MR. MCLAUGHLIN: Issue one: Market mania!

(Music: Blood, Sweat & Tears' "Spinning Wheel.")

Spinning wheel? How about spinning heads? Stockholders and stock watchers were whiplashed again this week. Corporate scandals, fairy-tale balance sheets, investor panic sent the market reeling. Stocks had been down over the year and started the week even further down; 7.6 trillion in stock-market wealth had evaporated since March 2000. The Dow was well below its post-September 11th at week startup. In fact, it was at its lowest since October '98.

But then, on Wednesday, a ray of hope shone down on Wall Street; a glimmer of good news; a sign that perhaps all was not lost -- a genuine history-making rally: 2.6 billion shares traded hands on the New York exchange, the largest volume ever. Investors gained back 500 billion in the value of their stocks. There was a 480-point jump in the Dow, the second-largest point gain ever. Nasdaq was up more than 61 points, gaining back 5 percent of its value.

On Friday, the Dow finished up 78 points. Question: What do you make of the week, Lawrence Kudlow?

MR. KUDLOW: I think the most revealing part of this week was the handcuffing and arrest of the Riga family, the father and the son who stole a cool $3 billion without bothering to tell anyone. They borrowed 3 billion and loaned it to themselves.

MR. MCLAUGHLIN: That's Adelphia?

MR. KUDLOW: -- Adelphia Cable or what's left of it, and didn't bother to tell anybody on the board or in the financial department.

MR. MCLAUGHLIN: What's the point?

MR. KUDLOW: The point is, the market really wants to see the law enforced where corporate fraud is existence (sic). And that was the single defining event of this week, which, if we get more enforcement actions, which I think is absolutely coming down the road, full steam ahead from the Justice Department and Robert Morgenthau's office in New York City --

MR. MCLAUGHLIN: You want to --

MR. KUDLOW: The market is going to like this.

MR. MCLAUGHLIN: You want to say anything about Ebbers' getting fined $500 million?

MR. KUDLOW: Well, you know --


MR. KUDLOW: I'm going to say this is good from the standpoint of law enforcement. I don't welcome bad things for anybody, but when you break the law in this country, which is governed by the rule of law, you have to pay. And it turns out white-collar crooks are going to pay as much as anybody else. But the one thing, John, that's still lacking -- I mean, I think we're at a bottom. I think the market is greatly undervalued -- perhaps as much as 30 or 40 percent. But the market wants to see profits. That's what makes the market go around. And profits are rising, but no one will believe it until the CEOs certify on August 14th or shortly thereafter new profit statements with the Security (sic) Exchange Commission under the prospective criminal penalty of 20 years in jail.

MR. MCLAUGHLIN: Eleanor, is he missing something? Because the SEC announced a probe of AOL-Time Warner. So isn't this idea of the markets having been retuned to a state of consumer -- or investor confidence is really a wash because of that development, contrary to the Adelphia and the Bernie Ebbers development?

MS. CLIFT: Well, I think the Republican Party has glommed onto the notion that it's now the party that's tough on corporate crime, as well as street crime. And I think the markets are responding to that. And we did have sort of a trifecta last week with the Rigas family doing the perp walk and the 500 points on the Dow and the passage of the corporate reform bill. So there's kind of a spike in the stock market, and there's a spike in how Republicans are feeling.

But there's still underlying concern that this administration does not have a credible economic team in place. They don't have a visible person out there to bring confidence to the public or Wall Street. And I think the administration is still playing catch-up on this whole issue.

MR. MCLAUGHLIN: Are you surprised that despite what the SEC has done and the Justice Department has done with regard to these transgressions of these companies, we haven't heard a peep about an indictment of anyone at Enron? Is that a case of the dog that didn't bark and how suspicious that is?

MR. BLANKLEY: Well, I don't know. It may well be a case -- I'm a former prosecutor -- of having to get the evidence before you go to indictment. So depending on how well-hidden evidence is, if there is any hidden there, I don't think it's come to this --

MR. MCLAUGHLIN: Well, they were pretty speedy with Adelphia.

MR. BLANKLEY: It just depends how available the evidence is.

I want to talk for a moment to the question of whether -- you know, where the market's bottoming out. I've heard an awful lot of experts talk about where it is, and so my sense is that most of these guys couldn't find the bottom with, you know, two hands.


