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Demand for Answers on Capitol Hill; Federal Reserve Meeting Today; New Legal Problems for Countrywide; UC Berkeley Welcoming Vets with Open Arms

Aired June 25, 2008 - 12:00   ET


JOHN ROBERTS, CNN ANCHOR: Hello and welcome to "ISSUE #1." I'm John Roberts. Ali Velshi and Gerri Willis are on assignment today.
For the 40th time this year, the ninth time this month, there is a hearing on Capitol Hill dealing with record prices for oil and gas. But while some are blaming speculators, you might be surprised to find out you could actually be benefiting from high prices.

Two states saying enough is enough and they are suing both Countrywide and its CEO, Angelo Mozilo, in the mortgage meltdown.

And the Federal Reserve is meeting at this hour. Why the decision that it makes or doesn't make matters to you.

From the ISSUE #1 headquarters to the newsroom, we are all over the stories that matter to you.

It's a big story today, the demand for answers on Capitol Hill. The Senate is asking whether the high price of oil is just a bubble or is it a new reality for the U.S. economy?

CNN's Kate Bolduan is following the hearing in Washington. She joins us now live.

Good afternoon, Kate.

KATE BOLDUAN, CNN NATIONAL CORRESPONDENT: Hey, there, John. Well, you said it. The focus today was to answer the very big question. Are high oil and gas prices a passing economic phase or a reality that's here to stay?


SEN. CHARLES SCHUMER (D), CHAIRMAN, JOINT ECONOMIC COMMITTEE: I think that everyone would like to believe that high oil prices are a bubble. That you burst the bubble and the price will come down and stay down. We all hope that's the case, but it may not be so.


BOLDUAN: Now Senator Charles Schumer, he said at this committee, they really wanted to get to the root cause of today's energy situation. Lawmakers heard from among other experts, one of the nation's best known energy experts, Daniel Yergin. Yergin says the concern over oil speculators which is a hot topic right now is a real concern, but not the whole story.


DR. DANIEL YERGIN, CHAIRMAN, CAMBRIDGE ENERGY RESEARCH ASSOCIATES: We really are in an oil shock. And you've all addressed how painful it is for consumers and businesses. The specter of stagflation is once again in front of us. Low growth, high inflation. We've discussed how oil prices have gone up. In such circumstances, this tendency is to try and find a single explanation. For something this big, there is not a single explanation.


BOLDUAN: And as you see, Yergin says it's several factors coming together at once. Now, supply is down while world demand is up, especially in rapidly developing countries like India and China he says.

At the same time, political situations with countries like Nigeria, Venezuela and Iraq have resulted in them pumping out less oil. Yergin says the weak dollar is also at play here. And while it's really unclear what conclusions the committee is going to reach or draw from today's hearing, Daniel Yergin makes one thing very clear.

What he calls the either or energy debate that's gone on in Congress, he says isn't working. He argues it's not a choice of more drilling or more alternative energies that were all for relief, he says it should be a combination of new supplies, renewable, and greater efficiency -- John?

ROBERTS: A question that will put the New Jersey governor, John Corzine, a little bit later on in this hour.

Kate, there's been a lot of congressional hearings recently on this topic. Yesterday, one panelist, an energy analyst said that he thought that the price could go down dramatically within 30 days if Congress were to adopt new legislation regarding speculators. What can you tell us about that?

BOLDUAN: Yes. That is getting a lot of attention. This came out in a hearing as you mentioned earlier this week. Some say that if lawmakers would pass legislation as they've talked about curbing oil speculation, then within 30 days of the president signing it, we'd see oil prices drop by half and gas prices would then reflect that.

But on the flipside, some analysts say that this idea would do much more harm than good. They say oil trading could then just simply shift unregulated overseas markets and then oil prices would go even higher. So as often as the case, John, there are both sides of the story.

ROBERTS: Yes, and a lot of people still not sold on the idea that speculation has a lot to do with the high price of oil.

BOLDUAN: Right. ROBERTS: Kate Bolduan for us following the hearings on Capitol Hill today. Kate, thanks very much.

BOLDUAN: Thanks, John.

ROBERTS: Well, some people are blaming speculators. There's a bit of a twist here. You might be surprised to find out that you could actually be benefiting from these high prices.

CNN's senior correspondent Allan Chernoff is here to explain how you might be benefiting. So, how?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Well, John, I think this term speculator is being a bit overused here, frankly, because it's not just classical speculators who are moving the price of oil but it's so many investors. And, believe it or not, that could include you and me and all of us.

Let's have a look at some of the speculators -- so-called speculators in the market. Yes, you have your traditional high rollers. People with big bucks who like to gamble -- and I mean gamble. And you also have Hedge Funds.

Remember, a few years ago, Hedge Funds were not such a big deal. Now, Hedge Funds have been putting billions and billions into the energy markets. Keep in mind, the stock market has generally not been a great place to be over the past year. So a lot of people, they're putting their bucks into the commodity markets.

Keep in mind, this is not just happening in oil, it's happening in plenty of commodities. But oil is the big focus right now. But then, let's have a look again at our graphic and you'll see we're also talking here about pension funds, endowment funds.

