Return to Transcripts main page
Issue Number One
Blackout: Five Years Later; Energy Winners & Losers; Protecting Your Money; Quick Vote Results, Microbes Make Oil
Aired August 14, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CO-HOST: Inflation is up, foreclosures are up, housing prices are down. What it all means for you.
And Senator Barack Obama about to be endorsed by a major union.
Issue #1 is your economy. ISSUE #1 starts right now.
From the ISSUE #1 headquarters to the CNNMoney.com news room, we are all over the stories that matter to you.
Welcome to ISSUE #1. I'm Christine Romans. Gerri Willis is off today.
A major union gets set to endorse Barack Obama. We look at the power of unions and whether they really do influence votes.
Three major airlines about to join forces. What it means to the future of flying.
And five years now after the Northeast blackout, is your hometown any safer from going dark?
But the big story today, rising inflation. Chances are, your standard of living is suffering. Inflation in this country is running at the highest annual rate in 17 years. It's a safe bet your salary is not going up that quickly, nor your savings or investments.
Let's get you right to CNN's Susan Lisovicz, live at the New York Stock Exchange.
SUSAN LISOVICZ, CNN FINANCIAL CORRESPONDENT: Hi, Christine.
The actual annual inflation rate now stands at 5.6 percent. The increase month over month from June to July, meanwhile, came in twice the expected rate. And it leaves us even more squeezed, because most of us are not getting annual salary hikes of 5.6 percent. This, as the value of our biggest investment, our home, keeps going down.
Check out the inflation increases in one year. Energy up nearly 30 percent, transportation up nearly 13.5 percent. And food up 6 percent. These aren't iPods or flat screen TVs, these are essentials, and that's why it hurts so much -- Christine.
ROMANS: And we're watching how many people every week are lining up to file for unemployment benefits for the first time. It's been averaging over 400,000. A slight improvement, though, this week. LISOVICZ: That's right, Christine. Weekly new filings for unemployment claims dropped last week, but the decline was less than expected. The overall number, as you mentioned, came in at above 400,000, 450,000 the actual number. And many economists consider anything over 400,000 a recession or a red flag. The four-week moving average which is considered more reliable is well above that number -- Christine.
ROMANS: All right. Susan Lisovicz at the Big Board.
Thank you, Susan.
ALI VELSHI, CO-HOST: Well, Senator Barack Obama might be on vacation right now, but that's not stopping a large union from endorsing him.
CNN Deputy Political Director Paul Steinhauser is live in Washington with more.
Hey, Paul.
PAUL STEINHAUSER, CNN DEPUTY POLITICAL DIRECTOR: Hey, Ali.
Yes, Barack Obama continues that vacation in Hawaii this week, but today we've learned that the International Firefighters Association -- that is the largest firefighters association in this country -- they are backing Barack Obama. And this is actually a pretty big deal because this union had backed Chris Dodd, Senator Chris Dodd, during the primaries. He dropped out of the primaries a long time ago, and they haven't endorsed anybody until then.
Now they're backing Barack Obama. With that comes a lot of firefighters and people who get out the vote, and some money, as well. So it's a pretty big endorsement for Barack Obama.
What's interesting is Obama's taped a message which will play at the firefighters' union meeting in Vegas. But being there today for them in Obama's place is Joe Biden. Joe Biden will be speaking to the firefighters and touting Barack Obama.
Why is this interesting? Because Joe Biden is considered to be on the short list, the short list as a possible running mate for Barack Obama -- Ali.
VELSHI: Paul, what's going on with Senator McCain today?
STEINHAUSER: John McCain is going to be in Colorado all day. He's got a bunch of fund-raisers, and he's also going to be going over to the Aspen Institute and speaking there.
And I've got a feeling you're going to be hearing a lot about the battle between Russia and Georgia. Senator McCain has been talking about this nonstop since last Friday. He's been taking a very strong line against Russia. I think you'll hear more comments about that today -- Ali. VELSHI: He's also -- that's an opportunity for him, Paul, to show what he has advertised as his particular strength, and that is foreign policy.
STEINHAUSER: Exactly. You know, that's one of the few areas where in the polls Americans think he would do a better job than Barack Obama. And he's been speaking out a lot about it. And also, Ali, Colorado, a battleground state, a state that McCain really wants to keep on the Republican side.
VELSHI: Paul Steinhauser, good to talk to you. We'll talk to you again. Thanks very much.
We've got more news, by the way, concerning Hillary Clinton. We'll bring that to you shortly.
Now, you saw Poppy Harlow drinking out of a tail pipe of a car yesterday. That was weird. It was a hydrogen car, though, so it was safe. And while that is safe, there are some positives and negatives to hydrogen cars. Poppy tells us what they are.
Plus, gas inspectors, they make sure you get what you pay for at the pump. But how do they do that? Well, we'll take you inside and show you how.
You're watching ISSUE #1, right here on CNN.
(COMMERCIAL BREAK)
VELSHI: This is the time in the show where you get to weigh in our on "Quick Vote." Poppy Harlow is here with today's question.
Hey, Poppy.
POPPY HARLOW, CNNMONEY.COM: Hey.
Well, we're focusing on the stock market, how people feel if their money is in the market. We see the Dow go up 300 points one day, down 300 points the next day. All over the place.
So how do you feel when it comes to investing these days? Here's our question for you: How confident are you in the stock market? Very? Somewhat? Or maybe you've pulled all your money out.
Tell us on CNNMoney.com. We'll bring you the results a bit later -- Ali.
VELSHI: Excellent question. The Dow's up 117 points right now.
