FTN - 9/16/01, Part 4

SCHIEFFER: And back with our expanded coverage of this extraordinary story. We have a new casualty figure from Mayor Rudy Giuliani in New York. Just a moment ago, he told reporters that the missing and dead, the total now is 5,097. To put that into some perspective, the largest one-day death toll in the history of the country was at the battle of Antietam, when some 4,300 people were killed.

Now, we're told that Attorney General Ashcroft is coming in to have a news conference. Let's listen in a little.

(NEWSBREAK)

SCHIEFFER: So the attorney general is outlining for members of the media what the Justice Department intends to do. He's talking about increasing the capability to have telephone surveillance. He is also talking about such things as increasing and raising the penalties for terrorists. But I think the important thing is he is underlining this morning, this is a much broader effort than just an effort to go after Osama bin Laden.

As Secretary of State Powell said earlier today, as the vice president said just a while ago, "Osama bin Laden is the target of the moment." But this is a much broader effort aimed at a much broader network of terrorists.

(NEWSBREAK)

SCHIEFFER: Certainly this is a delicate situation.

With us now to talk a little more about it, the former secretary of defense, Bill Cohen, Middle East expert Judith Miller of the New York Times.

And just to underline the delicacy of all of this - and Colin Powell referred to this this morning - there is a large fundamentalist group in Pakistan which could well topple the government that's now in power. And what sets Pakistan apart from other countries where there are these large terrorist cells, they have nuclear weapons.

BILL COHEN, Former Secretary of Defense: I think what we have tried to point out is that we have to be very careful in what we ask for publicly, especially what we are demanding that we release in terms of our public statements from the Pakistanis.
Whatever private assurances they have given should, I think, remain that way.

Otherwise, we're going to create a real serious situation for President Musharraf which could in fact result in the toppling of his government.

So we have to be careful. I think that's why Secretary Powell was so judicious in his comments today. And it should remain that way.

SCHIEFFER: But the fact that they do have nuclear weapons. What is the security of those weapons? Could someone steal one of those weapons?

COHEN: Well, they're under military security right now. To the extent that you have any kind of a coup, toppling, essentially a military government, President Musharraf was the former general in charge, now a president. But if the military in any way is compromised, if there is an element within it radicalized, that could in fact compromise the security of those weapons.

SCHIEFFER: Well, et me just ask you while we're on this, because I've wondered. What sort of delivery systems do they have? I take it that Pakistan could not fire a missile that could get to the United States.

COHEN: That's correct.

SCHIEFFER: But they could - they could...

COHEN: They do not have long-range capability at this point. But this is going to raise another element of the debate coming up in Congress. There's already a question as to whether or not the fight against terrorism should come focus without regard to the national missile defense system. There will be elements on Capitol Hill say, "Wait a minute, you could have another country who could emerge and then pose a threat in the future." So this debate is going to get fairly complicated and fairly intense.

BORGER: Judy Miller, we've talked an awful lot about - this morning, about going in and getting Osama bin Laden. The Pakistanis may deliver an ultimatum to the Taliban. We're going to get Osama bin Laden. How hard is that?

JUDITH MILLER, New York Times: I think it's enormously hard. And I think that's what Secretary Powell was explaining today that this has got to be a long, sustained campaign. That Pakistani-Afghan border, 1,500 miles long. Alan Pizzey discussed it.

These groups are deeply embedded in Afghan society. If you're going to quote, "smoke them out", as the president says, you're going to have to smoke them out of villas, compounds, caves, areas where they stage all over. And these guys are constantly on the move. This is not going to be easy.

BORGER: Let me ask former Secretary of Defense Cohen here, is this a job, then, for special forces, special operations?

COHEN: I think the whole panoply of resources that we have at our disposal - military certainly, in terms that would involve bombers, B-2s, B-1s. Would it involve missiles, cruise missiles? Would it involve special forces? The whole panoply has to be available - our covert operations, the CIA.

But financial as well. And we ought to focus on this because shutting down the financial support is going to be critical. Not only for this - for Osama bin Laden, but for other operations as well.

SCHIEFFER: You know, in line with that, what are we going to do, apparently this is not being taken lightly. Here is a quote I was just handed. When the president met with New York and Virginia senators and others last week he said, and we quote - this is the president talking, "I'm not going fire a $2 million missile at a $10 tent and hit a camel in the butt. This is going to be decisive." The president means business here.

But what happens after that, Judy? Because, as you say, this is - this is...