Yes, universities putting billions at work in those markets. Pension funds, huge companies, and a lot of employees all have their money pooled. And yes, the managers of those funds are putting money into oil. And you have commodity funds as well.

There are so many different types these days. Index funds. There are also exchange-traded funds. All these newfangled ways, John, for people to put money to work in the oil market and most of that money is on the buy side. So that inherently creates a lot of upward pressure on the price of oil. That's one reason it's trading at over $130 a barrel. The supply-demand fundamentals do not dictate $130 oil.

ROBERTS: All right. So supply and demand, part of it, though, investors also seem to be playing a role here. Is there any way to determine exactly how much of a role that they're playing?

CHERNOFF: It's very tough. And that's a great question. Part of the reason is that so much of the trading these days in commodities happen electronically. It's not all at the New York Mercantile Exchange, which is regulated by the Commodity Futures Trading Commission. A lot of it is happening on a market called the EIS, which is based in Atlanta. That's an electronic trading vehicle. Also, trading is done in London, Dubai, so it's all over the world. A lot of people getting on the action. Some of the talk in Congress is about at least getting a reign on those alternative ways to trade.

ROBERTS: And these are what are called these dark markets out there.

CHERNOFF: Yes. You could certainly call them dark.

ROBERTS: All right, Allan Chernoff this afternoon. Allan, thanks very much.

This show is all about you and it's time for you to get involved and weigh in on our "Quick Vote." Poppy Harlow from is here with today's question.

What are we asking today, Poppy?


Well, as you well know, the race for the White House is on and the two men at the forefront of that race are very different when it comes to their views on business and on the economy.

So here's our question for you today. Who would make a better business partner? Senator McCain, Senator Obama, or neither? Weigh in on We'll bring you those results a little later in the show -- John?

ROBERTS: Poppy, thanks so much. Looking forward to that.

Business and politics, the topic of our next segment. Why Senator McCain's policies toward business in America could become a big boost in November.

And the Federal Reserve meeting at this hour. Why their decisions make such a big difference to your bottom line.

And we're going to check in with Roland Martin. He's live right now on CNN radio and live. We are all over ISSUE #1, right here on CNN.


ROBERTS: Yesterday on ISSUE #1, we talked with Steve Koepp from "Fortune" magazine about Senator Obama's plans for businesses and the economy. Today, we look into Senator McCain's economic plans.

David Whitford is an editor-at-large with "Fortune." He wrote an article this week called "The Evolution Of John McCain," and he joins us now from Boston.

David, good to see you. In the interview that you did with John McCain, you asked him what the greatest threat to the American economy is and he said radical Islamic terrorism. Were you surprised by that answer?

DAVID WHITFORD, EDITOR AT LARGE, FORTUNE: Yes, I was pretty surprised, John. We were looking -- I mean, I was expecting him to say something about -- I don't know, rising gas prices or climate change or something like that. But it was very telling that he turned it around to an answer about national security. I think he feels that that's the issue on which he's got the best chance of winning in November.

And I think we're going to see a lot of that this year. Questions directed at John McCain that he will try to turn into national security issues.

ROBERTS: So if John McCain can, in fact, make the economy a national security issue. He has admitted that the economy is not his strongest point. But if he manages to make that connection, could he mitigate any disadvantage that he has on issue no. 1 with Barack Obama?

WHITFORD: Yes, possibly. I mean, look, he has gained some -- obviously, he has gained some familiarity with economic issues over the years. And he really has a plan that's very different from Barack Obama's. It's a pretty clear choice.

I mean, we can run down through the list here. But I would start with free trade. John McCain has been an advocate, a long time advocate of free trade for breaking down trade barriers. He's against tariffs. He's against anything that interferes with the free flow of goods across national borders.

And, you know, we have seen Barack Obama move a little bit more in that direction lately. But still, Barack Obama's approach is that we need to do more to protect American jobs, that we need to do more to protect American industries. McCain's going very dramatically in the other direction. And that's a good choice.


WHITFORD: It allows people to make one or the other?

ROBERTS: Big differences on energy policy, as well, David. John McCain advocating gas tax holiday as well. Expansion of offshore drilling. Are either one of those plans viable in bringing down the cost of a gallon of gasoline at the pump?

WHITFORD: Well, I think neither really have very good political prospects. I mean, certainly, his proposal for a summer gas tax holiday has zero chance of ever even being introduced in Congress much less being past. And he would admit himself that that's not the sort of thing that's going to have a long-term positive effect on energy prices.

In fact, I think that most economists would say that the effect might even be detrimental because it would increase demand for gas and demand seems to be what's driving up gas prices. His other proposal to open up offshore drilling, you know, conceivably, I suppose, if it were to become law might have the effect of increasing supply. And that might have the effect of bringing down energy prices long-term.

But, again, I think it's unrealistic and maybe moving us in the wrong direction. We need to begin weaning ourselves from fossil fuels not finding new ways to exploit them.

