CNN LOU DOBBS MONEYLINE
U.S. Markets Closed for Labor Day; Will Jailed Corporate Wrong- Doers Boost Confidence in Market?
Aired September 2, 2002 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: This is a special holiday edition of LOU DOBBS MONEYLINE. Sitting in for Lou Dobbs, Jan Hopkins.
JAN HOPKINS, GUEST HOST, LOU DOBBS MONEYLINE: Good evening and happy Labor Day. U.S. financial markets were closed today. Tonight we look at the progress made in fighting corporate crime. Nine months after Enron filed for bankruptcy the Justice Department filed its first criminal charges in its case against Enron.
This also marks the first time an executive surrounded by scandal has been forced to give back some of his ill-gotten gains since Enron's collapse. We'll ask a panel of experts if the guilty plea will restore investor confidence in the markets, and if the worse is finally behind us. We'll also look at the health of our nation's job market on this Labor Day. Labor Secretary Elaine Chao will be our guest.
And we'll look at two professions, whose employees are grossly underpaid, teachers and firefighters. Do the rewards outweigh the paycheck?
But first, we begin tonight with a look at the first criminal charges against a former Enron executive. Michael Kopper was charged with conspiracy to commit wire fraud and money laundering. His plea could put pressure on Kopper's boss, former Chief Financial Officer Andrew Fastow.
(BEGIN VIDEO CLIP)
STEPHEN CUTLER, SEC ENFORCEMENT DIRECTOR: This case is but a first step, albeit a vital one, in our effort to hold responsible and bring to justice those who participated in this massive betrayal of investing public's trust.
DAVID HOWARD, KOPPER'S ATTORNEY: Michael Kopper has accepted personal responsibility for his role in the Enron tragedy. Michael has admitted that he misused his position at Enron to enrich himself and others and, in so doing, violated his duties as an Enron employee.
(END VIDEO CLIP)
HOPKINS: Not only is Kopper the first former Enron executive to face charges, he is also the first executive in any of the recent scandals to give back some of the money he made. In Kopper's case, $12 million. Peter Viles has the report.
PETER VILES, CNN CORRESPONDENT, MONEYLINE (voice over): To cut a deal with the government, Michael Kopper had to put something on the table that prosecutors rarely see -- cold hard cash, $12 million worth, finally making good on the warning the president made on Wall Street in July.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Corporate officers who benefit from false accounting statements should forfeit all money gained by their fraud.
VILES: Kopper agreed to give back $12 million he made in deals he now says were illegal. The money goes to a fund set up by the SEC, and ultimately, back to the investors who owned Enron stock.
LARRY THOMPSON, DEPUTY ATTORNEY GENERAL: The task force investigators, the FBI investigators and our attorneys recommended this as the appropriate amount so that all of the ill-gotten gains could be returned to the Enron investors.
VILES: Government prosecutors and regulators have long had the power take back ill-gotten gains. In the last great wave of scandal, it took back $50 from Ivan Boski and $400 million from Michael Milken. The SEC currently has about 60 investors' claims funds, some fairly successful.
In the case of the Infinity Group, a Ponzi scheme that raised $28 million for more than 6,000 investors, the government got back $9 million, 45 percent of valid claims. In the case of Enron, however, tens of billions were lost. And $12 million may be a lot to Michael Kopper, but it isn't even close to 1 percent of what investors lost.
IRA SORKIN, FMR. SEC ADMINISTRATOR: It's a difficult process. It will be very difficult here because of the size of the number of shareholders who claim to be victims and the relatively small amount that will be put into the fund.
VILES: The government is also going after Andrew Fastow's ill- gotten gains, identifying $23 million, above and beyond the $12 million Kopper will give back, included in the list of what the government wants to seize is a house in Houston owned by Andy Fastow.
Peter Viles, CNN Financial News, New York.
HOPKINS: We'll have more from Peter Viles in just a moment.
But first, a new report confirmed what many suspected. CEOs who cook the books earn more. Chief executives of companies under investigation for accounting irregularities earned 70 percent more than the average CEO.
The executives of 23 companies under investigation earned an average of $62 million from 1999 through 2001. The average CEO earned substantially less, $36 million. Clearly, no one is feeling sorry for were average executive, as a typical CEO makes more than 400 times than an average worker. While executives took in whopping amounts of money, shareholders and employees suffered massive losses. The values of the shares of the firms in question lost $530 billion, that's a half a trillion collectively.
It's not CEOs who take home exorbitant home pay. Salomon Smith Barney's once-revered telecom analyst Jack Grubman left the firm last month. Grubman came under fire for his recommendations on the telecom sector, even as telecom stocks were sinking. Grubman was called before Congress to explain his support of WorldCom admitting he even sat in on company board meetings. One of the most striking aspects of the Jack Grubman story is the money he is he is walking away with, a package valued at $32 million. Again, Peter Viles reports.
VILES: Here's another tough lesson for investors in the summer of the perp walk. When the mighty fall, they still land pretty high. How else do you explain that Jack Grubman, one of the most famously wrong analysts of all time, is walking away from Wall Street with compensation valued at $32 million. How else to explain Dynegy, where Chairman Charles Watson left with a package worth $33 million, while shareholders were left to look at this, a stock in freefall.
The list goes on. Linda Wachner lead Warnaco into Chapter 11, now she wants $25 million. Chuck Conway, K-Mart also in bankrupt, his parachute, $9.5 million. Why does corporate America keep doing it? Don't they understand how angry these deals make workers and investors?
