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American Morning
AIG Backlash Building; Taking Back From the Madoff's; Laid-Off Professionals Turn to Retail; People Cutting Visits to Salons; Rhode Island Housing Rehab
Aired March 17, 2009 - 06:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KIRAN CHETRY, CNN ANCHOR: Welcome. It's Tuesday, March 17th. It's St. Patrick's Day.
JOHN ROBERTS, CNN ANCHOR: It is St. Patrick's Day.
CHETRY: We're not being pinched.
ROBERTS: No, we're not, but we're going to wear the green today. This is good. You know, today is the day whether you're Irish or you want to be.
CHETRY: That's right.
ROBERTS: Right?
CHETRY: Everyone's Irish today.
ROBERTS: I'm sort of a wannabe. I'm Scottish.
CHETRY: And I have nothing to have anything to do with it, but I love it. I love the day.
ROBERTS: It's going to be a great time today. A lot to cover this morning and a special "ROAD TO RESCUE" edition of AMERICAN MORNING. Today, we're bringing you the kind of coverage that you won't see anywhere else on TV, and we're taking dead aim at issue number one, the economy. But we're doing a lot more than giving you just headlines about money in the markets. We're telling stories and sharing tips that will help you and your family weather this economic storm.
And we are tapping into the full resources, the global resources of CNN to do it. Christine Romans, Gerri Willis will be here, along with a lineup of guests. And you can ask questions. Call our new show hotline at 1-877-MY-AMFIX. That's 877-692-6349. You can also send us an e-mail or link to our Facebook and Twitter pages by heading to CNN.com/fix.
And with that said, let's get going this morning. Here are the big stories that we'll be breaking down in the next 15 minutes.
Outrage at AIG, it's growing in a big way this morning as the bailed out company gives away millions in bonuses. A U.S. senator now saying that company executives should resign or in the Japanese tradition, commit suicide. We've got the tape and you'll hear it this morning.
Federal prosecutors moving to seize more than $100 million in personal assets from convicted Wall Street swindler Bernard Madoff and his wife, Ruth. They have targeted homes, cars, boats, even $65,000 worth of silverware, everything that may have been profit from Madoff's criminal enterprise.
And your home, it's your biggest investment and its value has most likely tumbled in the past year. This morning we are searching for answers on just how bad it will get and when you could expect home values to bottom out and potentially start back up on the upswing.
CHETRY: All right. The big story this morning, backlash building from coast to coast as bailed out insurance giant AIG hands out hundreds of millions of dollars in bonuses to executives. We told you about it yesterday on our show, but now the new news today. President Obama joining the chorus blasting AIG and also vowing to look into how to take the money back.
Also, Republican Senator Chuck Grassley channeling the outrage creeping up across the country. In fact in a radio interview, he said that AIG execs should resign or kill themselves.
(BEGIN VIDEO CLIP)
SEN. CHARLES GRASSLEY (R), IOWA: I would suggest the first thing that would make me feel a little bit better towards them, if they had follow the Japanese example and come before the American people and take that deep bow and say "I'm sorry," and then either do one of two things, resign or go commit suicide.
(END VIDEO CLIP)
CHETRY: All right. Well, it's not just the president and members of Congress who are upset, so are you. In fact hundreds of people have been calling our brand new show hotline, 877-MY-AMFIX, and the majority of them are furious.
(BEGIN VIDEO CLIP)
JOE, CALLER, ROCHESTER, NEW YORK: This is Joe T. calling from Rochester, New York, calling to comment about AIG.
That is the most deplorable thing I have ever heard in my entire life. And the question to them is, they didn't know this before they took our bailout money? It's terrible what they're doing. It's disgusting that we even gave them the money and it's disgusting that they're allowed to continue to do business.
CHARLES, CALLER, ATLANTA, GEORGIA: This is Charles from Atlanta, Georgia.
I want to comment on paying these AIG executives all these big bonuses. The CEO seems to say that we have to pay them these big bonuses to get them to stay. To me, that's like the Detroit Lions. We need to pay our players big bonuses to get them to stay. God, do we want them to stay?
