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YOUR MONEY

Examining the Current Financial Crisis

Aired September 20, 2008 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ALI VELSHI: Welcome to YOUR MONEY. I'm Ali Velshi. Christine Romans joins me in a moment, along with a panel of financial experts, who'll help us sort through this crisis.
Treasury Secretary Henry Paulson and Congressional leaders are working on a comprehensive plan this weekend that could mean the biggest government bailout ever. His announcement came after a week that will go down in history. Monday morning, you woke to news that Wall Street had lost two of its major brokerage firms. Lehman Brothers filed for bankruptcy after the government refused to bail it out. Bank of America bought Merrill Lynch in a quickie deal. And the stock market was spotted with a huge sell-off, down 504 points for the day.

But that was just the beginning. Financial stocks tanked as investors worried about Washington Mutual, Morgan Stanley, and other firms. And the federal government jumped in Tuesday night with an $85 billion bailout loan to insurance giant AIG.

Markets around the world were taking a beating. The world's central banks took action, injecting $180 billion into the financial system to stem the losses. The SEC announced a ban on short selling, betting that a stock will go down instead of up. As Paulson said, he and Congressional leaders should have their comprehensive bailout plan ready next week.

Markets responded positively, but investors are on the edge of their seats to see what happens next. Christine?

CHRISTINE ROMANS, CNN CORRESPONDENT: Is your money safe? Is your job safe? Can our next president do anything to turn this economy around? We have a team of top experts here to help you make sense of the Wall Street collapse. We'll sort through the panic, the mess on Wall Street, and offer real answers for where we are and what you can do right now, this very moment, to protect yourself.

Joining us now for this special emergency edition of YOUR MONEY, Mark Zandi, chief economist at Moody's Economy.com; Diane Swonk, chief economist with Mesirow Financial; and Louis Barajas, personal wealth adviser and author of the soon to be published book, "Overworked, Overwhelmed, and Underpaid."

Let's start with you first, Mark. A historic week. Will there be stability now in the financial markets? And can we get the economy moving in the - right direction again?

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: Yes, I think so. When policymakers act aggressively, at least historically, it works. They convince people that they're on the case, that they're going to the job, and that was first confidence and we're off and running again.

ROMANS: We can't say the worst is behind us. We can say that it's the beginning of the beginning of the end?

ZANDI: Yes, that's the way I would put it. I - you know, everybody's baseball metaphors. I think this is the sixth inning of a nine inning game. And it's not a double header. This is three innings to go. This is going to be painful. We've got I think a tough economy ahead of us, but I think the worst in the financial markets is over.

VELSHI: Louis Barajas, you are a personal wealth adviser. Everybody wants to know this week, we've had e-mails, we've had call-ins. What do I do with my money? Is my money safe in the bank? Is my - are my investments safe? Is my 401(K) safe? Is my money market safe? What have you got to tell them?

LOUIS BARAJAS, PERSONAL WEALTH ADVISER: Well, what I've got to tell them is that their money is not safe if they're acting on fear. What got us into this problem was greed. We all know that. And if we're going to make decisions now based on fear, our money's not going to be safe. And so the problems right now, we're seeing a lot of people who are going to prey on the vulnerable. People who are saying you're money's not safe, move it into gold, move it into this. And then we lack diversification.

Keep your money where it's at. Keep it consistent. What we need to do is take a look at (INAUDIBLE), why did we invest the money where we have it now in the first place?

ROMANS: Louis, let me ask you this. If you've got a little money to put away right now, if you were smart or lucky enough to have some money sitting aside that's not getting hammered, you know, has lost 25 percent in the stock market, should you be buying?

BARAJAS: You should be buying if you're buying with a goal in mind, with a risk tolerance, with a timeframe. You know what the money's going to be used for, not just to speculate. And that's what gets us in trouble, it's a speculation.

VELSHI: Diane Swonk, you have been following the economy for a long time. It occurs to me that an economist might be looking at this from a 50,000 foot view and say it's serious, but these are economic cycles. Is this very unusual? Is this something that's going to come and go and we'll be OK? Well, how do you see it?

DIANE SWONK, MESIROW FINANCIAL: Well, it is serious. There's no question about it. I echo Mark's comment earlier that this is a major turn in events. And confidence, unlike the real economy in financial markets perceptions can become reality. And the panic that it had taken over was extremely important to address. And I think the fact that we had a coordinated effort finally from the government, it may not be the best plan. That's frankly irrelevant. We'll fix the problems with it later. The fact that people now understand their money's safe, and they can move forward with some sense of certainly about how actions will be held - handled in financial markets going forward is very, very important.

So this is the worst financial crisis since the Great Depression. No way near the severity of the Great Depression. And I think the difference between that is a very important difference. And the idea that people are being preyed upon...

ROMANS: Right.

SWONK: ...like the Great Depression, is very important, too. We don't want to go there. Remember, that was a time when there were shantytowns, where people who didn't have homes ended up living in shantytowns and tents. 25 percent unemployment rates. And frankly, people who lived out production - worked at production lines could lose their job in a second and have someone replace them. That is not the world we're in today. We're in a global world, where now everybody in the rest of the world understands that they need us even more than we need them. And all of our oars are now in the water.

ROMANS: Right.

SWONK: We're all in the same boat. We're going to reach land.

ROMANS: Let's listen to what Treasury Secretary Paulson had to say Friday about this crisis and about what they're trying to do about it. And Mark, I want to get your response.

(BEGIN VIDEO CLIP)

HENRY PAULSON, TREASURY SECRETARY: This is what we need to do, because for some time, we've been saying that the root cause of the problems in our economy and our financial system is housing. And until we get stability in the housing market, we are not going to get stability in our financial markets. We worked with Congress on a number of steps, all of which were important leading up to this. But this is the way we stabilize the system and get it through at cost.

(END VIDEO CLIP)

ROMANS: So the housing market, it's all about the housing market here. And we're still seeing - you can't get a home loan in many places. You are still seeing that kind of seized up. And we know that housing prices are still falling. Until they stop falling, can we turn anything around?

ZANDI: No, I think that is the root cause. Prices are down 20 percent from where they were two years ago. They're going to continue to decline, but I think by these kinds of actions that are being taken by the government, it's not just the setting up an entity by a mortgage loans and mortgage securities, all the different things that they're doing. I think it's going to put a floor under prices. So I think that's very, very positive.

VELSHI: All right, we got a lot more to discuss. Mark Zandi, thank you for joining us. We appreciate that. Louis Barajas and Diane Swonk, hang on, because we're going to come back with some more ideas and some questions for you. ROMANS: All right. Thousands of Lehman Brothers employees cleared out their desks this week. Their jobs are now in the dust bin. With another half a million jobs lost this year. Find out how safe your own job is when this emergency edition of YOUR MONEY comes right back.

(COMMERCIAL BREAK)

VELSHI: This is a special emergency edition of YOUR MONEY. Forget the stock market for a moment. For most folks, the economy comes down to whether or not you have a job.

As you can see, unemployment is on the rise. At 6.1 percent, the unemployment rate has hit its highest level in nearly five years. And while that is alarming, it doesn't begin to tell the whole picture. More troubling, 605,000 jobs lost through August. That's an average of 76,000 jobs lost each month. Economists say we need to create at least 100,000 jobs each month just to keep up with the new folks entering the workforce. So essentially to break even, we need to have created 800,000 jobs so far this year. And instead, we've lost more than 600,000.

ROMANS: Sounds like impossible math to many families. With the economy in crisis mode, how much worse will the employment picture get? For the answers, we turn back to our all-star panel. Steven Leeb, president of Leeb Capital Management; Diane Swonk, chief economist with Mesirow Financial; and Louis Barajas, personal wealth adviser.

Let's bring in Steven Leeb here first. The job is such an important part of this.This whole crisis started with toxic mortgages that sort of imploded in the housing market. And now we're seeing another track here. We're seeing jobless rate creep higher. Now this is the second shoe to drop.

STEVE LEEB, PRES., LEEB CAPITAL MANAGEMENT: Well, it is, Christine. And it probably will continue to creep up. I mean, unfortunately, unemployment tends to be a lagging indicator. So before -- after the economy really does make bottom, it's still likely that unemployment rate will continue to rise. So I don't think that it's going to get better next month or even the month after, but it will get better. I mean, make no mistake what the government has done will sow the seeds for I think a very, very sharp recovery.

VELSHI: Diane, let's talk about this. In order for people to feel wealthy, and to bring this economy to recovery, something has to improve. Either the value of their house has to improve, of they have to see their retirement nest egg improving, or there have to see their salary improving, which means more jobs. Can any one of these on its own start to help confidence? And which one is likely to come first?

SWONK: Well, it's already, we know the one that comes first is, of course, the financial markets. And what's happening this week with the turnaround and a plan on whether it works - whether the plan, however sound it is, and whatever changes come down the road, it has changed perceptions. I think it is important to note that the economy, unfortunately, will get worse before it gets better. We're set up very poorly going into the holiday season. And you know, even consumers who have jobs are seeing their wages squeezed, because, in fact, they're not getting the overtime they once did. Or if they're in the service sector, not getting the tips or bonuses that they once did. So even if they have a job, they're feeling left behind and pinched by high prices at the pump and what's going to be a very hard fourth quarter.

I will reiterate what was said earlier is that we now have sown some seeds for a much better 2009. And there is a light at the end of the tunnel. And it's no longer a train.

ROMANS: Louis, let me ask you. I mean, we're hearing some forecasts for a tough end of the year. Maybe things turn around next year. That is the big hope. If you're one of those people sitting there right now worried about their job, or worried and living paycheck to paycheck, what do you do first?

BARAJAS: You need to take personal responsibilities. You know, right now, everybody's pointing fingers at each other. The Democrats and Republicans, the government, the economic institutions. We have to remember that this is about people. And people aren't sleeping at night. People aren't eating well. People are very nervous.

You need to take personal responsibility. Forget about everybody else. You need to sacrifice a little bit and change your priorities. Start saving, putting some money away, because if you know that you may be losing your job, you need some emergency reserves. And put the money in the bank. The banks are safe. Start saving some money. Start cutting back.

What's going to have to happen is people are going to have to decide that I can't count on anybody else, but I'm going to have to take responsibility. So put some money away. Make sure that your financial -- your personal financial house is in order.

ROMANS: Louis, I mean, people have been asking us, I mean, people who work here, people in our family, our friends, people on the street have been asking us what we think. And what I kind of keep saying to people is you have to, you know, pay yourself first, you have to be saving money, you have to make sure that you don't have an onerous debt load, you have to be living within your means, and teaching your children to live within your means. I mean, this is a giant wake-up call that overindulgence just isn't going to do it, because we're really stretched right now.

BARAJAS: Yes, it's not even a wake-up call. The wake-up call happened a long time ago. We've gotten ourselves into this mess because of us, the stuff that we've done. We've borrowed, we've purchased homes we can't afford hoping that things will change. People have lent us money that they knew we couldn't pay back. And that's what I want people to understand. It is about us.