MR. BLANKLEY: But there was one encouraging piece of -- not exactly news, but Gallup did a survey which showed that the public, although they expect the economy to be rough for a while, are very optimistic in the medium and long term, which, I think, shows sort of a maturity and calmness in the public that we hadn't seen reported in the media over the last couple of weeks.

MR. MCLAUGHLIN: What do you make of the market, Mort?

MR. ZUCKERMAN: Look, the market's been going down for --

MR. MCLAUGHLIN: Twenty-eight months.

MR. ZUCKERMAN: -- two years.


MR. ZUCKERMAN: And in my judgment, it reflects what's going on in the economy. We have had a sharp contraction in business profits. There has been a modest improvement of that. We had a recession, a mild one, but there's been -- it's a recovery now that is jobless. There is a real fear that we may have a double-dip recession, which is what I think is triggering a lot of the stock market declines.

MR. MCLAUGHLIN: You know --

MR. ZUCKERMAN: So I don't think it's just a function of, you know, the shenanigans going on, although I do agree with you. I mean, I think Enron was the Watergate of this whole thing. And as I keep on saying, if somebody a year ago had told you that you could get a share of Enron, a share of WorldCom, a share of Global Crossing and a Burger King for five bucks and get change back, you wouldn't have believed them. We've had a tremendous wipeout of values. That's going to have an effect on business performance, on consumer performance and on the budgets of state and local governments, which are going to have to contract dramatically.

MR. MCLAUGHLIN: Yeah. As to your assessment of the macroeconomy, did you not hear what the chairman of the Fed said about our economy? It is efficient, it is flexible, and it is resilient.

MR. ZUCKERMAN: I agree with all of that. That doesn't mean that he -- I mean, he also said something called "irrational exuberance" at -- when the market was at 6,000. (Chuckling.) It's now still at 8,000 --


MR. ZUCKERMAN: So who knows what the market's going to be? I mean, the market's predicted nine of the last five recessions, as they say. So --


MR. ZUCKERMAN: But all I'm saying to you is that I wouldn't be over-optimistic about the markets, not for a while. You wait and see whether a bottom forms, but it'll take more than three months.

MS. CLIFT: Now the --

MR. MCLAUGHLIN: Wait a minute. Have your personal financial fortunes led you to project this cloud of pessimism over this group about the economy?

MR. ZUCKERMAN: I am so --

MR. MCLAUGHLIN: I mean, has it moved into that area?

MR. ZUCKERMAN: I am so glad you asked this question. Really, I --

MR. MCLAUGHLIN: How's Boston Properties doing? (Laughter.)

MR. ZUCKERMAN: Well, that happens to be doing well, of course, because --

MR. KUDLOW: Where's your portfolio? Put it on the screen! (Laughs.)

MR. ZUCKERMAN: I have not bought stock for 30 years, because I don't know what I'm doing in the stock market. And that's not the only --

MR. MCLAUGHLIN: Do you believe in real estate?

MR. ZUCKERMAN: I do believe in real estate. So far, so good.

MR. MCLAUGHLIN: You can't go wrong with that. Why are you whining?

MR. ZUCKERMAN: Who -- I'm not whining.

MR. MCLAUGHLIN: You're whining about the economy.

MR. ZUCKERMAN: No, I'm just trying to predict the economy. I would love the economy to be going up all the time. It just doesn't work that way.

MR. MCLAUGHLIN: You've just said --

MR. ZUCKERMAN: The way up is also the way down for the economy. So we don't always have an -- we had a bull --

MR. MCLAUGHLIN: The market is not the economy.

MR. ZUCKERMAN: That's right. There is a gap between --

MR. KUDLOW: Let me ask you a question now. Let me ask Mort -- Mort --

MR. MCLAUGHLIN: This is true, but the question -- when is the bad market going to affect the macroeconomy? That's the big question.

MR. KUDLOW: Do you really -- let me just -- I mean, with some common sense, knowing that we've had 10 downturns since the second war, we've had 10 bear markets but we always come back in stride, and we do have a strong productivity cycle, as Greenspan and John has discussed, do you really believe this is the time to sell, now with the huge companies, big cap, great companies down 50 percent?

MR. MCLAUGHLIN: You better sit and wait it out.

MR. ZUCKERMAN: I'm not arguing that this is the time to sell, and I'm also not arguing it's a time to buy.

MR. MCLAUGHLIN: Exit question.