(END VIDEO CLIP)
CHETRY: So there are our viewers and good calls, by the way. Thanks so much sounding off, not pulling any punches.
CNN's Carol Costello in Washington with a special connection not only to this story because you're covering it but also to the Detroit Lions. How about that comparison?
CAROL COSTELLO, CNN CORRESPONDENT: I know. I must say with a pretty comparison, thank you, Mr. Viewer.
You know what, Kiran, anger is boiling over out there. I think we've reached the tipping point. It really is Main Street versus Wall Street in a vicious way now. There's also a lot of political posturing going on out there and in the end, though, there's not much anyone can really do.
(BEGIN VIDEOTAPE)
COSTELLO (voice-over): America has declared war on AIG, from the president...
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: This outrage to the taxpayers who...
COSTELLO: To Congress.
REP. BARNEY FRANK (D), MASSACHUSETTTS: People who screwed this thing up enormously.
COSTELLO: To New York's attorney general, to taxpayers and the time for tact is over.
UNIDENTIFIED MALE: Makes me feel disgusted.
UNIDENTIFIED MALE: Makes me angry, certainly.
UNIDENTIFIED FEMALE: Well, they can change the law. They do every day.
UNIDENTIFIED MALE: If you're a CEO of a company like that, you shouldn't be able to drive a limo. You should ride your (bleep) on the subway like everybody else does.
COSTELLO: Public outrage has intensified ever since word leaked out that some AIG executives will receive $165 million in bonuses, despite the fact you, thanks to a $170 billion bailout, now own 80 percent of AIG. How can that be?
AIG says there's nothing it can do. It's bound by preexisting contracts that if voided would lead to serious legal as well as business consequences for not paying. And while that may be true, there are plenty who say bull. REP. CAROLYN MALONEY (D), NEW YORK: The autoworkers had a contract, too. They're being asked to modify it. Why in the world was AIG executives and workers not asked to modify their contracts, particularly those who caused the problem.
COSTELLO: Because experts say those executives knew AIG would not be allowed to collapse because the government believes AIG's failure would tank the whole economy. By contrast, the auto unions voluntarily modified their contracts because the government made it clear bankruptcy was an option.
BARRY E. ADLER, NYU SCHOOL OF LAW: Federal money should be conditioned on elimination of old claims, whether that's done in bankruptcy or through a nationalization process. Before the federal government pours money into a troubled company that it deems necessary to save, the government should make sure that that money goes where it's intended.
COSTELLO: So what can the government do? Well, it can wield the shame weapon. The New York attorney general now wants names so he can publicly determine who is getting a bonus and whether they were involved in conduct that led to AIG's demise. And Congress will hold hearings on Wednesday. The star attraction? Edward Liddy, AIG's government-appointed chairman.
(END VIDEOTAPE)
COSTELLO: OK, and here's another idea for you, Kiran. Congresswoman Maloney plans to introduce legislation that would tax any bonus compensation at 100 percent. To get a bonus, you're taxed 100 percent. A lot of people probably would say, what a great idea. I don't know if it will fly, but we'll see what happens today when she plans to introduce that legislation.
CHETRY: Right. It's interesting because she's saying it bypasses the argument that, you know, we're violating our contract. So they're saying OK, you're going to give them the money that's fine, it just gets taxed at 100 percent so we get it right back. We'll see if it flies.
COSTELLO: You know, the one thing this has done it's united Democrats and Republicans because both sides are mad. So we're seeing a beautiful kind of bipartisanship, if you will, because of these bonuses.
CHETRY: That's right, united against a common enemy. We've seen it so many times. All right, Carol, thanks so much.
ROBERTS: It's also united politicians and the common person. As you just heard, taxpayers are angry, Congress is angry. Our viewers calling into our hotline 1-877-MY-AMFIX are angry and it doesn't end there. A lot of our iReporters also fuming over the unbelievable bonuses being paid out by insurance giant AIG.
Here is Gerald Dimmitt. Let's listen to him.