If you watched ISSUE #1 you probably thought, what is wrong with Poppy Harlow? Check this out. She's drinking water that came out of the tail pipe of that car, and that was a hydrogen-fueled car, and the water, she tells us, is actually safe to drink. But there are positives and negatives to hydrogen cars.
Poppy is looking healthy and with us today. So I suppose the water is fine.
HARLOW: I survived the night.
VELSHI: Yes.
HARLOW: Did people see the water? Did we show that?
VELSHI: Yes, we showed it.
HARLOW: OK, good. All right.
Well, everyone asked me today at work, "Did you make it? Did you make it through the night?"
It's really just H2O that is coming out of tailpipes. You know, the only emission from these cares. It's unbelievable, right?
It's water and it's drinkable, according to the EPA. That's what they told me.
Another big plus, hydrogen is one of the most abundant -- it is the most abundant resource, the most abundant element in our universe. You can get it from grass, from solar, from wind energy, but notably, you can also get it from oil and coal.
The biggest obstacle facing these vehicles though is cost right now. Analysts say it ranges from about $2 to $9 to produce the amount of hydrogen needed to be equal to a gallon of gas.
Now, that cost does come down as technology advances, and also as demand increases. But also, hydrogen fuel cells that one run these cars, they don't last as long as gas engines. They also -- right now, they cost about two times as much. But the industry experts that we spoke with yesterday say by the time you see these cars on the market, they'll have to be competitively priced.
VELSHI: All right. When we think of hydrogen, is there a safety issue in these cars?
HARLOW: There are safety concerns.
VELSHI: Yes.
HARLOW: Of course, people that back the technology say it's just as safe as a gas car. If there's a leak, of course, hydrogen can ignite. So steps are being taken to design a fuel nozzle that connects securely with the car's tank when you're filling up.
VELSHI: Right.
HARLOW: The experts we spoke to though say the dangers are indeed manageable.
(BEGIN VIDEO CLIP) THOMAS BARRETT, DEPUTY SECRETARY OF TRANSPORTATION: By the time these vehicles will be available for public sale, they'll be absolutely safe. That's our charge. The safety of hydrogen is not any different than anything else -- ethanol, gasoline, batteries. They all have risks associated with them. We need to manage these risks differently, but it's not any more or less safe, it just needs to be approached differently.
(END VIDEO CLIP)
HARLOW: Now, hydrogen as a fuel is not a new idea. It's been around for years.
And Ali, you know, NASA uses it.
VELSHI: Yes. And the problem is NASA doesn't have to ship around the world looking to fill up their tank. What -- for hydrogen cars that are out there today, or when they get out there, where do you fill up?
HARLOW: There are just a few on the road in California. It's a leasing pilot program, and there's not many places to fill up right now, folks.
About 60 hydrogen fueling stations across the country, more than half are in California. But again, it's the proverbial chicken and the egg problem. The stations won't come until people by the cars, and people won't buy the cars until they have a place to fill them up.
Regardless, analysts and industry experts say it could still be about four to 10 years before hydrogen-fueled cars hit the mass market.
VELSHI: It could be a big deal if it works out the right way.
HARLOW: It could be. I mean, when I drove it, it feels like a totally normal car. It's silent and there's no CO2 emissions.
VELSHI: Yes, very interesting. Good. Thanks, Poppy.
HARLOW: You're welcome.
ROMANS: All right. The number of consumer complaints about gas stations has been climbing ever since gas prices took off earlier this year. Now the price of a gallon of gas has eased a bit over the past few weeks, but the complaints, well, they're still rising. And that's where gas inspectors come in.
Here's CNN's Allan Chernoff.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN SR. CORRESPONDENT (voice over): Inspector Bill Bell (ph) is checking for tampering. If the state seals are missing, he knows the pump is suspect.
UNIDENTIFIED MALE: So long as it's on the pump, we know no one's been tampering with the inside of the pump.
CHERNOFF: It's rare to find a violation, says Bell (ph). More common, a mechanical problem that could shortchange consumers. So from every nozzle, Bill and his partner Joe Wood pump five gallons into a precise five-gallon container.
(on camera): So he is giving a little bit of gas away.
JOE WOOD, SUFFOLK COUNTY HEIGHTS & MEASUREMENTS INSPECTOR: About a teaspoon full.
CHERNOFF: How often do you find that five gallons pumped here is not really five gallons?
WOOD: I would probably say one in 100.
CHERNOFF: One in a hundred?
WOOD: And it's probably more likely to be over than under. Under is even more rare.
CHERNOFF (voice over): It did happen at this Mobil station in Texas last month. Inspectors found every single pump was shortchanging motorists by just a bit.
UNIDENTIFIED FEMALE: This pump has no longer got the state seal of approval of being accurate.
CHERNOFF (on camera): The inspectors are also checking for pump jump and pump creep. Pump jump is when the price at the pump starts climbing before you even start pumping, and pump creep is when the price keeps on going up even after you stop pumping.
(voice over): It's most common, say inspectors, at no-name dealers who sometimes do a poor job maintaining their machinery. Inspectors also take samples to be analyzed in a lab for quality.
After water was found a few weeks ago in the gas at this station in Port Jefferson, New York, the owners shut down. And New Jersey inspectors recently found 350 violations in the 1,000 gas stations they checked.
ANNE MILGRAM, NEW JERSEY ATTORNEY GENERAL: That obviously concerns us enormously, because that means that a third of the gas stations have a problem and are not complying with the law, and that's bad for consumers.
CHERNOFF: To avoid problems, Bill and Joe say buy brand name gas. And if possible, pump your own.