RICHARD TRUMKA, AFL-CIO: The average American just simply cannot believe the amount of money that these people are walking away with. First of all, their 401(k)s are shot; they're going down. And people that caused all of the problems are walking away with millions of dollars.
VILES: The truth is companies do these deals mainly because they agreed to them years ago, during a different economy, a different world, really. Take Grubman, his contract was written in 1998, he's so rich, even Congress wanted the details.
REP. ED ROYCE (R-CA): Your compensation, it's been reported, in the area of $20 million. Am I roughly in the ballpark?
VILES: The company source says most of what Grubman's getting now was negotiated four years ago. Forgiveness of $15 million loan, plus $4 million in interest, $12 million in stock and options. What's new is $1.2 million in severance pay.
VILES (on camera): For the record both Citigroup and Salomon Smith Barney declined to comment on Grubman's compensation. Also, for that record, that congressman was in the ballpark. Grubman testified before Congress that over a four-year period, his pay did average about $20 million a year.
Peter Viles, CNN Financial News, New York. (END VIDEOTAPE)
HOPKINS: While executives who were forced out of their jobs continue to reap millions of dollars in severance pay. Laid off rank- and-file workers are barely able to make end's meet. However, some unemployed may soon be able to find work again. Kathleen Hays explains why.
KATHLEEN HAYS, CNN CORRESPONDENT, (voice over): In the last three months, the economy produced only a total of 95,000 new jobs. And that is after losing nearly 1.7 million jobs since April of last year. Firms still remain reluctant to hire, but economists say even a small pickup in the economy will force them to act.
JAMES GLASSMAN, JP MORGAN CHASE: Today is a great environment when you can find a lot of people who are qualified. I think a lot of businesses who have a little bit of foresight tend to do more of their planning and hiring now. That is what we're waiting for.
HAYS: The weakest areas of the labor market continue to be in manufacturing, especially in high tech. The travel industry is expected to be under pressure again, as airlines cut costs. Job seekers will find prospects in the healthcare industry. The hot housing market is creating jobs in real estate, residential construction and mortgage lending.
JOHN CHALLENGER, CHALLENGER, GRAY, & CHRISTMAS: The areas continue to grow are the essentials. Things we can't do without. We have to have homes, healthcare, food, defense and security. It's all of those extras that have been having the hardest time.
HAYS: Hard times in the labor market may spur fresh policy initiatives from Washington. Economists say a weak reading on the August employment report could be the catalyst for another Federal Reserve rate cut. Taxes have been cut on households and businesses and the Bush administration is considering tax cuts on investments.
Economists say there are other steps the federal government could take to stimulate growth, including funneling money to states that are struggling under massive budget deficits.
JARED BERNSTEIN, ECONOMIC POLICY INSTITUTE: If the federal government could increase its fiscal grants to those states, that would be money that would be quickly funneled into the system. It would be spent quickly and it would help stimulate growth in those states. And I think begin to, perhaps, nudge the unemployment rate back down.
HAYS (on camera): The nation's unemployment rate hit a 40-year low of 3.9 percent back in October of 2000. Now, it's back up to about 6 percent. But economists say that is still quite tame compared to much higher levels of unemployment reached in past sessions. Kathleen Hays, CNN Financial News, New York.
HOPKINS: For more on the status of the labor market and the health of the economy, earlier, I spoke with Labor Secretary Elaine Chao.
HOPKINS: Madam Secretary, thank you for joining us on this Labor Day.
ELAINE CHAO, SECRETARY, U.S. LABOR DEPT.: Nice to be with you.
HOPKINS: On this Labor Day, we have gone through a number of years where it's been very easy to get jobs, very easy to change jobs. That is not the situation now. What do you tell the people that are employed and the people that are not employed in the U.S. today?
CHAO: Well, last month, unemployment rate was about 5.9 percent. This is still about the average for the last decade. But, obviously, we are concerned when any one person is out of a job. The president has said that any one person out of a job is one person too many.
HOPKINS: Madam Secretary, where are the new jobs? Where are the regions where people are hiring? And what are the professions and the industries where people are hiring?
CHAO: The industries that are desperately seeking workers include the healthcare industry, the mortgage banking industry, the educational industry, and, of course, if you have any kind of background in law enforcement or physical security, you are in high demand. The physical security industry is looking for people as well.
HOPKINS: And on the other hand, technology workers that were so in demand a couple of years ago, now are having a hard time.
CHAO: I would encourage technology workers not to be discouraged, because their skills -- and they -- are very much in demand, if not in the short-term, certainly in the long-term. Our economy has been transformed and it is in the process of transforming itself still from a manufacturing sector to an information-based economy. And so people with technology skills, in the long term, will do well, because their skills are still very important.
HOPKINS: You know, in the last four months of last year and clearly we were in recession at that point.
HOPKINS: The economy lost 2 million jobs and only some 200,000 jobs have been created this year. That is -- 1 million -- I'm sorry, were lost in the last four months of last year, and only about 250,000 have been created this year. That is a lot of people that are kind of falling between the cracks.
CHAO: Well, I think we have to remember that our economy is very dynamic. What you say is correct. The attacks of September 11th, on top of the three quarters of negative growth that was in the first part of 2001 did not help workers.
And so a lot of people saw the attacks of September 11th that destroyed their jobs. A 1.5 million jobs actually were lost in the aftermath of the attacks of September 11th. And I think that's a tremendous statement to the resiliency and the strength of our economy that we are now in a period of positive growth, i.e., a period of recovery.
