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CNN IN THE MONEY

Dispute Over Iraq Fuels Talk of French Products Boycott; Demand for Military Gear Pumps Money Back Into Silicon Valley; College Costs Rising

Aired February 23, 2003 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JACK CAFFERTY, HOST: Today, on IN THE MONEY the French kiss off, the dispute over war with Iraq fueling talk of a possible boycott against French products. See whether they could change the way you shop as we check France's economic ties to Iraq.
Plus, seeing is believing, the demand for high-tech military gear pumping money back into Silicon Valley. We'll tell you whether you can cash in on the Pentagon shopping spree.

Also ahead, bright and busted, the cost of a college education is rising. See how far some people will go to cope.

Good afternoon and welcome. I'm Jack Cafferty. This is IN THE MONEY. President Bush took a tougher stand this week in favor of war with Iraq, and his French counterpart, Jacques Chirac, dug in his heels against military action. Those moves have added to the tensions between the two countries, which have been rising quickly enough anyway. The tabloids have been as restrained as ever on this one. Here's the wildest example, earlier this month, the "New York Post" running a cover showing the French and German U.N. ambassadors as weasels. Real weasels.

Across the United States, there's talk of boycotting French products. One North Carolina restaurant owner even stopped selling French fries. From now on, they are freedom fries, thank you. And liquor store owners dumping French wine in the streets as a way of protesting. To give you an idea of how strongly many Americans feel on this issue, I want to read you a couple of the hundreds of e-mails I received this week about the French-U.S. squabble.

"The French clearly do not support the United states, so why do we allow French people to work in the U.S.?"

Another one. A marine officer stationed in Bosnia with French and other troops writes: "A French officer told me he thought Americans were a bunch of cowboys, and if we provoke a war with Iraq, we wouldn't be able to count on the support of France. I told him it didn't surprise me since we never had support from them even when we came to France's rescue in World War I, World War II, Vietnam and the Cold War. I also told him France is a third-rate military power." That's from Lieutenant-Colonel Mary Beth Johnson, United States Marine Corps.

And one more here from Gary. He writes: "Might I remind our French 'friends' that had it not been for the U.S.A., there would be no France... only a great Germany."

Harsh words, indeed.

Time now to introduce our panel of guests on the program. Andy Serwer here, as always, editor-at-large from "Fortune" magazine. Also from "Fortune," senior writer Stephanie Mehta. And making it a "Fortune" triple-header this week, editor-at-large, Justin Fox. Welcome to all of you. In some corners, you hear that at least one of the reasons France is not lining up with the United States has to do with the long-standing economic ties between France and Iraq. Philippe Coste is the U.S. correspondent for the French newspaper "L'Express," and he joins us to talk a little bit about this simmering dispute, if you will. Welcome. It's nice to have you with us.

PHILIPPE COSTE, U.S. CORRESPONDENT, "L'EXPRESS": Thank you.

CAFFERTY: So, let's start with this perception that Americans have that Jacques Chirac is stomping around like a petulant, 4-year- old whose not getting enough attention. What's your take on the French side of this issue?

COSTE: Well, the French are in a complicated situation now because it's true that they changed their take on the question of Iraq. Until resolution 1441 was voted in November, the French only wanted, let's say, a U.N. solution to the Iraqi problem against unilateral solution to the problem that was proposed by the United States.

CAFFERTY: But France voted in favor of 1441, did they not?

COSTE: Yes, of course. It was a perfect agreement on this case. And then something changed visibly after the January 20. And now we're more into direct confrontation, it's true, between the French view, the French government's view, and the United States. It looks like the French are more and more excluding, let's say, the possibility of use of the creditability of the use of force And this is, effectively, damaging a little bit the prospects for a war for George Bush's plans in Iraq.

CAFFERTY: It also, in some corners, is isolating France in the world community to a degree. My question is, are there vested interests beyond just being opposed to a unilateral military action against Iraq, for example, French-Iraqi business connections?

COSTE: Well, you know, if you had asked me the question in '94 when the French wanted to lift the sanctions, then I would have said that there was a vested economic interest, in that the French were -- wanted to go back to Iraq. But now, I mean, our commerce with Iraqis represent 0.2 percent of our external exchanges. Going back to Iraq now would mean being within a country still under sanctions with the impossibility of doing any real, you know, commercial exchanges with them. And so, if the French purpose was to get oil, the simplest way would be to go with the Americans. So I don't buy that. I think it's a more complex political issue. It's true that for 30 years, the French have had privileged relations with Iraq. So have the Americans, actually. STEPHANIE MEHTA, SENIOR WRITER, "FORTUNE": So, Philippe, what do you make of all of this talk of a boycott? I mean, isn't this just an excuse for Americans to get back at the French for all those dumb American jokes over all these years?

