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Isreal Continues To Put Up Fence In West Bank; Gigli Bombs In Box Office; Credit Card Companies Pushing Cards On College Students

Aired August 10, 2003 - 15:00   ET


ANNOUNCER: From New York City America's financial capital, this is IN THE MONEY.
JACK CAFFERTY, HOST: Welcome to the program, hope you're enjoying your Sunday. I'm Jack Cafferty. Coming up on today's edition of IN THE MONEY, raising a ruckus as Israel puts up a wall on the West Bank, Washington may threaten to cut off aid. We'll find out if blocking the dollars is the best way to bring peace to the Middle East.

Plus, how J.Lo can you go? The starlet's new film, spell that "turkey," one of this summer's box office bombs -- I mean, this thing laid eggs that made most chickens look weak in the knees by comparison. We'll look at how Hollywood turned movie houses into flophouses for the summer.

The young and the reckless: Credit card companies pitching plastic to college students, something that gets under the skin of this college tuition-paying father. Find out what happens when the spending gets out of hand.

Joining me for today's program, as always, CNN correspondent Susan Lisovicz, back from a nice vacation for a couple of weeks. Nice to have you back. We missed you.


CAFFERTY: And "Fortune" magazine editor at large, Andy Serwer.

So the Gulf War ends, and oil prices were supposed to plummet, down to around somewhere between 20 and $25 a barrel. Now, gasoline prices were supposed to plummet. Here we are in the middle of the Summer driving season, we've got crude oil prices as high or higher than they were when the Gulf War was going on, gasoline prices are going up, and the reports are indicating they're going to continue to go up for the rest of the summer. What's wrong with this picture?

LISOVICZ: It's not boding well for an economic recovery, that's for sure. I mean, it's one of the things that fuels our -- you know, our industries. And I saw that -- I was down at the New York Stock Exchange this week, and oil is again at $31 a barrel. Once you get over 30, it's...

ANDY SERWER, "FORTUNE" MAGAZINE: It's like a tax on the economy, what it is. But, although I'll tell you, the economic bulls will tell you that maybe it's a sign of the economy resurging, that there's increased demand for it. And, I will tell you one thing, though, it is true. You go out there, and as far as gas prices go in the United States, there are a lot of people staying at home. You see bombs over in Indonesia and all that sort of thing. People are staying in the United States, and they are driving. All of a sudden Cape Cod and Branson, Missouri, are looking awful good.


SERWER: You know what I mean? And so people are buying a lot of gasoline.

CAFFERTY: So, demand's up, inventory's down, and...

SERWER: Yeah, and the other thing is Iraq isn't online yet, either.

CAFFERTY: That's true.

SERWER: I mean, they're not pumping oil out...

CAFFERTY: They were supposed to have that thing up and running a long time ago, and it hasn't happened, yet. Right.

LISOVICZ: And, other than Arianna Huffington, there aren't that many Americans driving hybrids. We still love those fuel...

CAFFERTY: I forgot, is she's a hummer or a hybrid?

SERWER: She'd better get the -- California...

LISOVICZ: She's the hybrid.


CAFFERTY: Thank you.

SERWER: Gas prices very high, though.

CAFFERTY: The Israeli Prime Minister Ariel Sharon may have a new fight on his hands, this time with the Bush administration. Senior U.S. officials stepping up their criticism of the Israeli security fence that's being built along the West Bank to keep terrorists from entering Israel. Among the U.S. complaints is that the 370-mile-long fence cuts into Palestinian farmland and isolates villages from each other. If Ariel Sharon does not make some changes in the fence's route, the Bush team, this week, warned that the United States may cut back Israel's foreign aid package, which totals $9 billion in loan guarantees annually. Joining us from Jerusalem with the Israeli reaction, Sheila MacVicar.

Sheila, nice to have you with us. This is a tactic that worked 10 or 11 years ago with President Bush's father. But, I wonder if not, the world is a changed place now. How's this idea going over, and what chances are there that the Israelis are going to go along with this? SHEILA MAC VICAR, CNN CORRESPONDENT: Well, you're right. It was a tactic that worked and worked very successfully when President Bush's father was president of the United States and James Baker was his secretary of state. At that time they applied a financial penalty to the growth of settlements, and it did have the effect of virtually freezing all settlement activity.

What we are hearing from Israeli officials is that they are listening to the Bush administration and that they have heard the concerns of the Bush administration. Now, you know, of course, that there's been a series of visits back and forth between Washington and Jerusalem and West Bank leaders in Ramallah that it seems fairly clear that the Bush administration has heard the concerns and complaints of the Palestinians. Some Palestinian leaders calling the fence, the security fence a "New Berlin Wall." The proposal that is in front of the Israelis now, is that the route -- the proposed route of the rest of the fence should be amended and that the Israelis should think about making some kinds of changes along portions of the fence which have already been built, which will give Palestinians greater access to agricultural lands, their lands, that they are currently separated from.

