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CNN LOU DOBBS MONEYLINE
Dow Rises 56.56 to 8,736.59; Nasdaq Falls 15.93 to 1,328.26
Aired July 31, 2002 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, CNN ANCHOR: Tonight, Congress opens the debate on a military strike against Iraq. Senators urge the president to seek congressional approval before any attack. We begin our coverage with Jonathan Karl on Capitol Hill.
JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Lou, it's a question of containment versus invasion, as the Senate foreign relations committee began a spirited debate on options for dealing with Saddam Hussein.
KITTY PILGRIM, CNN CORRESPONDENT: Are oil supplies in the United States sufficient if there is a strike on Iraq? We'll tell you how much oil is in the strategic reserves.
JAN HOPKINS, CNN FINANCIAL CORRESPONDENT: General Electric is the latest company to expense employee stock options. I spoke with GE's Jeffrey Immelt, who signed off on the company's financial statements.
BILL TUCKER, CNN FINANCIAL CORRESPONDENT: A last-minute buying surge not enough to save the day or the month for the Nasdaq.
DOBBS: AOL Time Warner is the latest to join a notorious group in corporate America. It is now the target of a Justice Department investigation.
And those Oregon wildfires are now the top firefighting priority in the nation. U.S. troops and the National Guard have joined thousands of firefighters on the frontlines of what has become an inferno raging out of control.
ANNOUNCER: This is LOU DOBBS MONEYLINE for Wednesday, July 31. Here now, Lou Dobbs.
DOBBS: Good evening.
Tonight, lawmakers are hearing chilling testimony about the threat posed by Iraqi dictator Saddam Hussein. Those threats include the possibility of Iraq building nuclear weapons and the possibility that Saddam Hussein might share weapons of mass destruction with terrorists. Jonathan Karl joins me now from Capitol Hill with the story -- Jonathan.
KARL: Well, Lou, there was total disagreement -- total agreement at this hearing that Saddam Hussein poses a significant risk and something should be done about it. But there was widespread disagreement about what exactly should be done. Many Democrats came forward and said that they believe the administration has not done what it needs to do to make the case for military action.
(BEGIN VIDEO CLIP)
SEN. PAUL WELLSTONE (D), MINNESOTA: I do not believe as a senator that the administration has yet made the case for military action against Iraq. And I think that before any decision is taken about whether or not we go to war, we need to have a careful and deliberate and substantive discussion, not only here, but with people in our country. And we'll see whether the case has been made.
(END VIDEO CLIP)
KARL: And the Democratic chairman of that committee, Joe Biden, said, questioned what would happen after an invasion of Iraq? And even if Saddam Hussein was removed, Biden questioned what would happen in post-Saddam Hussein Iraq? Would there be a power vacuum? Would there be chaos that would be actually worse than the current situation?
Now, whatever happens, Democrats said that if the president wants to go forward with military action against Iraq, that he must first get congressional approval. That suggestion, however, was strongly disagreed with by the top Republican here in the Senate, Senator Trent Lott.
(BEGIN VIDEO CLIP)
SEN. TRENT LOTT (R-MS), MINORITY LEADER: I think, you know, what you're talking about there is just a blatant political move that's not helpful. You know, what do they want us to say? Oh, Mr. Saddam Hussein, we're coming, we're coming, get ready. Now you can expect this, you know, two weeks after election day. And by the way, here's the way we're coming, but before we do that, we'll have a huge debate so you'll know full well exactly what's going on. Give me break.
(END VIDEO CLIP)
KARL: But, two senior Republicans here on Capitol Hill, Richard Lugar of Indiana, who was the top Republican at that hearing today, and Arlen Specter of Pennsylvania are both on record saying that they too believe that if the president is going to go to war against Iraq, that he should first come and get a consensus, get the sign-off of the United States Congress.
Now, Lou, all this discussion was going on while people on all sides of this debate believe that there is no imminent invasion. The administration has said that there are many options under consideration and there's no plans for an invasion. And Senator Biden said that based on his discussion with administration officials, he does not believe that there will be an invasion of Iraq any time this year -- Lou.
DOBBS: Jonathan, thank you. Well, whenever an attack, should there be an attack, on Iraq, it would have a major impact on the American economy. The cost of launching a military offensive is expected to run into the tens of billions of dollars. Unlike the Persian Gulf War 11 years ago, when U.S. allies picked up most of the expenses, this time, the United States would likely shoulder most of the cost. Wolf Blitzer joins me now with more on the story.
WOLF BLITZER, CNN ANCHOR: Lou, there's no doubt that the cost could be very, very high. Just to give some perspective, the Persian Gulf War, according to the Congressional Research Service, cost the U.S. and its allies about $60 billion. But $50 billion of that came from Japan. The Persian Gulf state Saudi Arabia, Kuwait, some of the other Emirates, the Europeans. The United States wound up shelling out about only $10 billion.
This time around, many of those states are by no means supportive of a U.S. military strike, and it could wind up being very, very expensive. And another huge wild card, as you know out there, is the oil supplies. If there is a disruption of oil shipments from the region to the West, the price per barrel could go up, gasoline prices could go up, manufacturing could go up. That could have a huge impact, of course, on the U.S. economy. All these considerations, carefully being weighed by senior Bush administration officials as they plot their next strategy -- Lou.
DOBBS: Wolf, in terms of today's debate, there isn't much of a debate about the nuclear weapons issue, whether Iraq has them, is there?
