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Issue Number One
Bear Stearns, JPMorgan and Ben Bernanke Facing the Heat; Universal Coverage; Healthcare Fact Check; Congestion Pricing
Aired April 03, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GERRI WILLIS, CO-HOST: It's a good old-fashioned grilling on Capitol Hill. Bear Stearns and JPMorgan and Ben Bernanke facing the heat. A friendly user guide to all the housing bills in the House and Senate and what they mean for your house.
And we found a silver lining in the mortgage meltdown.
The economy is issue #1.
ISSUE #1 starts right now.
You are looking live at pictures of Capitol Hill, where legislators are grilling Wall Street executives about the bailout of Bear Stearns.
Welcome to ISSUE #1.
I'm Gerri Willis. Ali Velshi will be here in a bit.
As I said, you're looking live at these pictures. Ben Bernanke here. All eyes today on Washington, D.C. The topic, the controversial bailout of Bear Stearns.
Fed chairman Ben Bernanke, officials from the New York Fed, Treasury Department, the SEC, and high-ranking executives from JPMorgan and Bear Stearns all gathered to face the hard questions about how it all went down.
CNN Senior Correspondent Allan Chernoff is on Capitol Hill with the latest -- Allan.
ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Gerri, we've had fireworks this morning before the Senate Banking Committee. Some members of that committee expressing deep disapproval of the federal government's actions to step in and help the rescue of Bear Stearns.
Remember, $30 billion of taxpayer money was put on the line when a shotgun wedding was basically arranged by the federal reserve for JPMorgan Chase to buy out Bear Stearns, the fifth largest investment bank, that was about to go bust. And they struck this deal, but some senators say it never should have happened.
Let's listen.
(BEGIN VIDEO CLIP) SEN. CHARLES SCHUMER (D), NEW YORK: Where were the regulators? Was someone asleep at the switch? Or is it that our regulatory structure doesn't work?
SEN. JIM BUNNING (R), KENTUCKY: How big do you have to be to be too big to fail? That's the question I ask first. I am very troubled by the failure of Bear Stearns, and I do not like the idea of the Fed getting involved in a bailout of that company.
(END VIDEO CLIP)
CHERNOFF: Was it a bailout? The chairman of the Federal Reserve, Ben Bernanke, says no. We maybe bailed out the financial markets, we bailed out the economy, but we weren't trying to bail out one specific investment bank. Ben Bernanke said he did this to protect all Americans.
(BEGIN VIDEO CLIP)
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: Given the exception pressures on the global economy and financial system, the damage caused by default by Bear Stearns could have been severe and extremely difficult to contain. Moreover, and very importantly, the adverse impact of the default would not have been confined to the financial system, but would have been felt broadly in the real economy.
(END VIDEO CLIP)
CHERNOFF: Indeed, another Fed official said at the hearing that the average American would have felt it in his or her pocketbook. We would have seen our savings, our investments, take a hit if this deal had not been done -- Gerri.
WILLIS: Well, Allan, come on, you know, you bail out one investment bank, aren't you going to end up bailing out the rest if they have problems?
CHERNOFF: That's what they call the moral risk. The Federal Reserve chairman is saying he does not -- absolutely does not -- want other bankers, other investment bankers to think that they can take big risks and that Uncle Sam will just come and bail them out. He is saying this is something that he hopes will never, ever happen again, and it really was an extraordinary move.
WILLIS: Well, we all hope it wouldn't happen again, Allan. But is it possible taxpayers could lose $30 billion?
CHERNOFF: The chairman of the Fed is saying, yes, we put $30 billion -- and now it's been revised to $29 billion -- on the line, but, he's saying, we will not lose that much money. He's saying we have collateral here.
What we have are securities that Bear Stearns had actually purchased, many of them mortgage-backed securities that nobody seemed to want. But he's saying, over time, these securities should have their value. And he even said yesterday they might have even gain in value. But, of course, we'll have to see about that one.
WILLIS: We will, indeed.
Allan Chernoff, thank you for that.
ALI VELSHI, CO-HOST: All right. Well, Ben Bernanke isn't ready to say that the U.S. is headed into a recession. Some people are saying we're in a recession. Some people are using even stronger terms like "economic collapse."
Peter Schiff is the president of Euro Pacific Capital. He's the author of "Crash Proof: How to Profit From the Coming Economic Collapse."
He joins us from Stamford, Connecticut.
Peter, a good name for a book. Probably sells a lot of books.
First of all, do you really believe we're headed toward economic collapse?
PETER SCHIFF, AUTHOR, "CRASH PROOF": I do. I think everything that I forecast in my book that I wrote over two years ago, came out last year, is happening right now. And it's going to get a lot worse.
You know, Ben Bernanke, first of all, he's lying. These securities are securities that JPMorgan wouldn't touch with a 10-foot pole.
They don't have $29 billion worth of value, that's the problem. If they really were good collateral, then Bear Stearns wouldn't have gone bankrupt.
And, you know, this is a bailout, not just for Bear Stearns' shareholders, but more importantly, for Bear Stearns' creditors. And the Fed is interfering with the free market. People need to know that if you loan money to investment banks, if you loan money to hedge funds, and they do very risky things, you might not get your money back. The Fed...
VELSHI: What happens if you loan money to people for their mortgages and they can't pay that back? Does somebody in that equation get bailed out?
SCHIFF: No, they shouldn't. I mean, the problem is real estate rice price are too high. That's why there's all this risk in lending.