ROBERTS: All right. Well, obviously, we're going to continue to talk a lot about this. David Whitford from "Fortune" magazine up there in Massachusetts. Thanks for being with us today. Appreciate your time.

Right now on CNN radio and live, our own Roland Martin is hosting a live program on this election year and other hot topics. Let's make and (INAUDIBLE) at CNN, and Roland Martin makes.

Hey, Roland, how are you doing this afternoon?


ROBERTS: You heard David Whitford just a second ago suggest that John McCain is trying to turn the economy into an issue of national security. You know, polling shows that more Americans trust Barack Obama on the economy than John McCain. But if John McCain can make this a national security issue, can he narrow the gap some?

MARTIN: Well, of course, he can, because -- I mean, he's a one- trick pony. Everything that he does is all through the prism of national security. But I don't necessarily know if people are going to buy that argument.

Remember, we had the previous argument. We have to go into Iraq, the issue of stabilizing the Middle East with oil, national security. People are saying I'm not necessarily going to buy that. And so, he can try it. I just don't know if it will be successful.

But, obviously, he can turn people's mind into that. It's an advantage for him because the one area that he is riding on, he's hoping on, he's praying on come November.

ROBERTS: You know, Roland, we talked a lot about energy in this hour. And $4 a gallon gasoline at the pump is starting to change people's perspective a lot. They are driving smaller cars and not buying SUVs anymore. But they're also rethinking what America's energy policy should be.

The majority of Americans do support John McCain's proposal to perhaps open up offshore drilling or at least hand it over to the states to decide. There's also a new embracive nuclear power even by some environmental groups. Who has got the right policies do you think for your listeners on that front?

MARTIN: Well, frankly, because (INAUDIBLE) phone lines right now, and talking about that, it's really up in the air. You make the point about what some 55 percent, 57 percent of people say -- yes, I now support it.

But, John, here's the fundamental issue. Are we supporting exploring oil off the coastline because we need more and more gas? Or is this forcing us as Americans to say -- wait a minute, maybe it is our consumption. I mean, I think about the obesity rate in the country. We all love larger portions, super size it, super size it, but all of a sudden -- now we've got a fat country. And I was saying -- well, maybe it's our consumption.

Maybe we should also change that. The thing about, John, in America, we are only forced to make changes when we have to. And so the $4 a gallon gas is forcing Americans to say -- maybe we ought to rethink public transportation. Why don't we have bullet trains in Europe, but we don't have them here in the United States? That's what it's actually doing. And so the good thing is we're having to be creative now because we have to because we're spending so much money on gas.

ROBERTS: Right. Talking about consumption, Roland, looks like the Barack Obama campaign is going to consume more money this general election than any other campaign in history. He's opted out of public financing because he is so good at raising money in the private sector. What are your listeners saying about that, particularly this idea that he went back in an earlier pledge to accept public funds for the general election?

MARTIN: Well, here's the deal. I got a caller on talking about that. It's a win-win for both. If you're John McCain, you get the great talking point of bashing Obama over side his head by saying -- oh, he went against his word. You can't trust him. He will change his mind.

But then again, of course, he made the decision the day after John McCain went back on his word when it came offshore oil drilling. It's a good point for Obama because you have a fund-raiser advantage. You don't give that up. I know the purists will say -- oh, no, he shouldn't have done it. No. When you have an advantage, you hammer somebody over the head.

Remember, 2000, George W. Bush opted out of public financing in the primary, why? Because he had a fundraising advantage over who? John McCain. So the exact same thing applies.

If Obama had chosen to accept public financing, the RNC would have said -- Thank you for joining us with this. And behind his back were they saying that's the dumbest person I've ever seen in my life. You don't give that up. And so, I understand the criticism. He should be criticized. But it's a win for McCain, it's a win for Obama. Simple as that. But you don't give up that kind of advantage. That's nuts.

ROBERTS: Yes. A lot of people believe, cynically perhaps, that the first rule of politics is when your opponent's down, keep your foot on his throat. All right, Roland Martin for us.

MARTIN: That's right. Yes, good move. ROBERTS: Roland, thanks very much. You can catch Roland's show, by the way, right now on CNN radio and live.

Coming up, next, one university going out of its way to make sure that soldiers returning home get the education they need. We're going to check it out.

And talk of an oil rush in one of the biggest cities in the United States. Just how much are we talking about here? And where is it? We'll take a look, coming up, next. You're watching ISSUE #1.


ROBERTS: New legal problems for troubled mortgage lender, Countrywide. Lawsuits filed today from the states of California and Illinois. Both states accusing the lender of shady dealings to entice homeowners to apply for risky loans.

Countrywide, the nation's largest mortgage lender has been at the center of the subprime mortgage mess since it began last fall. So far, Countrywide has declined to comment on the pending litigation, but it's probably no coincidence. Today is the same day that shareholders are expected to vote on the company's takeover by Bank of America.

Illinois Attorney General Lisa Madigan wants Countrywide to pay restitution to all consumers who lost their homes or loans and establish a grace period for homeowners of risk of foreclosure to explore other options.

