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Issue Number One
Calls for Credit Card Consumer Bill of Rights; World Food Crisis; Food Bank Shortage; Answering Your Questions; Quick Vote Results
Aired April 17, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TONY HARRIS, CNN ANCHOR: And hello, everyone. I'm Tony Harris.
"ISSUE #1" begins in just a moment, but first the shepherd tending to his flock in a mass celebration in our nation's capital.
Catholics converge on Nationals' ballpark in Washington this morning for Pope Benedict's first public mass of his six-day visit to the United States. An estimated 46,000 turned out for the service held under strict security measures.
Pope Benedict has a full schedule for his remaining days in the United States. Tonight, he meets with representatives of other religions. That event is being held at the Pope John Paul II Cultural Center. Tomorrow he travels to New York where he addresses the United Nations general assembly. On Saturday he celebrates mass at St. Patrick's Cathedral. Sunday, he visits Ground Zero where he will meet with 9/11 survivors and some of the families of those killed in the terror attacks. Then later he celebrates mass at Yankee Stadium.
Iraq on the agenda this afternoon. President Bush meets with the British prime minister Gordon Brown. The British leader is in Washington holding back to back meetings with all three presidential candidates. He is meeting this hour with Hillary Clinton at the British embassy. Earlier this morning Mr. Brown held talks with Barack Obama. Later the prime minister will sit down with John McCain.
Happening now, the biggest child custody hearing in Texas history. A judge must decide whether the hundreds of children removed from a polygamist compound should remain in state custody. Texas Child Protective Services removed the children nearly two weeks ago over concerns of possible sexual abuse. Members of the polygamous sect deny the allegations.
More news at the bottom of the hour. Now "ISSUE #1" with our CNN's money team, Ali Velshi and Gerri Willis.
ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Calls for a credit card consumer bill of rights that could protect you. We'll look at one of the fastest growing white-collar crimes in the country and what the FBI plans to do about it. And Suze Orman is here live taking your calls.
ISSUE #1 is the economy. ISSUE #1 starts right now.
Welcome to ISSUE #1. I'm Ali Velshi. Gerry Willis will be along in just a minute.
Credit card companies have long been criticized for abusive and confusing practices that can push consumers deeper into debt. Well, on Capitol Hill today lawmakers are discussing what is being called the credit card bill of rights, legislation, they say, is designed to protect consumers from practices that could hurt them.
CNN's Brianna Keilar has been following the hearing. She joins us live right now from Washington, D.C.
Brianna?
BRIANNA KEILAR, CNN CORRESPONDENT: Oh the perils of plastic, Ali. We are hearing all about them today at this hearing on Capitol Hill. Now Congresswoman Carolyn Maloney chaired the subcommittee hearing on the credit card holder's bill of rights legislation that she has introduced. And here is what it would do.
Would protect against arbitrary interest rate increases. It would prevent companies from penalizing people who pay on time, among other things, and the bill of rights would also let card holders set limits on their credit. It would prevent card companies from giving subprime credit cards to people who can't afford them. That, of course, is what happened in the subprime mortgage debacle as well. So it's also happening with credit cards.
And one of the things that we saw in this hearing, we heard from cardholders like Susan Wones from Denver who paid on time. She did not go over her limit and still, she saw her interest rates jump even when, you know, they signed up for what they thought was a fixed rate card. Now Wones told Congress that she saw two credit cards from Chase jump to interest rates of 25 percent and 32 percent.
(BEGIN VIDEO CLIP)
SUSAN WONES, CREDIT CARD CUSTOMER: Thirty years of credit history I have never defaulted, I pay on time, I'm a good customer, so why would I expect a rate to go up to that amount when I'm following the rules that was set forth by them?
(END VIDEO CLIP)
KEILAR: But by no means is everyone on the Hill a fan of this legislation. Republican congressman Jeb Hensarling of Texas warned that putting these restrictions on credit card companies could dry up credit.
(BEGIN VIDEO CLIP)
REP. JEB HENSARLING (R), TEXAS: I fear that the legislation will help turn back the clock to an era where a third fewer Americans had credit cards and those that did had little choice and paid the same high universal rate.
(END VIDEO CLIP) KEILAR: Some people on the committee were also talking about personal responsibility, questioning if Congress needs to solve this problem or consumers just need to be more conscientious, basically saying that if consumers aren't going to read the fine print, they shouldn't be surprised when it cost them -- Ali?
VELSHI: All right, Brianna, we'll stay on this on ISSUE #1 if there's going to be a credit card bill of rights. Thanks for telling us about it.
Brianna Keilar in Washington.
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Congressman Barney Frank is the chairman of the House Financial Services Committee and he joins us right now live from Capitol Hill.
Congressman, great to have you here. Thanks so much for joining us.
REP. BARNEY FRANK (D), MASSACHUSETTS: You're welcome.
WILLIS: You know, you're formally introducing a long awaited bill to help people who have been stung by this mortgage meltdown. In broad strokes, it allows the FHA to stand behind $300 billion in mortgage loans. Why has it taken so long to get this in front o Congress?
FRANK: Because we had first the administration's insistence that they do it in a voluntary way. Ultimately, we don't have two-thirds thirds to overturn the veto and the administration said they had a plan that they thought would work. And as a matter of trying ultimately to get something done, we said OK, we'll see what happens.
