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Aired November 9, 2001 - 18:00   ET


ANNOUNCER: This is Lou Dobbs' MONEYLINE, for Friday, November 9. Here now, Lou Dobbs.

LOU DOBBS, CNN ANCHOR: Good evening, everyone. What could be a major breakthrough in Afghanistan. Backed by heavy U.S. air support, Northern Alliance forces claim they have captured the key city of Mazar-e Sharif. General David Grange will be here to assess the war's progress.

President Bush beefing up airport security around the nation, boosting the number of National Guard troops at our country's airports. We'll have a live report for you from the White House.

We'll also have the latest for you on the anthrax attacks. A profile of the anthrax mailer is emerging from the FBI, even as the bacteria is found in more New Jersey post offices.

Wholesale prices take their biggest plunge ever. Kathleen Hays will be here to tell us whether deflation could be the newest economic threat. And those lower prices did little to move stock prices on Wall Street today, but the Dow did close above its September 10 level for the first time.

Now, the latest developments from Afghanistan. The Northern Alliance says it's gained control of the strategic Taliban stronghold of Mazar-e Sharif. The Pentagon says it is very difficult to confirm that claim.


REAR ADM. JOHN STUFFLEBEEM, PENTAGON SPOKESMAN: There's a lot of dust in the air right now. There's skirmishes happening across these various fronts, if you want to call them as such, and with that dust in the air, it's very hard to tell exactly what's going on.


DOBBS: The Pentagon says Mazar-e Sharif is important because it would allow humanitarian aid and supplies to be brought in from Uzbekistan on the ground.

Meanwhile, explosions were heard around the Afghan capital of Kabul over the past few hours. CNN staffers nearby have described the attacks as waves of bombing runs. At least eight bombs fell near Bagram Air Base.

The president today took steps to reassure the traveling public; the president boosted the number of National Guard troops at our nation's airports by 25 percent. Major Garrett is at the White House and has the report -- Major.

MAJOR GARRETT, CNN WHITE HOUSE CORRESPONDENT: Good evening, Lou. Further indication that that president works on both fronts of the war each and every day. Starting his day here at the White House with an important meeting with a key coalition ally, Indian Prime Minister Vajpayee. The two talks about a number of issues, among them the disputed region of Kashmir, which has caused no end of discord between India and Pakistan, another crucial U.S. ally in the war on terrorism. No breakthroughs on Kashmir, but continued dialogue on bilateral issues between the United States and India.

Then, the president used his afternoon to sign a proclamation thanking businesses for providing National Guard and National Reserve forces to the United States and thanking those reservists for participating in a wide range of activities, among them beefing up security at American airports. The president will increase by 2,000 the number of National Guard personnel at American airports for the busy holiday traveling season, Thanksgiving and Christmas. Those National Guard troops, which have been there for a good number of weeks, will be much more visible and much more active, in baggage screening, security checkpoint screening, protecting parking garages and even air traffic control towers themselves.

The president said all these steps were necessary to reassure a somewhat jittery traveling public.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We're calling up these Guardsmen and women immediately. This increase in security will last through the busy holiday period, and is an addition to more than the 6,000 members of the Guard already mobilized at airports since September the 11th. These are temporary measures, and we believe they'll help a lot.


GARRETT: Lou, the context for this is the continued stalemate between congressional Republicans and Democrats over an airline security bill. The White House knew that if that bill was passed a few weeks ago, they wouldn't have the beefed-up security measures in place for the holiday traveling season. It's clear that airlines are continuing to loose money, hemorrhaging millions of dollars every day in operating losses. The White House thought now was the time to add more visible security in the airports to give the traveling public a sense that the government is stepping in, addressing their concerns to encourage them to travel more during the holiday season -- Lou.

DOBBS: Major, thank you very much. Major Garrett reporting live from the White House tonight. As we reported earlier, Northern Alliance forces in Afghanistan say they have captured the key city of Mazar-e Sharif. If it is true, it's a major breakthrough. CNN's military analyst General David Grange joins us now. General, good to have you with us.


DOBBS: The strategic importance, if you will, of Mazar-e Sharif.

GRANGE: Well, it's strategic because it gives us the firs land bridge from Uzbekistan into Afghanistan. It's at a crossroads that runs northwest-southeast through the northern part -- northeastern part of Afghanistan to Kabul. It's significant because it has an airfield. It has an area dominated by Tajik, Hazari, Uzbek type tribal people who are more friendly to the Northern Alliance, which would then welcome, I'm sure, the Northern Alliance to dominate that area.

So -- and it's their first major victory on the offensive, not on the defensive. So instead of hit-and-run raids, you have a major objective taken down. That will be a great morale booster not only to the Northern Alliance, but also to other countries bordering Afghanistan to see that maybe this will work.

DOBBS: And in terms of the military strategy here, would you imagine that Mazar-e Sharif, because of the air base, would become a forward base for U.S. ground forces as well as perhaps U.S. air operations?

GRANGE: A great good possibility that the international coalition would use this air base. It shortens the radios of strike aircraft, lift aircraft for operations, where right now we have pretty long distances to move forces or move attack aircraft from carriers or other bases throughout the region.