MR. ZUCKERMAN: All I'm saying to you, in 1966, the market was at point x; we didn't get back to that point for 30 years. So it takes a long time sometimes --

MR. KUDLOW: No, it --

MR. ZUCKERMAN: -- before the market makes any real progress. And we may be in for a long period of very low growth in the market.

MS. CLIFT: Well --

MR. MCLAUGHLIN: I was distracted. You say this is not a time to buy?

MR. ZUCKERMAN: No, I personally wouldn't buy at this point, absolutely not. I would wait for a good deal of time.

MR. MCLAUGHLIN: Would you buy now?

MR. KUDLOW: Absolutely. People should buy because --

MR. MCLAUGHLIN: Well, you're prepared to sit for five to 10 years.

MR. KUDLOW: I'm prepared -- listen, I've sat for the last couple of years. I'm telling you that cycles like this come and go. The corporate fraud was something different this time.


MR. KUDLOW: But that will run its course. That is --

MR. MCLAUGHLIN: All right. We --

MS. CLIFT: And --

MR. MCLAUGHLIN: Wait a minute. Wait a minute. One minute. We are all agreed we should not sell, no one should sell now. Right?

MR. ZUCKERMAN: I would agree with that.


MR. MCLAUGHLIN: You would agree with that.

MR. ZUCKERMAN: I would agree with that.

MR. MCLAUGHLIN: Eleanor, quickly. We've got to get out.

MS. CLIFT: If I were in Larry's income bracket, I'd buy, too. But you've really got to have some excess cash around to take a flyer in this market.

MR. KUDLOW: Eleanor. Eleanor --

MR. MCLAUGHLIN: Oh, I disagree. I disagree.

MS. CLIFT: And if the president continues to press the partial privatization of Social Security, I hope his political --

MR. MCLAUGHLIN: The critical question is -- the critical question is, how long can you wait to get -- if you buy now, how long do you want to wait? That's what you have to project in your head.

MS. CLIFT: Well, it depends what age group you're in and what income group you're in.

MR. MCLAUGHLIN: All right. Exit question. When will the market bottom out, and what will the index be at that point?

MR. KUDLOW: I just want to help Eleanor.


MR. KUDLOW: In order to get into my income bracket, you should buy now. (Laughs.) That's --

MR. MCLAUGHLIN: You should or should not?

MR. KUDLOW: Should! Absolutely.

MR. MCLAUGHLIN: Be careful of where you're doing it and be prepared to wait.

MS. CLIFT: Right.

MR. MCLAUGHLIN: Let's go. Quickly.

MR. KUDLOW: And in all fairness, John --

MR. MCLAUGHLIN: When it is going to bottom out?

MR. KUDLOW: It is bottoming out.

MR. MCLAUGHLIN: Still out on August the 15th?

MR. KUDLOW: It is bottoming out as we move into this August 14th certification date because the economy fundamentals are improving, there's no question about it.


MS. CLIFT: Another big hit in mid-August because you're going to have hundreds of companies restating their earnings.

MR. MCLAUGHLIN: Well, a big hit maybe, but that's maybe when it's going to bottom out. You're saying that?

MS. CLIFT: Maybe.

MR. BLANKLEY: It will bottom out almost precisely six months before I buy some stock, I would guess. (Laughter.)

MR. MCLAUGHLIN: When is it going to bottom out?

MR. ZUCKERMAN: It will bottom out this year if we don't have a double-dip recession. If we have a double --


MR. ZUCKERMAN: This year.


MR. ZUCKERMAN: Oh, I can't predict that. And I wouldn't dare to predict --

MR. KUDLOW: Which day? Which day?

MR. ZUCKERMAN: On any day --

MR. KUDLOW: Which day?

MR. ZUCKERMAN: Whatever the day is, it will be at 5:00 in the afternoon after the market closes. (Laughter.)

MR. MCLAUGHLIN: Will it penetrate below 7,000?




MR. MCLAUGHLIN: Well, what is that, you know?

MR. ZUCKERMAN: Hey, listen. Nobody's going to --

MR. MCLAUGHLIN: The asteroid may hit the Earth. What does that tell me? (Laughter.)

MR. ZUCKERMAN: You make a living out of making political predictions, you know. That's easy. (Laughter.)

MR. MCLAUGHLIN: Well, I'm looking to you, and I'm not getting -- I've got a dry stick here.

