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CNN IN THE MONEY

Ford Announces Major Restructuring; A Look at Campaign Finance Reform; Author Speaks About Public Education; Russell Simmons Teaches Budgeting

Aired September 17, 2006 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


(NEWS BREAK)
ANNOUNCER: From New York City, America's financial capital, this is IN THE MONEY.

JACK CAFFERTY, HOST: Welcome to the program.

I'm Jack Cafferty.

Coming up on today's edition of IN THE MONEY, spending power. Getting to Washington isn't just about the candidate, it's about the cash. We'll look at which party is smarter at raising it and spending it.

You can take off the kid gloves now. Find out why some corporate bigwigs like H.P.'s Patricia Dunn get such a cushy ride and you and I don't.

Street smarts -- rap mogul Russell Simmons will be here. He wants to bring financial know-how to the urban poor. We'll ask him how he plans to go about doing that.

Joining me today, a couple of IN THE MONEY veterans. We have Jennifer Westhoven and we have Andy Serwer.

Ford Motor Company hemorrhaging money and out with some rather draconian measures at the end of the week to try to stop the bleeding.

ANDY SERWER, "FORTUNE" MAGAZINE: Yes, there's hourly workers, every single one of them, 75,000 people, offered a buyout.

JENNIFER WESTHOVEN, CNN CORRESPONDENT: Right.

SERWER: Fourteen thousand white collar workers will be getting the ax. And then the real big news on Friday, I thought, was cutting the dividend. And that came as a bit of a surprise. I mean there was risk there if the stock tanked. So you could see people were surprised.

You know, this is a huge year for Detroit. I mean we're seeing this with G.M. Chrysler has problems, too.

WESTHOVEN: Well, they've got to try and save money somehow, right, and have stockholders maybe share in that pain a little bit, too. A lot of people now at their kitchen tables are trying to figure out do we take the $140,000 or do we give up health care coverage for the rest of their lives?

That's a serious decision.

CAFFERTY: Yes, and $140,000, if you're looking at a serious illness, doesn't take you all that far anymore.

SERWER: And that's the high end, too.

WESTHOVEN: Yes.

CAFFERTY: Daimler Chrysler, by the way, announced an operating profit reduction, looking ahead to next year, of $1.25 billion. And it's all coming out of North America eventually.

WESTHOVEN: Maybe you move and work at a non-union Toyota plant in Kentucky.

SERWER: Yes, that's the thing. I mean the two most successful auto companies over the past couple of decades, Toyota and Honda. And Toyota and Honda. We keep saying it.

CAFFERTY: Yes.

SERWER: Day after day, month after month, year after year -- and they're making cars here. They're making sedans that people want.

CAFFERTY: Yes.

SERWER: You know, we can make trucks and SUVs, but that market is getting killed. That's part of the big problem for Detroit. It's because of high gas prices. And so, you know, the Japanese have the sedans. We have the other end. The other end isn't working.

CAFFERTY: We've got the wrong end.

WESTHOVEN: Right.

SERWER: We've got the wrong end of the stick. That's about it.

CAFFERTY: We have the end that clears the fence last when the cow jumps over the moon.

SERWER: Yes.

CAFFERTY: Wouldn't it be great if our political leaders were really good at what we elected them for?

Dream on. You know, looking out for our interests in Washington.

Well, instead, what many of them are really good at is fundraising and reelection campaigns.

Right now, the RNC has got a war chest of about $60 million for this upcoming mid-term. The DNC not so healthy, only $15 million. And all that cash is going to do more than just buy TV ads. Joining us now to talk about all of this, John Samples, who is the director of the Center for Representative Government at the Cato Institute. He's also the author of a soon to be released book called "The Fallacy of Campaign Finance Reform."

John, nice to have you with us.

Welcome.

JOHN SAMPLES, DIRECTOR OF CENTER FOR REPRESENTATIVE GOVERNMENT: Thanks for having me, Jack.

CAFFERTY: So the Republicans out fundraise the Democrats by a margin of something between four and five to one.

Why is it so lopsided?

SAMPLES: Well, it's not quite that. There's other committees where the Democrats are more even. And, in fact, the Democrats are doing better than they used to. It used to be much larger of a gap.

The reason is the Republicans have always been better at organizing themselves and reaching out to people and getting the small or individual contributor. And, also, they've been helped this year by the Democrats, who voted for the McCain-Feingold campaign finance bill. And that's had the effect of making the Democrats have less money, I think, because the Democrats are the party of the big contributor and McCain-Feingold means the big contributors, like George Sorros, can't give money directly to the Democratic Party anymore.

WESTHOVEN: I want to ask you a little bit about the Republican Party, which is supposed to have a great track record when it comes to getting out the vote. Ken Melman is supposed to be great at that. But this year, this is supposed to be something that's really difficult, that maybe the Republican base isn't so energized to go out and vote.

SAMPLES: That's right. That's correct. So far in this. And we're really in a wild race here and we're going to have a lot of changes. But so far it looks like the Republicans are depressed and the Democrats are energized.