CAFFERTY: Quick question. If they can resolve questions about the proper route for this thing, why isn't it a good idea? It seems like it would accomplish what they -- what they think it might do.

MAC VICAR: Well, they point to the example of Gaza -- certainly, the Israelis point to the example of Gaza. And they say, one of the reasons why there have been so few terror attacks over the course of this intifadah, which have come from Gaza, is because Gaza is now virtually fenced off, and that fence is very sophisticated, and they say it has done the job. They say if it works in Gaza it's something we can export and we can take to the West Bank. The problem, of course, in the West Bank is -- when is a fence a security fence and when is it a political boundary?

There is no agreement on where those boundaries should go in the West Bank. You know that there is the green line, the cease-fire line from 1967. That is where the Palestinians say if there's going to be a fence there should be a fence. That's not the route that the Israelis have taken in building this fence. And we're getting very close to the point where they have to make decisions around a very big settlement block called Ariel, where there's more than 22,000 Israeli settlers who live in the West Bank. The question is should the fence take a big detour into West Bank land or should it stay closer to that green line? That's one of the big questions, one of the big concerns. A lot of this has to do with optics, what -- when is a fence a fence and when is it a border?

CAFFERTY: Well, of course, as the dialogue along the road map to peace in the Middle East talks about a Palestinian state, we're talking a lot about political borders eventually, aren't we?

MAC VICAR: Well, indeed, that is the question. And that is one of the great unresolved issues. If you look back to the Camp David Summit, when President Clinton was in office, he brought together, then Israeli Prime Minister Ehud Barak, Palestinian leader Yasser Arafat -- at that point the Israelis put a package on the table that would have given, they say, the Palestinians something like 95 percent of the land of the West Bank. That wasn't acceptable then; the Palestinians say that's still not acceptable. So issues about borders, demarcations, and where occupation begins and ends are key issues and key issues which have not been resolved.

CAFFERTY: All right. Thank you, Sheila, very much. I appreciate it. CNN's Sheila MacVicar, joining us from Jerusalem.

Using U.S. foreign aid money as a tactic to influence Israeli polish -- using foreign aid money as a tactic to influence Israeli policy decisions is nothing new. President Bush is taking his cue from his father, who in the early 1990s threatened to cut back on loan guarantees if then Israeli Prime Minister Yitzhak Shamir did not put a freeze on building Jewish settlements.

Joining us today to talk more about this political strategy is Michael Duran, who is an assistant professor at Near Eastern Studies at Princeton University and a member of the Council on Foreign Relations.

Michael, nice to have you with us.


CAFFERTY: It's a different world from President Bush's father's world. American troops in Afghanistan, the regime gone in Iraq, and a cease-fire in place that at least for the moment seems to be working and a road map to peace that is getting some multilateral support. What about this idea of using the carrot and stick approach in terms of foreign aid dollars as a way to coerce Israel into doing what the United States wants?

DURAN: The tactic is a perfectly good tactic, but I don't think that this is the right place to do it at this time. As you said, it's a new world out there, but the thinking that is going on in Washington, right now, about how to approach Arab-Israeli matters is really the old thinking, from the Oslo period. And, I think we saw what happened with Oslo, that was a mistake. So, I think there needs to be a fundamental rethinking of how we approach this conflict.

LISOVICZ: But Michael, aren't these loan guarantees critical to Israel? Isn't it something that might make Israel think twice about its actions?

DURAN: Oh, it's -- in the right circumstances we do want to make Israel think twice about their actions. But, what's wrong here is that we're getting involved in nitty-gritty of negotiations in between the Israelis and the Palestinians, which have nothing to do with the road map, right. The theory behind the road map was that each side would take actions regardless of what the other side did with no conditions. And what we're arguing over now are conditions imposed by the Palestinian hard-liners. We have to think of a way to get out of that so that we're not negotiating over conditions on conditions on conditions. SERWER: Michael, two words -- "military hardware." Doesn't the United States have the ultimate leverage over Israel? I mean, we supply them with all that materiel. Why don't we use that as a point?

DURAN: We have -- we have lots of different levers that we can -- that we can use over Israel. But, what we want to do is we want to get the Israelis and the Palestinians into a position where they're negotiating over the most substantive issues in the conflict and not over secondary, tertiary -- tertiary matters, which is what we're doing right now. The whole principle behind the Oslo process and the principle behind the road map is that we can set up a process that will somehow -- somehow spark a political -- a substantive political negotiation at the end of the process. We need substance up front and process to achieve it.