BLITZER: Most of the experts believe that the Iraqis are getting increasingly close. Richard Butler, the former chief U.N. weapons inspector, cited an International Atomic Energy Agency study two years ago that said if there are no international inspections, the Iraqis could develop what was described as a crude nuclear device within two years.
Well, guess what? Two years is about right now. And Butler also said the assessment of the experts after the Gulf War was that the Iraqis then, had they not invaded Kuwait in 1990, were only about six months away from developing that crude nuclear capability. So that clock is clearly ticking, and that's a source of grave concern to top Bush administration officials.
DOBBS: Wolf, we have been talking about, listening to, two administrations, the previous and this, talking about the threat of Saddam Hussein and Iraq in terms of weapons of mass destruction, whether they be biological or chemical or nuclear. Yet, all that time and all of the threats and saber-rattling, Saddam Hussein remains in power. What is, in your judgment, his likely strategy in response here?
BLITZER: His strategy is to do what he's been doing rather successfully over these past several months, reach out to the Arab world, some of the Arab states, by expressing his support for the Palestinians, reach out to those Europeans who want to do business with Iraq, especially the French, reach out to the Russians, who have long-term financial stakes in Iraq. And also reach out to China, trying to generate support for his stance.
And you know what? So far, even U.S. officials will acknowledge he's doing a pretty good job on that propaganda or diplomatic front.
DOBBS: Wolf, thank you very much. Wolf Blitzer.
Well, three Americans are among seven people killed in today's bomb explosion in Hebrew University in Jerusalem. The state department says another American is unaccounted for tonight. At least 80 people were injured in the explosion, many of them in critical condition. Police say the bomb was left inside a handbag in a cafeteria. The radical Islamic group Hamas is claiming responsibility. It says the bomb was in retaliation for Israel's attack on one of its commanders last week. Fourteen civilians also died in that attack. The White House calls today's bombing a horrific act of terror. The Palestinian Authority also condemned the terrorist attack.
A man suspected of selling fake ID's to two of the September 11 hijackers is believed tonight to be in Egypt. Law enforcement authorities raided the New Jersey home and business and Mohammed El Atriss today. The FBI believes El Atriss took a flight from Newark to Egypt over the past two days. He also bought a copier machine capable of reproducing seals and holograms from FBI agents posing as store clerks. An FBI agent also delivered the copier to El Atriss. Today's raid on his home came after a four-month long investigation.
And a dramatic comeback on Wall Street today. The Dow Jones Industrials spent all but the final hour lower. At the low point, the Dow Jones Industrials down 143 points. A late-session rally lifted the Dow. It closed up more than 56. The Nasdaq up -- rather down almost 16 points. The S&P 500 up eight points. We'll have complete market coverage for you later in the broadcast. Jan Hopkins will have the market for us.
And turning now to our MONEYLINE poll. The question tonight: Should President Bush seek congressional approval before attacking Iraq? Yes or no? Cast your vote at cnn.com/moneyline. We'll have the results for you, of course, later in the broadcast.
Still ahead here, anti-American demonstrations in Iraq as U.S. policymakers talk about regime change in Baghdad. CNN military analyst General David Grange will be here to tell us how it can all be accomplished.
WorldCom tonight stands accused of cooking the books to inflate the number of Internet users. We'll have a special report for you.
And reaction to the Senate ethics committee ruling on Senator Robert Torricelli and the businessman who says he gave him expensive gifts. Stay with us.
(COMMERCIAL BREAK) DOBBS: The Senate's decision to hold hearings on Iraq is giving the debate over what to do about Saddam Hussein a much higher profile in the public consciousness. It's also raising questions about the human and economic cost of a possible attack.
But the U.S. Energy Department is raising a strategic petroleum reserve. It will rise to 700 million barrels as part of a plan announced last year.
Kitty Pilgrim has the report.
(BEGIN VIDEOTAPE)
PILGRIM (voice-over): When it comes to oil, the United States is awash with extra supply, but military strategists like to run doomsday scenarios about oil supplies in the event of a war in the Middle East.
So here are some of the facts: If all oil imports were cut off to the United States -- an inconceivable event -- the strategic petroleum reserve would last for more than two months.
If Iraqi supplies alone were cut off, the strategic petroleum reserve would make up the shortfall for two years. And most oil experts say Saudi Arabia would certainly make up the difference right away.
RICHARD N. COOPER, ECONOMICS PROF., HARVARD UNIVERSITY: World demand is weak at the moment, and there's a lot of excess capacity, particularly in Saudi Arabia, but also in other countries. And I think that any shortfall from Iraq would, in relatively quick order, be made up by production elsewhere.
PILGRIM: Oil prices do tend to spike in time of turmoil in the Middle East, jumping before the 1991 Gulf War, although prices dropped just as the war started.
And oil prices spiked again in 2000 with the start of the current Palestinian uprising.
But the fact is, the spikes are largely psychological, and supply was never in jeopardy.
RAAD ALKADIRI, PETROLEUM FINANCE COMPANY: Prices of 40, 50, $60 a barrel, the kind of incredible prices that have been thrown around, unsustainable for anything by a very, very short period of time. And the concept that OPEC, if it saw that opportunity, wouldn't pump as much oil as it could into the market to take financial advantage of that, misses the -- misses OPEC's strategy altogether.
(END VIDEOTAPE)
PILGRIM: The White House says the president would only order a release of reserve oil if there was a disruption in supplies, not just to keep the prices low.
