The NewsHour with Jim Lehrer

RAY SUAREZ: Good evening. I'm Ray Suarez. Jim Lehrer has the day off. On the NewsHour tonight: A summary of today's news; the Congress and CEO s discuss the corporate accounting scandals and the crisis in confidence; analysis of the week's news with Shields and Brooks; the fallout from another police beating, caught on videotape; and a look at the news business; and whether all missing persons are created equal.

NEWS SUMMARY

RAY SUAREZ: The Senate today voted to bar companies from making personal loans to top executives and directors. President Bush had called this week for ending the practice. Since then, White House officials have acknowledged that during the 1980s, Mr. Bush took loans of $180,000 from a Texas company he served as a director. The proposed ban on such loans is now part of a broad corporate reform bill. It's headed toward a final vote in the Senate next week. We'll have more on this story in a moment. The President's new task force on corporate fraud met for the first time today. It included FBI Director Robert Mueller, Treasury Secretary Paul O Neill, and SEC Chairman Harvey Pitt, among others. The President has described the group as a kind of "swat team." On Wall Street, the Dow Jones Industrial Average finished its worst week since last September. It lost 117 points today to close at 8,684. For the week, it was down nearly 700 points, or more than 7%. The NASDAQ Index fell less than a single point today, to 1373, but it was down 75 for the week, or more than 5%. The Senate today approved nearly $5 billion to battle AIDS worldwide over the next two years. The bill also mandates a five- year plan to curtail the spread of the disease. The House has already passed a similar measure. Today's vote came as the international AIDS conference wrapped up in Barcelona, Spain. Former President Clinton appealed for wealthy countries to do more. Former South African President Nelson Mandela said the price of drugs must not stand in the way.

NELSON MANDELA: We must find ways and means to make lifesaving treatment available to all who need it regardless of whether they can pay for it or where they live, or for any other reason why treatment is denied.

RAY SUAREZ: Researchers, activists, and others at the conference this week heard reports of promising new drugs. They also heard forecasts that 25 million children will lose at least one parent to AIDS by the end of this decade. The federal budget deficit could hit $165 billion this fiscal year. The White House Office of Management and Budget made the projection today. The deficit is up nearly 60% since February. Budget officials predicted two more years of deficits before the government returns to surpluses in 2005. They blamed the current red ink on recession, the sell-off in stocks, and the costs of the war on terror. Some Democrats blamed the President's trillion-dollar tax cut. An Afghan war captive born in America was denied access to a lawyer today. A federal appeals court in Virginia cited the government's position that Yaser Esam Hamdi is an enemy combatant. The appeals court ordered a lower court to reconsider its ruling, allowing Hamdi to meet with a federal public defender. Hamdi is being held at the naval base in Norfolk, Virginia. That's it for the news summary tonight. Now it's on to: Cracking down on corporate misdeeds; Shields and Brooks; a police beating on tape; and missing children and the media.

FOCUS CLEANING UP?

RAY SUAREZ: Political and business leaders are responding to the scandals on Wall Street and corporate America. Kwame Holman begins our report with the activity in Congress.

KWAME HOLMAN: It emerged late yesterday as a bone of contention in the Senate's debate on reforming accounting practices,. An amendment by Senator John McCain requiring corporations to declare stock options given to top executives as an expense recorded on the corporation's balance sheet.

SEN. JOHN McCAIN: Before the Senator from Nevada leaves the floor, I would wonder if he would respond to a question. Do we intend to vote on these pending amendments and the motion to recommit?

KWAME HOLMAN: Assistant Majority Leader Harry Reid was almost apologetic in denying McCain a vote.

SEN. HARRY REID: I have spoken to the manager of the bill in the minority and it appears to me very unlikely we are going to be able to do that. So even though would I like votes, it doesn't appear we are going to be able to have votes.

KWAME HOLMAN: McCain was incensed.

SEN. JOHN McCAIN: Whatever side you are on the issue, the fix is in, as we say in the sport of boxing or all too often in the sport of boxing and the fix is in and we will now have cloture invoked and there will not be a vote on stock options. I have been through rather difficult issues that I have been blocked on getting votes on and I want to tell my friend from Nevada and all my colleagues, we will have a vote on stock options. Sooner or later we will have a vote on stock options. It's curious to me-- actually, it's not curious to me, why a vote on this amendment is blocked. It's because every lobbyist in this town for the high-tech community has said don't, don't do it. The one thing that the folks in Silicon Valley are scared of more than anything else is that they would lose their precious stock options.

SEN. TOM DASCHLE: That's as unfortunate as it is inaccurate.

KWAME HOLMAN: This morning, Senate Majority Leader Tom Daschle said he agrees something should be done by stock options -- not by the Senate but by an independent accounting review board the Senate would create.

SEN. TOM DASCHLE: We haven't sent the bill to the President yet and have you some members dictating to that independent board what they should do. How independent is a board if we're already dictating to them what they ought to be doing once they organize?

KWAME HOLMAN: And so on the Senate floor this morning, Michigan Democrat Carl Levin on behalf of Senator McCain as well proposed requiring any newly accounting board to review the issue of stock options within one year and adopt an appropriate standard.

SEN. CARL LEVIN: At a minimum, Madam President I ought to be allowed to get a vote on this amendment.

KWAME HOLMAN: But Levin also was denied, this time about it objection of a Republican. Levin said he would try again on Monday.