CAFFERTY: Michael, if it wasn't for the support of the United States, it's fairly obvious to most people what would have happened to the state of Israel a long time ago. As a practical matter, threatening to withhold loan guarantees is kind of a bellicose, empty noise, isn't it? It's not going to happen. I mean, we're not going to pull out a financial support and allow Israel to become financially bankrupt and sit back and say -- well, they wouldn't move the fence. I mean, as a practical matter that's just -- that's nonsense.

DURAN: Yeah, I think you're right. I think that it's unlikely that in this circumstance we're really going to play hardball. What we might do, if it actually came to withholding some of the money, is it would be a fraction -- it would be such a small fraction of what we offer that it wouldn't have that great political effect. It would send a message that we are willing to do it under the right circumstances, but we're not going to go whole-hog on this issue of the fence. I think that's quite obvious.

But let me -- Jack, if I may, let me point out, as well, that the Bush administration has been saying all along that unlike Clinton it wasn't going to get involved in the nitty-gritty, and here it is getting involved. So I think we -- what I'm saying about rethinking our whole approach, we need to admit up front that we are going to be involved in the nitty-gritty. So, the question for us, then, is -- what -- where should we be -- where should we be applying pressure in order to get the two sides to do what we want? And...

LISOVICZ: So, let's put that question to you in the remaining seconds that we have. What is the first priority, in your view, as a scholar -- where should the U.S. be applying pressure? In what area?

DURAN: Well, the U.S. needs to -- needs to start articulating what it considers to be a legitimate solution to the conflict. So, it has to be more open about what it's trying to do. What we're trying to do here is, sort of, secretly force the two sides to agree to what we want. I think we need to be open about how many settlements we want to rip up, about what we're expecting from the Palestinians, about where we want the border to be, and so on, and applying policy according to our principles.

CAFFERTY: Interesting stuff. Michael, thank you for joining us. I appreciate having you on the program today.

DURAN: Thank you.

Michael Doran. He's a member of the Council on Foreign Relations, assistant professor for Near Eastern Studies at the Princeton University.

Coming up on IN THE MONEY, as we continue: "Alone in the Dark."



JENNIFER LOPE ZAS RICKI, "GIGLI": I'm sorry to bother you.


Hello. Hollywood films that were pegged to be blockbusters are playing like bombs. If you can see just one movie this summer, don't.

Also ahead: charged up. Credit card companies are targeting college kids. Find out what happens when the spending gets out of hand.

And looking for a new role: Hollywood names like Gary Coleman are fighting to become governor of California. Makes you want to move to North Dakota. We'll tell you who has the biggest stake in that race as we continue.


LISOVICZ: When Hollywood cranks out a hit, it usually orders up more of the same, a lot more of the same. That was the game plan for the summer labeled the "Summer of Sequels" back around June. Here in August, it's looking more like the summer of stinkers. From "Charlie's Angels: Full Throttle" to the new J.Lo extravaganza, wannabe blockbusters have been flaming out as fast as the studios can bring them on. To help us understand where Hollywood's going wrong, we're joined from Washington by "USA Today" movie reporter, Andy Seiler.

What a delicious interview it is Andy, because I have not seen one movie this summer. I'm dying to see "Finding Nemo," but none of my little nieces or nephews will go with me because they've seen it so many times. That's really the only big blockbuster this summer, right?

ANDY SEILER, "USA TODAY": No, that's not really fair. I mean, first of all, "Finding Nemo" is absolutely doing fantastically here, you're absolutely right, but so is another Disney film, "Pirates of the Caribbean," very popular. And you know, some very small movies are really breaking through that are -- have something original going for them like...

LISOVICZ: 28 days... SEILER: "Bend it Like Beckham," "28 Days Later," there's a new one called "Whale Rider," one coming out called "American Splendor." All great movies. They all happen to have been made completely outside the big Hollywood system.

Now, the problem is here, you're absolutely right, I mean, the idea of making a big brand name, a sequel, a remake, a spin-off, it's a great strategy, but it ain't so great if every single studio's pursuing the same strategy, and the movies aren't very good. Now, actually, "X2," which started off the season, the second "X-men" movie, everyone agreed was better than the first "X-men" movie, and it did fantastically, but from -- it's been all downhill from there. I mean, you got things like "The Hulk," it had a fantastic opening, It dropped 70 percent in its seven week -- second weekend. Now, that's -- as far as I know, that's the highest a No. 1 movie has -- the biggest drop ever -- any movie's ever taken. That means audiences -- they hated it.



SEILER: You know? And, it also got terrible polling ratings from opening night audiences. And those are the people that are -- you know, want to like a movie.

SERWER: Hey, Andy. Andy, let me jump in here.


SERWER: Andy, it's Andy.

SEILER: I know. Our names are so similar.