MR. ZUCKERMAN: Have you ever put any of your wrong predictions on? Not once!

MR. MCLAUGHLIN: Exit question. All right, we'll say I'm sticking with that August 15th, I think right around there.

MR. KUDLOW: And that's very good, by the way, for a comeback prediction -- (inaudible) -- Congress.


When we come back: At a time when small investors -- get this -- have seen a 40- to 50-percent drop in their portfolios, why did the heavily criticized head of the SEC, Harvey Pitt, publicly ask for a 21-percent pay increase in his salary, from $138,000 to $168,000, and full Cabinet rank?

We'll be right back.


MR. MCLAUGHLIN: Issue two: Corporate clampdown.

PRESIDENT GEORGE W. BUSH: (From videotape) Today, thankfully, the Senate and the House passed corporate legislation which will insist upon holding people accountable for being honest with the American people.

MR. MCLAUGHLIN: Honest reform? How honest? A key component of the reform bill, requiring companies to count stock options granted to executives as a business expense, was left out. Too complex an accounting matter to rush. A hue and cry has ensued. But the most important element, the real reform engine, the creation of the independent accounting board, so named, is front and center in the bill.

The new board is designed to be independent from government and industry. Repeat, government and industry. Formerly, a completely private-sector group of accountants wrote and enforced auditing standards. That means auditors policed themselves, and many lawmakers say that that lack of independent oversight led to the accounting scandals plaguing corporate America.

The new board will monitor accounting practices, investigate alleged wrongdoings and punish firms that fail to live up to accounting standards set the board. Punishment can include license revocation of any company failing to cooperate with board investigations. Other features of the independent board include power to subpoena accounting firms under investigation by the board, authorization to fine individuals $100,000, and corporations $2 million, for accounting wrongdoing.

Start-up time frame, operational in six months. Composition, five members, each serving a five-year term. Insulation from the accounting industry. Board members are barred from association with an accounting firm for three years prior to serving on the board. Inspection annually of the work of any accounting firm which audits 100 or more companies. Supervision of the board by the Securities and Exchange Commission. Under the legislation, the board is tightly tied to the SEC, the entity which determines who serves on the board.

Question: Will this oversight board prevent an Enron-style, fast and loose accounting practices?

Mort Zuckerman?

MR. ZUCKERMAN: Well, it certainly stands a better chance of preventing that than anything that existed before. I think it's a very welcome addition because we were getting into a casino operation in which the dealers were either putting in aces or taking out aces under their game before it was done. So I think we have to clean it up. And I think this is going to be a major --

MR. MCLAUGHLIN: All right. I've got a question for you.

MR. ZUCKERMAN: -- a major step in that direction.

MR. MCLAUGHLIN: The members of the board will be appointed by the SEC. The chairman of the SEC is Harvey Pitt. Some people believe that Harvey is the fox in the chicken coop because of his association with the accounting industry, but note that he did not lobby for them but he did present their cases before the SEC.

Now my question to you is, if he's going to populate the board, this independent board, does that not vitiate it from the start? Answer that. And also tell me why he asked for a raise in the middle of all this. Does he have the tinnest of tin ears?

MR. ZUCKERMAN: Well, I don't know when that request was put in, but "tin" doesn't even capture his ear if that's the case. But let me just say, this guy knows this world very well. That's not the worst thing in the world to happen. He's also under a tremendous amount of public attention. My sense is that he's going to do very well with the appointments and do very well in the prosecutions. He's one of these guys --

MR. MCLAUGHLIN: You don't think that the independent review board is going to be the final blow to drive him out of office and he will resign, he will resign on demand?

MR. ZUCKERMAN: (Cross-talk.)

MR. KUDLOW: This is a victory for Pitt.


MR. KUDLOW: This is a victory for Pitt. He basically worked with Sarbanes and helped create this board, which replaces another board that Chuck Bowsher ran.

MR. MCLAUGHLIN: But he had a different composition board from Sarbanes.

MR. KUDLOW: Not very different.

MR. MCLAUGHLIN: Quite different.

MR. KUDLOW: No, it wasn't. But let me tell you the key point which your brilliant analysis missed. And that is, the financing of this new board and the financing of FASB, which is the Financial Accounting Standards Board -- it is FASB which will make the new rules on options, on off-balance-sheet partnerships, and a myriad of other --

MR. MCLAUGHLIN: What about the financing? Is that what you're talking about?

