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ISSUE NUMBER ONE

Democratic Candidates Speak Out on Manufacturing in America; Cutting Back; Troubled Skies; Foreclosure Rescue; Curse Averted

Aired April 14, 2008 - 12:01   ET

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


GERRI WILLIS, CO-HOST: The countdown to Pennsylvania. And the Democratic candidates speak out on manufacturing in America.
A big airline merger looks this close from becoming a reality. What that could mean for your plane ticket price.

And if you think the war is expensive, wait until you hear about the cost of rebuilding the American Army.

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

Welcome to ISSUE #1. I'm Gerri Willis.

This is a show that covers your job, your house, your savings, your debt.

Ali Velshi will be along in just a minute.

We begin with the race though for the White House.

With one week to go until the Pennsylvania primary, the Democratic candidates are speak out on ISSUE #1, the economy. This morning, both Hillary Clinton and Senator Barack Obama spoke at an economic forum to address one of the state's key businesses, manufacturing.

CNN's Dan Lothian live at the Election Express in Philadelphia.

Hi there, Dan.

DAN LOTHIAN, CNN CORRESPONDENT: Hello, Gerri.

Well, yes, they were speaking at the forum on manufacturing in Pittsburgh this morning, and really focusing on an issue that really has been part of this campaign now for several weeks here in Pennsylvania, where they're focusing on jobs that have gone -- they believe gone overseas because of these trade deals, because of NAFTA, because of CAFTA. And so that was really the focus this morning. But also what they did is they talked about job creation.

They talked about bringing back some of those jobs that have gone overseas. And they both went after China.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: It's not simply enough to enforce trade laws. We also need to immediately and aggressively crack down on China's unfair trade practices. China should be a trade partner, not a trade master.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: I opposed NAFTA early from the start. And I've been consistent, I haven't changed my position. I said I would oppose CAFTA, and I did. I have consistently spoken out about the importance of making our trade agreements work, not just for Wall Street, but for Main Street.

(END VIDEO CLIP)

LOTHIAN: Senator Obama pointed out to the union members there, he said, listen, I'll be very honest with you. I don't think all trade deals are bad. He said he has supported some trade deals in the past. And he says, I can't blame a lot of job loss or all job loss on these trade deals, because he said automation really is to blame for some of that as well.

But again, with a little more than a week to go before the primary here on the 22nd, the focus again turns to NAFTA, it turns to the economy, and this is something that helped Senator Clinton in Ohio. She's hoping it can help her here. Senator Obama hoping to make up ground, focusing on not only the economy, but NAFTA trade deals as well -- Gerri.

WILLIS: It's all about jobs, jobs, jobs.

Dan Lothian, thank you for that.

LOTHIAN: That's right.

ALI VELSHI, CO-HOST: Thank you, Gerri.

It's crunch time for the Democratic candidates ahead of the Pennsylvania primary. That's what Dan was just talking about. And as they battle it out, where is John McCain in all of this?

CNN Senior Political Analyst Bill Schneider -- he's part of the best political team in television -- joins us now from Washington, D.C.

Bill, all this bickering, it's making things look a little better than they might for John McCain.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, at the moment, John McCain is sitting back, listening to the bickering. He's getting his two cents in every now and then about who is an elitist here, because the Democrats are calling each other elitists or phony populists. He's probably enjoying it.

He's gone out and he's introduced himself to the voters. And in the polls right now he's not doing badly. He ought to be doing terribly because the economy's poor, there's a Republican president in office, the war is very unpopular. But yet, he's running neck and neck with both Democrats, and maybe a little ahead in some polls. So, if the election were held right now, he might do actually pretty well. Of course, the election's not being held right now, it's being held about seven months from now, and everything could change.

VELSHI: Seven months is, I don't know, five times the amount of time that we've been focusing on Pennsylvania.

So tell me how this race sort of breaks out, as you see it right now.

SCHNEIDER: Well, there is a lot of bitterness between the Democrats, and this is bothering Democratic voters and Democratic leaders around the country. They want the race ended.

If Barack Obama were to win Pennsylvania, they believe that that pressure on Hillary Clinton to get out of the race would be enormous. But there has been no poll showing him ahead in Pennsylvania to date. So there's a lot restlessness to see what happens.

If she wins a huge victory in Pennsylvania, 15, 20 points or something, then that will give her enormous momentum, and she'll go on to Indiana, North Carolina, and hope to pull an upset. And it will get things going longer.

The Democrats are worried that the bitterness, the animosity between the candidates, could harm them when it comes to the convention and the fall campaign. But I would point out one important thing -- the differences between Hillary Clinton and Barack Obama are not ideological.

They don't differ on any big issues -- for instance, trade, that Dan was just talking about. They're both critical of trade with China and trade deals with Latin America and NAFTA. Each one is arguing the other is less opposed than he or she is, but they don't really differ in principle.

You don't have an anti-war and a pro-war candidate. You don't have anti-civil rights and a pro-civil rights candidate. They're not deep issue or ideological differences. The differences in this campaign are bitter, but they are personal differences. So there's hope that they can get over them by the time the election comes around.

VELSHI: All right, Bill. And we'll ask you to look into that crystal ball every day.

Bill Schneider is our CNN senior political analyst, and he's part of the best political team on television.

