Return to Transcripts main page
Issue Number One
President Bush Address Small Business Concerns; Pope Benedict Speaks at the U.N. Building; Supplemental Income: Ways to Earn Extra Cash
Aired April 18, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNN ANCHOR: And I'm Fredricka Whitfield. "ISSUE #1" with news on the economy, that begins right after a check of the headlines.
Pope Benedict begins the second leg of his six day tour of the United States in New York City. Last hour his holiness addressed the general assembly of the United Nations, he is the fourth pontiff to visit the world body. Later today the pope is scheduled to observe ground zero, visit a Jewish synagogue and speak with leaders of other religious denominations.
Aftershocks in the Midwest after an earthquake rocked the region earlier this morning. The 5.2 magnitude quake was centered about 38 miles north northwest of Evansville, Indiana. It was the strongest earthquake to hit the region in 40 years. People felt it hundreds of miles away, all the way to Iowa and Tennessee. Several aftershocks followed. The largest registering a 4.5 magnitude. This building in Louisville, Kentucky, it was damaged and skyscrapers were shaking in Chicago and in Indianapolis. No injuries and very little damage reported.
More news at the bottom of the hour.
Now "ISSUE #1" with CNN's money team, Ali Velshi and Gerri Willis.
GERRI WILLIS, CNN ANCHOR: The countdown to the Pennsylvania primary. How ISSUE #1 will play a role. Why an adjustable rate mortgage might be the right way to save you money. And how to handle your health care when changing jobs.
ISSUE #1 is the economy. Your job, your house, your savings, your debt.
ISSUE #1 starts right now.
Welcome to ISSUE #1, I'm Gerri Willis. Ali Velshi will be along in just a minute.
But first we are following a developing story out of Washington, D.C. as President Bush reportedly looks to the chief of the Small Business Association to resuscitate the department of housing and urban development. We are live with the very latest from inside the beltway, plus the business forecast for spring, it's raining pink slips. You can expect more as two of the nations biggest financial powerhouses say they'll lay off more workers due to market turbulence and a troubled economy. Who are they? We'll tell you. That plus a whole lot more, join Ali Velshi and myself for ISSUE #1 which starts right now.
ALI VELSHI, CNN ANCHOR: We are just days away from the Pennsylvania primary and the battle for ballots is entering the final round in that state.
CNN senior political correspondent Candy Crowley has been following it all closely. She joins me from Philadelphia.
Candy, you're a veteran of this, you've seen it all but this is different. The final stretch for what? We keep saying it's the final stretch. We're getting somewhat closer to the end of this primary battle with the Democrats. It doesn't look like we are.
CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: No, it doesn't look like we are. You can tell by the candidates' schedules they have both been in North Carolina over the past couple of days or are going there. That also holds true for Indiana. These are May 6 primaries. They know it doesn't end here. We expect that Hillary Clinton will win. The talk has been about the margin.
The Clinton campaign has been pushing back very hard saying well anything less for Barack Obama than a win shows that he's failed because he's spending so much more money here. I think the more conventional wisdom is perhaps that she is going to win and the question is can he hold her to single digits? So, a big weekend. They will be back here obviously. Next Tuesday's vote is paramount in their mind but it is not the only thing on their mind. They are looking ahead.
VELSHI: Candy, Super Tuesday and then Ohio and Texas. And all of these were just, they were so -- the pulse was just beating. I think Americans who are not in Pennsylvania must be wondering, what's the feeling? Is it all everybody is talking about in Philadelphia or is this becoming a little bit like, wow, is this going to be over at some point?
CROWLEY: No. I think actually in Pennsylvania you do find excitement. We saw it in the new registration numbers a couple of weeks ago. When it comes to the people in the state, they clearly are excited because they think they really have impact on the primary contest. When you think your vote is important, it's pretty exciting.
If you are in Iowa and you did this a while back, I imagine you are looking at it less intensely than you were just anecdotally. I talked to a lot of people outside the state who say well you know I'm kind of taking a break right now. A lot of them feel that they've heard the same thing over and over.
VELSHI: We really do think about whether we are going to make a difference. You are talking about the margins at this point. People really are very engaged in this thing. Is there anybody left in the margins? Are there votes to get from people who haven't seen everything that Barack Obama and Hillary Clinton have to say?
CROWLEY: There absolutely are if you believe the polls. There are people who remain undecided and enough people by the percentage point to actually sway this election. Generally going into these last couple of days, people really have moved to one side or the other. They may say, well I'm not really decided, but they are pretty sure where they are headed.
In the final days of almost any election whether it's a national election or a primary, it's a lot about getting your voters out. Over this weekend, you are going to hear from both of them saying, listen, you've got to go knock on doors, you've got to get my people out, it's that sort of thing. Because they know that at this point in Pennsylvania, people really have either made up their minds or are leaning in one direction or another and the key is to reel them in and get them to the voting booth.
VELSHI: Candy, good to see you.
Candy Crowley, part of the best political team on television joining us from Philadelphia.
WILLIS: It's your turn to weigh in on today's "Quick Vote" question. That means it's time to check in with Poppy Harlow from Money.com.
Hi there, Poppy.
POPPY HARLOW, CNNMONEY.COM: Hi, Gerri.