(CROSSTALK)

COHEN: Well - but he may be required to fire missiles as well. As long as everyone understands it's not going to be a one-shot proposition.

And he also has another problem, it seemto me, and there is a timeframe that he has to operate, immediate, reasonably soon and then long term. If he doesn't take action reasonably soon, that will call into question on the part of some, the leadership of the country. If he takes action precipitously, our allies may call under question the leadership. So it's a very delicate situation and decision that he has to make. I'm satisfied they are approaching it in the right way to date.

SCHIEFFER: Judy, let me ask you, because you are an acknowledged expert on terrorism, your new book is called, "Germs", I think, and it's about bio - but talk to me a little bit about the mindset of these people.

Some people in America say these people are crazy. Are they crazy?

MILLER: I've interviewed a lot of them, Bob, and they're not crazy. And we underestimate them when we call them crazy fanatics. They are fanatics, but they are rational fanatics. And they are educated. We've seen them now, they're pilots, they're engineers, they're taxi drivers. This group, these networks, use the range of people available to them. And they are very inventive at both recruiting new people and spotting the weaknesses in our system.

BORGER: I'm interested in their financing. Where do they get their money? Where do they put their money? And why can't we stop them from getting this kind of financing?

COHEN: Well, they raise money in a variety of ways. They raise money right here in this country through a number of so-called charitable organizations, religious organizations, some of which are legitimate, others which are not. And that money is funneled back into their coffers. It's distributed in a way that makes it almost impossible to trace. This is going to require a great deal of technical information.

BORGER: Where is it kept? In Swiss banks?

COHEN: In many banks. It's spread throughout the world. This is not simply sitting in one Swiss bank. If we knew it was sitting in one Swiss bank, we could take care of that. But, this is a distributed globally.

MILLER: But, Mr. Secretary, your administration had task forces in more than 20 cities in America, and yet, we've seen almost no crackdown on the financial network and the structure. As far as I know, most of these groups are still operating. How can you explain that? Why were there no cases brought to stop this flow of money?

COHEN: For the very difficulty we have talked about. You have many of the banks overseas provide for confidentiality, which cannot be broken into. We're getting more and more cooperation from them now. I think now that they've seen the error of their ways in terms of protecting information, they are going to be much more forthcoming. It's difficult to break into the financial system that's global now and not simply confined right here in the United States.

SCHIEFFER: Let me ask both of you: We've seen these suicide atacks. Should we expect more of that or is there something else coming?

COHEN: I think we should expect more of that. This is not a one isolated attack upon the United States. This has been long in the planning and as Judy just mentioned, they're like predators. They will look for every weakness they can find. To the extent that we beef up security in the airports as we should, they will look to other modes of transportation.

MILLER: And also, we've seen in Osama bin Laden operations, there is oftentimes what we called in the paper today on one-two punch. There is one attack, and then there are plans for a second that follow fairly quickly after the first. We've seen that in a number of his operations. And I'm sure that's what are one of the factors that led the FBI to close down many of the bridges and tunnels in New York and the airports for a while, because there has to be some concern about a follow-up attack.

SCHIEFFER: I thought you made a very good point just a while ago is how extremely sophisticated these people are. I mean the planning that went into this, sleeper agents that have been in this country for years. I mean the ability to buy airplane tickets on frequent flyer miles, which we now know that some of them did. I'm not sure we've seen anything quite like this in the past.

MILLER: I never have. And I've been looking at this for 20 years. But, you know, people learn from their mistakes. And that's what this organization is really good at.

BORGER: If you were doing an FBI profile of an Osama bin Laden terrorist, what would it be?

MILLER: Well, I tell you who it wouldn't be. It wouldn't be a woman. I've never seen a woman active in their ranks. We've never seen a leading female operative, which would lead me to think that maybe that's where they'll try and go next. But you get all ages, very young people, very old people, people who are middle class, people who are desperate and unemployed. It's hard to do these kinds of profiles.

BORGER: Secretary Cohen, you heard this morning and the vice president also said that Saddam Hussein, so far as we know, was not involved in this particular terrorist attack. Would you, knowing what you know about Saddam, would you rule him out, however?

COHEN: I wouldn't rule him out. This is not necessarily a pattern that he has followed in supporting terrorist actions abroad so to speak. Is he capable of it? The answer is yes. Does he have the finances to do it? The answer is yes. It's not necessarily consistent with his past behavior, where he has launched his attacks mostly against the Kuwait people, and the Kurds within his own country. But, I wouldn't rule it out.