And the voluntary plan that they did -- the entirely voluntary plan hasn't worked well.
WILLIS: Yes.
FRANK: And once that became clear, we have now begun to mobilize the support to do this in a -- not totally involuntary, but in a more binding way. But, look, these are realities that you have a president and that nothing he is going to veto, he's going to pass, and we did want to get things done, so we...
WILLIS: Right.
FRANK: ...with him and I think we are at that point now.
WILLIS: Well, and that, you know, begs the question, do you think the president will sign this bill, you know, if both Houses -- the House and the Senate get together on this? Is there a possibility that it could get vetoed when it goes to the president's office?
FRANK: There is a possibility but it's a much slighter one and what we're talking about doing, and we've had conversations, I talked to the chairman of the Federal Reserve, we've talked to treasury and to the other bank regulators, because again, we're trying to get something done, not just score political points. We are putting some pressure on the administration.
There is some other legislation in the mix here. Last year, Congress -- the House passed a bill to improve the regulation of Fannie Mae and Freddie Mac. The administration has started out skeptical of those two entities, but now realizes, I think correctly, that they are needed to provide more liquidity. But the secretary of the treasury very much want Fannie Mae and Freddie Mac to be regulated better.
What we are talking about is a package that would include the FHA bill that the House passed last year that the administration wants to expand the existing FHA. The bill will improve the regulation of Fannie Mae and Freddie Mac and this new version. And I think that there was a very good chance, much better than even that we could put together a package that while the president wouldn't be thrilled with every piece of it, it would have enough that he wanted so we can get a signature.
And that's what we're working for.
WILLIS: There has been a lot of criticism of the Federal Housing Administration that it's ineffective, it doesn't do its job well. Can this agency play the critical role that you want it to play in fixing this mortgage meltdown?
FRANK: I believe it can with this proviso. For the short-term increase in dealing with mortgages, we are going to empower them to hire some outside people. Overtime, there are two FHA bills. There's one that will make them more of a place going forward as an alternative for subprime mortgages. That they'll have to increase their internal capacity. But for the short term, trying to work out what you described earlier about writing down these loans so that they can refinanced, they're going to have to hire some people.
You know, actually, the good news is that there is some excess capacity out in the economy right now in this area. The bad news, of course, is that it's a result of an economic downturn. So we do believe that if you give the FHA the right to do some contracting out, that they'll be able to do a reasonable job.
WILLIS: You were quoted recently as almost threatening the lending industry to get in line and get behind some of these reform measures. Is that working? Are they behind you now on this bill?
FRANK: Well, I would make one correction. Strike almost. I was threatening them. Look, going forward, there's going to be some legislation that tightens the regulation here. We've already passed some of it. We're hoping - you know, when people say, well, don't legislate too much, the answer is OK, we won't legislate to the very limit if you'll show some voluntary cooperation.
But if you're going to insist as the lender that you're not going to insist as the lender that you're not going to do one inch more than the law actually requires you, then we have to write a tighter law. I am hopeful that we will see movement. It's too early to say yet because the legislation hasn't yet been adopted.
I am optimistic that by the end of May, we will have the package I described to you signed by the president.
WILLIS: Representative Frank, one more question here. Do you believe that taxpayers here will actually be on the hook for the entire $300 billion? Is that what we'll be paying?
FRANK: No, no, no.
WILLIS: How much will we be paying?
FRANK: Thank you for asking that question. The $300 billion is the total amount of mortgages that would be insured only if every single person who got a financial guarantee defaulted and none of the property was worth anything when we sold it, it would be $300 billion. We work with the Congressional Budget Office. They told us that it's -- a guarantee (INAUDIBLE) of $300 billion -- you're talking about between 1 and 1.5 percent of that, maybe $3 or $4 billion is the most likely range...
WILLIS: OK.
FRANK: ...that it might cost the taxpayers.
WILLIS: Thank you, Representative Frank. We appreciate your time.
VELSHI: Well, mortgage fraud is one of the fastest growing white-collar crimes in this country. In fact, it's growing so fast that the FBI is taking some serious steps to crack down on criminals in the industry.
CNN's Kelli Arena is live in Washington with the story.
Hi, Kelli.
KELLI ARENA, CNN JUSTICE CORRESPONDENT: Hey there, Ali.
FBI director Robert Muller told a Senate committee just yesterday that agents are investigating -- get this -- about 1300 mortgage fraud cases. That includes a probe of 19 companies that may be guilty of possible fraud in connection with loans that were made to risky borrowers.
(BEGIN VIDEO CLIP)
ROBERT MUELLER, FBI DIRECTOR: We've had a tremendous surge in cases related to the subprime mortgage debacle. We currently have almost 1300 cases that have grown exponentially over the last several years and we expect them to grow even further.
(END VIDEO CLIP)
ARENA: Now in more than half of those cases, Mueller says that victims lost more than $1 million. He didn't identify any of the companies that are under scrutiny, but our sources have told us that one of the companies is Countrywide Financial, which you've reported, Ali, the nation's largest mortgage lender. And Justice Department officials have said that mortgage lender Dural is another company.
The FBI director says that he's had to actually shift agents from other areas such as health care fraud and other financial crimes to focus on these mortgage investigations and currently there more than 200 agents dealing with this problem.
VELSHI: All right. 200 agents. Are we expecting indictments, arrests and anything like that soon?