SEN. CARL LEVIN: This is a critical issue that is not addressed in this bill, which is a big part of the lack of credibility that we have right now in our markets.

KWAME HOLMAN: Meanwhile, the Senate, by simple voice vote today did approve a ban on personal loans from companies to top officials. That goes with the bill's main provision requiring executives to certify accuracy of corporate financial statements and with the tougher criminal penalties adopted this week for corporate officials who deceive shareholders and shred documents. Final action on the Senate's accounting reform bill is expected late Monday.

RAY SUAREZ: Now, how a group of corporate leaders see recent events. Our business correspondent Paul Solman of WGBH in Boston has that.

PAUL SOLMAN: Joining us from New York is Pete Peterson, chairman of the Blackstone Group, a private investment banking firm, co-chairman of the corporate governance task force at the Conference Board and former Secretary of Commerce during the Nixon Administration. From Denver, William George, until recently the CEO at Medtronic, a multibillion dollar medical technology firm. And with me here in Boston, RichardSyron, CEO of Thermo Electron, manufacturer of scientific center instruments. He is the former CEO Of the American Stock Exchange.

And welcome to you all.

Okay. Pete Peterson, let's start with a question that is becoming almost a clich . Are we looking at a few bad apples, or a rotting orchard?

PETER PETERSON: Well, you know, it's very soothing clich , and it comforts us businessmen to believe that, and I believed it for sometime. But I've got to tell you a couple things about that--.

PAUL SOLMAN: You mean you believed that it was a few bad apples?

PETER PETERSON: Yeah. I kind of believed that until recently; however, there's certainly more bad apples already than I would have guessed. Second, I don't know how we answer that question accurately because how would we really know how many bad apples there are? And besides, with the total breakdown in public confidence, I don t think it matters very much what we businessmen think about ourselves. What matters is what the public thinks, because their public trust is what s really crashed. And I brought with me a survey that I just read this morning that is very melancholy, and it makes me sad and perhaps even a little ashamed.

They asked several hundred voters, I mean, ordinary people, which comes closest to your thoughts about these instances of corporate wrongdoing? One was every company does this kind of thing but only a few will get caught; 43 percent believe that.

PAUL SOLMAN: But isn t it every company that

PETER PETERSON: The second one is many other companies will be exposed; 36 percent believe that.

I guess the bad apple theory that we soothe ourselves with, these are isolated instances. Only 15 percent of the Americans believe that. So whatever we may think, obviously most voters believe that this is somewhat of an orchard. And that says to me that we've got what I call a moral cancer or governance cancer and it s going to metastasize if we don't cut out this thing in a hurry or as soon as we can into an economic cancer. So that would be my answer to that question.

PAUL SOLMAN: Bill George, you re a CEO, you're on boards I assume. You know other CEO s. Are you guys to blame and is it as pervasive as the public seems to think it is?

WILLIAM GEORGE: Well, I think Pete is on the right point. We have a real loss of investor trust and it is not just American. It's worldwide. I saw a survey in "Wall Street Journal" Europe that only 21% of the Europeans think CEOS are honest. I found that pretty shocking. And so to say we are going to solve this by putting a few of the crooks in jail, I think it really misses the broader point here. We in the business community really need to step up to our responsibility in terms of governance and leadership, and we have a huge vacuum and you don't hear a lot of business leaders criticizing what is going on and you have the some great companies in the last few days that have come out with multibillion dollar reversals in their accounting. So it is not just three or four bad companies who have destroyed a lot of shareholder value. So I think we need to move on a much broader front than just trying to extend jail terms for criminals and to strengthen our systems of governance. I'm afraid it is going to take the combined effort on the part of the New York Stock Exchange, SEC, but also corporate boards. I've served on I think nine boards over the years. And they've been very good boards but I feel somehow our boards have not done the job in terms of governance and separating their role from management and have really conceded too muchof the power to the CEO s, and you see the extreme excesses of what is really a lot of greed in our system, greed on the investment side, obviously greed on the accounting side and greed on the corporate side. I think we have to face into that issue.

PAUL SOLMAN: We'll get to policy in a minute. Dick Syron, when you run into a CEO now, and you must have known a lot of them when you were running the American Stock Exchange, do you secretly think, gee, what were they doing that I didn't know about? I mean do you trust your former colleagues or associates less?

RICHARD SYRON: Well, you know, it's become the mantra to say that we're all ticked off, whether it was a few bad apples or was more systemic. But I think there is a lot of anger by a lot of us in terms of what has happened. And we, it comes back to what Bill and Pete both said, have more of an interest than anyone else in a lot of ways of seeing this thing cleaned up. I was joking with someone. You get on a plane with someone, they ask what you do, I'm tempted to say sell paint not that I m a CEO of a company. But I think that we have to recognize that some of this is a result of putting in place incentives that brought about results that may have been totally at variance than their intended consequences.

PAUL SOLMAN: That's the next question I was going to ask you. Why in a sense should we be so surprised? I mean, I can understand how we're sort outraged, you know, when we see the consequences of what's been going on. But weren't the incentives fairly clear and growing for a CEO to get-- to manipulate, if you will, the stock of the company, to get as much for him or herself as possible, while the disincentives, the punishments were going away?

RICHARD SYRON: Well, I think that is unfortunately true. But I think it holds true on a number of dimensions. One, we probably under funded the SEC for a period of time. We didn't sufficiently respect the people who worked there or pay them as well as the people who were being paid to deal with the issues on the other side.