COSTE: It's true, but it's been silly on both sides. But I'm a bit afraid of the tone it has taken lately. I mean, if media and tabloids want to bash the French, they should start with the president. It's his job. He's got a thick skin. But I cannot resent the way my country's portrayed as a country of cowards. I mean, we lost 2 million men in the First World War. This left big marks in France. There's not a city, there's not a village that doesn't have a jam-packed memorial. And I think this should be kept in mind when you think about the French.

Secondly, even in 1940, I hear that Andy Rooney said we capitulated in 20 minutes. It might have been 20 minutes, but it was 100,000 dead. And so I don't really like people who now, comfortably in front of TV, spit on anybody's grave just because it's politically fashionable to do so. As far as boycott is concerned, I don't think -- I think it would be -- first it's contrary to the American policy of globalization. And trade. I thought trade in the American mind was the best way to reform countries. Secondly, I think it's un- American and it's un-Republican. I mean, this administration came to the White House shocked, shocked that 66 countries in the world were under sanctions, have been put under sanctions by the previous administration. I don't see why they should use against those kind of arguments.

JUSTIN FOX, EDITOR-AT-LARGE, "FORTUNE": One thing, in response to one of those earlier e-mails, if it weren't for France, there would be no U.S.A., there would only be a greater Britain, if you want to go back that far. The other question I have, though, is how -- I just don't sense this massive hostility toward France in the U.S. The place where there's massive hostility towards France is in England. And a lot of these journalists who are making the loudest noises are all like "New York Post." That's all run by English people in Australia. I mean, how much of this is real American groundswell or how much is just the fact that we've got a bunch of carpetbagger English journalists taking over our media?

CAFFERTY: No, no.

COSTE: I tell you that it's -- there's really a point there. Actually, France doesn't have a tabloid press properly. I mean, we have a kind of tabloid press that talks about stars and so on. But we don't have these kind of rants and these amazing things coming from England and so on. And, basically, we don't have a "New York Post" that would, you know, take a cause like that, oversimplify it, then attack, then treat us like we were, I don't know, a bunch of fascists, just for the sake of selling papers.

CAFFERTY: Wait a second.

COSTE: So, we don't have really the same way -- it's true that there are lots of anti-American jokes in France. CAFFERTY: I was gong to say, it's a national past time.

COSTE: Not truly. Not really true.

CAFFERTY: Of course it is. And it has been for years.

COSTE: Bashing George Bush, maybe.

CAFFERTY: No, no. Americans, in general. Come on. A fascination.

ANDY SERWER, EDITOR-AT-LARGE, "FORTUNE": Yeah, the French have this love-hate relationship with us. Don't you? We hate you. We hate you. Give us your blue jeans. I mean, it's always give us your movies, your blue jeans. And we always say we hate you guys, give us your food. I mean, this has been going on since time immemorial, right.

COSTE: Yes, it's been like that. I mean, these are two competing world cultures in a way. Maybe ours is declining. There's a big debate on that. The question is not really about the decline or whatever. It's that the French -- I mean, 70 percent of the movies French people see are American. I mean, they love Americans. There are more McDonald's in Paris and in the Paris suburbs than all of New York. You cannot -- there are exchanges. There are exchanges of view. There are stereotypes on both sides.

CAFFERTY: Let me ask you this. What do we do about the issue of Saddam Hussein? This guy has been in violation of 16 or 17 U.N. resolutions over a period of 12 years that have called upon him to disarm. He lives in defiance of the international community. There is every reason to believe that he possesses things like botulism and smallpox vaccine and nerve gas. What ought to be done with this guy? He's thumbing his nose at all the civilization countries in the world by refusing to comply with resolutions that the French government, along with a lot of other governments voted for. What is France's answer? Just continue inspections indefinitely until this guy causes some real problem some place?

COSTE: Well, well, the current position of the French government is a bit problematic because it's true that it hinders and it damages the credibility of the use of force. And I think it's true that we can argue that the threat of force is the best warranty of effectiveness of the sanctions. So, I think what's happening is that I think there's a big political fight in -- is the French populism the answer to the American populism, I would say. And, actually, I think that Jacques Chirac wants to go into history as the president who really listened -- the only president, maybe with the German chancellor, who listened to his public opinion, who made a case against the mighty power of the United States. I think it boils down to that.

But when the French negotiated the Resolution 1441, I think it was a perfect match and a perfect mix of force and diplomacy, and the Americans agree. SERWER: But are the French really against a hard line against Iraq because they're worried about terrorism coming into their own country? They're closer to the Middle East. They're closer to the situation. Isn't that the real reason?