As I mentioned, the healthcare industry, physical security industry, the education industry as well as mortgage banking because of the very low interest rates, are desperately seeking people.
HOPKINS: Now, another thing that worries workers, this Labor Day, is what has happened to their 401(k) plans. Is there anything you can do as Labor secretary? Are you lobbying to make these plans hold for people that really lost a lot of money in the corporate scandals?
CHAO: Well, this administration acted very, very quickly in the aftermath of the scandals of Enron and several of the others we have seen. The president, on February 1st, launched a major comprehensive pension reform program. It has been passed by the House and, yet, awaits action before the Senate.
The president has also signed the corporate responsibility legislation, which sets forth governance reform for corporate America. We hope that these new legislative proposals, plus the one that he just signed, on top of very tough enforcement action will ensure that workers' pension are protected.
HOPKINS: Thank you very much for joining us, Elaine Chao, the labor secretary.
CHAO: Thank you.
HOPKINS: Coming up, on this special holiday edition of MONEYLINE, from recession to recovery, our panel of market experts will talk about the current state of the economy.
And firefighters risk injury and death nearly everyday. Yet, their rank on the pay scale does not measure up. Plus, find out how well connected Enron's former Chairman Ken Lay really is.
And there is dignity in every job, but is there enough pay? Best- selling author Barbara Ehrenreich answers that for us next.
HOPKINS: ... is the same as coming out of most recessions?
ROBERT BARBERA, THE HOENIG GROUP: No. In '91, '92, we said we had secular headwinds associated with late 1980s debt excesses. We had a debt binge, junk bonds and the like. In the current environment, I'd say it's late 1990s equity accesses. Same kind of dynamic, though, it means corporate profits are under pressure. It means balance sheets and income statements are being called into question. And the way you attack that is by cutting costs. And that's why a jobless recovery over the next six to 12 months.
HOPKINS: Greg Valliere, from the Washington point of view, do you think it looks like '91 as well?
GREG VALLIERE, SCHWAB WASHINGTON RESEARCH: Very much so. It's really pretty eerie to look at this President Bush having an economy that doesn't feel good, like the last President Bush had. I know that a lot of Republicans on Capitol Hill are nervous. I think they're taking Maalox every few hours over the fall election.
Right now, you have to say for the stock market, this is one of those big variables with both houses truly up for grabs. Tiny, tiny majorities could shift in either house. I think right now, though, the safe bet there is not going to be a tidal wave, but the Republicans will do fairly well.
HOPKINS: So, not a big change in Washington?
VALLIERE: Yes, for a lot of reasons. The big one, Jan, is that redistricting helps the Republicans in several states, such as Texas.
HOPKINS: And maybe the economy isn't so bad, that the voters would say, you know, throw out the old guys and I want new ones?
BARBERA: If the economy was so bad, who would you blame? In other words it really was --
VALLIERE: Osama bin Laden, maybe, gets a lot of the blame.
BARBERA: If you thought it was a bubble that burst, this after all a Clinton-Rubin creation with a dash of salt and pepper from Greenspan. But it would be hard to say let's blame the current administration for an economy that is disappointing.
HOPKINS: Tom McManus, how do you feel?
TOM MCMANUS, BANC OF AMERICA SECURITIES: The typical post-war recession, I think, most of the job losses were more like furloughs. Where people were laid off, and then a couple of years -- or maybe even a couple of quarters later -- they were hired back to do basically the same thing they were doing before the recession.
HOPKINS: Right, particularly, in manufacturing that happen.
MCMANUS: Yes, this recession and the last one, the one in the early '90s, were different in that most of the job losses are permanent. Their corporate restructuring; they're related to the globalization of the economy. They're painful, but ultimately, with productivity, will feel better. Unfortunately, what is different about this one than the last one is that in the last one, the technology sector was a net job creator. In this one, the technology sector is a net job destroyer, because of those equity excesses that Bob was talking about.
HOPKINS: So, what does all this mean to the stock market? If companies are more productive, it should mean that profits are better?
MCMANUS: The productivity is slower than the stock market had been led to believe. I think the data is a little bit more optimistic than what we're seeing in terms of the real profits that the companies are able to generate. You've got higher oil prices than people expecting. And I think investor expectations are still too high based on the very strong run that we had for stocks over the past --
HOPKINS: The other question is, we've been talking about this, is the economy going to go into recession again? Is there going to be a double dip? Is that part of what investors are concerned about, just quickly, Tom?
MCMANUS: I think that it's not really the question of whether we go into a contraction mode, in other words negative growth, the question is how long do we stay in this subpar growth environment? And my sense is we stay there a little longer.
BARBERA: I think, too, if you think about the performance for the market over the last 90 days, 120 days, that big decline, I don't think it was about disappointment with the current economic situation. It was a real reassessment of what went on in the late '90s. So, the base of profits is probably 20 percent lower than people thought. That's when you become conservative in your accounting assumptions, the late '90s mostly didn't happen. You got a rebound that's significant, but from a substantially lower base and that's what the market's been chewing (ph) on .
VALLIERE: I'd say there's one huge difference between '91 and now, for the two Bushes. In '91, the first President Bush was not getting along with the Fed chairman, very rocky relationship. This President Bush has a Fed chairman who I think will stay very accommodating.
HOPKINS: We'll talk about the rates and the market and corporate scandals and a lot of other things later in the broadcast. Thank you.
Coming up next on MONEYLINE, a report on America's most underpaid workers. Why teaching salaries just don't make the grade.