Moving on to our military veterans now. A new G.I. bill is set to give more college benefits to vets. One college, UC Berkeley, was once the center of anti-war protests. Now, it is welcoming vets with open arms.

Ron Williams coordinates the school's Veteran Services Program. Stuart Martin is a Marine veteran and now attends UC Berkeley. They join us now live from campus.

Ron, let me ask you first of all, UC Berkeley making an accommodation for vets? Why are you trying to attract them to your campus?

RON WILLIAMS, COORDINATOR, UC BERKELEY VETERANS SERVICES: Well, there are so many reasons, not the least of which. These are folks who come and have already served -- not only served the country, but are involved with public service. Berkeley has a long-standing tradition of sending a number of folks into the Peace Corps and a number of public service agencies.

But these are folks who are coming to our university who have enhanced professional skills, life skills, and are really offering something to the university as they come here and not just only to be shaped by it.

ROBERTS: So you say that these veterans have got something to offer the university, as you mentioned, enhanced life skills. But Stewart, they also come with a set of concerns that perhaps typical students wouldn't have. What are some of those concerns?

STUART MARTIN, MARINE VETERAN & UC BERKELEY STUDENT: Well, the number one concerns are actually generally financial. Veterans are coming from a professional workforce. So they have things like families and children, spouses, car payments, possibly mortgages that most typical students are not going to have. So these finances are a real problem.

ROBERTS: So how has this program assisted you thus far?

MARTIN: Thus far, this program -- well, Ron's the coordinator for the program, so he basically rolls out the red carpet for us any time we need it. I go to him with financial aid problem. He'll call ahead to the financial aid office. There's a person specifically in the financial aid office to deal with me. And they know our situations, particularly to veterans.

ROBERTS: So, Ron, how does this program work? I mean, what are the things that you're offering these veterans who had, Stuart said, have some special concerns that normal students wouldn't have?

WILLIAMS: Right. Well, there are three prime areas. The first is one that Stuart has already mentioned. Our network of campus supporters and advocates who are familiar with the issues and concerns, complexities, even, financially and otherwise, that the veterans bring to our campus. So these are folks ranging from our office of financial aid, the office of the registrar who reports veterans' benefits to the V.A., all that information.

Our Career Center, the Counseling Psychological Services, Disabled Students Programs, a number of folks throughout campus.

ROBERTS: Hey, Stuart, I want to ask you about this new G.I. bill which is going to fully fund, give people a full ride to college if they've served in the military for four years. How much extra help will that be not only for you but some of your colleagues from the Marines and also in the Army who might be coming into college after serving the tour of duty?

MARTIN: It's going to be incredible. It's going to basically cover full tuition as well as living expenses. So for me, personally, it's going to allow me to actually focus on my studies instead of worrying about finances. For everyone else, for all of these other perspective college students that may be still in the military or recently discharge, this is going to possibly be the pushing point to get them into college.


MARTIN: It's going to make this financially possible for people with families or spouses or dependents.

ROBERTS: And Ron, just to finish this off here, as we said at the top of this, UC Berkeley used to be a hot bed of anti-war activism. Now, you're welcoming vets with open arms. Is that history created any kind of a stigma in attracting these veterans to your campus?

WILLIAMS: You know, it has. And yet that's something that -- I would want Stuart to speak to this, too, as far as his own experiences. But there is a clear distinction between even anti-war versus anti-veteran.


WILLIAMS: We are absolutely in support of the students and wanting to make certain that people know that this is a welcoming place to earn an undergraduate and even graduate degrees.

ROBERTS: Stuart, at first did that history give you any pause in going to UC Berkeley?

MARTIN: Before I got here, I had concerns about it. Obviously, the reputation is here. And then I got here and I realized it's very important to differentiate between anti-war and anti-veteran.

I've never seen anti-veteran here. I've seen anti-war. Obviously, the city of Berkeley and the universities. The university town, students are generally anti-war. But the veterans are welcome with open arms. I've seen nothing but curiosity and welcoming here.

ROBERTS: Well, it's a great program. Stuart Martin, Ron Williams, thanks for being with us and sharing this afternoon. Appreciate it.

MARTIN: Thank you.

WILLIAMS: Absolutely. Thank you.

ROBERTS: The Federal Reserve is meeting. We're going to tell you what's expected of the Fed. What it could mean to your bottom line. And we're talking about offshore drilling off the coast of New Jersey.

New Jersey Governor John Corzine joins me live to talk about his plans to fight the president's plan. You're watching the home of ISSUE #1, the economy, on CNN.


ROBERTS: The Federal Reserve meeting today to decide whether to lower, raise, or keep interest rates the same. It sounds like a headline for the business section. But what could they decide? Or what they decide could make a difference to your bottom line.

Our Susan Lisovicz joins us now from the New York Stock Exchange with a preview and what it means for you.

Hi, Susan.

SUSAN LISOVICZ, CNN CORRESPONDENT: Hi, John. Well, the Federal Reserve has been trying to juice the economy by making money cheaper. Lowering interest rates aggressively since September. All told, the federal funds' rate has come down nearly three points in September. And that affects the prime rate, which is the benchmark for many consumer and commercial rates.