COSTE: That is a very big -- I mean, we've been threatened by terrorism and we've been attacked for years now. And it's true that there's a large Muslim minority in France that is becoming restless for social reasons that have been sewed for years and years. It's true that we have also traditionally good relations with Arab countries. And especially with countries in the Maghreb that were part of the former French colonial empire. And there is a real fear that at one point this could get out of control, and that the first targets could be European countries like France.

But I think it goes beyond that now. I think that Iraq lately has become some kind of pretext for some kind of a confrontation between the United States and France, and, especially, to enhance France's stature in the European Union. I think it's more this question. Don't ask me to defend stubbornly the French position. Lately, it's been more -- since January 20, since the threat of veto -- which I don't believe will happen -- I think it's more a political stand than the negotiations that have happened before.

CAFFERTY: All right, Philippe, we have to leave it there. A voice of reason from your side of the Atlantic. Thank you very much. Philippe Coste is a reporter for the French weekly news magazine "L'Express." Thank you for being on the show. I appreciate it.

Coming up on IN THE MONEY, combat chic. Products borne on the battlefield are hot property on the civilian market. Find out how you might be able to make them pay off for your portfolio.

Also ahead, smart money. As college gets pricier, the people who pay for it are getting ever craftier. We'll tell you how they're managing to foot the ever-increasing bill.

(COMMERCIAL BREAK)

CAFFERTY: If a war with Iraq moves off the drawing board and on to the battlefield, some futuristic new weapons may move right along with it.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: So, right here, I can target an individual.

UNIDENTIFIED MALE: These are so-called acoustic weapons. They could become a reality sooner than you think. Inventor Woody Norris has devised a way to focus a sound wave the same way a laser focuses a beam of light. Here he's just playing around with unsuspecting New Yorkers. But he contends that this type of technology has military applications. For example, with it, you could fake troop movements from hundreds of miles away, or you could turn up the power a few notches and fire what are known as sonic bullets. Among the devices that U.S. troops could call on if there's a war, a man-made bolt of lightning that uses microwave energy to fry an enemy's circuitry. It shuts down everything from computers to the telemetry equipment on jets, supposedly without harm to humans. We'll talk about it in a minute. It's made by a high-tech firm in Silicon Valley. Spot something like that before it makes the defense department hit parade, and you could have yourself a tidy little investment.

Or put your money on a product that moves from combat to the civilian world. Some recent examples, the hummer, global positioning technology and night vision goggles and the like.

(END VIDEO CLIP)

CAFFERTY: Here to talk about other advances and help us trace the links between the Pentagon and Silicon Valley, we're joined by Edward Epstein, who is the Washington bureau reporter for the "San Francisco Chronicle." Good to have you with us. Thank you.

EDWARD EPSTEIN, WASHINGTON BUREAU REPORTER, "SAN FRANCISCO CHRONICLE": Thank you.

CAFFERTY: There are some questions about whether these laser and sound weapons are harmful to human beings. No?

EPSTEIN: Certainly is. Ideally, they say that this bolt of lightning, a high-powered microwave weapon would not harm humans. But when you consider that it would generate 1 trillion watts of electricity, which is many times that in a bolt of lightning. And if you consider an ordinary microwave has 1500 watts of energy, you can see there is a danger, perhaps, if you're directly hit by this. What I've read in unclassified documents -- of course, this weapon remains highly classified -- is if you're hit directly by this, you could be damaged. But if you're in the periphery of it, and the weapon area that it could affect is a football size field, let's say, you would not be harmed.

CAFFERTY: What else is out there in the little bag of tricks that Uncle Sam up his sleeve for this thing if we get going?

EPSTEIN: Well, we know that the Predator was used in Afghanistan and was later used to kill six people in a SUV in Yemen. That's the remote controlled unmanned aerial vehicle armed -- that's armed with a cruise missile. And it can stay aloft over a target area for 24 hours. It's remote controlled by somebody back in Tampa, let's say, at Central Command headquarters. The weaponry, of course, is advanced so much I think a lot of us still tend to think of a bombing an enemy, sort of the B-52 carpet bombings we saw in Vietnam or the thousand- plane raids of World War II, but now you send one plane out with these smart bombs and cruise missiles, and one plane can take out five targets.

SERWER: Edward, do you think they'd really use -- I want to talk about the microwave thing. I was reading about it and they said it wouldn't normally hurt flesh and blood. I love that little expression there. I mean, are they really going to use this thing in Iraq? Would they use it, really?

EPSTEIN: Well, Secretary of Defense Donald Rumsfeld was asked about this, and he kind of obliquely indicated I think that we will be using this as a way to decapitate Iraq's military in the beginning by frying their communications. And also, in particular, in Iraq by making it impossible for Saddam to use any chemical or biological weapons he has or might want to use.