Part of the strategy is to keep markets informed and confident in the event of an action against Iraq -- Lou.
DOBBS: Kitty, thank you.
Well, the senator in charge of the hearings on Iraq says Saddam Hussein must give up his weapon of mass destruction or be removed from power. The hearings are being held as the White House steps up the pressure for a change of regime in Baghdad. Yesterday Defense Secretary Donald Rumsfeld said air power alone wouldn't be sufficient to defeat Saddam Hussein.
Joining me now, General David Grange, military analyst here, our regular commentator on military affairs.
General, good to have you here.
At this point, with all of the leaks and, again, Defense Secretary Rumsfeld talking about this, is there any scenario that hasn't been run by Saddam Hussein in the press?
BRIG. GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Well, I think he's received just about all the plans that we may have on the shelf, but that could be that we're just trying to overload him so he can't plan.
But I think what we'll see is a combination of the inside-out; which really means that you go in and you take down command and control and key infrastructure immediately with raids on the ground or air power, probably supporting some type of a coup attempt as well as a heavier option to take care of larger forces.
And I think all that's critical, because when you do this kind of planning and you meet things on the battlefield, opportunities of failures, you have the flexibility to react with one of the other parts of the plan.
DOBBS: General, amongst the many areas and approaches in attacking Iraq, nearly across the board there's the estimate of a cost of about $50 billion to carry out an attack on Iraq.
That is a huge amount of money for a force that, if we are to believe what we are reading and reporting, is a force half the size of that of the Persian Gulf War.
GRANGE: Yes, I think the force will be smaller than the Gulf War, mainly because I don't we could -- one, we can't afford a build- up time. And the other is just the staging capability and/or the threat from WMD, that Saddam may use against our forces as they're preparing to do their parts of the mission.
You know, what's really critical, I think, is once the attack is over, the reconstruction phase. And as many say, this cannot be a drive-by liberation, it's got to be a concerted effort during a consolidation to help their oil get back into place, and that would help on the cost, I believe.
DOBBS: Let's focus on, first, the attack, should there be one, before we get to reconstruction, if you will. We're anticipating, it seems to me, quite a bit as it is.
But in terms of this attack, a great deal of discussion about the fact the United States cannot do this alone. Is that, in your judgment, absolutely true? And what are the best options, in your judgment, to proceed?
GRANGE: I think the United States could do it alone, but it would be advantageous to us -- obviously, one, we need some kind of support just to launch. And especially the ground forces involved. We need some kind of rationale to go in besides just that we want to. In other words, the U.N. or someone has to be involved. And some say that, yes, it's OK that we're going to do this thing.
I know the country -- our country has a right of self-defense by a preemptive strike, in our definition, but most of the world doesn't believe that. So I think a lot of that has to be worked out yet before we launch.
But physically we could do it.
DOBBS: I was really focusing on the military aspects of it, General, because the politics get, at best, a little unwieldy. As difficult as the military aspect is, at least it's somewhat more concrete, if you will.
In terms of the attack on Iraq, the suggestion that Iraq, according to one of the battle plans that was proffered by Pentagon sources, the idea of encircling Baghdad as a strategy, give us your best judgment about that.
GRANGE: Well, you know, the military tries to avoid combat built-up areas in the urban terrain. It's very difficult to fight in the city. I think to contain it would be probably the course of action.
But I think there is some critical infrastructure that still would have to be taken down within the city. And that's where it gets a little sticky, is where you conduct the raids to go in and take out a command and control facility or a media facility or airport, how long do you stay there? Do you end up getting in a fight and get stuck there, and how do you get out or link up with other forces?
It's very tough. But I think you need a part of that to do the mission.
DOBBS: General David Grange, thank you very much.
GRANGE: Thank you.
DOBBS: Coming up next: anger about the White House's interpretation of that brand new law on corporate corruption. Some critics accuse the Bush administration of not doing enough to protect corporate whistle-blowers.
WorldCom faces new accusations about cooking the books. This time it's not about finances, it's about the telecom's forecast for Internet growth.
And mob rule in Chicago after a van crashes into the porch of a home. Two people in that van are beaten to death.
That story and more still ahead. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: Come clean or leave office: That's the message tonight to Senator Robert Torricelli from his Republican opponent in New Jersey. Torricelli was admonished by the Senate Ethics Committee last night for accepting kickbacks from a businessman who was also a campaign contributor. That businessman, David Chang, was convicted earlier this year of violating federal campaign laws. Torricelli, for his part, has insisted for months that he did nothing wrong.
There's a new fight tonight on Capitol Hill about corporate reform. Yesterday the president signed the landmark legislation against corporate corruption into law. Last night the White House quietly issued a statement that would appear to limit one of the key provisions of that bill: protection for whistle-blowers. And that change has some senators very angry.
Tim O'Brien reports from Washington.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT (voice-over): It was Sherron Watkins, the Enron executive who blew the whistle on deceptive practices that threatened to bring the company down in a wave of accounting scandals.
Congressional efforts to protect whistle-blowers like Watkins may be thwarted by a narrow White House interpretation of the new Corporate Governance law. Only hours after President Bush signed the bill into law, the White House issued a statement: "Given that the legislative purpose is to protect against company retaliation for lawful cooperation with investigations, the executive branch shall construe the section as referring to investigations authorized by the rules of the Senate or the House."
In other words, if there's no congressional investigation underway, there's no protection for whistle-blowers; a narrow view that ignited a firestorm on Capitol Hill.