You know, basically, the common sense that you just talked about. Save money, pay yourself first. Who doesn't know about this? But the problem, we forget. We forget and so we're in a very materialistic society right now. We're still spending. I was at Nordstroms the other day. Boy, I'll tell you what, the shoes were flying. The women's shoe section was just, you know, it was a mad house. People are spending money. And it seems I was looking around and saying what recession? You know...

ROMANS: Right.

BARAJAS: ...what bad economy?

ROMANS: Well, I always say, the United States of America and our consumers do the mathematically impossible. We have a negative savings rate.

VELSHI: Savings rate.

ROMANS: A negative savings rate.

SWONK: Yes.

ROMANS: And you know, Alan Greenspan has said before, you know, not recently...

VELSHI: Yes.

ROMANS: But before he had said that no civilization has survived on earth has every survived by not putting provisions away for the future. We are a civilization that has not put things away for the future.

VELSHI: We are not. We have a lot more to discuss obviously.

BARAJAS: Absolutely.

VELSHI: So next on this emergency edition of YOUR MONEY, no matter who wins the election in November, the next president is going to inherit a financial crisis. How will the candidates save your money? We're going to put their plans to the test. Coming up next on YOUR MONEY.

(COMMERCIAL BREAK)

ROMANS: Alan Greenspan calls it a once in a century financial crisis. Two storied investment banks, first Bear Stearns and now Lehman Brothers, implode. Merrill Lynch was buying banks a year ago. Now it's being bought. And insurance giant AIG needed a federal bailout.

(BEGIN VIDEOTAPE)

ROMANS (voice-over): One of these teams inherits a Wall Street crisis. Each candidate at the top of the ticket says he's the man to fix it.

BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: We've had policies that have shredded consumer protections, that have loosened oversight and regulation, and encouraged outside bonuses to CEOS, while ignoring middle class Americans. The result is the most serious financial crisis since the Great Depression.

ROMANS: Barack Obama pushed his outsider credentials, merging his usual criticism of Washington with Wall Street. John McCain praised the Fed and Treasury for not bailing out Lehman Brothers.

JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: The McCain-Palin administration will replace the outdated, patchwork quilt of regulatory oversight and bring transparency and accountability to Wall Street. We will bring transparency and accountability. And we will reform the regulatory bodies of government.

(CHEERING)

ROMANS: No matter how detailed their dueling economic plan, the next president will have to do some old-fashioned firefighting first. Daniel Clifton analyzes Washington for Wall Street.

DANIEL CLIFTON, STRATEGAS RESEARCH PARTNERS: We believe that this is a defining moment in the campaign. This is a crisis. And in crisis, leadership rises to the top. So both candidates have the challenge of being able to one, be a leader in a time of crisis. But two, fashion a response that's going to make the American voter feel comfortable.

ROMANS: And at the core, the difference in the candidates' approach to fixing the problem. How much government involvement is enough? How much is too much? A non partisan think tank breaks down the choices this way.

ROBERT KUTTNER, DEMOS: There are two parts to how you fix this financial crisis. One is that you recapitalize a lot of these financial institutions, pump money into them. The other is that you regulate it, so it doesn't happen all over again.

(END VIDEOTAPE)

ROMANS: Now both candidates have sharply criticized regulators. Barack Obama blamed eight years of Republican policies. John McCain said he if werepresident, this would never happen again. And late in the week, they're both starting to really, really fine tune and articulate what their response is going to be.

VELSHI: Well, can either of these candidates really make a difference in fixing the economy? We're joined again by our all-star panel. Steven Leeb, president of Leeb Capital Management; Diane Swonk, chief economist with Mesirow Financial; and Louis Barajas, a personal wealth adviser.

Diane, let's ask you. What are the things in the economy that are broken? And you can choose any off of that list that the president can have an impact on?

ROMANS: Just the top three.

VELSHI: Yes, what can they do?

SWONK: Well, you know, actually in reality, they are dealt a hand that's already been dealt. They are not going to be able to do a lot, except react to what has already happened. And even there, very limited in their ability to maneuver.

What we saw this week was a non-partisan response, a bipartisan but non-partisan response to the crisis at hand. And a lot of people throughout their partisanship and said, listen, we've just got to roll up our sleeves and come up with a solution. We'll deal with the repercussions of that solution later on, but we need a solution.

And that's the same kind of mode the next president's going to be asked to be dealing with. And I think at the top of the list, I mean, with all of these issues out there, the top of the list is going to be the reality of you can throw out whatever pandering that either both sides want to say on taxes, on stimulus, and whatever. The reality of budget, on deficit reduction, the politics of that, is going to it be the hardest thing the next president faces.

VELSHI: Remarkably difficult discussion to have.

ROMANS: It really is.

VELSHI: It's not sexy at all. It's not - it's hardly on the table...

ROMANS: Yes.

VELSHI: ...for all the things that we discussed, Steven?

LEEB: I want to make a distinction. There's two types of problems in this world. There are problems that can be solved by money. And this is the biggest problem that we've ever had that can, emphasize can, be solved by money. It's always been a question, are we willing to put up as much as we need? And the Secretary of theTreasury and the Federal Reserve chairman said yes. Whatever this economy needs, we will put it up and we will solve this problem.

But there are also problems that cannot be solved by money. And I fear that we may lose track of those problems. Some of them include resources. I mean, we've sort of gone on to the back burner right now.

VELSHI: The energy discussion.

LEEB: The energy discussion. Oil under $100, shut down a lot of projects that otherwise would have been there. Once this economy gets going, you're still going to be faced with the fact...

ROMANS: Still too expensive.

LEEB: ...that 2.5 percent of the Chinese have cars and they all want cars.

ROMANS: Right.

LEEB: You're going to be faced with the fact that Iran, by early part of next decade, will be an oil importer. From whom? We really are going to be constantly faced with this choice between growth and inflation in this world.

Now one thing I really take solace from, and I feel so good about this in this crisis, is that for the first time in my memory, we've seen Democrats, Republicans, everybody come together in a non-partisan way, thank goodness, because we're going to need a lot more of that going forward.

VELSHI: Right.

ROMANS: You know, let me tell you by looking back at the last time we had presidential elections conditions even remotely like this, that is 1932 and Franklin Delanor Roosevelt. And he had a motto then. And it was bold persistent experimentation. John Gear at Vanderbilt University...

VELSHI: Right.

ROMANS: ...was telling me about this. And at that time, what was considered a selling point for him, was that he was going to switch course. He was going to change. He was going to be flexible. If it didn't work, he was going to bail out and try something else.

Now that's called flip-flopping.

VELSHI: That's right.

ROMANS: Now we have - that's being inconsistent, and that's something that gets you, you know, the fact squad comes after you.

VELSHI: Let's ask Louis Barajas. Louis, if the president can only do so much, then as voters, when we hear these two candidates coming out and saying I'm going to do this about the financial situation, or I'm going fix that, what -- how do we make a decision?

BARAJAS: Well, you make a decision based on what we just heard. You know, on different policies, the economic policies, their health policies, policies just about how they see the world, and the international markets. It's just not about this. We have to gain perspective.

You know, money's to be used to live a better life. That's all the purpose money is for. And so the problem is that we've lost perspective. And everything's focused on money. And we've forgotten about all the other things that we need to take care of in the U.S.

ROMANS: All right, Louis Barajas, Steven Leeb, and Diane Swonk, thanks everybody.

Coming up, the Federal Reserve bailed out insurance giant AIG, but is the government doing enough to protect you and your money?

VELSHI: Well, we'll find out about that in a moment.Join us with what you need to know about that on this emergency edition of YOUR MONEY.

(COMMERCIAL BREAK) VELSHI: This is an emergency edition of YOUR MONEY. Many economists say it's the most serious economic crisis that this country has faced since the Great Depression.

ROMANS: But there are several very important differences between what happened then and what we're seeing right now.

CNN's Mary Snow reports.

(BEGIN VIDEOTAPE)

MARY SNOW, CNN CORRESPONDENT (voice-over): As the Federal Reserve pumped billions of dollars into the banking system to restore confidence in the markets, President Bush moved to calm fears.

GEORGE W. BUSH: The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence.

SNOW: Economists say this is the worst financial crisis since the Great Depression, but with the distinction.

JAY ROSENGARD, HARVARD UNIVERSITY: I think a significant difference is that the government has learned from its failures in the Great Depression, and has been much more proactive. And we do have stabilizers that we did not have before.

SNOW: Case in point, the government's unprecedented bailout of insurance giant AIG. Another big difference, the economy. Despite its problems, the current unemployment rate stands at 6.1 percent.

BOB MCTEER, FMR. PRES. FEDERAL RESERVE BANK OF DALLAS: In the Depression, you know, there was much more spillover into the real economy. And you had 25 percent unemployment at the height of it.

SNOW: But this financial crisis, say economists, hits at a vulnerable time with housing prices falling, with banks tightening lending, it affects consumers ability to get loans. And some economist say to stop the bleeding, new regulations are needed for Wall Street firms.

JEFFREY SACHS, ECONOMIST, COLUMBIA UNIVERSITY: The way to stop this from happening is through proper regulation in the first place, through looking at bubbles and saying, no, you're not going that way. To looking at bonuses of tens of billions of dollars and saying, what are you doing? You can't afford that.

SNOW: New York Mayor Michael Bloomberg, a Wall Street veteran, has been critical of too much regulation in the past, suggests some oversight agencies are out of date and says the real world has changed.

MICHAEL BLOOMBERG, MAYOR, NEW YORK: I don't know that the regulators are asleep at the switch. I just think the structure is not suitable for the real world.

SNOW (on camera): While a host of ideas are being offered, some market watchers say that a law separating commercial and investment banking should be brought back. It was created after the Great Depression, but it was scrapped in 1999.

Mary Snow, CNN, New York.

(END VIDEOTAPE)

VELSHI: Although the news of bank closing is a simple question, how do you protect your money? We're joined by another economic brain trust. Andy Serwer is the managing editor of "Fortune" and co-author of this week's cover story in "TIME". Stephen Leeb is the president of Leeb Capital Management. And Greg McBride joins us, too. He's a senior financial analyst with Bankrate.com.

Greg, welcome to the show. Gentlemen, welcome to the show.

Greg, listen, question we're getting from all sorts of people about the security of their investments. You're in the business at Bankrate of...

ROMANS: Right.

VELSHI: ...of telling people where good investments are and where good interest rates are, but they're worried about the safety of them. Bank accounts, CDs and money markets?

GREG MCBRIDE, BANKRATE.COM: Well, you know, and that's one of the things that I think the government's really working to put to rest, a lot of those fears. They're shoring up the money market, mutual fund system so that there's not further exodus of money from those investments and further concern about other funds breaking the buck.

