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Issue Number One

Fed Rate Decision; Dealing With Worst-Case Scenario of Homeownership; President Bush on the Economy Later Today; Answering Your Questions; Gold Diggers

Aired March 18, 2008 - 12:09   ET

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

GERRI WILLIS, CNN HOST: The countdown is on. Two hours away from the Fed rate decision. We'll tell you why you should be paying attention.
Plus, dealing with the worst-case scenario of homeownership.

And if you're looking to strike gold, listen up. We'll tell you how to do just that.

ISSUE #1 is the economy, ISSUE #1 starts right now.

Hello, everyone. I'm Gerri Willis.

We'll be with Ali Velshi in a minute, but first, one of the three people who could be charged with fixing this economy just finished what could be the defining speech of his campaign. Senator Barack Obama delivered a speech on race in Philadelphia less than one month away from the all-important Pennsylvania primary.

CNN's Suzanne Malveaux is traveling with the senator at the Constitution Center in Philadelphia -- Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Gerri, it was a very important speech for Barack Obama. It was very ambitious as well.

What he tried to do was to talk specifically about his relationship with his former pastor, Jeremiah Wright, some of the controversy, to distance himself from those remarks that were considered offensive by some, very critical of the U.S. government. But at the same time, try to explain his relationship to this man and why it is important to him.

Now, Barack Obama went through a host of different issues. He talked about slavery, he talked about inequality, he talked about anger among black voters, he talked about anger among white voters. And really this very complicated issue of race relations in America.

But what really seemed to resonate is the point in which he talked about his own personal life story, the fact that he is the product of a white mother, a black Kenyan father, and there were incidents in his own life where he had to deal with offensive comments coming from his own family, and how that relates to the relationship that he has with this reverend.

Take a listen.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: I can no more disown him than I can disown the black community. I can no more disown him than I can disown my white grandmother, a woman who helped raise me, a woman who sacrificed again and again for me, a woman who loves me as much as she loves anything in this world, but a woman who once confessed her fear of black men who passed her by on the street, and who on more than one occasion has uttered racial or ethnic stereotypes that made me cringe.

These people are part of me, and they are part of America, this country that I love.

(END VIDEO CLIP)

MALVEAUX: So, Gerri, really trying to make the case here that he has a unique background, he is in the position where he feels that he can bring people together to unite the country. That has obviously been part of his campaign, central to his campaign.

He talked about Reverend Wright, saying that the profound mistake was not the fact that he was critical of the U.S. government or even critical of white people, but the fact that he saw society as being stagnant, that there wasn't the ability to move beyond this. And that is what he is trying to appeal to voters.

The campaign very much aware, however, Gerri, that issues of race are not going to go away, perhaps not even the controversy over Reverend Wright will go away. But they certainly feel that they've opened the dialogue here to at least starting to discuss this very controversial issue when it comes to race and politics in this country -- Gerri.

WILLIS: Fascinating speech.

Suzanne, thank you.

ALI VELSHI, CNN HOST: Well, we're just over two hours away from what's expected to be another Fed rate cut. Now, when the Federal Reserve meets, you might think that they don't make any decisions that really directly affect you, but that couldn't be further from the truth.

Lakshman Achuthan is with the Economical Cycle Research Institute. That is a group that you spend your time studying, economic cycles and recessions. And you've been right every time in the past when you have said we're heading toward a recession.

What is happening today? The Fed is going to cut rates, we don't know by how much. Is it going to make a difference, is it the thing we need to save us from going into a recession?

LAKSHMAN ACHUTHAN, MANAGING EDITOR, ECONOMIC CYCLE RESEARCH INSTITUTE: Well, absolutely. They absolutely have to cut today. They will cut today.

There is a little bit of debate, is it 75 or 100? That actually doesn't matter. It's really about psychology at this point. And the view by the markets, by people in the economy, has the Fed gotten control of the situation?

VELSHI: Because there's some feeling that they've been behind, they haven't really -- everybody in America seems to know we have an economic problem. The Fed seems to be late getting to this.

ACHUTHAN: Absolutely. I mean, they're being dragged kicking and screaming to cutting rates. And belatedly, they have switched from this inflation-fighting discussion to, we're going to avoid a recession, we're going to avoid a meltdown. And you see that they're moving very quickly to try and get there.