How did they get too high? It's because of Alan Greenspan and now Ben Bernanke. They kept interest rates much too low and they inflated the housing bubble.
The housing bubble and the collapse is not a failure of free market, it's a failure of government, and government artificial interference in interest rates and in the money supply. And, you know, Ben Bernanke said he wants to prevent the public from losing. He can't do that. You know, we got into this mess, again, because the Fed didn't want the ramifications from the bursting of the tech bubble to hurt the overall economy. They blew this housing bubble up. Everybody's going to get hurt. And you know what? The bailouts are hurting worse.
VELSHI: The bottom line here, Peter, though, is, you know, you and I may have been responsible borrowers, but if there are foreclosures around us in our neighborhoods, in our towns, the tax base goes down, our property value goes down. So we're all affected by this one way or the other.
SCHIFF: But, remember, there's no way to stop it. The property values were artificially bid up by this boom, by the lax lending standards. They have to go back down.
We can't live in the illusion that our houses are worth these crazy values. They are not. And it's distorting the economy.
Meanwhile, Ben Bernanke is creating all this inflation. There are more losses because of what he's doing.
Inflation is not being caused like he said today by rising commodity prices. He's the one that's causing commodity prices to rise by these low interest rates and printing all this money, and the average American...
VELSHI: All right. And wheat and corn and things like that, they are -- that's not the Fed that's doing that. That's world demand that's causing it.
SCHIFF: Yes, it is.
VELSHI: No it's not. Wheat is not because of the Fed. I mean, that's...
SCHIFF: Yes, it is, because...
VELSHI: It's not.
SCHIFF: ... the demand is from the money that we print. Global output of commodities is rising.
VELSHI: All right. Tell me how to make money. Your book says how to make money from the coming economic collapse. What do our viewers do to actually capitalize this?
You made predictions that are true. What do they do now? What is your next...
SCHIFF: Well, what they have to do is get rid of the currency that Ben Bernanke is debasing, get rid of their U.S. dollars, sell their U.S. bonds, cash in their CDs, and get their money invested abroad. Own Swiss francs or euros or New Zealand dollars. Invest in other countries. Buy gold, buy commodities. Buy the things that are rising as a result of what the Fed is doing and protect your wealth. Because it is under attack right now from the Federal Reserve and it's going to get worse.
VELSHI: Gold's a little under a thousand bucks, but it's still been in that $900 to $1,000 range. You don't think that's too late to get in?
SCHIFF: No.
VELSHI: You think people should still do that? And I guess for our viewers, that would mean buying an exchange-traded fund or some sort of a mutual fund of gold?
SCHIFF: Exactly. Or you can buy the physical metals, you can invest in mining stocks.
I think gold will be several thousand dollars an ounce. You know, it has risen from under $300 to over $1,000. And, you know, the entire this rise has happened, the Federal Reserve has been diminishing it or saying it's not going to last.
Again, Bernanke testified today that he expects commodity prices to fall. The Fed has been saying that for eight years and they've been wrong for eight years, because they continue to create inflation. And if they keep debasing the money, prices are going to rise and American citizens are going to lose.
VELSHI: Peter, thank you for joining us.
Peter Schiff is the author of "Crash Proof: How to Profit From the Coming Economic Collapse," and the president of Euro Pacific Capital.
WILLIS: We want to hear what's on your mind. For that, let's go over to Poppy Harlow at the cnnmoney.com set for today's "Quick Vote" question.
Hi there, Poppy.
POPPY HARLOW, CNNMONEY.COM: Hi, Gerri.
Well, today we're talking about health care. A national health insurance policy, is that really what's next for America? It is certainly a hot topic for the race for the White House. All the candidates have their own idea of what's the best health care plan is for you, but what do you think?
Here's our "Quick Vote" question today: Are you in favor of universal health care? Yes or no?
Log on to our site, cnnmoney.com. Voice your opinion. We'll be back later with your answers.
While you're on our site, you can check out the coverage of the candidates, their economic plans and the proposals for health care here in America -- Gerri.
WILLIS: Poppy, thank you for that.
HARLOW: Sure.
VELSHI: And while we're waiting to hear what you think about universal health care, we'll take a closer look at where the candidates stand on that particular issue. One that is going to be very important to you after all the stuff that we're mired in right now.
We're separating fact from fiction.
Then, see how some are turning the mortgage meltdown into a booming business.
And don't forget to e-mail us your questions. The address: issue2@cnn.com. We'll answer what's on your mind next.
(COMMERCIAL BREAK)
VELSHI: Senator John McCain has been criticized by his Democratic opponents for not focusing enough on the economy. So this morning, on CNN's "AMERICAN MORNING," the senator fired back.
Dana Bash, part of the best political team on television, is traveling with the senator in Jacksonville, Florida.
Hi, Dana.
DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Hi there, Ali.
You know, it's really interesting. What Senator McCain is officially doing, what his campaign wants everybody to be covering, is this sort of biography tour that he's been on all week long. In fact, today, here in Jacksonville, he had an event and a speech at the very hangar where he arrived back from being a prisoner of war. He was there, of course, for five and a half years, so he arrived back more than 30 years ago.
But obviously he cannot escape, and his campaign insists he does not want to escape, the issue that the voters are talking about -- of course the topic of this program, which is the economy. And they also understand that there is a danger in this whole narrative that the Democrats are pushing actually taking hold.