DOBBS: Victoria Clarke, the Defense Department spokeswoman and -- spokeswoman -- and Admiral Stufflebeem today at the Pentagon briefing -- some reporters expressing some concern about General Franks. What was your take on that briefing?

GRANGE: Well, I look at the situation of General Franks a little bit different. I think basically everybody ought to get off his back and let him fight his fight. He's being compared to General Schwarzkopf and others in different types of wars that we have been in. Comparing Afghanistan and Desert Storm is like comparing Vietnam to World War II. You can't do it. Every war has its own shape and look to it, and it's just unfair.

DOBBS: Were you at all taken aback by the number of reporters questioning whether there was some frustration or disappointment with the progress of the campaign and General Franks after an entire long period of some 30 days?

GRANGE: Yeah, there's a lot of talk about, well, we want this to be a quick war, and you heard that from Musharraf and some other people. What is a quick war? I mean, I don't know what a quick war is. I don't know what does that equal in time. Does that equal Vietnam? Does it equal Korea? I mean, I don't know. And, you know, who's defining quick? It's the same with the time line. What's the time line? No one has been briefed on a time line, so how can you criticize it?

DOBBS: It's safe to say that those engagements required something more than 30 days. Tomorrow, President Musharraf to meet with President Bush, amongst the things that he will ask the president for, reportedly, is a suspension of U.S. and British and coalition attacks on the Taliban and al Qaeda during Ramadan. What would be your counsel to the president?

GRANGE: I would say, why? Why stop the momentum? You know, Muslim nations have fought Ramadan years in the past. I think there's a civil war going on inside of Afghanistan. Is the Northern Alliance going to stop fighting? Is the Taliban going to stop fighting during Ramadan? I think not. So, why should the international coalition?

Keep the pressure on. Explain the reasons why. This requires, however, a very aggressive information campaign to make people understand why this would continue, because there will be a lot of different information coming out from the other side.

DOBBS: OK. General David Grange, thank you very much.

And again, repeating, the Northern Alliance claiming that they have taken the key city of Mazar-e Sharif in Afghanistan.

Well, in a rapid response to the U.S. administration, Osama bin Laden's al Qaeda network has sent a tape to the Al-Jazeera television network office in Kabul. On that videotape, bin Laden's top lieutenant, Ayman Al-Zawahiri commented on the president's address to the nation last night. In those comments, he criticized the United States for its support of Israel, which he called "the main engine" behind the September 11 attacks.

Zawahiri also criticized the president for refusing to meet with Yasser Arafat at the U.N. meetings in New York City this weekend, and he says the al Qaeda network will fight until the last American soldier is out of Muslim territory.

New developments on the anthrax investigation today. FBI officials say it's highly likely that the three anthrax letters at the center of the outbreak were written by the same person, and, they say, it was probably the work of a loner who is male and who may work in a laboratory. That assessment comes from linguistics and behavioral experts who have examined the letters.

And New Jersey officials say four new postal facilities in the Trenton, New Jersey area have tested positive for anthrax. Officials say they suspect cross-contamination with other sites. Anthrax was found at the Trenton mail center in Hamilton township, where three anthrax-tainted letters were postmarked; one of them sent to Senate majority leader Tom Daschle, two others sent to New York media outlets. And there may be another case of skin anthrax involving a member of the New York media. Mayor Rudolph Giuliani say they are awaiting the test results on the man. The mayor did not identify the man nor did he say where he works.

Iowa State University destroyed its one anthrax sample last month because of concerns about security. The anthrax strain dated back to the 1920s. The university said it destroyed the sample after consultations with the FBI and the Centers for Disease Control.

Eileen O'Connor has been covering the anthrax investigation. She joins us now from Washington.

Eileen, first, those are interesting insights from the FBI, profiling the person that they suspect is behind these letters, including partly, as I understand it, the theory that penicillin was misspelled in one of those letters. Why is that significant?

EILEEN O'CONNOR, CNN NATIONAL CORRESPONDENT: Well, they say that they believe, Lou, that that was misspelled on purpose. And even the use of the words, "death to Israel, death to America", that it's not a typical militant Islamic wording.

And so what they're saying is that this person was probably trying to take the September 11 attacks, use it for their own ends and was actually trying to throw investigators off in a sophisticated type way to implicate an Islamic fundamentalist group. And misspelling penicillin would lead investigators, perhaps, to believe that this was not a native English speaker.

DOBBS: Now apparently, the FBI using, Eileen, linguistics and behavioral experts. What about old-fashioned handwriting experts? Are they playing any role in this as well?

O'CONNOR: Well they are, but you know, Lou, they say the use of block letters and the fact that there was just so few letters and so few words on the letters, that makes it very, difficult to do that kind of analysis.

So, one of things they're doing is, basically, they're releasing to the public a totality of characteristics that they believe this person must have had. And that -- you know, the way they did this profile isn't just from the handwriting, isn't just from the contents of the letter, but the kind of anthrax that was used, the sophisticated kind, the fact that this person must have had some kind of background in science or perhaps had access to a lab or lab equipment.

