Week in Review: Padilla Conviction, Market Turmoil

Top stories in the news this week included the conviction on terror conspiracy charges of Jose Padilla in federal court, turmoil in the world's financial markets, staff changes at the White House and more trouble for Democratic presidential candidate John Edwards.

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SCOTT SIMON, host:

This is WEEKEND EDITION from NPR News. I'm Scott Simon.

Dan Schorr is on vacation. So we're pleased to be joined this week by NPR's senior Washington editor Ron Elving.

Ron, thanks very much for being with us.

RON ELVING: Glad to be with you, Scott.

SIMON: And to move through some of the news this week, a federal jury - federal court jury in Miami found Jose Padilla guilty of terror conspiracy charges. He'd been held for years as an enemy combatant. His trial was, perhaps, the most closely watched of the government's post-9/11 terror prosecutions. What conclusions can you make about the outcome?

ELVING: First of all, you could almost hear the Bush administration heaving a great sigh of relief, Scott. This - losing this case would have been a big blow to their approach to the whole war on terror as far as prosecutions and justice go. Padilla has been in preventive detention for several years in initial reports where he was involved, as you recall, in some kind of dirty bomb plot - a low-yield nuke that would spread radioactivity.

Well, we never heard much more about that or saw any evidence of that, and it all got downgraded to these conspiracy charges he's been convicted of that involved planning to do mayhem overseas. And this is what he was actually convicted of, and he could face a life sentence for that.

So that's a victory for the conspiracy charge strategy the administration is pursuing right now. And at the right - at the same time, of course, the critics are going to say why couldn't she just have taken this into the federal court system in the first place. What's all these talk about special tribunals?

SIMON: Mm-hmm. I do want to get, obviously, with the stock market this week because the Fed responded to the decline of recent weeks by cutting interest rates on the money it lends to commercial banks by half a point, and the stock market rallied on Friday. In the long term, though, could - do they have to worry about inflation?

ELVING: Surely. This is a classic recipe for increasing inflation assuming that there are other inflationary factors present like energy prices and what have you. And that's why the Fed has been so reluctant to get involved in the market for these last few restless weeks.

But the Fed is now saying it's got a much bigger worry on its mind, and that's the threat that this credit crunch resulting from these mortgage meltdowns is going to get so severe that it hobbles the entire economy, not only here but around the world. So that would cut off not only mortgage funding but all kinds of funding for financial transactions and really cause the entire economy to seize up to, at least, some degree and that could tip us into recession.

So this week, having seen how close we came to that kind of a market disaster, the Fed decided it couldn't be neutral any longer, and this half-point move on Friday would probably not be the last one. A lot of people are calling for another half-point at the discount window, if not in the federal funds rate.

SIMON: At the White House this week, Karl Rove announced his resignation and Press Secretary Tony Snow indicated that he'll leave before the end of the president's term. Now, this is often about the time in which people begin to leave a second-term administration, but any more significance in recognizing these two situations might be very different?

ELVING: It is August, and the president is, of course, a lame duck, but these are not ordinary staff. In Karl Rove, you've got the political strategist who took Bush from the world of baseball to the world stage. And in Tony Snow, you've got just the best press spokesman Bush has ever had, all the way back to his campaign in 2000. And, of course, Tony is battling cancer. As we all know, he's undergoing chemotherapy. He has said he's not going to through 2008, and a lot of people are saying he may not come back this fall. He needs to concentrate on his health and his family.

And, you know, it's very hard to replace players at these positions, especially this late in the game. And by the way, we've had some notable Republican retirements in Congress as well - former Speaker Dennis Hastert and Deborah Pryce of Ohio, a lot of people thought she was on track to be speaker herself one day.

SIMON: I want to ask about a Wall Street Journal report this week that John Edwards has $16 million invested in the Fortress Investment Group. It's a subprime lending unit - it's subprime lending unit foreclosed or is foreclosed now, 34 homes in New Orleans. Senator - former Senator Edwards has been a harsh critic of predatory lenders and has certainly made a point of saying that the federal government has failed New Orleans. More than any haircut, does this undercut his image as a man devoted to the cause of the poor?

ELVING: You know, Scott, it's tough to keep pitching yourself as Woody Guthrie when your gold cufflinks keep showing. This is just a highly specific kind of irony that goes to the heart of his contradiction. He's John Edwards, the candidate, the champion of the poor, and he's John Edwards, the investor who lives among the very rich. Now, Bobby Kennedy could bring this off 40 years ago and FDR did it 75 years ago. But as a magician, John Edwards may not be in their class.

SIMON: A very violent week in Iraq. Of course, at least 250 civilians were killed in northern Iraq, the single deadliest attack since the war began. All this happens, of course, as people await the September report from General Petraeus and Ambassador Crocker. It turns out now they're going to testify openly, but that wasn't always certain this week.

ELVING: There is a sense in Washington right now that the essentials of this much ballyhooed September report are already in place, and the rest is going to - it will all be about presentation and perception. And we think the general is going to say there's been progress in the fighting but not in the governing and give us more time.

In other words, maybe March, April next year they might be able to start drawing down the troops just as we're unable to really replace the troops. And the Democrats are going to insist that's not just fast enough, and it's all going to come down to half-a-dozen Republican senators who are going to have to decide which way they come down on that question.

SIMON: NPR's Ron Elving. Thanks so much. Sorry, we didn't get the chance - the nicest story of the week - Rick Ankiel returning to baseball with the Cardinals. He's doing great.

ELVING: But you sure don't have to be a Cardinals fan to be pulling for him, Scott.

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