Now, plenty's been said about the candidates, about the Pennsylvania economy and proposals to help fix it. But it's easy to talk about a struggling economy when there are so many folks who actually live through these struggles every day.

CNNMoney.com's Tammy Luby (ph) spent some time off the campaign trail and with the working class folks of Wilks-Barre, Pennsylvania.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: We love our town.

LORNA ALTAVILLA, WILKES-BARRE RESIDENT: I think it's actually taken a positive step forward. I really do. I see a lot of improvement. There are a lot of businesses opening. It seems to be moving in the right direction.

UNIDENTIFIED FEMALE (voice over): There's more to do in downtown Wilkes-Barre, Pennsylvania, these days.

(on camera): Are you still going downtown?

ALTAVILLA: Yes, we're still going downtown. They have a lot of places that you can go that you couldn't go before. There really wasn't anything to do. There was no reason to walk down here.

UNIDENTIFIED MALE: Up until a year ago, there was nothing downtown. There weren't even streetlights. And now there's streetlights.

UNIDENTIFIED FEMALE (voice over): This fragile rebirth could be threatened by the downturn in the national economy.

JOSEPH REMBIS, WORKS IN WILKES-BARRE: Some people are just biting the bullet and doing what they have to do. You know. But for some people, for sure they are spending less money in town and they're bagging lunches more.

ANN WARNICK, HOTTLE'S RESTAURANT: It's going to have an impact on all businesses as far as shopping, eating out, going to events. People are making choices now. Sometimes they will come to Hottle's for dinner and they go to The Kirby (ph). Sometimes they just go to The Kirby (ph).

We'll get them eventually. They'll come back.

UNIDENTIFIED FEMALE (on camera): I mean, how was your feeling towards the future at this time last year versus now?

MAYOR TOM LEIGHTON, WILKES-BARRE, PENNSYLVANIA: Because of what has transpired across the country, ultimately you have to be worried that it's going to come back to Pennsylvania and affect northeastern Pennsylvania, and cities like Wilkes-Barre.

UNIDENTIFIED FEMALE (voice over): Cracks are appearing. Empty storefronts litter the downtown. Unemployment is ticking up, and troubles on Wall Street could affect the city's budget.

(on camera): What are the ramifications if you can't restructure the debt? LEIGHTON: Tying our belts (ph) even more.

UNIDENTIFIED FEMALE: Could it be like laying off city workers or...

LEIGHTON: No.

UNIDENTIFIED FEMALE: No?

LEIGHTON: Not laying off, but cutting back through attrition.

UNIDENTIFIED FEMALE (voice over): Not everyone is worried. Bob Scocozzo co-founded Scent-Sations, which produces Mia Bella candles.

BOB SCOCOZZO, CEO, SCENT-SATIONS: It's important for us stay in Wilkes-Barre because we're born and raised here. And a lot of our employees, they're family and friends, or friends that we've gotten to know, are from here. And we don't want to lose that, otherwise we would have went to China and made these candles for two-thirds the cost and made a lot more money. But we wanted to keep everything here, keep people employed, because we live here and we like it here.

ALTAVILLA: I'm not really afraid because we actually have lived through a recession back some several years ago. And I think, again, if you maybe lower expectations a lit bit, use a little bit of cautious spending, we, even as a nation, we could get through this a lot better. I think we have to look at it in a more positive fashion and take some positive steps.

It's a very nice town, and we have made a lot of progress in the past few years. And I personally would like to see that continue.

UNIDENTIFIED FEMALE: For CNNMoney.com, I'm Tammy Luby (ph).

(END VIDEOTAPE)

VELSHI: All right. That's Wilkes-Barre, Pennsylvania.

For much more on the election, the economy, and everything in between, log on to cnnmoney.com.

WILLIS: And this is the time every day that we check in with Poppy Harlow from cnnmoney.com. And she's right here on the ISSUE #1 set.

Poppy, what have you got?

POPPY HARLOW, CNNMONEY.COM: We're talking about airlines -- you know, rising fuel prices for these carriers. Airlines going bankrupt. And if you travel a lot, you deal with a lot of delays around the country at a number of the biggest airports.

We want to know what you expect. Here's our question today.

When I travel, I expect my flight will be on time, delayed, overbooked, or canceled? Boy, if you were booked on American last week, you might have dealt with a lot of those issues.

Vote on cnnmoney.com. We'll be back a little later in the show with the results -- Gerri.

WILLIS: I love that question. And I want to vote twice, if I can.

HARLOW: Yes.

WILLIS: OK.

Still ahead, the still rising cost of gas. We'll have the latest.

And we talk about the high cost of the war in Iraq. Wait. Wait until you hear how much it will cost to rebuild the American Army.

And we're going to answer your questions. The e-mail, issue1@cnn.com.

(COMMERCIAL BREAK)

WILLIS: Welcome back to ISSUE #1.

We start off this week in record territory for gas prices. AAA reports the average price for a gallon of unleaded is $3.37. Now, that is down a mere one-tenth of a cent from the new record price set yesterday.

VELSHI: Well, we've talked about the high cost of the war in Iraq on this show and how it's impacting the economy here at home. But wait until you hear how much it's going to cost to rebuild the American Army.