You were just talking about thousands of lay-offs at some Wall Street powerhouses. But folks there are jobs out there. The Fortune 500 list, that comes out on Monday. Lots of big names on that list. We want to know what your dream job is.
Here's your quick vote question today: What big company would you most want to work for? Here are your choices. Google, Starbucks, Whole Foods or Nike. Log on to CNNMoney.com and vote.
We'll bring you the answers later in the show.
Where is CNN? I don't know where CNN is on that list. It's a pretty good place to work.
WILLIS: Time Warner? I see none of them. Thank you Poppy.
HARLOW: Sure.
WILLIS: Up next, what gas prices are looking like for your weekend? Plus, how to handle your health care when you're changing jobs. And we're answering your questions, the address issue1@cnn.com.
You're watching ISSUE #1.
(COMMERCIAL BREAK) VELSHI: This is ISSUE #1 on CNN. This show is all about you and you pay a lot for gas. Oil surging to another record price today, briefly passing $116 for a barrel of oil. Where the price of oil goes, gas prices must follow. The national average for unleaded gasoline hitting $3.45 a gallon. That, too, is a record. That seems a lot to pay for a gallon of gasoline.
But Californians are paying considerably more, forking out a whopping $3.84 a gallon. Now over in New Jersey here they're getting a steal. Average there, only $3.19 for a gallon of gasoline. We talk about gas prices almost every day on ISSUE #1 but it's one thing to talk about the price of a gallon of gas.
It's another entirely to have the opportunity to hear how all of you out there are coping with rising costs. So we've decided to ask you.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I'm filling up every half a tank so it doesn't look so bad, but it's costing me about $150 a week. You are very aware of where you are going now because of the cost of fuel.
UNIDENTIFIED MALE: I just sold my 2002 Cadillac SLS and bought a '93 Honda. I have been spending and filling up my Honda for roughly about $33 to $35. I was spending $90 a week on my Cadillac.
UNIDENTIFIED FEMALE: I'm making changes in my life to conserve by filling up and not keeping extra things in my trunk. I'm trying to manage the gas prices by doing that.
UNIDENTIFIED MALE: I'm considering buying a hybrid car to augment what I'm doing with my gasoline car. The price -- the increase of gas is not just the cost for the car, it's being able to pass up a gas station so that I don't have to feel that impact every time. It's more for peace of mind than anything else.
UNIDENTIFIED MALE: I drive about 1,000 miles a month and I just filled up. It was about 20 percent higher than what I paid just maybe two weeks ago. I try to cut back and not travel as far, consolidate my trips, stuff like that.
UNIDENTIFIED MALE: I take my wife back and forth to work. Her car sits in the garage because we don't have -- that way we don't have two gas-guzzlers, only one. But it really affects you every time you go to the pump. You just close your eyes and pump the gas and just wait until the next time you have to fill up.
(END OF VIDEO CLIP)
VELSHI: Still ahead on ISSUE #1, the art of living lavishly, but still within your means. Then Pope Anomics, we'll break down how much it costs to host the pope. Send us your questions, the address, issue1@cnn.com.
(COMMERCIAL BREAK)
VELSHI: You're watching ISSUE #1 on CNN. Politics and money have always gone hand in hand, usually in the context of how much the candidates spend on their campaigns. But this year, your money is taking center stage on the campaign trail. The economy has become ISSUE #1 to the candidates and of course more importantly to you, the voters.
For more, let's go to Tom Foreman.
He's the host of CNN's "THIS WEEK IN POLITICS" in Washington -- Tom.
TOM FOREMAN, CNN CORRESPONDENT: Hey, Ali.
this really is the issue that has become just the time bomb for these campaigns out here. Months ago we saw the early nibbles of it. But it's getting stronger and stronger and all the campaigns are trying to talk about what they will do for the economy. But the problem is, how much can a president really do alone? The fact is, righting the ship as you know, takes a lot of different elements moving together and it's not clear that any one of them in particular can do that -- Ali.
VELSHI: So the issue Tom here is, do you want the candidate who you think is best equipped to do the things to the economy that you need done or do you want the candidate who is best equipped to get the right people, assemble the team together, get that consensus through Congress? Because people seem to understand the president can't wave a magic wand and end a recession, for instance.
FOREMAN: Well the simple truth Ali is that second part of the equation that you mentioned, that really matters. The economy is just so vast now with so many moving parts, you truly find yourself saying the president's role absolutely is a leadership role. It won't be the individual measures that any president can put through, although those can help. It will be their ability to get many people in many different sectors, not just in the government, all pointed in the right direction.
That will make the difference to the voters out there who are worried about their pocketbook, maybe more, probably more, than the individual programs that these candidates are putting forward. Because frankly, some of these individual programs don't stand a whole lot of chance of actually getting through Congress.
VELSHI: One of the things that people often tells us, let's say we are in a recession and let's say the last eight or 10 months. We have spent so many months talking about it. Part of the complaint is we know for so many months last year Tom, the Federal Reserve, the administration, they just wouldn't catch up to what Americans were saying. That this economy is slowing down and it's slowing down fast. It's interesting to listen to the candidates these days who are talking both about things they would do once they are president, but things that should be done right now.