But the case in -- of Chaffee -- Senator Chaffee in Rhode Island -- suggests that, in fact, the Republicans are in pretty good shape. They sent their turnout effort, their organization up there, and they pulled him through.

There's an idea that 2004 might repeat itself, that Melman and the Get Out The Vote organization might really work again.

SERWER: Yes, John, is it true that, you know, whoever has the most money wins? And if that's the case, doesn't that favor the Republicans? Is that what you're really talking about here?

SAMPLES: Well, John Kerry had more money than George Bush and John Kerry isn't president right now.

SERWER: Oops. Yes.

SAMPLES: So there's a lot of cases where the people that spend more, in fact, don't win. And that's actually a common conception that is, in fact, wrong. The Republicans will have some more money. But if their voters are depressed, if they don't go to the polls, if they fumble the get out the vote effort, then they're not going to do very well in November.

CAFFERTY: Well, you know, this is just a theory of mine, which means it's probably not worth the brain that it was conceived in, but it seems to me that part of voter apathy has to have something to do with this idea that the game is fixed going in, that the big corporations and the lobbyists have bought the government, bought the races, bought everything they need and that when you and I show up to vote, it really doesn't matter all that much because it's already been decided.

That takes us to the subject of campaign finance reform.

Shouldn't we figure out a way to get the corporations out of the game? Don't they serve as a corrupting influence to this system that doesn't work very well anymore?

SAMPLES: Well, under the laws now, corporations can't give money to campaigns and labor unions can't either. And, in fact, there's a lot of evidence and study that people that look closely at these things suggest that campaign contributions themselves don't have much influence on policy.

Now, I know the common conceptions are all to the other side. But it's, in fact, the case that money and all those kinds of things have not had much effect on people's trust, distrust or apathy at the voting booth.

So I think really we have to look elsewhere. And a lot of it has to do with the fact that maybe both parties don't stand for something or people don't expect that their vote will make a difference when the person they vote for actually gets in office.

WESTHOVEN: All right, you mentioned before the Republicans seem to be good at being organized. I couldn't help but notice that within the Democratic Party, there's this big splinter group, the September fund, even in the fundraising.

Are the Democrats, you know...

SERWER: They're shooting themselves in the foot again.

WESTHOVEN: Boy, yes, they seem to be doing it again.

Is that going to be OK? Does that hurt their power going into this election?

SAMPLES: Well, it does two things. One, the September Fund is supposed to raise $25 million. The money is welcome to the Democrats. But, again, because of McCain-Feingold, which the Democrats supported, the September Fund is not integrated into the operations of the Democratic Party.

So that a lot of that money is likely to be wasted in trying to get Democratic voters to the polls.

So we see another case of campaign finance reform biting back on the people who voted for it.

SERWER: But, John, I want to pick up something you said. You said that corporations and lobbyists are restricted from giving money.

But doesn't it get there somehow, through soft campaign contributions, as they're called, soft dollars?

SAMPLES: Well, what they can do is set up political action committees under the law, which are legal, and they can solicit, in the case of corporations, a limited number of individuals. Most money and most -- almost all money in campaigns comes from individuals. So corporations and labor unions can, in fact, act in campaigns in that way. But it's within the law and it probably doesn't have all that much influence.

CAFFERTY: Yes, but let's remember who writes the laws, John. And they write laws that are advantageous to themselves and to their reelection efforts and to their longevity in the Congress. And the public has this suspicion that the whole thing reeks. And my sense is the public is probably right.

Anyway, we've got to stop there.

Good to have you with us.

Thank you.

SAMPLES: Thanks for having me.

CAFFERTY: John Samples, director of the Center for Representative Government at the Cato Institute in Washington.

When we come back, you can take off the kid gloves now. Find out why some corporate bigwigs like H.P.'s Patricia Dunn get such a cushy ride and you and I don't.

Plus, see if more money equals better schools. We'll get the real story on some big myths about education.

And over the limit -- foreclosures are on the rise. Allan Watchler (ph) has the numbers.

Stick around. We've got us a new feature.

(COMMERCIAL BREAK)

WESTHOVEN: A couple of big time executives had to step down this week, Peter Dolan at Bristol-Myers Squibb and Patricia Dunn at H.P.

But if you think executives like these two have to clean out their desks and leave empty-handed, think again, because when bigwigs get punished, they are usually in for a much easier ride than the rest of us.

For a look at the ethical problems with that, we are joined by Tom Donaldson.

He's a professor at the University of Pennsylvania's Wharton School.

Welcome to the program.

THOMAS DONALDSON, UNIVERSITY OF PENNSYLVANIA: Hello.

WESTHOVEN: Now, we are seeing this fall Bernie Ebbers is going to have to go to jail. Jeffrey Skilling, of course, from Enron, also going to get sentenced.

At what point -- I mean shouldn't corporate boards be getting a message here? Is it just human nature that people have got to push the envelope? DONALDSON: It's incredible, isn't it? I mean you would think with the Enron era of scandals the corporate, all the corporate Watergates, people would get the message.