CNN Pentagon Correspondent Barbara Starr joins me now with more -- Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, hello to you, Ali.

You know, rebuilding, as they call it, the U.S. Army is a major effort in the Pentagon because, of course, we've been at war in this country for now more than five years. Now, the Army says they can manage all of it, but how much is all of this going to cost?

You know, it costs over $140 billion every year just to run the Army as it is. And there is growing concern that if another crisis was to break out, the Army would find it very tough going.

So listen for a minute to what the number two general in the U.S. Army had to say about all of this on Capitol Hill just a few days ago.

(BEGIN VIDEO CLIP)

GEN. RICHARD CODY, VICE CHIEF OF STAFF, U.S. ARMY: We are faced with a dichotomy of readiness. We are the most battle-hardened, best- equipped, best-led and best-trained force for the counterinsurgency fight that we now face. But we are also unprepared for the full spectrum fight and lack the strategic depth that has been our traditional fallback for the uncertainties of this world.

We are a stress force but not a hollow force. We are a better force, but our focus has been narrowed. Overall, I believe that the strength of our soldiers and their families are truly what allow me to say unequivocally this Army's not broken.

(END VIDEO CLIP)

STARR: "Unprepared for the full spectrum," grim words from General Cody. So, what's it going to take money-wise to fix all of that? The Government Accountability Office started look at all of this, and the numbers, Ali, are staggering.

Once again, the Army is going to need another $192 billion overall through the year 2013. That's $118 billion for replacing lost or damaged equipment from the war. The next item on the list, $62 billion to equip new units, $10 billion to replace equipment they took out of storage for the war in Iraq.

And lurking out there in the years ahead, another $160 billion for something called the Future Combat System. That's a bunch of new equipment, new electronics, new communication systems to make the Army better for the future.

It is a huge price tag, and it's something that it's going to take many, many years. Tough going in the years ahead -- Ali.

VELSHI: That first line you had, $192 billion. So, first of all, that's the Army. What about the other services? Are there similar price tags? And by the way, anybody got any suggestion as to where the money's going to come from to pay for all of this?

STARR: All very good questions. You know, the Government Accountability Office just several days ago did another report looking at the big-ticket weapons items for all of the services. And what they found is that, of the 95 weapons programs they looked at across the entire U.S. military, many of them were over cost, over budget. Adding up all of that cost to overrun, another $295 billion.

So what economists tell you about all of this, of course it's going to be money out of the federal budget, money that the Pentagon and the administration say needs to be spent. But why is it important to the individual taxpayer, other than they have to pay for it? It's money coming out of the economy.

It's money that is not available, as you have talked about so often, for capital investment, for improvements in the country's infrastructure, for health care, for all the other competing costs out there in the economy. This is money that goes into one sector only, national defense -- Ali.

VELSHI: Barbara, I'm hoping one day I'm going to ask you the question that says, you know, where is the money coming from? And you're going to say, it's going to come from the sky. No one's going to pay for it.

STARR: They print it down in the basement.

VELSHI: Yes, that's right.

STARR: Just kidding.

VELSHI: Barbara, good to see you. Thank you for telling us that story.

STARR: Thanks.

VELSHI: Barbara Starr.

WILLIS: Well, I guess we can give up on our income taxes going down. You've probably heard of another tax, the Alternative Minimum Tax. It's confusing, but you're going to get it down once and for all.

Up next, Ali is going to walk you right through it.

And we'll open up the help desk. Send us an e-mail to issue1@cnn.com, and we'll try to answer all your questions when ISSUE #1 comes right back.

(COMMERCIAL BREAK)

VELSHI: We are just one day away from April 15th, the dreaded tax deadline. And more and more of you are getting hit with something called the alternative minimum tax. The AMT can be quite confusing, so let's clear it up once and for all.

The stated purpose of the Alternative Minimum Tax -- AMT for short -- is to prevent high-income taxpayers from taking advantage of loopholes in the tax code, and to make sure that everybody pays a minimum tax amount. Now, there's no instant way to know whether you're subject to AMT, but single filers who make over $44,350, or couples filing jointly who make over $66,250 a year, have to calculate their taxes twice using two different sets of rules.

The first calculation uses typical deductions. The second one for ATM offers fewer deductions. And guess which one you end up paying? Whichever one is higher.

Now, accountants and accounting software will figure this out automatically, but you might be surprised to find out you're paying what was supposed to be a tax for the rich. When AMT was invented 30 years go, no one thought to peg it to inflation. Back then only a few hundred Americans at the richest tax levels had to pay it.

Today, it's becoming a tax on the middle class, and it's expected to hit 5.4 million taxpayers filing for 2007 this year. That number could go up sixfold in the next few years if lawmakers do nothing about it.

WILLIS: Ali, hate that AMT. We want to report the latest news on ISSUE #1, the economy. But we also want to help you.

We asked for your e-mail questions, and the response, it's been overwhelming. So let's answer some of those questions.

Laura Rowley is with Yahoo! Finance; Stephen Gandel is with "Money"; and we have got our very own Allan Chernoff with us today.

Welcome to the panel. And let's get started with the first question.

The first question is from Sharon in Florida. She says, you know, "I am on the verge of defaulting on my mortgage. I've called the bank four times in the last six weeks, spoken with four different people asking if they can help me before I default. I was told I have to be three payments behind before they will do anything. Why won't anybody help me?"