FDIC bank insured accounts, I mean, if you have money that's fully covered by FDIC insurance, you can sleep soundly at night. That money is protected. In particular, everybody needs that emergency savings account. A bank saving's account or high yield money market deposit account, that's the place to be. It's FDIC insured. And if you're seeking out the highest yields, you're going to get returns that are north of 3.5 percent. That's better than what you're getting on...

VELSHI: Greg, a high-yield money market account, that's not what the government said that they're insuring this week. That's not - that's different.

MCBRIDE: That's correct There's an important difference is that this money market deposit account it's a bank product. It's FDIC insured. So you have no downside risk as long as you're under that $100,000 limit. And the upside is the highest yielding money market deposit accounts beat the money market mutual funds. So there's some additional yield pick up, which is important with inflation as high as it is right now.

ROMANS: I think the number one thing everyone is talking about right now is just protecting what they've got. I mean, they're looking at their 401(K)s, if they've got them, and they're seeing - I mean, the Dow is off 25 percent from its high. I mean, it's incredible how much wealth has been erased in people's retirements. That is a real problem. I want to the listen to something the president said on Friday, because the president said he wants to really address the root of all of this.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We must address the root cause behind much of the instability in our markets. Mortgage assets that have lost value during the housing decline, and are now restricting the flow of credit. America's economy is facing unprecedented challenges. And we are responding with unprecedented action.

(END VIDEO CLIP)

ROMANS: Boy, Andy, this is unprecedented. I mean, he used the word several times.

ANDY SERWER, MANAGING EDITOR, FORTUNE: Yes.

ROMANS: And you can't overstate it.

SERWER: Well, I think the money market thing is the kind of real key for investment. I mean, the stock market we saw go way down, it came way back. I mean, that's just what happens with stocks. Right? Breaking the buck in the money market fund is really amazing. And for...

ROMANS: Well, tell people what that means exactly.

SERWER: Well for years, well with our price at $1, it owns a lot of short-term securities. And it's always sort of calibrated so it's worth $1. And if it falls less than that, that happens when people seek redemptions. So they have to sell it. And they sell at a loss. That is a huge problem.

But the key thing here is that for years, we've been told oh, it's pretty much just a safe as a government insured account. But you get an extra, you know, percentage point of yield. It's a free lunch.

Well, guess what? It's not a free lunch. Now it's going to get bailed out. So you pay more as a taxpayer - you might pay more in taxes. So it all sort of evens out in the wash over 20 years.

LEEB: I think what's really unique here, Christine and Ali, is that it's not just the stock market that's going down. We've been through a lot of stock market cycles. Most recently in 2000. 2000 to 2002. I mean, the tech stocks lost 80 percent. How many people had money in techs? I don't know anyone that didn't.

VELSHI: Except Warren Buffett.

LEEB: Except Warren Buffett, yes, that's about it.

But this combination of home prices going down with stock prices going down and people now asking the question, is my money safe in a bank, in a money market fund? I mean, you don't want to have people asking that question. I mean, that's sort of a sign of how serious the crisis is. It's like a pilot telling you, well, we have plenty of gas in the plane. Huh? Haven't thought about it.

(CROSSTALK)

LEEB: I mean, yes, wow.

SERWER: And you hear people asking, you know, how does FDIC insurance really work? Someone asked me that and I said well, what do you mean? And they said well, I got $100,000 in it. I said, yes, that's right. And they said but what if my wife and I both have accounts? So you're having people actually asking about the mechanics of it.

VELSHI: Right.

SERWER: And I believe if you're a couple, you can have $300,000 (INAUDIBLE).

ROMANS: You know what, Greg, Greg -- I asked Greg about this the other day, because I was really curious about it. A lot of people have been asking the same thing, Greg, about the idea. How much of your money is safe in one account?

MCBRIDE: This is -- it's up to 100,000 in one account, but you're insured on a per depositor, per account basis.

VELSHI: Right.

MCBRIDE: Here's what I mean by that. If you're an individual, and you have a checking account, a savings account in a money market deposit account, and you have more than $100,000 across those three accounts, you're not fully covered. You're only covered up to $100,000.

ROMANS: This is, of course, a good problem...

MCBRIDE: So what do you do?

ROMANS: ...to have.

VELSHI: That's true.

ROMANS: Many people in America are not having this problem. They're having a problem actually paying their debt.

VELSHI: Right, their mortgage.

SERWER: But if you're, you know, you do have a bunch of money saved if you've been working your whole life, you might be...

ROMANS: That's absolutely right.

VELSHI: All right, we're going to take a break. Coming up, think you got a raise last year? Well, think again. We'll explain why you're actually making less than you were a year ago, next on YOUR MONEY. (COMMERCIAL BREAK)

VELSHI: Well, salaries are up more than 3 percent in the last year. And on the surface, that's seems like good news. There's a little bit of a problem, though. Your money's worth less because of inflation, which is currently running at 5.4 percent annually.

The bottom line is the things you buy on a daily basis like food and gas are up way more than that. Gas prices up more than ten times as quickly as salaries over the last year. And don't worry about the fact that you think oil is down a lot lower. Gas prices are still pretty high. Household energy costs have jumped almost six times as much as salaries. And read all of what the government calls food at home. Those prices are up 7.5 percent.

ROMANS: So when will we start making some money again? Well, surprise, surprise, are there ways to be making money right now?

We're joined again by Andy Serwer, managing editor of "Fortune;" Stephen Leeb, president Leeb Capital Management; and Greg McBride, senior financial analyst with Bankrate.com.

I want to go back to you first, Greg. This is -- if your wages and what you're bringing home, are going up so slowly but the cost of everything else is going up so much more quickly, what exactly is someone to do?

MCBRIDE: Well, this is a time where it's -- you don't want to be dependent on borrowed money. This is a time where if you have a liquid savings cushion, it's really going to make all the difference and help you sleep better at night.

If you don't have that savings cushion, or what you have is not sufficient, this is the time to make some tough decisions with regard to spending. Cut back so that you can put some money away. Nothing you do financially will help you sleep better at night than knowing you have some money put away.

VELSHI: Right, and people have been calling and e-mailing us, and asking about this is what they tell me I should do. I hear experts on TV saying I should stay invested but really, I can't sleep at night doing this. Well, I guess, Stephen, if you can't sleep at night with your investments, that's a very key sign you need to change things around, no matter how much sense it makes.

LEEB: No, you definitely have to change things around. And we really have to wake up and realize we're not in Kansas anymore, that this is an entirely different world. Now I don't want to sound too controversial here, and I don't want to, you know, be giving advice.

ROMANS: Oh, come on.

LEEB: No, well, you know, there's one investment that has done well during this turbulent times. And these are turbulent times. I'm not talking about the next six months. And that's gold and precious metals. They do do fairly well, no matter -- during the Depression, Newmont went up tenfold. During the 1970s, and I fear that's what we're going to end up back, gold was a wonderful investment. Now I'm not telling people...

SERWER: A gold book here.

LEEB: No, I'm not. I mean, no, no, before you get the wrong idea, I mean the last thing I want to give people the impression that I want them to go out and put 100 percent of their money into gold.

But in terms of sleeping well at night, gold's been around for 3,000 or 4,000 years. If you want to buy one or two gold coins, I think it makes sort of sense to put those under your pillow at this point.

Now that doesn't mean you swear off stocks. It doesn't mean you swear off money market funds, but it means you take a cold look at history and say, what does well when things really get turbulent? Either turbulent deflation, turbulent inflation. And that does tend to be precious metals. That's just a historical fact, Ali.

ROMANS: A couple of days this week - a couple of record days for gold this week, because apparently people were so spooked about stocks, that they were taking, you know, clearly taking...

VELSHI: That's the explanation why oil went up this week, because people were looking for something other than stocks to invest in. So there's a real spook factor here with the average retail investor and with Wall Street. People are scared.

SERWER: I think things are going to change, you guys. I mean, our society is going to look different because of this. And maybe those high falutin jobs on Wall Street, you know, young people making $200,000 a year at Morgan Stanley going to Kinkos and xeroxing things, maybe that's going to go away. And maybe carrying, you know, $40,000 on your credit card if you're 25 years old, and rolling it over every month at 8 percent, you know, that's probably going to get jacked to the moon. These things are going to change, I think.

LEEB: But you know what may happen, may also change, is these blue collar jobs, these people that come out of these trade schools, they may find themselves in tremendous demand. We're going to need oil rigs. We're going to need people to drive trucks up in the Tarzans. These aren't easy jobs.

SERWER: And dig up that gold for you.

LEEB: And dig up - well, forget about that. I mean, gold is just go to sleep at night and not worry. But I mean, to get this world running, we're going need all the natural resources we can possibly find. Even if we're going to put up windmills, we're going to need steelworkers to put up those turbines. We're going to need steel.

VELSHI: Yes.

LEEB: We're going to have to find those resources. And I'm betting on skilled blue collar workers. Don't tell your children to grow up to be investment bankers. Tell them to grow up to be... (CROSSTALK)

SERWER: We're all going to have to learn how to garden. No child born this week, I'll tell you, is having their parents tell them they need to grow up to be an investment banker.

ROMANS: That's absolutely right. All right, coming up, we've assembled a CNN money team to talk about where we go from here. Something you did not know about the Wall Street crisis, next on the emergency edition of YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: Well, certainly a week to remember from Wall Street. And our CNN money team was there to follow it all.

ROMANS: For a reporter's perspective on a historic week, we turn now to Jennifer Westhoven, Susan Lisovicz from the New York Stock Exchange, and Poppy Harlow from CNNmoney.com.

Poppy, first let me ask you. What were the stories that were the most, I guess, popular on CNN.com this week?

POPPY HARLOW, CNNMONEY.COM: Yes, on CNNmoney.com, it was just amazing to see the headlines for the market stories. Monday, we see stocks just pummeled. That's the top story. Dow, worst day in seven years, down more than 500 points. Tuesday, Fed holds interest rates steady, the top story. Stocks rise on Fed. Keep going on to Wednesday. We see another thrashing for stocks. Dow down 449 points. Then on Thursday, we saw a wild rally at the finish. I mean, look at this. Down up, down up literally this week.

And then what was really nice, what a lot of people turned to was an inside look at Lehman Brothers. It was Lehman's dying hours by "Fortune" magazine's managing editor Andy Serwer. He knows Lehman inside and out. He was outside of those headquarters on Sunday night taking a look at the employees walking out with boxes and giving everyone, all of our readers, an inside look at exactly what was unwinding and what everyone was going to be talking about on Monday. Christine?

VELSHI: Hey, Susan, you and I got to spend some time together like we used to do in the old days at the New York Stock Exchange. Christine used to be there, and Jennifer's worked there. We've all worked...

ROMANS: We've all spent our time down at the NYSC.

SUSAN LISOVICZ: We all have the scars to prove it.

ROMANS: That's right, that's right.