Plus a new twist on six degrees of separation, we'll tell you how well connected Enron's former chairman is.
And it's a profession tainted by recent corporate scandal, but students are still signing up for accounting. We'll have a report.
Plus best-selling author Barbara Ehrenreich tells us how she made a living on poverty-level wages. (COMMERCIAL BREAK)
HOPKINS: For some of our nation's most important workers, there is a major disconnect between pay and priorities. Many teachers and firefighters are struggling just to make a living. While there may be a renewed sense of heroism for the nation's firefighters, they are not compensated for the potential risks that they face daily. And teaching is one of the lowest paying among white-collar professionals. Fred Katayama has more on America's most underpaid.
FRED KATAYAMA, CNN CORRESPONDENT (voice over): Teaching is no 9 to 5 job. Don O'Neil leaves the house he shares with his sister's family and arrives at Weaver High in Hartford by 7. To connect with inner-city students the science teacher helps coach the football team and he advises students, meets with parents and grades paper.
DONALD O'NEIL, SCIENCE TEACHER: When the bell goes on, you're on stage. Your actor, psychologist, instructor, parent, social worker, and have you to do it five or six periods a day, five days a week, regardless of how you feel.
KATAYAMA: For all of this, the 50-year-old, six-year veteran gets paid just $36,000, even though his state ranks third highest in teacher pay. His paycheck shrank by a third when he switched careers from managing a paint store to managing students.
O'NEIL: You're not focusing.
KATAYAMA: To make end's meet, he teaches night and summer school as well.
(on camera): Teachers just don't make the grade when it comes to pay. The average teacher earns roughly $43,000 a year. Adjusted for inflation, their salaries have risen less than a 1/3 of a percent per year during the last decade, despite the economic boom.
(voice over): And the pay gap between teachers and other professions keeps growing. For example, accountants make 22 percent more than teachers today, double the gap nine years ago.
DOUGLAS HARRIS, ECONOMIC POLICY INST.: Education spending has grown somewhat over the years, although not as quickly as most people think it has. A lot of the new money is going into special education, which tend to have smaller class sizes, which means you end up hiring more teachers instead of paying the teachers you have, more.
KATAYAMA: Last year, more than 200 teachers in New Jersey broke state law by striking over pay and benefits. That landed them in jail.
O'NEIL: (INAUDIBLE) ...go no where, that's the whole point of this.
KATAYAMA: Teaching is an emotionally demanding job and teachers often get little respect.
O'NEIL: Don't forget this, too.
KATAYAMA: Yet, O'Neil won't give up the chalk talk for anything else.
O'NEIL: I get a lot more back, that's what it is, I think. I'll be teaching a class and a kid will pop in and go, hey, you know, I really miss you.
KATAYAMA: His colleague, who teaches health, could earn six figures with his medical degree, but finds joy in teaching kids.
DR. KELSON ETTIENNE-MODESTE, HEALTH TEACHER: The way medicine is being practiced now, being so managed, I found out that through education, I'm getting a lot done.
KATAYAMA: They'll have to keep banking on emotional rewards, not financial, given the slow economy, their paychecks aren't likely to get fatter any time soon.
Fred Katayama, CNN Financial News, Hartford, Connecticut.
KATAYAMA: Anxiety soars as Engine 55 answers a call in nearly 100-degree heat.
What is as tough as fighting a fire is raising four kids on a firefighter's salary. Alberto Gonzalez is a 10-year veteran of the Philadelphia Fire Department.
ANNA GONZALEZ, WIFE OF FIREFIGHTER: As much as I would love him to make more money than he does, I could not ever want him to do something that he really is not happy with.
KATAYAMA: He works 48 hours a week.
ANNA GONZALEZ: I kiss him like that, every day before he leaves.
KATAYAMA: He makes $46,000. His wife works as a teacher's aide to make end's meet. They transferred their daughters from private to public schools.
Firefighting is the second-most stressful job, according to the Jobs Rated Almanac. Sandwiched between senior corporate executives and the president of the United States. But a mid-ranking firefighter earnings roughly $35,000, a fraction of those on the surrounding rungs.
What is more, firefighters have the second-longest workweek after the president and the second most physically demanding job, after football players. (on camera): Blame economics for the relatively low pay. Firefighting is a highly sought after profession. For every job opening, there is as many as 30 applicants.
(voice-over): This, despite the fact that each year, 40 percent of firefighters suffer an injury. And more than 100 die trying to save the lives and property of others.
LES KRANTZ, AUTHOR, "JOBS RATED ALMANAC 2001": I've always thought firemen were underpaid, and that was well before 9/11. They always were heroes. This goes on since civilization, when the job began. And in terms of pay, one of the reasons that the pay is not so good is because there are so many people that can do it.
KATAYAMA: Gonzalez balances the books by working as an emergency medical technician at a racetrack on his off days.
ALBERTO GONZALEZ, FIREFIGHTER: I would love to make more money. Who wouldn't? But it's a challenging job. The satisfaction I get is going out that door is that we are going to help somebody.
KATAYAMA: Also making the job rewarding, the camaraderie.
ANTHONY CUBBAGE, FIREFIGHTER: You live with the guys, you eat with them, sleep with them, you cry with them, you laugh with them. I mean, it's a family.
KATAYAMA: The Philadelphia Fire Department founded by Benjamin Franklin, prides itself on being the nation's oldest.
Despite the hazards and the pay, firefighters at this station say they wouldn't dream of doing anything else for a living.