I mean part of what's going on is whenever you've got temptation and piles of money, you're going to have people who cut corners. But, you know, another issue here is when we decide we're going to do somebody about it, with the Sarbanes-Oxley or new rules of corporate governance, we're always fighting the last battle. And people are very creative so they find out new ways to get things done.

SERWER: You know, Tom, Jennifer mentioned the two most recent transgressions, I guess. We're talking about Bristol-Myers and also H.P. But, you know, the board really did nothing in either case.

I mean, if you look at Bristol-Myers, that was an independent investigator or a government oversight person who told him that -- told the board that he should leave. And then at H.P. you know, there was just this whole imbroglio.

So, you know, boards -- they're still just rubber stamping, aren't they?

There's no independence between boards and CEOs in this country that I can see.

And what do you think would ever change that?

DONALDSON: Well, it looks that way. And especially when you see the halfway measures at H.P. I mean Patricia Dunn is going to get to stay on the board.

SERWER: Yes. DONALDSON: But, you know, it's a new world. And despite these, it used to be not so many years back that you could write the board meetings in advance. This year, we're on track to have a record number of changes at the CEO level and the boards are finally stepping up, despite these recent incidents, and doing something about it.

CAFFERTY: Talk a little about these golden parachutes. You've got some real weasels that go out the door with their pockets full of money. And everybody knows they're weasels, including the people that give them these pockets full of money at the end of their tenure.

What's up with that? Is that just hush money?

DONALDSON: Being a CEO is a great gig if you can get it. I mean if you and I steal a Xerox machine, we get two week's notice. Mr. Gilmartin, who stepped down from...

CAFFERTY: Merck.

DONALDSON: ... at Merck, ended up with $1.6 million, his regular salary. He stayed on as a special adviser. And not only that, but he got about $5 million in stock options.

So this is not two week's severance.

CAFFERTY: No, but why do they get this money if they're certified, bona fide bad guys and everybody knows it? Why do they still get all this dough?

DONALDSON: Well, I mean, there are a couple of reasons.

I mean, first of all, it's still pretty clubby at the board level. But another reason is these people are smart enough to negotiate big soft pillows before they ever step into the arena.

It's about time, by the way, that we started stepping up and firing some of these people for cause, because when you do it for cause...

CAFFERTY: Right.

DONALDSON: ... you can take some tougher measures than you would otherwise.

WESTHOVEN: And what's the way that people can do that?

I mean obviously you can't just start calling up board members.

Is it putting money into these socially active funds? Is it calling up places like Fidelity and saying hey, we want you to, you know, take these boards to task about ethics?

DONALDSON: Well, that's part of it. That's part of it. And the way we educate people to become managers and assume their roles on the board, that's another part of it. But I've got to tell you, the way we've been approaching it, I think, doesn't work. We've focused almost entirely on rearranging the deck chairs, if you will, new rules of corporate governance, more outside directors and so on.

We need to start paying attention to the people whose seats we put into the chairs. Are these people with enough courage? Do they show a past history of courage to step up and make the hard calls or not?

SERWER: Yes, particularly, you know, the compensation committee of the board. One of my favorite little gigs, where you, you know, the CEO can't be on the committee, but the friends of the CEO sure can. And then they go out and they hire one of these compensation consultants and they say well, let's see, the guy at Pfizer gets this, the guy at Bristol gets that, and so here at Merck, we have to at least make that much.

I mean what kind of a racket is that?

DONALDSON: The more persuasive you can be, if you're a consultant to the board, in saying we're paying this guy right because if we don't, we're not competitive in the market...

CAFFERTY: Yes, we won't have a job as a consultant.

DONALDSON: That's right. The more money you make as a consultant.

WESTHOVEN: All right, so at Wharton you are there teaching our future leaders, CEOs.

Shouldn't ethics be a full semester, not a half semester, as I'm told it is?

SERWER: There you go.

DONALDSON: You're not supposed to beat up on the professors.

WESTHOVEN: You've got good reviews.

DONALDSON: Well, thank you.

SERWER: Well, we want you to work more.

No, she's not beating up on you.

WESTHOVEN: Yes.

DONALDSON: No, no, I -- I understand. And, you know, all too many schools don't have anything that's required at the MBA level, at least by way of a separate course. We need to do a lot more. You're absolutely right. That's where this stuff starts.

CAFFERTY: Tom, we've got to leave it there.

Thanks for joining us.

It was a pleasure.

DONALDSON: It was a pleasure.

Thank you.

CAFFERTY: Tom Donaldson, professor at the Wharton School at the University of Pennsylvania.

If I was back in college, I'd go to his class. But that's -- he probably wouldn't let me in.

It's time now for our look ahead.

Building permits, housing starts are due out on Tuesday. The Producer Price Index also comes out Tuesday. The main event, of course, is Wednesday, which is when we'll find out if the Fed will hold interest rates steady for the second consecutive time after a two year campaign of raising rates.

