Return to Transcripts main page
Issue Number One
Greyhound Bus Crashes in Indiana; Primary Day in South Dakota and Montana; CFTC Gets Slammed on Capitol Hill; Repo Business is Booming
Aired June 03, 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: "ISSUE #1" is straight ahead.
I'm Tony Harris at the CNN Center in Atlanta.
Here's what's happening right now. We begin with a story just in to CNN from Indiana. Chicago affiliate WLS reports a Greyhound bus has overturned on interstate 65. It happened in Crown Point. That's near Gary. Reports say as many as 30 people could be hurt. Authorities say the injuries do not, do not appear to be life threatening and the bus is now on its side.
It is the last primary day. Voters are going to the polls right now in Montana and South Dakota, closing out six months of contests. Hillary Clinton is not giving up. Campaign chairman Terry McAuliffe tells CNN Clinton will keep going until someone has the numbers. He was reacting to an "Associated Press" story. It said Clinton was ready to acknowledge that Barack Obama has enough delegates to win at her post-primary rally tonight.
McAuliffe says that story is wrong. Barack Obama is about 40 delegates short of having the 2,118 delegates needed to clinch the nomination. But there aren't enough pledged delegates up for grabs today to reach that, so it comes down to super delegates. One of them, House majority whip Jim Clyburn, he announced this morning he is backing Obama. That's a quick look at what's happening right now.
I'm Tony Harris. "ISSUE #1" starts right now.
ALI VELSHI, CNN ANCHOR, ISSUE #1: Record gas prices again and now a major auto maker is closing plants. Thousands and thousands of jobs could be in jeopardy.
A big hearing going on right now on Capitol Hill looking into market manipulation into the oil industry and whether it's responsible for the high prices you're paying. Plus, how to get 50 miles, that's right, 50 miles of gallon from your car. And a look at what major hurricanes could do to the price at the pump.
ISSUE #1 is your economy. ISSUE #1 starts right now.
Hello, I'm Ali Velshi and this is ISSUE #1. Gerri Willis will be along in just a moment.
We begin with another record in gas prices. AAA reports the national average for a gallon of regular gas up 0.3 of a cent now at $3.98. Oil prices are down below $126 a barrel today, but the world's biggest auto maker says it now knows what you know. High gas prices are changing the way you drive.
General Motors' CEO Rick Wagoner says the spike in gas prices has caused Americans to dump their trucks and SUVs in favor of smaller and more fuel-efficient cars and he says this shift is here to stay.
(BEGIN VIDEO CLIP)
RICK WAGONER, CHMN & CEO, GENERAL MOTORS: Of greatest concern is the unprecedented rise in oil prices. These higher gasoline prices are changing consumer behavior and rapidly, significantly affecting the U.S. auto industry sales mix. We at GM don't think this is a spike or a temporary shift. We believe that it is by and large permanent.
(END VIDEO CLIP)
VELSHI: GM is closing four North American truck and SUV plants, cutting track capacity by 700,000 vehicles. In Canada, the factory that makes the award-winning but poorly-selling Chevy Silverado pick- up truck and its GMC Sierra twin. In Mexico a plant that builds medium duty commercial pick-ups and two U.S. plants, one in Lorain, Ohio which makes the mid-sized SUVs Chevy Trailblazer and GMC Envoy and one in Janesville, Wisconsin, which makes the large Chevy Suburban and GMC Yukon.
The company is also looking at dumping its gas-guzzling Hummer brand. GM hasn't had a profitable year since 1994 and it won't have one this year either. But CEO Rick Wagoner says its cars and crossover vehicles are selling much better.
(BEGIN VIDEO CLIP)
WAGONER: Going forward, our focus on cars and crossovers will accelerate. In fact, 18 of our next new 19 product launches in the U.S. will be cars or crossovers.
(END VIDEO CLIP)
VELSHI: And it's ramping up production of those types of cars. Starting in September, GM is adding a shift at two of its U.S. plants. One is the Lake Orion, Michigan plant which makes the Chevy Malibu, the North American car of the year and the Pontiac G-6. The others in Lordstown, Ohio, where the compact Chevy Cobalt and the Pontiac G-5 are built. The Lordstown plant will also be home to a new generation compact fuel-efficient car similar to the Chevy Aveo.
GM's board has also approved money to develop the Chevy Bolt, a plug-in hybrid electric car which can run gas-free for up to 40 miles before it needs a recharge. The Volt could hit show rooms by 2010. GM's rival Ford Motor unveiled similar plans in May though Ford did not give any specifics of plant closures -- Gerri.
GERRI WILLIS, CNN ANCHOR: Thank you, Ali. It is your turn, that time of the day to weigh in on today's quick vote question, which not surprisingly has something to do with cars, especially new cars. Poppy Harlow is here from CNNMoney.com.
Hi, Poppy.
POPPY HARLOW, CNNMONEY.COM: Hi, Gerri.
You heard it here on ISSUE #1, nearly $4 a gallon across American for gas. It's a lot more than that in some states. So we want to know how you are going to cope. Here is our CNNMoney Quick Vote question today: The next vehicle I buy will be a compact car, a hybrid, a truck or SUV or a bicycle?
Weigh in on CNNMoney.com. We'll bring the results a later in the show.
I think I'm going to get a bike.