Stephen, I hear this all the time.

STEPHEN GANDEL, SR. WRITER, "MONEY" MAGAZINE: Well, traditionally, banks were set up to wait until you were in real dire straits before they were willing to help you. But all the new regulations and all the plans that have been put into place by Bush and the Fed are supposed to help you beforehand.

So, go ahead and call the new number for the Hope Now Alliance -- 1-888-995-HOPE. They should be able to help you before you head into default.

WILLIS: I think that's a great idea. Just getting a counselor, somebody on the telephone who can walk you through all of this, makes a lot of sense.

Second e-mail is an interesting one. It is, "How do you differentiate between good capitalism, greed and corruption? And how much of our economic and social problems are due to the lack of our distinctions between these ideas?"

OK, Allan, this is like -- I feel like I'm, you know, in college, a freshman, and we're going to write a paper now. What do you say though? I think it's a good question. You know, where is the line?

ALLAN CHERNOFF, CNN SR. CORRESPONDENT: There's a lot out there, and part of the reason that we have so many problems right now in our economy is because of all of this greed and corruption and the fact that it was not identified.

WILLIS: Right.

CHERNOFF: Look at subprime situation. You had lenders so greedy and making such horrific, just terrible loans. And as a result now, we're seeing the economy in a major, major funk. And it's worldwide.

So this is a great question. As you say, it really is an essay question, but that's a quick, short answer for you.

WILLIS: Yes. I think it's an interesting idea. You know, at what point do you draw the line, and then where are the rules?

Let's go on to the third question. This one from Sandy in Florida.

She asks, you k now, "My house is going into foreclosure, but it may take months." It's a slow process. "My tenant has expressed that he will stop paying rent. Do I have the right to keep collecting rent?"

Laura, what do you think about that? You know, a lot of people, you know, are pushing this line. What should this fellow do?

LAURA ROWLEY, YAHOO! FINANCE COLUMNIST: Yes, that's a very tough situation. But until the bank actually wins the foreclose order, you still own the property and still have the right to collect rent, and still have the right to evict a tenant who doesn't pay you rent. So, you have your rights until you get that order from the bank that you're officially in foreclosure. And usually the bank will assign rights of payment directly to them, and then your tenant should start paying the bank. So this is not a free ride if you're going into foreclosure for tenants.

WILLIS: All right. Well, great answer, Laura. OK.

The fourth e-mail is from Anne in New York. She asks, "I owe $75,000 on my mortgage. It's a five-year mortgage at 4.5 percent." Hooray. That's a good level.

"That will end this December. Then the interest is based on the prevailing rate. I have $63,000 in a credit union CD which comes up for renewal next month. Given the condition of the economy, for the short term, should I look for a higher yielding CD or pay down my mortgage with the $63,000? My mortgage has no prepayment penalty."

Boy, that's a mouthful. But you know what? We're out of time.

We're going to have to come back and answer this in just a minute.

OK, guys, thanks so much. It's Stephen, Laura and Allan.

Thank you. We'll be back to you with that answer. You're going to have some time to study up.

VELSHI: Well, we are going to answer it. We are going to answer that question. Stay with us. I want to know the answer to that one.

For a change, we've got a sliver of positive news for America's retailers, but just a sliver. Retail sales rebounded slightly last month after a drop in February. The Commerce Department says retail sales moved up two-tenths of a percentage point in March. That compares to a four-tenths of a percentage point decline in February. The gain is mostly due to record gas prices. Well, marriage, children, retirement, these are all major life decisions, and many decisions that many Americans are actually putting off with the economy the way it is. We'll explain.

And a major merger looks likely in the airline industry. What this could mean for the price of your plane ticket.

All that and so much more as ISSUE #1 rolls on. Stay with us.

(COMMERCIAL BREAK)

(NEWSBREAK)

GERRI WILLIS, CNN ANCHOR: Welcome back to ISSUE NUMBER ONE. You say the most important issue to you is the economy and we're all over it.

So many of you out there are dealing with major life decisions, from marriage, to children, to retirement, and we're starting to hear, starting to hear, that a lot of you are putting off those decisions because of the economy. Jennifer Westhoven is here with the story.

Hi, Jen. What's going on?

JENNIFER WESTHOVEN, CNN CORRESPONDENT: You know we talk about foreclosure rates and retail sales and mergers, but I think this is some of the clearest evidence we have so far that this is really -- Americans are really putting their dreams on hold. That the economic downturn is having an impact on our lives.

Four in 10 American adults, that's 41 percent, say they're postponing their dreams. And these are major life decisions where people think, maybe I can't afford this right now. The survey says it's either a lack of savings, that you don't have enough money up front to pay for this, or a fear about the overall economy. You know, how do you borrow if you're afraid you might lose your job? It is nerve-racking when you think that you could lose the main lifeline of your financial security.

So these are major life decisions we're talking about. Getting married. Having children. How do you commit to something like that, you know, if you can't pay for it? Buying a home. Getting a medical procedure. And going to school. I mean we know that it more than pays for itself in the long run. Even retiring.