SEN. PATRICK LEAHY (D), VERMONT: I'm amazed more than shocked. I mean, this is interpreting it in a way that basically ignores Congress and protects corporations. That's not what we intended.
O'BRIEN: The Republican co-sponsor of the measure also agreed the White House has it wrong.
SEN. CHARLES GRASSLEY (R), IOWA: If there's an investigation already going on, you probably don't need any help out of whistle- blowers. And if there's not an investigation going on and you can't talk to a member of Congress, then what good is a whistle-blower protection?
O'BRIEN: White House Spokesman Ari Fleischer said the law was ambiguous, and the White House had an obligation to clarify what it meant.
ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: Because there are clarifications needed in the statute, and the Department of Labor has to enforce it, and so we needed to settle on some type of definition, and that's what was provided.
(END VIDEOTAPE)
O'BRIEN: Fleischer also said Congress has the right to clarify what it meant, and several lawmakers predicted it will do so swiftly.
Their concern is that by highlighting any possible uncertainty in the law, the White House undermines its very purpose of encouraging whistle-blowers to come forward -- Lou.
DOBBS: Tim, Senator Grassley's reasoning is unimpeachable: If there is no investigation, you need a whistle-blower; if you have an investigation, you don't.
What in the world is that about?
O'BRIEN: Well, he's absolutely right. And that's the downside of the administration's argument. On the other side, I think the administration's concerned that by letting every -- complaining to any Congressman would give too much power to Congress. And that's one of their concerns.
And reading the statute, you could read it either way. But the way the White House is reading it is going to have some political ramifications, especially in this climate.
DOBBS: OK Tim, thanks. Tim O'Brien.
WorldCom has admitted cooking its books to exaggerate profits to the tune of nearly $4 billion. Now some critics are saying it's about time WorldCom came clean about something else: inflating the Internet bubble; a bubble that, when it burst, cost investors billions of dollars.
Steve Young has the story.
(BEGIN VIDEOTAPE)
STEVE YOUNG, CNN CORRESPONDENT (voice-over): Internet growth doubled every hundred days when the Web was first commercialized in 1995 and 1996. But a critic says the dot-com mantra that the doubling kept rolling on was a WorldCom-manufactured myth.
That conclusion was reached back in 1997 and 1998 but a scientist then working for AT&T.
ANDRE ODLYZKO, UNIVERSITY OF MICHIGAN: If you double every quarter over five years, you end up growing by a factor of 1,000 -- of one million, sorry, a cumulative factor of 1 million, and that is simply impossible.
YOUNG: Odlyzko says when he tried tracing the source of the much-repeated 100-day growth claim, all roads led to WorldCom and statements by its then-CEO Bernard Ebbers and especially John Sidgmore, then-head of WorldCom's Internet unit, UUNET, the world's biggest.
A former UUNET senior engineer says the outside world was snookered by statistics Sidgmore put out and other companies repeated.
ANDREW BYNUM, FORMER WORLDCOM SENIOR ENGINEER: All they could do was reiterate or resay the same things that they were being fed by the executives of companies like WorldCom.
YOUNG: Sidgmore declined to be interviewed for this story, and repeated phone calls to Bernard Ebbers' lawyers seeking comment were not returned.
A WorldCom spokeswoman says Sidgmore wasn't talking about traffic, but actual growth of Internet network capacity over the mid- to late-'90s. But that would have meant network growth by a factor of 1 million.
In 1998 the myth gained the imprimatur of the U.S. government.
WILLIAM DALEY, SECRETARY OF COMMERCE: That the digital economy is alive, well and growing.
YOUNG: And doubling every 100 days, an official Commerce Department report said, citing UUNET.
March, 1999: John Sidgmore tells the "South China News": "If you're not scared of the 1,000 percent a year growth, you don't understand."
Right to the edge of the burst bubble, January, 2000, Sidgmore again says: "Internet demand is doubling every 3.5 months."
SCOTT CLELAND, PRECURSOR GROUP: Clearly the purpose was to inflate the stock in order to do two things: to allow further acquisitions, and a way to create personal wealth for the people that had options.
(END VIDEOTAPE)
Roy Bynum, the former WorldCom engineer, says he doesn't blame WorldCom for bursting the dot-com bubble, but for inflating it -- Lou.
DOBBS: And what a good job was done, not only by WorldCom, but lots of other folks as well.
Steve, thank you.
Coming up next here: The bad news continues for AOL Time Warner; the Justice Department joins the SEC investigating the media firm's accounting practices.
Investors worry about the pace of economic growth. They should also worry about the government's reporting and measurement of that growth, which is altogether unreliable and unbelievable. We'll have that report for you.
And a nightmare journey for a heart attack victim. He waited 20 minutes for medical attention while a Boston train made its regular stops. That is a firestorm in Boston. And that story is coming right up.
We'll continue in just a moment.
(COMMERCIAL BREAK)
DOBBS: These are the top stories we're following tonight.
AOL Time Warner faces a new inquiry into its accounting. Greg Clarkin has the story.
CLARKIN: You've got trouble. The Department of Justice is the second government agency looking into AOL Time Warner's accounting practices.
KATAYAMA: The Dow finishes its worst July ever on a positive note.
TUCKER: An after-hours earnings warning may cast an early fall on August.
HAYS: It's not just CEOs; now the government is restating its numbers as well -- Lou.
DOBBS: Kathleen, thank you.