And what they're pushing is sort of what you just alluded to, that John McCain said, he said to an interviewer in kind of an off- the-cuff way several months ago, that he doesn't know very much about the economy. And he has made pretty clear since then that he knows a lot more about foreign policy and national security than the economy, but he is also trying to hammer home in a big way his experience when it comes to the economy. Specifically, his experience in the Senate.
Listen to what he said on "AMERICAN MORNING."
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: I said it wasn't my strongest because I spent 22 years in the military, and I have been a member of the Armed Services Committee, and involved in every major national security challenge in the last 20 years. I've been involved as chairman of the Commerce Committee. I've been involved as part of the Reagan revolution, where we cut taxes and restrained spending and embarked on one of the strongest periods of economic growth in the history of this country.
I know economics very well, certainly better than Senator Clinton and Senator Obama. So let's clear that up.
(END VIDEO CLIP)
BASH: So, there's the experience issue, the experience factor that Senator McCain is pushing when it comes to national security. He is now also trying to push very hard when it comes to the economy.
I was traveling, Ali, with him on his bus yesterday, and myself and a few other reporters were talking to him about the challenge he has of really trying to break this narrative before it takes hold that he doesn't get it on the economy. He says he understands, that he obviously understands the way politics works, and that he is going to, as we've talked about before on this program, going to put out some more specific policy proposals when it comes to the economy in general, when it comes to housing, and he hopes that when that actually happens, that that will try to sort of change the narrative and help him better defend himself, because he'll have -- actually have some meat to put on the bones, which he really doesn't have right now with regard to policy proposals on the economy -- Ali.
VELSHI: All right. But he has said -- he said to you in an interview a couple of days ago that he will within the next couple of weeks have some fairly detailed proposals coming out. And I know you'll be on that for us.
Dana, thank you very much for that.
WILLIS: The road to Pennsylvania is getting shorter. Just a few weeks left until the big primary day, and one candidate raised quite a bit of cash in the month of March.
CNN's Dan Lothian is live right now with the CNN Election Express in Philadelphia.
Hi there, Dan.
DAN LOTHIAN, CNN CORRESPONDENT: Hello, Gerri.
And the candidate who raised all that money is Senator Barack Obama. The campaign feeling pretty good today, because in the month of March, they say they were able to raise more than $40 million. They said about -- that came from about 440,000 different donors, and about half of those donors were first-time donors who gave an average of about $96 or so. What raising this kind of money allows Barack Obama to do is what we've seen happening here in the state of Pennsylvania, where he's outspent Senator Clinton 3-1 on television ads so he can kind of blanket a market. And this is an area where Senator Clinton has been doing quite well here in Pennsylvania, but nonetheless, he can force her to spend money on television ads, but he can also get the attention of the voters out there, certainly the white male voters. That's the group he's trying to go after.
The Clinton campaign, reacting to this, said that they won't be releasing their numbers until later in the month, perhaps on or before the 20th. They said that they -- they knew that he would out -- outraise them. He's been doing that now for several months.
They also point out, though, that Senator Barack Obama outspent them in Texas and Ohio, and their point is that he outspent them there and they were able to win. They said he's outspending us here in Pennsylvania, but they think they can win going forward -- Gerri.
WILLIS: Dan Lothian, thank you for that.
VELSHI: Well, as the focus tightens on Pennsylvania, because of the primary, we want to find out what key economic issue voters there are most concerned about. One of those issues is the struggle of small business.
Now, there are more than 20 million small businesses in the United States. And they remain the biggest engine of job growth in this country.
Well, CNN Election Express producer Josh Rubin took to the streets of Philadelphia to get a closer look at some of the obstacles facing small business.
(BEGIN VIDEOTAPE)
JOSH RUBIN, CNN PRODUCER: One of the best parts about working on the Election Express is all of the great food you get to eat as you travel the country. Now, Philadelphia's a food town. And the market at Reading Terminal is the perfect place to pick up some groceries, or to have a great meal.
(voice over): But with inflation on the rise, deli owner Steve Safern tells us that we're probably going to have to pay a little bit more than we used to.
STEVE SAFERN, OWNER, EAST SIDE DELI: And it's just a great environment down here. You can meet the most unique people from all over the world that come to this market. And the food itself, is unique to the city.
Right now, the economy's probably the number one problem I think on everybody's mind, from housing, to what we can put in our cars, to what we put on our tables. The cost of milk is going up. The cost of grain -- our breads have almost doubled in the last two years. When you look at the whole picture for a restaurant, everything that we do as a restaurant is going up. So, it's going to eventually have to be trickled back down to the consumer. So, right now, we have not raised our prices. We have really been trying to stand firm on where our prices are. But our profit margins are shrinking more and more every single day.
I really worry about when or if I need to raise my prices, because I don't want to have to raise them. But the economics of everything else, I won't make a profit. I'll lose money if I don't. So, my hands are being tied by what goes on outside of here.
Everybody's raising their prices, and eventually I'm going to have to raise mine, too. I always want to be optimistic, but the way things have been going, the downward turn really leaves a question mark in my mind of where we're at and where we need to be at.
RUBIN: Josh Rubin, from CNN's Election Express, Philadelphia.
(END VIDEOTAPE)
VELSHI: If you're out there and you go to the Election Express, you have got to check out the Reading Terminal Market. It is just fantastic. It's full of food, but anybody in the food business these days is really having a tough time.
WILLIS: No kidding. You have to pass on your cost to everybody else.