SERWER: Listen, you know, not all sequels are bad. I mean, you mentioned "X," and "Matrix" did pretty well. And of course, the "Godfather II" -- you know, so why is it that some sequels are just terrible and others seem to be pretty good?

SEILER: Well, I think that -- that what they did right -- and in addition to the "Matrix" sequel, which had the biggest opening ever for an R-rated film, and then the "Terminator 3," Arnold, who's gone on to become the running man with the total recall and every other title you ever want to think of, he was in and has a double meaning now, that would have been the biggest R-rated movie opening ever if it weren't for the "Matrix." But, I think that it isn't just what they do, it's whether people want to see them. In the case of something like "Charlie's Angels" or the "Tomb Raider" film, which didn't even barely open, I mean, once was enough for people. I think a lot of people came out for "Charlie's Angels" the first week and, again, that had a huge drop. Nobody, wanted to see another "Tomb Raider" movie no matter how good it was.

SERWER: That doesn't look so bad.

(LAUGHTER) CAFFERTY: That's not "Tomb Raider," is it?

SERWER: Oh, no. That's "Charlie's Angels."

CAFFERTY: That's "Charlie's Angels."


SEILER: But, I do...

SERWER: I want to -- you know, I want to see "Gigli"-- I mean, everyone -- you know everyone -- this is one of those things everyone talks about. Who's actually ever seen that movie? I'm curious.

SEILER: Well you're noting to -- very...

SERWER: I'm curious.

SEILER: Very, very good point. If everyone who had -- who says they hated "Gigli" had seen it, it would have done well.

SERWER: Right, yeah. It's like Woodstock.

SEILER: You know what I...

SERWER: No one went to Woodstock.

SEILER: Exactly. And, you know what I -- you know what I think it is? I think that there's a lot of built-up resentment over the bad movies. And, I think that people are taking out their hostility on this one even if they haven't seen it. I've had people say to me -- Why, isn't someone going to get fired for that? It's like they have a personal stock in the thing.

CAFFERTY: But, they should take -- they should take their animosity out on it because those people are tedious that are starring in it. They're just -- they've worn me out. I'm so tired of Jennifer Lopez and Ben Affleck, I could pound nails in my foot. I mean, so when they come out with this movie, and they -- important people are going to hate it because they're tired of them.

SEILER: But even the people who saw it hated it.

CAFFERTY: Did you see it? Did you go to like a screening and stuff?

SEILER (LAUGHING): Everybody but -- went but me, I couldn't bring myself.


SERWER: Oh, he didn't see it, either. He's a...

CAFFERTY: So here we are, four people,

SERWER: critic. CAFFERTY: ...talking about this movie

SEILER: I saw all the other movies.

LISOVICZ: Even the critics aren't seeing it.

CAFFERTY: Let me ask you about something else. You're doing a cover story on the history of celebrities in politics. And, that freak show out in California is just -- I mean, it just doesn't get any better than that. I mean, what a time to be doing a cover story. Give me your take on what's going on out there and how the United States is going to be perceived by the rest of the world if this is allowed to continue to its conclusion.


SEILER: Yes. As a matter of fact, it's the issue that's on sale now, the "USA Today" has two cover stories on Arnold. I didn't get to write the one on the front page, but I got to write the one about Hollywood and its connection with Washington. I think this is just absolutely a daffy situation, but...

CAFFERTY: He's not in.

SEILER: I don't know what -- I don't know what people in other countries -- I don't know what people in other countries think about us in the first place. So, Lord knows what they think now, and I don't know whether they distinguish between the United States as a whole and California in particular. But it is pretty remarkable that there's a system where you can get somebody new in and get the other guy kicked out. It's a lot easier than getting elected in the first place.

CAFFERTY: Absolutely.

SEILER: And...

CAFFERTY: If Schwarzenegger becomes governor, it will be a lot less effort than Gray Davis spent to become governor, right?

SEILER: Well, you know, Gary Coleman, I feel bad for the guy. He's still got the advisors he's always had. They -- nobody told him don't announce on the same day as Arnold.

CAFFERTY: I know. I know. Right. You're not going to make the front page of the paper...

SERWER: Overshadowed.

CAFFERTY: ...if you don't time it a little bit better than that.

Fun stuff, Andy. Come back and giggle with us again, will you?


CAFFERTY: I he appreciate it. Andy Seiler, who's a movie reporter for "USA Today."

Just ahead we'll look at how GE's doing under the man who replaced the legend, the legend being Jack Welch, the man who replaced him being Jeff Immelt -- that guy.

And, how can you keep your kids from learning all the wrong spending habits when they leave for college and beyond? We'll tell you how common that problem is and how someone has some ideas on how to overcome it.

Plus, already a financial winner in the wild California recall election. We'll have more on that delightful little story coming up as we continue.