WILLIS: Well, you know, it had to happen with the economy as bad as it is. But, you know, it just shows just how important it is to start saving all along the way. You know, you really can't make your decisions on the basis of, what is the market doing today or how the economy is.

WESTHOVEN: Yes. And one of the things that we're seeing is, people who are in -- who were expected to go into retirement, they're not retiring. The Labor Department says there are a million Americans already in the workforce who were expected to have left by now, who clearly said, you know, maybe I'm going to stick around and work a little longer. It could be that they want the health benefits, the paycheck or they can't sell their home right now and move to where they wanted to go.

WILLIS: It's so sad.

Jen, thank you for bringing us that story.

ALI VELSHI, CNN ANCHOR: All right, the Delta Northwest merger is close to a reality. In an industry where few things are ever a given, various reports indicate that an announcement could come as early as today or tomorrow. Certainly sometime this week. And when it happens, if it happens, that merger would create the world's biggest airline.

The deal, which we've reported on for months, reportedly would have Delta paying about $3 billion for Northwest. That said, there are still some issues with pilots and the way they see this deal.

So what does a deal like that actually mean to you, the consumer? Rick Seaney is the CEO of Fare Compare. He's in Dallas.

Rick, good to see you. Again, thanks for being with us.

RICK SEANEY, CEO, FARECOMPARE.COM: Good to be here.

VELSHI: We've gone through this road before, down this road before. Do you think this deal, first of all, is going to happen?

SEANEY: I think it will. I think, you know, after the second time, it's pretty likely to happen. It looks like we're really close to getting a deal done. They even did some work on doing some international stuff as well. So I think this deal is going to go through.

VELSHI: Now, Rick, one of the things you do on Fare Compare is you let us know when an airline tries to institute fare increases. And they have been remarkably frequent this particular year. In many cases they call them fuel-related surcharges. But the bottom line is, passengers have seen their fares go up. What does a deal like this, generally speaking, mean to passengers? Is it good or bad?

SEANEY: In general, it's bad. Basically, competition drives pricing. Anytime you take away any type of competition, I don't care who it is, whether it's the three airlines last week that went bankrupt or Frontier, who's still flying, it's bad overall for consumer. That being said, Northwest and Delta don't have much overlap. So they're not the big issue. The big issue will be when the next merger comes, which is likely to happen right on the heels of this one.

VELSHI: And we -- Continental and United have been mentioned as those two partners. Is that what you're sort of thinking or hearing?

SEANEY: That's correct. Yes, Continental and United mentioned. Maybe even some smaller, regional airlines being gobbled up. It's really tough right now and we just need competition to drive pricing. Without competition, we are going to see higher airline ticket prices.

VELSHI: You said there's not a lot of overlap. Let's take a look, if we can, at some of the cities that Northwest and Delta call their hubs, although I don't know how efficient, how effective those descriptions are anymore. Delta uses Atlanta, Salt Lake City. It uses New York, LaGuardia and JFK as hubs.

SEANEY: Cincinnati as well.

VELSHI: And Cincinnati. And Northwest has Detroit, Michigan and Memphis. How does that affect the way we travel? Because a lot of these low-cost airlines don't use this hub system. They use point to point travel.

SEANEY: That's correct. I mean there wasn't much overlap between the two airlines anyway. And Northwest has had actually pretty decent pricing. Delta's been a little bit higher. They've had some of the highest prices out of Cincinnati and Salt Lake City of all cities in the country. So I don't see that they can actually go up much further. So I don't see much happening there.

VELSHI: All right. Let's take a look at those -- you mentioned those airlines that went bankrupt over the last couple of weeks. In many cases, airlines go bankrupt in the United States and they keep flying. We had a few airlines that actually just stopped flying entirely. Most people who had tickets probably know what to do, but, tell us again, what happens? If you're on an airline that goes bankrupt, what do you do?

SEANEY: Well, the first thing you should always do is immediately contact your credit card company. You have up to 60 days, depending on you credit card company, and you should try to get distribute that charge and get that going. If you're outside of 60 days, your options are pretty thin. For instance, when ATA went out of business, mostly between California and Hawaii, Southwest was selling those tickets as well as a co-chair and Southwest agreed to keep everybody whole, so you could actually get your money back or get a new flight through Southwest. So, other than that, really, your options are pretty thin. You have to get in line with the rest of the creditors as part of the bankruptcy proceeding.

VELSHI: Rick, you're on top of the fare increases and you really track those very well. What about these fees? We've seen -- I mean, it really gets under my skin. Most of the airlines now -- or many of the larger airlines -- have instituted a fee for a second bag. If you want more than that, then, you know, you're going to pay even more. But we've got all these little fees. They tend to add up when you're buying a ticket.

SEANEY: Yes, you could have actually up to $50 if you want a second checked bag, $25 each way. There's dozens of fees out there, whether it's a fee for actually getting a human on the phone. If you want to get a human on the phone, they're going to charge you a fee for that.

Really the way to get around fees is basically you have to book online and you don't -- either can't be a human involved in the conversation, otherwise you're going to get hit with these fees. And we're going to see this continue. I think it's happened a lot in Europe recently where we have all this a la carte pricing for everything. And I think we're going to see that continue in the U.S.