Fred Katayama, CNN Financial News, Philadelphia, Pennsylvania.
HOPKINS: My next guest deliberately took low-paying jobs in several U.S. states. Author Barbara Ehrenreich wanted to find out what it was like working for the minimum wage, or close to it. She says she was surprised by what she found.
Barbara Ehrenreich is author of "Nickel and Dimed". She joins us now.
Barbara, what was the biggest surprise that you found?
BARBARA EHRENREICH, AUTHOR, "NICKEL AND DIMED": Well, surprise one, I could not make enough money to live on. I averaged $7 an hour, I worked as a hotel housekeeper, a waitress, a Wal*Mart floor clerk, nursing home aide, and a maid with a house cleaning service, averaged $7 an hour. I found out the rents were so high and these are not, you know, sort of glamorous cities I was in, in most cases. I actually could not quite make end's meet, even though I sometimes worked two jobs at a time. That was a nasty surprise. Another surprise, though, is I had to struggle to learn these jobs. I had a Ph.D., I've written books. But still, there's -- you have to learn very quickly in these jobs. There is a lot you have to memorize. You have to be concentrating all of the time. And I found it something of a struggle. So I never used the word unskilled any more to describe any job. Every job takes skill.
HOPKINS: What was the reason for doing this and providing the book?
EHRENREICH: Well, it all started out with a question about welfare reform. The principle of welfare reform is everybody should get off of welfare, these single moms on welfare, should get jobs and they will be OK. They'll be lifted out of poverty.
So, I thought, is that true? I mean, can you really get out of poverty on the amount you can earn out there at an entry-level job. I know I'm not a good testament because, for one thing, I didn't have children with me to take care of and support. But, still, it was extremely difficult.
HOPKINS: Now, you chose different sections of the country, deliberately, to see what it was like in different areas?
EHRENREICH: I didn't have any scientific plan. I went to Key West, which is a tourist industry place. I went to Portland, Maine. And then I also went to Minneapolis. Those were my cities and I can't - you know, there was no big scientific basis for the choice of them.
HOPKINS: You had a different jobs including one at Wal*Mart. What was that like?
EHRENREICH: Well, Wal*Mart, in some ways, it's more like a cult than a corporation. For one thing, you have an eight-hour orientation session, before you can step out into that floor. It was a lot of, you know, rah, rah, stuff about the company. You have endless rules.
In my department, there was a rule you were not supposed to talk to your fellow workers. You know, you could say where is the such and such something to do with your work, but you were never supposed to chat or say things like, "How was your weekend?" I found that strange.
And, of course, they're watching your time to the second at Wal*Mart. You have to punch in and out for a 15-minute break. It was -- it's a little oppressive.
HOPKINS: Also, you had to learn a lot, right? You had to know where a lot of things were and they changed the position?
EHRENREICH: I was in lady's wear, which I thought would be really quite genteel, but it meant memorizing the location of hundreds of clothing items, which would then be rotated every few days just to keep the customers' interest. I felt like I had Alzheimer's. It was extremely difficult. HOPKINS: You were also a waitress. How did you do it?
EHRENREICH: Well, it was a little harder than when I first waitressed when I was 17. For one thing, you know, it's a computer ordering system now. And I found that, you know, really hard to grasp, because you've got about 10 minutes to learn everything. And, of course, waitresses, that is intense concentration. You're running all the time. I think waitresses must have invented multitasking. So, that is another -- that was a hard one.
HOPKINS: And cleaning, the final area that you worked?
EHRENREICH: Oh, that was - now, that was the most physically punishing job. To my surprise, because I thought how hard could housework be? But you do it under extreme time pressure for these cleaning services. We would have so many minutes per house, like 78 minutes, or 110 minutes. And we literally ran through. It was aerobic exercise. Most of the women I worked with had already, even the young ones sustained a knee injury, back injury, repetitive stress injury. That was not fun.
HOPKINS: Barbara Ehrenreich, the author of "Nickel and Dimed," thanks for joining us on this Labor Day.
Coming up next, on this special holiday edition of MONEYLINE, the recent corporate scandals may have given accounting a bad name. But the profession is actually gaining popularity on college campuses.
And the president took a lot of heat for his working vacation, but he's not the only one spending time in the sun instead of in Washington.
Plus the report on the world's cheapest private jet, is it affordable enough for everyone? We'll tell you which movies had people lining up at the box office this summer and which ones fell flat.
HOPKINS: You may have heard of "Six Degrees of Kevin Bacon." In this game you chase any actor in six steps or less to Kevin Bacon, through movies he was in with other people. That game inspired the "Washington Business Forward" magazine. The magazine's editor-in- chief, Eamon Javers, realized the former chief executive of Enron, Kenneth Lay, is also extremely well connected.
EAMON JAVERS, WASHINGTON BUSINESS FORWARD: We were sitting around the offices of magazines the other day and talking about the business and economic scandals going on.
Harken Energy, Halliburton and Enron, they're pretty tightly connected. What we didn't realize until we started looking into it, is that Kenneth Lay of Enron, can actually be connected, Kevin Bacon style, in six degrees or less, to just about every scandal that's ever happened in American business or politics.
Here's how we did it. Start with Monica Lewinsky, for example. Monica Lewinsky received job advice from Vernon Jordan before the sex scandal broke. Vernon Jordan sits on the board of directors of Revlon, which is headed by Ron Perlman. Ron Perlman was financing many of his deals by junk bond king Michael Milken. Michael Milken lobbied in California for energy deregulation with Kenneth Lay.