VELSHI: Right.
WILLIS: And then they get blamed for it. You know they do.
VELSHI: And it's a luxury. So a lot of people won't take the passed-on cost. It's a tough gig. It's an interesting thing to follow.
Coming up next, we've actually found a silver lining in the mortgage meltdown. See if you can take advantage of it.
WILLIS: And we're separating fact from fiction in the race for the White House. A closer look at the candidates and health care.
(COMMERCIAL BREAK)
WILLIS: Welcome back to ISSUE #1.
The Harry Reid bill, the Barney Frank bill, the Dodd bill, there are so many housing bills and proposals on Capitol Hill, we wanted to break them down for you.
Eamon Javers is with politico.com.
Welcome. Good to see you.
EAMON JAVERS, FINANCIAL CORRESPONDENT, POLITICO.COM: Hey, good to see you.
WILLIS: All right, so -- OK, we have lots of bills, and finally the Senate comes together with a compromise, and now we find out that the biggest beneficiaries are, what, the housing industry? You've got to be kidding me.
How did that happen?
JAVERS: Well, there are a lot of people who are squawking that, look, the housing industry, these big builders, are the ones who got us into this mess. They certainly shouldn't be the ones who benefit from any legislation that Congress passes. But they are among the beneficiaries of this Senate-crafted compromise.
It's sort of a grab bag of relatively little proposals that have been kicking around Capitol Hill for a while. They left out a lot of the big contentious stuff from this bill...
WILLIS: A lot of it.
JAVERS: ... because they couldn't get a deal done on those things.
WILLIS: Right. Well, let's talk about some of that contentious stuff.
JAVERS: Sure.
WILLIS: Like this mortgage issue, also called the mortgage cram- down, where bankruptcy judges could essentially forgive mortgage debt for folks who come in front of them.
JAVERS: That's right.
WILLIS: Now, the industry didn't like that all. How quickly did it take them to shoot that down?
JAVERS: Well, I mean, cram-downs are hugely controversial among mortgage lenders because they feel like, look, we're entering into a contract with a buyer who says he or she is going to pay us back at a certain rate over a certain number of years. It's not fair simply to allow bankruptcy judges to come in after the fact and rewrite the amount of money that these people owe us. And it's particularly appalling for Wall Street folks, because they feel like they now trade securities based on those mortgages, and they have no idea how to buy and sell securities...
WILLIS: Right.
JAVERS: ... if they don't know what the underlying mortgages are worth.
WILLIS: Well, Eamon, let's talk about another one of these issues that didn't make it into this bill. This is an FHA program to insure some $40 billion worth of mortgages. Now, I thought that stood a chance. Why didn't it make it? JAVERS: Well, some of the proposals have hundreds of billions of FHA backing of mortgages, and it looks like that was just simply too much money to get into this bill that was moving very quickly. There was a real perception on Capitol Hill that you needed to move really fast.
This is on people's minds right now. They wanted to send a very strong, bipartisan message that Congress can act, it can do something, and sort of calm the fears out there a little bit by showing that government is actually doing something.
WILLIS: You know, we're showing folks right now what's in that Senate proposal. FHA, for example, raising the standard limits for the loans backed by the FHA. Now, this could make a real big difference.
Do you think, though, all told, all these proposals that are in this stimulus package, are they actually going to be passed?
JAVERS: Well, this things has days of debates still left in the Senate.
WILLIS: Right.
JAVERS: It's got to go to the House of Representatives. Lobbyists for all of these industries are going to have a couple of shots at this bill before it gets passed and sent on to the president for his signature. So what we're looking at now might not be the final version of this thing.
But a lot of these ideas are going to be generally well thought of, particularly the one where it allows the government to spend some money rehabbing foreclosed homes in neighborhoods. One of the things about this housing crisis that has people so upset is that you've got these foreclosed homes that are sitting empty and vacant, they've got weedy lots, broken windows, and it's driving down housing prices of all the neighbors.
WILLIS: That's right.
JAVERS: And sprucing up some of those homes might go a long way to keeping housing prices across the board up in some of those really hard-hit neighborhoods.
WILLIS: Eamon, an absolute pleasure having you here. Thank you for that.
JAVERS: Hey, thanks so much.
VELSHI: Well, the mortgage meltdown is a nationwide problem, and Stockton, California, is consistently listed at the top of the list of foreclosures in this country. But in Stockton, in the middle of this foreclosure crisis, there's something of a silver lining.
CNN's Thelma Gutierrez explains.
(BEGIN VIDEOTAPE)
THELMA GUTIERREZ, CNN CORRESPONDENT: Three months ago, we traveled to Stockton, California, because we heard about a local agent who had bought a bus and organized foreclosure tours. He says his business is "on fire," that many families are seizing the opportunity to buy bigger and better homes.
(BEGIN VIDEOTAPE)
ALICIA SERRANO, NEW HOMEOWNER: A house like this was always out of our reach. This is our house.
GUTIERREZ (voice over): Alicia and Carlos Serrano say they still cannot believe this four-bedroom, 2,300 square foot home is actually theirs.
A. SERRANO: This is our kitchen here and our family room/den.
GUTIERREZ: Built in 2006, their home is in a new subdivision in desirable North Stockton, far away from the much smaller 60-year-old home they once lived in across town.
CARLOS SERRANO, NEW HOMEOWNER: Start unpacking.