(BEGIN VIDEO CLIP)
GERALD DIMMITT, VANCOUVER, WASHINGTON: These big companies don't give a damn about we, the people, and the United States of America. They only care about themselves and it's quite clear as we look at the news and we see that they're rewarding a bunch of poor achievers with millions of dollars that we, the taxpayers, gave them. We mortgaged our children's future.
(END VIDEO CLIP)
ROBERTS: He sounds like the guy that narrated "Lord of the Rings," does he?
CHETRY: He does.
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: That great voice.
ROBERTS: CNN's Christine Romans joins us now and this outrage over AIG, I mean, you would think that it's pretty well-placed.
ROMANS: It's an overwhelming response. I mean, I couldn't believe the response that we got from all these phone calls. And you're right, it is pretty well-placed. I mean, look, we put hundreds of millions, billions of dollars into this company and now turning around and paying out the very people who put the company in the mess and the global economy in a mess.
A couple of things here. The Treasury Department had said that it doesn't think legally it can get that money back but what they might be trying to do is to recoup that money going forward somehow, meaning any future monies that they give to AIG they'll say hey, but you got to pay us back for the $165 million in the bonuses. But that still means those people get the bonuses. I mean, that's what this is all about which is why Congress they're trying to figure out ways to get that money from those people. It's sticky but this is a legal contract and it looks like it's a binding contract.
CHETRY: We're going to be talking to Jeff Toobin, our legal analyst, in a couple of minutes about that situation. But, you know, in a quick word, is it realistic that the congresswoman's plan about trying to tax it at 100 percent, could that possibly happen?
ROMANS: I'm not sure. There's a couple -- there's another one as well in there, too, another bill that was floated yesterday. I think you're going to see a lot of legislation written for people to try to get this back.
CHETRY: OK. By the way, you get a pinch, you're not wearing any green except your eyes.
ROMANS: No, OK, my eyes. That means I'm Irish every day. My eyes are green.
CHETRY: Thanks, Christine.
Well, we know that the story had a lot of people looking to sound off, and we love to hear from you. Call our new show hotline, 877-MY- AMFIX, 877-692-6349. Leave a message as you just heard some of our other callers do, or you can put a question in as well on any big story that's going on.
ROBERTS: Well, this is the picture of outrage for over 13,000 investors listed in bankruptcy court records as having trusted Bernard Madoff with their money, but Madoff's mug shot may be cold comfort to those who were swindled by his $65 billion Ponzi scheme. As he awaits sentencing in June, the feds are going after Madoff's ill-gotten gains, trying to recover anything they can for victims of the massive fraud. And it appears prosecutors are determined to leave the Madoffs with next to nothing.
CNN's Allan Chernoff is following that story for us this morning.
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: John, Kiran, Ruth Madoff, Bernard Madoff's wife, has the bulk of the families' assets in her name. Even so, legal experts say, the government should have little problem seizing everything the Madoffs have, the homes, the boats, even the family jewels.
(BEGIN VIDEOTAPE)
CHERNOFF (voice-over): Bernard Madoff swindled investors out of their life savings. Now, he's about to lose his.
In pleading guilty, Madoff gave up more than his freedom. He agreed to forfeit anything he made off the criminal enterprise. That includes his four homes in Manhattan, Montauk, Palm Beach and France; all the fine art and furniture in them, worth nearly $10 million; a $39,000 Steinway piano; silverware set worth $55,000; and Ruth Madoff's jewelry, valued at $2.6 million. There are four cars, two Mercedes, a BMW, and a Volkswagen, and $17 million at Wachovia Bank.
In all, more than $120 million of assets most of it in Ruth Madoff's name.
BRADLEY SIMON, FMR. FEDERAL PROSECUTOR: It would be a little hard to separate her money from the criminal enterprise. At the end of the day, in my view, the government is going to take every penny.
CHERNOFF: Liquidating Madoff's company could raise millions more for victims of the fraud, but the total still amounts to a tiny fraction of the $65 billion that Madoff investors thought they owned. Victim Miriam Siegman believes Madoff must have more hidden away.
MIRIAM SIEGMAN, MADOFF VICTIM: I think there's a huge possibility that there are all kinds of accounts and there are money that have been sloughed off into other entities.