SERWER: Is there a downside to relying too much on high-tech in a war?

EPSTEIN: Well, if it works, it's fine. But as we saw in Belgrade when our cruise missile hit the Chinese missile, we swear by a mistake and it seriously damaged our relations with China.

CAFFERTY: Not to mention the people in the embassy.

EPSTEIN: Well, yes, of course.

CAFFERTY: They were quite damaged, as well.

FOX: This does seem to be a pretty common complaint about all this, gee whiz, weaponry from the Pentagon that it sounds great and looks great in press briefings, but it never actually works quite as advertised. Right? Or does it now?

EPSTEIN: Well, I think in Afghanistan, there was, you know, there was the Taliban claimed we killed several thousand Afghans, but no one could find evidence of that. There is no more mass bombing like we used to see.

CAFFERTY: Are we creating more problems for ourselves, though, than maybe we're solving?

EPSTEIN: Yes.

CAFFERTY: The analogy to the atomic bomb. We figured out the atomic bomb and unleashed the greatest and most dangerous arm race in history. Are we doing the same thing here? Are we getting into another arms race with this stuff?

EPSTEIN: That is a very good point. And it is exactly true because other people can get a hold of these things. Make them. "Popular Mechanics" magazine a few years ago had a story that you could make one of these -- a small one for $400 if you knew how to make, if you can get the parts. So, there will be an arms race. Inevitably, there always has been. Other people want to get the weapons we or somebody else built and they don't have. What's more ...

FOX: I was just saying, in 20 years, every self-respecting burglar is going to have one of these things to short out your burglar alarm. Right? EPSTEIN: Well, that's why it could cost us tens of billions of dollars to harden our electronic circuitry to make it so these weapons can't hurt our civilian and military communications and command and control for the military. That's exactly correct.

SERWER: And there is a lot of these companies that are making this stuff, you know, relying on that to kind of keep them ahead of the game. And some of these companies I noticed weren't companies that were exactly at the fore of the business world right now. Silicon Graphics, Unisys, Cray. I mean, are these companies really depending on this military buildup to survive and keep ahead?

EPSTEIN: Well, the military, obviously, is a growing sector in the economy. I believe they're pumping what, $40 billion more in the next budget request from the president. So, especially in a slow economy, it is certainly a sector that these companies re looking to.

CAFFERTY: All right. We are going to have to leave it there. I appreciate you giving us a little look at the battlefield of the future here on IN THE MONEY. Edward Epstein is the Washington bureau reporter of the San Francisco Chronicle. Thanks very much.

EPSTEIN: Thank you.

CAFFERTY: Coming up on IN THE MONEY next, a change of suits. They are continuing to play musical chairs here in the executive suite of our parent company. Decide whether you'd put money into AOL Timer Warner, as we tell you who's running the show this week, if we can figure that out.

Plus, going to college without going broke. With the price of a degree on the rise, we'll look at how some people are handling the pressure. Stick around.

(COMMERCIAL BREAK)

CAFFERTY: Our stock of the week this week is our own parent company, AOL Time Warner. Once again, getting very difficult to know who to suck up to around here because they keep changing the names on all the executives doors. For example, this week, Jamie Kellner stepped down as head of the company's television network. Kellner's departure, less than a month after CNN founder Ted Turner left his post as AOL Time Warner vice chairman. Kellner will be replaced by former Turner protege Phil Kent. Take notes on this stuff, because there'll be a quiz at the end of the segment. AOL stock continues, meanwhile, below $12 a share. And in 1999, it was going for $90 a pop.

So, needless to day, there are some problems. We will get the panel's thoughts on whether the company is moving in the right direction or any direction that's discernible at all at this point. Let me start, though, with a question. I think the stock closes between $10 and $11 earlier this week. If you had a thousand bucks, would you go buy some AOL Time Warner shares? I mean, looking at the value of the assets, and maybe the change of the company coming out of a ...

FOX: Not if I needed it back soon.

CAFFERTY: OK. But if you had some time maybe?

FOX: Yes, maybe.

SERWER: How do you make $5,000? You put 10,000 into AOL.

CAFFERTY: That's very nice.

SERWER: Listen, at some point it is going to come back, but they've been saying that for a while now. And they said that at $25, too. Right.

FOX: Right.

MEHTA: Right. Well, the thing to remember about the company is that it is trying to come out of a really tough period. Basically, the comps from 1999 and 2000 were impossible to try to meet.

FOX: Because they made so much money?

