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YOUR MONEY

Significant Progress Made on Talks Over Wall Street Bailout; Is Your Money Safe?: Answering Your Questions

Aired September 27, 2008 - 13:00   ET

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


ALI VELSHI, CNN HOST: Hello everyone. This is a special edition of YOUR MONEY. I'm Ali Velshi.
CHRISTINE ROMANS, CNN HOST: I'm Christine Romans.

Breaking news this hour. The U.S. financial system facing the greatest crisis since the great depression, but the word of the hour from Capitol Hill, progress. The Democratic Senator Harry Reid says significant progress has been made in talks over that $700 billion Wall Street bailout.

VELSHI: This really is witnessing history as law makers face mounting pressure to get this done before the Asian Markets open tomorrow night. So where does legislation stand, how soon it will pass and what are the next steps? Kate Bolduan joins me now live from Capitol Hill with the very latest -- Kate.

KATE BOLDUAN, CNN CORRESPONDENT: Hey there Ali. Well lawmakers, you said it, they do say they are making progress. Democrat and Republican aides they have been working throughout the night until about 2:00 Eastern we hear and they're back at it again today, trying to hammer through the details of a plan that they can present to the key negotiators.

We will hear from a top Senate Republican aid is that the unresolved issues, the sticking points remain at about a dozen and that is what is going to be the focus of the conversation when the four principal lawmakers, these negotiators meet later this afternoon, we are told and one of those negotiators Republican Senator Judd Gregg.

We spoke to him a little while ago and he came out and spoke to cameras and he says they're not there yet. He paints a bleak picture if they don't reach an agreement, but he says they're on their way. Listen hear.

(BEGIN VIDEO CLIP)

SEN. JUDD GREGG (R), NEW HAMPSHIRE: The credit markets are on the verge if they haven't already frozen up. We're looking at a situation where if we don't take action to relieve that pressure, action which the markets will have confidence along the lines of what the treasury secretary has proposed. On Monday or Tuesday, Main Street America will be under dire stress and we expect to have -- when we sit down we agreed that we'll stay there until we get this done.

(END VIDEO CLIP)

BOLDUAN: Get this done and that is clearly the focus of what these negotiators are trying to do. Senator Gregg described it to me as they're not on the same page, but at least they are within the same book and he said that's progress at this point, Ali.

VELSHI: You'll pardon our own viewers for being puzzled. They weren't really all that sure Washington could hand this thing to start with and then for the last week and a half we've been hearing we are almost there. There is no deal talks have broken down. We're almost there, now we are not even prepared to say we're on the same page they are in the same book. From your presence there, your being there for this whole thing, do you have some sense that they are closer than they were a few days ago to a deal?

BOLDUAN: It does sound like they are closer and it may sound complex, but let me describe it to you this way, Ali. Up until this point there was a point when there was bit of a breakdown and there was that stall in negotiations when they came out of that White House meeting a couple of days ago.

And what we have today is we do have four principal negotiators and that they say is progress because the House Republicans, they're opposed to some of the fundamental basics of the plan that was presented by the treasury and at least now they have someone representing their view at the negotiating table and that is progress. They're not going to leave the room unless they come to an agreement and they hope to get that done before Asian Markets open.

VELSHI: You'll be on the story and we'll come back to you if there are any further developments. Kate thanks very much. Kate Bolduan on Capitol Hill.

ROMANS: While lawmakers in Washington go back and forth on this deal, a lot of you are home are probably trying to get a grasp on why our financial system is so at risk in the first place.

CNN's senior correspondent Allan Chernoff is here with more. Allan, it doesn't feel today like the economy is collapsing around us but there's this urgency almost a near panic about getting this done quickly.

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Indeed. Economists are debating whether or not we have a recession right now, but the treasury secretary and the economists are very worried about a lending freeze. We've got some very serious economic danger signs.

First of all, money, the cost of money has gone way up for banks, companies, consumers and the availability of money has gone way down for banks, companies and consumers. If that persists, you really could be talking about an economic collapse, Christine.

ROMANS: That matters for people beyond just people who are exposed to the actual stock market.

CHERNOFF: This is really not all about the stock market. It's more about the lending markets. The credit markets and that is where the real problem is because we're talking about companies being able to get the money they need to continue their operations. If they can't, companies will be going bankrupt. Millions and millions of us could be losing our jobs. That's really where the hit is and of course, also, consumers not being able to get loans for cars, for mortgages, you name it. Anything.

ROMANS: We should consider this $700 billion bailout a quick fix by any stretch of the imagination.

CHERNOFF: Not at all, in fact if Congress were to pass the deal this very minute it's going take time to get this all into place and it's going take time to restore confidence to the financiers who lend out the money that is so essential to the economy's functioning.

ROMANS: We do this right now and still the economy will suffer in the very near-term. We've heard over and over again economist say that there's still more pain and more job loss and more housing problems ahead.