PAUL SOLMAN: That's right. The other government investigators didn't get paid-- they got paid more than the SEC people got paid.

RICHARD SYRON: Exactly.

PAUL SOLMAN: The President has now suggested we release-- we at least hire more SEC People.

RICHARD SYRON: I think also we had the situation on the options side, and options in my view were too short-term; that people were rewarded if the stock went up. You didn't lose very much if it went down.

PAUL SOLMAN: That was the CEO having the option to buy the stock at a low price.

RICHARD SYRON: Well, at the current price, but being highly incented to the short-term performance of the stock. I think, Paul, this really is part of a broader economic problem. And I think Pete is right. If we are not careful, it is going to be a serious economic problem. But a broader economic problem of short-term orientation we have in everything. As long as you incent CEO s on the basis that boy, if you are expected to make 92 cents this quarter, it better be 93 and 94, and if it is 91, it's a disaster and you won't be compensated one way or the other, you know, Pogo is right, we ve met the enemy and it's us.

PAUL SOLMAN: Pete Peterson, do you agree with that? Weren't the incentives there? I mean, why should you be so surprised?

PETER PETERSON: Well, I agree that we in business had better look in the mirror here. And I imagine for the moment that instead of us guys engaging in self-serving soothing declarations, we look at what's going on here from the standpoint of thepublic. Incidentally, another statistic I read that really made me sad, I always thought politicians were at the bottom of the pile. It now turns out that the voter thinks of politicians more favorably than us. And how much more insulting can you get than that?

PAUL SOLMAN: Journalists are finally moving up.

PETER PETERSON: Let's review the record as they say, as the public probably sees it. I read a "Business Week" article in which they pointed out that 20 years ago the CEO got about 40 times what the average worker did. It's now, according to them, 541 times. They point out that the earnings of CEO s have grown ten times faster than the average worker. They pick up the paper and hear guys that ruin companies, who made hundreds of millions of dollars. Other guys who cashed in options then the company goes bankrupt. So why should we be surprised that there's a distrust here? And I agree entirely with Bill and I'm trying to look in the mirror in this commission. We'd better start looking at ourselves because the blunt and melancholy truth is we have not been showing much leadership. For example, we know in our heart of hearts that executive compensation is one of the critical issues that's on the minds of the people. Now what are we talking about? We're talking about stock options that have doubled. We're talking about loans in egregious amounts for people to buy options. We are talking about repricing options. We say to people we're aligning interests with the stockholder. If I were a stockholder and looking us in the eye, what would I be saying? I d say In the first place you guys don't have to exercise those options unless you know, the price is up. And the second place, you can turn around and sell them in a hurry as Bill pointed out. And in the third place, nobody is offering me any loans. So there are some tough questions here about how we account for options. We don't want to think about it, but we're taking massive deductions on our income statement. I read in the paper yesterday that Enron got $625 million check from the government. Bill's right about the long term here. Should we be extending the holding periods, for example?

PAUL SOLMAN: Well, let's talk about some of the specific proposals. Bill George, you raised this issue before. President Bush has put on the table a number of proposals, the Senate has what are spoken of or written of as tougher proposals. What do you see out there that you like? Do you think that President Bush's proposals to start with, are going to make a significant difference in changing the moral tone and behavior of CEO s in America?

WILLIAM GEORGE: I don't think he's gone nearly far enough. It's a little bit like putting a bad lock on the stable door after the robbers took our horses. Pete is on the right issues. We need to stop all these things he is talking about. Actually, going back to stock options, I thought they were a good long-term incentive. We had 10-year stock options at Medtronic. I never cashed any of them in until the last day; I never sold any stock except to pay the taxes on the option gains.

PAUL SOLMAN: That s because they aligned your interests supposedly with the interest of the shareholders.

WILLIAM GEORGE: Right.

PAUL SOLMAN: If you owned the company, then you wouldn't be incentivized to run it for your own personal profit, right?

WILLIAM GEORGE: Exactly. I think what happened is too much of a good thing. We got greedy and we re killing the goose that laid the golden egg. Now I think we are going to have to face the issue of the value of the stock options. And what personally I would like to see is and the Stock Exchange Committee has come out and said they would like to see all options approved by shareholders. We've always done that at Medtronic. I think they should be. It's the shareholders shares we are giving away. Second, I think we re going to have to look at the value. Personally I don't like theoretical calculations about the value of stock options. I would much prefer us to say, when you take the gain, if I get a $5 million gain out of stock option, at the time I take the gain, that's a taxable event, that's the time that the company should record a gain because there is a real gain there. And I think that would equate stock options more with stock grants, restricted stock, cash bonuses and other forms of compensation and put everything on the same level playing field. And then we, boards and shareholders would have to look seriously at those issues and see did the shareholders get the real gain?

PAUL SOLMAN: Okay. Dick Syron, quickly on stock options and also what about tougher jail sentences, which is part of what President Bush was talking about with regard to people who commit fraud?

RICHARD SYRON: Well, I think there is probably value to tougher jail sentences talking about what Pete Peterson said. And some of these people should and I hope do go to jail.

PAUL SOLMAN: Do you think they will?

RICHARD SYRON: I fear that many won't. And I think to get back public confidence, we probably do need to have some people go to jail. And I think that will be something that will tend to bolster public confidence.

PAUL SOLMAN: I just want to ask quickly to just a very short question to each of you. Do you think, Peter Peterson, that CEO s will go to jail?