Now, the question is, has it convinced people? Do people think that they've got control of the situation? So, 75 or 100, it really doesn't actually matter. There is a statement with it. Does it convince people, does it put a floor under people's attitudes which have been quite -- you know, a lot of despair lately in the headlines.

VELSHI: Right. When the Fed cuts rates, the prime will go down, adjustable loans will become cheaper, mortgages won't necessarily, but the U.S. dollar will go down again. And that has been so central these days to the high price of oil, the fact that we've got inflation.

Is that even a concern right now, or is that -- do we have to put that aside and say the Fed's got to cut rates so that we can all get more access to credit?

ACHUTHAN: Right. Right. There's a lot of multitasking attempts. But right now, job number one is, avoid a recession, avoid a meltdown.

And then remember after we've avoided that, or after we've mitigated that, to take off the stimulus so you can keep inflation under control. But that's a secondary issue.

And for the dollar, this is an issue. The Fed will never talk about it, no one in the government will ever talk about it. Right? That's the policy.

VELSHI: Right.

ACHUTHAN: But right now it is actually helping in the sense that it is holding up a very cyclical part of our economy, the manufacturing side, which if it wasn't for the weak dollar, would be plunging very quickly and we'd be in a very deep recession. We're not because of the weak dollar at the moment.

VELSHI: Just this morning we got news Delta is laying people off, in part because of fuel prices, in part because of a slowdown in the economy. The one thing we have not felt that is symbolic of a recession just yet is massive job loss. We've seen some. We've seen about 100,000 jobs lost in the first two months of this year. That's really the big deal, isn't it, if we start seeing job loss?

ACHUTHAN: Yes. This is why it matters. I mean, we're all sitting here debating this Wall Street stuff, but the reason it matters on main street is because, if you do tip into a recession, it's not simply a word, it's a process. It's a negative spiral that results and brings with it months on end of job losses.

So, even if you don't lose your job, you're going to feel uneasy because you're going to know someone who did. And that will affect the way that you go out and spend your money, and things like that, and that slows things for a time and gives you the recession. Mind you, I've also heard the "depression" word out there. Given all the work we've done on cycles, I just don't see that. We just don't see that at this point.

VELSHI: OK. Lakshman, you guys aren't winging it. This is what you do at the Economic Cycle Research Institute. And you will let us know one day when you get all that information and you make a decision about whether we're headed into a recession or not, you'll come and tell us first.

ACHUTHAN: I will tell you first.

VELSHI: Lakshman Achuthan of the Economic Cycle Research Institute.

WILLIS: ISSUE #1 is all about you, and you get a chance to weigh in right now. Let's go over to Poppy Harlow, who is at the cnnmoney.com set with today's "Quick Vote" question.

Hi there, Poppy.

POPPY HARLOW, CNNMONEY.COM: Hi, Gerri.

Well, the Federal Reserve and the government have made a number of aggressive moves to try to stabilize our economy. The Fed has cut interest rates five times since September, they've made more cash available to our banking system. The government has issued billions of dollars in checks to consumers as part of the economic stimulus package, and launched a number of initiatives to help homeowners that are facing foreclosure.

But what do you think? Here's our "Quick Vote" question today. To date, do you think the federal government has taken the necessary steps to turn the economy around? Yes or no?

We'll be back a little later in the show with your answers. You can log on to cnnmoney.com to vote. We'd like to hear from you.

WILLIS: Thanks, Poppy.

Vote now and we'll have the results later on in the show.

VELSHI: Now, coming up next on ISSUE #1, more reaction to the Barack Obama speech. And a brand new CNN poll on the economy. We'll go to Bill Schneider next. WILLIS: Plus, we want answers to your questions. Send us an e- mail to issue1@cnn.com.

(COMMERCIAL BREAK)

WILLIS: The whole concept behind this program is that you get to weigh in. Every day this week we have new polls showing you what worries you have about your money. For that, let's go to CNN's senior political analyst, Bill Schneider. He's live with us in Washington, D.C.

Hi there, Bill.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Hi, there.

Well, we asked people in our most recent poll, what are the economic issues that they are most concerned about? Maybe a bit of a surprise, as most Americans believe we are in a recession, and that's about job loss. But the top concern of most Americans, 65 percent, is about the inflation rate.