WILLIS: You're going to get a bike. I'm thinking unicycle? I'm thinking what else could I do here?
It's a great question, Poppy. Thank you.
Up next, today could be a turning point in the Democratic presidential race. We'll fill you in. In the end who though will be better for the markets, a Democrat or Republican? We'll take a closer look.
Plus, big hearings on Capitol Hill on possible price fixing in the oil industry. We'll let you in on one of the secrets of one man who gets 50 miles to the gallon, yes 50 miles to the gallon.
You are watching ISSUE #1.
(COMMERCIAL BREAK)
WILLIS: This just into CNN, reports this hour that Spirit Airlines may lay off 60 percent of flight attendants and 45 percent of its pilots in the next two months. The "Miami Herald" reports the low-cost carrier has notified union leaders of these impending cuts and that Spirit will close, close its La Guardia and San Juan bases and reduces its Ft. Lauderdale base. A spokesman for Spirit Airlines tells CNN the letters were just a precaution and there are no specific plans -- Ali.
VELSHI: Gerri, thanks.
We've been telling about an investigation going on in the price fixing in the oil industry. That investigation is by a government group called the CFTC, the Commodities Future Trading Commission. Across Washington on Capitol Hill today, a completely separate hearing on market manipulation.
CNN senior correspondent, Allan Chernoff, has been watching the hearing. He's here to help sort it all out. Hi, Allan.
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Ali, the Commodities Futures Trading Commission is getting slammed today on Capitol Hill. A panel of experts testifying before a Senate committee right now agree that speculation is definitely driving up the price of oil and gas and they say it's partly the fault of the CFTC. They are referring to professional investors throwing hundreds of millions of dollars into the energy market, not only here in New York at the New York Mercantile Exchange, but also overseas in unregulated trading conducted in London and Dubai, where investors can buy contracts as a benchmark for U.S. crude oil beyond the reach of U.S. regulators. The most critical witness of all this morning, the former head of trading in markets of the CFTC.
(BEGIN VIDEO CLIP)
MICHAEL GREENBERGER, FMR. HEAD OF TRADING, CFTC: The CFTC has abdicated its responsibility to the financial services authority in the United Kingdom and to the Dubai financial services authority for 30 percent of the west Texas intermediate U.S.-delivered contracts sold in the United States of America. That is an outrage.
(END VIDEO CLIP)
CHERNOFF: The CFTC last week announced that it has been investigating the oil markets since December for evidence of possible manipulation of the market and also has struck a deal with the UK to share more information about energy trading Ali so they have done something here.
VELSHI: And if it's the agency that regulates this and says it's been investigating oil and it's telling us about the investigation in very little detail, why is that not satisfying critics?
CHERNOFF: Not satisfying at all, first of all, partly because of the reputation of the CFTC. They are known as being a very, very lax regulator. They have not cracked down very much over the years. In fact, in recent years, there's been a big growth in off market trading which is beyond the reach of the CFTC and committee members of the Senate Commerce Committee say the CFTC has just let speculators take control of the energy markets.
(BEGIN VIDEO CLIP)
SEN. MARIA CANTWELL (D) WASHINGTON: CFTC is not doing everything it can to protect American families and businesses from the possible oil price manipulation.
(END VIDEO CLIP)
CHERNOFF: Even oil companies that sell gasoline are complaining, including the president of Inland Oil.
(BEGIN VIDEO CLIP) GERRY RAMM, PRESIDENT, INLAND OIL: Excessive speculation on energy trading facilities is the fuel that is driving this runaway train in crude oil prices today.
(END VIDEO CLIP)
CHERNOFF: The companies that refine crude oil into gas are suffering because they are paying so much for crude oil. And the people who run gas stations say their profit markets are also hurting because they have to pay so much for deliveries of gasoline.
VELSHI: So a whole bunch of people think it's speculation. What if anything can be done to curtail excessive speculation, if that's what it is?
CHERNOFF: Things can be done. It's not so easy to get it done politically. First of all, you can raise margin requirements. That is the down payment of what you have to put up basically to buy a futures contract in energy. Also the head of research for the Consumer Federation of America has just testified he thinks those who manipulate the energy markets should be put into prison. The CFTC does not have that kind of authority -- Ali.
VELSHI: This is truly complicated stuff Allan. Thank you for helping us get to the bottom of it and I suspect this won't be the first time or the last time you're doing that.
Allan Chernoff, thanks -- Gerri.
WILLIS: Ali, well, everyone wants to get the most out of their gas, but there are some folks out there who are taking the concept to a whole new level. It's called hypermiling.
Now CNN's Miles O'Brien is live right now and he's probably not hypermiling. He's in his Yukon.
Hi there, Miles.
MILES O'BRIEN, CNN CHIEF TECHNOLOGY & ENVIRONMENT CORRESPONDENT: The truth is what I discovered Gerri, even if you have a Yukon, you can hypermile.
Right now I'm not doing so well, 3.3 miles per gallon. That is pretty darn pitiful. This is why we take the subway in Manhattan.
WILLIS: No kidding, holy cow. You should be embarrassed.
O'BRIEN: I should be. I should be. I'm driving around in a rolling anachronism. There are ways to improve the picture if you're stuck with one of these Detroit beasts and I met the guy who has all the tips for you.