A. SERRANO: I do my stuff, you do your stuff.
GUTIERREZ: They moved into their dream home just a week ago. The original selling price? About $500,000. But after it went into foreclosure, the Serranos bought it for $257,000, nearly half of what it was once worth.
A. SERRANO: We wouldn't have been able to buy a home if the values would not have gone down so much.
GUTIERREZ (on camera): You would never have been able to afford this house?
A. SERRANO: I don't think so.
UNIDENTIFIED MALE: All right. Welcome to the repo home tour.
GUTIERREZ (voice over): The Serranos found their house on a repo home tour. It's the brainchild of agent Cesar Diaz, who says he got the idea from a tour he had taken of the Hollywood Hills. The concept, bring buyers to the foreclosures. So far, business is booming. He has four tour buses running.
CESAR DIAZ, REALTOR: The price started at $240,000, it's going into escrow at $215,000. Our agent just closed this one today. Yesterday, $300,000.
GUTIERREZ: Diaz says some of the bank-owned properties his buyers have bid on are actually getting multiple offers.
(on camera): How many offers?
DIAZ: Fifteen offers.
GUTIERREZ: Fifteen offers?
DIAZ: Yes.
GUTIERREZ: $259,000 is what the asking price is?
DIAZ: Yes.
GUTIERREZ (voice over): Diaz says there are plenty of buyers out there waiting for a bargain. He says since August, he's closing about 12 deals a month.
(on camera): Your top month?
DIAZ: I mean, gross sales, $25,000, $30,000 in commissions. Obviously we have expenses.
GUTIERREZ: In one month?
DIAZ: Yes.
GUTIERREZ: For you?
DIAZ: Yes.
GUTIERREZ (voice over): Alicia says there's a downside to it. She's keenly aware her fortune is someone else's heartache. She often thinks about the family who lived in this house and the child whose drawings are all over her walls.
A. SERRANO: Even my son's room, it was Spider-man wallpaper, and you think, this kid must have loved his room. Everyone who's moved into a home that it has been foreclosed on, they're ecstatic, you know? The dream come true, brand new home at affordable prices, whereas everyone who left, where are they now? You can't help but think about those things.
GUTIERREZ: Ironically, the Serranos have rented out their old home to a family who went into foreclosure. As for this house, they plan to grow old here over the next 30 years with a low fixed rate that's affordable for them.
(on camera): Many of the bank-owned properties that were once vacant in the Serranos' neighborhood are now marked "Sold." Some are first-time buyers and families who are moving up, others who are investors who are jumping on the discounted homes. In the majority of the cases, they're going into multiple offers. But one agent cautioned, if the properties aren't priced right by the bank, they'll continue to sit empty.
Thelma Gutierrez, CNN, Los Angeles.
(END VIDEOTAPE)
GERRI WILLIS, CNN ANCHOR: Up next, why doctors across the nation are warming up to the were idea of universal health care. And just what are presidential candidates saying about health care? We're doing a fact check when ISSUE NUMBER ONE comes right back.
(COMMERCIAL BREAK)
T.J. HOLMES, CNN CORRESPONDENT: Hey there, everybody. I'm T.J. Holmes, live at the CNN Center in Atlanta, Georgia. We'll get you back to ISSUE NUMBER ONE in just a second, but first got a check of the stories making headlines right now.
Up first here, tragedy in rural western Pennsylvania. Police say a fire at the house you're seeing here killed at least eight people earlier today. Also there are two that are still missing. All the victims here apparently were trapped inside that home. Reports do say that a young woman, who jumped from a window, and a boy also escaped. They were both taken to a hospital. Investigators now looking into what caused that fire in the first place.
And for the second time this week, a U.S. airline shuts down. ATA Airlines, the latest. Canceled all of its flights today after filing for bankruptcy. The Indianapolis-based carrier says it cannot stay in business after losing a key contract in its military charter operation. The company flew about 50 flights a day. The airline is asking other carriers to help passengers who may be stranded by the abrupt shutdown.
Well, airline safety, a developing story with deepening concerns. Lawmakers demanding answers on Capitol Hill. Right now you're looking at a hearing going on there. And among the troubles matters they want to investigate, a pair of whistle-blowers who first talked to CNN. The two FAA inspectors are accusing Southwest Airlines of not only ignoring their safety concerns, but trying to hide them. They say the FAA was allowing the airline to postpone inspections and allow the airline to fly planes that should have been grounded.
Well, I'm T.J. Holmes. Going to see you back here at the top of the hour for CNN NEWSROOM. Now I want to get you back to ISSUE NUMBER ONE.
WILLIS: Welcome back to ISSUE NUMBER ONE. The CNN Money team is all over the issue you say is most important to you. That's the economy.
Let's talk health care for a minute. There's always been a contentious relationship between doctors and the insurance industry, but now doctors are actually saying they might be OK with universal health care. Jennifer Westhoven is here with the story.
Jen.
JENNIFER WESTHOVEN, CNN CORRESPONDENT: I think when you hear that doctors are interested in universal health care, you almost really do a second take about how credible that kind of a system might be. But doctors now say that the current insurance system is actually interfering with you getting the best care. That's a big shift from just two years ago. It's all about money in this new survey. Of more than 2,000 doctors, a majority, 59 percent, say they now support universal health care. A single system administered by the federal government. That's up from just two years ago when it was just 49 percent. It was done by the Indiana University School of Medicine. It's published in the "Annals of Medicine." That's a leading journal.