The inflation rate is something they see every day, because you see the price of gasoline on billboards up and down the street, and you can watch it change, sometimes more than once a day. So the inflation rate here in a recession, as most Americans believe we are, the inflation rate is their top concern, followed closely behind this by the unemployment rate in this country.

Most Americans are not as much concerned about the drop in home values because, frankly, most people are not about to -- in the process of selling their homes. And a little lower than that, the drop in the stock market, because that doesn't directly affect people as much as the prices that they pay, particularly at the gas pump.

VELSHI: Hey, Bill, you and I have intersected a few times on the road through the course of the campaign, and that -- what you just told us reflects probably what you and I have heard on the street. Inflation is definitely far and above, with gas prices, sort of the big issue.

But this unemployment thing, we were just talking about Lakshman Achuthan about that, that that is, in many cases, the turning point of an economy. That's where it goes from good to bad. Tell us a little bit more about Americans' concerns with unemployment.

SCHNEIDER: Well, 59 percent say they are concerned about the recent drop in employment. So it is a concern, and it's a very serious one. It's more of a concern, interestingly, to women than men. Most women work these days and they feel vulnerable in the marketplace, because many of them are.

It's more of a concern to voters, lower-income voters than to upper-income voters. But what I find interesting is the enormous political difference between Democrats and Republicans on this issue.

Notice that 59 percent say they are very concerned about the recent drop in employment. That figure is 73 percent among Democrats, it's only 32 percent among Republicans. The division between Democrats and Republicans really overrides many other divisions in this country. It's gone very deep, even to the perception of what economic problems most concern you.

WILLIS: Bill, Barack Obama just finished what might be the most important speech of this race. I want you to weigh in a little bit. He's the fellow who may end up guiding this economy over the next few years.

What do you make of his speech?

SCHNEIDER: Well, this was the most sophisticated speech about race and race relations in America, frankly, that I've ever heard. It is more than any scholarly treatment, certainly more than any political treatment.

I think the key phrase in his speech was that "society must change." Change has been the theme of his entire campaign, so he said we cannot talk about race as if nothing can change in this country. He said the Reverend Wright often spoke of it that way, and he blamed him for that as if our society were static, as if no progress had been made.

He said optimistically, America can change, that we have a choice, particularly in this election, to accept the politics of division between blacks and whites and many other divisions, conflict and cynicism, or to see that this is a country that can transform itself. And he sees hope, particularly in younger voters, in the next generation, who he says has managed to overcome many of these deep divisions that older voters still have.

WILLIS: Well, Bill, thank you for that.

Coming up, we turn the show over to you.

VELSHI: It's your turn to ask questions. Send us an e-mail to issue1@cnn.com. We're going to answer those questions right after the break.

(COMMERCIAL BREAK)

WILLIS: We have been getting so many e-mails about Issue #1, and we want to answer as many of your questions as possible.

To help us do just that, AOL money coach Hilary Kramer, Fortune's Shawn Tully, and CNN Senior Correspondent Allan Chernoff. They're all here right now to help answer your questions.

Let's go to the first e-mail. It's from Rick in Alabama.

He asks, "I saw this economic crunch coming and was lucky enough to sell my house in California three years ago. Last year, I completely got out of the stock market. Now, I have over $500,000 in cash and I don't dare put it in banks or stocks," he says. "I'm nervous, I don't know what to do. Where do I put my money?" Allan.

ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Hey, you know, if you don't want to be in the stock market, there are plenty of alternatives. He lives in California? Well, right now, California State University is offering municipal bonds, a 25-year bond, AAA- rated, is yielding 7.75 percent, triple-tax-free.

WILLIS: That's crazy. That's crazy. I mean, that's unheard of.

CHERNOFF: And that is a fantastic yield. It is more than 10 percent when you factor in the tax issue.

WILLIS: Shawn, I want to go to this fear though in the marketplace right now. I think a lot of people out there are really worried about stocks, they're worried about their investments. Is now the time to bail?

SHAWN TULLY, EDITOR-AT-LARGE, "FORTUNE": No, now is the time to buy, because we have for many years not had any buys in the stock market. Stocks were radically overpriced, and in some sectors they still are.

You do not want to go near tech stocks, in my opinion. But the good thing that we've seen is, because these prices have dropped so much, dividend yields have soared.