MR. KUDLOW: The financing of this board --

MR. BLANKLEY: It's funded by the accounting firms.

MR. KUDLOW: No, it's going to be funded by all listed stock exchange companies and accounting firms, which means --

MS. CLIFT: Well --

MR. KUDLOW: -- which means it's a mandatory fee. Congress will not have any leverage to pull what they did in the '90s, and the AICPA will not have any leverage.

MS. CLIFT: Well -- yeah, the '90s numbers are --

MR. KUDLOW: That's the key point.

MR. MCLAUGHLIN: Eleanor, Eleanor, did you digest all that?

MS. CLIFT: Yeah. The '90s --

MR. MCLAUGHLIN: Can you spit it back?

MS. CLIFT: Yeah. The '90s numbers are over. This board is independent. It's not a creature that's beholden --


MS. CLIFT: -- to the accounting -- well whatever-B. It's not beholden to the accounting industry.

MR. MCLAUGHLIN: It's a junk-food FASB.


MR. KUDLOW: FASB and -- (inaudible).

MS. CLIFT: And Harvey Pitt is the walking wounded, but the only way he lives is if he conducts himself as really a tough cop. And I think he's going to do it. And if you talk to the people on Sarbanes' staff, they defend his asking for --


MS. CLIFT: -- this Cabinet status because he's really --


MS. CLIFT: Yeah, he wasn't trying to glorify himself. He was trying to get the agency -- it was a mistake --

MR. MCLAUGHLIN: Okay. Exit --

MR. ZUCKERMAN: They have made a lot of things -- they've criminalized a lot of things so that this board is going to say we're going to have one nation under indictment here before you're done.

MR. MCLAUGHLIN: Exit question.

MR. KUDLOW: Mort's point is a key point. This idea that, look, yes, we're going to have reforms, but let's not criminalize all of business which creates jobs in this country.

MS. CLIFT: No danger of that.

MR. KUDLOW: And it would be nice at some point to give investors something such as let them have a larger capital loss deduction for future investments. That is out there, and it would be a good thing to do.


MR. MCLAUGHLIN: All right. I want to tell you what's really going to make the market straight, and that is the market. The market has already inflicted pain on those companies that have misbehaved, and it will be ultimately the market that will effect reforms. And we should understand (and drop it ?).

Issue three: Watch your asteroid.

(Music clip of REM's "It's the End of the World as We Know It (And I Feel Fine)" and video clip from movie "Armageddon.")

MR. (Actor): What kind of damage?

BILLY BOB THORNTON (Actor): Damage? Total, sir. It's what we call a global killer. The end of mankind.

(End videotape segment.)

MR. MCLAUGHLIN: It's hurtling through the heavens at 60,000 miles an hour. It's 1.2 miles wide, and it might be on a collision course with earth. Might be. Emphasis on might. NT7, that's what they are calling the asteroid, is described by Dr. Benny Peiser, an anthropologist at Liverpool's John Moores University. He's an expert on the effect of asteroids hitting the earth. Quote, "This asteroid has become the most threatening object in the short history of asteroid detection. In the worst case scenario, a disaster of this size would be global in its extent, would create a meltdown of our economic and social life, and would reduce us to Dark Age conditions." So says Peiser.

NT7 could wipe out 25 percent of the world's population and cause major climate change, tidal waves, floods, a nuclear winter and widespread forest fires. The strike day has been calculated as February 1, 2019, 17 years hence. Astronomers have rated NT7 as a one on something called the Torino probability-of-strike scale. A zero on the scale means business as usual, no asteroid strike. A 10 on the scale means certain impact. NT7 is the first asteroid ever to score even a one on the scale, and that means careful study is warranted.

Question: Suppose we have only 17 years of civilization left. What should we do with it before we lose it? (Laughter.) Tony, I ask you. And I also want to know whether you know Dr. Peiser from Liverpool.

MR. BLANKLEY: Not personally. I know a few people from Liverpool, but no asteroid physicists. You know --

MR. MCLAUGHLIN: Well, you better (hit the dole ?), because you never know.

MR. BLANKLEY: It's worth noting that even in the worst-case scenario, this is smaller, less damaging impact than the one that wiped out the dinosaurs 60 million years ago.