ARENA: Well, you know, Ali, you know, these are very complicated investigations. They require forensic analysis and financial expertise. So we don't expect any major announcements very soon. And while the FBI director really doesn't have a whole lot to say in terms of the investigation, he is openly talking about this because there's a lot of pressure on the bureau and on the Justice Department to show that they're taking this seriously.
VELSHI: All right. Kelli Arena, thank you for following this and we will, of course, keep everybody posted on what's going on on that side of the investigation.
Now we've been talking about mortgages. We've been talking about houses. The other thing that you're all very concerned about are gas prices. Gas and oil both hit record highs. We're talking -- we're not even in the peak of the summer driving season. We haven't started that yet. At the pump, AAA says the price of gas went up almost a penny, hitting a new record of $3.42 on average for a gallon of unleaded self-serve gasoline.
Thirty days ago on average we were paying $3.29 a gallon for unleaded gasoline. Last year the price was $2.86. Twelve years ago, by the way, we were paying $1.31 a gallon.
The price at the pump is tried to oil and oil hit another record high cresting at $115.54 a barrel. That in part because of a U.S. Department of Energy report that showed an unexpected drop in oil inventory -- Gerri?
WILLIS: In our green room, there she is. Suze Orman. She's standing by to take your ISSUE #1questions. Pick up the phone, give us a call, the phone number 866-792-3399. That's 866-792-3399. She's getting ready right now or you can send us an e-mail to Issue1@CNN.com.
E-mail us, call us with your questions and we'll work with Suze to get your help to get them answered for you a little later in the program.
All right. Coming up on ISSUE #1, we talk about inflation all the time, but what exactly does it mean and how does it hit your wallet? We will lay it all out there for you and the green race for the White House. We'll tell you how green your candidates are when ISSUE #1 rolls right on. (COMMERCIAL BREAK)
VELSHI: All right. You open up your Merriam Webster dictionary, define inflation as the continuing rise in the general price level. Well, that's just a definition. All you need to know is inflation means that you're going to have to spend more to get the same goods that keep you going every single day or you're going to have to spend the same amount of money for less.
We wanted to take a closer look at inflation to give you a better understanding of how this all works.
CNN senior correspondent Alan Chernoff joins us now to do this, because you've really spent a lot of time breaking the sound and making people understand what exactly inflation is.
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Ali, you know, if you look at what the government says it is, 4 percent according to the consumer price index on an annual basis, that doesn't sound all that bad. But the fact is, of course, we all know when we go into the grocery store, the prices are going up very, very rapidly.
Just have a look at some of the basic items we buy every single day. Bread, for example, up by 15 percent, eggs 30 percent, milk 13 percent. These are annual increases over the past 12 months. Massive increases and these are the items that we're buying every single day.
So Ali, that 4 percent that does not tell the story. And you were just talking earlier about the price of gasoline, the price of fuel oil. They are absolutely soaring at the pump. Prices over the past 12 months, retail up by more than one quarter and you see fuel oil up nearly 50 percent. Very expensive.
VELSHI: (INAUDIBLE) prices impossible to understand why -- how the rest of the prices are only up 4 percent when we know that everything on this table requires fuel in order to get it to you.
CHERNOFF: And here's why, here's why the government calculation isn't all that bad, because some of the big-ticket items that we don't buy every day, for example, computers, cars, those prices over the past 12 months actually -- believe it or not -- have declined a bit. Women's apparel also down by 5 percent. Now maybe you know some women who do shop every single day for clothing, but most people aren't buying that the way that they're buying...
VELSHI: Right.
CHERNOFF: ...milk, bread, eggs. That's where we really feel it. So the feel inflation is worse than the number that the government is telling us.
VELSHI: And when you cut back or if you are earning a lower income, when you have to make choices about the things you're going to spend on, it's the choices you can't make. You can't not buy the eggs, the milk, the bread, in many cases, the gasoline for your car. So it becomes -- further disproportionate. CHERNOFF: Great point. Great point, because you may go without buying a new computer, buying a new car. You can put that off for a year. You're not going to put this off.
VELSHI: Yes.
CHERNOFF: So you're really feeling that inflation. Inflation is worse than 4 percent a year.
VELSHI: All right. Allan, thank you for staying on this story and we will continue to bring you breakdowns of how inflation affects you in your everyday life -- Gerri.
WILLIS: Thank you, Ali.
This is the part of the show where you get to weigh in. Every day, we come up with questions and we want to know what you think, what the viewers think about certain issues.
Poppy Harlow is with CNNMoney.com. She's here with today's quick vote.
What you got, Poppy?
POPPY HARLOW, CNN CORRESPONDENT: Well, Gerri, we just heard Allan and Ali talking about how expensive groceries are. They're getting -- just soaring prices. It's all about money. We want to know where you are spending your money.
Here's our "Quick Vote" question today. The 2008 Fortune 500 list comes out on Monday. What big companies are you most likely to buy products from? Here's your choices: Wal-Mart, Apple, Home Depot, Microsoft or Best Buy.
Log on to CNNMoney.com to vote. We'll be back later with the answer. And I want to see, I think it's going to be Wal-Mart, but we'll see what people have to say. Please vote. We'll be back later.
WILLIS: What ever happened to the department stores? Thank you for that, Poppy.
HARLOW: Exactly. Sure.