MEHTA: They made so much money. So, I think part of what's going on is comparing AOL Time Warner to Viacom or even a Yahoo. Those companies, they hit their trough at a different period in time. So, now they've already come out. We're not going to come out -- AOL Time Warner is not going to start coming out until 2003, 2004.

SERWER: But the real problem here is stability if you ask me. I mean, I continue to say AOL stands for another ousted leader. I mean, Kellner, Isaacson, Turner, Case, Levin, Pittman. I need another hand now. We need some stability here.

FOX: But, Andy, the people they're bringing back are all old- timers.

CAFFERTY: I was going to say, is that the right answer?

FOX: Well, that's what -- you actually covered this wonderful company. I mean, do you have a sense that there's a grand plan in that or is it just, they're available?

MEHTA: Well, I think that, you know, the Kellner announcement was not a surprise. "Fortune" signaled that in an article a couple of weeks ago. I think that people thought that Kellner was clearly going to be going back to California, and that's what he's doing. But in terms of the grand plan, I think the grand plan is to try to run the businesses. I mean, when you talk to Dick Parsons, and you talk to the other people over at 75 Brock, their priority is going to be run the businesses as best they can, instead of the synergy stuff that they talked about a year ago. Or, you know, trying to make numbers that are impossible to achieve.

CAFFERTY: I read a piece in one of the business sections of one of the papers the other day. I don't remember which one, but it talked about the fact that pieces of this company may be sold, including, for example, maybe AOL; and including, for example, maybe the music division; and including, for example, the book pub -- How much of this company may, in fact, be put on the auction block? The company has a tremendous amount of debt.

FOX: Just so they don't sell you, Jack, that's all.

CAFFERTY: Well, they'd give me away. They won't sell me. There is a tremendous amount of debt, though. They have to do something to address that.

SERWER: Well, they're going to allocate the debt to the cable company, a lot of that, right?

MEHTA: Yes. They are going to allocate a portion of the debt to the cable company. And they're going to do an IPO of that. You know, but I think the big challenge for this company is, you know, again, they are going to have to run the business. They are going to have to look at the assets they have and figure out what belongs together. And, you know, we've come out of a period of time where everybody thought, wow, you know, you have to be a gigantic media conglomerate. And you need to own distribution and you need to own content. And you need to be a part of the Internet.

I mean, priorities have changed and Parsons is gong to look at this as a very cold manager would; which is, you know, what businesses make sense together and which ones don't. And he has no emotional ties. Case was emotionally tied to AOL. Levin was emotionally tied to "Time." I think Parsons is a professional CEO. And he is going to go about it the way a professional CEO would.

SERWER: And you don't need to buy a cow if you need milk. In other words, that's what they did. Oh, we need to get in this business. Instead of doing a joint venture, they bought it. They put it all together. And the one point I want to make, you know, this company is under such a microscope.

CAFFERTY: Sure.

SERWER: I challenge anyone out there to tell me who is Jamie Kellner's counterpart at Viacom. No one knows. We're under a microscope. Everything, the "New York Times, the "Wall Street Journal," all the media, everyone loves to cover this company to death, and go to it, guys.

FOX: We have three books being worked on right now.

SERWER: Right, three books.

FOX: Four.

SERWER: Four.

CAFFERTY: It's a great story. You know, hindsight is always 20/20. I remember when this thing first was a rumor and everybody thought, wow, what a genius idea to do, you know, to do the kind of thing you were just talking about. Take content and put it together with -- you know, with the ability to deliver it. And everybody thought this was maybe the smartest idea that anybody had come up with in a long time. Now we sit here and say, gee, what a dumb idea that was.

FOX: Well, Carol Loomis (ph) of "Fortune" magazine said it then.

CAFFERTY: Did she?

FOX: And I give her credit for that.

CAFFERTY: There were very few people who did.

SERWER: It's easy in hindsight. You're right, Jack.

CAFFERTY: Meantime, we've got those stock options that are not worth anything. So fix it.

Coming up on IN THE MONEY, college economics 101. The cost of higher education is going up, up, up. We'll look at how you can crack the books without breaking the bank.

Plus, going first class without leaving the ground. The CEO of bankrupt United Airlines launches a new penny-pinching campaign after staying at luxury hotel, naughty, naughty. Back after this.

(COMMERCIAL BREAK)

(NEWSBREAK)

CAFFERTY: The cost of a college education continues to rise much faster than the rate of inflation, and that's putting a lot of pressure, not just on students, but on the families who send them off to school. I know these things. One report just out says that in New York alone, listen to this, the state university system wants to increase tuition 41 percent. The governor, though, riding to the rescue saying, no, no, 35 percent will be enough. Well, they don't call it higher education for nothing, I suppose. Even the wealthy are out trying to ease the pain. Some will bend the rules to try to do that. For more, we're joined from San Francisco by Eric Schurenberg who is the deputy editor of "Business 2.0." Eric, it's nice to have you with us. Thanks for joining us.