PETER PETERSON: Well, why don't we look at what's actually happened instead of my opinion. The Enron case has been around since what, October?

PAUL SOLMAN: Yeah.

PETER PETERSON: And we've read of some egregious circumstances earlier than October. And nothing has happened in eight or nine months. Now in my view, had it happened, had some guys gone to jail on the assumption that there is fraudulent behavior, I think it would have helped.

PAUL SOLMAN: Do you think things are actually going to change? Is the system, because of the outrage that we are hearing, going to adjust, Bill George?

WILLIAM GEORGE: I think it has to change. We have no choice in the business community. And I think we need to start cleaning up our own house by getting a separation of our board governance from the management and cleaning up the governance, getting more than 50 percent independent directors and having the board really take responsibility. We can put people in jail but that's not going to solve a problem. I think the only way we are going to restore confidence of the investors, if they can see that corporations are taking things in their own hand to govern well and to produce not meeting analysts expectations that s been part of the problem -- but to produce strong long-term results that reward them for their investments and that we are good financial stewards of their investments.

PAUL SOLMAN: Okay. Bill Syron, yes, no. Is it going to change dramatically?

RICHARD SYRON: It's already changing and I think it is changing because of all the attention that has been brought to this. I think that people, I suspect, I don't know, I haven't talked to a lot about this, looking at these things on a day-to-day basis, hopefully differently than they did a year ago.

PAUL SOLMAN: Dick Syron, thank you very much. Thank you all. Appreciate it. We are out of time.

RAY SUAREZ: Still to come on the NewsHour tonight: Shields and Brooks; a police beating incident; and media coverage of missing children.

FOCUS SHIELDS & BROOKS

RAY SUAREZ: That brings us to Shields and Brooks-- syndicated columnist Mark Shields, and David Brooks of the "Weekly Standard."

Well, earlier this week the President shared his thoughts on recent corporate many scandals with the rest of the country. What did you make of what he had to say?

DAVID BROOKS: It was the first speech President Bush has given that did not change the direction of the conversation and it has been overrun over the last two days. So it was a political misreading not a political success. I would like to defend the part that has been most dismissed, that is the talk of the morality of Wall Street, the stuff on the morality and ethics. One of the things that happened over the past two decades is that standards of behavior just changed not legalities, not illegalities but things that were not done in 1980 were done in the year 2000 as the stock market rose: Treating corporate money as part of your own personal pool of goodie sharing, giving $60 million bonuses to CEO s as opposed to $6 million, as if somebody does a better job with $6 million. That's not a question of legality. That's a question of just what is socially acceptable. I think Bush was absolutely right to say we have to have a change of manners and morays. Now, the legality stuff aside, that got so dismissed as just words but I thought it was part of what has to be part of the real change in what's happened.

RAY SUAREZ: Mark.

MARK SHIELDS: Ray, I think you can't take the President's speech without considering the press conference the day before, which, to some degree was a disabling prelude to the speech, because what the President essentially was saying was do as I say, not as I did. He called for outlawing practices, which he himself had benefited from in the private sector. So in a strange way, without disabling or crippling him, it certainly did not make him the believable and credible sheriff that he wanted to be.

RAY SUAREZ: However, rightly it burns, did he put out the fire? Did he douse it by saying, look, this is old business than all the message people went out and said this is old business. I had it dealt with by the SEC ten years ago. It's over. Is it over?

MARK SHIELDS: I think the Harken part of it is over, the "Washington Post" in the lead editorial Friday said in their judgment, hardly accused of being a Bush house organ, the Post said that they thought it was. But the problem is the practices. I mean not that they were illegal, but he was part of the sort of crony capitalism, this chumminess that if you need a few bucks, take it out of the till and all of the rest of it. I think that was a problem. The other problem is something David has talked about on George W. Bush. He gave up the bold colors of moral clarity for sort of a pale pastel on nuance gray of ambiguity when he started-- you don't understand accounting. It's in the gray area. That's not where the President wanted to be on this issue. So when the New York Daily News again, a paper very friendly to President Bush leads with its headline "Bush Talks, Market Tanks," that's tough. That's a tough commentary.

RAY SUAREZ: Let's very briefly remind people of what we are talking about -- really two issues: Loans by the Harken Corporation, of which he was a director, and also sales under favorable terms of stock, which he then sold in advance of that stock price declining and in advance of the company going in into severe losses. Has he cut his own losses this week?

DAVID BROOKS: I agree with Mark, Harken will not expand. Paul Krezin of the "New York Times" has tried to blow it up but I think once you look at the broad spectrum of the issue, it has never been a big issue. When you look at how the SEC investigated him and found him clean, then I don't think Harken will be a big scandal. The issue for Bush is broader and some ways more challenging. It s not like a little political scandal, it's not a Whitewater. The problem is that the American people after September 11 had great faith in American institutions, great faith in the direction the company was headed in. And that was just shown in the polls. It just skyrocketed. Now we've had the Catholic Church, the FBI, the CIA, and now the financial markets. What we've seen is a sharp drop in faith in institutions and a sharp drop in is the country on the right track. When the people feel their country is on the wrong track, they want to take it out on somebody and Bush faces another set of questions, which is, can you get it back on the right track? And they take it out on incumbents. That's the danger.