CHERNOFF: Because of this sudden crisis of confidence, there's no doubt that the economy is going to be taking a hit and a lot of economists are saying with or without a bailout, get ready for tougher times.

ROMANS: All right. Allan Chernoff, thank you, Allan.

VELSHI: All right. Let's get right to the details and where we go from here. Stephen Leeb is the president of Leeb Capital Management. Peter Schiff is the president of Euro Pacific Capital. These gentlemen are both authors and they've both seen good markets and bad and they both probably agree about everything that Allan just said but there's a key difference between the leadership. You think that in fact a recession, a deep recession is necessary, not only inevitable.

PETER SCHIFF, PRESIDENT, EURO PACIFIC CAPITAL: Absolutely. The root of the problem is in response to the most irresponsible monetary policy in U.S. history, American citizens borrowed and spent trillions of dollars and now the institutions that loaned the money are going broke because we can't pay it back and this bailout isn't going to change the fact that we're broke.

As a society, we need to go back away from borrowing and spending and toward producing and saving again and the government is trying to interfere with the free market and if they succeed with this bailout they'll bring on a crisis far greater than the one they're trying to avoid. They'll destroy the dollar and then we're going to see hyperinflation and we are going to see prices and interest rates going sky high and there's nothing we'll be able to do about that.

VELSHI: David.

STEPHEN LEEB, PRESIDENT, LEEB CAPITAL MANAGEMENT: I don't know where to start, Ali. The one thing, the bailout doesn't necessarily have to be a losing thing. The headline in "Barron's" today is that actually the treasury could end up making money on this bailout. It's $700 billion, that's a huge number.

But you know how much we've lost because of this crisis in terms of lower equity value in our homes? Lower stock prices? It's in the trillions. So how does $700 billion all of a sudden counteract trillions of dollars that's been lost? How does $700 billion that can turn into a profit for the treasury somehow -- why are you laughing?

SCHIFF: It's not going make any mono pep.

LEEB: One other thing, just sort of anecdotal, when you see Barney Frank and Hank Paulson, people whose lifestyles and political persuasions could not be more different the only thing they share in common is a very, very high intellect embracing on this, guess what? You do have an issue. I know Peters is brighter than those guys so I'll bow to him. But this is a very serious thing. Now Peters for the free market. No bailout, I'll tell you what's going on happen.

You know what the government which already owns Freddie Mac and Fannie Mae, they backed AIG, you can add to that list without a bailout, J.P. Morgan and Citigroup, almost every other financial institution with the possible exception of one that's located in Omaha and that's called Berkshire Hathaway.

SCHIFF: The government not going solve the problem.

VELSHI: What will solve the problem? Letting nothing happen will solve the problem?

SCHIFF: We have a problem. We're broke. We consumed ourselves into bankruptcy. Our factories are gone --

VELSHI: But do you lecture the child or do you put out the fire?

SCHIFF: We can't. We're setting a bigger fire. You're talking about the fact that real estate prices are falling. They have to fall. They're too high. They need to go a lot lower. We can't interfere with that.

LEEB: First of all, you can interfere and as "Barron's" points out, it's pretty simple. All of a sudden if you free up the credit system housing prices will stabilize and the money that this government is --

SCHIFF: We can't stabilize money prices are too high.

LEEB: Peter, who says, you?

SCHIFF: The market.

LEEB: People can't afford --

VELSHI: Breathing time for a second. Don't even think of anything else because we will come back to this and we will stick around. This is important because this is possible the debate you should have heard on television last night with two different people with different philosophies explaining what the good and bad of this is. Your phone calls and twitter messages are next on this special live edition of YOUR MONEY. Stay with us we're coming right back.

(COMMERCIAL BREAK)

ROMANS: Welcome back. This is an emergency edition of YOUR MONEY.

VELSHI: As the details of a financial bailout plan come out of Capital Hill, a lot of folks are going back to the original debate. Should there each be a bailout?

ROMANS: Stephen Leeb is president of Leeb Capital Management; Peter Schiff is president of Euro Pacific Capital. Gentlemen, you disagree. You strongly disagree. Peter, you don't think that we can step in here that a big bailout will suddenly make this right.

LEEB: No. First of all the smaller bailouts along the way have made the situation worse. All the government can do is create inflation. The government doesn't have any money. They're going print it. They'll calm the Chinese and the Japanese and the Saudis into loaning us more money, but they're done. We borrowed and spent ourselves into bankruptcy.

That's the problem. It's the fundamentals of the economy. I wrote a book called "Crash Proof." The economy is collapsing in exactly the way I wrote that it would. But also in that book I was afraid that the government would do exactly what they're doing now and this is worse. We're going die from the cure, not the disease.

SCHIFF: OK, I just have to one up Peter, I wrote a book called "The Common Economic Collapse" about two years before Peter wrote his book and I said that if housing prices ever declined it would make the tech bubble look like a picnic, but we would have to get out of it and here's why.