CHERNOFF: And the government says it's continuing to search for more assets to help victims recover some of the money they lost.
(END VIDEOTAPE)
CHERNOFF: For good measure, the government told Madoff before his plea it intends to seize $170 billion. Good luck finding that amount -- John, Kiran.
CHETRY: All right, and right now it's still getting harder to own and hold onto a home. And as we speak, home prices are sinking. So just how bad can we expect things to get and more importantly, when will things get better? We've got some answers for you still ahead.
Also a reminder, we're taking your questions live on Twitter all morning long. Head it-to-our show page at CNN.com/amfix to get the Twitter link, and Gerri Willis is logged on and she is ready to tweet.
It's 12 minutes after the hour.
(COMMERCIAL BREAK)
ROBERTS: Welcome back to a special "ROAD TO RESCUE" edition of AMERICAN MORNING.
And part of our focus this week, the housing crisis. Despite the president's plans to stem the tide of foreclosures, right now many of you are still feeling the brunt of it. Here's an iReport from Ritchie in Arizona. He owes more than his house is worth now. He's underwater and he's thinking about just walking away.
(BEGIN VIDEO CLIP)
RITCHIE WILSON, IREPORTER: Property values out here in this neighborhood, southern Arizona, has greatly decreased in value. The builders have walked away. The landscapers have gone to pot. The homeowners association are not taking care of their business, and it's just an eyesore and you get to the point to where you just want to walk away and say, you know, I give up.
(END VIDEO CLIP)
ROBERTS: And we would love to hear from you. Send us an iReport. Just go to CNN.com/amfix. Of course, all morning long we're twittering. You can send us your comments. You can read what we're saying this morning and of course, we're on Facebook as well. Go to CNN.com/am for links to all of the various platforms that we're reporting on today -- Kiran.
CHETRY: John, thanks.
And focusing more now on the housing crisis, it's a mind-boggling $1.4 trillion. That's how much home values plunged in just the fourth quarter of last year. With numbers like that, we're tapping into the resources of CNN money to bring you insight on when your home's value may start to increase again.
CNN's Christine Romans is back with us. And this is especially pertinent because of so many people that are facing the situation, not foreclosure but being underwater.
ROMANS: That's absolutely right, Kiran. This is a huge issue for so many people. People want to know how bad things are, how bad they're going to get, and when it's going to get better. We looked at the job market yesterday morning. Now, we're zeroing in on what's likely your biggest assets, your home.
(BEGIN VIDEOTAPE)
ROMANS (voice-over): A huge bubble popped. The housing market crashed. How bad is it?
TIMOTHY GEITHNER, TREASURY SECRETARY: Millions have lost or at risk of losing their homes.
ROMANS: $74,000 homes repossessed by the bank last month alone. Eleven percent of homeowners are behind in their payments. The vast majority of you are paying your mortgage on time, but the value of your house is likely plunging.
ROBERT SHILLER, YALE UNIVERSITY: We've been going down now for almost three years.
ROMANS: According to Case-Shiller data, in some cities home prices are down 40 percent. Millions of Americans owe more on their house than the home is even worth. How bad will it get? Let's look to the charts.
A home that was worth $100,000 inflation adjusted in 1890, tumbled in the Great Depression to just $73,000. The equivalent home during the 1982 recession cost $107,000. Even after the housing crash today, that very house is valued at $137,000. Even though prices are down, they're still well above the housing booms of the 1970s and 1980s. It means we may have a way to go to bottom out.
When will it turn around? Is good news finally on the horizon?
SHILLER: I'm not predicting it but I'm saying it would be entirely within the realm of possibility that later this year, we would see an improvement of that sort in the housing market.
(END VIDEOTAPE)
ROMANS: Robert Shiller says watch for successive months of stable home prices across the map. That will be the best sign, as he says, that we're coming up. So we haven't seen it yet but that's what he'll be looking for, home prices starting to stabilize and rise in different places across the country. That's what we're all watching for, Kiran.
CHETRY: Of course. Meantime, I guess the word of the day is patience if you're trying to figure out you're your lender whether or not you're going to get foreclosure help.