RAY SUAREZ: Well, the House and Senate tried to take some of that thunder and noise to its own bosom this week, a lot of debate, a lot of news conferences. John McCain rode into battle trying to get the granting of options; that is, the ability to buy stock at a preferable price at specific times, listed on corporate earnings and loss reports as part of what their business costs are. He lost. He lost with people coming up to oppose him from both sides of the aisle. Was this just another John McCain tilting at windmills deal? He said this is coming back for a vote, don't you worry.

DAVID BROOKS: This is John McCain tilting at Silicon Valley where the salaries come from stock options and both parties are beholden to Silicon Valley and they crushed him and Carl Levin. What happened on Capitol Hill was remarkable this week there. There were so many proposals out there it was coming out of the wood work, it was like a frenzy. And a lot of the emphasis was on throwing these guys in jail, you know, hanging them over a mosquito pond naked just to torture these guys, which to me is the wrong focus. There has been so little coherence but it seems to me one of the things we've learned over the past seven months -- and Paul has brought this out in his reports -- is the central problem here is conflict of interest. The auditors have to please their firms so they don't give honest information because they want to win the clients. The stock analysts are partners with the investment bankers so they don t give honest buy and sell recommendations. There should be some clarity brought to the Capitol Hill debate, which is just chaos. And the clarity should be, let s get that people are supposed to be gatekeepers in the financial markets, let s get it so their incentives are correct to give honest information, because right now their incentives are screwed up, but there has been not that kind of clarity. Instead, it s let s send him to jail for five years.

RAY SUAREZ: Barney Ebbers was in the stock with his hands and feet sticking out. He said he wasn t going to say anything but they kept pummeling him for the rest of the day and into the night.

MARK SHIELDS: There were two central political arenas this week. One was Wall Street where stocks fell and fell precipitously. They fell because there were more sellers than there were buyers. That's why stocks go down. Why there are more sellers is central. These are not people, investors who understand that there are risks. These are not people who say that this is a bull market and therefore I'm getting out. These are investors, Ray, who are absolutely convinced, what they suspect is that the thing is rigged; that it is a three card Monty game, that the rich guys, the big guys, the powerful guys are playing with fast information, that they re treating them like rubes who just walked into the carnival or the county fair and are being taken advantage of at the Kupee doll show. That's one. The second thing is the Congress. I think you have to say all opposition to the Sarbanes bill, which was considerable, organized lobby, Phil Gramm, Rick Santorum, former Republican, melted. I mean, they re all now -- they're all reformers, they re all born again reformers. Why? Because they re terrified; they re terrified that Republicans prided themselves on being the corporate party. They brought a corporate style to the White House. They brought corporate press. They brought corporate operations; they brought -- meetings began on time. They had an agenda. It wasn t like Bill Clinton s late night bull sessions, people walking around in Levi s. This was corporate. And now it s corporate and they're trying to distance themselves and separate themselves from that tag. For three successive elections Republicans have kept the House by making one argument, and that is, by raising a lot of corporate money, they say, you want Chairman Charlie Rangel, Democrat from New York, as chairman of John Dingell of Michigan, a formidable anti-tough guy, or do you want Henry Waxman of California in charge of health? All of a sudden there s a sense of gee, maybe people say, maybe we do; maybe we do want someone who s going to keep an eye on these folks. And I think that s why you saw Republicans stampede.

DAVID BROOKS: You know, there used to be a distinction between being conservative and believing in markets and honest competition and being corporate. Over the past five years, ever since Newt Gingrich left, that distinction has gone away. And the danger here for the Republicans is they don't have-- we don't have honest competition in the markets in part because of the crooked behavior but in part because of this price fix here or of crooked behavior but in part because government responds by saying let's blanket the financial markets with government oversight. Let's have some government body going through the books of every company in the land. Let's have tort lawyers suing everybody for every little precept. That would be just as bad as the disease. That's why I think it's really important for the Republicans to get order on the debate and say let's get--.

RAY SUAREZ: Didn't there used to be more regulation on this stuff than there is now? I mean are we talking about returning not to some place where we've never been, but to a place where until just the recent past we used to be, in the oversight, in the vetting?

DAVID BROOKS: There's tremendous difference between the state attorneys and district attorneys on who gets prosecuted which district attorneys are likely to present a case because it is so difficult to prosecute somebody for this sort of corporate crime. But listen, the real problem is simply that the people within the financial markets who should have an incentive to keep the markets honest so people want to invest in the markets and make money, they were allowed to stray and allowed just pad their short-term interests as against their long-term interests. So the Republicans really have torearrange the incentives. which means splitting up these firms.

RAY SUAREZ: Mark was spinning this off until later in the year, approaching mid summer. Mid-term elections aren t that far away. Nobody is talking about Jalalabad and Kandahar right now. They're talking about getting their statement, quarterly statement in the mail and they re not looking very pretty.

DAVID BROOKS: I'm a little curious though in terms of how this will play out in terms of the mid-year election. One Republican consultant says, what is the ad the Democrats are going to run against the Republicans? Do you say they're corporate, they wear ties? That doesn't seem like a persuasive ad why you should unelect a Republican incumbent. That will be a problem for the Democrats.

MARK SHIELDS: I don't see it as a problem right now. The problem is if you are going to do a campaign and you're debating those who cheat on welfare or crime in the streets, Democrats by definition are on the defensive in that kind of a debate. When you're talking about guys who are cheating people out of their retirement, are robbing widows and orphans of their future, then you're not talking-- you're talking about not that the Democrats have been that tough but that the Republicans have been too chummy. And I think that is the problem for the Republicans -- that there is a widespread perception that they are very too close, too chummy, almost subservient to the Republicans. How much has the climate changed? I'll tell you how much the climate has changed. You have Republican members of the House Ways and Means Committee openly saying on the record it is George Bush's tax proposal before the committee today, it could not pass the Congress of the United States. I mean, that's how much it has changed.