FOREMAN: It's tricky as you know Ali, the problem is in one breath you want to encourage the economy. You want people to be hopeful. You want them to move forward. However, if you talk too much about what's bad and how bad it is and how long it's going to be bad, that encourages people to tighten up and to sit back and not engage the economy so much, which can make it worse.
All of these candidates face a very unenviable task right now. And whoever is in office in this country, faces an unenviable task because they have to encourage the markets to move forward. They have to encourage people to engage and have hope, but if they do it too much, it looks like they are out of touch and they don't understand what normal voters are dealing with. And trust me, we are all dealing with a lot.
VELSHI: We follow this very closely on ISSUE #1, the candidates talk about it so much. You can catch Tom -- thank you for being with us Tom. You can catch Tom every Saturday at 7:00 p.m. Eastern on his own show, "THIS WEEK IN POLITICS," where they recap so much of what was said and give you a great take on it. It's right here on CNN.
Thanks Tom.
WILLIS: Small business in America is struggling. We've talked a lot about it on ISSUE #1 and this morning, President Bush made remarks to America's small business summit.
Brianna Keilar joins me now from Washington, D.C. with the highlights -- Brianna.
BRIANNA KEILAR, CNN CORRESPONDENT: Hi there, Gerri.
As you know, it's very important how people feel the economy is doing. If they think that they are in a recession, that's very important. It can affect their economic behavior. Today because of this, we saw President Bush doing some of what we've been seeing him do a whole lot of lately. Basically being an economic cheerleader at America's Small Business Summit of 2008.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We'll recover from the slowdown. And we are going to bounce back strong. And the small businesses of America are going to lead the way.
(END VIDEO CLIP)
KEILAR: We heard him reiterating some familiar themes today tailored to the small business audience. He talked about the economic stimulus package. He mentioned of course rebate checks will soon be in the mail, but he also talked about one of the provisions in that economic stimulus package. That is accelerated deductions for small businesses that are purchasing equipment.
He, in particular, highlighted two people, two small business owners who say this has helped them immensely. One person saying that they've been able to buy more computers that actually they've been able to even hire more employees because of what the economic stimulus package has done for them.
Then he also pushed Congress on two things. One, extending his tax cuts that are set to expire in 2010. He has always said that it will create more certainty in the economy. And of course, Republicans in Congress on board with that, generally speaking, but Democrats are not. Then the other thing that he did touch upon again today, the Colombia Free Trade agreement, this is a very controversial free trade agreement of course.
He sent it to Congress. House Democrats changed rules so that they didn't have to take it up in the time they were supposed to have a vote on this free trade agreement. President Bush said small businesses are hurt by this because you've got goods coming in from Colombia to the U.S. without -- they are duty-free, and he says it's not the same the other way. That most of the products going into Colombia from the U.S. are facing tariffs.
Democrats say you know what though some Americans are going to lose their jobs because of this trade agreement and President Bush needs to address that before we go ahead and sign off on this and have a vote -- Gerri.
WILLIS: Complicated stuff there Brianna. There is another big headline though in Washington today. It has to do with the Department of Housing and Urban Development. What's going on?
KEILAR: President Bush just announced a new head, a new secretary for the Housing and Urban Development department, Steve Preston. He is actually the current chief of the Small Business Administration. One of the things that President Bush highlighted about him that was particularly interesting, he said that he has at the helm of the SBA developed areas with high unemployment and poverty rates.
And obviously with the mortgage crisis going on he is going to want and is hoping that Steve Preston will be able to achieve something similar with the housing markets that are really having a difficult time. But is the -- he would be, I should mention he hasn't been confirmed. This is just President Bush saying here is my pick for the replacement of the old HUD chief Alfonso Jackson. So he still would have to be confirmed by Congress -- Gerri.
WILLIS: That's critical news as people watch the FHA which will be a critical part of ending this mortgage meltdown.
Brianna, thank you for that.
Are you dreaming of living the high life? My next guest says hey, you can and still stay within your means. You'll want to know about that. Let's find out about it. Farnoosh Torabi is the author of "You're so Money." I
love the title, first off.
FARNOOSH TORABI, AUTHOR, "YOU'RE SO MONEY": I love the way you say it, too. WILLIS: You have to let us in on the little secret about how you made this all happen. You got a little help from mom and dad.
TORABI: Sure thing and I will admit, I'll be the first to admit it. In 2004 I was living in New York City -- I still live in New York City, renting and wanted to continue living in Manhattan and my rent was up. My father said why don't you buy? I was like, daddy, are you crazy. The average home is more than $1 million. So the apartment that I was going for was about $295,000 and I didn't have the down payment.
WILLIS: How much?
TORABI: $295,000. It was a studio --
WILLIS: You did as a first house, and your parents obviously help you out with it.
TORABI: They helped me out by taking out -- they had built equity in their home in Massachusetts. They took out a home equity line of credit, gave me a check. I bought it cash. Then went to Washington Mutual, took out an equity line of credit on my new apartment and paid back my parents about 80 percent. So they have about 20 percent still invested in my home and guess what, it's appreciated about 100 percent since 2004.
WILLIS: All right.
So folks out there with wealthy parents, now you know how to do it. Let's talk about this age group that you are so interested in.
TORABI: Sure.
WILLIS: They are under pressure right now. The economy is not good. Sometimes it's the youngest people, the newest people to a company whose jobs are cut.