Allan Chernoff, CNN, New York.
(END VIDEOTAPE)
ROMANS: New developments now from the campaign trail.
Hillary Clinton's name will now be placed into nomination at the Democratic National Convention.
CNN's Bill Schneider, part of the best political team in television, is on board the CNN Election Express, headed to Denver.
Hi, Bill.
WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Hi there.
We're crossing into Iowa right now. And as you indicated, there is some big news on the campaign trail.
We're headed to the Democratic convention, where we have just learned that Senator Hillary Clinton's name will be placed into nomination at the Democratic convention. Her delegates will be there, and they will be able to vote for her for the Democratic nomination for president.
This is something she wants and many of her supporters want as a statement for history for the history books, that she did very well in the primaries. By our calculation, if you give all the superdelegate voters to Barack Obama, she will get -- she has about 40 percent of the delegates at that convention, and they will be able to vote for her.
ROMANS: Bill, does that make it largely symbolic, or is there a way that, you know, the outcome could be possibly any different because of this?
SCHNEIDER: I don't think it will make any difference. It will expose a division in the party, which the Obama people would rather not see exposed. But keep in mind that every Democratic convention since 1964 has had a roll call vote. So this is nothing unusual.
The Clinton campaign would probably not call it symbolic, they would call it historic, because she is the first woman to win primaries for the Democratic nomination, she wants those votes recorded. When an Obama campaign official was asked, what do they get in a bargain, they told our Candy Crowley peace (INAUDIBLE). They want a peaceful convention, and this will help soothe the differences between the Obama and Clinton camps.
ROMANS: All right. Bill Schneider on the Election Express.
Thank you, Bill.
VELSHI: Love that bus.
Listen, three big airlines are coming together in a major business deal that could change the way you fly.
Plus, the latest on the value of your house.
And we'll see if we're anymore ready to handle a major blackout than we were five years ago, when 50 million people lost power. We'll check it out.
You're watching ISSUE #1, right here on CNN.
(COMMERCIAL BREAK)
VELSHI: Welcome back.
We've got a deal to tell you about in the airline industry. Three airlines are seeking immunity from the United States for antitrust after announcing an agreement that critics are calling a monopoly in the making.
Now, no one knows about these things better than CNN's Richard Quest. He's live in London with the very latest.
Richard, this is a deal with American Airlines, British Airways and Iberia. What does it mean? And what's the controversy?
RICHARD QUEST, CNN INTERNATIONAL CORRESPONDENT: Substantially, these three airlines are saying that they want to get together, they want to coordinate their schedules, and crucially, they want to be able to coordinate a revenue share on those all-important profitable routes across the north Atlantic.
The three airlines -- remember, you just said, American, British Airways, and Iberia of Spain. We can forget Iberia for the moment. They are, if you like, a bit of sugar on the top, the icing.
This deal is really all about British Airways and American Airlines coming together to try and get this alliance. And to put it bluntly, Ali, twice before they've tried and twice before they've failed to convince the regulators.
VELSHI: Why would it be any different now? And what, by the way, is the argument from those who oppose it? What's the danger that occurs by these two airlines coming together? They're not buying each other, it's not a merger.
QUEST: BBM -- Big Bad Monopoly. Between the two of them, British Airways and American Airlines, they have nearly 50 percent of all the traffic from London Heathrow to the United States. And that means Sir Richard Branson of Virgin Atlantic says there's a monopoly in the making and we'll all be paying more for our tickets if they get the go-ahead.
But you said what's different between then and now? The difference is, of course, there are many more airlines flying into Heathrow from the U.S. We now have Delta, we have Northwest, we have US Airways, we have Continental Airlines. All the old arguments against this tie-up have basically gone out of the window.
VELSHI: Richard, with all the issues that are facing airlines, particularly here in the United States, which, as you mentioned, are different from airlines that fly long routes, the more profitable overseas routes, how does this -- what is -- who is the gainer here? Is the consumer the gainer here, or is this good for British Airways and American Airlines? Where do we come out ahead on this one? QUEST: The gainer, certainly, I don't believe, is going to be the consumer. There's enough competition across the north Atlantic at the moment to keep prices pretty relaxed and pretty down.
No, the gainer is going to be American Airlines, based in Texas; British Airways, based in U.K. No question about it. They will be able to gain the benefits of their alliance that they've so far not been able to realize.
Ultimately, of course, remember crucially here, United has exactly such immunity with Lufthansa. Delta, Northwest has it with KLM and France.
So really what American is saying -- and I'm not supporting one side or the other. These are the arguments.
VELSHI: Right.
QUEST: American is saying, look, all you other guys have got it. You're all in London Heathrow, you're all -- there's a recession on, a depression on in the airline industry. We need this.
It'll be very hard, I believe, for a new or an old administration to basically go against these arguments this time around. Particularly -- you know, Ali, I saw a very interesting number recently. If the worst numbers come to fruition, the airline industry this year seeks to lose maybe $6 billion if oil is over $135 a barrel. Those sort of numbers, which U.S. official is going to say no?
VELSHI: I hear you.
Richard, always good to talk to you. Thanks very much for joining us on this.
Richard Quest, our expert on the airlines.
ROMANS: Ali, airlines know the toll that higher energy costs have taken. Everyone from businesses to individuals are trying to find ways to cut costs and cope with it. But one man found an interesting way to do that, by simply going back to basics to go green.
CNN's Deb Feyerick is here with that story -- Deb.