RAY SUAREZ: So, I mean is this something that's over in a month a couple of months? It feels like the sand under our feet here in Washington has shifted a little bit. But it's hard to know--.

DAVID BROOKS: In earlier discussions with the CEO s, they were self-flat waiting themselves as CEO s should these days. This was the whole country. When the stock market was going up and up, you could not put Bill Gates face on enough magazines because Bill Gates sold, any CEO sold. Those were the heroes that were making people money. And that could come back when the market shoots up again.

RAY SUAREZ: David, Mark, thanks a lot.

FOCUS CAPTURED ON TAPE

RAY SUAREZ: Now, another videotaped police abuse case in Southern California. Saul Gonzalez of KCET Television reports.

SAUL GONZALEZ: At a rally this morning in Inglewood, California, African American and civil rights leaders gathered to protest police brutality.

REV. KERRY ALLISON, Hope Community Church: We come from our different places and different residences all over Southern California and even in other states that to tell Inglewood, to tell this nation, to tell this world, that we won t stand for police brutality anymore.

SAUL GONZALEZ: The demonstration was sparked by last week's videotaped arrest of an African American youth at a filling station. In the tape, shot by an amateur cameraman, a handcuffed 16-year- old named Donovan Jackson is shown having his head slammed into a car by Inglewood police officer Jeremy Morse, who then punched Jackson in the face. The videotape has re-ignited the national debate over police brutality in America.

MICHAEL ZINZIN, Coalition Against Police Violence: This incident is a problem not with one bad police officer, but rather a systematic crisis being repeated time and time again across the country.

SAUL GONZALEZ: Family members of Jackson say they are especially infuriated because the youth has no arrest record and is developmentally disabled. Tabliah Shakier is Jackson's cousin.

TABILAH SHAKIER: It's bad enough that we get beaten for the color of our skin or our zip code, but it is even worse when you do it to a special ed student.

SAUL GONZALEZ: Inglewood, where the incident took place, is a predominately working class African American and Latino community bordering Los Angeles. Its mayor is Roosevelt Dorn, a former LA County superior court judge who's led criticism of the alleged police abuse captured on videotape.

MAYOR ROOSVELT DORN, Inglewood, California: What I saw was this officer commit a felony assault, assault with a deadly weapon by using the automobile, battery, abuse and violation of this youngster's civil rights.

SAUL GONZALEZ: However, on Thursday, Inglewood's police chief, Ron Banks, cautioned against jumping to critical conclusions in the case.

CHIEF RON BANKS: I do not agree that any such judgment can be made at such time without the investigation being complete.

SAUL GONZALEZ: The chief also asked the public and media not to condemn his entire department and brand its members as racist.

CHIEF RON BANKS: We serve a heavily minority community; we serve them on a daily basis well within the guidelines of our policy, and to take this incident and characterize it as an example of racial profiling to me is unwarranted.

SAUL GONZALEZ: Officer Morse has been placed on paid leave from the Inglewood Police Department and faces the possibility of criminal charges in the incident, which began when LA County sheriff's deputies tried to arrest Jackson's father at the filling station for expired license plates. Police say Jackson then became combative -- actions not caught on video -- forcing officers to restrain him. Along with the LA County District Attorney s Office, federal authorities, including the U.S. Attorney, and FBI, have launched their own investigations to determine if excessive force was used in the Inglewood incident. The Justice Department has also sent its top civil rights attorney, Ralph Boyd, to Southern California to assist in the investigation. On Wednesday, attorneys for Donovan Jackson and his father filed a civil rights lawsuit against Officer Morse and the city of Inglewood.

JACK SWEENEY, Jackson Attorney: We want to send the city of Inglewood a message that we are going to prosecute this case as vigorously and as roughly as they beat our client.

SAUL GONZALEZ: And the videotape will be indispensable in the coming legal battle.

LAURIE LEVINSON, Loyola Law School: Videotape is terribly important. In fact, even in this one incident we know that no cop filed a complaint against the other officer until the videotape came out.

SAUL GONZALEZ: Laurie Levinson is a former federal prosecutor and criminal law professor who studies police abuse cases.

LAURIE LEVINSON: Once they have the police actions captured on videotape, no one can deny it. They can try to explain it away, but we know what happened.

SAUL GONZALEZ: However, Levinson cautions that even with video evidence, it's often difficult to conclusively prove excessive force cases.

LAURIE LEVINSON: It is actually a very flexible standard. And even though you see someone in handcuffs and you think, "Don't touch him, hurt him anymore," police officers might still see something in his actions, his hands, in the look in his eye that poses a threat. And law enforcement standards may allow them to react. So you can t give one definition to what excessive force is because it always depends on the circumstance.

SAUL GONZALEZ: Officer Morse is arguing that he struck Jackson because the youth grabbed his testicles. The police officer's attorney, John Barnett, says an investigation will vindicate his client.

JOHN BARNETT, Officer Morse s Attorney: I'm not going to tell you what he told me, but I can tell you that I think that the evidence is going to show that the force used was appropriate to the situation.