TORABI: Right.
WILLIS: Now tell me, if you are in that situation what do you do?
TORABI: Stay focused. Don't not only become great at your own job, but learn more responsibilities, take on additional responsibilities. Maybe even staying an extra hour or two at work. Dress like your boss. If your boss is putting on a tie every morning, you put on a tie every morning.
Also, if you can't get a raise on the job, think about other revenue streams you can create for yourself after your 9:00 to 5:00. If you've got skills, talents, interests, if you have a green thumb, this is a great season to start gardening. If you are a great tutor, hey, there are opportunities on the weekends, in the evenings.
I babysit, I freelance write and I authored a book. Over the holidays too, maybe part time work at the department store doing the holiday frenzy, get some overtime. So there are opportunities. Money is everywhere, I always say.
WILLIS: All right, let's talk about what you do to live the high life even though you are desperate about your job, you're worried about the future?
TORABI: You have to figure out what is your good life? You can't just go out there and spend on everything. I mean we want it all, but do we really? What are our priorities, what are our values?
WILLIS: So maybe you don't live the high life.
TORABI: You live your definition of the high life. Less might be more.
WILLIS: Any other advice to folks though, who, say they are trying to get into the job market right now. What do you do?
TORABI: I believe in good job karma. I believe you've got to identify who are the people you trust in your life, your friends, your family, maybe even a co-worker. Put the feelers out there say you are looking for a job. That's how I got my job at the Street.com. I just told some people that I was looking to move on and a week later I got some phone calls. I mean really, trust your friends, trust your family and good job karma.
WILLIS: And borrow from your family is the lesson of this story. Farnoosh, thanks for helping us out today we appreciate it.
TORABI: Thank you so much.
VELSHI: Hi, coming up next, what a visit from a highly visible figure like the pope means to a city's bottom line. Plus, we'll tell you why it actually might be OK for some folks to look into an adjustable rate mortgage. If the situation is right, it could save you money. We want to hear from you. This show is about you. The address, issue1@cnn.com.
ISSUE #1 rolls on next.
(COMMERCIAL BREAK)
DON LEMON, CNN ANCHOR: Hello everyone, I'm Don Lemon, more ISSUE #1 in just a moment. But first we want to check your headlines for you.
Pope Benedict XVI begins the second leg of a six-day tour of the United States in New York City. Last hour his holiness addressed the general assembly of the United Nations. He is the fourth pontiff to visit the world body. Later today the pope is scheduled to observe ground zero, visit a Jewish synagogue and speak with leaders of other religious denominations.
Happening now in San Angelo, Texas, day two of what's being called the largest child custody hearing in U.S. history. The plight of more than 400 children hangs in the balance as their polygamist parents demand the state of Texas return the children to their custody. Two weeks ago Texas child protective services took custody of 416 children after a phone tip alleged sexual abuse at the group's compound. Members of the breakaway Mormon sect deny the allegations.
Aftershocks in the Midwest just hours after an earthquake rocked the region early this morning. The 5.2 magnitude quake was centered about 38 miles north-northwest of Evansville, Indiana. It was the strongest earthquake to hit the region in 40 years. People felt it hundreds of miles away, all the way to Iowa and Tennessee. Aftershocks soon followed the largest registering 4.5 magnitude. This building in Louisville, Kentucky was damaged and skyscrapers were shaking in Chicago, as well as Indianapolis.
There were no injuries and no major damage reported. One woman got quite a scare though when she was trapped inside her home after her porch collapsed. Details on that and other stories at the top of the hour right here in the "CNN NEWSROOM."
I'm Don Lemon.
Meantime, more ISSUE #1 with Ali Velshi and Gerri Willis.
WILLIS: Welcome back to ISSUE #1.
Pope Benedict is in New York City right now after several days in Washington, D.C. When a major public figure comes to a city, it has a dramatic impact on that city's economy. CNN's senior correspondent Allan Chernoff decided to take a closer look and break down the pros, the cons.
Hi, Allan.
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: A few cons, but not a big deal here in New York City. You know, we do have a few more cops on the street today and some traffic on the east side of Manhattan is disrupted. But even for the pope, people stuck in traffic are a little more forgiving than they are, for example, when the president comes over.
Let's talk about the positives. The positives are big. New York City is expecting this will deliver more than $50 million in revenue to the city. That's quite a big increase. In fact, compared to 1995 when John Paul II visited here, that was an impact of about $45 million.
Now here we're talking about spending in restaurants, for taxis, hotels. The average overnight visitor to New York City spends $330 a day. So this is some real serious money.
But the long-term impact is even bigger because it's as if New York City is co-starring in a movie with the pope. Let's have a look at what the head of the convention of visitors bureau said.
(BEGIN VIDEO CLIP)
GEORGE FERTITTA, CEO, NYC & COMPANY: The pope is big business, but it's also an inspiration for our city. And, also, we can't forget that this kind of iconic visit will have an incredible impact on people seeing this visit all around the world, highlighting our wonderful city.
(END VIDEO CLIP)
CHERNOFF: You just cannot buy this type of publicity -- Gerri.
WILLIS: Yes, and I was just thinking, $50 million? I didn't realize the pope was such a big eater. You've got to tell us now, how does this stack up with other big events?