VELSHI: Rick, one thing none of us could have really predicted is how high oil has gone, over $110 a barrel. That, of course, doesn't work for some of these lower cost carriers. Tell me what you've seen in the last several months in terms of fuel increases. We see them happen and we see the airlines pull back sometimes. Sometimes they stick. Where are we? How much more are we paying now?

SEANEY: Well, I mean, if you took January 2, 2008, and compared it to just this past week when United attempted an increase, which looks like it's going to stick, of $30 for the longest flights, passenger are paying up to $130 more than they did on January 2nd. We've had 11 increases, seven of them now that are basically, for the most part, stuck. The other four got rolled back. People are paying well over $100 more than they did earlier in the year.

And I don't see it stopping for the foreseeable future. We're actually on pace right now for potentially 40 increases this year if it stays on pace.

VELSHI: Wow. Rick Seaney, good to talk to you. Thank you for being with us.

Rick Seaney is the CEO of farecompare.com.

WILLIS: Boy, they get you coming and going. That was a great interview, Ali.

A big lender puts a stop to certain types of loans. We're going to tell you all about it.

Plus, one woman's story of avoiding foreclosure. We'll show you how she did it.

Plus, your e-mails, our answers. The address, issue1@cnn.com.

(COMMERCIAL BREAK)

WILLIS: If you're a college student about to graduate or maybe you know one, you'll want to listen up. Sallie Mae says it's getting out of the business of offering low-cost consolidation loans to college graduates. They say the federally backed business is no longer profitable. Instead, Sallie Mae will concentrate on focusing on making new loans to students just getting started in college. Now all of this is no doubt rooted in the problems last year -- financial losses, a failed buyout and reshuffling of top management.

Ali.

VELSHI: Gerri, the mortgage meltdown is a tragic indication of just how severe this housing crisis is. One and a half million American households were in the process of foreclosure last year and it is expected to be worse this year. But there are steps that people can take to avoid losing your home. CNN's senior correspondent, Allan Chernoff, has that story.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN CORRESPONDENT, (voice over): We first met Jillian Simmons in January when she was panic over the likelihood of losing her home.

JILLIAN SIMMONS, HOMEOWNER: This is my home. This is my castle.

CHERNOFF: Jillian's adjustable mortgage rate was due to jump to at least 11 percent, which would mean a monthly payment she could not afford.

SIMMONS: Losing my home. That's my biggest fear.

CHERNOFF: While Jillian faced depending trouble, she had never missed a mortgage payment and has held a steady job working at Bloomingdale's for 27 years. Jillian came to Brooklyn Housing and Family Services, a non-profit that provides free counseling. Otencia Chance-Green took her case.

OTENCIA CHANCE-GREEN, BROOKLYN HOUSING & FAMILY SERVICES: She would have gone into default and probably into foreclosure.

CHERNOFF: The housing counselor told Jillian to write a simple letter to the bank explaining her circumstances and the fact that she would not be able to afford her monthly payments if her interest rate were adjusted higher.

Jillian wrote to the bank, Fremont Investment and Loan, a major subprime lender.

SIMMONS: I'm a singled, divorce, mother living alone with my children. Please lower my rate from the 7.95 percent I have at the moment, so that somehow my payments will be more affordable and change to a fixed rate. Thank you, Jillian Simmons.

CHERNOFF: Did you ever imagine they'd lower you to 5 percent?

SIMMONS: Never in my wildest dreams.

CHERNOFF: Otencia followed up with persistent calls to the bank. Two months later, a letter arrived for Jillian.

SIMMONS: I held a letter. I said, oh my God.

CHERNOFF: It was the answer to her prayers.

SIMMONS: Congratulations! Oh, my God! Oh, my God!

CHERNOFF: Fremont Investment and Loan did more than Jillian had asked. The bank lowered her interest rate by 3 percentage points, dropping her payments by $1,000 a month, and made the loan a fixed rate mortgage to keep her monthly payments constant. SIMMONS: And I read it and I read it and I read it and I said, oh, my God, thank you, Jesus, thank you, God. This is exactly -- I mean, you can't go better than this.

(END VIDEOTAPE)

CHERNOFF: Why was Fremont Investment and Loan so cooperative? The bank refused comment, but the parent company, Fremont General, this morning announced a plan to sell off Fremont Investment and Loan because it suffered financial problems after making so many risky loans. So it has been under pressure to service loans that are being paid up rather than forcing mortgages into foreclosure. Not every homeowner can expect the kind of break that Jillian got, but the fact is, banks are willing to negotiate.

Ali.

VELSHI: Wow, what a story. What a story. I mean Gerri often tells us when we've got issues with houses or with credit cards, do actually approach the bank and write the letter. Tell me, what does the bank want out of this? If you're facing this thing, does the bank want to get this thing done and foreclose on your home or would they rather make a deal like this?

CHERNOFF: They want to make a deal. I mean they should want to make a deal. It's in their interest because they'll keep making interest, even if it is a lower rate. Foreclosure is very expensive. Some non-profits have told me it costs banks at least $40,000 to foreclose. There are lawyer fees. They've got to actually have the house auctioned off. Very expensive. Time consuming. And they're losing business. They want to retain their business.

VELSHI: They're in the business of lending money. Well, Jillian should make herself a consultant and tell people how to write those letters. Fantastic story.