VELSHI: This was almost like the old times. To see big moves like that at the New York Stock Exchange?

LISOVICZ: Well, you know, let me just tell you this. Early in the week, I had to remind myself what were the circuit breakers? The actual point sell-off for the New York Stock Exchange to stop trading. That's how anxious things were.

And by the way, it's a 1200 point decline for the Dow Jones Industrial Average to have some sort of halt in trading.

ROMANS: And we never got near that. I mean people throwing around words you know, like panic...

LISOVICZ: Never got near that. Never got near that, but the magnitude of events and the type of atmosphere prompted me to find out, to remind myself, to refresh my memory.

At the end of the week, I refreshed my memory on the biggest point gain for the Dow Jones Industrial Average ever. And that was about close to 500 points at the top of the market in March of 2000.

VELSHI: That was before the tech bubble burst.

ROMANS: Right.

LISOVICZ: Exactly, that's the kind of week all compressed into five trading days it's been.

ROMANS: You know, Jennifer, we all talk about the back stories. You know, people ask us...

LISOVICZ: Yes.

ROMANS: You know, well, OK, so I saw your report, but you know, what are you telling your friends? Or what are you telling your family? I mean, what's your back story on all this?

JENNIFER WESTHOVEN, CNN CORRESPONDENT: I just think that I would really like to know what the heck Treasury Secretary Paulson said to all those people in that room that scared them enough to line right up shoulder to shoulder and come right out and say OK, we all agree, we're all going to do it.

And so, I - you know, I heard that he can be a very intimidating guy. He's certainly a very tall guy. And I just really wonder what kind of nightmare scenario he talked to them about

Because you hear all this what would have happened if we didn't do something? What would have happened if the Treasury program didn't do this?

VELSHI: Right.

WESTHOVEN: You know, he laid out.

ROMANS: A book will be written. A book will be written.

VELSHI: I'd love to know what happened...

ROMANS: Yes.

VELSHI: ...in that meeting and what kind of negotiations. Because ha has come across as a bit of a deal maker...

ROMANS: Yes.

VELSHI: ...in the last several months. He's been able to accomplish that.

Poppy, you have been able, to -- one of the things we've been telling our viewers who are particularly watching this emergency edition of YOUR MONEY, is that money.com has a lot of the tools that people are worrying about this week. The questions we've been getting, and you might have been getting similar ones via e-mail or on the site, what do I do with my money? Is my money safe? Is my money safe in a bank account? Is my money safe in a money market or a CD? What's going to happen to my bank? And that information is all there on the site.

HARLOW: It's all there on the site. I mean, I read you the headlines on our site, but there's a whole part of our site dedicated to what do I do with my 401(K)? What do I do with my investment? Where does my money stand? And why do I care if I'm not a Wall Street insider? Why do I care?

I can tell you I was so impressed with our writers and everyone on the video team all week going through breaking all those things down. And it's still a concern going into next week and ahead. So all those tools are on our site that you're going to need for that. But a big focus, that's what people were e-mailing us and asking us about on our site. What does this mean to me and my savings?

VELSHI: All right, Poppy Harlow of money.com, you stay with us. Jennifer Westhoven and Susan Lisovicz, we're going to continue on with our CNN money team.

ROMANS: Right. Don't move. Our CNN money team weighs in on what's on the horizon for the American economy. Our emergency edition of YOUR MONEY is back in a moment.

But first "Right on your Money."

(BEGIN VIDEOTAPE)

ERIC TYSON, CO-AUTHOR, HOME BUYING FOR DUMMIES": It's attractive to people to be able to look at terrific properties and get them way below market value, possibly even flip the property and make a quick profit.

UNIDENTIFIED FEMALE (voice-over): Simple, right? Not so fast, says real estate expert Eric Tyson. There's plenty that can go wrong with buying a foreclosed property.

TYSON: You really should be an experienced property buyer. This should probably be your fourth or fifth purchase at least.

UNIDENTIFIED FEMALE: He says your credit should be top notch as well. Lenders know foreclosures are risky. Unlike a conventional transaction, it can be hard to get access to a foreclosed property before the sale, which can lead to some ugly surprises. Damage or disrepair can turn a bargain into a money pit.

TYSON: Might move into a house and think everything looks OK. And it turns out that there's problems with electrical wiring or plumbing or things weren't done right the first time.

UNIDENTIFIED FEMALE: Tyson recommends you double what you expect to spend on repairs, then subtract that amount from your offer.

TYSON: Fix-up work, construction work almost always costs more, takes longer than what you think.

UNIDENTIFIED FEMALE: And be prepared to walk away. If a bidding war overheats, the price could climb near market value.

TYSON: There's just so many things that can go wrong. It's not worth, you know, what little money you might save.

UNIDENTIFIED FEMALE: And that's this week's "Right on your Money."

(COMMERCIAL BREAK)

VELSHI: Welcome back to this special edition of YOUR MONEY.

ROMANS: We're joined once again by Jennifer Westhoven, Susan Lisovicz from the New York Stock Exchange, and Poppy Harlow from CNNmoney.com. And we were just talking about what is the thing that you took away from this week, the back story, your back story from covering this story, but then also being a consumer and a saver. (INAUDIBLE).

VELSHI: (INAUDIBLE)

ROMANS: That's right.

VELSHI: We have to look through it.

ROMANS: That's right.

VELSHI: Poppy, what about you? What didn't happen on TV that you want to share with us this week?

HARLOW: You know, it's interesting. I was on the road for the first part of this week. Unexpectedly, all of this stuff breaking on Sunday night. And I called some of my friends that work at Lehman Brothers. And it was just the stories that they were telling me about packing up and the camaraderie at the firm and what people were saying, what they were looking to do.

You know, and the 25,000 jobs in jeopardy when we got that news. Some now may be saved if this deal goes through with Barclays. But still talking to them, and getting a real sense of how they feel, and how unexpected the collapse of Lehman Brothers was to the people that even work there. And just hearing from them what it's going to mean for all those employees as well. It's really tough out there for all of the shareholders as well, but it's affecting a lot of employees, too.

WESTHOVEN: Well, you know, one of the things that I got, I would almost call it back -- question as opposed to a story, and I don't know have an answer for it. I can't tell you the amount of e-mail I got of people with such a backlash against these CEOs. Some people said, you know...

ROMANS: Yes.

WESTHOVEN: ...it's fine to bail out this company, but what is going to happen to these CEOs? And I feel like the sad truth is I don't know that there's going to be an answer. I have yet to see a government really say how could you guys collect this money and then have the company in the tank the next year.

ROMANS: That's interesting, because a lot of people, you know, we get a lot of e-mails from people who are just so irritated by bailouts. Bailouts are so unpopular.

VELSHI: Yes. This one might be the biggest one ever.

ROMANS: And to talk about, you know, not bailing out irresponsible behavior, but isn't that why you have a bailout in the first place?

VELSHI: Is there a back story?

ROMANS: Sorry, I'm hogging -- but that, you had somebody with irresponsible somewhere, otherwise you wouldn't have a complete mess on Wall Street.

WESTHOVEN: Yes.

VELSHI: You totally failed the back story test.

Susan, what's your back story?

LISOVICZ: I think my back story is something that we all agree on, is that we're living through history. And to be in the front seat, to be talking to the public at such an historic time, unprecedented time with such fluid -- such a fluid situation, I thought for me the real situation, the real test was to try to maintain the right tone...

ROMANS: Right.

LISOVICZ: ...which is that people are fearful. And this involves our money after all.

VELSHI: Yes.

LISOVICZ: But the cavalry was coming. And to try not to talk it up any more than it is, and to remain calm.

VELSHI: Yes.

LISOVICZ: And you know, as journalists, you know, we are getting excited because this is just an incredible story that's unfolding second by second. But to remember to take a breath. After all...

VELSHI: Yes. LISOVICZ: ...that's what investors should do.

VELSHI: Yes, yes.

LISOVICZ: But as journalists to also step back, because you don't really have to put too many adjectives on the story.

VELSHI: That's exactly right, good advice.

ROMANS: It's so big.

VELSHI: And this is going to continue to be a huge story.

ROMANS: And we're going to continue to be talking about it. But the next hour is all about you.

VELSHI: That's right, pick up the phone, give us a call, and we will try and answer your questions about this economy and this crisis. The number 866-792-3399. Once again, call us now, 866-792-3399.

ROMANS: You can also talk to us on Twitter. You logon to twitter.com/issue1CNN. That's twitter.com/issue1CNN.

VELSHI: Your questions on this special emergency edition of YOUR MONEY just 90 seconds away. But first, the latest headlines right now from Don Lemon in the CNN NEWSROOM.

DON LEMON, CNN ANCHOR: All right. Thank you, guys. We'll get back to you, guys, in just a moment. I'm Don Lemon here at the CNN World Headquarters.

Here's what's happening right now.

That is chaos in Pakistan at a hotel packed with westerners an enormous suicide truck bombing. It happened just hours after Pakistan's new president promised to root out terrorism. That blast ripped right through the Marriott in Islamabad, killing at least 40 people, and wounding dozens of others. And we're told, one American is among the dead and another is reported wounded in that blast.

Two celebrity entertainers are listed in critical but stable condition tonight. They were in a chartered jet crash that killed four people. Former Blink 182 drummer, Travis Barker and club disc jockey, D.J. A.M, well, they had just performed a concert in Columbia, South Carolina. Their Lear jet crashed as it was taking off from the Columbia airport overnight. Barker and D.J. A.M. were the only survivors.

Don't blink, you might miss this when you want to pay attention to the whole thing. This was a practice run -- check it out -- by a racing boat in San Diego. We'll get that for you if we can. The boats can go so fast that they can catch air underneath and that can be disastrous to those boaters. The boat was going about 180 miles an hour when it went airborne -- there's that video. And you can see it just shatters into splintered as it hit the water. Incredibly, the driver was only slightly hurt. Well, if you've got $700 billion lying around, hope you do, because that's how much it's going to cost all of Americans to bail out Wall Street. Congress will hammer out the details next week.

In the meantime, we want to get you back now to New York. "YOUR MONEY: Emergency Edition", Ali Velshi and Christine Romans take it away, guys.

VELSHI: Don, thank you

CHRISTINE ROMANS, CNN HOST: Thank you, Don.

VELSHI: Well, we're coming back to this special live edition of "YOUR MONEY." This was an historic week on Wall Street, the ramifications of it so huge that we wanted to give you a change to speak out and be heard.

ROMANS: There are so many questions about what this means and what happens next. We've opened up the phone lines to you. We're taking your comments also on Twitter.com. The phone number is 866-792-3399. We're going to put that up for you. Also, the twitter address: Twitter.com/Issue1CNN.

VELSHI: We put together quite a panel this Saturday evening to help guide you through all of this.

ROMANS: Hilary Kramer is an AOL money coach. Doug Flynn is Flynn Zito Capital Management. And our very own Poppy Harlow is from CNNMoney.com.