CHERNOFF: Well, you know, the pope is pretty big. But this is the big apple. And we host a lot of major events here in New York City. So let's have a look at our chart and see the comparison. Have a look over there.
The U.S. Open. Now this is not entirely fair because the U.S. Open does last two weeks. But even on a per day basis, you see the U.S. Open brought in in 2005, that's according to the comptroller's office the last time this was calculated, $425 million. The Republican National Convention, over $260 million -- $265 million. And the baseball all-star game, which will be played at Yankee Stadium, the last time at Yankee Stadium later this year, the anticipation is $150 million just for that ball game.
So, Gerri, we've got some stiff competition for the pontiff here in New York.
WILLIS: Yes. It sounds like it doesn't really stack up with some of the biggest events. Thank you for that, Allan.
VELSHI: All right, we talk so much about adjustable rate mortgage. So many folks stuck in subprime ARMs that are resetting and are forced into foreclosure. But when looking for a mortgage, you should look into whether an adjustable rate mortgage might be right for you. Greg McBride is with bankrate.com in West Palm Beach.
Greg, good to see you. Thank you for joining us.
I can't believe it. I was just talking yesterday to somebody, somebody with very good credit, in prime, refinancing their mortgage and going into an adjustable rate mortgage. Why are people doing this?
GREG MCBRIDE, SENIOR FINANCIAL ANALYST, BANKRATE.COM: Well, it can make sense for people in certain situations. There are a couple of prerequisites. Are you, you know, for example, are you -- if you're not going to be in the home for very long, it can make sense. If you can expect a big increase in income. That's not very common but, you know, if you're in that situation, it could work for you. You have to be good with your money. This is not a shortcut to affordability.
And, finally, you have to understand and be comfortable with the risks. What happens if that higher income doesn't pan out? What happens if your time table doesn't come to fruition? VELSHI: All right, there's one lesson we've all learned from this whole thing is, just read, understand what the terms are, understand what the worst-case scenario is if interest rates were to go up. Know that kind of stuff. But you're also saying that there's a type of person, there's a profile, for whom an adjustable rate mortgage might make sense.
MCBRIDE: Absolutely. You know, you'll start with, say, a young couple that, you know, you're buying a starter home. You're not going to be there very long. The advantage of the adjustable rate mortgage is that it functions as a fixed-rate loan. If you buy a house, you think you'll be there five or six years, a seven-year adjustable rate loan could function as a fixed-rate loan.
If you expect to move up or move down, maybe downsize to a smaller home once the kids are out of the house, you know, then an adjustable rate mortgage could function as a fixed-rate loan. Could generate some tangible savings as well.
VELSHI: All right. If you're a family, you've got teenagers, college age kids and something like that, does it make sense for you to do this sort of thing?
MCBRIDE: I'll give you an instance where it certainly would. If, you know, you need to manage your cash flow while the kids are in college and then you eventually look to downsize to a smaller home once they graduate, that's where an adjustable rate mortgage could make sense. But if you're in a home and the kids are -- you're going to raise your family there, you're going to be there for the long haul, then an adjustable rate mortgage is not right. You want the stability of a fixed-rate loan.
VELSHI: Let's talk about rates. Let's talk about how they compare, a 30-year fixed to an adjustable rate mortgage. There's not a lot of spread right now. It doesn't necessarily, for most people, make a lot of sense. A 5/1 ARM is 5.59 percent. A 30-year fixed, if you've got good credit, is 5.87 percent.
MCBRIDE: Yes, not much of a spread there. Not very compelling. And let's break that difference down.
If you're looking at a difference of a quarter of a percentage point, that's $50 a month on a $300,000 loan. Probably not enough to offset that risk. But these rates fluctuate constantly. And so a couple of months from now you might be looking at a three quarter of a percentage point difference. And if you're looking to buy a home this summer, then that's a difference of $150 a month. That's where the savings can add up if you're in one of those situations.
VELSHI: So when you're looking -- and I just want to keep that graphic up there to talk about the difference between which loan you should get. At this difference right now, the saving in the adjustable rate mortgage over the fixed rate mortgage for 30 years is about $50 a month. If that spread were to be bigger, if the fixed rate mortgage were three quarters of a percentage point more than the adjustable rate, that savings is $150 a month. MCBRIDE: Absolutely. And the key here is that this is not a shortcut to affordability. A fixed rate mortgage might not be the best loan in every instance, but it is the best gauge of affordability. If you can't afford a house with a fixed-rate loan, you can't afford the house. It's that simple.
VELSHI: All right, let's stop trying to sort of squeeze a round peg into a square hole. You can do a lot of this research. There are calculators around and there are things even on your site, bankrate.com, where people can go and sort of see how much this particular loan would cost them at that interest rate. And I think it's a tool people should use.
MCBRIDE: Absolutely. I mean, you know, it functions as a fixed- rate loan. But if you can get some savings on the front end, you're not having to bear the risk, yet you get the benefit in terms of monthly savings.
VELSHI: What does one say when one is looking at this adjustable rate mortgage and says, well, what do I think? Do I think interest rates are going down or do I think interest rates are going up in the near future? What does your information tell you?
MCBRIDE: Well, I mean, I think the best candidate is, this is not a decision you're making based on the outlook for interest rates. If you're a good candidate for an adjustable rate mortgage, by and large it's because your time table is short enough that that loan would function as a fixed rate loan.