The Fed is expected to keep rates unchanged at two percent. That's historically low. But clearly consumers still aren't spending. Weekly mortgage applications fell more than nine percent. Falling to the lowest point of the year, in fact, for the trade index. And that's despite a drop in mortgage rates.

Also, new home sales fell 2.5 percent last month and remained near historically low levels even as housing prices continue to pull. Why is that? Well, credit remains tight. A hangover from all those sub prime loans that ended up in default and foreclosures -- John.

ROBERTS: But, Susan, it's not just tight credit that's reigning in consumers. I mean they're paying a lot more for everything from fuel to food. You know, doesn't that help too?

LISOVICZ: Good point. And that, John, is why the Fed is in such a quandary. Inflation has heated up at the same time the Fed has been so relentlessly cutting rates. The root of it, of course, is record high energy prices. Inflation tends to feed upon itself. And we're seeing just that with sharp hikes in food, transportation, commodities, lots of commonly used products.

The Fed doesn't want to raise rates right now to stifle inflation because it fears the economy will be pushed even further south. So we expect the Fed to stand pat on interest rates but to talk tough about inflation and perhaps the hint of a rate hike later this year if things improve. And, of course, it's t-minus two hours from that decision. We'll bring it to you live, John.

ROBERTS: All right. Looking forward to that. Thanks very much. Susan Lisovicz for us.

LISOVICZ: You're welcome.

ROBERTS: The search for a solution to America's fuel crisis. New Jersey Governor Jon Corzine doesn't think that offshore oil drilling is the answer. He joins me live to talk about it in just a couple of minutes.

But first, let's get you up to speed on the latest headlines. Don Lemon is in the CNN "NEWSROOM."

Hey, Don.

DON LEMON, CNN ANCHOR: John, shouldn't you be like preparing for bed sometime now? Instead, you're ...

ROBERTS: Not just yet. There is still a lot of work to do, Don.

LEMON: All right, John, thank you. We're following several developing stories for you today right here in the CNN "NEWSROOM."

The Supreme Court today outlawed executions for people convicted of raping a child. A majority of the justices ruled that capital punishment is unconstitutional for violent crimes other than murder. The case came from Louisiana where Patrick Kennedy was sentenced to death in 2003 for the brutal rape of his eight-year-old stepdaughter. Prosecutors say the young victim suffered internal injuries. Kennedy denies he did it.

Well, the search is on in California's central Sierra, Nevada, mountains for 11 members of an outward bound group. The group of two adults and nine teenagers never met up with a hiking leader as planned on Saturday. That leader had gone off to scout another location. There's no cell phone service in the area where the hikers are believed to be. We're going to speak with a family member coming up in the "NEWSROOM" at the top of the hour.

The battle against raging wildfires in California is intensifying. Fire crews from Nevada and Oregon are joining the effort to put out more than 800 wildfires. So far tens of thousands of acres have burned. Hundreds of people forced from their homes. The fires were set off by multiple lightning strikes.


UNIDENTIFIED MALE: You know how I be. Last week, Kobe couldn't do without me.


LEMON: That's only the beginning of it. NBA great Shaquille O'Neill having a little fun at Kobe Bryant's expense. But an Arizona sheriff says O'Neill will have to answer to him for this rap. We'll have details straight ahead in the CNN "NEWSROOM."

I'm back at the top of the hour in the "NEWSROOM." Now let's throw it back to John Roberts in New York -- John.

ROBERTS: Don, we'll see you then at the top of the hour. Thanks very much.

The government issued its annual energy outlook this morning. And, of course, we all want to know, what does it mean for oil prices? CNN Money's Poppy Harlow is here now with the details of that.

Hey, Poppy.

HARLOW: Hey, John.

Yes, that report came in a bit better than expected. So oil prices are falling. Prices may dip in the next few years, folks, but don't expect too much relief over the long-term. That is because demand is surging. And it's international energy outlook, which extends to the year 2030, the government says global energy use will jump 50 percent. The reason, population growth and strong demand in developing countries. Think India and China.

Now as a result, prices are expected to range between $113 and $186 a barrel. That's the range we're in pretty much right now with the current price right around $133 a barrel. That followed that stronger than respected report on domestic crude supplies. And by the way, the government's projections, John, are based on 2007 prices and we are seeing more than double that today.

ROBERTS: What about biofuels, ethanol, renewable energy sources? Are they expected to make a dent?

HARLOW: Yes, they'll make somewhat of a dent. But coal, folks, is still the number one source of energy for power generation. And it's not exactly the cleanest. With the use of coal running high, the government expects carbon dioxide emissions to surge by more than 50 percent by 2030. That would hurt the environment by spurring global warming.

But the good news is that countries around the world are working on their own energy fixes. And right here in the U.S., we are playing a big part in that effort. We're actually expected to account for nearly half of the rise in the world's biofuel production.

And also what's becoming more and more popular is hydroelectricity, wind and solar energy. And the government expects the use of renewable energy sources to increase by more than two percent per year. So it doesn't sound like a big number, but it's a faster increase than what we're seeing in coal, oil, natural gas, and nuclear.