Also tonight, a Senate committee hears disturbing testimony about Saddam Hussein's capabilities with weapons of mass destruction. Witnesses say Iraq might build nuclear weapons within the next three years, share weapons of mass destruction with terrorists.
And at least seven people killed in a bomb explosion in a cafeteria in Hebrew University in Jerusalem. Three of those victims are American. The State Department says another American is unaccounted for in the terrorist attack.
Troubles mounting at AOL Time Warner, the parent of this network. The Justice Department is the latest agency to investigate the company's accounting. The SEC last week launched an investigation. AOL says it's standing by its books, which have been upheld by auditor Ernst & Young.
Greg Clarkin has the story.
(BEGIN VIDEOTAPE)
GREG CLARKIN, CNN FINANCIAL CORRESPONDENT (voice-over): It was the pressure cooker days of the summer of 2000. AOL was pushing hard, trying to get government approval of its deal to buy Time Warner and try to keep its revenues strong as the dot-com bubble began to burst.
And for an outfit known as aggressive, the question now is did AOL cross the line? That's the question Justice Department investigators are looking into. AOL Time Warner confirming the Justice Department has launched an investigation, a move that comes just days after the company said the SEC was looking into its books.
AOL Time Warner CEO Dick Parsons was traveling and unavailable for comment, and that left other executives to defend the company.
TED LEONSIS, VICE CHAIRMAN, AOL: The books or open, we're very cooperative, and we think that our accounting is correct, and you know, it's a distraction when we're trying to continue to provide these great services for 35 million customers.
CLARKIN: AOL Time Warner said it was cooperating with the JUSTICE DEPARTMENT as well as the SEC. Questions about AOL's books have been swirling since the "Washington Post" outlined the company's aggressive deal-making weeks ago, deals that were often struck with failing dot-coms in a variety of ways, all with an eye of pumping up AOL's revenue.
And for those doing business with AOL, the message was clear: the company would use its distribution muscle.
JASON CALACANIS, EDITOR, "VENTURE REPORTER": AOL's attitude during the boom days from '96 to 2000 was essentially, if you want to talk to us, bring a check, and there were no partnerships with AOL. Partnership in AOL terminology meant a seven or eight figure check.
(END VIDEOTAPE)
CLARKIN: And lawyers say the next step will be for the Justice Department to determine whether criminal intent was involved at AOL, and that right now is the unknown. Did AOL executives cross the line in their attempts to keep their revenue line strong -- Lou.
DOBBS: Greg, thank you very much.
Well, a late session comeback on Wall Street. The Dow Jones industrials, a 200 point trading range today, ending higher. Jan Hopkins has our market coverage for us tonight, as always. This looked like it was going to be a bad day.
HOPKINS: That's right. But then, at the end of the session, investors decided that they wanted to own more stocks at the end of the month. That helped turn the market around from early concerns about a weakening economy.
At the close the Dow was up more than 50 points. Weakness in tech stocks pulled Nasdaq down one percent. The S&P 500 rose for the fourth day in a row, and that's the first time since December. Fret Katayama is at the New York Stock Exchange, Bill Tucker at the Nasdaq Marketsite -- Fred. FRED KATAYAMA, CNN CORRESPONDENT: Jan, money managers went on a late day buying binge to dress up their portfolios on this last trading day of the month. Oil and health stocks led the markets higher. General Electric turned around after it said it would begin expensing stock options. AOL Time Warner lost 90 cents. the Justice Department is conducting a preliminary investigation into the accounting practices of the parent of this network.
IBM lost nearly two percent. It's buying the consulting unit of PricewaterhouseCoopers. Verizon, losses at the local phone company more than doubled in the second quarter and cut its forecast, but investors had priced that into the stock. The Dow posted its fourth straight monthly loss for the first time in 20 years.
Now, let's join Bill Tucker at the Nasdaq Marketsite.
BILL TUCKER, CNN FINANCIAL CORRESPONDENT: Thank you, Fred. The late buying spree did lift the Nasdaq up off its lows for the session, but as for saving and saving the month, forget about it. The Nasdaq closing down 16 points at 1328 on volume of 1.6 billion shares. For the month, the Nasdaq recorded a moderate loss, 135 points.
In historic terms, that was only enough to rank it the 16th worst month on record. Average daily volume during the month was enough to earn it the distinction of fourth heaviest ever, and the month did end on a bit of dark note, when the Priceline and Adobe came together after the closing bell and both warned that earlier forecasts for their third quarter were too rosy. In after-hours trading, Adobe is trading sharply lower, Priceline higher -- Jan.
HOPKINS: Thanks, Bill. As Fred mentioned, one stock that helped the market today was GE. It was up 60 cents. Late this afternoon I sat down with Jeffrey Immelt, GE's chairman and CEO to talk about the company's decision to expense stock options.
(BEGIN VIDEO CLIP)
JEFFREY IMMELT, CHMN. & CEO, GENERAL ELECTRIC: Jan, I've talked investors, I talk to a lot of people around here, and what investors are clamoring for today is just disclosure and a sense of where the company stands.
There is no perfect way to account for stock options today. I think all of us agree with that. But fact of the matter is that most investors want to see it as an expense, want to see how it's incorporated in income statements, and I think GE out to provide that.
(BEGIN VIDEOTAPE)e
HOPKINS: And Immelt says it will mean about one cent less for earnings this year. Immelt and his CFO have also certified GE's financial statements, as required by the SEC.