Speaking of the Fed meeting, coming up right after the break, we're going to try to get inside Ben Bernanke's brain. Hang around for our shot at handicapping the Fed's next rate move.

Plus, dress like a rapper, think like a banker. Find out how hip-hop mogul Russell Simmons is bringing financial knowledge to the streets.

And running out of time -- watch out for the iPod, literally. Find out who stole time in our Brainstorm segment.

We have a lot of segments here.

SERWER: We do.

CAFFERTY: Yes.

(COMMERCIAL BREAK)

WESTHOVEN: It's time for the week's top stories.

It's our Money Minute.

Now, as we mentioned earlier, at Ford, the cuts just keep on coming. Fourteen thousand white collar jobs will go. And on top of that, Ford is going to offer all of its hourly union workers -- that's 75,000 people -- big buyout plans. It's also speeding up some factory closings by four years and Ford will also stop paying dividends to save money.

Medicare will charge wealthy seniors a lot more next year. Now, while most people on Medicare will see their payments go up by just about $5, about one-and-a-half million people who make more than $80,000 a year will have to pay a lot more in surcharges. The government says that will save $21 billion over 10 years. And if you're a guy who wants to succeed, drink up. An economic study shows that men who drink more make more money compared to those that don't visit bars very often. The researchers, though, found no correlation between drinking and better salaries for women.

SERWER: Ben Bernanke and the rest of the Fed's Open Market Committee are getting the band back together this coming week. Last time, they put the brakes on the longstanding rate hike trend.

But will they hold them steady again or go another way?

That's the focus of this week's Street Talk.

You know, there was a report out on Friday showing that inflation slowed in August, which would seem to support Bernanke's move to stop hiking rates and pause.

So, you know, maybe the guy has got it going on.

WESTHOVEN: What's the split right now in terms of people -- the thinking about this?

SERWER: Well, I think right now the numbers of the futures are suggesting a pause will -- there will be another pause, I should say, Jack.

CAFFERTY: Yes, the Fed fund futures indicates there will be no rate hike in the next week.

Oil prices have dropped more than $10 a barrel in the last month. That's a big component of inflation. If oil prices should stabilize at these lower levels, maybe Ben Bernanke is on to something.

WESTHOVEN: And already we saw some of the shopping numbers for back to school. They looked a little better than they thought. And the thinking here was that people had a lot more money because gas prices have been down.

SERWER: Well, it's always a balancing act, of course.

CAFFERTY: Yes.

SERWER: And it looks like things may be OK. I mean the fact that gas prices have fallen from over $3 to $2.60 and change is a very positive sign. I don't think there is any danger of us, you know, going into an overheated phase at this point.

CAFFERTY: No.

SERWER: I think there's still a lot of concern.

WESTHOVEN: Right.

SERWER: With elections, the elections are -- there's a lot of uncertainty always with that hanging.

The other thing is, the Fed does not like to flip-flop.

CAFFERTY: No.

SERWER: I mean they're not going to do one thing one month and then one thing another month.

WESTHOVEN: Right.

SERWER: They like to have things go nice and slow. Six months at the very least, I would think, and, you know, so I don't think he's going to try to turn the battleship back around the other way all of a sudden.

WESTHOVEN: It's nice, too, with mortgage rates coming down that that's helping people a little bit, have a better cushion in the housing market so that maybe the Fed doesn't have to worry about that as much.

CAFFERTY: There's a school of thought out there that says that the Fed is more likely to cut rates the next time they do something than they are to raise them now.

SERWER: Yes, I would think so.

CAFFERTY: (UNINTELLIGIBLE).

SERWER: But you agree that it's probably going to be to hold them at this point?

CAFFERTY: Oh, yes, no.

SERWER: Yes.

WESTHOVEN: Yes.

CAFFERTY: I don't think nothing happens next week.

SERWER: Right.

WESTHOVEN: Yes.

SERWER: Yes. That's it.

All right, there's lots more to come here on IN THE MONEY.

Up next, class is in session. We'll try to separate the spin from the straight talk over money and education.

And, it's not exactly the watch's finest hour. Find out why and see what the cell phone has to do with it.

And we want to hear from you. You can send us an e-mail right now. We're at inthemoney@cnn.com.

(COMMERCIAL BREAK)

(NEWS BREAK)

CAFFERTY: The conventional wisdom out there is that America is falling behind the likes of India and Europe when it comes to educating our young people. Critics say that schools are in desperate need of more money to fix the system and pay our teachers what they are worth.

Well, not so fast, according to our next guest. Joining us now is Jay Greene, he's the author of "Education Myths: What Special Interest Groups Want You To Believe About Our Schools, and Why It Isn't So."

Jay, welcome. Nice to have you with us.

JAY GREENE, AUTHOR, "EDUCATION MYTHS": Nice to be on your show.

CAFFERTY: Myth number one, I suppose, is we're not spending enough money on our public schools. Why is that?