WILLIS: And that's what you like, dividend-yielding stocks.

TULLY: Yes, I like high-yielding stocks, yes.

WILLIS: OK. Well, we'll be searching for those.

Let's go to the next e-mail. It's from Tara in Pennsylvania. She asks, "I'm currently in an interest-only mortgage. How are these types of mortgages affected, and should I get out now or stay where I am?"

Hilary, I want to put this to you, because interest-only mortgage is very controversial. What do you think, should she get out?

HILARY KRAMER, AOL MONEY COACH: She should certainly get out of that mortgage, because if you're variable, if you have interest-only, your rate could still go up even if interest rates are going down, unless you're legally linked to some kind of index when you signed your documents originally.

WILLIS: Dump the mortgage.

KRAMER: That's right. Cash is king in this economy, and at any cost try to make sure that you don't get squeezed.

WILLIS: Let's grab another one. This is from Al in Oregon -- woops. Let's go to Al in Oregon -- I have it right here.

"Please explain how a variable rate mortgage payment can go up even when interest rates are dropping" -- Allan. This is one of the market's big questions, right?

CHERNOFF: Right, absolutely. Well, you know, rate -- the mortgages that you have on a variable rate are not necessarily tied to every interest rate that you see in the financial market right now.

You've got the short-term rate that the Fed really is controlling. Then the longer-term rates really have much more to do with the demand for those notes, for those bonds, and also with the inflation expectations. So that's why when we say, oh, the Fed's cutting rates, not every rate is coming down. It should be only so easy.

WILLIS: Right. Very frustrating. So frustrating to see that. And of course we'll have more on that in just a couple of hours.

Hilary, Shawn and Allan, stick around. We'll take on more e- mails in just a bit -- Ali.

VELSHI: Thanks, Gerri.

Coming up next, the president gets set to address trade and the economy. Timed very nicely to coincide with the Fed rate decision this afternoon.

We'll check out what he might have to say.

Plus, we'll head back out to T.J. Holmes. He's out there talking to people about what they think about the economy -- there he is right there -- the election, and your bottom line.

You're watching ISSUE #1.

(COMMERCIAL BREAK)

DON LEMON, CNN ANCHOR: Hello, everyone. I'm Don Lemon, live at the CNN world headquarters in Atlanta.

Happening right now in the news, Barack Obama in Philadelphia speaking out just a short time ago on race.

(BEGIN VIDEO CLIP)

OBAMA: Race is an issue that I believe this nation cannot afford to ignore right now. We would be making the same mistake that Reverend Wright made in his offending sermons about America. To simplify and stereotype and amplify the negative to the point that it distorts reality.

(END VIDEO CLIP)

LEMON: Obama says he rejects what he calls divisive and distorted remarks by his former pastor, the Reverend Jeremiah Wright. But he also embraced Wright as the man who inspired his Christian faith.

And the campaign trail takes Hillary Clinton from Washington to Philadelphia. She's speaking at city hall this afternoon.

The U.S. Supreme Court is hearing arguments today on the constitutionality of the Washington, D.C., ban on handguns. In March, an appeals court ruled the ban violates the second amendment right to keep and bear arms.

Firefighters were called out this morning to check what's called a hazardous material situation at the Charlotte International Airport in North Carolina. A fire department spokesman says there was concern about a substance found in or around a parked U.S. Airways jetliner.

Oscar winning Director Tony Minghella died today in a London hospital. His publicist says the 54-year-old died of a hemorrhage. Minghella won a best director Oscar for "The English Patient." That film won eight other Academy Awards, including best picture. Minghella also directed "Cold Mountain" and "The Talented Mr. Ripley."

I'm Don Lemon. More now on ISSUE NUMBER ONE with Ali Velshi and Gerri Willis.

VELSHI: Continuing the countdown to the expected rate cut by the Federal Reserve and also President Bush's speech on trade and the economy. CNN White House correspondent Elaine Quijano is live in Jacksonville, Florida -- Elaine.

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Hello to you, Ali.

Well, President Bush continues to try to walk a fine line when it comes to talking about the economy. On the one hand, the president is trying to send the message that he gets it. He understands that people are facing economic hardships right now.