Jim Laird told us last night there is no difference between economic security and national security. If we let this economy go into the tubes 25 or 30 percent employment Peter mentioned China, Russia, Saudi Arabia, forget about it. Our access to resources is gone. In the past week lost in these headlines, the president of Iran taking advantage of our economic weakness said I made a mistake.

You know what his mistake was? I cooperated with the nuclear inspectors. No more. They're gone. I'm going do what I want. Two weeks ago, Russia, marches in to a prospective NATO country and takes it over and controls that oil pipeline. We've got to keep this economy as strong as we can for as long as we can so we can build alternative energy infrastructure.

LEEB: The government can't keep it strong, but it can make it a lot weaker. These problems are severe.

VELSHI: The free market --

LEEB: We can't solve them with a printing press.

Go to Zimbabwe and see how well it works. SCHIFF: Peter, comparing us to Zimbabwe -- yes, it is.

Somehow you may not like George Bush, but he is not Robert Mugabe (ph). They're a little bit different. A little bit different.

LEEB: Government doesn't work. Making the government bigger, printing money and buying up debt will not solve the problem.

SCHIFF: Look at "Barron's" today. You should have read it before you came in. I hate to tell you, the lead story in "Barron's" today is the treasury department, if this works out we'll make money with the $700 billion. Maybe.

LEEB: No.

SCHIFF: "Barron's" -- you don't care about "Barron's," you don't care about the financial media and you don't care about Barney Frank.

ROMANS: Want to look forward.

We talked about the presidential debates. We talked about Jim Laird trying to push these candidates on how the economy is a national security issue. Why didn't we hear the candidate say there's going to be pain ahead and this is the kind of pain we're going to have to take?

Did they really face it?

LEEB: No. That's a good point. They certainly don't want to level with the American public. They want to be Santa Clause and they don't want to tell the voters that hey, you've spent too much money. You can't buy a new car and you can't buy a new plasma TV. You have to save your money and you have to accept the lower standard of living because that's the reality.

SCHIFF: I think that Americans know this in their hearts. Over the last 20 years real median income in this country have gone down. So we've already been paying the price. What Peter said is yesterday's news. What we need and the real problem and I do give the candidates a little credit on this.

We have to get past this and yes, we may pay a higher price in terms of higher inflation, but the real problem, and I know it's been put on page 840 or 850 in the newspapers is resources. We've got to figure out a way of building alternative energies infrastructure. If we don't do it then it's totally game over and if we --

No. Who won the Second World War?

I'm asking you, I'm asking you who won the Second World War? It has a lot to do with it because this is a problem that will cause several trillion dollars to fix. Who won the Second World War?

LEEB: So why didn't the Soviet Union, why did they crumble? VELSHI: This is what it comes down to. This is an interesting point Peter. So those of you who say we shouldn't have a bailout or it should be very small or we shouldn't deal with it are saying that it is socialist in nature, it is anti capitalist to intervene in the private markets when the private markets fell. Peter, Stephen --

LEEB: Its government intervention that made it fail.

VELSHI: What's the solution?

What is the argument in favor of the fact that the government should get involved in the capital markets when they make mistakes?

LEEB: Because I'm going to show how contradictory Peter's arguments are. If the government doesn't get involved how many Wall Street firms stand today.

VELSHI: Maybe none.

LEEB: Fannie Mae, Freddie Mac has been taken over by the government.

SCHIFF: Already.

LEEB: AIG is part of the government. They were not a government agency. They were the largest insurer in the country, right now before anything else; the government brings you mortgages and controls the mortgage on your house and the insurance. Let this go any further and the government will control all of the banks in the country and is that what you want? Is that what you want?

SCHIFF: What I was coming on television years ago and predicting that Fannie and Freddie were going bankrupt. I knew they were going bankrupt and people thought that was crazy. It's because I understood the impact of the government on the markets.

LEEB: You don't understand the impact of not doing it.

SCHIFF: Yes, I do.

LEEB: It's going to be bad. You're contradicting yourself.

VELSHI: Let's see what the viewers want to talk about. It's your turn to talk on us on twitter. Give us a call and let us know what you need to know about your money. We have a panel of very smart people here. They're here to help you on this special emergency edition of YOUR MONEY.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The major factors of America's financial system are at risk of shutting down. The government's top economic experts warn that without immediate action by Congress America could slip into a financial panic and a distressing scenario would unfold.

(END VIDEO CLIP)

VELSHI: Welcome back to this emergency edition of YOUR MONEY the show is about you answering your questions on money talk us to on twitter and call us on the phone.

ROMANS: We have a whole panel of experts here for you.

With us today, CNN personal finance editor Gerri Willis, Ryan Mack of Optimum Capital Management and Louis Barajas author of "Overwhelmed, Over Worked and Underpaid." Doug Flynn certified financial planner with Flynn, Zito Capital Management. Let's head straight to the phones and we have a call from Doug in Florida. Doug what's your question?

DOUG, CALLER: My question is why does the government insist on pouring liquidity into the to top of the market when we can do a lot more good by giving relief to the tax payers and the working families of America and allow all levels of the economy to participate as that money trickles up through the system and lands on Wall Street.