WILLIS: Absolutely. Well, why did these doctors turn around on this issue?
WESTHOVEN: It looks like from what they are seeing in their offices, in the hospitals, they're seeing more patients with no insurance. There are 47 million Americans with none. They let problems go untreated. They end up in hospitals. The emergency rooms are clogged. And then even patients with insurance, doctors say they can't always afford the high co-pays and deductibles. Health care costs are rising twice as fast as inflation in America, 7 percent a year.
And then there's that contentious relationship you talked about between insurance companies and doctors. Insurance companies have gotten very aggressive. They question the doctors' choices. They're always looking to be cost effective. Even a simple prescription, they can question them on.
So I think that this could be a shift in the political climate that brings us closer to national health care. I mean, when doctors make this change, it's really interesting. They used to call universal health care a scourge. And now it looks like the scourge is that no one can afford it.
WILLIS: Wow, great report. Jennifer Westhoven, thank you for that.
ALI VELSHI, CNN ANCHOR: Well, health care is a major issue in this campaign. We know that from you. There are so many speeches in the presidential race and so many stands on the issue, we want to help you separate faction from fiction. So today's focus is on health care. Bill Adair is with Politifact in Washington. And, you know, Politifact takes these claims that are made and breaks them down with a truth-o-meter.
So, Bill, we're going to bring the truth-o-meter in. Let's start with a claim that you've got from the group Campaign to Defend America, which ran a television ad recently saying that George Bush and John McCain have no plan for universal health care and, for effect, we've dimmed the lights a little bit here so you can disclose to us on your truth-o-meter. True or false?
BILL ADAIR, EDITOR, POLITIFACT.COM: True. They don't because, like many Republicans, they prefer a free-market approach rather than a mandate like Senators Obama -- or like Senator Clinton prefers in terms of to achieve universal care. So we gave it a true on the truth-o-meter.
VELSHI: OK. Now let's talk about the Democrats. A lot of people think that the health care proposals of Senator Obama and Senator Clinton are very similar. But there are some differences. Senator Clinton has made the statement that Senator Obama only wants your children to have health insurance. Let's dim those lights again, or are they already dim, and take a look at your truth-o-meter on that. Is that true or false?
ADAIR: That's false. Senator Clinton is referring to the different approach that senator Obama takes. He mandates coverage for children. He does not mandate it for adults the way that Clinton does. And she is trying to insinuate that he doesn't want to cover adults. But, indeed, his plan does have a fair amount of coverage for adults in other ways in terms of subsidies to help the poor. And so we gave that a false on the truth-o-meter.
VELSHI: Now, some of those things that Senator Obama's plan has have caused him to be criticized for the cost of his plan. He said that his plan does more than anyone else's to reduce costs. And your truth-o-meter says?
ADAIR: False again. And here it's really quite a stretch in the way that he said it. The way that he defended it, he talked about how Bill Clinton's secretary of labor, Robert Reich, had set that his plan did more to cut savings than Senator Clinton's plan. And we just couldn't find any evidence of that. Likewise, we couldn't find that the experts really said that either. The experts, even the ones that the Obama campaign had enlisted, said both plans will have considerable savings but we really can't come to a conclusion that one would save more than others. So that one also earned a false on our truth-o-meter.
VELSHI: And, finally, just after listening to Jennifer Westhoven talking about the universality of health care and the appeal of that, a mailer from the Obama campaign has said that Hillary Clinton would force uninsured people to buy insurance even if they can't afford it. What does the truth-o-meter say about that?
ADAIR: We gave that one a half true on the truth-o-meter. He's right that Senator Clinton would force people to buy insurance through her mandate. And that's one difference between the two candidates, as I mentioned earlier. But it's a stretch for Obama to say that it would force people to buy it if they can't afford it. In the case of Clinton's plan, she, like he, has subsidies for people who are poor and can't afford coverage. And so we decided that that was really only half true.
VELSHI: All right, the truth-o-meter, very helpful to us. Bill Adair is the editor of Politifact.com. Thank you for being with us, Bill, and we'll look forward to talking to you more as we can use you to get more clarity on some of these issues that we've got.
ADAIR: Thanks a lot.
VELSHI: Gerri.
WILLIS: Up next, congestion pricing. It's something you should pay attention to if you drive anywhere near a city. It could cost you a bundle in the future.
And we'll answer your e-mail questions. The address, issue1@cnn.com.
(COMMERCIAL BREAK)
WILLIS: One day before the much-awaited jobs report, we're learning new filings for unemployment have topped 400,000. It is the highest level in two and a half years. The Labor Department says 38,000 more people filed for unemployment than expected. Tomorrow on ISSUE NUMBER ONE, complete coverage of the jobs report and some very valuable information to go along with it.
VELSHI: Well, traffic in New York City can be a nightmare. If you live in Atlanta, Boston, L.A., other big cities, you likely know what sitting in a standstill feels like. But New York City Mayor Michael Bloomberg has taken an idea from London that he feels will eliminate a good deal of traffic in Midtown Manhattan. CNN's Deb Feyerick is here with more.
Hi, Deb.
DEB FEYERICK, CNN CORRESPONDENT: Hey there, Ali.
Well the big question of course is, will it work? We are talking about the entire lower half of Manhattan, just here from 60th Street, the southern edge of Central Park, all the way down to the lower tip, where you can look out and see the Statute of Liberty. It's an area that includes 42nd Street, Wall Street, Chinatown. These are areas that are so busy that it sometimes takes 30 minutes to go just a couple of blocks. That's exactly why supporters say you need this kind of congestion pricing and they point to London, saying London has had amazing success in freeing up areas of the city.
