fact that, if things are going badly, it must be something that the president hasn't been doing right.

WOODRUFF: Isn't it the case that, in this 24-hour news cycle age, that the president has to be seen as doing something more of the time?

GREENFIELD: Well, I think a lot of people believe that.

The question is whether this or any president is allowed to stop and think about the right thing to do. Fred Thompson has been talking about that in terms of getting this homeland security passed by some arbitrary deadline. I think that's particularly true about the economy.

And, after all, think about it. Bush 41, the father, didn't invade, didn't go after Iraq a week after Iraq invaded Kuwait back in 1990. It took months for him to organize what became Operation Desert Storm. This President Bush did not go after Afghanistan on September 12. It took weeks to get the plan in place that provided the strategy that eventually ousted the Taliban.

So, if it's true that what this week's "Newsweek" reports, that this administration is kind of fixated on that television screen and is asking every day almost, "How is it playing?" that's not particularly good news for the president's political prospects, because it suggests they're putting imagery above substance.

WOODRUFF: It's interesting you would say that, because one would think that they would have to pay attention to the flow of news.

GREENFIELD: No, I agree they have to pay attention.

But, you know, if you think back to Ronald Reagan, who is now seen -- I think probably accurately -- as something of a political giant -- maybe he wasn't back then by his critics, but most people seem to think that he ran a very successful administration politically.

He had the ability to kind of slow things down, even in a 24-hour news cycle," to say: "You know what? We've got to take some time and do this right." And I think that message conveyed by a president is sometimes, in the long run, much more effective than a kind of day-by- day response to the fevered charge of the stock market or what's on our screen.

It's almost a way in which we need to president to be saying these markets can collapse overnight and it's not going to be put back overnight.

WOODRUFF: All right, Jeff Greenfield, "Bite of the Apple," thanks.


WOODRUFF: To California now, where Governor Gray Davis signed today what is being described as the nation's first bill to fight global warming. The new law slaps tough new vehicle emission restrictions on carbon dioxide and other so-called greenhouse gases. The auto industry spent millions of dollars fighting the measure.

I recently asked the governor his response to this criticism.


GOV. GRAY DAVIS (D), CALIFORNIA: Well, this is just old politics as usual. The automotive industry complained when we adopted the Clean Air Act, but they built better cars that were desirable around the world. They complained when there was a requirement to impose catalytic converters. The same thing happened. People wanted to buy their cars not here, but around the world.

This bill applies to the 2009 model cars. It requires the California Resources Board to can come up with technologically feasible ways to reduce pollution. I believe that will be done in a responsible, thorough and thoughtful way. We will reduce the emissions that we contribute to greenhouse gases. We will protect our children. And we will clean up the air. And trust me, it will be done in a responsible, thoughtful way.

WOODRUFF: Well, Governor, there's a coalition of something like 12 or 13 automakers. Are what they are saying is that the industry has already because more environmentally friendly. And they say that this bill, by what you've done, by what you've signed, interferes with federal environmental cleanup efforts.

I'm going to quote what one fellow said at this coalition. He said: "One state trying to control global warming is ridiculous."

DAVIS: Well, we have to do our part. All you have to do is look at the footage, Judy, of glaciers melting in Alaska. You know global warming is real. the Scripps Institution of Oceanography, which is respected around the world and which is affiliated with the University of California, is convinced that we must adopt the Pavley bill, which will reduce what they call carbon pollution that contributes to greenhouse gases.

I want to do our part to reduce greenhouse gases, set an example for others to follow. They do it in Europe. Carmakers make money there. I believe, at the end of the day, consumers, the environment and carmakers will all benefit from the thoughtful, reasonable approach that the Air Resources Board in California will take.


WOODRUFF: Despite the industry opposition, Governor Davis predicts that other states will follow California's lead by tightening emission standards.

Checking the headlines now in our "Campaign News Daily": The GOP Senate primary in Tennessee features dueling symbols of regional pop culture. Country singer Hank Williams Jr. Performed a free concert over the weekend sponsored by the Lamar Alexander campaign. Not to be outdone, Alexander's opponent, Congressman Ed Bryant, is running a new radio ad featuring former NASCAR driver Darrell Waltrip.

In New York, Senator Charles Schumer is taking sides in the Democratic primary for governor. Schumer today endorsed the state comptroller, Carl McCall, for governor. McCall faces former HUD Secretary Andrew Cuomo in the battle to take on the incumbent, Republican George Pataki.

I'll be back in a moment, but now let's look at what's coming up on "WOLF BLITZER REPORTS" -- hi, Wolf.


The alleged killer of little Samantha Runnion hears the charges against him. But with all the emotion out there, can Alejandro Avila get a fair trial? I'll ask the criminal defense attorney Robert Shapiro. And, with markets continuing to slide and with huge companies going bankrupt, what's a simple investor to do? Wall Street analyst Joe Battipaglia will be taking your phone calls.

It's all coming up right at the top of the hour, right after INSIDE POLITICS.


WOODRUFF: That's it for INSIDE POLITICS. "WOLF BLITZER REPORTS" is next. Thanks for joining us. I'm Judy Woodruff.


Expresses Confidence in O'Neill; Congress Works on Corporate Responsibility Bill>



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