VELSHI: Doug that's a fundamental issue in this discussion. Why don't we take that money and pump it in right from the bottom, Gerri. Why don't we give it to homeowners and taxpayers and wouldn't that solve the crises and the best argument I've heard is that it does not work that quickly and it may work backwards.

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: It's in the stimulus plan. We're not talking about stimulus plan, we are talking about bringing the country back from the brink of a financial disaster the country's cash register isn't working, it's stuck and that kind of move isn't going fix that problem and I understand people wanting to get real help to regular people. Believe me; my heart is there, but right now, Wall Street's broken.

ROMANS: Katherine in Indiana is on the phone. Katherine.

KATHERINE, CALLER: Hi. My question is. The last caller mentioned putting it in the bottom and instead of giving the money to consumers as a stimulus package why not help them pay off their mortgages or settle some of these foreclosures and then that would have a ripple effect on the economy and people wouldn't just be putting it in savings or spending it at Wal-Mart.

ROMANS: You know $200,000 the average price of a home, and median price of a home in this country, $700,000 billion would buy every home in default and then some.

VELSHI: The problem, what I think Washington has is understanding how the credit markets work and I think more than three weeks ago we weren't ever talking about the credit markets. It's this whole system that is bigger than the stock market that operates in the background.

That means that the companies that you work for can get money to borrow, to expand and not just to do that for their operating costs and we've seen in the last week, Caterpillar, General Motors and Goodyear all having trouble raising money for operating costs and that could end up costing jobs and it's a complicated situation. But that is a big question that is going on out there.

Let's go to Michigan. Lori is on the phone. Hi, Lori. Are you with us?

I'm sorry. Lori, we'll get to you shortly. Let's go to Carol in Kentucky. Hi, Carol.

CAROL, CALLER: Hi. How are you?

VELSHI: Good, thanks.

CAROL, CALLER: My question is my husband and I are 71 and we still owe $23,000 on our home. We have some stock and my question is should we sell the stock and pay off the mortgage now? Our mortgage is at 4 percent.

ROMANS: Louis, what do you think?

LOUIS BARAJAS, AUTHOR, "OVERWHELMED, OVER WORKED AND UNDERPAID:" It depends because what happens now is most likely the mortgage has more than paid off. They've paid off all the interest, the way we amortized loans is we paid off the interest first and now we have the debt that we're not owing anything on pretty much and I would suggest at this point, don't get scared and leave your money and let's take a look at what we want to do with the money.

ROMANS: Linda in Texas. Linda what's your question?

LINDA, CALLER: Yes. My husband is 61 and he would like to retire in about four to five years. We contribute to a 401(k) diversified, do we keep it there or do we roll it over right now with this crisis?

VELSHI: Very good question. One we've been getting many, many times this week. Doug lets go to you, what do you think?

DOUG FLYNN, FLYNN, ZITO CAPITAL MANAGEMENT: Just because you roll it over does not mean you will keep it invested. So if you have it in appropriate allocation, I don't think you want to let these types of events get you off the loan term game plan. This money could possible still be with you for the next several decades while you live your retirement life. If you roll it over to an IRA you can continue that. We're talking about rolling it over and putting it in the bank. I don't know that I would do that at this point. You are selling at the worst possible time right now.

BARAJAS: People are talking about Wall Street, Main Street; I don't know what that is. I'm going to talk about my street. I don't know if people know what proper diversification is. See a professional until you know what that is. A lot of people have made a lot of assumptions and that's why they've lost a lot of money.

VELSHI: Ryan this question might be the most popular one that we are getting in the last week, how do you determine what your allocation is? People are asking us do we continue to contribute. Do I stop my contribution and how do I rebalance?

RYAN MACK, OPTIMUM CAPITAL MANAGEMENT: Well, the bottom line is let's look back to the crash of '87. If you'd have invested the day before 1987 a year later you'll be up money, let's look at September 10th, the day before, the worst time to possibly invest a year later you would be up money.

VELSHI: You would have actually been up money two months after September 11th.

MACK: We need to have a long-term view. This is stocks on the cheap as far as I'm concerned. The Dow was at 14,280 and now it's hovering around 11,000 and see stock, keep putting money in there. That's their say long-term perspective, not short term.

WILLIS: A lot of us are in mutual funds and we don't buy individual stocks. There are two things that make a difference in your return. One is diversification and the other is not paying high fees. Did I say stock picking? I didn't say stock picking. That's not the main thing that makes the big difference in your investment.

ROMANS: There's plenty of time to give us a call. The address for twitter is twitter.com/issue one CNN. This is a special emergency edition of YOUR MONEY.

(COMMERCIAL BREAK)

ROMANS: Welcome back to the special emergency edition of YOUR MONEY. By the end of this half hour we're hoping to tell you whether your house is protected, whether your money is protected and whether your job is secure and exactly how you should ride out what's happening in the capital markets and the economy.