MR. MCLAUGHLIN: Well, that's encouraging. Yeah.

MR. BLANKLEY: So we still have a chance.

MR. ZUCKERMAN: However, if it does hit, and it does wipe out the dinosaurs, McLaughlin's really going to have to worry. (Laughter.)

MS. CLIFT: Yeah, I think the Bush administration ought to get that missile-defense shield up and running and make sure --

MR. KUDLOW: That's just what I was thinking. Just what I was thinking!

MS. CLIFT: -- it can handle the asteroid, because the asteroid is a real threat. We know it's out there, and those other threats are not quite as real as that one.

MR. KUDLOW: And not only that; that means the clock is running down on the possibilities of getting flat-tax reform. You know, we have a lot more -- for growth. We need growth and profits, John.

MR. MCLAUGHLIN: Well, we know one -- well, I think what we should do in these 17 years if this becomes -- this could be a very serious matter.

MR. ZUCKERMAN: You know, if they're going to --

MR. MCLAUGHLIN: But if it does -- if the degree of certitude increases up around five, I think we ought to start looking for a lunar base. What do you think of that? Do you know a lunar base?

MR. BLANKLEY: Well, I think that -- yeah -- do you know that there are --

MR. MCLAUGHLIN: Do you think you get some real estate to pay for you on a lunar base?

MR. ZUCKERMAN: There are al Qaeda members on that asteroid; you better watch it, John. I'd say the odds that there's going to be any difficulty here are about one in 200,000. I wouldn't worry about it.

MR. MCLAUGHLIN: Where do you want to be when the asteroid hits? Where do you want to be? ` MR. ZUCKERMAN: Frankly, I want to be playing tennis. (Laughter.) (Inaudible) -- concerned as we speak.

MR. MCLAUGHLIN: How about in the International Space Station? Wouldn't that be really something to watch?

MR. BLANKLEY: Actually, you know, the asteroid is really only a mile --

MR. KUDLOW: The problem is you then wouldn't have anywhere to land from the International Space Station.

MR. MCLAUGHLIN: What -- rubbernecking from up there. What do you --

MR. BLANKLEY: The asteroid is only a mile and a half in diameter, so it could probably be blown up by nuclear devices. So we can probably, you know, blow it up, should it get close.

MR. KUDLOW: I think --

MR. MCLAUGHLIN: Well, the nuclear scientists don't seem to believe that.

MS. CLIFT: But --

MR. MCLAUGHLIN: Why are you minifying (sic) the importance of this phenomenon?

MR. BLANKLEY: I'd rather not think about the other possibility.

MR. MCLAUGHLIN: We'll be right back with predictions.

MR. ZUCKERMAN: Geez, I thought Eleanor had --


MR. MCLAUGHLIN: Predictions: Lawrence.

MR. KUDLOW: If they haven't already, John, Special Forces from America and England will be invading Iraq before this summer ends.


MS. CLIFT: After the November elections, budget director Mitch Daniels returns home to run for governor, signaling a makeover for the Bush economic team.


MR. BLANKLEY: In September, final passage of the homeland security bill will be overwhelmingly bipartisan. No Democrats are going to want to go campaigning without voting for it.


MR. ZUCKERMAN: Well, the board of directors of AOL at the time of the merger with Time Warner are all going to be sued, and that includes Secretary of State Colin Powell.

MR. MCLAUGHLIN: Well. I'm happy to see the old guard at Time Warner has taken over. I predict President Bush of late has lost sight of the crisis of Latin America. This coming week, he will refocus on the growing social and political upheaval and dangerous one in this hemisphere.

Next week, Congress leaves town for four weeks. Next weekend, they'll get their report cards from us. Bye-bye!


MR. MCLAUGHLIN: Issue four: Traficant rants.

REP. JAMES TRAFICANT (D-OH): (From videotape.) You know what I was told? "Watch what you say. You're too outspoken."

MR. MCLAUGHLIN: James A. Traficant Jr., former sheriff of Youngstown, Ohio, and member of the U.S. House of Representatives for almost 20 years was expelled on Wednesday from the 107th Congress. This action marks the second time the House has removed a member since the Civil War. Traficant was convicted last April by a federal court on 10 counts of fraud, tax evasion and racketeering. Wearing a black suit with bell-bottom trousers, he spoke to his peers using a variety of rhetorical tactics:

First, Traficant appealing to the audience self-interest.