ERIC SCHURENBERG, DEPUTY EDITOR, BUSINESS 2.0: Hi, Jack. Nice to be here.

CAFFERTY: Can we have this discussion about both private and public schools, or should we try to separate them out when we talk about these run away costs?

SCHURENBERG: No. I think it's pretty much the same thing.

CAFFERTY: What's going on here?

SCHURENBERG: Well, the colleges say that their endowments have been slaughtered by the stock market, just like everybody else's. But you have to recognize that tuitions even went up when the stock market was good. I think it's really just a matter of colleges charging what the market will bear, just like anybody else.

CAFFERTY: When you say what the market will bear, I thought we were past the baby boomers. What have we got -- a bunch of other rug rats coming along wanting to get into those ivy-covered halls?

SCHURENBERG: Well, what we've got is the fact that it's probably -- as expensive as college gets, it probably costs you more if you don't go to college, so people are just not price sensitive. You know? What would you pay? What would be too much to send your kid to the best possible school?

CAFFERTY: That's a good point.

SCHURENBERG: I don't think we've gotten there yet.

SERWER: Hey, Eric, Andy Serwer here, how are you doing?

SCHURENBERG: Hey, Andy, how are you doing?

SERWER: Good. Listen, I mean, do any of these colleges or universities ever really try to control costs? I mean, does Harvard try to cut back in the physics department, or does anything like that ever happen?

SCHURENBERG: You know, I've never heard of it, Andy. In fact, I've heard the opposite. You may have heard of Mount Holyoke College and the so-called chevis (ph) regal strategy.

SERWER: No.

SCHURENBERG: They actually found that enrollments went up when they raised tuitions.

CAFFERTY: It makes you more prestigious.

SERWER: Right.

FOX: Eric, Justin Fox, here.

SCHURENBERG: Justin, how are you?

FOX: Doing well. My concern is I've got a little kid and I've been following all the advice. I was supposed to put the money in a 529 plan, or put some more here or there. But it sounds like the best deal is to be broke when your kids get to college, because then you get financial aid. Right?

SCHURENBERG: Yes. That's right. I mean, Justin, it's a game. It is a game and you have to play by the rules, and the rules, not written by you, the parent. They're written by the colleges and by the federal government who doles out the loans. And so, you wouldn't pay more than you owe in taxes. So, I don't think you should deny yourself financial aid that you might qualify for without -- as long as you don't lie or cheat.

FOX: But should I be putting money away in these 529s? I've got a 3-year-old.

SCHURENBERG: Of course. Well, you should be putting money away. I mean, let's not be foolish about it. But you have to be smart about it, and there are some places where it doesn't pay to put money away. The 529 might be one of them. They are not for everybody. It may come down to a tradeoff between whether you get financial --

FOX; So, what do I do?

(CROSSTALK)

SCHURENBERG: ... financial aid or (UNINTELLIGIBLE) money.

FOX: So the point is I just need to lose my job when my kid's a senor in high school, right.

SCHURENBERG: Junior in high school. OK.

FOX: Junior in high school. OK. I'll start working on that.

CAFFERTY: What about the idea that people actually try to look poor without being poor? What's that about and how do you do it?

SCHURENBERG: Well, Jack, I think that's the game. There are a couple of important rules to remember about this game. First, logically enough, the amount of income you make determines your eligibility for financial aid. The more income -- the income that your kid makes reduces your eligibility more than the income you make. The same way for savings. The savings in your child's name count more against your eligibility than savings in your name. So there are a couple immediate deductions you make from that, and one is, don't save in your kid's name.

CAFFERTY: OK.

SCHURENBERG: Even though people have for years encouraged to do that and take advantage of the lower tax bracket, fact is, when you get around to financial aid, that stuff is going to hurt you more.

MEHTA: Eric, it's Stephanie Mehta.

SCHURENBERG: Hi, Stephanie.

MEHTA: I thought it was a great article. But the one thing I didn't see mentioned in the piece was, you know, with all of this talk of military buildup, instead of boycotting France, why don't some of these parents consider ROTC for their kids?

CAFFERTY: ROTC, go for it.

SERWER: Yeah, absolutely, sure.

SCHURENBERG: Yes. That's a great idea, whatever works.

FOX: Well, it seems like less of a great idea when there's a war imminent, actually, than when there's not, I would think. CAFFERTY: Yes, but a kid born today, presumably we won't still be in Iraq by then. We'll probably be somewhere else. At what point, you know, a child born today, as I mentioned in the lead, it costs $60,000 a year by the time he is old enough to go to school. Is there a ceiling on this thing? How high is up? And at what point do the college and universities haves to come up with some other solution besides just gouging the people that go there?