Right now the value is in fixed rate loans. Those rates are still very low. If you saw a bigger disparity between adjustable and fixed rates, for somebody who plans to be in the home less than 10 years, that could be enough to tip the scales in favor of that adjustable rate loan.
VELSHI: All right, the tip that stands out the most from you for me is, you've got to be good with your money if you're going to take an adjustable rate mortgage.
Greg, good to see you. Thank you very much.
Greg McBride from bankrate.com.
WILLIS: More first quarter profit and loss horror reports. This one from Citigroup, where a deluge of pink slips is in the forecast. Citigroup says it will pare its workforce by slashing an additional 9,000 positions throughout the company.
Now this after the financial services giant reported another quarterly loss. This one to the tune of $5 billion. It comes on the heels of the worst-ever financial report for the previous quarter when the company tabulated a nearly $10 billion loss and announced a workforce reduction of some 4,200 jobs.
Citigroup's CEO blames ongoing market turmoil and the credit crunch. But much of Citi's recent financial woes are tied to the mortgage mess. Case in point, Citi recorded more than $13 billion in write downs. That's nearly half of which was directly related to subprime lending -- Ali.
VELSHI: Gerri, thanks.
Up next, something every single one of you out there needs to know. What happens to your health care when you change jobs or you lose your job? Dr. Sanjay Gupta willing be here.
And we'll open up the Help Desk and answer your questions. The address is issue1@cnn.com.
You're watching ISSUE #1 on CNN.
(COMMERCIAL BREAK)
VELSHI: All right, leaving your job, losing your job, it's a big life change and it can be scary. But in all the potential chaos, you cannot ignore one important aspect, and that is health care. CNN's Dr. Sanjay Gupta, host of "House Call," is live right now for us in Atlanta.
We are seeing increased job losses, Sanjay. We've lost more than 200,00 this year alone. And if we're in a recession, it could get worse. Health care, such a big deal.
DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: Yes. And, I mean, if you are someone who has lost your job, you suddenly lost potentially a big benefit, which is your health care as well.
Ali, you know, a lot of viewers know, who have been in this situation, if your company has 50 or more employees, there is a thing called Cobra, which allows you to retain your health care benefits even after you've left your job. A couple problems. One is that it lasts about 18 months. Second, is that it's very expensive. It can cost, on average, about $1,000 for a family of four. And that's if you've been pretty healthy so far.
Eventually, if you do buy private insurance, I want to give you a few things that you should sort of be on the lookout for that might help defray some of these costs. It's still going to be pretty expensive, but some things that might help.
First of all, you know, think about buying insurance as part of a group. So if you think about things, you can sort of negotiate lower prices if you buy as part of a group. Also, if you think about it, if you don't have a specific doctor, you can use a network provider doctor, that might bring your insurance costs down as well.
Here's something that maybe you didn't know. Federal credit unions often have plans. So if you have an account there, go talk to them about it. And also, a few states, Ali, have free or low-cost plans for people who are unemployed, have been unemployed for some time.
VELSHI: Sanjay, as a doctor, tell me this. We know that in tough economic times people make choices. We know people without health care coverage will choose sometimes not to go to a doctor or a dentist because even if they're sick, they know they can't afford the prescription coverage.
If you lose your job and you're about to face hardship, it seems to some people like the thing they may be able to give up rather than pay that $1,000 a month. Tell me, as a doctor, is it unsafe to go without health insurance if you can have it?
GUPTA: Well, a couple things exactly to your point. There have been studies on exactly what you're talking about. As prescription drug costs have gone up, for example, among private insurance carriers, at least one study shows that about 40 percent of people will make a decision at one point or another to go without medications.
Think about that. Almost one in two people will say, you know what, it's more important for me not to get these medications and buy something else this particular month, which is a frightening prospect.
As far as going without insurance, Ali. Look, you know, if you're 20 years old, 30 years old, your assumption is that you're immortal, you don't need it. Look, as a doctor, I can't, in good consciousness, advocate that someone doesn't have health care insurance, even if it is expensive.
One thing to keep in mind is that, if you are without any kind of health care insurance for around two months, 63 days to be more precise, you're going to get a good, hard look when you do try and sign up for health insurance in the future. It might be more difficult to buy that health care insurance. So you may end up paying more money than you think on the back side if you don't have health care insurance for a period of time.
VELSHI: You know, my doctor was telling me that he encounters people who have lost their benefits and he does things to try and help them. So it might be a conversation to have with your doctor as well to say, here's my situation. What do you recommend I do? Maybe that's an idea, as well.
GUPTA: Yes, we actually did a documentary on that very thing. And, you know, it's one of those things where there are specific sort of compassionate programs within hospitals. Maybe doctors themselves or the hospital as a whole.
And states do as well. You know there's a few -- if you have been unemployed, if you're someone who has a pre-existing conditions, for example, you might be able to get some help from the state. And we have found as well that large employers, even the federal government, are more likely to offer health care insurance to people who have pre-existing conditions. So a couple of things to keep in mind.
But, Ali, you know, look, it is difficult. The system, as we've talked about, we did a whole document on this, is broken. Something has to give here. It's very expensive for a lot of people. VELSHI: Sanjay, thanks for joining us.