One disturbing thing they pointed out today, Lou, is that it only would have taken about $2,500 dollars worth of equipment to actually produce the anthrax that was found in that letter. One of things they're doing, appealing to the public and saying, "Look, if you have a person who perhaps holds a grudge, doesn't like direct confrontation and has perhaps talked about getting those people some day, that person may have acted strangely after the September 11 attacks, might have perhaps started going off to one section of their house -- closed that session off -- was, in fact, disinterested in the media, might have started taking antibiotics."

But then after those anthrax letters appeared, would have been very interested in media coverage of that, trying to get whatever they could. Those are, in their totality, the kinds of things that they are looking for. And they'd like the public help, they need the public help.

You know, it was only when Ted Kaczynski's brother turned him in that they solved that case -- Lou.

DOBBS: And obviously, it suggests too -- one might infer -- that the FBI investigation is at something of an impasse, going this public with these characteristics, which normally they would hold rather tightly.

O'CONNOR: Well, they don't like to call it an impasse. What they say is they're reaching out to a proven help, which is the public. And they also say, Lou, that while their behavioral analysis indicates a lone individual, an adult male, someone with scientific background, they also say they are not ruling out the possibility that this is a terrorist group, foreign or domestic, or that this person or persons got a hold of this anthrax in some other way, through perhaps a black market source that was ultimately had been stolen from some lab.

So, again, they're not ruling anything out. But what they are trying to do is say this is what our behavioralists have come up with. Can the public find anyone who fits this description.

DOBBS: The highest order of probabilities.

Eileen, thank you very much -- Eileen O'Connor from Washington.

Still ahead here, the high cost of this war against terrorism. We'll tell you why Americans could be paying for allied support for some time.

And as the government cracks down on terrorist funding, some commercial banks are making it easier for illegal immigrants to open accounts. We'll have that report for you.

Also, we'll be talking with a former Justice Department official about the difficulty of cutting off the money supply to Osama bin Laden. And he'll have some ideas for us on what can be done.

Stay with us.


DOBBS: Italy and Liechtenstein today both froze bank accounts of people and groups suspected of funding Osama bin Laden's terrorist activities. But closing down those networks certainly will not be easy.

Michael Zeldin is the former money laundering chief for the U.S. Justice Department and joins us tonight from our studios in Washington.

Michael, good to have you with us.


DOBBS: Shutting down, as the Justice Department did on Wednesday the Hawalas, this is described as a very important step. Does it seem so to you?

ZELDIN: Yes, absolutely.

What we learned in the fight against narcotics is that money is, essentially, the lifeblood of criminal organizations. The people are fungible. The money is not. And so if you can shut off the flows in or out, you do long-term injury to these organizations. So, Wednesday was a significant day for the Justice Department.

DOBBS: And the Justice Department is prepared to shut down more of these Hawalas. There are some who say that the Hawalas, these informal networks that exist, not only in the case of Pakistan or Afghanistan, but countries around the world, Asian, South American as well, that they should be shut down altogether, that there is no basis for them.

ZELDIN: No, I think that would be incorrect.

The whole business of money transmission is legitimate and serves a valuable function in our society. Our post office does it. Western Union, we couldn't live without. It's the unlicensed, unregulated ones that we need to clamp down on, the ones that don't operate within the normal banking systems. And that -- now under the new money laundering laws -- will have to either be licensed and regulated or shut down and be deemed criminals.

DOBBS: One of the striking things that in our journalists have been investigating the Hawalas, they have found that even when they are, in point of fact, licensed or sub-agents, they are actually -- their jurisdiction falls under state governments. And in many cases, the people running these transfer offices have never met any sort of authority or investigative or licensing official.

ZELDIN: Well, that's right. And the new money laundering law, which was signed by the president on October 26, now requires for the first time state licensing and hopefully the states will have the means by which to regulate these in the same way that the OCC or the Fed regulates national banks in the United States. So there's going to be a big infrastructure need here from law enforcement at the state level. And that's the only way that you'll be able to get a clamp down on these unlicensed and illegally operating Hawalas.

DOBBS: If we make the determination that we are going to regulate all of what have been informal organizations for transferring money, that is going to require a lot more investigators, a lot more agents to supervise and to provide oversight. And at the same time, the commercial banking system itself, the Treasury Department, has made it very clear that the commercial banking system itself, through its correspondent banking relationships around the world, has also made it very easy for terrorists and other illegal organizations to use their facilities.

Do you think this can be successfully choked off soon?

ZELDIN: Well, soon I don't know about. But I think it can be successfully choked off.

Bankers, broker dealers, insurance companies are now all under new positive obligations, under the money laundering law passed October 26, to know their customer, to perform enhanced due diligence, to have money laundering compliance programs. This is a very broad piece of legislation that applies to banks and non-bank financial institutions.

So what the Treasury Department has determined is that we will go outside of normal banking, which has essentially gotten the message and is doing a terrific job in trying to clamp on these things and move to the correspondent banks, the foreign overseas private banks and the broker dealers and the insurance companies in a hope to make tight the noose around these illegal transmitters and these people who have bulk cash that they are trying to smuggle out of the country as well.

DOBBS: What more do you think needs to be done and done soon?

ZELDIN: Well, I think we have a very good first step in the new money laundering law.

The Treasury secretary has six or nine months, in different cases, to pass implementing regulations. The pressure really is on the Treasury Department to get good, fair regulations that banks and broker dealers and insurance companies can live with and effectively do their job.