REP. TRAFICANT: (From videotape.) I'll go to jail, but I'll be damned if I'll be pressured by a government that pressured these witnesses to death to get a conviction on a target they -- number-one target in the country.

There may come a time when you might get targeted.

MR. MCLAUGHLIN: Second, self-deprecating humor.

REP. TRAFICANT: (From videotape.) Am I different? Yeah. Have I changed my pants? No. (Soft laughter.) Deep down, you know you want to wear wider bottoms; you're just not secure enough to do it.

Do I do my hair with a Weed Whacker? I admit.

MR. MCLAUGHLIN: Third, the melancholy plea.

REP. TRAFICANT: (From videotape.) You didn't elect me. Yeah, you have the right to throw me out. My people don't want me out.

Vote your conscience. Nothing personal.

MR. MCLAUGHLIN: But it was too late. Nothing worked. His colleagues showed no mercy, voting for expulsion 420 to 1, California Democrat Gary Condit dissenting.

REP. JUDY BIGGERT (R-IL): (From videotape.) No member of Congress ever wishes to sit in judgment of a colleague, least of all a colleague as colorful and as indomitable as the gentleman from Ohio, Mr. Traficant.

Yet at the same time no member ever wishes to see the rules of this institution broken or the standards of its members brought low.

MR. MCLAUGHLIN: Question: Congressman Traficant carried his district for 20 years with about a 70 percent vote. On a probability scale of zero to 10, zero meaning zero probability, 10 meaning metaphysical certitude, what's the probability, do you think, Tony, that he could win his seat back from jail?

MR. BLANKLEY: Well, maybe a three, on the outside --

MR. MCLAUGHLIN: Now he's convicted of felonies. Can he still run for office?

MR. BLANKLEY: I don't know. I didn't think you could, but apparently for Congress, you -- I think you still can somehow.

MS. CLIFT: He's going to run as a independent, from jail, and --

MR. BLANKLEY: But you know, I think that the --

MR. MCLAUGHLIN: James Michael Curley did.

MS. CLIFT: Well --

MR. BLANKLEY: What we've seen of him in his closing comments we shouldn't remember him by. He was a much more entertaining and well- considered man than that. He spoke truth an awful lot on the floor of the House, and he said things a lot of members didn't have the guts to say. And that's one of the reasons why --

MR. MCLAUGHLIN: Do you think he was framed?

MR. BLANKLEY: I don't think he was framed. But I --

MR. MCLAUGHLIN: He says he was framed.

MR. BLANKLEY: Yeah, I think the end -- this has not been a pretty end for him. But I think there's a lot of performance of him, his frankness over the years, that I enjoyed hearing, and I think a lot of the public did, and I'm sorry to see him go. I'm also sorry to see the way he go -- we don't want to see corruption, but the closing statement was --

MS. CLIFT: Well --

MR. MCLAUGHLIN: What is the impact of this on the image of the United States Congress at this particular time, when there is already such an onslaught? Do you have any thoughts on that, Mort?

MR. ZUCKERMAN: Yeah. I mean, it doesn't help. But I have to say, I think, at this stage of his political life, he was seen as such an oddball that I don't think he really was seen to reflect the Congress in general. But it doesn't help. It doesn't help when anybody goes to jail --

MR. MCLAUGHLIN: Do you think Congress -- (cross talk) --

MR. ZUCKERMAN: -- it doesn't help when anybody gets expelled, and it doesn't help when anybody uses the kind of language that he used in the process.

MR. KUDLOW: He's in the wrong --

MS. CLIFT: Everyone --

MR. MCLAUGHLIN: Do you think Gary Condit took that position because he felt "there, but for the grace of God, go I"?

MR. KUDLOW: Well, probably. I'm sure he did. More -- I mean, I think --

MR. MCLAUGHLIN: What point do you want to make on this?

MR. KUDLOW: I think a lot of members do. But I think the key point is, he should have his own radio show, or maybe cable TV.

MS. CLIFT: He's been romanticized as a populist. He was really a petty thug.

MR. BLANKLEY: That's not true.

MS. CLIFT: And he may well get 10 to 15 percent of the vote and could help elect --

MR. BLANKLEY: He wasn't a petty thug.

MS. CLIFT: I think he's been -- he's been convicted on -- for taking --

MR. BLANKLEY: He was a genuine populist.