Let's try another one, Bob Dole. Bob Dole hawks Viagra for the Pfizer Corporation on TV. On the Pfizer Corporation board, is Frank Raines. Frank Raines is Clinton's former OMB director, who is now trying to bring a baseball team to D.C. with Fred Maleck (ph). Fred Maleck served in the Nixon administration, Nixon also employed Lawrence Eagleburger. Eagleburger later joined the board of Halliburton, where Dick Cheney served as CEO. Dick Cheney later met to discuss energy policy with Kenneth Lay.
Of course, when you're doing six degrees of separation, you got to do Kevin Bacon. And Kevin Bacon can be linked to Enron's CEO Kenneth Lay pretty quickly. Here's how we did it.
Kevin Bacon starred in a movie called "Quicksilver" with actress Jamie Gertz. Jamie Gertz was in "Less Than Zero" with Robert Downey, Jr. Robert Downey, Jr. appeared in an obscure movie about a Democratic National Convention that was financed by Sam Waksal, the former CEO ImClone. Sam Waksal was colleagues with John Mendelson, who sat on ImClone's board of directors. John Mendelson, president of the University of Texas Cancer Center, also sat on the board of directors at Enron with, once again, you guessed it, Kenneth Lay.
HOPKINS: Enron's accountant Arthur Andersen was found guilty of obstruction of justice. You might think that that would tarnish the image of the entire accounting industry. But the saying, there's no such thing as bad publicity is proving true to the accounting profession. More college students are enrolling as accounting majors this fall. And the courses are filling up fast. Ceci Rodgers has our report.
CECI RODGERS, CNN CORRESPONDENT, MONEYLINE: During the dot-com boom, accounting majors like Kenneth DeSouza didn't get much respect.
KENNETH DESOUZA, ACCOUNTING MAJOR, UIC: They didn't see the importance of taking accounting courses. All they cared about was HTML and Java script.
RODGERS: Now, he's the big man on campus. At the University of Illinois at Chicago, accounting courses for the fall are already full. And the number of students declaring accounting as a major has jumped 20 percent. In the wake of Enron, WorldCom, and the criminal conviction of Arthur Andersen, accountants and accounting are in the spotlight. KAM RAMAKRISHNAN, ACCOUNTING DEPT. HEAD, UIC: There may be more demand for accounting and disclosure and certification in the future, so overall, it may come out accountants be in more demand for accountants than before.
RODGERS: The high-profile accountants involved in the Enron case made accounting seem -- exciting.
ALLAN KOLTIN, PRACTICE DEV. INST.: All of a sudden, Andersen/Enron comes along and the kids are looking, and seeing David Duncan, $1 million, $2 million? Hey, accounting is cool. You can make a lot of money.
RODGERS: Students at DePaul are not even put off by the fifth year of school now required by state law in order to become a certified public accountant.
MOLLY SAUL, ACCOUNTING MAJOR, DEPAUL UNIV.: I think people are realizing that it's not just bookkeeping, like some people think. I think people are realizing the opportunities out there in accounting.
SAM DELGADO, ACCOUNTING MAJOR, DEPAUL UNIV.: There is definitely always going to be a need for accountants.
RODGERS: Enrollment there is up 10 percent.
RODGERS (on camera): Call it the revenge of the bean counters. A career in accounting is suddenly the best of both worlds. An exciting challenge and a secure job in a growing field, whether the economy is up or down.
Ceci Rodgers, CNN Financial News, Chicago.
HOPKINS: Still ahead, it's been a rocky summer for the markets. What is ahead? We'll talk stocks with our panel of experts.
And President Bush is on a working vacationing summer at the ranch. Find out who else in Washington is following the president's lead.
And a New Mexico company is building an aircraft that will dramatically cut the cost of traveling in a corporate jet. That is coming up next.
HOPKINS: Despite the recent corporate scandals, investors seem to have recently renewed confidence in the markets. I'm now rejoined by Bob Barbera, chief economist at the Hoenig Group, Greg Valliere, of Charles Schwab Washington Research, and Tom McManus, stock market strategist Banc of America Securities.
Is it true, Tom, that you see a few people on perk walks and investors are ready to come back into the market? MCMANUS: I think that is really just a coincidence. These so- called perk walks and the fact that some investors might feel a little bit better to see other people trotted out this way.
But I think that a lot of people have been giving short shrift to these certifications, in that the certification was really an important aspect over the last couple--
HOPKINS: The CEO and CFO recertifying their numbers.
MCMANUS: Oh, yeah. They needed to be certified by the 14th of this past month.
And the market had done a little bit better after that. And it seemed that right about the time when that bill was passed, and that bill was signed, the market started to do better. What that did was it provided the opportunity for a lot of those companies to come back to the market with corporate debt. And as they were able to sell the corporate debt, then the stock market started to become more confident, particularly for those companies that seemed the closest to the edge, without any financing opportunities.
HOPKINS: Greg Valliere, what do you think about the corporate scandals and the effect on Washington?
VALLIERE: My gut feeling is that the story will subside a bit, Jan. But there are two big stories to come.
The first is when Congress comes back, in the next couple of days, they will start to debate on pension reform bill. It will be a very emotional debate, similar to the accounting reform bill. So that story will percolate during September, number one.
Number two, a story has not gotten any publicity lately, returns, and that is Harvey Pitt and the SEC has to make some kind of ruling on Halliburton and the time when Dick Cheney was the head of that company.