So we're, in some sense, a waiting pattern. The banks, the broker dealers and the insurance companies are all now gearing up, their revamping their policies. They're conducting this enhanced due diligence. We'll wait for Secretary O'Neill to issue the new regulations and then we'll take stock in about nine months and see what additional means, if any, need to be undertaken.

DOBBS: You know, I'm struck, Michael, when you say that and I've heard others say it too: six to nine months.

The president calls this a new war. That doesn't sound like a we're on a war footing when we start talking about six to nine months.

ZELDIN: Well, I don't know.

When you talk about our entry in the second World War, how long did it take us to ramp up before we sent forces into Normandy?

DOBBS: Whoa, wait a minute...

ZELDIN: It takes some time to prepare for these things.

DOBBS: Michael, we're not talking about building aircraft and battleships and organizing armies and troops. We're talking about oversight and investigation of financial institutions and the transfers of funds within them.

ZELDIN: Understandably, it's not physical structures that you're building but you're building infrastructures and that's time consuming.

To get it right -- if you're a major money center bank with operations that are global and the president passes a law on October 26 that says thou shalt know who you're dealing with overseas. You shalt verify identification. You shalt have a compliance protocol. You shalt audit. That takes time. A huge money center bank has a need of an infrastructure that's not much like building tanks and planes and boats from the second World War. It's not a simple proposition and it's not inexpensive either.

DOBBS: OK, you mean to the commercial bank.

ZELDIN: Absolutely. To the financial services industry, this is an expensive proposition, this war on terrorism.

DOBBS: I guess I had more confidence in both the capital structure and their capacity to find the manpower to carry out these fiats.

But, Michael, I appreciate you being with us -- Michael Zeldin.

ZELDIN: Thanks, Lou.

DOBBS: In a time when the government is cracking down on immigration as well, some are saying now the banking industry is aiding illegal immigrants.

Several banks have, in fact, adopted a new policy of accepting identification cards issued by the Mexican government for customers who are looking to open accounts. The reason: to capture a huge untapped market. But opponents say they're helping to legitimize illegal immigration.

Casey Wian has the report from Los Angeles.


CASEY WIAN, CNN CORRESPONDENT (voice-over): Wells Fargo and a handful of other banks have started accepting Mexican government ID cards for customers opening accounts. Traditionally, Mexican immigrants, especially those in the United States illegally, have avoided banks, instead relying on cash and costly check-cashing services.

Reasons include fears of being reported to authorities and a lack of two forms of identification. By becoming the first bank to promote the acceptance of Mexican IDs, Wells Fargo is addressing both concerns.

JOHN MURILLO, WELLS FARGO: We don't question the status or legal status of any of our customers. As long as our customers meet the two identification requirement, then we are able to offer any of our financial services.

WIAN: Union Bank of California also now accepts Mexican government IDs.

YOLANDA BROWN, UNION BANK OF CALIFORNIA: We don't focus on immigration status. We're really more concerned about the legitimacy of the individual and that they do have access and that we're offering services to all in an equal fashion.

WIAN: Mexican officials helped shape the new policy. They want to protect Mexican immigrants from crime by eliminating the need to carry large amounts of cash. But immigration opponents blasted the policy and its timing in the aftermath of September 11.

IRA MEHLMAN, FEDERATION FOR AMERICAN IMMIGRATION REFORM: Wells Fargo and other companies have an interest in trying to maximize their business. But they also have a responsibility to be good corporate citizens.

And by essentially telling people that they're going to look the other way, even though they're pretty certain that people are violating our federal immigration laws, is a violation of their responsibility as good corporate citizens.

WIAN: Banks say offering financial services to millions of underserved potential customers is good corporate citizenship.

(on camera): U.S. immigration officials have raised no objections to the policy, saying they don't have the manpower to pursue otherwise law-abiding illegal immigrants. Even police chiefs in Orange County have voted to accept Mexican consular IDs for people detained for minor infractions.

Casey Wian, CNN Financial News, Los Angeles.


DOBBS: Well, efforts to maintain the international coalition against the Taliban will carry a price. And American workers may be picking up some of that price.

Tim O'Brien reports from Washington.


TIM O'BRIEN, CNN CORRESPONDENT (voice-over): Anti-American demonstrations in Pakistan have many apparel and fabric companies fearful that new orders might not be filled. Shipments to the U.S. are down by two-thirds. The impact on Pakistan's textile industry, which employs an estimated 70 percent of the country's industrial work force, has been devastating.

ADEEL SHAH, U.S.-PAKISTAN BUSINESS COUNCIL: They laid off about 10,000 people, so that really adversely affected the Pakistani economy.

O'BRIEN: Industry leaders in Pakistan are calling on the U.S. to suspend the existing 17 percent tariff on imports and lift or at least relax quotas. The Congressional Textile Caucus is worried.

REP. HOWARD COBLE (R), NORTH CAROLINA: I don't want this to be done on the backs of textile workers in my district and there are many of them.

O'BRIEN: Textile workers in North Carolina and other states have already been crushed by the competition from cheap imports, not to mention the sluggish U.S. economy.