VELSHI: We're taking calls and tweets. We have a tweet right now from Broken. Who says how long does foreclosure haunt you? How should we decide if to foreclosure leaving deed to the bank or including home in bankruptcy? Louis Barajas, what do you think?

BARAJAS: It will be on there for about ten years, but that does not mean that you can't buy a house again. If you lose your home and start working back on the credit you can buy one in a couple of years.

VELSHI: Gerri, I know you sounded on this before that you can possibly buy a house again, doesn't mean you should get yourself into this pickle about adjustable rates and mortgages you can't afford.

WILLIS: And if you can get a mortgage right now, let's face it. That's the problem. It's not just Wall Street that is having problems getting credit. It's regular individuals, auto loans, mortgage loans, credit cards, you name it. It's tougher to get money.

VELSHI: And last night the debate, people were reminding everybody about what it is that they talked about in the past. They've given you a warning about the housing crisis two years ago, longer. We knew that the economy was turning down more than a year ago.

ROMANS: At least.

VELSHI: So heed the warning now. Things are not fantastic. Don't get yourself into more trouble than you might already be in.

ROMANS: Let's go to the phones. Lori in Michigan has a question. Loti what's your question?

LORI, CALLER: After seeing Washington Mutual fail, what should you be looking out for your own bank?

ROMANS: And credit unions too, I've been getting a lot of questions from people who were wondering well is my credit union FDIC- insured and that is a little bit different? Louis.

BARAJAS: You can go on the Web site for FDIC. And they'll tell you. I can't tell you which banks are doing poorly and which are doing well, but they'll give you six other Web sites that you can look at whether your credit union or your bank and how stable it is right now and how strong it is. That's my suggestion.

VELSHI: Most of the stories about these banks are circulating around the media. Ryan and Doug, with respect to mutual funds, with respect to those kinds of investments, obviously the underlying investment the stock that those mutual funds are buying could be at risk, but what's the security? Are you getting calls from people who say are my 401(k) s safe or are my investments safe?

MACK: Bottom line is your 401(k) and your investments are about as safe as the company itself. So as long as you're invested in good quality companies and I'd just advise individuals to make sure they're buying the right mutual funds and if the company does bad then that's the risk you're essentially taking is if you're investing.

VELSHI: That's the beauty of a mutual fund. Any mutual fund could be hundreds that it divides that risk over right Doug?

FLYNN: Definitely and the calls we are getting are, is the mutual fund that I'm holding in my investment account is it held in my own name or is it held in the company's name or how does that work in case the investment company goes out of business and just like you check FDIC for your bank you need to check SIPC for your investment accounts and you want to make sure there's protection there for your assets and being held in an investment firm as long as they're a member of SIPC and you're below those limits.

ROMANS: Let's go back to the phone again. Joan is there in Florida, Joan what's your question for our panel?

JOAN, CALLER: I have -- I'm in Florida, and I have my money in a certificate and all my money in a credit union in New York State. Is everything going on with the banks affecting my credit union?

VELSHI: Let that's a good question. The CD first of all, you're talking about a certificate you're probably referring to CD. Gerri people have been asking, CD's, Money markets, cash in the bank. What's safe and what's not?

WILLIS: If your bank is FDIC-insured you're fine. The limits for FDIC insurance you should know, $100,000 for an individual account and $200,000 for a joint account, $250,000 if you have some kind of retirement fund in the bank and a CD, a certificate of deposit the bank has its full face and credit behind that instrument and if a bank has problems, the government steps in and takes over that bank and it typically happens over a weekend.

You are made whole almost immediately. You can use your ATM card and write checks and it's typically painless and I know people out there are concerned and worried and you guys probably talk to them every day.

ROMANS: If it is a credit union, a lot of people, if it's a credit union just treat it exactly like a bank.

WILLIS: The limits are the same 100,000 for single accounts, 200,000 joint and 250,000 for a retirement account. They have to be a member of NCUA, go to NCUA.org to get details on that.

VELSHI: We saw with the failure of Washington Mutual, the FDIC in that case did do what it normally does. Regulators took over the bank and the FDIC seized it and they had pre-a ranged a deal. They found buyers for it and they moved it over to JP Morgan Chase. It is a transparent; I think Gerri used the word a seamless transition if you are a client of Washington Mutual. That money is now safe. It's probably not worth getting alarmed about the things that you shouldn't be alarmed about but there are things out there that are worthy.

ROMANS: Let's go to the phone. Bonnie is in Missouri. Hi, Bonnie. What's your question?

BONNIE, CALLER: I'm holding $79,000 worth of corporate bonds in both Ford and General Motors that will mature beginning May 15th of 2009 through September 15th of 2009. If I would have to sell these bonds at this point I would have to take a $12,000 loss. Would you hold on to these bonds in an IRA account?

ROMANS: So, the bonds for an IRA account, how much? $79 in Ford and GM bonds maturing in May 15th.