GREENE: Well, it is a myth because people usually don't have a good idea of how much we do spend on schools. First we spend over $10,000 per pupil on average, each year. That adds up to more than $500 billion, more than we spend on national defense. And importantly, it is double what we spent three decades ago adjusted for inflation. And despite this doubling of spending, achievement has been flat.

CAFFERTY: Why?

GREENE: Well, obviously schools need enough money to do their job. But they also need the incentives to use the resources well. And we have been singularly focused on giving schools more money without paying proper attention to getting schools to use their resources effectively.

WESTHOVEN: So where is all that money going if we're paying double what we used to pay?

GREENE: Well, frankly a lot of it is going to teachers. We have hired a lot more teachers than we used to have. Adjusted for changes in student population, we have 45 percent more teachers than we did three decades ago. Teachers are -- have had a slight increase in pay, a big increase in benefits, and that accounts for a big chunk of this doubling in real spending over the last three decades.

SERWER: Wait a minute, Jay, you're saying the problem with American education is that too much money is going to teachers? I mean, come on. I mean, administrators --

GREENE: No, it's not -- actually, what we have done is we hired a lot more teachers and at the same time put them in the classroom less. So while we have had a 45 percent increase in the number of teachers, the number of hours that the average teacher spends in the classroom has dropped.

And so they have more time for planning periods, more committee assignments. We're not effectively using our teacher workforce and frankly I'm all for paying teachers more, but we might have to slow down the hiring of more teachers, if we want to pay teachers more. It is a choice between quantity and quality.

CAFFERTY: Let's get right to the dirt. In the introduction there was a suggestion that there is something sinister going on, there are things about the public school system that special interest groups don't want us to know. Please share.

GREENE: Well, I mean, I think that there are interest groups, teacher unions, school board associations that are regularly -- trumpet the myth that they're horribly impoverished, that they have no resources. We have bumper stickers that say it will be a horrible day when the Air Force has to have a bake sale to buy a bomber, but we spend on national defense than we spend on K-12 public education, each year.

WESTHOVEN: I know one of the points about your book is that you are argue that giving people a choice, letting them have voucher programs and sending them to private schools doesn't hurt the public school system. You say that's a myth, that you are exploding.

GREENE: Right.

WESTHOVEN: But let me ask you, does it help the public school system, though? It doesn't seem like it can. If that's what we're really trying to do here, improve education for everyone, what kind of steps should we be hoping the education does to fix thing to make things better?

GREENE: I think what we need to focus on is giving schools better incentives to use their resources effectively. And greater choice and competition is one ways to do that. And, in fact, in every study, published of voucher program in the United States, or charter competition in the United States has found that traditional public schools rise to the challenge.

When they have to work harder, try harder to retain their students, and the revenue those students generate, they do a better job; so rather than draining schools of talent and resources, choice and competition actually improves the performance of public schools.

SERWER: But, Jay, you know as well as I do that not all charter schools are successful. Many of them fail. Many of them are screwed up. And, you know, it is a very disorganized way of competing.

This business interest like to come in and say we're going to bring business sensibility to education, and have competition and all that. I certainly think a certain amount of that is fine. But, you know, it is very haphazard. Wouldn't it be better to fix the public school education system?

GREENE: Right. But we have to think about how we fix it. And part of how we fix it is by giving the people who work in it stronger incentives to figure out what to do. One of the difficulties we have in public education is that there are no consequences for decisions. People may choose wisely or choose poorly, and no one is rewarded or sanctioned. And one of the things that choice and competition does is it makes people experience consequences for their decisions so they're more likely to make good decisions. That's how we fix schools is by giving people some proper motivation to figure out what to do to fix them.

CAFFERTY: Very quickly. We're out of time. Where do you stand on the subject of tenure for teachers?

GREENE: Well, I think one of the big constraints we have in improving schools is school leaders don't have flexibility over who works in schools and they don't have flexibility over how to pay people who work in schools. And so until we give school leaders that flexibility to hire and fire, and to compensate, I think we're going to have a hard time attracting and retaining high quality people to teaching.

CAFFERTY: Jay, it is a subject that is relevant to everybody in the country who has kids. Thank you for your time today on IN THE MONEY, Jay Greene wrote "Education Myths: What Special Education Groups Want You To Believe About Our Schools, And Why It Isn't So." >

SERWER: Coming up on IN THE MONEY, Jack, how to be the next Russell Simmons. We'll talk to the hip-hop mogul himself. He's out to give the urban poor a crash course in financial skills. Stick around and get in on the plan.

Plus, time for a change. More and more people don't look at a watch to check the time. Find out what that means for the thing on your wrist.

(COMMERCIAL BREAK)

SERWER: According to the Census Bureau, one out of every four African-Americans lived in poverty in the United States last year. Our next guest is trying to change that. Hip-hop icon and entrepreneur Russell Simmons says that financial empowerment begins with financial understanding. And he's set out to teach urban youth about budgeting and wealth building. Russell Simmons, chairman of UniRuss (ph) Financial Services joins us now. His Hip-Hop Action Summit for Financial Empowerment is in Atlanta this weekend.