(BEGIN VIDEO CLIP)
IMMELT: I already thought that those kind of systems existed. Again, most CEOs believe in what we're doing and would never do anything to mislead investors. So we were signing -- I've signed rep letters in this company for six or seven years. I always thought that my good name stood behind all those things, and that I could be punished if I ever falsified anything, so I'd say intellectually this isn't new.
(END VIDEOTAPE)
HOPKINS: Immelt says that GE's businesses are showing signs of gradual improvement. He sees no indication that consumers are cutting back nor any reason to believe that the economy might slip into recession again. Immelt was quite passionate about his belief that investors have spoken loud and clear, they want to hear from CEOs that their business is sound and business practices transparent.
He believes investors deserve that kind of assurance -- Lou.
DOBBS: And to his credit, this is a change in response to that market need that is for confidence, and GE is to complimented, joining as they do Bank One, the Washington Post Company, and Coca-Cola now, so that's gratifying. Jan, thank you.
DOBBS: Well, GE's filing with the SEC today brings to the total number of CEOs who have signed on their financial statements -- the number is now 17. That's less than two percent of the total that will face that deadline, which is now only two weeks away.
The companies that have signed off on their results include these: AK Steel, amazon.com, AMR, Corning, Delphi, EDS, Fed Ex, and General Electric, Masco, Oracle, PepsiCo, Public Service, Qualcomm, Southwest Airlines, Texas Instruments, Textron, Enterprise Group.
And we should point out that the SEC gives these companies some latitude -- you might even call it a loophole -- after they are signed and certified. The SEC statement includes the phrase "except as corrected or supplemented in a subsequent covered report."
It is not just corporate America restating numbers, unfortunately. The federal government today released revised GDP data that provides evidence last year's downturn was indeed a recession. What good are these numbers anyway if they're wrong and wrong for more than a year? Well, Kathleen Hays has the report.
(BEGIN VIDEOTAPE)
KATHLEEN HAYS, CNN CORRESPONDENT (voice-over): It's not just CEOs of the big corporations who are restating their numbers. The government had reported the U.S. economy contracted in only one quarter last year. Now the Commerce Department's annual revisions show the economy shrank in three quarters and grew in just one, a restatement that left even some Wall Street pros shaking their heads.
STEVEN ROACH, CHIEF ECONOMIST, MORGAN STANLEY: It does sound a clear warning that the user must beware here, and use any statistics, whether they come out of the government or corporate America with an awful lot of caution. HAYS: Critics say the government's model for calculating gross domestic product has a fatal flaw. It was designed to measure the post World War II manufacturing-based economy. Now the U.S. is a services-based economy, and the GDP accounts don't always capture the numbers well.
The government defends its numbers and methods.
STEVEN LANDEFELD, DIR., BUREAU OF ECONOMIC STATISTICS: It's not that we're not concerned about revisions, we're concerned about the increasing size of them and so is the administration. The administration has a fiscal year '03 budget proposal before the Congress which would address the major source of these revisions.
HAYS: And most Wall Street economists say as flawed as economic accounting process may be, it's better than no accounting at all.
RICHARD RIPPE, PRUDENTIAL FINANCIAL: We could stop the process and say, oh, let's wait until everything is final, and some countries do that, but I think in this country we benefit from having an early read and then we just accept the revision as something that goes with the territory.
(END VIDEOTAPE)
HAYS: But there's something else goes with the territory, and that's more doubts about the U.S. economy. The government says it -- the economy grew about one percent in the second quarter this year, but after the latest revisions, investors may be wondering if it grew at all -- Lou.
DOBBS: Just as it turns out there wasn't growth in the first and second quarters of last year. Now, I find it amazing, economists are a frustrating and sometimes annoying lot but, if you will, a necessary evil on these matters. Why do they care? These numbers are simply wrong. The federal government, the Commerce Department, the Bureau of Labor Statistics, they struggle against the -- I'm not saying they have an easy job, but it's just a silly exercise most of the time.
HAYS: The people I talked to, I'm surprised too that there was so little frustration and outrage expressed -- with a number of economists we spoke to today. They say it's hard to catch the turning points. You see more this time when you're going into recession, out of recession. I don't know. I think there is business here, though, a MONEYLINE data service will spin off an IPO, Lou, and maybe we'll get some customers.
DOBBS: You know what? We're going to call it Kathleen Hays IPO, because I wouldn't any part of those numbers -- the people that have to put them together, because the numbers are frustrating and so are the people who continue to mess them up. Kathleen, thank you, as always.
HAYS: Thank you, Lou.
DOBBS: A reminder to vote in our poll tonight. The question is, "Should President Bush seek congressional approval before attacking Iraq?" Yes or no. Cast your vote at CNN.com/MONEYLINE. We'll have the results coming right up here in just a few minutes.
Still head, the Dow Jones industrials stage a late session rally. Political analyst Kevin Phillips says we're only halfway through a market downturn and an economic crisis. He will join us next, the best selling author.
And a pair of huge wildfires in Oregon have now been designated the top firefightering priority in the whole country. The U.S. army and National Guard backing up that declaration. That story coming right up. We'll return in one minute.
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DOBBS: Based on historical patterns, we're only halfway through the crisis in the markets. That's of a warning from Kevin Phillips, who's tracked the political and economic history of wealth for decades. He also says the Bush Administration is ill equipped to deal with the problem.
In a recent op-ed piece in the "L.A. Times" he wrote, "The Bush Administration, with its second rate economic advisers, and its cheerleader mentality, is caught in a maelstrom it can't understand."