Dr. Sanjay Gupta. You can catch him on "House Call" every Saturday and Sunday morning 8:30 a.m. Eastern right here on CNN -- Gerri.
WILLIS: Always great to have Sanjay on the show.
Up next, answers to your questions. It's the Help Desk back in business and the e-mail, issue1@cnn.com.
You're watching ISSUE #1.
(COMMERCIAL BREAK)
VELSHI: Welcome back to ISSUE #1.
On our radar today, Passover. Planning for Passover is proving a little more problematic than usual for those observing the Jewish holiday. There's a shortage of kosher margarine in grocery stores and there are reports of it being sold only in small quantities. In fact, there's reportedly only one American factory producing the buttery replacement, making kosher margarine a commodity in major demand since it is non-dairy and it's used in so many Passover recipes. The Passover holiday begins Saturday at sunset -- Gerri.
WILLIS: You ask, we answer. It's one of the themes of ISSUE NUMBER ONE and it's something we do every day here. On the Help Desk, let's get right down to it. Gary Shatsky is a financial adviser. Jack Otter is with "Best Life" magazine. And our very own Allan Chernoff is here as well. He's a senior correspondent.
Welcome to you all on a happy Friday. Let me tell you. Let's get to the first e-mail.
Samuel asks: "I am 25 years old, have $30,000 in my 401(k) and would like to take the money out for a down payment on an investment house." Not the primary home but an investment house. "Will I be penalized? If so, how much?" -- Gary.
GARY SHATSKY, FINANCIAL ADVISER: Well, first of all, congrats buying and investment house at 25. Yes, you will be penalized. There will be not only tax on it, but there will be a 10 percent penalty on top. And at 25, you could be having this money sit and grow tax- deferred for decades. So you should try to find some other way to get the money.
WILLIS: Yes, I don't like this choice. I mean, there's a lot of ambition behind that, but, you know, you can do other things with the money.
Michelle (ph) asks: "How do you recommend dealing with depression and frustration from the state of the economy?"
Now I know a lot of people out there, Allan, are really upset. What do you think they should do? CHERNOFF: Now she's not saying that she's totally out of work, but what I would say is, first of all, make sure she's getting her exercise, eat decently, but also focus on her own accomplishment, not worry about the big picture, all the doomsday discussion that we hear on CNN and other stations and what you read in the newspaper. Just focus on your own accomplishments and that's a good way, I think, to focus (ph).
SHATSKY: Frustration is certainly understandable. Depression, unfortunately, can destroy your financial life. So you really have to focus on the frustration and how to solve the problems by stepping back from where you currently are.
WILLIS: And small steps are fine, right?
JACK OTTER, DEPUTY EDITOR, "BEST LIFE": Set little, achievable goals and meet them and then you'll feel empowered to take on the big stuff.
WILLIS: I feel better already. OK.
We have another e-mail. "I've just recently been unemployed and I want to take out my 401(k) money to make ends meet while I look for another job." A lot of people in this situation. "They told me they'd take 20 percent off the $19,000 in my 401(k) if I took the money out. Should I do this?"
Gary, you see how many people are struggling with this right now.
SHATSKY: Yes, absolutely. But you've got to take a look at the penalties. You've got to ask yourself, is there a better way that's more cost effective? You should really be looking at that last after you've tried everything else.
WILLIS: Jack, you want to weigh in?
OTTER: I think Gary's nailed it. You've got two problems. One is meeting these short-term frustrations and obstacles that you're facing. But retirement is still looming, no mater what happens today. And people who have done the right thing, put that money aside, need to leave it there and have the power of tax rate plus compounding.
WILLIS: All right, we're going to here from Aileen. She asks: "My husband and I signed a 5/1 ARM," adjustable rate mortgage, "which is due to expire in August of 2009. I was wondering if it would be wise to refinance before that date to get a better or fixed rate or try to sell prior to August of 2009. With the current housing market, many houses in our neighborhood have been foreclosed."
OK. This is problematic, right, Jack?
OTTER: Well, there are two different issues here really. And the first question you have to ask is, do they like living in this house? How long do they want to be there? If they want to stay there for a long time, as the guest said earlier from Bankrate, now is a good time to refinance. You're really not going to pay that big of a penalty. But if they're thinking of leaving, yes, I'd put it on the market now. I don't think the real estate market ...
WILLIS: Really?
OTTER: Well, again, if they want to beat that August '09 deadline.
WILLIS: It could take a while to sell it.
CHERNOFF: It sounds like they're very -- there's a lot of anxiety behind this question. A lot of worrying.
WILLIS: And all the questions we have today.
CHERNOFF: And one way to take away some anxiety is to go to a fixed. Go to a fixed rate. At least you have some certainty ahead. You know what your monthly payments are going to be.
SHATSKY: But one of the things people have to focus on are when ARMs are readjusting right now, many people are finding they're getting a lower rate or the same rate because interest rates have dropped so much. So that has to be factored in. They could very well find themselves at the same rate when it does adjust because interest rates have plummeted over the last year and a half.
WILLIS: Good answer.
We have a question from Tariq who asks: "I have been trying to pay off about $30,00 in credit card bills. Should I temporarily suspend contributions to my company 401(k) and stock purchase plan?" You see this all the time.