CARLOS MOORE, AMERICAN TEXTILE MANUFACTURERS INSTITUTE: We've lost 90,000 workers in the last 18 months. Mills have closed all across the southeast.

O'BRIEN: Pakistan's President Musharraf is expected to discuss trade with President Bush when the two meet in New York this weekend. But Musharraf will not be the only ally seeking help.

Mr. Bush met with India's Prime Minister Vajpayee today. India would like the U.S. to set aside patents held by big drug companies so that it can provide inexpensive generic drugs to more of its impoverished citizens.

And then there's Russia and Vladimir Putin, another key ally, upset over U.S. restrictions on imported steel. Concessions may have to be made to all.

(on camera): In the wake of the September 11 attacks, President Bush warned that the length of the war on terrorism could be indeterminate. So too may be it's cost. And just who will be called on to pay the bill?

Tim O'Brien. CNN Financial News, Washington.


DOBBS: Well, this just in: The beleaguered energy company, Enron, tonight confirming that it has agreed to be purchased by rival Dynegy. The price: $7.8 billion in stock. This announcement ends weeks of speculation about Enron's future. Over the past month, Enron stock price has collapsed after Enron disclosed an SEC investigation of its off-balance sheet transactions. ChevronTexaco plans to invest $2.5 billion in the resulting combined entity.

Coming up next here, we'll update the progress of the opposition forces in Afghanistan and their efforts to take hold of a key strategic city.

Then, producer prices taking the largest one-month plunge ever. Kathleen Hays will be here to tell us if there's a serious threat now of deflation.

And this could be the weekend that China is admitted to the World Trade Organization. We'll have a live report for you from Qatar, when MONEYLINE continues.


DOBBS: Now the latest developments in the war against terrorism. FBI officials tonight say it's highly likely that the same person wrote three anthrax letters at the center of the anthrax attacks. FBI experts also say it was probably the work of a male owner who may work in a laboratory.

New Jersey officials say four new postal facilities in the Trenton area have tested positive for anthrax. Officials say they suspect cross contamination with other sites. Anthrax, found at the Trenton mail center in Hamilton Township. That's where three anthrax- tainted letters were postmarked.

Osama bin Laden's al Qaeda network has already responded by videotape to the President's address last night. In that taped interview broadcast on al Jazeera television today, a top al Qaeda lieutenant criticized the President's speech. He said it ignored what he calls the main engine for the terrorist attacks of September 11, America's 50-year support of Israel. He also says al Qaeda doesn't fear U.S. military force.

The Northern Alliance says it's gained control of the strategic Taliban stronghold of Mazar-E-Sharif. The Pentagon says its at this point too difficult to confirm that claim. We'll have a live report for you from the Pentagon in just moments. The President has activated 2000 additional National Guardsman to boost security at airports all around the country. President Bush says the increased security will last through the busy holiday period.

As we've been reporting, the Northern Alliance in Afghanistan says it has captured the strategic city of Mazar-E-Sharif. The Pentagon has been unable to confirm that claim, but the Pentagon does call the news encouraging.

Jamie Mcintyre, our Pentagon correspondent, joins us now. Jamie, what is the latest?

JAMIE MCINTYRE, CNN CORRESPONDENT: Well, after 34 days of bombing by the United States, it does appear that the opposition Northern Alliance has the upper hand, as they try to get control of the town of Mazar-E-Sharif. But the Pentagon says it can't confirm that until "the dust settles."

A U.S. official tells CNN that it has confirmed that Northern Alliance forces have moved into Mazar-E-Sharif, but says at last report, they was still fighting in the street. And some reports of Taliban troops retreating.

After 34 days and almost 8,000 bombs or more than 8,000 bombs, U.S. intelligence reports say that the aerosol has taken a toll on the Taliban and that as the casualties are climbing, some Taliban forces are retreating. Others are changing sides, sometimes in complete small units.

Nevertheless, the Pentagon is concerned that the Taliban may counterattack.


STUFFLEBEEM: You have to have enough perspective away from it, to see that not only has ground been taken, but it is held and provides that opportunity to again move to what your next objective is. We don't know enough yet to know what's been taken, will it be held, and therefore will there be more movement from that.


MCINTYRE: If the anti-Taliban rebels do take Mazar-E-Sharif, it would provide the United States with access to an airfield that it would allow it to both fly in humanitarian assistance and combat supplies. And it would also open a land route, so that those supplies could be brought in by truck overland. But Pentagon sources tell CNN tonight that U.S. has no plans at this time to operate combat aircraft, either fighter jets or helicopter gunships, off of Afghan soil -- Lou.

DOBBS: Jamie, thank you. May I ask you, you referred to some of the Taliban at least in retreat changing sides, as it was put. Is this literally happening? They are not surrendering but simply switching sides?

MCINTYRE: Well, one of key indicators that the Pentagon was looking for early on this campaign was defections. That would be an indication that the Taliban was losing morale. They'd only seen them in very small numbers. But according to the latest U.S. intelligence reports, some of the units up around Mazar-E-Sharif, entire units had en masse changed sides from the Taliban to the opposition. Now these weren't big units, but nevertheless, it was significant that they saw an entire group essentially going together and changing sides. This is not unusual for that part of the world.