(BEGIN VIDEOTAPE)
O'BRIEN (voice-over): Wayne Gerdes may look like he's out of gas. Actually, he's just hyper about saving every drop he can. And I mean hyper.
WAYNE GERDES, HYPERMILER: We are in neutral so I'm ready to pop. It starts. We're going. (INAUDIBLE) there's no point to wasting any fuel (INAUDIBLE)
O'BRIEN: Wayne is the reigning king of the gas mileage misers known as hypermilers. A ride with him is a real eye opener, not to mention a filling loosener. I'm going to hold on. That's what happens when you take a turn without touching the brake pedal. Wayne avoids it like well, gas stations. He routinely gets 50 miles per gallon in his plain old Accord, twice what Honda promises you.
GERDES: I'm already going to shut it down. This is an advanced technique.
O'BRIEN: He kills the engine whenever he can. Never tailgates, but does draft behind big trucks. He always drives the speed limit and plans trips as if they were the D-day invasion. So it forces you to think entirely different about how you drive.
GERDES: I'm already, I'm thinking like three lights ahead of here in suburban traffic area and now I'm going to use (INAUDIBLE) .
O'BRIEN: In Wayne's world, angry trailgaters are proctologists.
GERDES: Guys are riding your butt.
O'BRIEN: And when they pass him in a huff.
GERDES: They're the mad rabbits.
O'BRIEN: And big SUVs are FSPs as in --
GERDES: Fuel sucking pigs.
O'BRIEN: I almost didn't have the heart to tell him about my Yukon XL. When he came to New York the other day, he held his nose, plugged in a gadget that displays fuel economy and we are off like a herd of turtles for hypermiling 101.
GERDES: Easy, back off a little bit, shift to first. We are going slow enough in first. I want your foot on the brake and I want you to shut off the car at 1100 RPMs. You are working your butt off right now.
O'BRIEN: Using his techniques, I instantly curtailed my FSPs thirst for unleaded by 30 percent, but still a long way from 50 miles per gallon.
GERDES: This vehicle just isn't meant for downtown.
O'BRIEN: You think? Wayne started doing this after 9/11 made him reconsider our dependency on foreign oil. He runs a Web site with tips and with gas where it is now, he has a growing, albeit slow moving, following. He sure made me a believer. In fact you might say I'm pushing the concept. (END VIDEOTAPE)
O'BRIEN: So Gerri, it's not just about the driving technique. There are a few things you need to know about. First of all, Wayne pumps up his tires to the absolute legal maximum on the sidewalk,. has always clean filters and here is what I didn't think about. He uses low viscosity oil because that actually makes it easier for the engine to move. Also, real hypermilers do things like take their roof racks off and they never use their air conditioning.
You know what they use sometimes instead?
WILLIS: What do they use?
O'BRIEN: That's an ice vest. I'm wearing an ice vest right now. Just like a Nascar guy because you never, never want to turn on that AC if you are hypermiling.
WILLIS: You make me think of a Nascar guy, but I got to tell you. I'm really worried about. You are out there, you're on the streets of New York, you are driving around. I would think cabbies are so upset with you they can't stand it.
Is this really safe?
O'BRIEN: Well, it's not the way to make a lot of friends, I'll tell you that. I'll tell you, some of Wayne's techniques are frankly for people who are a little obsessive about it maybe and also have been practicing quite a bit like that turning the engine off thing. You've got to really know what you are doing to do that. A lot of what he does and what he employs is stuff that you can incorporate in your daily life.
Now as for the question, I asked him if what he does is unsafe. He said wait a minute. I go the speed limit. I never tailgate, who is being unsafe here? He's got a point.
WILLIS: That's interesting, fabulous information. We really appreciate it. Can you just be careful out there? I am afraid you are going to get arrested for talking on your cell phone while you're driving for goodness sakes.
O'BRIEN: We are certainly multitasking. I don't know what the laws are. I know you can't talk on your cell phone without an ear piece. I don't know what the rules are on live television.
WILLIS: Be careful out there, Miles. Thanks for the help. We appreciate it.
O'BRIEN: All right, you're welcome.
VELSHI: He's pretty stylish. He's wearing a vest even if it is a funny looking ice vest. Stay with us on "Issue #1." New information from the presidential campaign that you're going to want to hear. We'll have the latest on that. Plus the sale of new homes has been down for months. What are home builders doing to get you to buy? And are you not paying those bills? We'll show you what happens when the repo man comes for you.
We want to hear from you. The address, issue1@cnn.com. The help desk is ahead.
You're watching ISSUE #1 on CNN, and we're coming right back.
(COMMERCIAL BREAK)
WILLIS: It's primary day again. We have developing news from the election front.
CNN's Jim Acosta is in Keystone, South Dakota with details -- Jim.
JIM ACOSTA, CNN CORRESPONDENT: Hi, Gerri.
It is primary day here in South Dakota and Montana. We thought it would be fitting to end this long, strange trip that it's been at Mount Rushmore. And the voting is under way here in South Dakota and in Montana. The polls close later on this evening. After that we are going to see some political theater tonight, Gerri.