At the same time, he is trying to maintain a positive, upbeat tone, telling people that, while things are tough right now, better times are just around the corner. And that's what we expect the president to say here today.

Now here in Jacksonville, against the backdrop of the Jacksonville Port Authority, the president will focus much of his comments on trade. The Bush administration believes that one way to keep the economy going is to have more markets for U.S. exports. Now the president is also going to be talking about the broader economic picture, acknowledging stresses on the economy, but he'll say again that he believes the fundamentals of the economy are strong and that the long-term outlook is positive.

By the way, we should also mention, this is also a fund-raising trip for President Bush. A reminder that he is still quite popular with the GOP base. The Republican National Committee says that at two private fund-raisers here in Florida, the president will be netting some $1.5 million for Republicans -- Ali.

VELSHI: Elaine, thanks very much. We'll be keeping an eye on that speech, as well as the expected Fed rate cut. They coincide with each other at about 2:15 Eastern this afternoon. Elaine, thanks -- Gerri.

WILLIS: Well, one of the best ways to really know how folks are feeling about the economy is to get right out there. We want to talk to T.J. Holmes right now.

Hey, I understand you're at The Varsity. You've got to tell me, have you had a greasy hamburger yet?

T.J. HOLMES, CNN CORRESPONDENT: I have had a hamburger. It didn't look like the one I saw in the picture, but it was still good. OK. It's all good.

WILLIS: Good. Good. Glad to hear it.

HOLMES: You said you got to get out there and there's no more out there than you can get than The Varsity. This, of course, is a main hub of people day in and day out to have lunch. And these are everyday folks here. This is not where people because they want to spend a lot of money on a meal. This is where they come to get a good meal, get a couple good hot dogs.

We've been bouncing around, talking to people. And you're talking about the economy, Gerri, and looking here, this is a family, as you can tell, that would be concerned about the economy. This is Patrick and his little one (INAUDIBLE). His wife and child and with child. So this is certainly a group that would have some concerns about the economy.

This is something that (INAUDIBLE).

UNIDENTIFIED MALE: We're one of those families that's (INAUDIBLE) bearable rates two years ago and so we're certainly watching that. If there's an opportunity to lower our rates long- term, you know, we will lock in a lower rate. So it's probably our most pressing concern right now.

HOLMES: Do you like how it's going, things you're seeing, maybe even things you're hearing from some of the presidential candidates, things that the Fed is doing that you feel confident that things are going to get better and that somebody is on top of the situation?

UNIDENTIFIED MALE: Well, certainly. I think at 2:15 today, as it gets close to announce (ph) potentially another point to a point and a quarter, right, so we'll be watching that. Certainly hope that it will help our situation, and as well as spur the economy. I mean we certainly -- we're looking forward to the stimulus package to come in in May and putting a little money back into the economy and into some 529 plans.

HOLMES: All right. And putting that money back to the economy. Is that what you're really plan on doing? They (ph) talk about a lot of people want to pay off some debt and things like that, but you could go out and spend it, something like that?

UNIDENTIFIED MALE: Well, we certainly -- we want to put a little bit of it into the savings. But, yes, I think we'll have a few toys and some strollers and things like that with another one due any day here. I'm sure we'll put some money back into Babies R Us before its arrived (ph).

HOLMES: So any day. Well, good luck to you guys.

UNIDENTIFIED MALE: Thank you very much.

I want to get over to Gary (ph) here. (INAUDIBLE). And you have a business. You say everything that happened with the economy upset (ph) your business and that's why you (INAUDIBLE).

UNIDENTIFIED MALE: Yes, that's right because the company is not growing like it should. One of the problems that we have, of course, the gasoline. A salesman that travels by car, of course, you have to have gasoline. Gasoline costs are going up so high that if the government put a moratorium on the taxes on a gallon of gasoline for the next 12 months, that would stimulate the economy and make it grow.

HOLMES: So that's one of your concerns. Main issue there. Again, we appreciate you and you can hear kind of at The Varsity, there are plenty more, of course, out there, Gerri, but that's kind of a diversity of the issues we're seeing here. Everything touches everybody in a different way. Interest rates, gasoline, the housing crisis and things like that. We're hearing a bit of it all -- Gerri.

WILLIS: Well, T.J., thank you for that. People are well informed out there. Thank you.