BORGER: But, what do you expect from Saddam now?

COHEN: Saddam is going to use this as a rallying cry against the west. He's going to try to stir the spirits of his followers to say that a major bow has been dealt to the evil Satan. And to try to shore up his own support within his country. I expect he'll try to exploit it for his own purposes.

SCHIEFFER: Judy, what do you think the real possibilities are that the Taliban might give up Osama bin Laden? And do you think that the Pakistanis will make a real effort to go in there and tell them to give him up?

MILLER: Those are both the key questions. The Pakistani government has told us before that they have asked for bin Laden. They have pressed their friends and allies and contacts in Afghanistan to please get rid of him, send him anywhere. There's never been any good results from that, but things have changed so dramatically now that I think people, surely they must understand that this is a very different situation. And I'm not certain that the Taliban, at this point, may not give him up despite what they say about hospitality.

The problem is they would have to give up more than him. He's surrounded by a group of people who are just as skilled, just as brutal as he. And that whole network, that whole group, what Secretary Powell called the holding company, has to rolled up. And the camps have to be closed. I'm not sure they would do all that.

SCHIEFFER: And what about what the secretary said this morning about overtures to Iran? I asked him I understand we're making overtures, and he said, well, we've already had some very positive statements of response for Iran.

What could Iran possibly do here? How seriously do you take that, Mr. Secretary?

COHEN: Well, it was unclear from the secretary's statement whether we initiated the call to Iran or whether they volunteered it. They have a number of things that they're concerned about, certainly. They would like, at least the moderates within Iran, would like to have a better relationship with the United States. They do not want to be tagged with the same terrorist label that we are now looking at Afghanistan.

They have, in fact, been supporting terrorist activities. They do provide support to the Hezbollah. They do support the unraveling of the Middle East peace processes, so their hand has been there. So this may be an effort on their part to say that, "We don't want to be associated with supporting terrorism and now we'll offer whatever support we can to prevent it from coming out way."

SCHIEFFER: And we did get some help from Syria during the Gulf War; people forget that. Do you think we can expect help from Syria, Judy?

MILLER: I think this is a new government and it hasn't been tested yet, where you won't know for a while what will happen. In terms of Iran, I think it's - it must remember that they, too, share a border with Afghanistan. And the terrorism that they do, they like to control. They don't want someone else to control it. So I think they could actually be helpful. And in fact, there's some indications that they were alredy working with the Russians to help the Northern Alliance, which was fighting the Taliban, so I don't think you can rule it out.

COHEN: And there was one concern, as a matter of fact, that if bin Laden were to leave Afghanistan, one of the countries he might have gone to would be Iran, and so they don't want him there either.

SCHIEFFER: All right. Thank you both very much.

We're going to turn now to another part of this very complicated and many faceted story: What's going to happen on Wall Street? To talk about that a little bit now, Economist Yardeni of Deutsche Bank, one of the leading economists on Wall Street.

Thank you for coming, sir. And I guess that's the question, what's going to happen tomorrow?

EDWARD YARDENI, Deutsche Bank: Well, I think it's pretty clear that the New York Stock Exchange, the major exchanges are ready to open. They're ready to do business. There's, I think, a lot of people on Wall Street that just want to get back to work, back to business to show that the markets are operational. I also sense that we may be surprised that that would be almost a patriotic mood on Monday people wanting to see the market going up. There are no guarantees, when it comes to financial markets.

But I think the important thing to realize is that we have already slipped into a recession and usually that's a negative for the stock market and stocks have been down.

The likelihood is that this crisis will lead to a lot of government spending next year and markets do look forward, and it's possible the market may actually start to recognize that there are things in place here that'll give us a recovery next year, related to this unfortunate crisis, of course.

SCHIEFFER: I find it remarkable that the market is going to be able to open. When you look at what happened, when you have one bond house that, what, loss 700 people, I mean, this is a remarkable logistical feat, just to get things back up and going tomorrow.

YARDENI: Well, it's been an enormous body blow to Wall Street. It's been a - really, the message was pretty clear that this is also intended as an attack on American capitalism and American financial markets.

So as I said, there are people that have been scrambling very, very hard, very, you know, night and day to make sure that we send a message back, that we're back in business. This is not to say there might not be some disruptions. But the reality is Wall Street's been preparing for a long time with backup systems and I think you're going to see that working reasonably well on Monday.