I want to start with you, Hillary. As a money coach, people are asking you: what do I do now? How do I protect my money in this environment?

HILARY KRAMER, AOL MONEY COACH: OK. Well, the good news is, we hit bottom. We had what you call capitulation. The stock market, we will see that recover. Now, we're going to come back up from 20 percent- plus losses that we've seen.

However, the bigger problem is: unemployment and protecting your house of it's decreasing in value. But don't worry as much about the stock market now. That's past. It's a leading indicator.

VELSHI: All right. We want -- we're going to get to you, guys, a little bit, in a couple of minutes. I want to get to these phone calls and see what folks are saying.

UNIDENTIFIED FEMALE: Sure.

VELSHI: Let's go to Dallas first.

Kevin, you're on the line. Kevin, what can we do for you tonight?

KEVIN, CALLER FROM DALLAS: You touched on this a moment ago. Can you explain to those that are opposing the bailout what could happen if we do not do it? VELSHI: That's a good question.

KRAMER: Right, we almost had a run on the banks. I mean, I am opposed to the bailout. I feel on every level, this is about greed; this is about thieves that are -- that are actually blackmailing our government. But we had to do it because our banks almost went down. We almost had world financial crisis.

VELSHI: Did you get the impression, Doug, that if this hadn't happened or if there isn't some deal in the works, or for that matter, if this deal somehow doesn't get done, that we're in for more trouble in the stock market?

DOUG FLYNN, CERTIFIED FINANCIAL PLANNER: I think so, because there's a crisis of confidence, and that's what we've been hearing from our clients all week is just the, you know, how exactly -- where do we stand and why didn't people in government and otherwise know that this was coming and why didn't they do anything about it.

ROMANS: Right.

FLYNN: So, I think it's more of that.

ROMANS: And let's get right to the phones again.

Ellen in Sarasota -- Ellen, what's your question?

ELLEN, CALLER FROM SARASOTA: Yes, I really would like to know why isn't Lehman included in the federal bailout. When we're retiring, my husband is now 86, we purchased a $25,000 preferred bond from Lehman, and was told, you know, the safest chip, this is a safe investment.

VELSHI: Yes.

ELLEN: Now it seems to be worthless. But we really want to know why wasn't Lehman included; you know, it seems to be the only one that wasn't.

VELSHI: Poppy, let's talk about this for a second. One of the things, part of the reason we don't know what's included first of all because we don't have a -- we don't have a notice of what is going on here and we're expecting perhaps within the next 24 hours to get word of what this deal is. But, in many ways, it seems like Lehman Brothers and AIG and Bear Stearns, a few months ago, is what's prompted this to happen, this bailout. So they weren't included because there hasn't been a bailout until now.

POPPY HARLOW, CNNMONEY.COM: Yes, they weren't and they likely won't be. I think the big question here, unfortunately, for Lehman Brothers is there had to be a test of what happens when we do see one of these major banks and brokerages fail, and Lehman Brothers was ditched (ph). Bear Stearns, also, a lot of people say was more tied to the market. President Bush explained it today how all of these firms being intertwined.

And Bear Stearns, a lot of people say, was more connected to these other banks and so it would have been a greater risk of failing. So the Fed and JPMorgan came to Bear's rescue. But they had to see what would happen, I think, really, if a bank did fail. That happened to Lehman Brothers. They're brokerage, and part of their brokerage is being saved by Barclays. But still, they had to see -- what happened.

It's unfortunate for everyone at Lehman. It's unfortunate for everyone who had shares in Lehman and you had some money held at Lehman. But they had to see, I think.

VELSHI: And, Doug, this caller was talking about how they had bonds with Lehman. In fact, every one of us who has money markets or money market mutual funds probably had some connection to one of these major financial institutions because that's where the money market, that' where their money is.

FLYNN: Yes. And if you're in a regular and traditional money market mutual fund that's invested in commercial paper and not a government money market fund, perhaps, one of your funds owned some pieces of Lehman. I think you really had to not send a message that we're going to bail out every single organization that took unlimited amounts of risk at such a really bad precedent.

So, unfortunately, that one had to go. But this woman who invested in preferred stocks, you have to know the pecking order, preferred stocks, then, common stocks, and there is risk in all of that. So, that attractive yield she got for a couple of years sounded good but there was risk with that, and that's what she needs to understand.

UNIDENTIFIED FEMALE: Yes.

ROMANS: Let's take look at Twitter.com because we told you, we're taking questions in Twitter.com as well, and there's been a lot of questions about politics on Twitter. There's also been a lot of questions coming in from people about sort of, I guess, the morality of a big bailout. Will the $700 billion bailout -- this is from Itbasher -- will the $700 billion bailout now result in every home short sale and foreclosure being pulled off the market? Hillary?

KRAMER: OK. Well, this is what I'm waiting to find out. There must be, and this is the good news, some provisions in this new -- in this new entity the government is creating to take in these toxic mortgages that will protect those in foreclosure. There will be those provisions.

The problem is: for how long and will there be a new element agreed that takes in and will these mortgages eventually be sold off 20 cents on the dollar and someone is going to make a lot of money but it's not the homeowner.

VELSHI: But, if you think, if somebody is in the process of foreclosure or almost there and they missed their payments, are they going to get anything out of this deal?

KRAMER: They very well may. There will be provisions in the $700 billion. They can't just start buying bad mortgages from the banks but they're not protecting those underlying mortgages that are in foreclosure, which is the cause of this whole problem.

VELSHI: All right. We're going to take a break. We're getting started, though. We've got a lot of time to answer your questions. The phone number: 866-792-3399. The phone lines are open. The Twitter address is Twitter.com/issue1CNN.

(COMMERCIAL BREAK)

ROMANS: A real unique opportunity right now to ask your personal finance questions, your questions about this bailout, your questions about your retirement, your home, your money. Hillary Kramer is an AOL money coach; Doug Flynn is from Flynn Zito Capital Management; and Poppy Harlow is from CNNMoney.com. The number is 866-792-3399.

VELSHI: Let's go to Jerry in San Marcos, California. Jerry, you're on the phone. What can we do for you?

JERRY, CALLER FROM SAN MARCOS, CALIFORNIA: Hi, Ali. Do you think this is a good time to buy AIG stock?

VELSHI: Wow, let's take that one to Doug Flynn.

Doug, you managed a lot of money for people in the stock market. Good time to buy AIG stock or for that matter, any distressed stock, the stock of a company that has got serious trouble?

FLYNN: Well, it gets back to where does this fit into your overall portfolio. If you're talking about speculating and gambling, then that's just what you're doing, and if you want to throw a few thousand dollars at that, I often say it's...

ROMANS: Of risk capital.

FLYNN: Yes, exactly.

VELSHI: Not your house, your money or your retirement.

ROMANS: Retirement.

FLYNN: No, your retirement money, your savings for your kids, you don't mess around with that. But if you want to fool around with a few thousand dollars that you can afford to lose you might still be better off going to Vegas and blowing it there. But if you choose to do that, this is certainly one of the ways you can do. You can make a lot of money but you might, it might not work.

ROMANS: Myspacedd wanted to know the same thing. You know, will AIG stocks fully recover over time. You know, so, it's not just hearing them (ph). (INAUDIBLE) people are asking about AIG.

KRAMER: Right. But it doesn't really make sense to be looking at AIG when you have very stable companies, especially utilities. Utility averages off more than 20 percent this year. You can buy into those. Those stocks came off because they're very tied into banks. They need financing.

ROMANS: Right.

KRAMER: So every company out there came down.

VELSHI: But in fairness, the person was asking about AIG stock, it's not the same person looking to buy utility stock. There's a real gambling mentality out there when things are -- the chips are falling, it's all going nuts.

Doug, one thing I've told people is that there are mutual funds that do this for a living. Is that a better bet to go into one of these mutual funds where people buy distressed stocks and take these chances but at least they do it every day all the time?

FLYNN: It's usually a better bet in the long run but it's not as fun. And see, people just, they want to get in there. And we had this one, Enron and WorldCom...

VELSHI: Right.

FLYNN: People call up and say, the thing is trading at 25 cents. How can it go out? I don't understand. It has to go up. There's still going to be a company there afterwards. And the fact is, they could completely implode that stock to zero and come out with AIG part two, and move on from there.

VELSHI: Right.

FLYNN: So you have to be very careful with things like this.

HARLOW: Also, I think, when you look at AIG now, and Ali explained this well to a lot of us this week, is that the deal with AIG, that's a government loan. It's an $85 billion loan with an incredibly high interest rate. So...

VELSHI: Eleven percent.

HARLOW: Yes, exactly, that's unbelievable. So you have to factor that in, too.

VELSHI: (INAUDIBLE) the company is not saved with an 11 percent loan for that kind of money.

HARLOW: Yes.

ROMANS: We're going to the call (ph) on the phone again, Dorothy in Washington, Pennsylvania. Dorothy, what's your question?

DOROTHY, CALLER FROM WASHINGTON, PENNSYLVANIA: Is it time to purchase a rental property?

VELSHI: That's a good question.

ROMANS: Is it a good time to purchase a rental property?

KRAMER: It very well could be, especially because more people will be renting. There are opportunities there, but I am a believer that we haven't even begun to see the fall in the housing market in terms of values. This is the equivalent of thinking that, you know, we're down 10 or 15 percent and we can't go any further down. Think about how we quadrupled real estate over a 20-year period. We can see real estate go down 50 percent or 60 percent from here.

So, yes, it's a great time but make sure you understand you have enough time to hold this for the long run.

ROMANS: What if Dorothy is buying this for her son or her grandson. She knows the person she's running to. There are a lot of people out there, maybe older people who have money set aside, who are looking to help out the younger generation, if it's a family situation. Maybe this is a good time.

KRAMER: Then, absolutely. It's great. It's always a good time to buy real estate if it's for the right reasons, which is long-term...

VELSHI: Right.

ROMANS: And have vacation (ph).

KRAMER: And having a place to live or as you just pointed out, Christine, for your family to live.

VELSHI: A fixed mortgage, a fixed rate mortgage -- have we learned that lesson?

KRAMER: Yes. A fixed rate, 30-year fixed mortgage. Do you that 30- year...

ROMANS: Thirty-year fixed rate mortgage.

KRAMER: Yes.

FLYNN: But it comes down to the deal, too. You have to look at the underlying numbers, does it set positive cash flow, is this appropriately priced, you know, just because, maybe...

VELSHI: Will you make more from the rent -- substantially more from the rent than your expenses and mortgage.

FLYNN: Yes. That's right. In general, is it a good time? Sure. But you still -- it comes down to the deal. You don't want to overpay. You can still that happen in this environment.

ROMANS: Can she get a mortgage now, I wonder? I mean, can she go out tomorrow and get a mortgage, or are things so frozen up that it might be trouble?