VELSHI: All right, up ahead on ISSUE #1, problems in certain food banks. Find out the fastest growing segment of the population that are going to food banks. The answer is likely to surprise you.
And the green race for the White House. We'll show you how green your candidates are as ISSUE #1 rolls on right here on CNN.
(COMMERCIAL BREAK)
WILLIS: Welcome back to ISSUE #1.
When bigger doesn't mean better, the number of people filing for unemployment benefits surged by 17,000 last week. That's higher than the 12,000 experts were predicting and puts the total number of applicants to 372,000. Georgia, Michigan and Texas saw the biggest rise in jobless claims. States with the biggest drop, New Jersey, New York and Wisconsin -- Ali.
VELSHI: Thanks, Gerri.
Let's talk green for a minute. Everyone can try to be more environmentally friendly, but you probably -- you know, there's only so much you can do. Presidential candidates, however, are a bit more under the microscope. So Senator John McCain, Senator Hillary Clinton and Senator Barack Obama, well, we want to find out who's the greenest of them all.
Howard Gould is a friend of ours. He is Equator Environmental and he follows this all very closely.
Howard, I want to break down exactly what the candidates do. But there's one thing that sort of comes up and I need you to tell our audience what it is. What is a cap and trade system? This is something that comes up in this conversation about how green you are.
HOWARD GOULD, ECO-ENTREPRENEUR: Well, a cap and trade system is essentially a new market that's being created around CO2 which is the green house gasses being released and what they've done is they've created a type of security which is essentially one ton of CO2.
VELSHI: Right.
GOULD: And that's the license to emit one ton of CO2. So if you're a corporation that's out there that is emitting into the atmosphere, you will now be capped on the amount of CO2 that you can release to the atmosphere.
VELSHI: OK. With the Pope in the country, the example might be it's like buying an indulgence.
GOULD: Could be, yes. Could be.
VELSHI: You are buying the right to pollute.
GOULD: Yes.
VELSHI: And you can -- you then -- if you are going to be a big polluter by virtue of what you do as a company, you have to buy this. Is that kind of how it works?
GOULD: Well, essentially, yes. I don't think it would put it as the right to pollute, but I think that, essentially, if you're told you're allowed to cap 10 tons of emissions out there...
VELSHI: Right.
GOULD: ...and you're releasing 15, you now have to buy that overages from somebody else that's releasing either under their cap or from a company that is manufacturing CO2 credit. And that could be anything from growing trees to hydroelectric... VELSHI: So if you're really green, you've got an excess of this and...
GOULD: Exactly.
VELSHI: ...if you're not really green, you have to buy them from somebody else.
GOULD: Exactly. And that's where it comes in where these companies that are going to be able to meet their mandatory caps will have access to sell.
VELSHI: Right.
GOULD: And so there's going to be an excess...
VELSHI: As an incentive. OK.
GOULD: ...revenue there for these companies.
VELSHI: The reason I wanted you to explain this, because when we go through where the candidates stand, and we're going to do this right, because for some of you this is very important, your decision about who you vote for.
Let's start with Hillary Clinton. Break down where she stands on the environment.
GOULD: Hillary Clinton actually, for the League of Conservation Voters, has given her a 90 over her lifetime, which is very, very high. She is -- she and Barack Obama are leading neck and neck with this right now. And they both have very strong issues on this. everything from avoided deforestation to reforestation right through to biofuels. So they are -- she is very, very green as well as Barack Obama. And the issue when you start to run down all three of them becomes a little bit difficult with -- to distinguish those two, Barack Obama and Hillary Clinton.
VELSHI: Which is the case on many of their policies regarding the environment.
GOULD: Yes. Yes.
VELSHI: But one of the things about Barack Obama is that he wants to establish a national low-carbon fuel standard. What does that mean?
GOULD: Well, a low-carbon fuel standard is essentially when you start talking about fuels that are out there to minimize the impact that actually fuels will have on the atmosphere.
But I think that, you know, Hillary Clinton is right there with him on that same issue.
VELSHI: John McCain is pushing the idea of nuclear. He's pushed that a number of times. It's not something that gains a lot of popularity with the Democrats. Tell me about this.
GOULD: Well, the nuclear issue is something that you don't see a lot of environmentalists taking too kindly to. Now they're looking at it as the lesser of two evils, but the fact is there's an issue of what to do with this waste.
VELSHI: Right.
GOULD: So it's a clean technology but you have a lot of waste or very dangerous waste is being produced from it. So it's kind of an issue that yes, he is very green and he wants to do something green, which is nuclear technology, but it's still questionable whether or not this is going to be the right thing to do.
VELSHI: Are there green positions evolving? Or is this kind of where you think they're going to be? If you want to make a decision on the greenest candidate, can do you that today? Or should you be watching?
GOULD: No, I think you really need to wait on this, because if you look at somebody like John McCain in 2003, he reached across the aisle to the Democrats and actually at no political gain to himself did that and with Lieberman to establish a McCain-Lieberman bill.
Right now he's not really saying a whole lot. So it's kind of hard to tell where he's going to land on this because I think he's worried about the Republicans on one side and maybe he's also worried if he moves...
VELSHI: Right.
GOULD: ...too far away from the green issue, he's going to lose some of those Democrats on the other side.
VELSHI: All right. Which means we'll have to watch this, which mean you're going to have to come back...
GOULD: Exactly.
VELSHI: ...and talk to us.