LISOVICZ: Time to check the week's top stories in our money minute. The Energy Department says gas prices will keep climbing until the end of the summer. Vacation travel is picking up at the same time that supplies are dropping. But, the government says prices are likely to drop after Labor Day, which comes early this year.

The sell-off in the bond market continued at the beginning of the week, sending mortgage rates higher. The selling did ease up a bit by week's end, but the refinancing boom is definitely still on hold.

And Microsoft's antitrust woes are back in the news. The European Union says the company's monopoly power is ongoing and plans to force the company to share some of its information with competitors. It also may hit the software giant with a heavy fine. The Europeans are giving Microsoft one more chance to comment on these findings before it makes a final decision.

SERWER: General Electric's buying spree continues. The company bought AEGON 's Transamerica finance unit for a billion dollars this week. GE has been buying up commercial finance companies this year and shedding its insurance divisions. The total cost of those new acquisitions is $9 billion, so far this year. But, is all this on track for GE, which is still trying to emerge from a long shadow cast by former CEO Jack Welch?

GE's stock price has been riding the general market rollercoaster over the past year, but its shares are now selling at about half the price they were in the spring of 2000. So, that makes GE our stock of the week. Jack Welch left in September of 2001, right before 911, and the question is does this company still have it, I guess, right?

LISOVICZ: Well, it certainly has a lot of stuff. Between, you know, light bulbs and NBC, and financial services, engines, it's -- you know, it's got a lot to sort of ride out the storm. But, Jeffery Immelt has -- has emerged as a pretty good manager, it seems.

CAFFERTY: Yeah but, that's like trying to follow Walter Cronkite...

SERWER: Right.

CAFFERTY: know, or Johnny Carson, I mean...

LISOVICZ: Sure, tough act to follow.

CAFFERTY: It can be done but it's not easy, I mean, Welch was probably -- in the history of corporate of America.

My question and you may know the answer, I'm not smart enough to understand all the workings of GE, is -- how come the stock price isn't doing any better? I mean, this is a stock that continually, for years, and I used to work over there, so I've kind of been paying attention to it over the years...


CAFFERTY: ...would go up 10, 15, 20 percent a year and it's -- and it's just hit the wall.

SERWER: Well, I'll tell you something, Jack the stock has underperformed the market since Jack Welch has left, and that speaks to that question, again, of -- is there a Jack Welch premium? I mean, people say conglomerates are not the way to go because basically, bad businesses pull down good businesses, and what made GE work was Jack Welch's magic. He was a master salesman. Jeffrey Immelt is much more understated. So, when he goes to Wall Street, he doesn't have the same charm, the same magic, the same charisma.

LISOVICZ: But, the strategy is the same. When GE does a deal, it acquires the number one or two in that sector. I mean, that strategy has been unchanged, right?

SERWER: Right. But, they have a whole lot of -- they really rely so much on the financial part of the company. GE capital, $425 billion of assets. Some people say this is just a big, kind of, complicated bank these days. So, it's got issues like that, it's a very complicated company, these days...

LISOVICZ: But, it's...

SERWER: ...and they have to explain it. I mean, that's what's hard, I think.

LISOVICZ: It's still the company with the highest stock value in the world

SERWER: Value-wise

LISOVICZ: In the world.

SERWER: Valuable, you're right.

SERWER: They must be doing something right.

CAFFERTY: Well, I feel better knowing that. Thank you very much. That solves a lot of my problems. Last week's e-mail question of the week was about whether the U.S. friendship with Saudi Arabia is more trouble than it's worth.

Gabe from New Orleans wrote this, "The Saudis teach hatred and support terrorists, but the Bush-Cheney dependence on oil companies makes it hard for us to put real pressure on them."

Joe in North Carolina wrote, "We need the Saudis and they need us. Give diplomacy a chance! We're trying it with North Korea; we can do it in Saudi Arabia. Let's also consider becoming less dependent on foreign oil!"

Now, there's an idea.

Peter in California wrote this, "Saudi Arabia faces significant pressure from Muslim extremists. As long as we remain friends, they reap benefits from not appeasing these groups, if we turn our backs on them, they would have no motivation not to openly aid terror groups."

The e-mail address for this fine little program is,

We'll read more e-mails and ask a new e-mail question of the week a little bit later in the show. Something to look forward to.


CAFFERTY: It's a funny question.

Much more ahead on IN THE MONEY as we plow ahead. Easy for college kids to get credit cards? You bet, it's too damn easy, if you ask me and I'm a father of a college student. We'll look how a little plastic can lead to big trouble.

Plus, classic suits "Fortune" magazine names the ten greatest CEOs of all time. Find out who's on the list and maybe more surprisingly, who isn't.

And political muscle, Arnold Schwarzenegger's one of the stars running for California governor. Actually, he's the only star. There's a bunch of other ne'er do wells that are out there trying to get the job. We'll show you the field, tell you who has the most at stake, in a political race that could only happen there.