DEBORAH FEYERICK, CNN CORRESPONDENT: Well, Christine, you know, nowadays, it's fashionable to go green, but here's one man who has been doing it for decades. And he's got some pretty interesting things to show for it.
(BEGIN VIDEOTAPE)
MIKE DABROWSKI, SOLAR INVENTOR: Everything's solar, yes. It's all charged by the sun.
FEYERICK (voice over): Mike Dabrowski has been playing with the sun for 30 years. DABROWSKI: Ready?
FEYERICK (on camera): So that's the raw energy?
DABROWSKI: That's the raw energy that we stored over five minutes from this much sunlight.
FEYERICK (voice over): The inventor who has worked fixing TVs, stereos and supertankers uses solar energy for things like cooking...
DABROWSKI: Seventy-four degrees, climbing quickly -- 75, 77, 79.
FEYERICK: ... and charging his hybrid. Look closely at his suped up Honda Insight and you'll see it's no ordinary hybrid.
DABROWSKI: There's one here, and then three down there.
FEYERICK: He changed it in a major way by hacking into the car's computer and making it so the driver, not the car, decides whether to operate on gas or electric.
DABROWSKI: I can ship whether I'm generating power or I'm taking power out of the batteries.
FEYERICK (on camera): So you're the one who's deciding how this car is running?
DABROWSKI: Right.
FEYERICK (voice over): Extra batteries fuel electric power longer, and a fifth wheel propels the car when the gas is off.
DABROWSKI: I'm going to flip this switch, drop down the e-wheel. So now we're driving on pure electric, which was stored in that battery yesterday from that sunlight, from that solar panel.
FEYERICK: So far, he's installed or sold his system to nearly 60 people, though he has yet to make any real money.
(on camera): What is it you most want to create and leave behind?
DABROWSKI: A sustainable way of life for all of us. I really want to just help everybody.
I mean, I'm almost retired now. I'm like 62 years old, and if I can -- I don't have any children. So if I can leave something on this earth, you know, some ideas or just a way of thinking, maybe, I've done my part. I've left something positive on the planet.
(END VIDEOTAPE)
FEYERICK: Now, Dabrowski says his car can run 35 miles on a day's worth of sunlight. And by the way, that solar cooker on a sunny day, it takes about 30 seconds to cook a hot dog and about 20 minutes, he says, for a full-sized turkey. And he shows how to build a smaller version of that on his Web site, which is www.99mpg.com/mikestips -- Christine.
ROMANS: I love it. And I love that he uses everyday objects. That's what makes it so sort of compelling. It's really sustainable. He's using what he's already got.
FEYERICK: Well, that's exactly right. He doesn't have a lot of money, but he likes to show people that things laying around like satellite dishes, or even things like solar collectors, which are not all that complicated, are things that can be used to power all the things that people need. And that wheel that he actually put on that car was something he found in a friend's workshop.
ROMANS: It's not for everyone, though. I mean, not everyone has that inventor's mind to be able to tinker around the garage and figure out how to make your whole life sustainable. But it does show what can be done if you put your mind to it.
FEYERICK: Absolutely. And one thing about the electric car which is fascinating is that he decided he wanted to override the system because he figured out he could do it. Now, I don't know if I would know exactly when to be driving electric, when to be doing it on gas. So that's something that the average driver would have to learn, but he says it's pretty simple.
ROMANS: All right. Deb Feyerick.
Thanks for bringing us his story, Deb. Thanks.
VELSHI: All right. Coming up next, you're not going to believe how many people were evicted from their homes last month. Foreclosures are skyrocketing. We're going to have a look at the latest numbers.
Plus, looking through a microscope to find oil. Could a small bacteria be the solution to at least part of our energy crisis? Find out next.
You're watching ISSUE #1 on CNN.
(COMMERCIAL BREAK)
VELSHI: Welcome back to ISSUE #1 here on CNN.
More slippage in America's housing sector. According to the latest report by the National Association of Realtors, average home prices have dropped 7.6 percent in the second quarter of this year. The second three months of this year. Now, much of that is attributed to foreclosures and short sales scenarios, which account for nearly a third of recent real estate deals.
Former Federal Reserve chairman Alan Greenspan is quoted in today's "Wall Street Journal" saying that he sees America's housing sector possibly bottoming out sometime next year or even later than that.
Well, for all too many homeowners, they've already hit rock bottom as the foreclosure crisis deepens, and where there's plenty of misery and plenty of company. Foreclosure filings grew by 8 percent between June and July of this year, but even more ominous, foreclosure filings skyrocketed by 55 percent in July, compared to the same time last year.
That equates to roughly one in every 464 American homes in some stage of mortgage distress. Now, leading the way is Nevada, where nearly 1 percent of households have received a foreclosure notice.
And when it comes to homes actually being repossessed, look at these figures. Again, from June to July, just up 8 percent. But when you account for now versus a year ago, home repossession rates are up more than 180 percent.
ROMANS: Wow.
All right. Five years now after the massive blackout. Could it happen again?
That's next, but first let's get you up to speed on the latest headlines. Don Lemon has those in the "CNN NEWSROOM."
(NEWSBREAK)
DON LEMON, CNN ANCHOR: Travel restrictions on Mayor Kwame Kilpatrick. He can, he can attend the Democratic National Convention. Kilpatrick has been mired in controversy over romantic text messages with his former chief of staff. The messages indicated the two were having an affair. Both denied it under oath. Not guilty pleas were entered on their behalf at this morning's arraignment.
The crisis in the Republic of Georgia. Defense Secretary Robert Gates says he doesn't foresee the U.S. using force in the conflict with Russia. The U.S. military is helping spearhead relief operations in Georgia. Several planes have delivered supplies and many more are on the way.