Howard Gould with the Equator Environmental -- Gerri?
WILLIS: The cost of food is rising very quickly causing food shortages for nation's poorest countries. It certainly got the attention of the World Bank. We'll tell you why and we are getting ready for Suze Orman and Suze Orman, she's getting ready to answer your questions. Have a question about your house, your job, your savings, your debt, pick up the phone, dial 866-792-3399 and ask Suze Orman yourself when ISSUE #1 comes right back.
(COMMERCIAL BREAK)
DON LEMON, CNN CORRESPONDENT: Hello, everyone. I'm Don Lemon, live here at the CNN world headquarters in Atlanta. We'll have more of ISSUE NUMBER ONE in just a moment. First, we're going to check your headlines.
The shepherd tending to his flock in a mass celebration in the nation's capital. Catholics converged on National's Ballpark in Washington this morning for Pope Benedict's first public mass of his six-day visit to the U.S. An estimated 46,000 people turned out for the service held under strict security measures.
The pope is not the only distinguished guest in Washington today. British Prime Minister Gordon Brown is also visiting. He began the day by meeting back to back with the presidential candidates. Barack Obama was the first candidate at the British embassy for talks this morning. That was followed by a visit from Hillary Clinton. Later, the prime minister sits down with John McCain. Mr. Brown also meets with President Bush at the White House. That will happen this afternoon.
Happening now, though, the biggest child custody hearing in Texas history. A judge must decide whether the hundreds of children removed from a polygamist compound should remain in state custody. Texas Child Protective Services removed the children nearly two weeks ago over concerns of possible sexual abuse. Members of the polygamist sect deny the allegations.
More news at the top of the hour right here in the CNN "Newsroom." In the meantime, I'm Don Lemon. Now back to ISSUE NUMBER ONE with Ali Velshi and Gerri Willis.
ALI VELSHI, CNN ANCHOR: All right, welcome back to ISSUE NUMBER ONE. We talk a lot on this program about rising food prices. It's a big challenge for folks in this country. It's even more of a dilemma for those around the world. CNN's State Department correspondent, Zain Verjee, explains.
(BEGIN VIDEOTAPE)
ZAIN VERJEE, CNN CORRESPONDENT, (voice over): Hungry and angry in Haiti. Deadly riots over rising food prices.
JOSETTE SHEERAN, U.N. WORLD FOOD PROGRAM: We're seeing riots breaking out now in up to a couple dozen nations.
VERJEE: In Ivory Coast, Egypt, and Pakistan. Police even guarding food rations from looters. It's becoming a matter of life and death as aid groups warn of even more shortages.
ROGER YATES, ACTIONAID: People go hungry, they get sick. Some people will lose their lives.
VERJEE: In the past year, food prices have skyrocketed by 40 percent. Experts blame record high oil prices jacking up transportation costs, floods destroying crops and rapidly rising demand in China and India. The production of ethanol, the conversion of farmland from food crops to biofuels, pushes up price further. A global emergency, the U.N. warns, is a major setback in fighting poverty. One half of global food donations come from the United States. This loaf of bread represents U.S. food aid worth $1.5 billion a year. Forty percent higher food prices means there is less food to give. So with the smaller loaf, the U.S. now has to make some pretty tough choices, give some needy countries less and some none at all.
HENRIETTA FORE, U.S. AGENCY FOR INTL. DEVELOPMENT: It means that less food is going to almost every recipient because the prices are so much higher. So our U.S. dollar purchasing power cannot stretch as far.
VERJEE: With aid from the U.S. and other, the U.N.'s World Food Program feeds one cup of porridge to 20 million school children. Director Josette Sheeran says it's the only food most of them see all day.
SHEERAN: Today I can fill this 40 percent less than I could last June. So it has a direct effect on us.
VERJEE: In order to afford more food, the U.S. is looking for ways to cut cost, like transport. The U.S. grows all of its food aid at home. Food grown in the Midwest is loaded on ships and then sent to places like Africa and trucked across the continent. A long, expensive trip. President Bush wants Congress to approve a plan already used by the U.N. and others.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: And I ask Congress to support an innovative proposal to provide food assistance by performing crops directly from farmers in the developing world so we can build up local agriculture and help break the cycle of famine.
(END VIDEOTAPE)
VELSHI: Zain, you touched on a very complicated issue and really food prices are up for so many reasons that you included, including that increased demand in China and India. But this ethanol policy in the United States, subsidizing farmers to actually grow corn, which was food, which is now becoming fuel, the people you spoke to, how responsible do they hold that policy for the rising cost of food prices?
VERJEE: They say that that's a significant reason and a major contributing factor to that. Many experts we talked to, though, Ali, said the high food prices for that reason and all the others we outline, are really here to stay and they're not going down any time soon. The aid community too is -- what they're trying to do is look for emergency donations. But in the short-term, many are saying that that's just not going to be good enough. We need programs that will have real impacts and that's going to take a long time to happen.
Ali.
VELSHI: And the bottom line is, if there are these -- if there are shortages, and I think the world bank said maybe 36 countries at some point this year could go into danger. In your story you mentioned 12. Condoleezza Rice has just spoken on this because the United States, obviously, gets very involved when countries start to go hungry. What did she have to say about this?