VELSHI: How does he get those gigs at the lunch place at lunch?

Gerri, coming up next, with more and more jobs in danger, a different approach to dealing with losing your job. Now for more on your finances, check out cnn.com special report "Right on Your Money." Get tips on how to better manage and invest your money with video tutorials and interactive guides. You can also read or share i- Reports with other people. There's that and a lot more at cnn.com/rightonyourmoney. ISSUE NUMBER ONE coming right back.

(COMMERCIAL BREAK)

VELSHI: More and more Americans are losing their jobs. Almost 100,000 Americans have lost their jobs just in the first two months of this year. And those are just numbers. It's hard to know exactly what it feels like to lose your job until you find yourself in that situation or someone you know does.

CNN's senior correspondent Allan Chernoff is back with us -- Allan.

CHERNOFF: Ali, a growing number of people actually do have friends, family who are losing their jobs. It is happening all over the country now. And when people have trouble finding jobs, there is some serious political implications.

(BEGIN VIDEOTAPE) MARK SCHLEISNER, LOOKING FOR A JOB: I had met you at the job fair?

CHERNOFF (voice-over): Mark Schleisner, an experienced software developer, has been job hunting aggressively.

SCHLEISNER: Oh, yes, I can do technical aspects as well.

CHERNOFF: He lost his last full time position nearly a year ago as part of a corporate downsizing and thus far has been unable to land full time work.

SCHLEISNER: I know I can deliver. It's just rough. It's just really -- it's just really difficult.

UNIDENTIFIED FEMALE: And then she spoke to someone here. And ultimately she got to the hiring manager.

CHERNOFF: Mark is getting professional advice from a top career counseling firm, The 5:00 Club. But he's finding companies are slow to hire.

SCHLEISNER: I have a lot of skills, but a lot of IT places, it seems, are holding the line on hiring.

CHERNOFF: The fact is, many companies no longer are hiring. They're laying off. The economy lost 63,000 jobs last month. The worst monthly job loss in five years. The unemployment rate dipped slightly to 4.8 percent. Analysts say that's because many discouraged hunters simply dropped out of the job market.

With the economy sinking, voters say it is their number one concern that may play to the advantage of Senator Hillary Clinton. CNN's exit poll from the Ohio primary showed Senator Clinton with a clear advantage over Senator Obama among voters who said the economy is their most important issue.

PROF. DAVID EPSTEIN, COLUMBIA UNIVERSITY: If you look ahead to Pennsylvania, Pennsylvania, Ohio, a very similar state demographically and economically. I think that gives the Clinton campaign a big boost looking ahead to the big April 22nd contest in Pennsylvania.

CHERNOFF: If the employment picture turns even darker as the year progresses, it may play into the hands of the Democrats. CNN's latest national poll shows voters believe Senators Clinton or Obama are better able to handle the economy than Senator McCain.

(END VIDEOTAPE)

CHERNOFF: So the Republicans have to hope somehow that the national discussion turns back to foreign policy. Hard to see how that's going to happen with the economy doing what it is doing. But certainly our polling shows that voters believe Senator McCain is stronger on terrorism and also on being able to handle Iraq.

Ali, let's see if that happens. VELSHI: And Bill Schneider showed us that new polling, CNN Opinion Research polling, to show you that while inflation -- as you break down the economy, while inflation sort of tops most people's concerns, largely because of oil prices, 59 percent of Americans are concerned about the loss of jobs. And that's before we've actually seen all those job losses.

CHERNOFF: And the numbers could increase if this economy continues to deteriorate.

VELSHI: All right, Allan, thanks very much -- Gerri.

WILLIS: Get ready to go for the gold. Not the Olympics. We're talking about getting your hands on some real gold. We'll explain.

And next, answers to your questions. E-mail us at issue1@cnn.com.

(COMMERCIAL BREAK)

WILLIS: Our e-mail in-box is full and we want to answer as many of your questions as we can. We're back with Hilary Kramer, Shawn Tully and Allen Chernoff.

Our first e-mail is from Miguel who asks, "about a month ago I took my money out of the stock market. Where should I invest in order to continue to make money, even if it is at a smaller rate of return?" Hilary.

KRAMER: You really still want to keep your money in the stock market, in banks. You want to diversify. That's the most important point today.