SERWER: We wanted to share this e-mail with all of you. From Nick from San Antonio who wrote, "Didn't Allan Greenspan propose starting a program for elementary school students in finance, investing, savings, banking and stocks? I think we are raising a generation of financially stupid people." That's harsh.

That ignorance is what a lot of parents should be worried about as the college year begins again. Forget sex, drugs and booze. The biggest threat to America's college kids just might be plastic. Credit card companies bombard students with offers, as advertisers try to persuade them that there's more and more stuff they can't live without.


UNIDENTIFIED FEMALE: It's so tempting. You don't have any money. Obviously, you're going to run for those offers.


SERWER: The result is massive debt, wrecked credit histories, and headaches for mom and dad, like Jack Cafferty.

Our next guest says student debt is epidemic in the United States and prevention starts at home. Nathan Dungan is the author of "Prodigal Sons and Material Girls: How Not to Be Your Child's ATM." I love that. He joins us from Minneapolis. Welcome, Nathan. So how bad is this problem?

NATHAN DUNGAN, AUTHOR: This problem is enormous. I mean, when you look at what's happened here over the last decade, I think, Andy, specifically with college students and credit card debt, the number of college students today holding credit card debt of $3,000 to $7,000 is almost one-fifth of college students. It's increased almost 63 percent just in the last two or three years.

So what I'm looking at here and what I've seen happening over the last decade, and you pointed out to it, is the enormous amount of consumer messages coming at young people. The fact that there's very few programs helping them learn, you know -- be schooled in financial literacy, but also learning restraint. It's everything's about got to have it now. And I think frankly our society is working overtime to addict kids to spending.

LISOVICZ: Hey, Nathan, first of all, you look far too young to be your child's ATM unless there's some sort of prodigy. But let me ask this as a business journalist, because isn't one of the problems the credit card companies themselves, that they write off a certain amount of defaults, delinquencies, bankruptcies? They're really bombarding the kids, and they're not perhaps willing to exercise any kind of restraint toward marketing on campuses?

DUNGAN: Well, I think that's a great point, Susan. I think one of the things going on, one of the interesting phenomenons is as I was doing some research for the book I found that, you know, credit card companies have these massive, multimillion-dollar deals that they've cut with colleges, with universities to have access to these students.

I mean, there's one that I found which was just absolutely egregious as far as I thought, was the credit card company with the University of Tennessee. It was a seven-year deal cut with them for $16.5 million for access to student names, credit cards -- names, addresses, e-mail addresses.

So what's happening is not only is the college -- or university making money off of those students, but they're also -- every time those students use the card they're getting a royalty on it. And I'm thinking, what's wrong with this picture here? I mean, I think that there are some real ethical and moral issues, and I think very few parents even understand what's going on here.

And I understand, again, that universities today are certainly budget-pressed. I mean, it's no secret that across the country there are financial issues. But I mean, at the hands and on the backs of these students, I think that's, again, pretty creepy. And you couple that with the fact that there's no, or very few, I would say, a few companies have some financial literacy programs or teach students how to use them, but it's not happening. And if I had a nickel for every time when I speak around the country that parents ask me, Nathan, should I bail my child out, I mean, over and over, that's one of the top three questions I get asked. And what I say to parents is, you know, be careful, don't bail your children out unless you have a plan, because you will -- what will happen is their habits haven't changed and they'll just build the debt back up again.

CAFFERTY: You use the word "children." That's what they are. They're children. They're not adults. They don't have independent means of support. I have kids in college. I was only mad about one thing until you started talking. Now I'm steamed about two. You're telling me that the school I spend tens of thousands of dollars to send my kid to is selling my child out to the credit card companies while I'm not looking? Is that what you're suggesting?

DUNGAN: That's exactly what I'm saying. And I think it's really -- again it's a moral, ethical issue that's going on, and I think, Jack...

CAFFERTY: How about it's a legal issue? How about they shouldn't be allowed legally to do junk like this? How about the fact that if my kid runs a credit card debt I'm on the hook for the bill, not my daughter? How about the fact that my kid doesn't have any visible means of support and I get five or six credit card offers a week in the mail. The credit cards she has, they offered to raise the limit, give her more credit. She has no way to pay the bills. I have to pay the bills. How come there's not a legal issue involved here?

DUNGAN: Well, I think you're bringing up an excellent point, and I think -- you know, I was in a conversation the other day, and I said I'm a little surprised that you haven't seen some kind of even class action suit or at least some pressure around students, because a couple -- there's a slippery slope here I think for the universities in a couple of aspects.