Barack Obama is holding a big event in the twin cities in Minnesota at the site of the upcoming Republican national convention. Barack Obama will be throwing down the gauntlet there. His communications director Robert Gibbs was on "AMERICA MORNING" earlier today saying that he expects Barack Obama to have the number of delegates needed to clinch the nomination. There aren't enough delegates here in Montana or in South Dakota combined to give Barack Obama that magic number. He will need 27 to come on board by the end of the day. Because of that Hillary Clinton of 2,118. He's going to need about 27 super delegates to come on board by the end of the day. And because of that, the Hillary Clinton campaign says they are not conceding.
There was a story that came out in the "Associated Press" earlier today saying that Senator Clinton was planning on conceding this evening. Terry McAuliffe, the chairman of the Clinton campaign came out and said that is not the case. Until he has that magic number, they are not backing out -- Gerri.
WILLIS: Well, fascinating day ahead, of course. What about issue No. 1 for the voters, the economy? How is it playing out in South Dakota?
ACOSTA: Gerri, it is gas prices. We just had a gentleman walk up to us a few moments ago bragging about his Toyota Prius and how he does some of that hypermiling. I'm not making this up. He was talking about the very same thing that Miles O'Brien was talking about just a few moments ago. Also here in South Dakota, corn is a big crop and because of that, we've seen a lot of E-85 gas available at the stations across this state which offers folks a considerable savings when they go to the pump. Over in Montana, the governor of that state, Brian Schweitzer (ph) is known as the coal cowboy. That is a big coal producing state. So you hear people there talking about coal, talking about clean coal, alternative fuel technologies. And so we've seen Hillary Clinton and Barack Obama talking about both of these issues which fall under issue No. 1 as they've been campaigning in both of these states.
WILLIS: Across the country, it's energy, energy, energy that everybody is interested, Jim Acosta thank you for that. And complete coverage of the Montana and South Dakota primaries tonight right here on CNN with the best political team on television beginning 7:00 p.m. Eastern time -- Ali.
VELSHI: It's another primary. People want to know how the stock market does under various parties. So I wanted to break that down for you thanks to our friends at S&P capital IQ. They ran the numbers for us about who does better for the market? Let's look at the last 10 years, that first column in red is how the S&P did under a Republican president. You can see over the last 10 years, the market returned 5 percent under a Republican president.
Seven of the last 10 years by the way have had a Republican president. It's done 14 percent under a Democratic president, but in the last 10 years there have only been a Democratic president three years. Over the last 25 years, the Republicans do a little better, 12 percent but the Democrats, 18 percent. Over the last 50 years, a Republican president has caused the S&P to go up or has been in office while the S&P has gone up 11 percent. Under Democrats the S&P goes up 15 percent.
Let's take a look at another permutation and combination where you've got one party in the White House and that same party in Congress. Over the last 25 years there have been four of those years. The Democrats give you a 15 percent return. The Republicans give you a 15 percent return, the Democrats only 6 percent. Over the last 50 years, same thing for the Republicans, 15 percent stock market return. When it's Democrats in both houses over the last 50 years, it's 11 percent. Here is the one that you really want to see.
The markets seem to like when they mix things up. When there is a Republican in the White House but a Democratic Congress, over the last 10 years, the return on the stock market has been 6 percent under that combination. Take a look at what it is when there is a Democratic president at a GOP Congress, a 14 percent return and the numbers get better from there.
Over the last 25 years, it's been 13 percent with a Republican president and a Democratic Congress, 22 percent with a Democratic president and Republican Congress. Over the last 50 years, 11 percent with the Republican in the White House and Democrats in Congress, 22 percent again with the Democrat in the White House and a Republican Congress. The best performance for the larger market is when there is a Democratic president and a Republican Congress -- Gerri.
WILLIS: Interesting stuff. I guess it gives a whole new meeting to voting your wallet. VELSHI: That's right.
WILLIS: As we enter this hurricane season, what a strong storm could do to your already record-high gas prices. And watch out, why the repo man is busier than ever these days and what you should look out for. "Issue #1" rolls on next.
(COMMERCIAL BREAK)
VELSHI: We talk a lot on ISSUE #1 about record high gas prices and sometimes we say there is no relief in sight. That is with good weather. Imagine what would happen if a major hurricane hit like Katrina and caused damage to an area like Port Fourchon in Louisiana which is where so much of the country's oil, offshore oil comes in off of the 600 odd oil platforms in the neighborhood?
Well, Mary Landrieu is a U.S. senator from the state of Louisiana. Senator Landrieu joins us now from Capitol Hill.
Senator, thank you for joining us.
A lot of attention as hurricane season gets underway to how vulnerable we are and what lessons we've learned. I was at Fort Fourchon right after Hurricane Katrina hit the last time around and there was some pretty serious devastation in the area. What happens if another hurricane comes that way?
SEN. MARY LANDRIEU, (D) LOUISIANA: Well, Ali, hopefully we're better prepared than we were three years ago. And I'm very pleased that I was able to actually change the formula for port security issues to actually include some of our energy ports, which I think are sometimes left out in our calculation.
And you're absolutely correct. When Fort Fourchon shuts down, we lose thousands of jobs across the country. Oil prices can skyrocket because this particular port is the gulf's only deep water port. It services about 50 percent of the platforms that are out in the gulf. As you know, most -- all of the offshore drilling is done off the coast of Texas and Louisiana. So it's a very significant port.
It does not get the attention that it needs from the federal government. And I've been working, with some success, along with other members of Congress, to get some help to the roads and the infrastructure to keep it open even with 150 mile-an-hour winds.