HOPKINS: So, that is going to be a big issue -
HOPKINS: ...between the Republicans and the Democrats?
VALLIERE: You bet. Absolutely. This, of course, being a year divisible by two, you can be sure that both parties will posture. And I think Pitt will be go back underneath the magnifying glass again.
HOPKINS: Bob, what effect have all of the scandals had on the economy, any?
BARBERA: Well, I think in the later '90s, it was my perspective that a lot of the last leg up for profits was really accounting creativity. And the reversal of that accommodation, the fact we are very conservative in our accounting approach now, played a large role in the last leg down for the market and I think extending what has been a weak economy, if not an outright recession.
From my perspective, in terms of its implications in Washington, though, it is hard to come down on a particular party. Right now, certainly there is focus on Cheney and Halliburton, but it was, after all, in the Clinton administration that the decision was made to not change the ruling on accounting. Excuse me, on options. So stock options were left as something you could keep on the balance sheet.
HOPKINS: So, each party has to pay the piper (ph)?
BARBERA: You just can't pin the late '90s on a party.
HOPKINS: That is part of the reason why you see that there is not going to be very much change in the election?
VALLIERE: It's largely a bipartisan scandal. The Republicans might get hurt a bit, but just a little bit, in my opinion.
HOPKINS: There is another issue that I think is going to be very much front-and-center in the fall and that is Iraq. Is the possibility of an attack on Iraq in the stock market at this point, Tom?
MCMANUS: I think it is. I think the market feels that it's really when and not if. In the most recent past, I think there has been a little bit backing away from that in that President Bush basically said, Of course, we'll explain why we need to do this. Of course, we'll look for some sort of ratification of our ideas. But don't expect it -- way in advance -- don't expect it to give Saddam Hussein any big lead time.
BARBERA: I think for most of our lives, you know, political intrigue and military incursions have been a reality. For most of my life, the secretary of State was a lot more important than the secretary of Treasury, and the secretary of Defense was somebody you knew relevant to the head of the Fed. It was a rarified atmosphere in the late '90s when you could actually imagine that Alan Greenspan was the most important man in the world and the only issues were economic. We're back to a geopolitically charged world. But the market has traded in that kind of world and the big trade down to me was accommodating those less than brave new world expectations.
VALLIERE: I'm inherently an optimist about most things, but I had been troubled this summer to see that President Bush has lost control of the spin, the spin on Iraq. Everybody is talking about Iraq.
HOPKINS: And the economy?
VALLIERE: Yes. There is a new leak every other day, Jan, in "The New York Times" or "The Washington Post." Bush's inability to get on top of the spin has to end soon. He has to get back on top of this in September.
BARBERA: Was the last leak a Saddam leak, where they talked about, they will bring the war to the streets?
BARBERA: Saddam was saying, we may as well tell you our plan?
VALLIERE: Yes. It may have been a Saddam leak, but Bush, maybe around September 11, which could be a day for him to regain a lot of clout, but Bush has to regain that power, rhetorically.
HOPKINS: Thank you all for being with us. Thomas McManus, Bob Barbera, and Greg Valliere.
Private jets have long been considered a luxury afforded only CEOs and multimillionaires, but a start-up company is using new technology to drastically cut the price of those jets. That company could revolutionize of how people travel. Steve Young has the story from Oshkosh, Wisconsin.
STEVE YOUNG, CNN SR. TECHNOLOGY REPORTER, MONEYLINE: At the world's biggest private aviation show, a New Mexico company is promising to deliver a jet at less than a quarter of the cost of a current cheapest model. That would be the Cessna Citation CJ-1. It can be yours for around $4 million. But, Eclipse says it will deliver its Model 500 for only $850,000.
SAM WESSELL, ORDERED ECLIPSE: The numbers are just unbelievable. It really is a complete new stride in air travel.
YOUNG: With delivery scheduled for 2004, Eclipse says most of its production for the first three years is sold out, so get on line.
BLAIR MCKENDRICK, ORDERED ECLIPSE: I was on board about almost 2 1/2 years ago and I am position number 63.
YOUNG: Eclipse is using special welding to eliminate 2/3 of the rivets. Off the shelf computers for a control system rivaling a Boeing 777; and an 85-pound, but powerful power developed for cruise missiles. Combining all that technology could be risky.
THOMAS HAINES, ADPA MAGAZINE: If you really do your homework and partner with good companies such as Williams, which is the manufacturer of the engine, can you reduce some of that risk.
YOUNG (on camera): The company says its plane will allow mid- level managers to use private jets the way CEOs do today. To stretch their working day, increase productivity, and slice security delays associated with commercial flying.
(off camera): CEO Vern Raburn, who was Microsoft employee number 18, has bagged Bill Gates as one of his big investors in the still private company. Raburn talks jets the way Gates talk software.
VERN RABURN, CEO, ECLIPSE AVIATION: We expect to sell this aircraft at much higher volume than people are used to today. And it's the old adage, volume brings the price down (ph).
YOUNG: A deal to sell 1,000 Eclipses to Florida company for use as air taxis has fallen through, but Raburn expects to fill that gap.
(on camera): Are you saying that there are other people, unannounced yet, that will take that many?
YOUNG: Cheap as it is, the price is still more than chump change.
MARY STEEL: Well, if I sold my house, my condo, and my cottage, and four cars and two jet skis and my four ATVs, I'd still take a loan.
YOUNG: The company says the first test flight will take place in the next two weeks. To meet its deadline, Eclipse has just 18 months to win an air-worthiness certificate from the government.