Allan, thank you so much.

Gerri.

WILLIS: A good news story.

Up next on ISSUE NUMBER ONE, back to answering your e-mails. The address, issue1@cnn.com.

And we'll talk about the business of baseball. Find out how cement, construction workers and one very dirty Red Sox jersey could end up making a whole lot of money for charity.

(COMMERCIAL BREAK)

WILLIS: Welcome back to ISSUE NUMBER ONE. Let's keep this help desk going. Our experts today, Laura Rowley is with Yahoo! Finance, Stephen Gandel is with "Money" magazine and, of course, we have our very own Allan Chernoff. Now just a minute ago I read an e-mail and I gave you time to think about it. Now I'm going to read it again, so you can just a little more thought here. Anne in New York asks, "I owe $75,000 on my mortgage. It's a five-year mortgage at 4.5 percent that will end this September." That lock in. "I have $63,000 in a credit union CD which comes up for renewal next month. Given the condition of the economy, should I look for a higher-yielding CD or pay down my mortgage with the $63,000? My mortgage has no pre-payment penalty."

Stephen, what do you make of this. Think is really an arbitrage of playing what's more expensive, right?

STEPHEN GANDEL, SENIOR WRITER, "MONEY" MAGAZINE: But mortgages become a double four-letter word. It doesn't have to be. There are safe mortgages out there. OK. So there's two answers to this question, depending on how close this person is to retirement. If they're pretty close to retirement, OK, take that money, pay off the mortgage. You don't want a mortgage in retirement when you're not making any money. But if you're not close to retirement, take that money that you have in the CD, you don't want a new CD, put it into a diversified stock market portfolio. You'll be better off in the long run in the stock market than with real estate.

WILLIS: I love that. Laura, you want to weigh in.

LAURA ROWLEY, YAHOO! FINANCE COLUMNIST: Yes, absolutely. I mean, I think the answer issue is liquidity. Do you need that cash for something else? Do you have a child's college tuition coming up? Do you have a shaky job scenario. And also the issue of relocation. If you're going to move in the next five years, don't pay it down.

WILLIS: It's a fascinating question and I want -- I know a lot of people face.

Let's go on to the next e-mail. Sheila in Florida asks, "I am single, have no children, and am semi-retired. I would receive $600 from the stimulus package. It would be just enough to place me in a higher tax bracket. Is there a way that I can send that check back? I'll end up probably paying more than the $600 I'm getting."

Allan, you want to answer.

CHERNOFF: There's so much confusion about that stimulus program.

WILLIS: Right.

CHERNOFF: This is not taxable. None of these rebates are taxable. It is not going to put her into a higher bracket. She doesn't have to worry.

WILLIS: Keep the money.

CHERNOFF: If she's really worried, of course, she can send it to us.

ROWLEY: She can send it to Allan. Allan will take us out to dinner.

WILLIS: Well, save it. You've got to save it or pay off some high-interest debt.

Jenny in Texas asks, "my son will graduate next month. What are his prospects for finding work in this economy? Any suggestions?"

Any takers here? Want to forecast? Laura, go.

ROWLEY: I'll take that. I'll take that because there's so much negativity right now in the media and I can see why she's worried. But actually the National Association of College and Employers is forecasting an 8 percent rise in hiring for college grads this year over last year.

WILLIS: When? This year?

ROWLEY: This year. It was higher last fall. They were forecasting a 60 percent increase. But 8 percent over the previous year. The other trend that's really big is employers now hiring interns out of college. Paid internships. So if her son is offered a paid internship, don't, you know, poo poo it or . . .

WILLIS: Don't discount it.

ROWLEY: Exactly.

WILLIS: It's a good thing. All right. OK.

Mark has a question. He asks, "I recently saved up about $20,000." That's good news. "Unfortunately, I have a little over $14,000 in credit card and medical debt. Eight of the accounts are in collections. Three are supposed to fall off my credit report by January 2009. Should I take my savings and pay off the collection accounts or continue to keep it in a savings account?"

OK, I'm thinking this is a little bit of a no-brainer. Allan, go.

CHERNOFF: I'm begging Mark, why are you saving money when you've got all this credit card debt? Pay it off. Get it away from you. I mean, that's just such a common mistake. So many people feel, oh, it's OK to have this revolving debt. You're never going to earn that level of interest rate in a bank.

WILLIS: Right.

CHERNOFF: The level that the credit card charges.

GANDEL: I totally agree. But -- I'm sorry to cut you off. I totally agree. But I think -- and as you got this money, you can make a deal. You should go to the different creditors and say, listen, you see that I've got a bunch of debts, eight different accounts, but I got the money to pay you off. Let's make a deal. And I think if the person -- if Mark goes around and negotiates with each person, they might be -- he might be able to pay off that debt for $10,000 instead of $14,000.

WILLIS: All right. Well, that's a great idea.

ROWLEY: Yes, I just want to add, note on the check, cashing this check constitutes full payment of account number blank. That way the creditors can't come back.

WILLIS: All right, Laura, thank you to my guests, Stephen Gandel, Allan, as always, great to have you here. Thanks so much, guys. Great answers to the tough questions.