DOBBS: And must add to the reasons that the Pentagon describes these situations as fluid.

MCINTYRE: Absolutely.

DOBBS: Thank you very much. Jamie Mcintyre from the Pentagon.

Well, phone companies are continuing to make some progress in restoring service to business and residential customers in lower Manhattan. Verizon tonight saying more than 90 percent of their customers in that area have returned to normal. AT&T also lost a major hub, amidst the rubble of the World Trade Center. Now, just two months later, it has also restored most of that service.

Fred Katayama has the report.


FRED KATAYAMA, CNN CORRESPONDENT (voice-over): Buried beneath the rubble of the Twin towers, AT&T's switching hub serving lower Manhattan.

DOLORES HARRIS, OPERATIONS SUPERVISOR, AT&T: I had just exited the building. I didn't think we were going to make it.

KATAYAMA: No AT&T employees died. But the blow knocked out its local phone service to thousands of clients like Merrill Lynch and the New York Stock Exchange. AT&T regularly runs disaster drills like this one last year. But the exercises didn't anticipate that air travel would be grounded. Emergency crews from afar would have to drive in.

JOSEPH LAMONDA, OPERATIONS SUPERVISOR, AT&T: I've been in this business for 31 years. And we've dealt with floods and we dealt with hurricanes and storms, fires, but nothing under this magnitude.

UNIDENTIFIED FEMALE: I have a microwave circuit that is going to 14 Wall Street.

KATAYAMA: AT&T set up a war room to plot strategy and an observation post in a nearby building. Technicians recreated part of the lost hub by moving severed fiber optic lines into another building that housed switches. Everyone from security officers to electricians to painters worked around the clock.

THOMAS KANE, OPERATIONS MANAGER, AT&T: Typically, a construction program from the original thought to completion could take two years. You have to go through engineering and design and then procurement and get the equipment delivered and then get it installed. Once you get it all installed, you need to provision it and test it. We got done in two months what really would have taken two years.

KATAYAMA: Within six days, it restores phone service for Wall Street clients, enabling the Stock Exchange to open. Today, nearly two months after the attacks, 95 percent of clients have the dialtone.

(on camera): There's a lesson in all this. AT&T says it'll diversity its risk further, spreading its network infrastructure across other locations, as it rebuilds.

Fred Katayama, CNN Financial News, New York.


DOBBS: Agriculture is emerging as the make-or-break issue at the latest round of international trade talks. Failure to agree on farm subsidies sinking the World Trade Organization meeting in Seattle some two years ago.

But many remember that meeting for all the wrong reasons or right reasons: tear gas and rubber bullets. Thousands of violent anti- globalization protesters took to the streets in Seattle. Hundreds were arrested. Security for these talks going now, being held tonight in fact in the Gulf nation of Qatar, is very tight.

Charles Hodson is there and has our report for us -- Charles.

CHARLES HODSON, CNN CORRESPONDENT: Hello, Lou. Well, there's pretty well no comparison between Seattle and Doha, the capital of Qatar, which is where I'm standing at the moment. There has been, I would say, pretty well standard security, a lot of checks in terms of explosives checks, metal detectors and so on, badges, the whole big badge system. That has all been going on here.

But certainly no protesters on the streets, mainly because they decided to stay away. The expense of coming out here to the Gulf state, and also the fact that the visa system would not have allowed them in, and the fact that there have been a lot of security forces here.

In terms of one protest that happened, that was by NGOs nongovernmental organizations and took place, in fact, within the perimeter, within the meeting house. It happened within -- outside a meeting hall and with people will people who are perfectly well accredited.

One different thing here is the fact that the United States is under pressure in a way that it really was not in Seattle. There's a genuine feeling among developing nations that globalization has not benefited at all.

And in particular, the issue agriculture, which you talked about, the European Union, for example, says there are about $4 billion worth of agricultural export subsidies paid out by the U.S. government, which essentially is wrecking the export trade of developing countries which have little else really to export generally to the world.

However, the U.S. trade representative, Robert Zoellick, has his own ideas about this. He says we all stand or fall together. And if we fall, it could be the developing nations who come off worse. In other words, if Doha is not a success, some could feel the pinch more than others.


ROBERT ZOELLICK, U.S. TRADE REPRESENTATIVE: If the WTO falters, the United States, the European Union and other major economies would be handicapped, but ultimately, we'd have the means to take care of ourselves. For example, we would pursue trade liberalization through regional and bilateral agreements.

The reality is that for developing countries, most of all, they need the global rules that are equal for all.


HODSON: U.S. trade representative Robert Zoellick. Well, the big question coming up in the next few hours is the one that you mentioned, Lou, the admission of China. China's 1.25 billion people will be formally admitted probably in the next few hours to the World Trade Organization. That membership takes effect in a month from now.

Back to you, Lou.

DOBBS: Charles, thank you very much. Charles Hodson.

Coming up next here, a second day of surging oil prices. We'll report to you on what is behind the run-up. And a solid week on Wall Street, both the Dow and Nasdaq posting good gains. We'll have some perspective on the week ahead.

Also, the threat of deflation looms. Wholesale, commodity prices plunging. Kathleen Hays will be here with that next. Stay with us.