Steve Young, CNN Financial News, Oshkosh, Wisconsin.
HOPKINS: Still ahead on MONEYLINE, summer turns Washington into a ghost town with everyone, from the president to Supreme Court justices on vacation. Find out what they do with their time off.
Plus the Hollywood's blockbuster summer. We wrap it all up.
HOPKINS: Summer blockbusters are big moneymakers for studios, especially record-breaking films like "Spiderman" which debuted in early May. It's opening weekend returns shattered records, making a whopping $114 million in three days. But as summer fades, movie revenues have begun to fizzle and box office lines are dwindling. Casey Wian reports on the blockbuster summer.
CASEY WIAN, CNN CORRESPONDENT, MONEYLINE: "XXX" last weekend became the 13th movie to top $100 million at the box office this year and the 12th summer film to surpass Hollywood's blockbuster benchmark.
TOM SHERAK, PARTNER, REVOLUTION STUDIOS: All the doomsayers, you saw them out there saying, summer's glass is half empty. Well, guess what, the glass is half full. Everybody seems to be doing really well.
WIAN: At least that is the way it seemed for most of the summer. Starting with "Spiderman"'s record opening weekend in early May through July's Austin Powers in "Goldmember", studios and theaters and owners were expecting a record summer, but with the exception of "XXX" and "Signs", late summer has been disappointing, with six straight weeks of lower box office takes compared to a year earlier. PAUL DERGARABEDIAN, EXHIBITOR RELATIONS: Labor Day weekend will probably be down versus the same weekend a year before. It's probably going to end up being seven down weekends in a row. That certainly hurt what we thought was going to be a tremendous revenue record, you know, up by maybe 10, 20 percent. It's not going to happen. We will be at lower levels than we thought. Still a great summer, but we went out with a whimper.
WIAN: Studios continue to experience feast or famine this summer with films opening on huge numbers of screens and being tagged as a big moneymaker or a flop after the first weekend. Films with legs, like the surprise hit "My Big Fat Greek Wedding", are rare. It's been in theaters for four months. Still, the movie business, as it has for decades, is proving resistant to tough economic times.
JOHN STOCKWELL, DIRECTOR, BLUE CRUSH: I think movies are the greatest escape. Movies are always something that still actually fairly cheap form of entertainment, despite the rising ticket prices.
WIAN: The average price of a movie ticket nationwide, including discounts, was $5.65 last year. This year, it's expected to rise about a quarter. Even those box office receipts remain on a record pace, the number of people actually going to the movies is nearly unchanged.
Casey Wian, CNN Financial News, Los Angeles.
HOPKINS: Still ahead, Washington headed home for the summer. We'll take a look at Washington's elite and their working vacation.
HOPKINS: President Bush is wrapping up his month-long working vacation. The president took a lot of heat for his extended time off, and a lot of that heat is coming from people who are taking working vacations themselves, namely, Congress. Tim O'Brien has the report.
TIM O'BRIEN, CNN WASHINGTON CORRESPONDENT, MONEYLINE: Just through Labor Day, the Senate is out of session 13 weeks, the House, 12 weeks. That does not necessarily mean members are not working. Senator John Edwards, here working the beaches of North Carolina, pressing the constituents' flesh. Taxpayers rights group still question the lengthy congressional recess.
PETE SEPP, NATIONAL TAXPAYERS UNION: Certainly members of Congress can have a difficult job at times, but so does the average American worker. When they see these kinds of massive breaks and recesses, they have to wonder what is going on here?
O'BRIEN: The recesses do allow lawmakers time to go on fact- finding missions. Critics call them junkets. Take Maurice Hinchey, for example, in the past five years, the New York Democrat found time to visit 24 countries from China to Liechtenstein, with $111,000 in expenses picked up by the private groups or the taxpayers.
And when both Congress and the president take a protracted vacation, Washington is a decidedly different place. It's not that the town is deserted, it's not, but -
O'BRIEN (on camera): Do you work here?
UNIDENTIFIED MALE: No, not yet. I wish I did.
O'BRIEN: Where are you from?
UNIDENTIFIED MALE: Israel.
UNIDENTIFIED MALE: I'm from Fort Myers, Florida.
UNIDENTIFIED MALE: I'm from Texas.
UNIDENTIFIED MALE: Toronto.
UNIDENTIFIED FEMALE: San Francisco.
O'BRIEN: And whoever is from here -- isn't. It's necessarily a bad thing. When the president leaves town, the few power brokers left behind, often breathe a sigh of relief.
MITCH DANIELS, DIR., OFFICE OF MANAGEMENT & BUDGET: Well, I don't want to say we don't miss him. We do, of course, desperately. But with the president on the road and Congress in recess, I will say it's about as a comfortable period as we are likely to see around here.
O'BRIEN: The Supreme Court is also in recess. The justices take pride in their allegiance to precedence, but one of the courts most honored precedents, is summer vacation, three months of it. Chief Justice Rehnquist, who has a summer home in Vermont, also accepted a paid teaching gig in France last month. Justice Ginsberg will be spending part of her summer vacation lecturing in Italy.
In fairness to the justices and the members of Congress, while they all do get a great deal of time off, many of them work just as hard away from the office as they do in the office. Many of them.
Tim O'Brien, CNN Financial News, Washington.
HOPKINS: that's MONEYLINE for Labor Day. Thank you for joining us. I'm Jan Hopkins, in for Lou Dobbs. Good night from New York. Have a great holiday.
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