Kevin Phillips join us now. Good to have you here.
KEVIN PHILLIPS, AUTHOR, "WEALTH AND DEMOCRACY": Nice to be here.
DOBBS: What maelstrom?
PHILLIPS: Well, I think basically what you're looking at is that the United States' position at the present time with the stock market implosion and the weakness in the economy bears a striking relation to the two major bubbles of the 20th century: 1929 to '32 in the United States, and 1990s in Japan.
And once you start taking this business cycle seriously as something that's coming off a bad bubble, with a major negative wealth effect out there, because the GDP amount lost from the stock market downturn from 2000 to 2002 is roughly the same percentage of the GDP that was lost in 1929 to '32. So I take the negative wealth effect seriously.
I think it's likely to effect the consumer. I think you've got a stimulus from 9/11, both on monetary side and the fiscal side, that's starting to wear off, that you've got all these concerns about the numbers from corporate and financial America, and now from political America.
DOBBS: (UNINTELLIGIBLE)
PHILLIPS: And all of these things start to add up to a softness. And I think if we have another quarter, at some point, one or two quarters out, that's a downer, then people will start to wonder if this isn't another recession. The market takes a big hit, and the financial sector, which is poised on a brink right now watching the bank stocks over the last week or so, takes a big hit.
DOBBS: Of course, one can take the inverse perspective, and that is that we are on our way up, and that, of course, is what makes markets, and so we won't waste our time with my taking the opposite view. But the fact is, we have a number of serious issues, and you've defined the maelstrom, now you talk about the economic team of the Bush Administration as being second rate. Why is that?
PHILLIPS: Well, unfortunately, it would take too long to fully describe, but we can go with a capsule version.
DOBBS: Please.
PHILLIPS: We have an SEC chairman who obviously needs a second office for his ego, and how he's possibly going function when he's busy worried about equivalency with senior cabinet people, and too busy to deal with other things, I have trouble taking him seriously. A lot of people want him to resign.
The budget director, OMB director Mitch Daniels, has no standing with Congress.
Larry Lindsey, the financial adviser, is a former Enron consultant who's sort of splipping and sliding.
And the secretary of the treasury, Paul O'Neill, is an old green eyeshade guy from the Office of Management and Budget 25 years ago who came out of the aluminum industry.
Now, the problem I have with the aluminum industry is it doesn't have the same business cycle that the rest of the economy has.
DOBBS: Right.
PHILLIPS: So maybe in a sense he's equipped to be on the Bush team because of that, but I would feel better if we had one that knew the regular cycle.
DOBBS: If we had the talent, the requisite talent in that team, what would you counsel them here?
PHILLIPS: Well, you have to go back more than a year now to counsel them to take all the historical parallels that are raised between the collapse of the Nasdaq bubble and major market crashes of the last century. Take this seriously, look for weakness in the economy.
DOBBS: But of course that happened before this team, this second rate team, as you style it, was in office.
PHILLIPS: Yes, but they came in basically at a point in time when the economy seemed to be picking up, the market was rising -- I mean for a while, until...
DOBBS: The market was rising?
PHILLIPS: In the fall. When the -- in fall of 2000, and then you get the result from Florida, which sends it into the bag.
DOBBS: Kevin, I would never argue with you about these things, but that just started sounding a little more partisan, if you will, particular. Because we saw 40 percent decline in the Nasdaq in the year 2000.
PHILLIPS: No, I was meaning in the period right before the elections, even three or four months, you could you start to feel...
DOBBS: I see.
PHILLIPS: So I think what happened is the administration was assuming that the problems developing in the winter came partly from all the political problems.
DOBBS: Right.
PHILLIPS: And that the economy was really still in good shape. And I think they took that position until the summer, when they started getting scared, and then 9/11 bailed them out.
DOBBS: And it seems we've had plenty of event in which to take things increasingly seriously over the last would two years. Extraordinary number of events. Kevin, it is great to have you here. Your new book wealth "Wealth and Democracy" doing super. Keep it up. It's great to you have here.
PHILLIPS: Thank you.
DOBBS: Still ahead I'll have a few thoughts and we'll take a look at a number of wildfires in Oregon burning out of control. They threaten to become a monstrous inferno. That story and more still ahead. Stay with us.
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DOBBS: Tonight there are 27 major wildfires burning across nine Western states. So far this year 53,000 wildfires have burned more than 4 million acres. That's more than twice the 10-year average. Two fires in Oregon have destroyed 180,000 acres are now less than two mile parts.
Stopping those fires from joining has been designated the top fire-fighting priority in all the nation. A battalion of regular U.S. Army troops with support of the Oregon National Guard have joined the 1,700 firefighters already working along the front lines of that fire. Seventeen thousand people in that fire's path are on alert tonight to evacuate within 30 minutes, if necessary.
A firestorm over a senseless tragedy in Boston. Sixty-one-year- old James Allen suffered a heart attack while on a commuter train yesterday morning. Although the crew knew about that situation, the train made two more scheduled stops. They picked up passengers before arriving in Boston and then going for help for the victim. James Allen later died in the hospital. The train's conductor has been suspended pending an investigation. Let's turn to the MONEYLINE poll, the results of that poll. The question, "Should President Bush seek congressional approval before attacking Iraq?"
Seventy-six percent of you say, "You bet." Twenty-four percent say, "No."
"CROSSFIRE" will begin in just a moment. Let' go to Tucker Carlson and Paul Begala to find out what they have for us -- Paul.