Secretary of State Condoleezza Rice in France today to meet with President Nicolas Sarkozy. He helped broker the cease-fire between Russia and Georgia. Tomorrow, Rice heads to Georgia's capital, Tbilisi.
I'm back in the "Newsroom" at the top of the hour. I'm Don Lemon. Now let's throw it back to New York and Christine Romans.
Christine, you look very nice in red.
CHRISTINE ROMANS, CNN ANCHOR: Oh, thank you. That was very nice of you. Thanks, Don, nice to see you. All right, we'll talk to you soon. Can't wait.
LEMON: All right. See you.
ROMANS: Five years ago today, August 14, 2003, the lights went out. Fifty million people lost power that day in eight states in the Northeast and parts of Canada all because of what should have been a minor issue in Ohio that was allowed to cascade, to balloon, into a major one. It makes you think about the nation's power grid, our demand for energy and if this could happen again. Tyson Slocum is with Public Citizen, a non-profit, left-leaning, consumer advocacy group in Washington. That's a mouthful.
Tyson, thanks for joining us.
Five years on, $10 billion damages from then. Could it happen again?
TYSON SLOCUM, DIRECTOR, ENERGY PROGRAM FOR PUBLIC CITIZEN: Sure. Congress has taken some steps to address the problem. In 2005, Congress passed the Energy Policy Act which, among other things, beefed up transmission and made reliable standards for electricity mandatory. Prior to that, it had been voluntary and we had had a patchwork system.
But addressing transmission alone is not going to solve the problems. Going forward, if we want a more secure, reliable electric grid, we've got to focus on decentralizing it. You had a story earlier about an individual living off the grid because of solar power. So encouraging more use of localized, renewable energy and investing in demand reduction strategies, like energy efficiency is one of the best investments going forward to reduce our reliance on a centralized grid and to make sure that we are able to generate enough power considering continued economic growth and population growth.
ROMANS: Well, we know that electricity use is forecast to increase almost 30 percent from 2006 to 2030 driven by residential growth. Are we, as it is now and what we're doing now, are we equipped to handle that surge in demand?
SLOCUM: Not right now. And I think that that surge in demand isn't necessarily a reality. We can become far more efficient at the way we use energy by investing in energy efficiency, making sure that our homes are more weatherized and more energy efficient. Everything from replacing windows, to upgrading insulation. And also, the government taking more affirmative steps to encourage home-based solar systems and things like that so that we have less reliance on centralized power units. So there are ways, even with growing populations, to reduce electricity. But it's going to take some government investment to help become more efficient.
ROMANS: And that's where the politics starts to get into play and people have different ideas of how to make those investments or where those investments are need. But we do know at this point, we have what seems to be a voracious appetite for power, whether it's electricity or any of the other number of ways that we use to power and heat our homes and the like and drive our cars. Where do we go from here on that? Are we at some sort of tipping point that, you know, our standard of living and life as we know it, we have to have some major investment and major changes for that to continue.
SLOCUM: Yes, I mean, households are clearly suffering under the weight, not only of gas prices in the transportation sector, but home utility costs. Electric and natural gas bills and home heating bills, particularly this winter, are set to be records. And so, if we're going to help families out to brave these high prices, we've got to help them to be more efficient and we've got to help them to generate more energy.
States like California and others that have provided generous incentives to households and small businesses to generate more of their power on their rooftops from solar or to encourage families to make energy efficient improvements to their home, those states have been leaders in reducing electricity and energy demand. And so I think that we need to have more of that focus from the federal government and we would be able to successful brave this storm.
ROMANS: That horrific blackout back in 2003, there was criticism of New York's City infrastructure in particular. Have those infrastructure issues been addressed? Things that have been the cause in the past of blackouts in this country?
SLOCUM: Not really. You know, since that 2003 blackout, we had another major blackout in the New York City area and that was due to inadequate reinvestment by local utilities into the energy infrastructure system. And so it takes money to invest, to improve reliability. And with electricity deregulation, there has been less incentives for cooperation between different utilities to work together on reliability issues and more competition. And that competition has also resulted in an erosion of reliability.
So while Congress has taken some steps to address some problems in the transmission sector, how electricity gets moved from large power plants out to places where people use electricity, we've got to focus on becoming more efficient in the way we use energy, so we use less, and encouraging more distributed generation, localized renewable energy, to get more people off of the centralized grid.
ROMANS: Tyson Slocum from Public Citizen. Thanks, Tyson.
SLOCUM: My pleasure.
ALI VELSHI, CNN ANCHOR: Well, there are certain cities that are doing better than others when it comes to energy. Find out how your hometown is fairing.
And energy costs as you know are way up. Transportation costs are going up. Food is more expensive. How inflation will affect your life and your bottom line in the upcoming year.
ISSUE NUMBER ONE rolls on next.
(COMMERCIAL BREAK)
ROMANS: News for you about Airborne, the dietary supplement that claims to keep you from getting sick. Well, the makers of Airborne have agreed to pay $30 million to settle a class action lawsuit that charges the company made false claims about the cold-fighting benefits of those tablets. The FTC says there is no evidence the product provides any benefit for people who are exposed to germs in crowded places. VELSHI: Well, whenever you live, the chances are your energy bill has probably gone up this year. These energy prices can play into the success or failure of businesses and business development in your area in ways that might not be obvious to you. Rod Kurtz is a senior editor for "Inc." magazine, which has done -- take a real look at the gains and losses of energy.