SCHURENBERG: You know, I'd be interested in seeing an experiment about that, Jack. I mean, I would like to see a college offer a great education at a reasonable price, and see if they were able to come in as a low-cost provider, and have that be a competitive advantage. Right now, it seems to me what colleges compete on is not the dollars but the facilities, or the reputation, or things like that. And, the consumers are just not price sensitive. There's no downside to raising tuition. And, no downside to layering on costs for gyms and new theaters and --

CAFFERTY: Sure.

SCHURENBERG: Things like that.

SERWER: Eric, I put some money in one of those 529 plans a couple of years ago, and it's just like my 401(k). You know, they had to show me these charts of how it's going to have like 40 grand or something, and now I've got less money than when I started. Just a comment. And the other thing here is, you know, they were talking about, oh, University of Michigan is just as good as Princeton. Is that really true? Or is it true that getting, you know, an Ivy League education is still worth more in the marketplace?

SCHURENBERG: Well, I mean, you've seen the studies the same as I have that right out of college, yeah. Getting that Ivy League credential is a pretty big thing. It opens up a lot of doors for you in Wall Streets, and places that really don't even look at kids from the University of Michigan. But, later on in life, things even out. Talent rises to the top.

CAFFERTY: So that old phrase, it's not what you know it's who you know. And if you come out of one of those Ivy League schools like a Harvard, or a Yale or Princeton, presumably the contacts you have made, as opposed to the formal education you may have been endowed with, will get you farther along the road of life than the kids who comes out with maybe a comparable education out of the University of Illinois. Right?

SCHURENBERG: Right. You know, I went to an Ivy League college and look at me. I ended up as a lousy journalist.

(LAUGHTER)

CAFFERTY: You've been interviewed on this program. I don't know.

SERWER: Write to the source. See if you can get a refund.

CAFFERTY: Good to have you with us. Thank you, Eric.

SCHURENBERG: My pleasure.

CAFFERTY: Eric Schurenberg, deputy editor of 2.0. Still ahead, head on IN THE MONEY, as we continue, hey big spender, the CEO of United Airlines has a comeback plan for the company. He got the luxury hotel room and his workers get the pay cuts.

Plus, we'll check viewer e-mail. If you like what you're seeing, or you want to see a change, send us a note. If you don't like what you're seeing, send us a note. The address is inthemoney@cnn.com. Back in a minute.

(COMMERCIAL BREAK)

CAFFERTY: This week's "Scandal Watch" begins with a look at United Airlines' CEO Glen Tilton. As you probably know, United is bankrupt. And Tilton is desperately trying to cut costs and save the company. That doesn't mean he's roughing it. Until about a week ago, Tilton and his wife were living in the Four Seasons Hotel, near United's Chicago headquarters. The monthly bill for those accommodations, $18,000. It was all because Tilton refused to give up his home in San Francisco, where he returns just about every weekend, presumably on United, as long as they're still flying. United says the Tilton's now have a permanent apartment in Chicago. We can only assume that the rent be slightly less than $18,000 a month.

As you prepare to pay your 2002 tax bills, and we all are, get this, much of the money that the 12 biggest Wall Street firms are being forced to pay the government to settle that stock analysis scandal, it's probably going to be tax deductible. The "Wall Street Journal" says many of the firms will be able to slash millions from their 2002 tax bills because of the settlements being deductible. Plus, many of those firms will also get insurance payments to help them cover the costs of paying the settlement. At the end of the day, some of them may, in fact, be out very little. That means people like us will end up shouldering a bigger overall tax burden this year than we would have if they had the money and didn't get a bunch of breaks for it. So, who says crime doesn't pay?

MEHTA: Well, I think what the Bush administration needs to be pushing is deductibility of parking tickets. And then I think everybody will be just fine.

CAFFERTY: And you'd be good, right. You wouldn't owe anything.

FOX: Yes.

SERWER: You know what's funny are these CEO's, and just getting back to Tilton for a minute from United, is that all these guys live like that, and it was just fine, and they were living like that, and then their company falls off a cliff and they are still at the same level. It's like, whoops, looking down there, my company fell off a cliff and I'm still living like a king. It just doesn't work.

CAFFERTY: What was that house that we had pictures of from the air down in Florida?

SERWER: That's Scott Sullivan's house from WorldCom, the CFO. I mean, that house is just ...

(CROSSTALK)

FOX: Because in Florida, they can't take your house away. Yes.

SERWER: But he's looking to sell it because he needs money. And he was ...

(CROSSTALK)

FOX: But they can take the money away.