KRAMER: It defends on her credit rating.

ROMANS: Right.

KRAMER: If she has enough assets underlying it but it's gotten to the point where if you're a small business owner, even a large business owner, you can't just go out there and get a mortgage like you used to.

VELSHI: Well, we have a question on rates, I think, from Nancy in Wilmington, Delaware.

Nancy, are you on the phone?

Hello, Nancy.

NANCY, CALLER FROM WILMINGTON, DELAWARE: Hi.

VELSHI: What can we do for you?

NANCY: Yes. I have a quick question on rates. What percent -- I noticed the mortgage rates were going down. How much should it go down before you think about refinancing?

My other quick question is a hypothetical. If you have $15,000 in the bank, you have a job that hopefully will keep going, and you have $15,000 in credit card debt, do you take that $15,000, just pay off your credit cards or do you hold that $15,000 and pay a little bit more than your minimum to pay down the credit card debt?

VELSHI: OK. Excellent.

ROMANS: Thanks, Nancy.

VELSHI: Two very, very important questions, Nancy. Thank you for that.

Hillary, let's start with you

KRAMER: When it comes to credit card debt, get rid of it. No debt, get it paid down as quickly as possible. You might not be able to do it in one swoop, but you want to do it over two months or three months, because especially now, I think rates are going to go up, rates aren't going to go down.

What everyone has to understand, what's the implications of a $700 billion bailout is that our government is going to have to borrow money in order to find the $700 billion and then we're going to have inflation and we're going to have to raise rates. So, be very careful. There's a great time, a 30-year, it's about 6 percent right now, a 30-year fixed mortgage, excellent time.

VELSHI: Yes, which is historically not such a bad rate.

ROMANS: No, not at all. Especially looking at the 80s, you know, people are buying houses at incredible interest rates. What about the $15,000?

FLYNN: I have to disagree. I've seen too many people in practice who pay that off and then the threshold for paying for this woman might be $15,000 in credit card debt. And now, she pays it off and it creeps back up to $15,000, and now, doesn't have the savings anymore.

KRAMER: But I'm making the assumption that she's paying it down and turning over a new leaf.

FLYNN: Sure. I'm saying, in theory, it absolutely does make sense to pay it off when you're paying at 18 percent, and you're making two or three. But just in practicality, you have to know yourself.

VELSHI: Right.

FLYNN: And if your threshold for paying is $5,000 on credit cards, whatever it is, people have a way in practicality of it, creeping back up to that number before they change their habits.

ROMANS: Nancy needs to look at her underlying buying habits and spending habits here, causing her to get $15,000 in credit card's debt in the first place, and make sure that it doesn't happen again, too.

VELSHI: Well, we can agree on one thing. Those minimum payments aren't going to help.

ROMANS: No, they're not. They're absolutely not.

VELSHI: If she does -- whether she pays off the $15,000 or not, she's got to be more than the minimum.

ROMANS: All right. So, there's so much more to find out on the story, 24 hours a day, seven days a week, if you logon to CNNMoney.com. This is such a fantastic job of just laying lay it all out there for you and there are even some very cool tools that you can use to figure out your own financial system. That's CNNMoney.com.

We're back with more of your calls -- you can also logon to Twitter right now -- next.

(COMMERCIAL BREAK)

ROMANS: OK. We're back on Twitter.com, also taking your phone calls, getting your personal finance questions about your house, your college tuition, your money, your kids, your retirement, everything as it pertains to this mess that we've seen on Wall Street.

VELSHI: The phone number is 866-792-3399. Our panel: Hillary Kramer is AOL's money coach, Doug Flynn is from Flynn Zito Capital Management, and Poppy Harlow is from CNNMoney.com.

ROMANS: Right away, we're going to go to Twitter.com. We've got Rocker M (ph): How does the bailout and the economy affect college students and student loans? A very good question. Doug?

FLYNN: Yes, you got me on that one.

HARLOW: I can jump in on this one, if you guys want.

I think it has the potential to be very, very good for those of you out there looking for loans of any type because the whole goal here is to add more liquidity to the markets, to grease up the economy, and to make any kind of loans more available, because right now, it's actually hard to get a mortgage. It's hard to get a student loan. It's hard to get any kind of loan, a small business loan.

So, it could be potentially very, very good for people.

KRAMER: Right. It's also very positive, because even though right now we're sitting in the ashes, and it seems like the world is falling apart, financial crisis, 10 to 15 years from now, we could be in immense full market. So, if you're 20 or 21 today, you are sitting pretty, because you can ride that wave up. So think of it as an opportunity, even though it may be hard, let's say, to find a job right now, we're coming out of college, you know, being able to afford a place to live.

ROMANS: Well, in this kind of troubled times, you know, this is when if you have the ability and you can see through it, if you can invest a little bit right now -- I mean, you talk to, you know, people who invested back in '87 or in '91 and they saw through the wreckage. I mean, they've done quite well.

VELSHI: Well, is that what's happening, Doug? Are you getting -- your clients are calling you, you know, when we saw that drop, that gain in the market on Friday, we were looking at, we were looking at where the biggest point gains had been in the market and you may remember, it was in March of 2001, right before the market collapsed.

FLYNN: That's right.

LEVS: What are people doing now? Are they taking their money out or are they putting their money in?

FLYNN: I would say neither. They're really just -- we haven't seen a lot of redemptions but we haven't seen people saying this is great. Some people think it may be a great time to invest but they don't feel, they don't have the confidence. So, it's really more of -- if I had this money invested for the long-term, is it still safe to leave it there for the long-term, should I get out now.

ROMANS: And what's the answer?

FLYNN: The answer is: if you sell now, then you've locked in that loss and that would be probably the worst thing you do for your money (ph).

(CROSSTALK)

VELSHI: But then you got to make up all that ground.

FLYNN: That's right.

HARLOW: And let's say you sold on Monday or Wednesday when you saw the Dow fall more than 500 points on Monday, when we ended the week the Dow ended down only 33 points.

FLYNN: Yes.

HARLOW: It was essentially flat.

KRAMER: That's right.

HARLOW: So if you sold and you didn't wait, you were out of luck.

KRAMER: Right.

ROMANS: Let's go back to the phones quickly. Florence in New York has a question.

Florence, what's your question?

FLORENCE, CALLER FROM NEW YORK: I'm a federal employee and I would like to know what will be the effect of this economic situation on the Thrift Savings Plan, and also, which fund or funds would be the best place to be at this point?

ROMANS: All right. Who wants to answer that one?

VELSHI: Well, two good questions. First of all, it's actually very interesting, Thrift Savings Plan, these are governed under a different laws. One of the issues about this whole restructuring the financial services regulation is that the financial service industries are regulated by more than a dozen different agencies, all of which have different rules, so thrifts are affected differently than traditional banks are.

FLYNN: That's where a saving's plan is the governmental version of a 401(k). So, it's this separate entity, that 401(k) money.

VELSHI: So, her investments are the same as anybody else's, they are mutual fund investments?

FLYNN: Exactly. They have basically a couple of index funds to choose from and it gets back to a risk tolerance -- is it long-term money, there's an equity index fund, there's a small cap, there's an international, there's a fixed income. There's not a lot of choices, but it's just like your 401(k). So, it probably isn't going to be effective.

ROMANS: I think -- yes.

VELSHI: So, speaking to her and people like her, where are you telling people to put money, Doug?

FLYNN: Well, we don't want to let something like this get you off your long-term game plan. You know, speaking to what we were talking about a moment ago, if you were on vacation this week, you came home, you're like, oh, the Dow didn't really move this week.

ROMANS: Right.

FLYNN: So does it really change for your long-term goal that's 20 years away? No. So, if you were putting money every week off of your paycheck, that's the best thing you can continue to do. Obviously, speculative money that you have that you need in the short term probably shouldn't be in this market anyway.

ROMANS: Right.

FLYNN: But long-term retirement money, don't change what you've been doing if you have the right allocation.

ROMANS: OK. We want to get to a lot of phone calls in here. Bill in Stockton, California.

Hi, Bill. What do you have to say?

BILL, CALLER FROM STOCKTON, CALIFORNIA: OK, when do you want me?

ROMANS: Right now.

BILL: OK. This is Bill from Stockton, California, was a foreclosure dead center of the nation.

VELSHI: Right.

BILL: OK? And you might not like this call, because I'm going to tell you that a lot of the problems that have been caused in our town, which is a very multicultural town, has been because of what I call in title "core" (ph), have not had to verify incomes, they've not had to tell their assets, they've had not had to have any money down. Some of their closing costs have been tape-wormed.

VELSHI: Hey, Bill. You got a question for us?

BILL: Pardon?

VELSHI: You got a question for us?

BILL: No, I want to tell you.

VELSHI: OK. Let me -- we're here to help people out tonight. We'll have a lot of time to discuss why it happened and how it happened. But if you got a question, we're happy to help you out, otherwise, we're going to move on.

ROMANS: Well, let's talk - let me ask you if he's got a statement about how in the "no doc" loans, the loans that some of these people...

VELSHI: That didn't cause the end of this, I mean, it didn't.

ROMANS: Yes, but there are a lot of people looking to place some blame.

KRAMER: Yes, and I do believe that the blame starts on Wall Street which had this great idea, they figured out in a very greedy way that they could make a lot of money by packaging mortgages. So, they pushed it down all the way into the system to make sure that everybody got a home, and that those mortgages were packaged up, whether or not the person could afford it or not. So, I actually place the blame on the street and not on people that didn't know that they couldn't afford their mortgages. ROMANS: I had a really interesting conversation with the mayor of Cleveland, who told me that anybody who thinks that core people caused a multitrillion-dollar collapse.

VELSHI: Yes.

ROMANS: How...

KRAMER: But there's a lot of that blame game going on right now.

ROMANS: Right.

KRAMER: And people think it's the individual who didn't know what they were doing but should have known what they were doing. I know a lot of people, and people in all different demographic levels who went for kind of arms, who went and they've reached for more than they can afford and it was predatory lending practices, that caused it.

VELSHI: I want to look at the one that's on the top there on Twitter from Springnet. It says: What specifically will this plan do for folks with high interest mortgages because those are still folks who are faced with these challenges that are getting us into this.

Hillary made this comment earlier. Poppy, I want to ask you, what do we think this does at the bottom end for people who might be three months away from foreclosure or four months away from entering into foreclosure because they can't meet their payments? Does it do anything for them?

HARLOW: It's a huge question. Chuck Schumer, a New York senator asking about it today. OK. This is the plan, I'm glad there is a plan, but what on earth does it do for homeowners near or in foreclosure? I want to know; I want an answer.

Honestly, to this guy's question, we don't know yet. We'll probably know in 24 hours or so. Hopefully, something, right? Hillary and I were talking about it in the break...

KRAMER: Right.

HARLOW: Hopefully something.

ROMANS: Yes.