VELSHI: 2009. Doug, I see an expression on your face that looks a little worried.

FLYNN: yes. I don't know why you're still holding them in the first place given the state of the credit markets and those two firms which are could absolutely go bankrupt. We do hear from time to time people saying how could a company like GM go bankrupt or other companies go bankrupt and the fact of the matter is they can still operate and be completely bankrupt and all of those corporate bonds are completely worthless.

So the question I would ask is if what is going to bother you more? If you sell it now and take a $12,000 loss or if you try to wait until May or next September and you have zero? VELSHI: I want to point out. Buried in all of this news that we've seen, this is the only weekend in history where a failure of the major bank is not the number one story in the news. Another piece of news is that General Motors has drawn down its entire credit line, its entire credit line. It took out the last three and a half billion.

Which means at this point General Motors' ability to finance its operations is entirely dependent on cars being sold and their finance unit working. If individuals are wanting to buy corporate bonds what is your advice to them? They should do this in funds, should they not?

FLYNN: Most definitely, but it will not have the same appeal in the semiannual dividend. You have to take a look at these companies and say how much are they earning relative to what the value of the company is? A lot of these companies have negative earnings and you know if you have negative earnings how long will you stay in business?

ROMANS: More phone calls and twitter talks next, but during the next break logon to CNNMONEY.com and you can check on the very latest news and your money. That's CNNMONEY.com.

(COMMERCIAL BREAK)

ROMANS: Is your money safe? This is a special edition of YOUR MONEY. Trying to help answer these questions for you.

VELSHI: We don't stop in the commercial breaks, Gerri Willis, Ryan Mack, Louis Barajas, and Doug Flynn are sitting there, and they are our panel of experts. And Gerri you folks have been having a discussion about what the paralyzed consumer, investor, American citizen is supposed to do right now.

WILLIS: Well here is my question, you know I have money and a lot of people do out there, they want to invest it, but I am paralyzed. I do not know where to turn. We just had a question about corporate debt. That's the last thing I do right now. I don't know what those individual companies are up to if I have money what should I be doing with it?

BARAJAS: First of all, make sure they're budgeting appropriately so if they start an investment strategy they can sustain it with their disposable income. Secondly, they need to have three to six-month living expenses in case something happens if a car breaks down or leaky roof and they lose a job. The economy is going awry. Job loss is definitely a risk.

People are fearful or they're angry. I am seeing people who are really, really angry. You can decide to repair our lives or take action. Do exactly what he said and do something.

WILLIS: But guys where do I put my money? I have some money and I want to spend it, I want to invest it, I think things are cheap right now, but I'm paralyzed.

FLYNN: It's difficult off my own money every two weeks I put money in our 401(k) and it's painful to watch it. Every time I put it in, it goes down.

VELSHI: But you are still doing it, but as an expert you are still doing it.

FLYNN: I have to still do it. Because that goal for me is many decades out so I'm not putting the money I need tomorrow in there, but the goal that's very far out, you have to keep it safe? This will all work itself out.

MACK: We have to educate ourselves. The Internet bubble happened why? Individuals are putting money into stocks like lemons and antelopes jumping into the river falling to certain death, you know? Investing in stocks that are qualified and research stocks and exchange-traded funds, great place to invest right now, low expenses and well diversified in the broad asset classes and make sure we're not just following the crowd.

BARAJAS: Right now when people are get greedy they're preying on the vulnerable. I mean I go with the average person on the street and they are really scared, you see all these commercials on, go to gold. And we see another run on gold. Go to something else and then we have problems all over again.

ROMANS: Lets take a look; I want to go to twitter.com. This is so funny to say. This seems like a terrible time to be a recent college graduate. Bad job market and no credit, how will my generation recover? Not something you heard at presidential debates. People talking about how a generation can recover. Ryan, let me ask you, this is a tough time. You got a long time horizon before you can retire, but you have student debt and you're trying to find a job in a lousy market.

MACK: You know Warren Buffett said it best; the best defense is your own ability to generate income. Sometimes we can't necessarily look for the economy right now. We have to look within ourselves. What skills do you have? What sort of passion do you have that you can apply yourself toward? If you can't give 110 percent on your job and you're kind of lagging you met get cutoff. I actually like being a lawyer. I actually starting my own business and trying to create capital for myself and use that offensive mechanism of saving money to help save that money for the long run.

VELSHI: 605,000 jobs lost so far this year and there's no one who believes that number will not get bigger for the rest of the year. Let's go to Utah, Richard is on the phone. Hi, Richard.

RICHARD, CALLER: I'm curious. I haven't heard any mention of holding people accountable that were making billions of dollars while this all happened. Are we going hold them accountable and recover some of their cash in assets that they piled up while this was all going on?

ROMANS: Oh Richard we talk it accountability a lot you wouldn't believe it. One of the things that we talk about is. Do you talk about accountability or do you try to solve the problem first or where are we in the cycle of these crises? There are a lot of people who are calling for somebody's head, Gerri. In your reporting you've been hearing an awful lot about this too. Just outrage out there.