So there's an energy fix in the making, but the problems we face now are likely to pester people for many years to come. We have a lot more information on this, John, right on our site,

ROBERTS: A lot more upward pressure than downward pressure at this point.

HARLOW: Certainly.

ROBERTS: All right, Poppy, thanks very much.

President Bush announced last week that we should consider drilling off the U.S. coastline for oil to reduce our dependence on foreign sources. Senator John McCain agrees with the president. Senator Barack Obama does not. Another prominent politician disagreeing with the president's position is New Jersey Governor Jon Corzine. Governor Corzine joins us now from Trenton, New Jersey.

Governor Corzine, no secret that you're an opponent of offshore drilling, particularly off the coast of New Jersey. Why are you an opponent? GOV. JON CORZINE (D), NEW JERSEY: John, we have 127 miles and a $35 billion industry with probably 10 to 15 percent of our employment secured by our coastline. And we don't think that's a good risk- reward to see offshore drilling and the potential risks of an oil spill. You put that together with the surveys that went on in looking at supplies in the 1970s and it's relatively deminnous (ph).

And I think the third thing I'd say is, even if there were a lot of oil offshore and there is no expectation that there would be a high amount, particularly off the Atlantic Coast, it would be 20 years, give or take a few years, before that would actually come online. And we think we ought to be doing what you all were talking about in your previous segment, developing those alternative energy sources that would replace our addiction on oil.

ROBERTS: All right. Well, let me take a couple of things that you said there, governor. According to the U.S. Minerals Management Service, along the Atlantic Coast there is thought to be some 3.8 billion barrels of oil, also natural gas reserves. Is it good policy to let that go untapped? I mean even if you're looking a decade or two down the road here, with America trying to reduce its dependence on foreign oil, should those resources go untapped?

CORZINE: Well, John, I think we ought to be giving emphasis to the development of other kinds of alternative fuels. And I know that is where Senator Obama is. There is a real sense that we ought to be increasing as much as 20 percent our alternative fuels by 2020 in most of the states. We ought to be putting the efforts that we would have to make with regard to investment in those offshore drilling opportunities in those other areas.

ROBERTS: But could offshore drilling be a part of a comprehensive strategy that would include more alternative fuels conservation?

CORZINE: I think it ought to be the last resort as opposed to the first resort. We have many, many steps that we ought to be taking. There's a lot of work to do on nuclear energy. Making sure that we have places to store the waste and reprocessing. Many places that we could go before, I think, we ought to be thinking about tapping into those reserves.

ROBERTS: On that subject of nuclear energy, would you be prepared to see more nuclear plants built in the garden state?

CORZINE: Well, we actually have an energy master plan where we're working on the safety and security and the storage of waste. If we can come to positive conclusion on that, I absolutely would. We already get about 50 percent of our energy from nuclear power here in the state. We have four plants. They are aging and we're going to have to think about whether we want to renew that.

I'm not arguing that that's the only step. We need to be in wind, solar, biofuel, all of those other areas. And Senator Obama is talking about spending $150 billion in the next 10 years in those kinds of production activities coming from a cap and trade program. Very strong program. Will work and get us off this addiction on oil.

ROBERTS: All right, Governor Jon Corzine of New Jersey. It's good to talk with you, governor. Thanks for coming in today. Appreciate it.

CORZINE: Good to be here.

ROBERTS: There's a whole lot of oil under one of the biggest cities in the United States. We're going to show you where and tell you how some are quietly drilling for it. It's in plain sight but you'd actually never know.

And a silver lining to the mortgage meltdown for one of America's best known charities.

You're watching ISSUE NUMBER ONE.


ROBERTS: This just in to CNN.

Countrywide Mortgage shareholders have just approved the takeover of their company by Bank of America. As we told you earlier in the program, the troubled mortgage lender is the target of two lawsuits filed today. One by the state of California, one by the state of Illinois. The Bank of America-Countrywide deal is valued at about $4 million. We're going to have much more on this story coming up in the CNN "Newsroom."

A massive oil reserve hidden in plain sight under the country's second largest city. But getting to it is the hard part. Ted Rowlands has the story for us from Los Angeles.


TED ROWLANDS, CNN CORRESPONDENT, (voice over): Driving along Pico (ph) Boulevard in Los Angeles, you wouldn't notice, but inside that building with the tower there's a working oil drill helping to produce more than 900 barrels of oil a day. Take a look at this building from the street.

Now look at it from above. Across Los Angeles, oil production blends into urban life. Some of it hidden. Some of it out in the open. It's in neighborhoods near baseball fields. Even Beverly Hills High School has oil pumping on campus disguised as a work of art.

IRAJ ERSHAGHI, UNIVERSITY OF SOUTHERN CALIFORNIA: More than 2/3 is on (ph) the ground.

ROWLANDS: Dr. Iraj Ershaghi is the director of petroleum engineering at USC. He estimates there's more than 9 billion barrels of oil still to be had in the Los Angeles basin. A real opportunity to reduce imports, which he says should not be lost.