VERJEE: Well, she did say that it's a matter of urgent concern. She said the U.S. is responding to this. She said that President Bush has pledged something like $200 million for food aid. And Congress has also been asked for something like $350 million more in additional aid. But it's a difficult situation. And one of the key things people are really worried about, too, is that this is also a global security issue that if the food crisis continues to get worse and people begin to riot and fight and starve, the anger and the hunger will occur to an extend where governments can be destabilized, as we've seen around the world.
VELSHI: Exactly. And you talk -- you showed bread, which is about wheat prices. We know corn prices are at record. You talked about Sierra Leone. They eat rice in Sierra Leone. All of these crops are at record highs. So this problem, as you say, no sign of it going away any time soon.
Zain, thanks for staying on top of it for us. Zain Verjee, our State Department correspondent.
GERRI WILLIS, CNN ANCHOR: Startling news from last week's national meeting in Atlanta of more than 200 food bank operators. Forty-seven percent of people needing food assistance had jobs. That's right. Demand is increasing. It's tougher to raise money and supplies are going out faster than they're coming in. CNN's Don Lemon reports.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: She had open heart surgery when she was born. She does a lot better, but she still has breathing problems, you know. She's like, yes, table food.
DON LEMON, CNN CORRESPONDENT, (voice over): Crystal (ph) and Ariana (ph), like some 16,000 other Atlanta area families, depend on the Atlanta Community Food Bank for help. The fourth largest food bank in the country was founded 28 years ago by Bill Bolling. He says his agent has never seen a higher demand and from people who never need his services before.
BILL BOLLING, FOUNDER & EXEC. DIR., ATLANTA COMMUNITY FOOD BANK: Actually we're seeing almost half the people who are coming to our number agencies having a job, sometimes two jobs, and not being able to make ends meet.
LEMON: Joann Cainion uses the services. She has no health insurance. And even with two jobs, doing domestic work five days a week and alterations, she still can't afford to put food on her table. Add to that the spiraling cost of driving across town to work.
JOANN CAINION, FOOD BANK RECIPIENT: It's sickening. But, see, if your gas keeps going up and your paycheck don't go up, you're just -- you're working to pay gas.
LEMON: Mark Wilson (ph), a brick layer, mows lawns to make ends meet. He can't find a construction job, but said says he and his four children still have to eat.
MARK WILSON, FOOD BANK RECIPIENT: Thank you very much.
UNIDENTIFIED FEMALE: You're very welcome.
LEMON: America's working poor, feeling the economic downturn, with food banks coming to the rescue.
UNIDENTIFIED FEMALE: Thank you.
UNIDENTIFIED FEMALE: You're welcome.
UNIDENTIFIED FEMALE: Thank you.
UNIDENTIFIED FEMALE: Thank you so much.
LEMON: Don Lemon, CNN, Atlanta.
(END VIDEOTAPE)
WILLIS: Shocking story.
VELSHI: Yes. I'm out of my skin, by the way. I cannot contain my excitement right now. Suze Orman is here in the building. She is -- not even in the building, she is right next to us, actually, ready to take your phone calls. The lines have been ringing off the hook.
Suze, so good to see you. Welcome.
WILLIS: You know, it's not too late. The phone number, 866-792- 3399. And you can also e-mail us your questions. Hey, the address, issue1@cnn.com. We tell you every day.
(COMMERCIAL BREAK)
VELSHI: You know, the real driver behind this show, ISSUE NUMBER ONE, is that we provide you with information on the issue that you have told us is the most important to you, the economy. And one way to do that is to answer your e-mails. And today we're answering your phone calls.
WILLIS: We do all of this on the help desk. And joining us on the help desk today, one of America's favorites personal finance experts and author of "Women & Money," an important topic, Suze Orman.
Welcome. Good to see you.
SUZE ORMAN, AUTHOR, "WOMEN & MONEY": Great to be here. Let's answer questions.
VELSHI: And so many other books. The lines are off the hook, so I want to go right to our callers. We are going to start with Faye in Oklahoma.
Faye, welcome to the show.
CALLER: Well, thank you.
VELSHI: Go ahead. What's your question for Suze?
CALLER: Well, I'm 89 years old and I'm a widow. I owe nobody a penny. And I was wondering if investing in tax-free bonds was the smartest way to go for more income. And, if not, what is it?
ORMAN: You what's very, very funny, my dear one, is that years ago you used to have to be in a high tax bracket to want to invest in municipal bonds. But because of the bond debacle, there are many municipal bonds out there right now that are actually paying you more than Treasuries, more than CDs and they give you the tax advantage of, what, having it be tax-free. So if you know that it is a quality bond, forget the ratings right now because the rating services don't know anything of what they're doing. So if you have a good financial adviser, that's a whole another story, but if you have a good financial adviser and they know the issues behind the bond and it's a good quality bond, go for it. Go for it. Go for it.
WILLIS: I love this answer because this is a really important topic, especially right now with the way muni bonds are being priced. It's something else. We need to do more on that topic.
VELSHI: We will. Yes.
WILLIS: Let's go to the e-mail from Patty. "If I pay off my outstanding debts that are on my credit report, will that improve my credit score and how soon?"
ORMAN: Yes. But are those outstanding debts really old? So here's what you have to understand. Thirty percent of your FICO score is made up of something called your debt to credit limit ratio. How much you owe to the credit limit that all the credit cards give you. Debt goes down, credit limit goes down, FICO score goes up.