Russell, thank you very much for coming on the program.

RUSSEL SIMMONS, CHAIRMAN, HIP-HOP ACTION SUMMIT: Thank you for having me on the show.

SERWER: All right. Why don't you talk about what you're trying to do and what UniRuss (ph) is up to.

SIMMONS: Well, first, the philanthropic component is that the Hip-Hop Summit Action Network have been to 57 summits, and a great number of them the subject matter was financial literacy.

And Chrysler Financial has funded us and supported some of work, the stars of the summit, like in Detroit, Eminem hosted three different summits. And in Philadelphia, Will Smith hosted, in LA, Snoop Dogg hosted.

We're going to Atlanta tomorrow. And we're going to have Ludacris and GZ (ph) and Jermaine Dupree (ph) and some of the stars from Atlanta. The idea that the arts will tell them what a FICO score is. I mean it is not something that we teach in schools, either. How do you build your credit? How do you rebuild your credit? How do you protect yourself from the obvious.

College student, go to school and first thing they do is start to build a hole that sometime they never get out of. So very important that we teach them about empowerment. And personal empowerment begins, a great part of it can begin with financial empowerment. That's one thing.

And now the UniRuss Financial Service Company, which is a different company, which is one of the supporters of the summit. And what we do is we created something called the Rush card. What the Rush card is, I don't know if you know, 60 million Americans do not have bank accounts. Those people are forced to go check cashing places, where they pay a fortune. Then get online and spend eight to 12 hours a week paying their bills. We created a virtual bank account, and give them a Black Visa Card or Baby Phat Rush card, so it is a step towards empowerment. What happens is a lot of time we want to work in all areas, but a lot of people who have the least pay the most.

WESTHOVEN: This is obviously a great, you know, program. You're obviously trying to help people. It certainly is helpful to get some kind of access to start having some kind of a financial credit history, so you can get a bank account.

But I actually wanted to ask you something a little personally about this. I know you have done a lot of stuff in terms of voter drives. What made you think, I'm going to take on finance. I got a hard enough time explaining this stuff and I'm not talking to a whole lot of kids, who aren't necessarily interested?

SIMMONS: Kids are excited to learn about it. If you watch one of our summits, you'll see they all get their books, we give them big booklets, with details, details given in a way they can digest them. The first thing they do is they get their pen and paper out, sit down quietly and listen to not only the rappers but the financial expert talks about this basic stuff.

I took it on because it was obvious. It is like someone said it is the last leg of the Civil Rights Movement was in economic empowerment. It is really -- one of the steps you need. We do talk about voting quite often. The rappers do talk about the most basic subject matter, which is that hard work, dedication, and focus is the reason that they're successful.

Lots of people don't believe it when their prophets taught them, or their teachers or rabbis, or reverends. They don't believe that hard work and dedication and good imagination -- and some faith -- will take you over the top.

CAFFERTY: Russell, let me ask you -- SIMMONS: The rappers teach them the obvious.

CAFFERTY: All right. Let me ask you a question about the other things that rappers teach them, though, that the message from the rap community is bling and cars and --

SIMMONS: Let me say this --

CAFFERTY: -- women and live fast, love hard and die young to quote an old country song.

(CROSS TALK)

SIMMONS: Let me say -- I we don't have much time. I want to get to that.

We talk about the lack of consciousness on the part of the rap community and what they talk about, whether it is bling-bling or whatever -- they are reflections of us. And when you talk about the gangster rappers, why never mention our gangster government? Why not talk about our lack of consciousness. Why for instance -- I was on the news the other day on, I guess, "Hardball" and I was on right after Governor Pataki. I love Governor Pataki, but he said it was us against the barbarians, and he used the word "crusade". We're are so concerned -- I lived next door to 9/11. I had the closest building. My building was --

CAFFERTY: Russell I don't mean to interrupt you but I asked you about the message from the rap community.

SIMMONS: Let me make a point.

(CROSS TALK)

SIMMONS: I'm going it talk about the lack of consciousness of adults, 20,000 -- 3,000 Africans who died in last few hours and we could have saved their lives and we never discussed them on our news. The truth is it's not just that the rappers are not conscious, they're not as sexist as the adults, they're not as racist as at adults, not as homophobic as the adults, they not rapped up in taking advantage and exploiting other people as the adults.

They're just more obvious. They just tell you what's in you, that you try to hide. So I think that rappers are the poets and just as they have always been. They tell the truth about our society, and people are offended by them. So I defend the rap community. I can tell you if you name a rapper, I'll tell you the name of their charity. You can't name a charity of any politician.

CAFFERTY: That's a good point.

SIMMONS: Of course, 50 Cent gave way $400,000 last year. Eminem gave away who knows what the Shady Foundation gave away and the work it does in the community. The Ludacris Foundation, the Sean Carter Foundation, the my four foundations, the Hip-Hop Summit Action Network, the Foundation for Ethnic Understanding, the Rush Philanthropic Art -- I'm a giver!