SAUL GONZALEZ :As authorities investigate the most recent example of alleged police brutality in Southern California, many are comparing the case to the racially charged beating of Rodney King 11 years ago. However, the Inglewood incident has not elicited the same degree of community protest as the King case. Mayor Dorn believes that s because the incident is more about excessive force than police racism.

MAYOR DORN: I think that this officer in the frame of mind he was in, it would not have mattered what color that youngster was. He would have committed the same act. And that s what s so dangerous.

SAUL GONZALEZ: In a twist in this story, Mitchell Crooks, the man who s videotape started the uproar, faces his own problems with law enforcement; he was arrested in Los Angeles yesterday for outstanding petty theft and DUI warrants. At this morning's rally, speakers demanded that Inglewood's police chief take quick action at the officers present at the Jackson arrest.

DEMONSTRATOR: We re here to say that if you don t give us this rogue officer, we'll get rid of you. We'll remove from you office!

SAUL GONZALEZ: More rallies are planned for this weekend.

FOCUS - MISSING

RAY SUAREZ: Next tonight, why do the media cover some missing persons cases and not others? Media correspondent Terence Smith looks into that question.

CORRESPONDENT: And despite the break, Elizabeth Smart s family still doesn't know where she is or if she is even alive.

TERENCE SMITH: Elizabeth Smart, a Salt Lake City teenager, was abducted at gunpoint June 5. Her disappearance has led to an intense, nationwide search, and equally intense, national media attention.

CORRESPONDENT: Another bizarre day in the kidnapping case of Elizabeth Smart.

TERENCE SMITH: Police briefings are carried live on cable, and updates on the search appear hourly, regardless of the progress.

CORRESPONDENT: Today is no different than yesterday as it pertains to their search for 14-year-old Elizabeth Smart.

TERENCE SMITH: Network morning news programs have led their broadcasts with the story.

CORRESPONDENT: A strange case gets even stranger.

CORRESPONDENT: This is the smart kidnapping case in Utah.

DAN RATHER: There is a development tonight in the case of Elizabeth Smart.

TERENCE SMITH: And, according to ADT Media Research, the three network evening news programs have given the story 29 minutes, more than one entire broadcast. Advocates for missing persons say the coverage is a blessing, but one bestowed on few cases. The disappearance of Alexis Patterson, a young African American girl in Milwaukee has prompted only limited national coverage, often in conjunction with the Smart case. The tandem coverage has raised questions about whether race and affluence determine which missing persons are covered... ...and which simply disappear.

TERENCE SMITH: Joining me to discuss the coverage of missing persons cases are Greta Van Susteren, host of "On the Record with Greta Van Susteren" on the Fox News Channel and Keith Woods, a faculty member at the Poynter Institute, a school for journalists where he leads seminars on race relations. Welcome to you both.

Greta, on any given day in the United States, I'm told there are about 2,000 missing children. Why has this case gotten so much more coverage than the others?

GRETA VAN SUSTEREN: I think there's one aspect of sort of a contagious atmosphere because everybody is telling the story. Everybody else is going to tell the story. And, look, it is an intrigue, it s a mystery. How can you put your child to bed and expect that you are going to see that child in the morning and someone comes in and snatches that child away? So I think it also sort of affects us emotionally. But I think that there's the whodunit nature of it as well as the fact that everybody is talking about it. We get fascinated by it.

TERENCE SMITH: Keith Woods, what do you think explains the non-stop wall-to-wall coverage of this case versus others?

KEITH WOODS: Well, I think you can also add the fact that it's a wealthy family, that this is not supposed to happen in neighborhoods like that; that in a lot of ways the people who are doing the coverage can relate to that family in ways that they might not be able to relate to the family of Alexis Patterson.

TERENCE SMITH: In the sense Keith Woods that it was, as Greta said, an abduction from the house?

KEITH WOODS: Well, in the sense that it was a child who looked and whose family looked a lot like the people who are telling the stories in the news.

TERENCE SMITH: Greta Van Susteren, Keith mentioned both race and affluence there. Are those factors in your opinion in explaining the extent of the coverage?

GRETA VAN SUSTEREN: I think in part. I think that that's a really good criticism historically about the media. I don't know if it is a good argument in terms of timing. For instance, we just spent an enormous amount of time dealing with Arelia Wilson, a young African American child who has vanished in the state of Florida. So right now we have spent a considerable amount of attention on that story. But historically I think that's true. Look at the Johnbenet Ramsey case, a lot of attention put on that, and probably very few people have ever heard of Girl X, who about a week later, in a project in Chicago, was brutally tortured to the point where she remains brain damaged today. So I think historically that's true but right now in this month we have spent a lot of time on Amelia Wilson so it may not be the case in June and July of 2002.

TERENCE SMITH: Keith Woods, you said in your first answer that Elizabeth Smart looks like the people responsible for the coverage. What do you mean?

KEITH WOODS: First I want to say that I don't think that's the entire explanation for the disparate coverage in the two stories. But I do think that the fact that how we can relate as journalists to the people we're covering plays a big part. And so I mean that almost literally, certainly racially, but also they look like us in that they are middle class people, upper middle class people, that they put their children to bed at night in homes that seem to look like ours in a lot of ways in that respect, the media is drawn to it. But I think it is much more than that. I would add that the Arelia Wilson case is a story that s being told about massive failure of systems, not the story about a missing child. And if you watch the way the story is being told, it is an investigation into the foster care system; it is not an investigation trying to find a child for the most part.

TERENCE SMITH: Greta.