WILLIS: You cannot blame these people. We saw this coming for years. It was obvious. The derivatives market is any number of times bigger than the stock. The bond market combined. It was clear this would happen. People are outraged but the question at the end of the day and the question for Congress this weekend is are you going to punish Wall Street or are you going to fix the problem because you can't do both at the same time.

VELSHI: We talked about the derivatives market. This is my blackberry. I own it. I'll rent you the ability to use it for 30 days and you will somehow rent that out to someone else, the ability. It is so much bigger than the stock market which actually has things that it invests in.

We'll keep taking your phone calls and a little more than 15 minutes for your tweets as I have been told they are called and your phone calls. You're watching a special emergency edition of YOUR MONEY.

(COMMERCIAL BREAK)

ROMANS: Gerri Willis, Ryan Mack and Louis Barajas and Doug Flynn are our panel of experts here trying to help us protect your money. As you can see, deep in conversation.

VELSHI: They're working the questions they've got. Because these are not simple answers, they sound simple, but they're not. Let's go to the twitter board real fast to Reed Right. Reed says is there any good reason not to outlaw the arm, the adjustable rate mortgage? Gerri Willis is our expert on adjustable rate mortgages.

WILLIS: I don't think you should outlaw them. I think they make sense sometimes. There are a lot of people in this country who work in jobs where they move around a lot. They don't want a 30-year fixed rate mortgage; they want a 10 or a 15. I think they're OK, but they shouldn't be misused.

BARAJAS: I think what the problem is most people think that the arms are the same ones that the subprime where they were interest only and converted to fully amortized loans which are something different, arms work and arms have always worked.

ROMANS: OK, let's go to the phones quick. Betty in Florida has another real estate question. Hi, Betty.

BETTY, CALLER: Hi, I'm trying to do a loan modification through the bank and they don't want to talk to me. If I go through a lawyer, what the bank is willing to do? Are they going work with me?

VELSHI: This is very interesting. You were talking to me about the other day that we tell people that's what they should do. We say don't ignore your bank, please phone them and have a conversation with them and we have heard that they will work with you on a modification and then you get calls like this. WILLIS: Let me tell you it is a hard case here. If she misses a payment she's more likely to get help. This is sad, but true. Go to HUD.gov on the Web site, they have an 800 number and they you can get consultants to come in and argue your case.

VELSHI: That's ridiculous.

ROMANS: Won't it hurt your credit?

WILLIS: You don't care about your credit at that point. You're about to lose your house, right?

BARAJAS: For the last four years I've had client comes to me. I'm calling the bank, can I get them and everybody on television says just call them, they'll work with you. I haven't heard of a bank working with anybody. That's one of the reasons why we're in this mess.

VELSHI: Well listen for anybody who is out there in a bank listening to this, please save yourself and America some trouble. We are hearing from people, who are struggling, but they want to keep their home and they want to make those payments and if they're able to capitalize and delay those payments, people want to do this and I don't see why any bank would want to own anybody's home in America right now.

ROMANS: It would they're an awful lot cheaper to help people avoid foreclosure than it is to go through foreclosure. I mean an awful lot cheaper.

Let's go back to the phones. Steve is there in Michigan. Hi, Steve. What's your question?

STEVE, CALLER: OK. We're going borrow $700 billion from our people overseas or wherever we can get the money. OK. A year from now, 18 months from now, six months from now this doesn't turn around. Where do we get the money from then? We are already into a trillion dollars from debts abroad. When do we say enough is enough?

ROMANS: Steve, here's the issue. Do you take it now or do you not take the money now and you have something far worse? This is the discussion we were having at the beginning of the hour.

VELSHI: AIG, there were a number of analysts who said it would not have been any where close to $85 billion if that deal were done a week earlier when they knew how much it was going to cost. There are a lot these either bail outs or loans that may have been less expense a week ago. We talk about Caterpillar, a major stable company paying almost double to raise money last week than it could have a week earlier. So there's something to be said for doing things earlier than later.

What happens if it doesn't work? There are a lot of people with that question out there. What is the exposure? Now fundamentally, while I know you care about the larger question, Steve, I will ask Ryan and Doug, what happens to you if it doesn't work? What happens to the investment in the stocks that I've got? Can you advise me, Doug, on what it is I should be investing in, in case this doesn't work?

FLYNN: Oh, boy. The issue is how much this is going to add to the national debt in the end if we don't have a way to work our way out of it. How much does it personally come down to? How much do I already owe for the several trillion?

ROMANS: I think you owe $32,000.

FLYNN: OK, I may. I'm sure it will add in there if we don't solve the problem. That's the pit bull here. If you don't do something, this is going to turn into a much bigger issue in the crises of confidence.

VELSHI: Should I stay away from investing, let's say I have a very well, diversified mutual fund, do I want to not be in financial institutions as part of my mutual fund or do I want to buy them because they are low?