However, if you have outstanding debts that are old, you haven't been paying them, they've been on your credit report for five years, if you pay them now, it's not going to help your FICO score one iota. The newest credit card defaults, the ones that you've just either defaulted on or are outstanding, you clear those up. That helps your FICO score.
VELSHI: All right. great advice.
Let's take you to Texas. Diane is on the phone.
Hello, Diane. Welcome to the show. What's your question?
CALLER: Hello. My husband and I are 70 years old and we have a 401(k). And about a month ago we got a little bit panicky because we lost so much money and so we pulled it out of the stock market and just put it in a money market. We think that we need to get back in there. And my question is, should we do it like today? And we had it in growth and income blend funds and where we were losing most of our money, though, was through capital opportunities. And we don't think that's the wise thing to do. What is your advice? ORMAN: Here's my advise. If, obviously, here you are, you're 70 and a half or 70, you're going to have to start making withdrawals from that 401(k). And why is it in a 401(k)? Why aren't you doing an IRA rollover with that money? Because in a 401(k) plan, all you have are mutual funds to invest in. You don't want to invest in mutual funds right now. You might want to invest in either exchange traded funds, individual bonds, CDs, Treasures. Do an IRA rollover to a brokerage firm, hopefully a discount brokerage firm, then invest that way. Then you can have some money safe. But be very careful. Remember, you have to start taking required minimum distributions April 1st after the year that you turn 70. So, you know what, be careful here.
WILLIS: Well, let's go right to Heloisa in Arizona who asks, "our combined income is in the lower $60,000's. We have no other debts and both our credit score are around 800." Love that, right?
VELSHI: Nice.
WILLIS: "We have no saving s to make the down payment. Do you think we should wait? Could we find a good loan for a new house with no money down?"
This is not a trick question.
ORMAN: What have you been doing? Are you living under a rock today? It's like, have you lost your mind? First of all, if you don't have money for a down payment, here's the bottom line, you cannot afford to buy a home. You can't even come close to afford to buying a home. You need at least 20 percent -- all right, you can scoot by with 10 percent but 20 percent down. You have to know you can afford it. Prices of real estate, they are not going anywhere. We're in this debacle now for at least another year or two. So save up and when you have the money be intelligent and don't make the mistakes everybody else had made that has gotten us in this situation we're in right now.
VELSHI: Learn from where we are right now.
Let's take you to Wisconsin. Kelly's on the phone.
Hello, Kelly. Welcome to the show. What's your question?
CALLER: Hi, Suze. Our daughter is a little over three months old. We want to start a college fund. What do you recommend to be the best investment without penalties when it is time to withdraw money for college costs?
ORMAN: All right, so I'm a real advocate of 529 plans. You know, if you go to the web site, savingforcollege.com, Joseph Hurley, in my opinion, is the nation's expert on 529 plans. You just have to remember, however, is this kid really going to go to school? If this kid ends up not going to school, then you're going to have penalties when you go to take out the money. But if you have the money, you can do it and you yourself, my dear one, you don't have credit card debt, you funded your retirement plan to the max, you have enough money in an emergency fund and you've taken care of yourself first, OK, then you can think about your kid. But if you aren't in that situation, don't you dare fund a child's education before you have funded your own future.
WILLIS: And do it early. And do it often. And don't forget about it. It's critical. These kids need to have a future. So many college kids now have such big debt when they get out of school.
VELSHI: Beautiful that somebody's thinking about it with they have a three-month-old.
Suze, stick around for us. And, please, you, stick around as well. We've got more answers to your questions on ISSUE NUMBER ONE and we are coming right back.
(COMMERCIAL BREAK)
WILLIS: Welcome back to ISSUE NUMBER ONE. We're answering your phone calls today to help you answer your questions.
VELSHI: Suze Orman is our super star guest on the help desk. And we're going to go right to your phone calls.
To Montana. Flo is on the phone.
Flo, welcome to the show. What's your question for Suze?
CALLER: Hi, Suze. I have a question on a Roth IRA. I'm 57. My husband is 10 years younger. And we've always contributed to our Roth IRAs, but last year I retired. And I'm wondering, we don't need to touch my 401(k). We don't need, you know, to touch my Roth. And I'm wondering what's the smart thing to do. Should we contribute to my Roth and we still contribute to my husbands, but I'm not sure.
ORMAN: Well, here's my question for you, Flo. Do you own your home outright?
CALLER: Yes.
ORMAN: So you have one year emergency fund? You have everything going and now you just have extra money and you're wondering, where do you invest it. So if you can, I would absolutely invest it in a Roth IRA, as long as you meet the income qualifications. Are you kidding, a Roth IRA is the absolute best retirement vehicle or investment vehicle out there, bar none. No taxes when you withdrawal it. You put all the money you want in there. Let it grow. And here's the key for you. If you never need this money -- remember, you do not have to take money out of a Roth IRA at any time, like 70 and a half with the other accounts, you die, you leave it to your kids, they get to take it out tax-free. They are going to love you.
WILLIS: Love that answer. Love that answer.
We have an e-mail from Jeanette. She asks, "I am going into repayment next month and understand I probably need to consolidate three loans. Do you have any good suggestions on what I need to watch out for when I consolidate these loans?"
ORMAN: Well, what does that mean, actually, that she's going into repayment? Repayment of what? And how are you going to consolidate the loans? And how much are they going to charge you to do so?