DOBBS: Oil prices surging today, after rallying more than a dollar a barrel yesterday. Boosting prices, Russia siding with OPEC's plan to cut production. Russia is not an OPEC member, but is the world's second largest exporter, after Saudi Arabia. In the past, Russia has not enforced output curbs. Light sweet crude oil as a result today, up 88 cents, settling at $22.05 a barrel. The prices are still down more than 20 percent just since the attacks of September 11.

Despite today's rise in oil prices, wholesale prices plunged in the month of October. In fact, the decline was much steeper than had been expected, in fact, the biggest decline in more than 50 years. But lower prices at the factory, combined with the collapse in commodity prices, has raised a troubling question: the threat of deflation.

Kathleen Hays is here now to examine that subject. And Kathleen, the President's chief economic adviser within the White House, Lawrence Lindsay, saying that despite that huge drop in producer price indexes, it doesn't suggest a deflationary environment.

KATHLEEN HAYS, CNN CORRESPONDENT: Guess he got a lot of questions about today on that, too. Do you suppose?


HAYS: Must be on somebody's mind.

DOBBS: Deflation has always been one of the things that Lawrence Lindsay has concerned himself with.

HAYS: Absolutely. So let's take a look and let our viewers decide. The Producer Price Index measures inflation in the wholesale sector, down 1.6 percent, the biggest drop since 1947. Now energy prices did play a part. Gasoline prices alone down 21 percent. Much more than energy though, car price at the wholesale level down 4.7 percent. Prices for capital equipment also in negative territory.

So there is a lot of weakness there. Now you can see this weakness going back over the decade. This is producer prices year over year. In the recession, you saw a plunge in the PPI. And in the Asian economic crisis, '97-'98, we also producer prices plunging. So here we are again.

Is it deflation? Well, certainly commodity prices are a big part of the story. They're really reflecting the global economic slowdown. This is the CRB index. It's near a 25-year low. Copper prices alone down 27 percent this year. They're near their '87 lows. Silver near an eight year low.

So you're asking me, but why worry about deflation? It's Friday night. What's the deal? Well, think about it. In a deflationary environment, firms obviously can't raise prices. They're falling. So if you have rising costs for labor, for taxes, for rent, it's tougher to cover them.

If you can't cover your costs, what are you going to do? You might to have cut back on output. You might have to even cut back on people's jobs. Now you other people are probably saying now, what planet is she on because where I come from, I'm paying some higher prices.

Let's look at the some trends in retail prices. Maybe you bought a computer recently. Over the last year, at the retail level even, computer prices down 31 percent. And if you shop, women's clothing on a year over year basis down nearly 3 percent. And even those new car prices down nearly a full a percentage point.

So even at the retail level, we're seeing these downward pressures. Now granted, some prices are rising. That's housing prices up 3.5 percent. Homeowner's insurance is up 2 percent over the last year. Medical care costs up 4.5 percent. Those Doctor bills just keep getting more and more expensive.

So it's the services prices. Those are stubborn. That's maybe why Larry Lindsay says it's not a deflationary environment. But if the weakness spreads from goods to services, I think that's the worry about it getting worse, Lou.

DOBBS: That's certainly one of concerns. And one of the prices that has gone up certainly is the price that has declined further is obviously the price of credit. And that is also a contributor in every case to a deflationary spiral. We're obviously a long ways from that, but it is obvious also, from what you reported, that there is that threat.

HAYS: And the silver lining? Falling energy prices maybe help restimulate the consumer, put more money in our pockets so we'll spend more and keep us out of that deflationary ditch.

DOBBS: Come on stimulus.

HAYS: You got it.

DOBBS: Thanks, Kathleen. Kathleen Hays.

Turning now to Wall Street, stocks edging slightly higher today, adding to solid gains on the week. The Dow closing above the September 10 levels for the first time since the attacks of September 11.. The Dow and S&P 500 gaining 3 percent on the week. The Nasdaq unchanged today, but surging 5 percent on the week.

And more on the markets now with Christine Romans, Allan Chernoff. Christine, this turns out to be quite a week.


DOBBS: Though something of a slumbering day.

ROMANS: Yes, today was very lackluster, but traders are telling me that this is how you pause after a very good week, a 3 percent gain for the Dow. They're saying investors looking for a fairytale ending to what's going on in the economy right now. They want to see things get better. They think it's going to happen eventually.

They don't know when, but right now, they say the stock market is meant to anticipate that. And they're making the bet that things will be better sometime late next year.

DOBBS: Well, it's been extraordinary since the attacks to be back to pre-September 11 levels.

Allan, on the Nasdaq?

ALLAN CHERNOFF, CNN CORRESPONDENT: Well, certainly very strong performances. In fact, since the low of September 21, we're up 28 percent on the Nasdaq Composite. Compare that to 16 percent on the Dow and the S&P 500. So we're really moving on the Nasdaq.

DOBBS: And we're going to begin next week in very good shape after these strong gains.

ROMANS: We've got a lot of data that could be very interesting. Retail sales, industrial production, CPI. There's also that so-called Wall Street speak "event risk." A lot of things going on around there in the world that folks are saying is keeping some people a little bit cautious, which is why they didn't want to take it up too much this week.