BORGER: Mr. Yardeni, the vice president this morning said that the country, quote, "quite possibly could be in recession." You just said that we are.

YARDENI: Well, actually, this past week we had some more economic indicators, like industrial production, which were down dramatically in August. I think economists have been more and mor moving into the camp that this is not just an economic slump, but it is a recession. So far, it looks like it's going to be a fairly mild one.

But with this crisis, undoubtedly, you're going to see a lot of people, you know, watching the news, cutting back on spending. It's going to worsen the recession through the end of the year but, again, I think that most economists also weren't quite sure how we were going to get out of this slump. Now it's very clear how that's going to happen.

BORGER: Mr. Yardeni, how do you see the future of the airline industry right now? Will it go bankrupt?

YARDENI: I don't think so. I think they're very important to national business, and it's pretty clear to me that there's already some movements afoot in Congress to provide a subsidy to this very, very important industry. You know, clearly, we can't afford as a nation to let terrorists shut down our system like this.

BORGER: So you would support a bailout of this industry?

YARDENI: I think it's not a matter of a bailout, it's a matter of this is an emergency, a crisis, a terrorist attack on an industry that we desperately need to operate the economy.

Another reason the economy may do better is that, you know, we will get the air system back in place. We need parts for our companies. Many of these parts are delivered by air. And so, this is really part of our national defense. I can't see that we're going to let companies go bankrupt.

SCHIEFFER: Well, of course, the Federal Reserve will be monitoring all this and Chairman Greenspan. What options are open to Chairman Greenspan and what can and should the Federal Reserve do here?

YARDENI: We're very, very fortunate to have Fed Chairman Greenspan at this point. He is a man with tremendous credibility during previous crises and I think we're going to be very impressed by what the Fed will do. Already we should be impressed because the Fed has provided an enormous amount of liquidity last week, along with other central banks to the banking system.

And we've seen, for example, the treasury bill rate - the three-month treasury bill rate - is almost down to 2.5 percent. So the markets are anticipating that the Federal Reserve will, in fact, deliver at least a half-point cut in the federal funds rate very soon. They're scheduled to meet in early October. I would not be surprised and I think the markets are anticipating there might actually be a cut on Monday.

SCHIEFFER: And I want to go back to what you said at the very beginning. You think, at this point, even in hard facts where money is involved, you think that for patriotic reasons, the market may stay up?

YARDENI: I just - look, all I can tell you is I've been calling around, talking to friends, and there is sort of an attitude of, you know, "Let's show them what we're made of." And I understand over the Internet, there's been some talk about, yoknow, buying rather than selling on this news.

There is no guarantee, as I said, but I wouldn't be surprised if the market really shows its strength.

SCHIEFFER: All right. Ed Yardeni - encouraging words, I must say.

We're going to continue with our expanded coverage on Face the Nation this morning. After a short break, I'll be back with a final word.

(COMMERCIAL BREAK)

SCHIEFFER: Finally today, Americans came together this week as they have not come together since World War II. You could see it and feel it, and not just in the calls for retaliation. I noticed it first as I was driving to the Capitol last week.

The road rage of rush hour evaporated like a morning dew. Instead, flags flew from car phone antennas and drivers waved and gave a thumbs up when you signaled to change lanes.

You could feel it at the Capitol. Congress passed a $40 billion emergency aid bill by an unprecedented unanimous vote. But that was only part of it. When Senate Republican Leader Trent Lott and his Democratic counterpart Tom Daschle approached the microphones this time, Lott had his arm around and his hand on the shoulder of his old political foe.

Someone said that America changed forever last week, but that is not quite right, because I am old enough to remember an America that used to be this way. That is the easy part for us to forget, because we got off-track in the '60s - a great cynicism gripped the country after the death of John Kennedy and as we became bogged down in Vietnam - a war we never understood. We lost faith in government, our institutions and each other.

But on Tuesday, we somehow remembered how it used to be and how we used to understand that we were all in this together; that any one of us could have been on one of those planes; that our children or brothers or sisters could have been in one of those buildings, and that it could happen again.

Many things happened on Tuesday, and I think one of them may be that we have finally gotten past Vietnam. Those who wanted to get America's attention got it, and they will rue the day they did.

I want to thank our affiliates who allowed us this extra time on their schedule to bring us this very important story today. And we want to close now with some pictures that will tell the story of last week better than any words.

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