VELSHI: And do you think we're there? I mean, if another hurricane comes in with those kind of forces, what happens? I mean the roads were buried that time. You couldn't get out to it. And this is kind of a -- for people who don't know, it's kind of a hub for oil activity in the Gulf of Mexico. All of the oil companies have some presence there. They store equipment there. It's a real base. Is it safe from a major hurricane?
LANDRIEU: Well, we're not where we need to be. And I've been advocating for years to spend a small portion of the $10 billion that's generated in taxes paid by the industry right now to the federal government to reinvest in LA-1, which is the road that connects America to its oil that is in the gulf. That is a road that goes . . .
VELSHI: And that's a road that's been -- some part of it -- like 17 miles of it has been elevated now?
LANDRIEU: Well, no, it has not been elevated. We have plans to elevate it, but it has not been elevated. We need to elevate that road and I think that we can. And, again, it would make sense to take just a small portion of the money that comes into the National Treasury to invest in energy infrastructure throughout the nation, primarily in the gulf. So let's hope we get that done. It's not going to get done for this hurricane season. But that's something that we're working on.
VELSHI: Well, then, let's hope that we don't have another direct hit to the area this hurricane season.
Senator, thank you for join us.
LANDRIEU: Thank you very much.
VELSHI: Gerri.
WILLIS: Thank you, Ali.
Well, time now to get you caught up on the rest of the day's headlines in the "CNN NEWSROOM."
Hey there, Don Lemon, take it away.
DON LEMON, CNN ANCHOR: Get you caught up -- that's exactly what we aim to do here.
Thank you very much, Gerri.
We have an update now on that Greyhound bus crash. It happened in Indiana near the town of Crown Point. That's just outside of Chicago. Authorities say as many as 30 people were hurt, but their injuries don't appear to be life threatening. That's good news. The bus flipped on to its side on Interstate 65. No word yet on what caused that crash.
Well, it is the last primary day. Can you believe it? Finally. Voters are going to the polls right now in Montana and also South Dakota. And Hillary Clinton, she is not giving up. Campaign Chairman Terry McAuliffe tells CNN, Clinton will keep going until someone has the numbers to win. Now he was reacting to an Associated Press story. It said Clinton was ready to acknowledge that Obama has enough delegates at her post primary rally tonight. She was going to acknowledge that.
Well, McAuliffe says that story is flat out wrong. In the 2:00 p.m. Eastern hour of the "CNN NEWSROOM," we'll talk with Clinton campaign senior adviser, current adviser, Maria Cardona.
Right now we want to check in with CNN's Chad Myers. We have some severe weather happening.
Chad, catch us up.
CHAD MYERS, CNN METEOROLOGIST: Well, we have a tornado watch, which means conditions are right. Something might fall out of the sky. No warnings right now. Nothing on the ground at this point. But we do have some pretty significant wind coming through Champaign. This is, you know, obviously we're in Illinois here. There's Springfield. Moving off toward the east.
This entire area is going to be under the gun for severe weather from almost Kansas City, right through Cincinnati and into Columbus, Ohio, Indianapolis and all of southern Illinois today. Some tornados probable. Not just possible. But also here in this moderate risk category.
We have three categories, one, two, three today. We're in the two. Not up -- quite up to the high. Not up to the three today. But certainly in the middle -- Don.
LEMON: All right, Chad Myers, we'll see you at the top of the hour.
The all important delegate count. Where does it stand? Could it change between now and the close of the polls? We'll update you on that in the CNN "Newsroom" beginning at 1:00 p.m. Eastern.
I'm Don Lemon. Now back to Gerri Willis in New York.
Take it away, Gerri.
WILLIS: Thank you, Don.
If you are in the market for a new home today, especially if it's your first home ever, you may be in luck. Developers are working to build new houses they think night meet your budget. Shawn Tully is an editor-at-large at "Fortune" magazine.
And, Shawn, you wrote this really interesting article about what you're calling the new down sizing. Now what's interesting about this is you're saying, this could be a solution to the housing crisis. How so?
SHAWN TULLY, EDITOR-AT-LARGE, "FORTUNE": Yes. Because housing became completely unaffordable during the bubble period. Starter home builders, whether it's Lennar, whether it's KB Homes, were building houses that were 3,500 square feet. They could sell all the $400,000 houses that they wanted. There was really no incentive for them to build houses that were extremely inexpensive that first-time buyers could afford.
Now a lot of first-time buyers did use exotic mortgages to buy, but eventually even they got priced out of the market. So they're on the sidelines. They're in rentals. They're the immigrants or the people who have one child, who just got married, who want to move out of a rental into a new house. WILLIS: And your article makes a very important point, I think, that they can now do this for essentially the same amount of money.
TULLY: Yes. The whole point and what the industry strove for in order to bring back affordability was to make the carrying costs of the house pretty much the same as the rental the person was moving out of to buy the house. This is the first time that's happened in seven or eight years.
WILLIS: Wow. Big. So that's big news really.
TULLY: That is big news.
WILLIS: And what we're looking at is the price of a new house, an '08 house, KB Homes, this is what you reported out, $271,000. Two years ago, it was almost $500,000. But now what they're doing -- the houses look almost exactly alike, but they're not. They're simply down sized.
Now, of course, this couldn't happen without a little help from Uncle Sam. How is the government helping?