And when I first saw this, I thought it meant, you know, how it affects business or what goes on. But you've really taken a much bigger, a 50,000 foot view of how energy has affected the fortune and failures of certain cities in America.
ROD KURTZ, SENIOR EDITOR, "INC.": Absolutely. I mean I don't have to tell you that energy has had a profound effect on our economy in the past year or so. So, you know, we do a best cities for business list every year. And when we were doing that list, we realize a lot of things were changing. People were changing the way that they commute. They're changing where they work. They're chancing where they locate their businesses. So we wanted to zoom in and see which cities are positioned, well-positioned into the future.
VELSHI: And some of them at the top of the list, now that you think about it, are obvious. Let's show you the energy crisis winners, as it were. Houston, Texas, Midland, Texas. Those seem obvious. These are cities that have really gained from the energy bill.
KURTZ: Yes. Well, I'll let you in on a little secret, oil companies are making a lot of money these days. So any city that's home to a lot of them is doing to be doing well because it's not just, you know, drilling for oil and actually pumping gas, it's, you know, the whole industry that goes around it. So these are industry towns and their industry is doing quite well. So you see Houston, you see Midland, you see Odessa in Texas.
VELSHI: Right. Those west Texas cities, yes.
What about Bismarck, North Dakota. How did that fit into it?
KURTZ: Yes, North Dakota. Who would have thought it. But they're actually well-positioned sort of for the present and for the future because they're close to some of these oil and shale deposits that we're hearing a lot about now. But they're also well-positioned for wind and for biofuels. You know, if you look at the whole great plains area, you know, it's got a new nickname, they're calling it the Saudi Arabia of wind.
VELSHI: Yes. I've head Boone Pickens say that, yes.
KURTZ: And you're seeing T. Boone Pickens and others, you know, realizing that this is good for business. Wind could fuel, pun intended, a lot of our economy in the future.
VELSHI: And on the losers' list, again, it didn't occur to me why, then you look at the list and it makes sense. Detroit, Flint, Michigan, Ft. Wayne, Indiana, Janesville, Wisconsin. That's further down the list. Auto towns.
KURTZ: Yes, you look at Detroit. Again, it's an industry town. And this industry is on life support. I mean, again, it's not just making cars, it's all the design firms that are there. There are a lot of advertising firms. And then you move down the list, Flint, Michigan, and Ft. Wayne, Indiana, they make pickup trucks. Hundreds of thousands of pickup trucks. People ain't buying them anymore. And then down to Janesville. The problem there is that they make SUVs, the Yukon, the Suburban and there's a big plant there that's actually going to be closing, I believe, in 2010.
VELSHI: Yes.
KURTZ: So, you know, they had boom times when people were buying SUVs and pickups. Not the case any more.
VELSHI: You know in about a week I'm going to go to Lordstown, Ohio, where GM has a plant there and they're making the smaller cars there. And they're introducing a -- they just brought a third shift into that. So if you can retool some of these industrial towns, you can possibly take advantage of the energy crisis.
KURTZ: That's the real opportunity. You are seeing the auto companies, American auto companies, they're starting to catch on. You're seeing places down in the south, in Huntsville and Chattanooga, places like that, that have actually foreign automakers that make a lot of cars here.
VELSHI: Yes, Nissan and Honda are there (ph).
KURTZ: So, you know, every, you know, downturn is an opportunity in disguise.
VELSHI: Where do the big cities, the big urban centers with mass transit fit into this map? The Chicagos and the New Yorks and San Franciscos?
KURTZ: Well, I live here in New York. I don't own a car. I don't drive a car. I take the subway. So it's interesting, you know, a lot of the bigger cities, they consume less energy. Look at a place like L.A., milder climate, less heat, less air-conditioning. The problem is, you pay more for energy in these cities. I got my ConEd bill yesterday, actually, $129. I live in a one-bedroom apartment. That's a lot. You know, if you look at a family, that's going to be a lot of money. So in the big cities, in the case of New York you often pay double what they do elsewhere.
VELSHI: And one of the big fears about oil, if it goes up, and we've been seeing oil go down, we're at about $115, $117. But if it were going up, people were saying this was going to destroy commuter areas. Places where bedroom communities where people would be 35, 40, 50 miles away, which exists around some American cities.
KURTZ: Well, it's interesting. I mean the conventional wisdom is, if you live in the suburbs, you know, you pack up the car and drive into the city everyday for work. But a lot of companies are actually shifting. They're going where the labor is. So they're locating in some of these suburbs. So it makes it easier. Often people in the suburbs have shorter commutes than people who live in an urban center.
VELSHI: This is a good read. Thanks very much for joining us. Rod Kurtz with "Inc." magazine.
KURTZ: Good to see you.
ROMANS: All right, Ali, we have an important update on one major bank failure. Folks might not be losing as much as they first feared. We'll have that update.
And how long will you have to deal with rising inflation? We put together some great minds right behind me here to help figure it all out.
You're watching ISSUE NUMBER ONE.
(COMMERCIAL BREAK)
VELSHI: Well, better news from the West Coast today following last month's collapse of IndyMac Bank. The FDIC, the Federal Deposit Insurance Corporation, says customers lost much less than originally feared by way of uninsured deposits. With the FDIC now saying $600 million went uncovered. That's far better than the billion dollar figure that was initially suspected. More than half of that $600 million has already been returned. Uninsured depositors could very well get more money back if and when the bank is sold. The FDIC still hopes to find a buyer for IndyMac within the 90-day window since its July 11th seizure.