DOBBS: Christine, you're such a...

ROMANS: I have to put a little bit of cold water on it, don't I?

DOBBS: You're such a worrier.

Allan, your thoughts?

CHERNOFF: Well, we are getting a few rays of hope. The Semiconductor Industry Association gave a pretty bullish forecast this week. And a few smaller software companies also had upbeat forecasts at a Merrill Lynch conference this week as well.

DOBBS: That's more of the stuff, Allan. Thank you. Allan Chernoff, Christine Romans.

Coming up next, we'll take a look at some of your thoughts on credit card interest rates, amongst other things. And when it comes to high interest rates, you tell us who is the worst offender. Searching for simpler things in life. Realism, patriotism, through the works of Norman Rockwell. Stay with us.


DOBBS: Modern concerns and anxieties. Anthrax, bomb threats, airline safety. Many Americans are searching for the simpler things in life these days. Americana is popping up everywhere as a result.

Kitty Pilgrim takes a look at the revival of Norman Rockwell.


KITTY PILGRIM, CNN CORRESPONDENT (voice-over): A sweet picture, but look again. The juxtaposition of nurture and menace speaks clearly in this Norman Rockwellesque ad for "The New York Times." An exhibit of Norman Rockwell paintings is drawing record crowds at the Guggenheim Museum.

LAURA CLARIDGE, AUTHOR, "NORMAN ROCKWELL, A LIFE": I get the feeling that right now, that Americans have come most aware of what they risk losing in that everydayness, if life changes too dramatically. And so suddenly as we look what -- at the small things that matter, Rockwell comes to mind because that's what he was a master of for six decades.

PILGRIM: Family, war, country, civil order, all with a humble, human touch, a simple vision of life. American art experts like Gavin Spanierman are not surprised by the new connection America is making to Rockwell in these troubled times, with themes of family and simplicity. Spanierman points to the bucolic simplicity of Winslow Homer after the Civil War as a similar pattern. Yet he says Rockwell always implied the presence of world events in his paintings.

GAVIN SPANIERMAN, SPANIERMAN GALLERY: Besides the wonderful storyline, there's always this sort of presence of an outside, obvious presence of an outside world, you know? It's not a snapshot. It is part of a much greater whole. And that's what I think he conveys so well. Advertising executives say their clients are opting for a kinder and gentler message, but a modern version, ads that emphasize camaraderie and connection, like this Mitsubishi ad.

DONNY DEUTSCH, CHAIRMAN & CEO, DEUTSCH, INC.: What will last is not Norman. You're not going to see Norman Rockwell in advertising, but feel good messages, family messages. And I think that's across all media. It's not just advertising. That's just what the doctor ordered right now.


PILGRIM: Now the era of edgy, demanding and abrasive may be over in both art and its commercial application, advertising. If it doesn't feel good these days, many are saying it just is not going to sell -- Lou.

DOBBS: Sounds good to me. PILGRIM: Yes, feel good advertising.

DOBBS: Thanks a lot. Kitty Pilgrim. Well, "WOLF BLITZER REPORTS" begins here in just a few minutes. Let's go to Wolf now in Washington. Wolf?

WOLF BLITZER, CNN ANCHOR: Thank you, Lou. There may have been a major breakthrough, as you know, in the U.S.-led war against the Taliban today. Have the Northern Alliance forces taken the strategic town of Mazar-E-Sharif. In our CNN war room tonight, the Northern Alliance's special representative, Haron Amin. We'll also go live to the scene, as well as to the Pentagon for latest. That and much more, all coming up next.

Lou, have a great weekend.

DOBBS: Wolf, you have a great weekend as well. Thanks.

Coming up next here, we'll take a look at your e-mail and some reports out next week that could move the markets. Stay with us.


DOBBS: Next week, companies reporting their corporate earnings include Dow component's Home Depot, Wal-Mart and Hewlett-Packard. Also reporting their results next week, Dell Computer, the Gap and Starbucks. And economic reports will include October Consumer Price Index and retail sales.

And next week, President Bush will meet with Russian President Vladimir Putin at the White House. Well, we continue to be inundated with criticism of the American Red Cross. Nearly all of you who wrote in say the Red Cross should simply give the money you donated quickly and directly to the families of those murdered on September 11. Our report last night on credit cards drew a huge response, but when it comes to credit card interest rates store cards seem to irritate you the most.

Robert Dew in Florida says Sears needs what he calls a reality check. He writes, "Sears have not dropped their rates in years and still charge a whopping 21.9 percent flat rate. Why should I shop there when they take advantage of us?"

You're also writing in about the challenges facing the postal service. And a lot of you coming up with ideas about how to help them fix some of the problems. Tom Williamson, for example, writing in also from Florida saying, "Stop all weekend services, both pick-up and delivery. The savings should be enormous." Tom also suggests "up the costs of those papers and circulars. Make them pay for what many of us throw in the trash without ever opening."

As always, we want to hear from you. E-mail us at And if you will, include your name and address.

Well, that is MONEYLINE for this Friday evening and for this week. We thank you for being with us. I'm Lou Dobbs. Have a very pleasant weekend. Good night from New York. "WOLF BLITZER REPORTS" begins right now.




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