WILLIS: Don't give up, in other words.

KRAMER: Absolutely. This is the bottom. This is capitulation, which is where the stock market comes back up. And it's important to understand the groundwork, which is that the stock market is a forward indicator. It's already pricing in 2009, 2010. So even if we do go into a recession, we're going to see the market come back.

WILLIS: Allan.

CHERNOFF: Eventually, at some point. That's not to say there's no risk left in the stock market. I mean it's popping up today. It could easily get slammed again until (ph) the next trading day.

WILLIS: No body knows where it's going.

CHERNOFF: Absolutely.

WILLIS: You've got to be a long-term investor.

CHERNOFF: If you're really afraid, maybe a CD, three percent.

WILLIS: All right. Let's pick up the next e-mail. J in Iowa asks, "What's the risk of owning short-term bonds versus insured bank deposits? With the bonds being issued by the government, aren't they good unless the government fails?" OK. This goes right to what the government is about. This is all about bonds, this is all about investing.

Allan, chime in here.

CHERNOFF: It's true. I mean if you're talking about Treasury notes here, Treasury bills, that's as safe as you're going to get. Go ahead, jump on in. Again, the yields are not fantastic. A lot of people have been jumping in there because of this flight to safety. But nonetheless, you can still get three percent on a 10-year note right now. You could do worse.

WILLIS: All right. OK. Steve asks, "which is worse on a credit report, a short sale or a foreclosure?" I'm here to tell you, they're both bad. If you can avoid them, do. Do you want to weigh in, Shawn. I mean, it's all about your credit rating no matter what you're doing, right?

TULLY: Well, foreclosures are very bad. And a lot of people want to walk away from their mortgages now because the value of their house is actually less than their mortgage. This is a huge problem that the Fed has identified.

WILLIS: What should they do, though? Like how many Americans are in this situation. A great number face this. What do they do, Shawn?

TULLY: Well, I think it's better to maintain your credit rating and keep making your payments and work something out voluntarily with your bank, if possible, because banks do not want to foreclosure. And they're willing to take a haircut to keep you in that house. They don't want to get a bunch of houses back, drive the prices down, have to do a lot of maintenance to fix the house up for a sale. You have a lot of leverage to work things out with a bank.

WILLIS: I've got another e-mail question I really want to get in here. It's from a fellow named Dave. "How is it that the federal government can bail out Bear Stearns in what amounts to corporate welfare and not hit the issue of homeowners mortgages harder than a band-aid proposal?

OK, Hilary, right up your -- I'm sure you're wound up on this one.

KRAMER: Absolutely. Gerri, will Bear Stearns, everyone is angered and disappointed to a certain extent because here's this company that made billions of dollars every year, it's like gambling, and then finally they lose and they get to walk away and not have to (INAUDIBLE).

WILLIS: Is it fair?

KRAMER: OK. Well, the reason it turned out -- it is fair and it was necessary. You have to liken it to an arsonist. If an arsonist lights a fire and that fire is heading towards neighborhoods, you still have to put it out. And because what happens here is, with Bear Stearns, if Bear Stearns had gone under, the entire economy could have unwound because the way you have counter party risk. There's someone on each side of the trade and it's all intertwined.

WILLIS: I vote for helping out the individuals, I've got to say. Guys, we are out of time here. Really appreciate your help. Great information.

Hilary, Shawn and Allan, thanks for being with us.

Every e-mailer we answer today will receive a copy of my new book. It's called "Home Rich." For more on "Home Rich," log on to cnn.com/openhouse. Keep those e-mails, questions and suggestions coming. The e-mail address, issue1@cnn.com.

VELSHI: All right, Gerri, thanks. And I thought that Hilary's analogy about a fire is a very sensible one.

Well, do you ever wish the phrase "gold mine" could be a reality? Well, it can be. You can actually dig for gold and find it. We've got that story up next.

(COMMERCIAL BREAK)

WILLIS: Up now, the results of today's CNN Money quick vote. Has the federal government taken the necessary steps to turn the economy around? Here are the results. And an overwhelming majority of you, 78 percent, said, no, the federal government has not done enough. Twenty-two percent of you said yes.

VELSHI: Tough crowd you guys are.