CAFFERTY: All right, you made your point.

SIMMONS: Wait! I want to make a point!

CAFFERTY: All right.

SIMMONS: The fact that the adults -- the adults want to point a finger at young people, as they always do, but the real guilty ones who don't teach them better and have nothing to show them that is better is the adults.

CAFFERTY: All right. Thanks, Russell.

CAFFERTY: That's my opinion. So, you asked me. You got it.

CAFFERTY: No, no, I appreciate it.

SIMMONS: Thank you so much.

CAFFERTY: That's good stuff. Good to have you here.

(CROSS TALK)

SIMMONS: Thank you, it's a pleasure to be on.

WESTHOVEN: And we know that you are, you are taking a role here in trying to teach people. So, we know that.

SIMMONS: I'm doing the best I can.

WESTHOVEN: Thank you.

SIMMONS: Thank you so much.

WESTHOVEN: In this week's "Brainstorm", we look at why the wristwatch might one day join the sun dial and the hourglass as archaic ways of telling time. Jen Rogers has that story.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: I think it's you, totally you.

JEN ROGERS, CNN CORRESPONDENT, IN THE MONEY (voice over): For some, a watch is indispensable.

(On camera): What happens if you go out of the house without your watch?

UNIDENTIFIED FEMALE: I usually go back and get it.

ROGERS (voice over): But among young people, bare wrists are on the rise. And watchmakers are taking notice as sales begin to slip.

TIMOTHY DOWD, PACKAGED FACTS: In 2005, the retail value of the watch market was $7.6 billion, which was down nearly 5 percent, which is quite a hit.

ROGERS: Timothy Dowd, who studies the watch market for Package Fact, says cell phones have broken up the wristwatch monopoly.

DOWD: I think it has become a style thing, too, which is what watch marketers really have to watch out for, the rival electronic devices become style statements.

ROGERS: Just how pervasive is this time telling trend? For our unscientific study, we headed to New York University.

(On camera): Can you tell me what time it is?

UNIDENTIFIED FEMALE: Nope. I'm guessing it is probably about 2:00.

UNIDENTIFIED FEMALE: Right now? It has got to be -- I have a phone.

UNIDENTIFIED MALE: 2:20?

UNIDENTIFIED MALE: Actually I never wear a watch, because you either break it, or lose it, so it's pointless.

UNIDENTIFIED MALE: Too much work.

UNIDENTIFIED MALE: That's why you have a cell phone.

ROGERS (voice over): Of the 10 people we asked, two had watches on.

UNIDENTIFIED MALE: I think it is probably the best way to tell time.

ROGERS (on camera): So, how much watches do you have?

UNIDENTIFIED MALE: Three.

ROGERS: And how do you rotate them? What is it based on?

UNIDENTIFIED MALE: I try to color coordinate.

(LAUGHTER)

ROGERS: That's good.

UNIDENTIFIED MALE: Please don't use that.

(LAUGHTER)

ROGERS (voice over): It's nothing to laugh at for the watch industry. As fashion rather than function may be its best hope of continued success.

BETH HUGGINS, TARGET: People have watches for dress up and then you have everyday watches; and then you have, like, the waterproof watches. You can have a different watch for every occasion.

ROGERS: In case you haven't noticed, it is not just watches, but clocks that are seeing a sales dip as well. One reason, stores adopting the casino approach to time telling. Hoping if you can't see what time it is, you'll keep shopping and spending.

(on camera): Here at this 100,000 square foot Target in New Jersey there is just one clock. And it is stuck in the corner of the food service area.

(Voice over): Both clock and watch sales tend to be cyclical, with people upgrading every few years. Whether that means sales will rise yet again, well, only time will tell. Jen Rogers, CNN, New York.

(END VIDEOTAPE)

WESTHOVEN: Coming up next on IN THE MONEY, how to make the phrase fixed rate mortgage sound sexy. Allen Wastler has the lowdown on the foreclosure boom on the new feature called "The Number".

And it's time to hear from you. We'll read some of your e-mails from last week and you can send us an e-mail right now, too, on anything on your mind. We're at inthemoney@cnn.com.

(COMMERCIAL BREAK)

CAFFERTY: Once in a blue moon those boring economic numbers aren't quite so boring after all. Webmaster Allen Wastler has something for us, as we initiate our new segment "The Number". Catchy title.

ALLEN WASTLER, CNN ANCHOR, IN THE MONEY: Oh, you like that?

CAFFERTY: Yeah.

WASTLER: You want to see some catchy numbers.

CAFFERTY: I do.

WASTLER: Le me show you -- let's flip those numbers up there.

OK?

CAFFERTY: Wow.

WASTLER: These are pretty significant numbers. These are hot home markets. They were hot home markets. Now the foreclosures are spiking up there. Look at Nevada, 255 percent. This is an annual increase in foreclosures.

If you add them all up it comes up to 115,292 foreclosures in August. And the experts say it is only going to get bigger.