I think number one, imagine if you're the development officer now at some of these universities trying to raise money for this millennial generation, I think in a quick sidebar here I think it's important for the viewers to know that this is a huge group. I mean, the reason they're getting targeted so incredibly is there's 80 million young people under the age of 25, that's a third of our population, by the way, and they spend and influence the spending of nearly $1 trillion a year in this country. That's a tenth of our nation's economy. And so when you look at it, there's a reason that these marketers are coming after these kids.

There's a reason they work with child psychologists. I mean, as I've attended some of these marketing to kids, teens and teens conferences, it's amazing what's happening. Now, let's fast forward. The fastest growing age group filing for bankruptcy in America today, according to Harvard University, is young people under the age of 25. So is it a legal issue? I think it is.

CAFFERTY: Yeah, we've got to stop there unfortunately, because I could talk on into the wee hours.

SERWER: He's getting steamed.

CAFFERTY: But we want people to watch the rest of the program.

LISOVICZ: Struck a nerve.

CAFFERTY: Thank you for your enlightenment. I added some emotion that probably wasn't necessary. Nathan Dungan, author of "Prodigal Sons & Material Girls: How Not to Be Your Child's ATM."

One other note, we as a society don't set a very good example. Debt in this country is at all-time highs. We're all living on credit cards, spending more money than we make or can afford to pay back. So you know, the kids see you drink booze, they'll probably drink booze. They see you live beyond your means, they'll probably do that too.

Coming up on IN THE MONEY as we continue, CEOs even an investor could love. "Fortune" magazine listing its top 10 chief executives ever. Find out what made them so good and why today's CEOs aren't any better.

Also ahead, join the crowd. Actor Gary Coleman wants to be California's next governor, along with Rin Tin Tin, Lassie, and the sons of the pioneers. We'll tell you about a race that's drawn everyone from an action star to a porn czar to a couple of porn stars. And Arnold.


CAFFERTY: Well, have times have changed. The term CEO is almost a bad word these days as opposed to the golden era back there in the late '90's and early 2000's. You got your corporate scandals, you got your golden parachutes, you got your angry stock holders, and you got bad behavior all combining to make the nations corporate leaders very unpopular. But our next guest says some of the captains of industry, in the past, could teach today's chief executive crop a thing or two or three or more.

It's something "Fortune" magazine addressed in a recent feature story called "The 10 Greatest CEO's Of All Time", Jerry Useem worked on that piece and he joins us now on IN THE MONEY. Welcome, nice to have you with us.

JERRY USEEM, "FORTUNE" MAGAZINE: Thanks for having me.

CAFFERTY: Who's the best ever. I won't got through the whole 10, but who's the best ever?

USEEM: Best ever is Charles Coffin (ph) a guy you've heard of, and I doubt anyone else has either.

CAFFERTY: No. Who is he?

USEEM: He is the founder of the General Electric company and what Coffin did was, he created machine called GE, that for the past century has created a series of giant CEO's, the latest of which have been Jack Welsh and Jeff Immelt, whose names have ultimately have eclipsed his own and in a large part they are playing on the stage that he built. So, when all said and done, we think he stood a notch higher than everyone that came after him.

SERWER: A lot of people not on that list, Jerry, like Bill Gates, Jack was pointing that out earlier to me. Bill Gates, Warren Buffet, how come they're not there? I mean these guys are giants.

USEEM: Yes, well, we did this list with Jim Collins whose the best-selling author who studies, basically, a century of American business and the logic was really simple that you can't really tell how good a job a CEO has done until they've been out of office for a while. The goal is to build...

SERWER: Microsoft right?

LISOVICZ: But Warren Buffet and Bill Gates they've revolutionized certain things.

USEEM: The goal is to build something, a sustainable company that's going to be great long after you've left the building and you've got to be out of the building for a while. We set the decade as kind of the cut off mark.

SERWER: Now this is firm.

USEEM: Yes, that was it. So 10 years from now, you might see Bill Gates, Jack Welsh, that might make it. But Lee Iacocca looked like the greatest thing ever...

SERWER: That's interesting.

USEEM: ...six years after he left they were speaking German in Detroit, so you never know.

CAFFERTY: What about a guy like Henry Ford who, you know, automobile, internal combustion engine, the assembly line production, stuff that is still very much a part of American life today.

USEEM: He had a huge impact, unfortunately he was a complete nut bag too.

SERWER: By gum, nut bag. That's some serious analysis.

USEEM: That pretty much...

LISOVICZ: And you still see that characteristic, unfortunately, pervasive in the corner suites. Let's ask you about any common characteristics. James Burke, not a lot of people know him. I do remember him from Johnson & Johnson. The whole Tylenol thing. Is crisis and the ability to steer the company...