ERSHAGHI: It took millions of years to cook that stuff underground. And you can't just walk away from it. ROWLANDS: Maps show a significant part of the Los Angeles basin is rich in oil, but with so many people living here, getting to it without disrupting lives or the environment requires facilities like the one on Pico. Here an electric, not diesel drill, does the work. It's capable of going thousands of feet down and up to a mile in any direction.

GREG BROWN, BREITBURN ENERGY PARTNERS: The technology is here to do this sort of a facility in ways that are environmentally very sensitive.

ROWLANDS: Greg Brown of Breitburn Energy says resistance to drilling usually comes from cities and neighborhoods. The state is encouraging more drilling as long as all the environmental concerns are addressed.

BRIDGETT LUTHER, CALIFORNIA CONSERVATION DIRECTOR: What kind of noise is going to come out of that well? What is the air pollution like? You know, what kind of engines are they using that might be polluting?

ROWLANDS: Oil drilling has a long history in California, which includes a track record of spills, accidents, and greed, as depicted in the movie "There Will be Blood." While many people are worried about more drilling, it's coming.

More than 4,000 applications have been filed already this year for new wells or opening old ones. That's up from a total of 3,000 last year. Oil companies say with more wells, imports go down, tax revenues and jobs go up. And the company's promise not to disturb the neighborhood.

Ted Rowlands, CNN, Los Angeles.


ROBERTS: At least not too much anyway.

Coming up next, CNN politics meets CNN Money. How the economy could play a big role in who you vote for come November. Our panel of experts are standing by.

We are all over issue number one, your economy right here on CNN.


ROBERTS: We spend a great deal of time on CNN talking about the economy and why not it is issue number one to many of you out there. And it's a good bet that the economy could weigh on your vote come November. Let's find out more about what's out there. Lynnette Khalfani-Cox is the author of "Your First Home." Mort Zuckerman is the editor in chief of "U.S. News and World Report." Allan Chernoff is a CNN senior correspondent. He's back with us.

So, Mort, let's start with you. When we look at these presidential candidates, two very different approaches to how to deal with the economy. Which one is more in tune with voters and which one is more in tune with what ails the economy?

MORT ZUCKERMAN, EDITOR IN CHIEF, "U.S. NEWS AND WORLD REPORT": Well, Senator McCain's approach is to extend the Bush tax cuts and if anything to expand on them. Senator Obama's approach is to cancel the Bush tax cuts, which have had disproportionately benefited the well to do, increased taxes on those people earning above $250,000 et cetera.

I'm much more in favor of Senator Obama's program. We have a $313 billion deficit in the first six months of this year. We can't afford to continue those tax cuts. He will devote some of that money to reducing the deficit, some of it to benefiting education and health care. I think that's a much more appropriate policy for the current time.


But, Lynnette, here's a question many people are asking. In this difficult economic time, Senator Obama is proposing raising capital gains taxes, raising payroll taxes on certain individuals, rolling back a portion of the Bush tax cuts on people who earn more than $250,000. Is now the time to raise taxes on anybody?

LYNNETTE KHALFANI-COX, AUTHOR, "YOUR FIRST HOME": Well, I think that you have to look from a practical standpoint at what the economy needs. Nobody ever likes to hear about tax increases. It's not a big favor or popular issue. But the fact of the matter is, there are some areas where it's absolutely necessary.

John McCain is talking about for small business owners, for example, giving them tax breaks for those who want to invest in their countries, invest in technology, make investments in equipment, things of that nature. I think that will play actually quite well with the small business community as well.

But at the end of the day, I think the American public is going to say, who's going to help strengthen my pocketbook on all the issues? Not just taxes. Housing, health care issues, all of the things that are bread and butter pocketbook issues for the average person.

ROBERTS: And, of course, when it comes to your pocketbook, an increasingly large slice of it going to, you know, put gas in the tank of the car. We've got some proposals out there, Allan Chernoff. John McCain wants to increase offshore drilling, as we were talking with Governor Corzine, about -- wants to give people a gas tax holiday.

Senator Obama wants to put a windfall profits tax on the oil companies. Would any of this affect the price of oil? Would Senator McCain's proposals drive it down? Would potentially Senator Obama's proposal for the windfall profits tax, like some people are saying, actually increase the price?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Yes, I wish that we could say some of these policies will automatically move the price of oil back to what we would all consider to be a more normal level. I don't think that's the case at all. I don't think the president of the country can really affect that.

The gas tax holiday, that is just a short-term political type of a fix. That's not really going to have major impact on the price of oil. And this creates a real problem because that is probably the number one issue right now affecting consumer psychology and therefore affecting spending and the economy.

KHALFANI-COX: Not to mention the fact that, as a country, we just need to consume less. We don't need to promote policies that are going to make people want to consume more . . .

ROBERTS: And we are, actually, beginning to consume less as well.

Another huge issue out there, the housing crisis. Sales down 2.5 percent. Home prices at the lowest level since August of 2004. You know, in many areas, the market is just crashing down in the 21 percents in a lot of big cities. Las Vegas, Miami, other cities, prices are way down. Who's got the better plan to deal with this housing crisis?