ROMANS: All right, food prices up almost 6 percent, transportation up, as well, energy costs up double digits. You know the story, the story there all too well. You know, how long is this going to last? Let's get right down to it.
Rod Kurtz from "Inc." is back with us. Ryan Mack with Optimum Capital. And Poppy Harlow is with cnnmoney.com.
No shortage of statistics today that show your standard of living is suffering from a lot of things that are going on out there. What you're paying at the, you know, at the pump, to fill up your grocery cart or your house.
Let's start with inflation. Up fastest rate in 17 years. The Persian Gulf War was the last time. You know, do we think that it'll come down a little bit? Or, I mean, is this something that's going to be a new kind of way of life for people?
KURTZ: I think, you know, as if you need the statistics to tell you you're feeling it in your pocketbook.
ROMANS: Right.
KURTZ: But, you know, you look at inflation. I mean, obviously, fuel prices are fueling this again with the fuel pump.
ROMANS: I love your fuel (INAUDIBLE).
KURTZ: Yes, there you go. It's my signature move.
ROMANS: If it works, stay with it. Stick with it, right?
KURTZ: But, you know, the interesting thing is, gas prices are, you know, coming down a little bit. And, you know, a lot of people think that hovering around $4 is the new normal. So, you know, chances are . . .
ROMANS: The new normal.
KURTZ: Yes.
ROMANS: Well, 28 days now of prices going down, but we're still -- gas is still a buck more expensive a gallon than it was last year.
HARLOW: Yes. And then what about this winter when we have to heat our homes? You're dealing with home heating oil prices and natural gas prices. That's going to play in because fuel and energy were the big factors in this inflation report. But also airline tickets and the cost of clothing. So people are feeling elsewhere. Not just the grocery store and the gas station.
ROMANS: And, Ryan, their savings, their investments and their salary and their pay is not going up 5.6 percent year-over-year.
RYAN MACK, PRESIDENT, OPTIMUM CAPITAL MANAGEMENT: Right. But I think the core inflation rate actually tells a better story for the economy as a whole. It's 2.5 percent. Only up 0.3 percent. So excluding food and energy . . .
ROMANS: But I can't live without food and energy. That's the thing.
MACK: I understand. Yes. Well, over the long run, it does give a better indication. Even if you look at the Treasury inflation protected securities over the 10 year, the base rate of 1.6, has been trading at 3.9, is forecasting about a 2.3 percent inflation rate for the next 10 years. So I do think it's an overall positive story. And like you said, gas is coming down. Food, which is more of an impact of a global economy, is not necessarily as predictable but (ph) coming down.
ROMANS: Let's talk about housing because, I mean, some of these statistics are staggering when you look at 680,000 people either abandoned their homes or were essentially kicked out of their homes over the past year. Seventy-seven thousand more physical foreclosures. Not just filings, foreclosures in the month of July. People are losing their homes. That means home prices have a ways to go before they can, you know, start to recover.
HARLOW: Yes, I mean, the home prices down 7.6 percent. When you're talking about single family existing homes. These are people that need their homes. That need their money. They don't have three homes. So that's going on. And then also what Alan Greenspan said about, we have not hit bottom yet in the housing market. To hear it from a source like him is very scary. And he says maybe 2009, maybe later, is when we hit a bottom.
ROMANS: You're talking about that interview in "The Wall Street Journal." And also Alan Greenspan, the former Fed chairman, was also critical of what he essentially thinks as a bailout or a move that could bailout Fannie and Freddie.
KURTZ: I love that even in retirement he's still sort of an oracle that everyone stops and listens.
ROMANS: Well just don't blame him for years of easy money that let this happen.
KURTZ: Yes, he got out while the getting was good.
Yes, I mean, you look at housing. I mean it really has a profound effect on local economies. I mentioned in the last segment we do a best cities list every year. And some of the cities that were at the top last year on the list, you look at places like Florida, Las Vegas, California, they all tumbled this year because, you know, you had foreclosures and it impacts not just homeowners and construction, but really a whole host of industries that are tied to the housing sector.
MACK: And if you look at essentially the key figures that I think looking forward, going forward, is inventory levels. It seems like they're starting to stabilize as prices still are decreasing and inventory stabilizing, looking at new construction, which still is dismally slow. Demand has to catch up eventually to the level of supply. Then once that starts to stabilize, I'm thinking nine to 12 months from now we should see . . .
ROMANS: Nine to 12 months you think things will start to . . .
MACK: Yes.
ROMANS: Bottom or get better?
MACK: I'm thing a turnaround in the economy in terms of the housing market, which has actually been dragging the entire economy right now.
ROMANS: Right.
KURTZ: And that's a long time. I mean, remember, we've been in this for a while already. So to hear another year -- I thought you were the optimist on this show.
HARLOW: You know, people are still selling their homes, a lot of people, for less than they bought them for. Twenty-five percent of people, if you take the 12 months it ended at the end of June. That's unbelievable. Selling their home for less than they bought them for. A lot of people, this is their only investment. MACK: That's 11 million to 12 million in business in the red (ph).
ROMANS: Well, and there are people who are holding out. And we've heard this anecdotally. There are people who are holding out because they can't walk in and write a check at the closing. I mean, and they can't. And they can't. Or they're afraid of losing their job and they can't sell right now, they've got to hold on and they're just trying to keep going. I mean it's going to be good, you know, for a home buyer who is going to stay in their home and they're not trying to sell another house. But that's only a certain segment of the home buying population.
KURTZ: Well, yes, and you need a place to live.