USEEM: Right, the famous Tylenol cyanide poisoning episode is taught in business schools and he acted very swiftly to take them off the shelf, but his real defining moment was 3 years earlier when they looked at the J&J credo which is sort of "We hold these truths to be self-evident" and he said look, are we going to live by this or not. He started a whole set of discussions. So when the crisis hit they didn't need to debate what...

LISOVICZ: Integrity.

USEEM: Yes, the debate was done. So he makes the list because he lead in the absence of crisis, not during.

SERWER: Just quickly Jerry, one person who surprised me on the list, K. Graham from "the Washington Post" who did she have to stand up to?

USEEM: Well, she had to stand up to Richard Nixon and publish the Pentagon Papers, give long leash to Woodward and Bernstein, and she took over, she was an accidental CEO, her husband had committed suicide and she sort of the very definition of courage. People think of her as a publisher, but she was a great CEO. Financial returns were enough that Warren Buffet invested and was one of the great -- one of the 50 best IPO's in the last quarter century.

And she, of course, is one of the -- there were even fewer women in executive posts.

USEEM: Back then it was a really remarkable...

LISOVICZ: A fascinating list and a good read. Jerry you seem senior writer at "Fortune" magazine. Thanks so much for joining us.

Coming up, the big question in California is who isn't running for governor these days. We'll find out whose already won in the recall election.

And we'll also ask our e-mail question of the week and hear a little of what you have to say. You can weigh in too at


SERWER: There's been a lot of interest in junk bonds lately and no wonder. Junk bonds or high yield bonds are securities issued by companies that aren't in the best of health. In order to raise money, these companies sell bonds, but to attract investors, they have to pay higher yields than companies that are in better shape.

With bond yields still down at multi decade lows, corporate bonds are yielding 4 percent and less. Investors are clamoring for yield to juice their portfolios. And junk bonds with yields from 6 percent and up look awfully tempting. But, of course, there's great risk in junk bonds. Basically, the higher the yield the riskier the bond. If you see a bond yielding 12 percent, well the market is telling you there's a real chance this company could go bankrupt, in which case you could lose all your money. On Wall Street there's no such thing as a free lunch.


CAFFERTY: Arnold Schwarzenegger, Larry Flynt, Ariana Huffington, Gary Coleman, and before this week is over, the cast of "Love Boat," all probably running for governor of California. But there are some businesses in that state who see this crowded as a beautiful thing. We're talking about all the TV stations in California, who will make anywhere from 30-70 million extra dollars on campaign adds in the unexpected race.

With the election set now for October 7, the candidates have less time to get their spots on the air and that should drive the bidding higher for the available television time. Got to be the greatest show in town, I mean...

SERWER: Who would you really vote for, Jack. I actually, like -- I was listening to Larry Flynt. I thought some of the stuff he said made sense. I mean, why not. He's just as good as any of them isn't he?

CAFFERTY: What I don't understand is the Lieutenant-Governor of the state of California says he wants to run. What would happen if Gray Davis would resign, say, you know, I'm out of here. Does he take over? I don't understand how the law works.

SERWER: And how do they put 500 names on a ballot. Like you said, Rin-Tin-Tin's paw print.

LISOVICZ: I don't know how you can read it with a straight face, Jack.

CAFFERTY: It's unreal.

LISOVICZ: It's so funny, but of course, one of the reasons why Gray Davis is in so much trouble is because of the poor state of the budget, with all this money coming to the TV stations, can you imagine just what these advertisements are going to look like?


SERWER: Is Charo running?

CAFFERTY: Let's check the e-mail again, Joseph offered this helpful hint, "To the gentlemen said he's paying $300 a month for a COBRA health insurance policy for his recent college graduate daughter," that would be me, "you should call your daughter's college or alumni association and see if they offer health insurance. Many of them do for just $50 a month. Maybe I will do that.

Jim in Cooperstown, New York came up with this idea, "My wife and I are considering buying and inexpensive dinner at a local cafe and we'll pay with 4000 shares of Enron stock. The cafe owners have agreed, but will only accept the shares at a 50 percent discount, any ideas?" I like that.

Now, the long awaited, much anticipated and certainly worth the wait e-mail question of the week, "would you ever donate money to a political campaign on the Internet or in any other way?" As always, you can send us your answers to

LISOVICZ: But no money?

SERWER: No, they can send money.

CAFFERTY: Well, I don't know. No, I guess not. Well, that's all the time we have. Doesn't it go quickly when you're having this much fun? IN THE MONEY back next week. As always, thanks to our regular contributors, Susan Lisovicz, of CNN Financial News, and Andy Serwer of "Fortune" magazine,

Join us next Saturday, 1:00 Eastern, 3:00 Eastern on Sunday, and you can catch Andy and me all week long on "AMERICAN MORNING," beginning at 7:00 Eastern and running I think, until the late afternoon. I've forgotten.

Have a great weekend. Thanks for being with us.


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