TULLY: Well, this is something that the housing bears really are ignoring, which is that virtually all first-time buyers are having essentially government guaranteed mortgages. Obviously, Fannie and Freddie, but much more importantly FHA. The FHA was essentially out of the business for about five years because subprime took the place of FHA and was much easier to get. You'd get exotic mortgages, negative amortization, interest-only.
Now the FHA has taken the place of the responsible subprime industry by lending to first-time home buyers. They may have a credit problem. But if they have the income, they will be able to get an FHA mortgage. All the pricing now is within the FHA limits. That's what the builders are aiming for.
WILLIS: All right. I have to ask you a quick question because you say this could be a solution to the housing crisis. However, there are 11 million existing homes for sale in this market. Big inventory. As much as 11 months. Tell me, how can we solve the problem with all that inventory?
TULLY: Well, this is, indeed, the next step. The first step has to be that there's more first-time buyers coming back in than there are new houses being built. That's about to happen because of this affordability thing. So this is going to sell off a lot of the standing inventory of newly built houses. OK.
The next step is that the existing home buyers, who were on the fence, homeowners who have small starter homes that they bought four or five years ago, they don't want to bring the prices down. The low prices of the newly-built home will force those prices down.
WILLIS: All right. Well, it sounds like more pain ahead . . .
TULLY: It is more pain. WILLIS: But maybe a quicker resolution to the problem.
TULLY: Yes.
WILLIS: Shawn, thanks for your help today. We really appreciate it.
TULLY: Thank you, Gerri.
VELSHI: Well, foreclosures are still at an all-time high. And more and more people are going delinquent on their debts. The repo business is booming.
CNN's Ed Lavandera talked with the folk who take away your possessions if you don't pay up.
(BEGIN VIDEOTAPE)
ED LAVANDERA, CNN CORRESPONDENT, (voice over): This house might not look like much, but it's Kent Colpaert's baby. He repossessed it. Now he's trying to sell it.
KENT COLPAERT, REAL ESTATE BROKER: You find the squatters moving into the properties on a temporary basis. They're trashing them, destroying them.
LAVANDERA: Colpaert has never been busier. Five years ago, he opened a one-man home repo business in a Detroit suburb. Today he's got 26 employees and business is up 185 percent as buyers snatch up foreclosed homes.
COLPAERT: We're growing almost beyond what I can keep up with. We're hiring new people all the time.
LAVANDERA: Colpaert spent 10 years as a self-described starving real estate agent. Not anymore. But it's different on the other side of the deal. A year ago, Robert Dahmen had it all -- a swanky condo, a 33-foot dream boat called Toy Box -- but mortgage troubles forced him out of the house and to hand over the boat keys to the repo man and declare bankruptcy.
Do you think you'll ever have another boat?
ROBERT DAHMEN, BOAT REPOSSESSED: Does a chicken have lips? Sorry. I don't mean to say it that way, but no. I don't think so. I really don't think so. I'm scared. I'm scared to buy anything.
LAVANDERA: Now Toy Box sits on blocks here in this overcrowded boat yard owned by Jeff Henderson. Boats are his repo business. Roughly all the 60 boats in this lot were repossessed just in the last two months.
JEFF HENDERSON, HARRISON MARINE INC.: We pick up boats from CEOs of corporations, right down to, you know, right down to anybody. So nobody's not affected by this whole thing. LAVANDERA: Henderson's business has almost doubled in the last year. Today, he hauls away the 41-foot sea ray, You'll Never Know, without any sympathy.
HENDERSON: No, I never feel bad. I didn't tell them to buy it. So I have no issue with it. You know, it's not a house. It's not a car. It's not any livelihood. It's just a toy.
LAVANDERA: Many financial experts predict boom times for the repossession business will continue for at least another year. You take the mortgage crisis, high gas prices and mounting debt. All of that blends together, putting people in a financial crunch.
Ed Lavandera, CNN, Detroit.
(END VIDEOTAPE)
WILLIS: Up next, stealing gas. Why fuel theft is a rising crime and why it's not just happening at gas stations.
You're watching ISSUE #1.
(COMMERCIAL BREAK)
WILLIS: Well, despite the slumping economy and the job cuts that go with it, companies aren't throwing in the towel when it comes to the future. To keep their talent pipeline supplied, they're hiring more summer interns.
Now, not only is this a source of cheap and eager labor, it's a way employers can bring fresh ideas into play. One analyst says, employers this year plan to increase their internship rosters by nearly 4 percent over last year -- Ali.
VELSHI: Thanks, Gerri.
Some companies are taking advantage of interns to build their talent pool. Other companies are taking advantage of the foreclosure crisis to build their bottom lines.
CNN's Thelma Gutierrez looks at how the housing bust has turned onto booming business.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: There's a lot of stuff in here.
THELMA GUTIERREZ, CNN CORRESPONDENT, (voice over): Welcome to the business of foreclosure. A lucrative, fast-paced, sometimes dirty business that California entrepreneurs are cleaning up on.
MICHAEL BUESCHER, BUESCHER CONSTRUCTION: We're seeing tons of these things now.
GUTIERREZ: Meet general contractor Mike Buescher. He fixes foreclosures for the bank. BUESCHER: We will tell the bank that the window's missing. We need to put a new window in there, frame and all. They may call us back the next day and say go do the window or they may say just leave the board in there.