So I have a feeling that you're talking repayment of a student loan. And if you're talking about a student loan here, here's the main thing that you should know. If you consolidate while you were still in school or right before the grace period is up, you will get usually a half a percent less than if you wait until after that period is up to consolidate. So don't wait until that repayment period, the grace period, is up. Do it right now. That's the best advice I can give you.
And here's the other thing. I just have to say this. Don't you dare fall behind on that student loan. You can never bankrupt at student loan. It will follow you to your grave. That is the number one loan that you need to pay off sooner than later.
VELSHI: All right, let's take you to Sarra in Maryland.
Sarra, welcome to the show. What's your question for Suze?
CALLER: Hi, Suze. My name's Sarra. I have a five-year ARM with 7.25 in my mortgage. I'm trying to refinance it. The mortgage company's telling me with the kind of loan I have, I'm supposed to have a five months delinquent before they can look at that.
ORMAN: Right. So what you're looking for -- see, this is why, Sarra, these mortgage companies, these banks are really getting to me. They are forcing people to be late with their payments for them to be able to help you. You're late with your payments, then you ruin your FICO score, which is your credit score. You ruin your credit score, your car insurance premiums go up. Everything else you try to do for yourself goes down the drain. What is wrong with all of you financial institutions. Can you not help these people before you get into trouble? Why are you forcing them to do this?
So therefore the truth of the matter is, 7.5 percent, all right, you're maybe a point, a point and a half higher than what you could get anyway. For now, can you just stay exactly where you are. Make sure that your FICO score gets up there. Work on that. And hopefully you can afford your payments. If you can't afford your payment, then it's a whole another story in terms of what we're talking about right now.
WILLIS: Suze, we're going to send those e-mails from the lenders right to you.
ORMAN: Thank you. I'll take them gladly.
WILLIS: Simon asks, "where are the jobs? Are some states better for jobs than others?"
ORMAN: Well, what do you do, Simon? What is it that is your thing? You know, there are a lot of jobs around there, it's just, what are you willing to do and what is your area? So you just don't want any jobs. So what if I said to you, jobs are better in Seattle than they are here and you go there and it's not a job that you want. You have to figure out what it is that you want to do and then find that job wherever you can. The key is, don't get into a desperate situation where you have to find a job. So make sure you have at least a one-year emergency fund just in case you lose the one you already have.
VELSHI: The beauty is, the Internet's out there. You can, if you figure out what your industry is, figure out where the jobs are.
Suze, stay with us for just a few more minutes.
WILLIS: We have one more very important question for you. What is the first thing you should do with regard to your finances if you lose your job? The answer next on ISSUE NUMBER ONE.
(COMMERCIAL BREAK)
VELSHI: Time now to check in with Poppy Harlow of cnnmoney.com. She's tracking your Quick Vote for the past hour.
Poppy, what have you got?
POPPY HARLOW, CNNMONEY.COM: Hey, Ali.
Well, we asked people, what big company they're most likely to buy products from. The Fortune 500 list does comes out on Monday. And I've got to say, I was right. Forty-five percent of you said you're going to shop at Wal-Mart. Next up, 24 percent of you said you're going to shop at Home Depot. This is something we've see before. People pulling back on what they're spending. They're heading to those big box stores like Wal-Mart. They're fixing up their homes a little bit at Home Depot. Those are the numbers.
Ali.
VELSHI: All right, Poppy, thank you so much.
Poppy Harlow at money.com.
Suze Orman is our guest today at the help desk.
Suze, we are seeing job losses. That's what happens in a recession. We've seen more than 200,000 job losses so far this year. The first thing you do with your finances if you lose your job?
ORMAN: If you lose your job, you have to make sure that, where are you are going to pay for your bills? So you have to make sure that your health insurance is OK. So you might, everybody, want to check out your Cobra plan. Is it more expensive to have Cobra, where the company that you used to work for is, what, paying for your insurance, or should you shop for it on your own? Shop for it on your own. It will be less expensive. I personally, if you are 55 years of age or older in the year that you lose your job, leave your money in your 401(k) because any money that you take out of a 401(k), if that's the situation, you do not have to pay the 10 percent penalty tax on. If you do an IRA rollover with it, you aren't going to be able to touch it in any way you want until you're 59 and a half.
And with that, you need to go out, find another job and do anything you can but do not borrow or withdraw money from a 401(k) to keep yourself going because money is protected against bankruptcy in a 401(k).
WILLIS: Suze, I've got to ask you, I get this e-mail all the time. People are under water on their mortgages. They don't know what to do. I owe more than the house is worth. I'm behind on my payments. What do you do? What do you tell folks who are in this situation?
ORMAN: I'm so sorry, but if you are behind on your payments and you, you know, are under water and it's only getting worse and worse, I'm going to reiterate what I just said again a few seconds ago. Do not throw good money after bad. Do not take money from a retirement account just to catch yourself up then because you've brought yourself, you know, up to date, but you won't be able to stay current. And then what happens to all of you? You end up claiming bankruptcy. So be careful here. Leave your retirement accounts alone.
WILLIS: Suze, thank you, thank you, thank you for being with us today. We appreciate it.
ORMAN: You're welcome.
VELSHI: So amazing to have you here. ISSUE NUMBER ONE back tomorrow, noon Eastern. Time for your latest headlines. Let's go to CNN "Newsroom" with Don Lemon right now.