FLYNN: Financial institutions are is not where you want to be right now. That whole thing has to work its way through. You have to have a lot of guts to really sector out. I don't think people are really diversified enough to begin with and have a regular standard portfolio that meets their risk level first. That's where it begins. If your goals are 10 or 15 or 20 years out, the market is going to do its thing. The market 15 years ago with all of this was like 3,500 on the Dow.

VELSHI: And now we're 10,000.

ROMANS: Let's go to the phones. Barbara in Arizona has a question. Barbara, what do you want to know?

BARBARA, CALLER: Yes, I would like to know, Washington Mutual now owns my home and now they are bought out. And I recently filed a Chapter 13 as well as working with a known council agency to save my home. Where do I fit into this? I mean, am I going to -- the banks don't want to work with everybody and everybody's trying to work with the banks to save their home. They want to stay in it. Where do I stand now?

VELSHI: The fact that Washington Mutual has been bought out by JPMorgan fundamentally has no affect on your loan or what's going on with your loan. The question remains, you have filed Chapter 13. At that point according to what Gerri and Louis were saying, that process is in place. Does this affect Washington Mutual's closure and transfer to JPMorgan at all?

WILLIS: I don't really see that. She's got very big problems here it sounds like. Working through a bankruptcy is always difficult. In this environment, it's going to be particularly difficult because she's going to have very difficult time getting money for anything at all. My advice here is it's time to really decide to, you know, pay less money for everything, and bring down your expenses, conserve. You really have to protect yourself here. And make sure that you keep your job. You have to keep your job here. BARAJAS: Just so people are listening. There are so many people out there and they're so troubled. If you're in the homes and really feeling that pain, you have to realize there is hope. It's just going back and creating a plan. There is hope. I'm seeing it right now.

VELSHI: Let's get into the final phone calls and final thoughts next on this special emergency edition of YOUR MONEY. But first, "Right on Your Money."

(BEGIN VIDEOTAPE)

ROMANS (voice over): The instability in the economy likely has folks within 10 to 20 years of retirement worried, especially if they haven't started saving. It is never too late to start saving for retirement.

UNIDENTIFIED FEMALE: So if you're in your 50s, you need to think about the fact that retirement is close, it's in the near future. So you don't want to be as aggressive and you want to look and see where you're invested in terms of asset classes. Cash, stock, bonds and liquid assets.

ROMANS: If you have not been contributing regularly to an I.R.A. or 401(k), consider making catch-up contributions.

UNIDENTIFIED FEMALE: When it comes to your IRA contribution, make sure you put the maximum amount in that you can. Take advantage of that opportunity. Even if you're 52 and in 7 1/2 years from now, you're going to be able to start taking withdrawals from that IRA, go ahead and do the maximum. Don't pay the taxes today.

ROMANS: But even if you have been saving for 20 or more years, remember, consistency is key.

UNIDENTIFIED FEMALE: Stay consistent always with your contribution, where you want to make changes, this has been aggressive, let's say and very concentrated in the stock market. Equities, go for more diversification. Start to bring it down a notch so that here in the final inning, you don't lose any money.

ROMANS: And that's this week's "Right on Your Money."

(END VIDEOTAPE)

(COMMERCIAL BREAK)

ROMANS: Straight to the phone. Kathy is in Massachusetts with a question. Hi, Kathy.

KATHY, CALLER: Hi, how are you?

ROMANS: Great.

KATHY: My question is what would the immediate impact to the average American citizens being the results of the immediate bailout? VELSHI: Well, we get to see from the American candidates exactly what it is going to be because nobody has talked about adjusting their tax plan. One of the things that Christine has been making clear over the last week is that the tax plans of most major candidates would see an increase in the debt, would cause an increase in the debt and that was before this plan has came about. No one has suggested that either the debt would increase or those tax cuts you were expecting might actually drop.

ROMANS: Doug, what do you think, I mean any big impact from the $700 billion day to day on the consumer when things happen or just things get getting worse?

FLYNN: I think that's what it is. It's the confidence. You have to stabilize this. I mean look, recessions are normal if we're in one as part of a growing term, growing economy. Day-to-day situation might be dire. But overall you have to fix this overall shift that we're all on.

MACK: I think at the end of the day, the capital, the bill will pass, the capital will free up. And we have to understand the most precious commodity that we have is really us and our ability to generate capital for ourselves.

ROMANS: Louis, wrap it up in ten seconds.

BARAJAS: I might hope another can of worms that we talked about, housing affects Social Security. Everybody is worried about their 401(k) s. Nobody's talked about it.

VELSHI: Nice of you to open up a can of worms with no time left. Louis Barajas, Ryan Mack, Doug Flynn, and Gerri Willis we hope you all learned a thing or two in this last hour and that we're helping you get through this financial crisis.

ROMANS: Economy is issue number one. We here at CNN are committed to covering it for you. Stay with CNN everyday for the latest from the CNN money team. Have a great weekend.

(COMMERCIAL BREAK)

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