GUTIERREZ: Susie Carriere, a former dairy farmer, has built a mini dynasty off something called trash out.
SUSIE CARRIERE, SC LANDSCAPING: Anything, if it's not fastened, it has to go. If there's bricks in the yard and it's not part of a pathway, they have to go. If they're piled up, they have to go.
GUTIERREZ: And businessman Robin Roger (ph) saw an opportunity in all those filthy, neglected swimming pools, like this one, that now belongs to the bank.
What are we looking at here?
ROBIN ROGER, BUSINESSMAN: We have mosquito larva. We have a gopher.
GUTIERREZ: A dead gopher.
ROGER: A dead gopher.
GUTIERREZ: The bottom line is that the banks want to move the foreclosed properties off their book. To sell them, they've got to be cleaned up. That's where Buescher, Carriere and Rogers seize the moment to grow their business.
CARRIERE: Business is insane. It's crazy. We do, depending on how bad the trash outs are, any where from three to seven trash outs a day. We're doing about 600 yards a month.
ROGER: By shear volume, we probably added at least 30 percent to our bottom line this year.
GUTIERREZ: So it's good business.
ROGER: Yes. It's good business.
GUTIERREZ: When you saw it coming, did you realize that this was a business opportunity for you?
BUESCHER: Absolutely. Absolutely. The best money I've ever made in my life was back in the 1990s when we were rehabing the foreclosed homes. Best money ever made.
GUTIERREZ: If these are the worst of times with financial forecasters predicting more foreclosures will be dumped on to the market, these entrepreneurs say, for them, the best of times are yet to come.
CARRIERE: Doing landscaping, it was probably $40,000, $50,000 a year. This year it's probably going to go over $500,000.
GUTIERREZ: Not bad for the few who are seeing green in a housing market that's deep into the red.
(END VIDEOTAPE)
GUTIERREZ: Now our entrepreneurs told us that as good as business is right now, they realize this is just a wave that will subside because they did this back in the '90s during the last housing slump. They say, while business is good, they're going to ride that wave.
Ali, back to you.
VELSHI: All right, Thelma, thanks very much.
Thelma Gutierrez in California -- Gerri.
WILLIS: Well, up next, we'll turn the show over to you, well, for a little bit. The Help Desk, right over my shoulder. They are stand buying to answer your questions. E-mail us. The address, issue1@cnn.com.
(COMMERCIAL BREAK)
VELSHI: Well, dire news this hour from a United Nations summit on the world food crisis. It's underway in Rome. U.N. Secretary- General Ban Ki-Moon says that in order to meet increasing demand, world food production must rise by a whopping 50 percent by the year 2030.
Soaring food prices triggered the current crisis, which in turn has resulted in hunger and riots around the world. To prevent even more unrest, the U.N. chief says world leaders must do much more to minimize export restrictions and import tariffs -- Gerri.
WILLIS: Ali, time now, of course, for the Help Desk. We turn the show over to you. We're going to answer your e-mail questions. So let's get right down to it.
Gary Schatsky is the president of objectiveadvice.com. Shawn Tully is an editor at "Fortune." And our very own Allan Chernoff is a CNN senior correspondent.
Welcome all. Let's get right down to those questions.
The first one comes from Texas. "Could America buy oil from countries that would give as a better deal, like places in South America, or is OPEC the only global provider of oil?"
Shawn, let's you start -- everybody can jump in on this who has an interest, but I think it's a fascinating question.
TULLY: No, certainly don't think it's not the only global provider. Canada is not a member of OPEC. That's one of our leading suppliers of oil. Russia is the world's biggest producer. It's not a member of OPEC.
However, the oil price is a world price and OPEC, by limiting production, raises the clearing point of that price. So, therefore, it hurts all consumers.
But the shorter answer is, no, we cannot get a better deal by going outside of OPEC because all prices are effected by OPEC.
WILLIS: All right. Well, Allan, do you agree.
CHERNOFF: I think maybe he's looking at some other countries where the oil companies are owned by the state. So, therefore, the consumers of those countries get a nice deal. But passing (ph) here.
WILLIS: So is your solution to move? Should we move? Is that your response?
All right. Let's get the next question from Scott in Georgia. "How does it affect your credit when you pay off and close more than one credit card a month?"
What do you think, Gary.
GARY SCHATSKY, PRESIDENT, OBJECTIVEADVICE.COM: Well, certainly when you're paying off credit cards and closing them every single month, they're looking at how long you've had the cards out. So it's going to hurt it -- hurt your credit rating. It doesn't mean you shouldn't pay it off. You should certainly be paying them off as fast as you can.
Now one thing you might think about is you might not pay it off and close it right away. You might pay it off and keep it open, or at least be slower about closing it.
WILLIS: It's all a strategy to keep your credit score as high as possible.
SCHATSKY: But you keep it high, but you don't keep it high at the risk of paying unbelievable amounts of interest.
WILLIS: Right. I love that strategy.
Let's take a question from New York: "Are there any signs that the dollar is going to go up any time soon" -- Allan?
CHERNOFF: There indeed are. The dollar has stabilized. It's begun inching up a little bit. And the Federal Reserve, it seems, is done lowering interest rates. And, also, oil has kicked down a little bit. So those are both dollar bullish.