Allan.
CHERNOFF: First of all, stock purchase plan, definitely. You have no business buying your company's stock.
WILLIS: Gary's going to argue.
CHERNOFF: You have no business buying your companies stock when you have all this toxic debt. Get rid of that debt. I know it's important to contribute to 401(k) and all that, but, you know, the rates that are charged on the credit cards, you're unlikely to earn that return in the stock market -- 15 percent, 16 percent.
WILLIS: All right, Gary, I'm going to let you get it.
SHATSKY: Well, here's the key issue. With a stock purchase plan that gives you a 15 percent discount, as many of them do, and use a very favorable formulation, even if the stock goes absolutely nowhere, you get a 15 percent gift from your company. And while certainly if you have no other choices, you'll do that. But you should think twice before you stop doing it.
OTTER: The key there is, you've got to sell it as soon as they'll let you.
SHATSKY: Absolutely right.
WILLIS: All right, guys. You know, you're fabulous.
Thank you, thank you, thank you, thank you. Jack Otter, Gary Shatsky, Allan Chernoff, great answers. Thank you so much.
VELSHI: Up next, the result of today's Quick Vote and a closer look at the story of how this country got so into debt.
You're watching ISSUE #1 on CNN. Stay with us.
(COMMERCIAL BREAK)
VELSHI: All right. We asked you to weigh in on today's Quick Vote. More than 12,000 of you did. For how you voted, let's check back in with Poppy Harlow from CNNMoney.com.
How's it looking?
HARLOW: It's looking good. The question was, what big company would you most want to work for? Overwhelmingly, 64 percent of you said Google. Your other choices were Starbucks, Whole Foods or Nike. And this does not surprise me, Ali. At Google . . .
VELSHI: Because you get free food.
HARLOW: You get free food, free gym, 20 percent of your time to spend on whatever you want.
VELSHI: They've got a game room.
HARLOW: I think you can bring your dog.
VELSHI: Oh, it's -- and they've got little scooters to go around the place. I'm surprised Starbucks was so low. It's a company that's known for its good benefits to people and, I guess, lots of coffee.
HARLOW: (INAUDIBLE) a lot of frappuccino making might get, you know, could be a little (INAUDIBLE).
VELSHI: Might get a little crazy.
All right, good question. Poppy, thank you very much.
Poppy Harlow from CNNMoney.com.
Roll out the red carpet, Hollywood is buzzing about the economy. Brooke Anderson has the story.
(BEGIN VIDEOTAPE)
PATRICK CREADON, DIRECTOR, "I.O.U.S.A.": We have a tenth graphic that's coming in.
BROOKE ANDERSON, CNN ENTERTAINMENT CORRESPONDENT (voice over): Documentary maker Patrick Creadon is putting the final touches on his new film. The subject, nothing less than America's perilous economic future.
CREADON: The government has made more promises than it can possibly pay for.
ANDERSON: The title of his film sums up the country's debt- ridden condition "I.O.U.S.A." Take the federal debt. The government owes more than $9 trillion. Or the Medicare and Social Security programs. They face long-term deficits projected at more than $40 trillion. The bill is being left for future generations to pay.
CREADON: That's just not fair. When you spend other people's money, which is what we're doing today, it's mean.
DAVID WALKER, FORMER COMPTROLLER GENERAL: Our financial condition is worse than advertised.
ANDERSON: David Walker, who recently resigned as head of the Government Accountability Office, is among the stars of the documentary. He insists, if political leaders don't address structural reform, the picture won't be pretty.
WALKER: Well, you could find the situation where the government is going to have to cut back on doing a lot of things that the people have now taken for granted or where income tax rates may have to more than double.
ANDERSON: Failing (ph) that, the nation could see much higher inflation or interest rates, Walker argues. The impact could far exceed the current economic downturn.
WALKER: If we get a crisis, it will be much more dramatic than the one that we're facing today and it will affect tens of millions of Americans.
CREADON: A lot of times when I'm working on the film, I have one of my daughters sitting on my lap. We have three daughters.
ANDERSON: Creadon says he made "I.O.U.S.A.," which comes out in August, largely out of concern for his kids' generation.
CREADON: If the debt stopped growing right now, we'd probably be OK. We could probably handle it. It's not today's problem, it's what lies ahead.
ANDERSON: For these guys.
CREADON: For these guys. My assistant editors.
(END VIDEOTAPE)
ANDERSON: All right. Warren Buffet and former Treasury Secretary Paul O'Neill also participate in the documentary. Now the film makers insist the movie is nonpartisan, just an effort to inform and they hope to motivate a discussion to prevent a national disaster.
Ali, I've seen an unfinished version of the film and it really does paint a dire picture of America's economic future that would be much worse than what we are experiencing today.
VELSHI: Well, if the economy's going the way it's going, it's going to be a big hit when it comes out in August.
Brooke, thank you so much.
Brooke Anderson in Los Angeles.
WILLIS: The economy is issue number one and we here at CNN are committed to covering it for you.
ISSUE #1 will be back here Monday, same time, 12:00 p.m. Eastern, right here on CNN.
VELSHI: And I'll be in Philadelphia with the CNN Election Express as we count down to the Pennsylvania primary.
Take it over to "CNN NEWSROOM" right now.