You know and the problem I think, not just with housing, but with a lot of what's going on with economy is uncertainty. We cover smaller, fast-growing companies at "Inc." and a lot of them are sitting on the sidelines for a whole host of reasons. You know, nine to 12 months, if we knew that for certain, that would be great. No one knows for sure.
ROMANS: We won't know for sure until it's already behind us and then you've missed the opportunity, you know, and then you don't know what's going to happen there.
OK, thanks so much. Thanks, guys, Rod, Poppy, and Ryan.
VELSHI: Well, coming up next, hunting for oil with a microscope. Could E. Coli be the answer to the nation's fuel crisis? I am not making this up.
Plus, it's not too late to weigh in on our Quick Vote. The question, how confident are you in the stock market? Log on to cnnmoney.com. Let us know. We're going to give you the results next.
You're watching ISSUE NUMBER ONE right here on CNN.
(COMMERCIAL BREAK)
ROMANS: This is a good day to ask this question. The Dow is up 169 points. How confident are you in the stock market? That's today's Quick Vote question. CNNmoney.com's Poppy Harlow is back with the results.
Hi, Poppy.
HARLOW: Hi, Christine.
Unfortunately, the Dow can go back down just as much in a matter of seconds.
ROMANS: And just as quickly, right?
HARLOW: Exactly. Well, here's what you said. Twenty-three percent of you are very confident. Thirty percent say you've pulled out all your money. But 47 percent, the majority there, say you are somewhat confident in the state of the market as it stands.
ROMANS: The 30 percent pulled out all their money?
HARLOW: I guess so.
ROMANS: I'm telling you, studies show, and Ali's going to back me up on this, studies show that once you pull it all out, it's too late. We're not smarter. We're not smart enough.
All right. Thanks, Poppy.
HARLOW: Listen to these people.
ROMANS: It's too late for them.
VELSHI: Stay in the markets.
You know what, the markets are down. It's a good time to get back in. Don't sit on your money in a mattress. We talked about inflation, 5.6 percent. You're not making any money on that.
Listen, when gas prices and oil prices skyrocketed, folks were looking everywhere for some sort of answer. Something that would lower the price of energy. Well here's an answer that's straight out of science fiction. Growing a form of the virus E. Coli to make fuel. CNN chief technology and environment correspondent Miles O'Brien has the story.
(BEGIN VIDEOTAPE)
MILES O'BRIEN, CNN CORRESPONDENT, (voice over): It's like an oil field on a microscope slide. These tiny bacteria are making diesel fuel. No drilling required.
What are we seeing? Now this is fuel here?
STEPHEN DEL CARDAYRE, LS9 INC.: These are the E. Coli cells that have converted the sugar and secreted out the oil.
O'BRIEN: Stephen Del Cardayre is the lead researcher with a company called LS9 that is harnessing a harmless strain of E. Coli to make fuel. All you have to do is feed the bacteria.
Doesn't have to be like corn or . . .
DEL CARDAYRE: You can use corn, but you can use sugar cane. Wood chips will work. Wheat straw will work.
O'BRIEN: In short, they aren't picky eaters. They eat sugar, digest, and then expel petroleum waste. Del Cardayre and his team have genetically engineered these tiny oil makers to create diesel because it's the easiest fuel to make. But E. Coli could make other fuels as well.
What is the catch?
DEL CARDAYRE: No catch. We've genetically engineered E. Coli to make fuel that can be used in existing infrastructure.
O'BRIEN: And that is a key point. LS9's E. Coli diesel can be mixed in with traditional fossil fuels. Ethanol is so corrosive it cannot be sent through existing pipelines. But can an army of microbes really make a difference? Bob McCormick is a government expert on biofuels.
ROBERT MCCORMICK, NATIONAL RENEWABLE ENERGY LAB: If you've got something that you can make work in a test tube, that's good. But you've got to be able to make it work on a very large scale to have an impact on our petroleum imports.
O'BRIEN: At LS9, they are ramping up as fast as they can, separating oil and water. They hope to be making millions of gallons a week in the next few years.
Is it possible to say we could grow our way out of our dependence on oil?
DEL CARDAYRE: I doubt we're going to completely eliminate our dependence on oil. But we'll certainly be able to wean ourselves of complete dependence.
O'BRIEN: That is, once they get the bugs out.
Miles O'Brien, CNN, south San Francisco, California.
(END VIDEOTAPE)
ROMANS: Leave it to Miles.
VELSHI: I know. He's always got a great -- first of all, he does great stories. And he's got a great beat and he really understands it well. But, yes, that's Miles for you. He's a great writer and he's a great thinker about (INAUDIBLE) stories.
ROMANS: He really is. All right, we love that story.
For more ideas, strategies, and tips to save you money and protect your house . . .
VELSHI: Including don't bail out of the stock market. Pardon me.
ROMANS: Yes, we're both disturbed by the Quick Vote today.
OK. You can watch "Open House" Saturday at 9:30 a.m. Eastern right here on CNN.
VELSHI: And for more on how the news of the week affects your bottom line, tune in to "Your Money" Saturday at 1:00 p.m. Eastern and Sunday at 3:00 right here on CNN with Christine and me.
ROMANS: OK. The economy is issue number one. We are committed to covering it for you.
VELSHI: Which means we'll give you some insight and guidance into how to stay involved in the market.
ROMANS: Information. Advice. ISSUE #1 will be right back here tomorrow, same time 12:00 Eastern, right here on CNN.
VELSHI: Right here on CNN.
Time now to get you up to speed on other stories making headlines.
ROMANS: CNN "NEWSROOM" with Don Lemon and Brianna Keilar start right now.