We want more of your questions and we want more of your calls. There's plenty of time to give us a call or speak out on Twitter. The number to call: 866-792-3399. The Twitter address is: Twitter.com/issue1CNN.

(COMMERCIAL BREAK)

ALI VELSHI, CNN, SENIOR BUSINESS CORRESPONDENT: All right, be patient with us. Our phone lines are open, I know we're going to kind of get through as many calls as we can. Phone number is 866-792-3399, and we're also taking your comments on twitter.com/issue1cnn. Hillary Kramer is with us, AOL money coach, Doug Flynn from Flynn Zito Capital Management, Poppy Harlow from cnnmoney.com. What do we got?

We've got Ruth from New Mexico. Ruth, what's your question?

RUTH FROM NEW MEXICO: My question was - can you have $100,000 in three different banks and have the FDIC insured them all, a total of $300,000 instead of just total of $100,000 in one bank?

Ruth, that's a good problem to have, my dear.

POPPY HARLOW, CNNMONEY.COM: It's a good problem to have. You're smart to have your money in different banks. The FDIC insures your individual account in a bank if that bank is backed up by the FDIC. You want to check that first.

VELSHI: They all have that on the front, on the window or something.

HARLOW: Logo, however you describe that logo, up to $100,000. You can have as many accounts as you want in different banks. And if your spouse has an account in the same bank that's fine, if it's separate, under his or her name. So you're definitely insured there but you want to check this out. Because not all banks do have that insurance policy.

CHRISTINE ROMANS: Let's got to twitter. Jay is on twitter.com with a question and there it is. What questions do we ask our retired parents about their finances to ensure they are safe? That is a fantastic question, Hillary.

HILLARY KRAMER, AOL MONEY COACH: First of all, we want to make sure is how do you feel, are you upset? These are sleepless nights, this is the most upsetting time to people all across this country on every level. We all know that. So that's the first question. Are you worried? Are you upset? Then you get down to the nitty gritty. What is the exposure, what is the situation because there's a lot of pride involved very often with our parents, and they don't want to tell us the reality. So we need to really prod there and really find out and help them understand, and dissect where things stand and also calm, you know, calm and make sure that there's some diversity there in the investments, the biggest problem is concentrated debts that may have taken place.

VELSHI: And we have been talking about this for years for all of time. One of the things you said was sleepless nights. I want to ask you, Doug, people are talking about the fact that they should stay on invested or hear on TV from financial planners, they should stay invested but they can't sleep at night. And we've talked about it as many times. If you can't sleep at night you've got to do something different.

DOUG FLYNN, CERTIFIED FINANCIAL PLANNER: That's true. And what you need to do is figure out whether or not what you presently have in terms of risk is appropriate for you. And if it turns out that it's not, that you're too aggressive, no matter how you got there, it doesn't matter what got you there. Here you are, how do you make the change? So if you make a major adjustment now you are probably going to take some losses. So I have two things on my computer. I have people that have told me they want to get more aggressive and I have a list of people that told me they want to get more conservative. And what I do is say OK if you want to get more conservative, now is probably not the time to do it. But I will call you and tell you when the time is to get more conservative. There's a time and a way to do, maybe overtime. Typically what happens is, by the time everything recovers and I call them back and say remember when you told me you want to get more conservative?

VELSHI: Now, markets are going conservative -

(CROSSTALK)

FLYNN: Oh, nobody wants to (inaudible). So what you need to have is the right allocation. But if you don't have that properly now you need to figure out a way to get from A to Z, just how do it. Don't do it crazily.

VELSHI: And you go to cnnmoney.com and you go to personal finance and you click on Money 101 and I'm telling you, there are very easy to digest ways of understanding how to do this and get it elsewhere on the web but please, you can do it now. You can look on there and see what's going on. Right, Poppy?

HARLOW: I got to give a plug to Walter (Uptograve), our ask the expert. I mean, I interview him every week. He's unbelievable. You can send your question to him. He knows everything. No papers in front of him. He just know it. And people ask these questions all the time and his key every single time I talk to him, diversify, diversify, diversify.

ROMANS: All right. Let's go to the phones. Jacky in Allentown, Pennsylvania. Hi, Jackie, what is your question?

JACKY: Hi, my question is, I bought a house and my husband lost his job seven, eight months ago. And it's hard for us to pay the bills because we're going down on the mortgage. Can you help us, please?

ROMANS: So many people are in that situation.

KRAMER: Very tragic and very sad and the answer is go right to the bank, tell them what's going on. Talk to them. The only positive that's come out of this entire mortgage foreclosure debacle, is banks have become negotiable. You can talk to them through.

VELSHI: And they don't want to get stuck with your house.

KRAMER: That's right. They will reduce the mortgage. They will let you take a six-month leave from paying the mortgage and you'll be able to work through the situation. You've got to talk to people rather than just live with the fear of how you're going to handle this.

ROMANS: People who are listening to all these stuff about the bailout package and everything. If they think they can't pay, they shouldn't pay their mortgage payment, that they can oh I think I can wait now, they can't. You have to still -

KRAMER: Oh, absolutely. Earlier, I wasn't making the point that now there's a $700 billion bailout that everyone's mortgage is going to be taken care of. The point I was making is that hopefully, and I pray literally that as part of this bailout there are going to be protections. The government is taking on these mortgages, the least that they can do is therefore try to work out on some of the underlying mortgages help for people. Now ultimately, I do fear that the $700 billion package will end up in the hands of private individuals who may be buying these and picking people out of their homes. Let's hope not and hope there's a long enough period of time where people can get out of the hole.

VELSHI: All right. Keep your calls coming. Get those messages on twitter. The calls go to 866-792-3399. I'm going to get that right once this show and if you're using twitter go to twitter.com/issue1cnn. But during the break, logon to cnnmoney.com and check out Jeanne Sahadi's great article, "Breaking down the bailout plan," everybody can understand it the way she's written it, that's cnnmoney.com. Jeanne Sahadi, we're coming back with your calls and twits.

(COMMERCIAL BREAK)

ROMANS: A rare opportunity for you to call in or to logon to twitter.com/issue1cnn and ask your personal finance questions, anything you want to know about your house, your loans, your student loans.

VELSHI: What's it called when you do -

ROMANS: It's actually called a tweet, Ali. You called it twit. You see we're very uncool.

VELSHI: I didn't mean to offend anybody there.

ROMANS: There are no twits here, it's tweets. Anyway, Hillary Kramer is AOL's money coach. Doug Flynn is from Flynn Zito Capital Management. Poppy Harlow is from CNN Money.com.

VELSHI: Let's go to Bill in Mississippi. Hi, Bill, what's your question?

BILL: Why has there been no mention of the greed-induced skyrocketing gas prices which inflated the prices of everything and devastated the financial stability of billions of households and businesses?

VELSHI: Uh-huh. Yes, you're absolutely right. That was definitely, as home prices are going down and people were paying higher interest and then we had this energy crisis, we were paying more for gasoline and we haven't even seen what it does to heating oil. People are not very worried about the fact that we don't talk about it as much. Gas prices have started to go down but the price you pay hasn't gone down. Oil prices have gone down. We just talked about this in the last hour with Steven (Leib) and he said let's not forget this, we're fixing one leg potentially of the stool. We still got housing, we still have jobs and we still have those high energy prices. Good point, Bill.

ROMANS: Let's go to twitter. (A Willy) is on twitter and has got a question for us. We're going to see that coming up right here in just a second. Slowly but surely. There it is. How do we educated people to make them between consumers? That way they can make smarter decisions which may have prevented this. Gosh, a little financial education, Doug?

FLYNN: Yes, it gets back to when you're in college and there's 25 credit card companies throwing credit cards at you and they don't give you any education on how to handle that. I often think that there should be courses in education how to handle a checkbook, how to handle your credit rating, what that does to you long-term?

KRAMER: Experience. It's all about experience. It's like our grandparents because they lived through the depression never trusted the banks. The same thing is going to happen here. You know, and hopefully there will be match with education and programs.

HARLOW: There are some interesting programs out there, these financial literacy courses and you may think I have a job and kids and a family and I don't have time. You know, look and see if your city offers one and maybe at a local community college or something, financial literacy.

VELSHI: ... college and high schools.

HARLOW: High schools and elementary school.

VELSHI: Send your kids to one of those and save their generation, send them to it.

Let's go to Spazz 27. He asked a question that relates to something you said earlier, Hillary. What happens to a line of credit that you have but are not using? Can a bank take that back without notice? You were saying that that woman should pay $15,000, that was my only fear that she pays it off and she then loses that line of credit, that credit card. That's happening these days, isn't?

KRAMER: Right, the banks have been pulling back on the lines of credit. A number of banks have done that so make sure if you think that you have this extra security that you can tap into, you probably don't more than likely.

VELSHI: Right. So in her case it might be, that might argue for her not paying out her credit card line even though that's an expensive way to keep a line of credit open because she's probably paying a high rate for it.

KRAMER: Right, although it's more lines of credit attached to the house, equity, home loans -

VELSHI: As opposed to a credit card -

KRAMER: Right. A credit card at $15,000, chances are another one will come in the mail. ROMANS: All right. John is on the phone in St. Augustine, Florida. John, what's your question, sir?

JOHN: I have a reverse mortgage and I haven't heard a thing about how people with reverse mortgages are going to fare in this fiasco.

VELSHI: What do we know about that? Do you anything about what they're doing on reverse mortgages? Is your rate variable or is it fixed?

JOHN: It's variable.

VELSHI: And has it gone up?

JOHN: Well, no. I don't really know.

VELSHI: OK. How long is it? What term is it?

JOHN: I'm sorry?

VELSHI: How long is the mortgage for? What is the term of your mortgage?

JOHN: Forever.

VELSHI: Forever. OK. It's a reverse mortgage so you will just, you won't have to pay that off. They've given you money against your house?

JOHN: That's correct.

VELSHI: OK. So if somebody has taken a reverse mortgage, they're making a set payment on that for the rest of their life most likely and they're using that, they use the equity. So it shouldn't have any effect on him.

FLYNN: They're getting the payment every month typically for the rest of their life for as long as they live. In a reverse mortgage the first thing we talk about is that you are basically disinheriting your children if the whole thing goes to the full equity of the house so if the house value goes down and the reverse mortgage is calculated up in terms of what you owe eventually that crosses, you get nothing. They can't throw you out which is why I don't think this is going to be any event to them.

VELSHI: Right.

FLYNN: But when you pass on depending on the difference is, it might be nothing and you don't have anything.

VELSHI: The only issue of course is if he wants to sell that house.

FLYNN: Right, they would do the calculation, what did you owe from the fake number plus all those crazy closing costs that are in there.

ROMANS: All right. Let's go to Anthony in Lancaster, Pennsylvania. Hi, Anthony. What's your question?

ANTHONY: Yes, my question is why reward all of these corporations when you can take the money and give it to the people that are holding the mortgage and pay off their mortgage and that money would go into circulation, and goes back to the mortgage companies and they all would be happy as a lark?