Now, the way it works is that drivers coming into Manhattan would have to pay $8 between the hours of 6:00 in the morning and 6:00 in the evening Monday through Friday. Truckers, delivery trucks, would actually have to pay $21. Critics say it is simply unfair and that it's something that shouldn't be done because it's going to hurt low to middle income people.
Now we are talking here to Sid Stricklan (ph), who we just stopped on the street. You think it's a good idea, yes or no?
SID STRICKLAN: Yes.
FEYERICK: And why?
STRICKLAN: I think anything that makes fewer cars in Manhattan would make it a more pedestrian-friendly city and be nicer.
FEYERICK: OK, Mr. Stricklan.
And that's really the whole goal of this, and that is people who don't have to be in the city during those key times are going to be left out of the city. And we're talking about money. About $500 million that this is estimated to bring in. And the mayor says that's money that can be used for new projects, for buses, subways, commuter trains. But it has to be passed by Monday because if it's not, then New York risks losing some $350 million that they would get from the feds.
Ali.
VELSHI: And I know you've been close to this. What's your bet as to where this goes? What's the likelihood of it being passed by Monday?
FEYERICK: Well, city council said yes. Albany can be a little bit trickier, but the prevailing wisdom is most likely.
VELSHI: Nothing like New York state politics. Deb, thanks very much. Deb Feyerick.
WILLIS: Up next, the help desk is open for business. We ask for your e-mails, and, hey, your response has been tremendous. Answers to your questions when ISSUE NUMBER ONE comes right back.
(COMMERCIAL BREAK)
WILLIS: OK, so the help desk, it is up and running today. Answers to your e-mail questions. Hey, let's get right down to business. Amanda Walker is with "Consumer Reports." Anya Kamanetz is the author of "Generation Debt" and Stephanie Elam is a CNN business correspondent.
Great to see all three of you.
You know, I want to get right to the e-mail here. The first e- mail from Randy. "My husband lost his job and has started his own small business. We are bringing in income, but it is sporadic. We are now in the foreclosure process. What should we do now?"
Amanda, what do you think? What would you advise this fellow? This is deep trouble.
AMANDA WALKER, "CONSUMER REPORTS" MONEY ADVISER: Yes, it's a really tough situation. If they're already in foreclosure, there are a lot of states, including Massachusetts and Ohio, started this, where through their attorney general's office they may be able to get free legal advice. They've started pro bono legal advice. So the best thing to do might be to start to call your state attorney's general office, ask for names and references and see if you can get some really good legal advice just to start off.
WILLIS: And get legal advice. And, also, now is the time to start really getting your finances in order and seeing what you can bring together, right?
WALKER: Absolutely. Absolutely. Yes, you could try and work with the bank. If they're already in foreclosure, it might be tough and banks haven't been very willing to work with people, I know.
WILLIS: Right. OK. Great advice.
OK. Kenneth has an e-mail. "I currently have a 30-year fixed rate mortgage with Countrywide. I make my mortgage payments on time, but with all of the problems with Countrywide, do I have to worry about the conditions of my mortgage changing or the rate changing?"
This is one of those questions, Steph, that I think, you know, he's worried that something's going to happen with his Countrywide loan. What do you think?
STEPHANIE ELAM, BUSINESS CORRESPONDENT: And I think it totally makes sense that he's worried about this. And the thing is, it's really important for everyone to know here is that everybody has their mortgage change hands a lot. That does happen a lot. What happens, though, is that banks cannot change the terms of your deal. So if you locked in a really nice rate, you don't have to worry about that. You are protected. But definitely understand the concern there.
WILLIS: And now it's owned by Bank of America anyway, since Bank of America took over Countrywide.
ELAM: Right. And that was better than it going bankrupt. So now you should be pretty much safe.
WALKER: They do have to notify you 50 days in advance if your loan is changed.
WILLIS: That's a good point.
WALKER: So you will get notice. You'll get notice when you have to start making payments to the new lender. And you're protected for about 60 days. There's a 60-day grace period where they can't report you late or report you to the credit bureaus.
WILLIS: You know, this is a good reason to like actually look at the e-mail that comes in your in-box.
ELAM: Got to read it.
WILLIS: All right. James in Alabama asks, "I'm ready to purchase a home. What is being done by the leading institutions to get people into housing? The credit scores needed are much higher now and there are no programs out there to get buyers into homes. How can I get financing?"
Anya.
ANYA KAMANETZ, AUTHOR, "GENERATION DEBT": Well, help is really coming from the government. So the package that was agreed on by the bipartisan yesterday said is the there's going to be $10 million for bonds to help for state and local financing agencies for first-time homeowners. So there's going to be a lot more financing coming in. Just look to the government for help.
WILLIS: You know, a great place to go to, HUD, the Department of Housing and Urban Development, at hud.gov. They have a web site, naturally. They have places to go for people who are first-time home buyers having trouble. It's a great place to go.
All right. Kin in Pennsylvania. "We have been in the foreclosure process due to job loss. We are now trying to get a loan modification with 15,000 down and a 10.5 percent interest rate. This is still going to be tough. Should we file for Chapter 13 instead or simply let our home go?"
What do you think, Amanda?