Listen, if you've ever had the desire to pan for gold or dig for gold or try to find gold with a metal detector, but with gold selling for $1,000 an ounce, this might be the time to give it a try. Maybe Dan Simon is cleverly in San Francisco at the are you at the Golden Gate Bridge, Dan?

DAN SIMON, CNN CORRESPONDENT: Well, you can see the San Francisco Bay behind me, Ali. This is where the gold rush began in 1849. Now more than 150 years later, there is another gold rush taking place out west. We went to Arizona where many are trying to capitalize.

Take a look.

(BEGIN VIDEOTAPE)

SIMON (voice-over): The Arizona desert is known for cactus, blistering heat, and, for some, gold. An hour and a half north of Phoenix, these people are literally digging for it.

DON DUESENBERG, HUNTING FOR GOLD: Well, everybody thinks they're going to get rich.

SIMON: Don Duesenberg is a retired construction worker who started doing this seven years ago.

DUESENBERG: Some people go play golf. They don't make any money. All they do is spend money. Well here, I probably get -- I get some back.

SIMON: Like times of old, they still use pans, but metal detectors and other modern equipment make finding the gold easier.

DUESENBERG: And if everything works the way it's supposed to, that's where the gold is trapped.

SIMON: About 70 to 80 years ago, this area was worked by professional gold miners. They found the easy stuff and the place was abandoned. But now these weekend prospectors are back, trying to find any scraps that were left behind.

And we mean scraps. You practically need a magnifying glass to see them in their vials. But Dave Cusack says they add up quickly. At least that's the plan.

DAVE CUSACK, HUNTING FOR GOLD: I'm semi-retired and I thought, well, I'd either get a part-time job or something that will pay well. And I thought, well, maybe looking for gold would be the same as a part-time job. So far it hasn't turned out quite that well, but I'm still hoping.

And start over.

SIMON: Seems to me you would have to have a lot of patience to do this.

DAN WARE, GOLD CLUB ORGANIZER: You've got to have a lot of patience and love to be in the outdoors.

SIMON: Dan Ware heads up a club for local prospectors. The club secured permit to search this and other federal lands. Membership in the last couple of years has soared, from about 70 to more than 400. His treasure hunting supply shop also brings in novices trying to get in on the action.

WARE: I keep thinking, where's it going to end. But everybody just keeps thinking there's more and more out there. And there is.

SIMON: One customer thought he found the nugget of a lifetime, but it turned out to be just a worthless rock.

UNIDENTIFIED MALE: It looked like gold to me, but it's iron pyrite.

SIMON: Are you finding that some of your members, some people who are doing this, are actually doing this to supplement their income?

WARE: Well, they have that idea. We try to explain to them, hey, this is a hobby. If you get any gold, it's a bonus. Don't plan on making a living doing it. SIMON: Good idea say gold experts.

NYAL NIEMUTH, ARIZ. DEPT. OF MINES & MINERALS: Go up into the hills, go up to some of the prospector shops, see if you find anybody's who's got an ounce in his hand.

SIMON: It's rare.

NIEMUTH: It's rare.

SIMON: Maybe so.

UNIDENTIFIED MALE: Nothing.

SIMON: But it doesn't stop the dream of some day finding the mother load.

(END VIDEOTAPE)

SIMON: And it's not just individuals. Mining companies are looking as well. About 20 sites in Arizona have been identified as possibly having gold. It is a very expensive business to mine for gold. But, of course, Ali, the payoff could be huge.

VELSHI: Did you find anything when the cameras switched off? Did you get anything?

SIMON: Just a few flakes here and there. I wouldn't quit your day job, that's for sure.

VELSHI: Dan, good to see you. Thank you very much. That's a great story. Gerri, gold is one of those fun things. I really like it. You can hold it in your hand and it's worth some good money.

WILLIS: I'm not mining for gold. That's not going to work for me.

VELSHI: No, I agree with you.

WILLIS: I like buying mine maybe in a store.

VELSHI: All right. Well, for those of you that don't want to mine for gold, keep watching us. We'll give you other suggestions.

WILLIS: Exactly. Across America, the economy is ISSUE NUMBER ONE. We're here all week, same time, same place, 12:00 p.m. Eastern right here on CNN.

VELSHI: Get ready for the latest news from Don Lemon and Fredricka Whitfield in the CNN NEWSROOM starting right now.

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