VELSHI: All right. Coming up next, we're talking Yankees and Red Sox. This is a huge story in New York. We're not talking about last night's game, we're talking about a curse on the New Yankee's Stadium averted. I'll explain next. You're watching ISSUE NUMBER ONE.

(COMMERCIAL BREAK)

VELSHI: All right, cnnmoney.com's Poppy Harlow here with the results of today's Quick Vote poll. There was a question on that poll about people who don't expect any delays when they travel. Come on.

POPPY HARLOW, CNNMONEY.COM: We asked people, what do they expect of their flight? Is it going to be on time, delayed, canceled. The majority, of course, said delayed. Check out these numbers here. But, Ali, 37 percent are so people (ph), at the last check, said they expect their flight to be on time, 37 percent.

VELSHI: (INAUDIBLE) you people? Thirty-seven percent of you think your flight's going to be on time.

HARLOW: Where are they flying out of? Not New York, I can tell you that one.

VELSHI: Yes, fascinating. But most people still expect to be delayed?

HARLOW: I know I do. I factor in a few hours there for delays. It's rough but the airline industry trying to turn things around a little bit.

VELSHI: A very optimistic bunch of viewers we've got.

Thank you very much.

Poppy Harlow from cnnmoney.com.

Now to the business of baseball. It's pretty serious business in many parts of country. And when you use the Red Sox and the Yankees in the same sentence, the intensity level goes way up. CNN's Fredricka Whitfield explains.

(BEGIN VIDEOTAPE)

FREDRICKA WHITFIELD, CNN CORRESPONDENT, (voice over): Things haven't been the same for the Yankees since that night in 2004 when Dave Ortiz of the Boston Red Sox blasted an extra inning homer and turned around an American League championship series the Yankees were all set to win.

The hated Sox would go on to win the World Series, their first since World War I, reversing the fabled curse that fell upon the Sox in 1920 when they traded Babe Ruth to the Yankees.

As for their own recent woes, the Yankees hope their upcoming move from the house that Ruth built to a new stadium across the street will prove to be a charm. So Yankees fans were incensed at news of a plot to jinx it.

"The New York Post" first broke the story of a worker at the new Yankees Stadium, who was a Red Sox fan, who buried the jersey of a certain Red Sox in the stadium's concrete bowels. None were more incensed than other construction workers.

FRANK GRAMAROSSA, STADIUM CONSTRUCTION WORKER: I read an article the other day that Derrick Fuder (ph) said, I hope somebody digs it out. And that's really what gave us our motivation.

WHITFIELD: Yankee brass called the jersey plot a "dastardly act," but wasn't sure about digging the shirt out.

RANDY LEVINE, PRESIDENT, NEW YORK YANKEES: It's never a good thing to be buried in cement when you're in New York. So we were thinking about, maybe we should just add some more cement on it.

WHITFIELD: Rather than tempting fate, workers sprang into action after the Yankees got a tip on the jersey's location. Five hours of digging on Friday and two more hours Saturday and there it was. That jersey with the name of you know who, the Red Sox's David Ortiz. Curse averted. The city that never sleeps can rest easy tonight. Well, maybe.

Fredricka Whitfield, CNN, Atlanta.

(END VIDEOTAPE)

WILLIS: All right. So that jersey is going to be donated to the Jimmy Fund. That's a Boston-based charity for kids with cancer, which is really nice.

VELSHI: OK, so there's some good out of it.

WILLIS: Yes.

VELSHI: There were a bunch of Yankees fans who would offer to go help with the digging up. And if they had been allowed to help with it, there would be no jersey to donate to any fund.

WILLIS: Absolutely not.

VELSHI: This is such a crazy rivalry, obviously. Everybody knows about this. But when you -- I mean, this has really got people worked up that somebody would bury . . .

WILLIS: I may be why.

VELSHI: Anybody but Yankees?

WILLIS: Yes.

VELSHI: All right. Well, there you go.

WILLIS: Yes. Yes. Absolutely.

VELSHI: All right. Well, that's a little bit of good news out of that story. But thank you for joining us today.

WILLIS: And don't forget, for more ideas, strategies and tips to stave you money and protect your house, watch "Open House" Saturday at 9:30 a.m. Eastern right here on CNN.

And for more on how the news of the week affects your wallet, turn in to "Your Money," Saturday's at 1:00 p.m. Eastern and Sunday's at 3:00 right here on CNN.

WILLIS: Across America, the economy is issue number one. We're here every weekday at noon Eastern right here on CNN.

VELSHI: They said I actually have more time to rebut the fact that it's a good thing they got that jersey out of the away because this new Yankee Stadium, by the way, is not going to be opened until next year. So it was almost a year that we'd have to wait with that curse.

Now you can finish.

WILLIS: All right. OK. Well, you know what, let's just turn it over to Don Lemon and Melissa Long in Atlanta. They've got your latest headlines in the "Newsroom."

DON LEMON, CNN ANCHOR: After the raid at the Yearning for Zion Ranch, hundreds of children from a polygamist sect in Texas needs hundreds of lawyers. We're on the case there.

MELISSA LONG, CNN ANCHOR: Two major airlines seem pretty close to forming one mega-airline. Whether pilots are on board or not, Ali Velshi is going to look at whether it will get off the ground.

LEMON: And you've heard a million times, probably on television, what you say will be held and used against you.

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