WALKER: Well, I think, again, this is a good time to call your state attorney's general office and see if you can get some legal help. There is some really good information at the American Bankruptcy Institute's web site. They have a consumer help section where they actually detail -- there's a whole question-and-answer process -- about whether or not you should file bankruptcy or consider an alternative. And they ask about things like, what kind of money do you owe? Is it secured, unsecured? Are your wages being garnished? That kind of thing. So it kind of walks you though it.
WILLIS: You know, if you do a short sale, find somebody out there who would pay something, anything for that house, it might be better.
WALKER: Yes, if you can get the house sold or if there's any way you can refinance. You can try and work with your bank if you can.
WILLIS: Yes, it's tough for people out there. OK.
Anna in Oklahoma. "I have an ARM on my home. My interest rate has gone up several times. I was under the impression that when 'nationally' the interest rate was lowered, mine should lower. I cannot get a response out of my mortgage company. What should I do?"
You know, we hear this all the time, Steph. You know, people think that when Bernanke sits down and says, oh, we're lowering interest rates that mortgage rates go down. True?
ELAM: And it's not necessarily the case. It doesn't work like that. And, obviously, she has an adjustable-rate mortgage, so this is a different situation. She's expecting it to directly correlate. And, for a while, they were dropping, but they're not dropping as much now. So it's not going to have that much of an effect.
WALKER: It sounds like it might be an interest-only ARM, which means she's been paying down the interest first. Then when they start paying the principle, your payments can really go up to nearly 30 percent higher. So that may be what's happened. It's . . .
WILLIS: Toxic loan. Interest-only loans.
WALKER: Yes, it may be time to think about locking in, if you can.
WILLIS: Exactly, because rates are really low right now.
OK, Arlene has a question. "I have a home equity line and just received a notice from my lender stating that they were lowering my available line of credit. They say it is based on appraisal. Is that legal? I feel like my safety net is now gone."
Anya.
KAMANETZ: Well, I mean, unfortunately, they have a lot more power than you may think that they do. So, you know, it probably is legal. Again, it might be a good time to go to hud.gov or go to your state attorney generals office if you do want legal advice. They do have free mortgage counseling advice as well.
WILLIS: You know, I wanted to ask you about this, because this is a problem in like California and places where the prices went sky high and now banks are saying, hey, we have no idea what these homes are valued at. Do you think that banks are right in doing this? Do they have this power?
ELAM: It's pretty controversial, Gerri, because the way that they're going about that, it's not like an appraisal of the old school days where someone came to your house, looked at what you had there and said, OK, based on the neighborhood, this is what your house is valued at. Instead, they're taking data. They're looking at mathematical equations to figure out -- and some people are saying, that's actually not fair to do to me. So it's controversial. So there might be a room there for a little bit of a fight to see if you can go back and get a real appraiser to look at your house and see what your status is.
WILLIS: We're always sparring for a fight.
OK. Yvonne in California. "My credit card company sent a letter that it was increasing my account limit from $20,000 to $23,000. I declined and requested it remain at $20,000. Does this effect my credit rating and/or FICO score?"
What do you think?
WALKER: Well, she didn't do anything, so her rates probably haven't changed. But if they increase it a slight amount, it might actually be good for her credit score because she'll have more available credit and if she doesn't go take out a bunch of new loans, she'll be using a lower percentage. So it actually might not be a terrible thing. Then again, if she ends up with too much available credit, then it can be seen as a negative thing, that she could suddenly take out a bunch of loans.
WILLIS: I'm going to have to wrap you guys there. Thanks so much for helping us out today. You were great. Amanda, Anya, Stephanie, great to see you. Thanks so much.
VELSHI: All right, airlines going bankrupt. That's not news. But normally we tell you it's not going to make any difference to you or your flights or your bookings or your miles. Well, one airline has shut down immediately, canceling all flights. We'll tell you about it next.
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WILLIS: Time now to get the results of today's CNN Money Quick Vote. For that, let's head over to the cnnmoney.com set and Poppy Harlow.
Hi, Poppy.
POPPY HARLOW, CNN MONEY: Hi, Gerri.
Well, thousands of people logged on to cnnmoney.com to vote today. Here's what they had to say when asked, do they support a universal health care plan, the majority said, yes. Fifty-seven percent said, yes, 43 percent said no. And, you know, this has been an issue and focus throughout the campaign, but it's been around for quite some time. Remember, Hillary Clinton was pushing for universal health care back when her husband was in office.
I'll send it back to you now, Ali.
VELSHI: All right, Poppy, thank you.
And on our radar, ATA Airlines has filed for bankruptcy and shut down effectively immediately. The low-cost airline says the shutdown is the result of financial troubles following the loss of a key contract for its military charter business. The Indiana-based airline served business hubs, like Chicago, Dallas and Oakland, as well as vacation destinations like Hawaii, Phoenix, and Las Vegas.
ATA employed more than 2,200 pilots, flight attendants and mechanics, all of whom will be getting some sort of notice. It's kind of sad. Aloha also last week announced that it was going into bankruptcy. So still tough times for the airlines.
WILLIS: A tough industry.
VELSHI: Yes.
WILLIS: For more ideas, strategies and tips to save you money and protect your house, watch "OPEN HOUSE" Saturday at 9:30 a.m. Eastern.
VELSHI: And for more on how the news of the week affects your wallet, tune in to "YOUR MONEY" Saturday's at 1:00 p.m. Eastern and Sunday's at 3:00 right here on CNN.
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