CAFFERTY: My guess is that's not insignificant to the economy overall when that kind of stuff starts to happen. WASTLER: No, people losing their homes, yeah, that's generally a bad thing. A bad thing, there's ripple effects there. That is going on is you'll remember way back to the beginning of the housing boom? And remember, we had lots of experts on, saying all these ARMS that they're floating out.

WESTHOVEN: Right.

WASTLER: Exotic mortgages, this is going to come back to bite us, this would be the biting us part. OK?

SERWER: Ouch! I can feel it.

WASTLER: For example, a lot of the ARMS they did -- there was a thing called 5-1 ARM. All right? First five years you had a locked in rate, stable rate. Back when they did this, back in 1999, 2000 rates were low.

CAFFERTY: Rates were nothing.

WASTLER: Rates were low. Not a problem.

Ah! But that one, that means you get to adjust the rate every year after the first five. So now we're hitting the adjustment and now percentage points are about 2 points higher than they were back then.

WESTHOVEN: These rates are still pretty low.

WASTLER: Yeah. I mean, it was low. And now it is coming up. But figure this, $200,000 mortgage, if you're adjusting up for the 2 points now, your payment goes from $950 to $1200.

SERWER: That is a license to get whacked in the head. I mean, people who are living on the edge anyway, because that's how they get teased with that thing, you don't have enough money to buy this home, but with this little tricky mortgage, you can afford it. Well, guess what --

CAFFERTY: You wind up buying more house than you can afford.

SERWER: That's what always happens with these things, right?

WESTHOVEN: In fact, you can still refinance to a fixed rate mortgage, it may not be a bad idea.

SERWER: I would think so.

WASTLER: Again, as you noted they're still fairly low, in the grand historical trend of everything. But right now we're seeing the bite. It will get worse and worse. There is $500 billion worth of mortgage money coming up for readjustment.

CAFFERTY: Are you going to have a different number for us next week?

WASTLER: We'll work on it. CAFFERTY: Cool.

WASTLER: We'll just spin the number wheel.

(LAUGHTER)

CAFFERTY: I like the number seven.

(LAUGHTER)

SERWER: All right, Webmaster Allen Wastler with "The Number". Thank you very much, Allen.

SERWER: In this week's "Life After Work," two entrepreneurs who retired from their first venture only to pursue another one.

(BEGIN VIDEOTAPE)

SERWER (voice over): Jim Stevens and Bruce Nevins have uncorked the secret of youth, living their dream as winery owners in Sonoma County, California.

JIM STEVENS, CO-OWNER, PERRIER NORTH AMERICA: I don't feel like I'm 59. I feel like I'm 39, or maybe 29. Really what is exciting is had when you see people in the tasting room, love those wines. That really makes it all worthwhile.

SERWER: Friends and business partners for over 30 years, Nevins and Stevens co-founded Perrier North America and built the foundation for the bottled water business in the United States.

BRUCE NEVINS, CO-OWNER, PERRIER NORTH AMERICA: The passion for wine really evolved by being in France a good deal of the time with Perrier. And having the opportunity to visit some of the wine country out there.

SERWER: Dutcher Crossing opened in 2005. It is a boutique winery that the duo is committed to keeping small and personal; showcasing the award winning wine and breathtaking landscape.

STEVENS: Just love wine country living. Love the passion for wines. People say when are you going to retire? I don't think I'll ever retire.

NEVINS: This is a real windfall. It is a real wonderful segue into another life.

(END VIDEOTAPE)

SERWER: We'll be right back with more IN THE MONEY.

CAFFERTY: This time now to read your answers to our "Question of the Week", about whether you still go to department stores to buy anything anymore.

Cam wrote this: "I buy ties, pants and sunglasses at department stores. You still have to try this stuff on. In the big box stores like Wal-Mart don't usually have dressing rooms."

Although there are Wal-Marts where you can see people walking around with no clothes on.

SERWER: Where is that?

CAFFERTY: Just kidding.

Another viewer wrote, "No way. I buy my food and daily use items at a warehouse store and my clothes online. It's nice not to have to leave my house and spend money on gas."

Barb in Calgary wrote: "I buy a lot of things at department stores, like cookware, dress clothing, and shoes. Suits and dresses are still less expensive at department stores than specialty shops. The department store is not dead!"

Here is next week's e-mail question of the week: Are lower gas prices changing your mind about who to vote for in the midterm elections? Send your answers to inthemoney@cnn.com or visit our show page at cnn.com/inthemoney.

On that note, thank you for watching. And for joining us for this edition of IN THE MONEY, my thanks to "Headline News" Correspondent Jennifer Westhoven, "Fortune" magazine Editor-At-Large Andy Serwer and cnnmoney.com managing editor, Allan Wastler, host of "The Number."

SERWER: "The Number".

CAFFERTY: We'll see you back here next week. Saturday at 1, Sunday at 3:00, that's Eastern Time. Hope to see you then. 'Til then, enjoy the rest of your weekend.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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