PAUL BEGALA, CO-HOST, "CROSSFIRE": Well, Lou, it's not just the "MONEYLINE" audience but Capitol Hill today that was debating whether we should invade Iraq, and we will have the former chief U.N. weapons inspector Scott Ritter here to debate a retired army colonel over whether, when, and how to invade Iraq.
TUCKER CARLSON, CO-HOST, "CROSSFIRE": And then we'll talk to the Reverend Jesse Jackson from Israel. He'll explain why he planned to meet with Hamas today before they murdered a whole bunch more people. Finally, what's the one thing men fear when they go to prison? Don't answer that, Lou, but we'll have a prison expert on tonight to tell former Congressman Jim Traficant how he can avoid that fate. It's going to be a great show.
DOBBS: We look forward to all of those answers. Thank you, Tucker, Paul.
A sad ending to the story of those stranded whales on Cape Cod. All of those whales died. Thirty to 35 pilot whales had to be uethanized late yesterday. They tried to strand themselves on the beach a third time. In the initial landing Monday 56 whales beached themselves. Autopsy reports on 11 of the whales show they were healthy. Three of the mammals were in late stage pregnancy.
Coming up next, a few thoughts on some of life's hard lessons, and we'll also share your e-mails. And of course, "In Their Words." Stay with us.
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DOBBS: Life is always teaching lessons in humilitity. Certainly the stock market is a great teacher, and so is, of course, politics and the economy regularly humbles the most cautious forecaster. But today the humble lessons seemed to be especially convincing, powerful and vigorous.
When I arrived in the newsroom this morning, the Commerce Department had already reported that gross domestic product in the second quarter had risen only 1.1 percent. Now, most economists had been forecasting double that growth rate, and frankly I believed them.
That was bad enough, but then the Commerce Department also revised first quarter growth down to only 5 percent from its original 6.1 percent. Then to make matters really worse, the Commerce Department revised last year's economic growth report to show that there were three quarters of negative GDP rather than one. Again, many economists had doubted there was a recession at all last year, and again I sided with their views. I even scoffed at the venerable National Economic Research Bureau when it officially declared a recession last year. I now want to apologize profusely to the august research bureau. I have transferred my scoffs to the Commerce Department, which is tonight far more deserving.
Those bureaucrats seem no more capable of reporting reliable numbers than WorldCom, Xerox or Enron, or too many other corporations these days. Perhaps the bureaucrats should be held accountable for their economic reports under the same standards as corporate America and its financial reporting.
And to top the day off, we learned that the Justice Department had joined the SEC in investigating the accounting practices of AOL Time Warner, the parent company of this network. So tonight, we're not only reporting the news here, but in a small way, we're a part of the news, and in a very large way, we're uncomfortable with being so.
But it's all part of those life lessons in humility, and believe me, they're beginning to take.
Let's take a look at your thoughts. Many of you wrote in about my interview last night with John Sweeney, the president of the AFL- CIO. As we reported, Sweeney wants stock options expensed, CEOs prevented from selling their stocks while in office, the use of the off-shore tax havens outlawed altogether.
Marc Steinberg wrote in to say, "It was refreshing to see a mainstream media outlet featuring the voice of labor. Mr. Sweeney isn't the most telegenic or articulate spokesperson, but he does have a solid message and it does seem to resonate."
Mary Ann Pietrowitz in New Jersey writes to say, "In regard to the proposals by the AFL-CIO to protecting investments of working Americans, I agree 100 percent. As you stated in your comments, many of us have recently regarded labor unions as not relevant in today's marketplace."
N.B. Green is Florida writes, "To give credit to John Sweeney as you did, I admire your guts."
Finally, Fred Squires in West Virginia wrote in to say, "I may be giving the Justice Department too much of the benefit of the doubt, but I bet the reason they haven't brought Enron executives to task is because their shenanigans were so complex that it's taking a lot longer to craft an airtight case."
Well, as always, we love to hear from you. E-mail us at MONEYLINE@CNN.com. Include please your name and your address. From your words to "In Their Words."
ARI FLEISCHER, WHITE HOUSE PRESS SCY.: The economy began its slowdown in March -- in the summer of 2000. It accelerated in slowdown and became a recession throughout almost all of 2001. Now the economy is growing. It's not growing as fast as the president wants it to grow, and American people want is for people in Congress and the president to work together to enact policies to promote more growth and job creation.
GEN. TOMMY FRANKS, U.S. ARMY: Successes up to this point are attributable to the will of this country and to each of the coalition members, a will which I believe has been grossly underestimated by the terrorist organizations which threaten us still. The Taliban, as I mentioned, is gone. Al Qaeda senior leadership is in disarray. Many of their planners, travel facilitators and logisticians are now dead or have been captured.
Their training facilities in Afghanistan have been destroyed. Command and control capabilities have disrupted, and their remaining leaders are, as the secretary said, on the run.
SUNDEL "SONNY" JUDSON, NEW JERSEY LOTTERY WINNER: You don't know what to say. You don't even realize when you get this kind of money what it is. It's sort of like funny money. I was fortunate. I have a nice family. I did well in my own life. And I'm just happy that I picked the right number at the right time the right day.
DOBBS: That's MONEYLINE. Thanks for being with us. Please join us tomorrow when we'll be joined by Professor Jeremy Siegel. We'll be talking abotu stocks in the long run. We'll also be joined by the CEO of Kmart, James Adamson. Thanks for being with us tonight. Good night from New York.
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