SERWER: Well, he needs the money presumably to pay legal fees and stuff like that.

CAFFERTY: You know, it's a triumph, again, of form over substance. We have these SEC regulations, supposedly, toughened up by the Sarbanes-Oxley bill. Well, now the lobbyists are busy pulling all the teeth out of that thing. We had this settlement that Wall Street firms were allegedly forced into making to, you know, compensate for their skullduggery with the financial analysis they were doing. But at the end of the day, when all the dust settles, a lot of these people are gong to be hurt very, every little. And, once again, it's the guy at the end of the food chain looking like the town moron.

MEHTA: I think that the "Wall Street Journal" edit page refers to those people as "lucky duckies." They don't make enough money to pay taxes.

FOX: But at the same time, whatever happens with the SEC rule making and everything else, I think that the fact that investors are a lot less credulous than they were a couple of years ago means that these things will be at least a little bit harder to get away with over the next decade. I just don't see that same level of excess being tolerated over the next decade by the investors, or by the press, or by the public, whatever the law says.

CAFFERTY: And maybe, ultimately, it is the investors who force the return of confidence to the markets, because if nobody's going to buy the stocks, the market's not going to go up. And these companies are going to maybe have to change their ways to try to get investors back into the marketplace.

SERWER: I know this is a big issue with you Jack, but still no jail time. What if I hold my breath until somebody went to jail, I'd be dead? I'd be dead. Right. I mean, when is it going to happen? It's unbelievable.

FOX: I think it's coming. But it is going to take awhile.

CAFFERTY: We keep hearing, well, this is too complicated. We don't understand the cases. It takes a while. But you're right. The greatest shortcut to restoring market confidence is to drag one of these three-piece suited thieves down the road in shackles and toss him on a chain gang down there in Mississippi in August, and start figuring it out from there. I mean, people will say, finally, they're cutting us some slack. And the bad guys are getting their comeuppance.

SERWER: Here's how you break rocks in the hot sun, you know. Hit them.

CAFFERTY: Take no prisoners.

All right. We've got more on IN THE MONEY as we continue. We're going to wrap this up in a couple of minutes. It's an interactive program more or less. We read and respond to your e-mails, provided they're not threatening or too provocative. You can write to us at IN YOUR MONEY at CNN.com, and we'll read some of this stuff in a minute.

(COMMERCIAL BREAK)

CAFFERTY: It's time now to check some of your e-mails from the past week.

Jay writes to us: "Tony Blair said it best... 'Saddam has already killed a number of Iraqi citizens equal to the number of anti- war protesters. Too bad the protesters don't understand simple math.'

Susan in Carson City, Nevada writes: "We'll probably attack Iraq the week of March 3. Otherwise, we may wait until next winter. But my opinion is our economy will not withstand the deterioration it would suffer if we waited until then."

And Claudine writes: "I think it's wrong for CNN to work people seven days a week. It sets a bad example for anyone who has a spouse or significant other and/or children." Amen. Claudine, we tape this program on a weekday. We're not really here right now. We're home watching it with you.

SERWER: I'm glad she's thinking of us.

CAFFERTY: But she's thinking of us, right.

SERWER: Very nice.

CAFFERTY: Anyway, you can get in on all this frivolity by writing to us at inthemoney@cnn.com. And we have a guy on staff here who will answer your e-mails.

SERWER: How many e-mails you get?

CAFFERTY: I don't know. That's Jake. How many e-mails we get, Jake?

JAKE: Hundreds.

CAFFERTY: Huh?

JAKE: They're coming in more and more. CAFFERTY: Fifty per show, about.

SERWER: A lot more coming in all the time.

CAFFERTY: I guess. I don't know. I don't know.

FOX: This very second, Andy, yes.

SERWER: Most are complimentary about you, I think, right?

CAFFERTY: I don't know.

SERWER: They're screened by someone. All right. I get the message.

MEHTA: We just saw that video clip of you with your computer. Was that staged?

CAFFERTY: No, we shot that yesterday. Do we have that? Roll it again. I haven't seen this yet. They made me do this yesterday, which is Thursday, although you're seeing this on Sunday.

SERWER: Now, confused.

CAFFERTY: There it is. It's coming. We don't have it.

SERWER: All right. Forget it.

CAFFERTY: All right. We'll use it again next week for those who missed it, including me. That's it for our program for this week. Thank you for watching. We'll see you again next Saturday for another edition of IN THE MONEY. My thanks to our guests -- Andy Serwer, Stephanie Mehta -- the class of the field, without doubt -- and Justin Fox. They are all from "Fortune" magazine. Can you spell synergy? I'm Jack Cafferty. Thanks. See you next week.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com



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