WILLIS: OK. All right.
We've got another question. This one from Sandy in Florida. She says: "My agent says it is better to short sell a home than do a deed in lieu of foreclosure. Is this true? "What's the difference between the two? Can I try both and go with whichever method works faster?"
What do you think? You know, Gary, so many people out there really in trouble trying to figure out a good solution in a bad time. SCHATSKY: You've got to try both of them. A short sale is obviously where you're selling it for less than the full value and the bank is agreeing to accept that amount. And deed in lieu is where you're merely turning over the deed to someone else. You've got to try both of them to try to get out of it as quickly as possible. And your credit score difference, I mean, it's going to be really marginal. The key is to get out as quickly as possible.
WILLIS: Right. And the deed in lieu, of course, is the very last-ditch effort. It's mailing your keys, jingle mail I think they call it.
SCHATSKY: Absolutely.
WILLIS: This one from Steve who asks, "in this day and age, what is the best type of investment account to open -- mutual funds, IRA, et cetera?"
You know, I think there's some confusion out there about what the vehicles are. A mutual fund is actually something you would buy and put into an IRA. What do you tell those newbies out there?
TULLY: Well, I've always been a big fan of index funds and ETFs because we're now in a low return world. We're not going to have the 15 percent, 20 percent returns that we had earlier in the decade. We're looking at 6 percent, 7 percent, and 5 percent return.
If you're paying two and a half points in fees on mutual funds to have someone actively manage money for you, which there's no sign that they do better than index funds, the best solution is pay 0.3 points and save all of those fees and your performance is going to be much, much better in the long term.
WILLIS: All right, guys, great information. Fabulous questions from the viewers.
Thanks for your help today. We have Gary Schatsky, Shawn Tully and Allan Chernoff. Thanks so much -- Ali.
VELSHI: Thanks, Gerri.
Up next, people are stealing gas and not just from gas stations. It's a disturbing, new trend.
Plus, the results of today's Quick Vote.
You're watching ISSUE #1.
That's the Quick Vote. You still have a couple seconds. What kind of car are you buying next? Answer the question, then come back and we'll show you the results.
You're watching ISSUE #1 on CNN.
(COMMERCIAL BREAK)
WILLIS: Well, it's time to get the results of today's Quick Vote.
Poppy Harlow, what is the verdict?
HARLOW: It's not a bike like I thought.
But we basically asked, the next vehicle you will buy, what's it going to be. Thirty-nine percent of you said a hybrid. Twenty-six percent said you're going to buy a compact car. But, surprisingly, a high number, 17 percent, are still going to buy a truck or SUV. You must be very wealthy or live in the middle of nowhere. Eighteen percent are going to buy a bike -- Gerri.
WILLIS: I love that. Thanks so much, Poppy.
VELSHI: Thirty-nine percent buying a hybrid. I'm going to get in the hybrid business.
Gas is pretty expensive. Now you might expect the theft from gas stations would be up, but you might not expect is that reports of gas theft from other places, like homes, is up as well.
Here's CNN's Chris Lawrence.
(BEGIN VIDEOTAPE)
CHRIS LAWRENCE, CNN CORRESPONDENT, (voice over): If you think you're getting robbed at the gas pump, you may be right. But not just there. Police say thieves are siphoning gas like it's the 1970s and using the Internet to share their tips. Consumers are fighting back, buying up gas caps with locks. So now the thieves have started drilling holes directly into the fuel line.
SGT. WALTER REED, COBB COUNTY: Not only do you lose your fuel, now you have to repair your gas tank.
LAWRENCE: Cobb County Sergeant Walter Reed says it's even worse for California's farmers, who lose thousands of gallons of diesel fuel. This surveillance video shows one thief as he taps onto a farmer's supply. Another drives off with the hose attached, which snaps the line and spills fuel everywhere.
PETE BALAMADY (ph), FARMER: That's probably part of the frustration. It's like, you know, if I could just catch that guy, boy, what would I would do?
LAWRENCE: Farmer Pete Balamady says an organized gang of thieves just took 900 gallons from his tanks.
BALAMADY: Flipped the switch. It sucks the diesel out into their storage tank in their van.
LAWRENCE: One night's work cost him $4,000.
Can you afford to keep getting hit like this?
BALAMADY: No. We don't recoup that. It just comes out of our bottom line.
LAWRENCE: Over the past few months, thieves have stolen more than $250,000 of fuel in this one county alone.
Where do you think these thieves are reselling all this diesel?
REED: Well, who's going to use diesel fuel? Truck drivers.
LAWRENCE: Right now they're paying top dollar at legitimate truck stops. Several truckers told us there's a black market where stolen gas is sold at a discount.
REED: It's going to cost him $500 to fill up and he can fill up for $200? What's he going to do?
LAWRENCE: Farmers are asking themselves the same question, wondering if fuel thieves will drive them right out of business.
Chris Lawrence, CNN, Bakersfield, California.
(END VIDEOTAPE)
WILLIS: Well, the economy is issue number one. And we here at CNN are committed to covering it for you. ISSUE NUMBER ONE will be back here tomorrow, same time, 12:00 p.m. Eastern.
VELSHI: Time now to get you up to speed on other stories making headlines. "CNN NEWSROOM" with Don Lemon and Brianna Keilar starts right now.