ZUCKERMAN: Well, I don't know that anybody has a great plan to deal with the housing crisis. We had a once in a century bubble between the years 2000 and 2006 when prices were going up roughly 10 percent a year compounded compared to 3 percent for the preceding -- per year for the proceeding 55 years.

That was a bubble that has burst. There's no way of really stopping that. All you can do is try and prevent foreclosures.

And we are just half way through, in my judgment, the decline in housing prices before they can get to an affordable level, by which I mean people will begin to go back into the housing market, start buying housing and have those prices begin to go up naturally because of demand rather than because of government programs.

ROBERTS: Right. And we still haven't seen this housing relief package from Congress either.

KHALFANI-COX: Both candidates, to their credit, have tried to tackle the foreclosure problem. And they both put forth solutions that would stem the tide of foreclosures. I think, frankly, that Obama has put forth a much more aggressive and detailed package when it comes to looking at the housing issue.

McCain's idea is essentially, let me help you to swap out of interest only loans, adjustable rate mortgages, et cetera, into FHA- backed loans and let's fight fraud because he thinks there's been a lot of abuse in the system. Obama has done similar proposals, but he's also taken that a step further and said a mortgage tax credit, let's reform the bankruptcy code to allow judges to be able to tweak somebody's mortgage payment. So I think those are the kind of issues that really are going to resinate with voters.

ROBERTS: A lot to chew on and we'll have a lot of time to chew on it as well because issue number one is the economy here on CNN. We talk about it every day.

It may be a tough time in the housing market, but we're going to show you why the mortgage meltdown is translating into somewhat of a charity housing boom.

And exercise your right to vote. Which presidential candidate would you rather start a business with, Senator Barack Obama or Senator John McCain? Log on to for today's Quick Vote. Poppy Harlow is back with the results coming up next.


ROBERTS: Who would make a better business partner? That's today's Quick Vote question. And CNN Money's Poppy Harlow here now with the results.

So what did we found out?

HARLOW: Hey, John.

Well, no decision here really. People are pretty split. Thirty- seven percent of you say you'd like to team up with Senator McCain. Thirty-one percent prefer Obama. And 32 percent of you out there say you'll opt out not wanting to work with either of the senators at this point -- John.

ROBERTS: All right. Interesting findings, Poppy. Thanks.

It seems that there's somewhat of a silver lining to the mortgage meltdown. CNN's Rusty Dornin explains.


ANITA HELLAM, STANISLAUS HABITAT FOR HUMANITY: This house right now is in escrow. We're about really to close on it. As well as this house. It's in escrow.

RUSTY DORNIN, CNN CORRESPONDENT, (voice over): Anita Hellam is snapping up houses as fast as she can in Modesto, California.

HELLAM: We're getting them for about one third market value. The prices in this community have plummeted.

DORNIN: She may sound like a real estate speculator, but Hellam is the local director for Habitat for Humanity, a non-profit that helps low income families with affordable housing. From Modesto to Minneapolis, the deep dive in housing prices has enabled Habitat to buy property beyond its wildest dreams.

HELLAM: We're getting these properties for about what it would cost us for a vacant piece of land.

DORNIN: Maria Corral is helping to dig a water line for her new home. A used house delivered by Habitat and cheaper than one that would have to be built from the ground up.

Would you have been able to do this project with your house if the housing prices hadn't fallen so much in this area?


HELLAM: She says I wouldn't have been able. This is something that would have been impossible.

If we had done this project two years ago, Maria wouldn't have been able to afford the property taxes.

DORNIN: When new housing construction dried up, Brian Daly (ph) was forced to hang up his tool belt.

BRIAN DALY: The jobs aren't out there like they used to be.

DORNIN: Then Anita Hellam hired him for $40,000 a year less. Construction crews willing to work for less and cheaper land. A winning combination for a charity eager to seize the moment in this market. Here it's refurbishing former rental property.

With the economic downturn, rents are cheaper, so people are able to upgrade housing, which leaves places like this empty and landlords often eager to dump the property.

Creating yet another opportunity for Habitat to buy.

HELLAM: We're making sure electrical, plumbing is all current. Re-roofing.

DORNIN: But for cheaper than you used to be able to?

HELLAM: Oh, for not even a third of what it would have cost us even a year and a half ago.

DORNIN: Hellam even has her eye on this. Developers went broke before the subdivision was built, but the utilities are in.

How much less would you pay now than you would a year and a half ago?

HELLAM: Well, a year and a half ago these were just completely out of my price range. They were $100,000 more than they are today easily per lot.

DORNIN: Transforming the nightmares of some into an American dream with a happy ending for others.

Rusty Dornin, CNN, Modesto, California.


ROBERTS: ISSUE NUMBER ONE is back again tomorrow 12:00 p.m. Eastern. And I will see you bright and early tomorrow, 6:00 to 9:00 a.m. Eastern on "AMERICAN MORNING."

CNN "NEWSROOM" with Don Lemon and Kyra Phillips starts right now.