GRETA VAN SUSTEREN: I just want to add one thing and this may be very callous of me towards sort of the field of journalism and in particular electronic journalism, but I'm always sort of curious if some in some ways some of these stories are not driven by the fact that the networks have limited resources and all the microwave trucks happen to be in one particular area so it is very easy right now to cover a story in Salt Lake City because all the microwave trucks are there. It is much harder, for instance, if a child is discovered missing right now tonight in North Carolina. So it's a little bit easier. But in defense of the media, and you know you can criticize the media-- maybe I can look at it as half full, is that we have now put the spotlight on missing children. People are stunned at the number of missing children some this country. So I can put a half empty-half, full spin on this either way.

TERENCE SMITH: I wonder also Keith Woods, how much difference it makes that there is video of Elizabeth Smart? There's not much video of Alexis Patterson, for example, in Milwaukee.

KEITH WOODS: I think that you can add a lot of different factors. You've got a community response in Salt Lake that's far different from the response in Milwaukee that allows the media to have excuses, essentially-- I shouldn't say excuses. They certainly have news pegs they can base their coverage on in Salt Lake that they don't necessarily have in Milwaukee. The fact of the matter is that if you took ten missing children cases, and you took five of them that happened to happen in poor communities and five that happened to happen in affluent communities, the fact of the matter is that the affluent communities would have those resources, would have those pegs would have those stories developing every day that aren't happening in the Milwaukee community. And so if the media is guided purely by the reactive kind of stance that we seem to be seeing here, then it won't have that kind of thing to react to. And the next seven-year-old African American poor child is going to get the same coverage as Alexis.

TERENCE SMITH: Greta, is affluence part of it?

GRETA VAN SUSTEREN: I think in part but I also think it is also the unusual nature of it. People Magazine did a huge story on the two missing girls in Oregon that were friends. I think they were in third and fourth grade and they disappeared on their way to the bus about six weeks apart. So I think it is also the peculiar nature. How can this happen in our neighborhood? How could two young girls who are friends vanish into thin air just six weeks apart? It is the unusual nature but it is also the ability of the family to put this in the public domain. A poor family in Milwaukee is probably not going to have as much access to the media as a family who can even afford to go to Kinkos and put out posters and put them on every single pole. So there is somewhat of that. It does disturb all of us in the media. We would love to cover all these stories because it is unthinkable that a child could disappear.

TERENCE SMITH: How much difference does it make -- I want to ask you both Keith Woods you first -- when the family has the resources and inclination to go out and hire public relations people, make themselves available to the media in the Elizabeth Smart case, actually buy ads in newspapers, which are very expensive. How much difference?

KEITH WOODS: I think it makes a huge difference but again I want to say that that only explains the way the things happen. It doesn't excuse it, nor does it let the media off the hook for being able to find its own passion, its own drive, its own reason for doing the stories that might exist without any of that kind of PR push from the family.

TERENCE SMITH: Greta, final comment from you on that point and what you expect as this story goes on.

GRETA VAN SUSTEREN: Well, I don't know if I think the PR helps. I don't think the Smarts need it because we are so consumed with it. I think the family in Milwaukee could use it more than the Smarts. Now my final comment is: As we look at all these shows and try to decide what show to put on the network,, the one thing I'm grateful for is that in this day and age -- after 30 years --we have three cable news networks that go 24 hours a day. Think of the old days when it was only 22 minutes a night on network news so maybe now more missing kids can get on the TV.

TERENCE SMITH: Okay. Greta Van Susteren, Keith Woods, thank you both very much.

FINALLY- TENNIS

RAY SUAREZ: Finally tonight, former Poet Laureate and NewsHour regular Robert Pinsky addresses tennis.

ROBERT PINSKY: At this time of year maybe even more than usual, grown-ups play games like golf and tennis. Often we give ourselves instructive advice about the games, sometimes with crazy metaphors like "imagine the ball as a loaf of bread. You hitting every slice." In the days when I was really obsessed with tennis, I wrote a poem about the game. And the poem turns out to be largely about advice. It s in iambic pentameter. This is from the section called Strategy.

"Strategy, hit to the weakness. All things being equal hit cross course rather than down the line because if you hit cross court back to him, then he can only hit back either towards you, cross court, or parallel to you down the line, never away from you the way that you can hit away from him if he hits down the line. Besides, the net is lowest in the middle. The court itself is longest corner to corner. So that a cross court stroke is the most secure. That should be your plan, the plan you need for winning."

And this is from the final section of the poem. "Winning."

"Call questionable balls his way not yours. You lose the point but have your concentration, the grail of self-respect. Wear white. Mind losing. Walk, never run between points. It will save your breath and hypnotize him and he may think that you are tired until your terrible swift sword amazes him. By understanding your body, you will conquer your fatigue. By understanding your desire to win and all your other desires, you will conquer discouragement. And you will conquer distraction by understanding the world and all its parts."

RECAP

RAY SUAREZ: Again, the major developments of the day: The Senate voted to bar companies from making personal loans to top executives and directors; and the Dow Jones Industrial Average lost another 117 points. Overall, the Dow had its worst week since last September, dropping nearly 700 points. The NASDAQ Index fell just a point today, and 75 for the week. And late today the United Nations Security Council voted to exempt U.S. peacekeepers from war crimes prosecution for one year. A reminder that "Washington Week" can be seen on most PBS stations later this evening. We'll see you online, and again here Monday evening. Have a good weekend. I'm Ray Suarez. Thank you and good night.