VELSHI: Kind of the point that you were getting at, right, Hillary?

KRAMER: I would love to see the $700 billion which we all know is going to be $1 trillion by the time we're done, I would love to see it go into pay off everyone's mortgage and let everyone live in their homes. Unfortunately, what's going on is we're taking care of Wall Street first. We're taking care of their losses. That's what this is all about. Even something like AIG, where do you think that first $25 billion went? It went to pay off loans and payments to investment banks that were owed, that AIG owed.

ROMANS: Doug, what is the Wall Street angle of it? Does Wall Street have a different point of view about that one?

FLYNN: Well, you know, it's - is there any personal responsibility at all left anymore? I mean, can you just do whatever you want with no consequences? I mean, whether you're a person who didn't understand what they were buying or you're a CEO of a company that leveraged these things 40 times. You can't have zero responsibility. That's why I think you can't just make direct payments to people.

HARLOW: Right and there has been some responsibility. AIG had that huge interest rate. Lehman Brothers went under and ultimately if you listen to what Treasury Secretary Paulson and what President Bush said today, they said listen this is to help Wall Street help Main Street. This is to help make credit more available. This is to help people.

KRAMER: It's to stop the run on the banks.

HARLOW: It was.

KRAMER: On the immediate level everything was melting down. It was living through the stock market that kept going down and it was spreading. It was viral, it was spreading all over the world. If you think that they closed the Russian market, you think about what was going on in Europe, they had, their losses were twice as what we were.

HARLOW: But we've seen these banks fail, and it essentially failed Main Street. I mean we had talk of Morgan Stanley tying up with another bank so we would essentially only have one independent investment bank left on Wall Street, one major one? I mean, that's a scary thought. They came and they did something and hopefully it helps everyone else, too. Hopefully it's not just Wall Street.

FLYNN: To this day, still people look me in the eye with a straight face tell me that they absolutely think real estate never goes down ever. So you know it does go down and you need to put 20 percent down and you need to be able to make the payment and there are people that got screwed over and there's a whole bunch of stuff going on. But at the end of the day if you can't afford those simple basic things and maybe we need to know what those are. Then maybe you might not be able to own a house and that's unfortunate.

ROMANS: It's a great time to be asking for advice. So stick around. More phone calls next. We're going to check in with what you're saying in twitter. The address there is twitter.com/issue1cnn.

(COMMERCIAL BREAK)

VELSHI: All right. We're back taking your calls and tweet, Hillary Kramer is an AOL money coach, Doug Flynn is from Flynn Zito Capital Management and Poppy Harlow is from cnnmoney.com. Tweet is when you get on twitter and you send us an instant message. You go to twitter.com/issue1cnn and your phone calls are coming in at 866-792- 3399.

ROMANS: Let's go to the old-fashioned phone first. Larry in Sierra Vista, Arizona. Hi, Larry. What is your question?

LARRY: Hi, I've been talked into the mutual funds and stock market and my 401(k) for many years but I also have some cash that I have set aside in savings. Is this an opportunity to move that cash into the stock market?

VELSHI: Larry, hang on the phone for a second. Doug.

FLYNN: Well, it depends how much will you have left over in cash? You have to absolutely have enough besides this that's your safety money, but certainly there are opportunities. What I wouldn't do pre-election this close is do anything major. If you're going to do anything, maybe dollar cost averaged in a little bit. I'm really not a proponent of dumping in a huge amount of cash.

VELSHI: You think dollar cost averaging. That means put a certain amount in regularly without regard to how the market is performing in that particular side.

FLYNN: People think of that on a monthly basis, saving monthly, but you can take $100,000 and divvy it up and ship it in that way. That's the same effect.

ROMANS: Next caller. In New York City, Lewis. Hi, Lewis. What's your question?

LEWIS: A two-part question about insurance. The FDIC insures you for $100,000 in bank and say you got caught with your pants down, and you had $150,000, and your bank went under, what happens to that $50,000?

HARLOW: Lewis, before you brush your teeth on Monday morning. I want you to call that bank and take $50,000 and put it in another FDIC- insured bank under your name. The first thing you should do absolutely and then it will be totally safe.

VELSHI: That's as obvious as getting your company to match your 401(k). I mean, just do that for it to be safe.

HARLOW: You got to do it.

VELSHI: Let's go to Laura in Unionville, Tennessee. Hi, Laura.

LAURA: Hello.

ROMANS: Hi, Laura. What's your question?

LAURA: I want to know if the government insures my money up to $100,000 in the bank, but if the government broke, what guarantee do we have that they're going to insure it?

VELSHI: That's a good point. The FDIC is an insurance program. It's not actually - it's not the same as that $700 billion that this plan may involve. It's actually separate insurance that the banks pay. So that it's a separate fund. Now, that said, Hillary, they don't have enough money for a lot of banks to fail.

KRAMER: That's right, but I do believe that the federal government will come in and back up any failures and that is one of the reasons why we have the $700 billion program in place right now. Because there was a systemic failure.

ROMANS: All right. Ashley is in Sherwood, Arkansas. Ashley, what is your question? Ashley, are you there?

ASHLEY: Yes, I'm here. And I was just wondering, the CEOs are making record profits and I just want to know if anybody is going to hold them accountable for what they have done?

ROMANS: Well, there's an awful lot of laws on the books about CEOs and all that. What do you think? A lot of questions about this. Doug.

FLYNN: I think they should hold them somewhat accountable. Certainly, that they shouldn't get $50 or $100 million bonus. I think if you put 20,000 people out of work. There should be some kind of accountability. Unfortunately, the system isn't game that way. They are set up to come in at low prices, get a huge amount of options and get guaranteed pay back. So, like any other market whether it's a baseball player or whatever it is, to lure the top talent, you have to do these things and unfortunately that's the system.

VELSHI: There is some sense that if this is described as a forest fire, you got to put the fire out. And then we will determine after this -

ROMANS: Who started it?

VELSHI: Who started it and what sort of regulation we should and why we should. It's a question we get a lot of. Let's go to Simi Valley, California. Mary is on the phone. Hi, Mary.

MARY: Yes, I have a CD and money market at Washington Mutual and I'm allowed to take out the interest every month on both accounts. Will I still be able to get my interest every month? VELSHI: First of all, CD and money market, do they behave the same way in terms of their safety and their - how they are protected, Hillary?

KRAMER: No. They are different in the sense that a money market as we've learned, has buck has been broken. And that a dollar now became 97 cents. But this is part of the Treasury, S.E.C., federal bailout plan which is that your money market is protected. You will still be able to take out your interest there. On CD, you are locked up for however long your CD maybe for. If it's fro 12 months, you can't take it out until that point in time anyway. Right now, it looks like Washington Mutual will be solvent and will be fine and not to have any worries on Washington Mutual.

FLYNN: Keep in mind, that there are a lot of people that are retired that take that monthly income off of it and she might have a money market in Washington Mutual which is a money market deposit account which is FDIC insured. But if you are getting money every month off of these things and the bank does fail, you may, you will get your money back eventually, but those interest payments will likely stop. There will be a little bit of a hold on which gets back to if you have more than $100,000.

VELSHI: So what should she do, if she has got a money market deposit or money market mutual fund, what is her choice? If she can't afford what you just said. That those interest payments may stop because you're depending on it. Where should that money go?

FLYNN: It can't all be in one place. It cannot be all in one bank. And I think that's one of the lessons but if you have that one bank, maybe open up a money market mutual fund at a separate fund family so you have two things going on. The chances are much smaller.

ROMANS: This is all really important stuff.

VELSHI: Yes.

Well, we're going to continue to take twitter messages and some final thoughts nest on this two-hour emergency edition of "Your Money."

(COMMERCIAL BREAK)

ROMANS: Got a few more minutes for some personal finance, some personal responses to your questions. We're looking at twitter.com right now. What have you got, Ali?

VELSHI: All right. Let's take a look at - I want to look at (weathernor) question down there. I got a 20-year variable mortgage, half a percent above prime. Is this the time to switch to a fixed rate? Hillary.

KRAMER: Always a good time to have a fixed rate mortgage.

VELSHI: The spread between a fix rate and a variable rate, is not that different these days anyway. KRAMER: But rates are going to go up. It has to go up because we're going to an inflationary period. Because we're doing off, we're going to have to borrow money in order to afford the $700 billion bailout. Go to a fixed rate.

ROMANS: (Lym) Reno, I do not have a 401(k) and I have a lot of student loans. The current climate is scaring me. What should I do? Doug.

FLYNN: Yes. I think you have to take a look at how money you have on a monthly basis. If you are, I don't know if I necessarily pay those student loans down any faster than they are required to, if they tax deductible and if they are a low rate. They are making that regular payment in and probably start putting a little bit of money away. That's really the lesson, you start saving.

VELSHI: All right. We have talked about (inaudible). It's a common question. Newbie says what will this federal bailout do to the savings rate and mortgage rates for the consumers. A big concern. Hillary, should we be concerned? You talked about mortgage rates most likely going up. Doug. Savings rate. We talked about money markets and money market funds and CDs. Do we think we will get more money out of those?

FLYNN: Well, I agree that interest rates are eventually are going to go up. And so, the benefit on the other side is that your savings rates and money markets will eventually go up, but they're not going to go up tomorrow. It's going to take a little while but eventually they will.

ROMANS: A lot of people ask me this. Is it a good time to buy my first home? Gosh, that -

VELSHI: Hillary, I mean, we had that one question and it turns out to be a depends.

KRAMER: It depends. It's always a good time if it's for the right reasons. Which is if you're going to stay there for the rest of your life, it's for family members. But otherwise, wait. We could see another shoe drop in the real estate market and we probably will be.

ROMANS: Well, we know that, depending on how old you are and how close you are to retirement, the answer to a lot of these questions are slightly different.

FLYNN: Sure. And this person, you know, if you save a little money, the price goes down but the interest rates go up and that effect might not be anything.

VELSHI: Right.

FLYNN: So, it comes down to the deal. Is it a good deal for you long-term?

VELSHI: It's a good time to think Wall Street. When they make a deal although not like Wall Street in the last couple of years. But it's not about whether it's a good time to buy a house, it's whether or not that house is right to buy at that price for that interest rate. Is that what you're saying?

FLYYN: Yes. And for that person in their situation. Can they afford it?

VELSHI: All right. You people have been excellent. Thank you. We had a great panel. Hillary Kramer, Doug Flynn and Poppy Harlow from cnnmoney.com. Please go to cnnmoney.com and check that out. There's great stuff on there.

ROMANS: The economy is "Issue number 1." We here at CNN are committed to covering it for you. Stay with CNN every day for the very latest on the CNN money team.

VELSHI: We are not leaving this story. Right now, we are joining Roland Martin. "Six Weeks To Go until the election," starts right now.

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