ROMANS: That's right, because we look at those February numbers and it was a little troubling. Even with this voluntary moratorium on foreclosures, we still saw the numbers go up.
CHETRY: Right.
ROMANS: What that tells us is that people who still live in their home, home prices are still falling. We're still affected (ph) in here.
CHETRY: Keep calling your lender.
ROMANS: Exactly. Exactly.
CHETRY: Christine, thanks - John.
ROBERTS: And more help for homeowners ahead on our special "ROAD TO RESCUE" edition of AMERICAN MORNING. Gerri Willis is going to will tell us how people behind on their mortgages can get back on track in her housing survival guide.
And eight years after leaving office, former President Bush about to grab the spotlight again. We'll tell you what he is up to and where today.
It's 18 and a half minutes after the hour.
(COMMERCIAL BREAK)
CHETRY: And welcome back to the Most News in the Morning. Twenty-one minutes past the hour. Time to fast forward to the stories that will be making news later today.
Celebrating St. Patrick's Day. President Obama's holding a budget meeting at the White House with the chairman in the House and Senate budget committees. The president is expected to make a statement after that meeting.
Also later today, former President Bush steps back into the public spotlight. He's giving his first paid speech since leaving office. It will be in Calgary, Canada. Tickets for today's event cost reportedly $400 apiece.
Also this afternoon, the Space Shuttle Discovery is going to be docking with the International Space Station. The shuttle and its seven-member crew are delivering the final set of solar panels needed to fully power the station as well as new equipment for the station's water recycling system. They want to make it so that more people can live there. How about that scare last week where they all had to go to the Soyuz capsule for a couple of minutes because of space junk?
ROBERTS: What I love is this water recycling system turns urine back into drinking water.
CHETRY: Oh, thank you. Thank you. I thought it was a purification system.
ROBERTS: It is of sorts.
All this week we're on the "ROAD TO RESCUE" helping you survive the money meltdown. And one of the things that really surprised us is a poll suggesting that nearly seven in ten homeowners are delinquent on their mortgage payments or seven in ten homeowners delinquent in their mortgage payments are not aware of the help that's available to them. So we had Gerri Willis to dig into that and she joins us now. What have you got for us this morning?
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: And good morning, guys. Yes, I want to show you a time line on how foreclosure works because it's sort of a mystery to most people.
Look, once you miss a payment your lender likely reports that to credit bureaus. Your credit score will probably take a hit with every payment you miss. Now after about three months, your lender files a letter of intent to file foreclosure or a notice of delinquency, and they send that via certified mail.
Now the letter will state that your home will go into foreclosure if you don't become current on payments. Then a formal foreclosure lawsuit that starts two months later. It's hand-delivered by a deputy or a sheriff. This is the scary part and it's where the legal process begins.
In some states, it could take a year or more to have your home sold and other states the process is faster. After you miss a few payments, your home could be sold at auction within one to six months. Although given the glut of homes in the market today, it could be a lot slower.
I have to say, though, this varies with where you are. What we described here was a judicial foreclosure and that, of course, is one that goes through the courts of law. In some places, these foreclosures occur in a month.
ROBERTS: Yes. So, what options are there for people?
WILLIS: Well, you know, you can get a loan modification out there. You can go to your lender and say I want a new loan, a loan that I can handle, one with lower payments, a lower rate of interest. You're going to have to apply for that and it requires that you do all the same things that you do when you apply for a loan. You better show all your documentation in terms of your income, whatever you owe to credit cards or anybody else.
Now, I know a lot of people out there are having a hard time right now getting those loan modifications.
CHETRY: Right.
WILLIS: But you should check out what the president is doing and what Congress has OKed with the Financial Stability Act. Go to financialstability.gov to get answers. This may help you get the loan modification you want. What I'm hearing, though, is it's taking awhile for these lenders to actually get it together and put these programs in place.
CHETRY: Yes, me too. And so does the foreclosure process stop if you've made those steps to reach out to your lender? Are they totally separate?
WILLIS: Well, you can, you know, stop the foreclosure process by getting a new loan but you've got to get your lender to agree because it's the lender bringing the action. So that's the way that works.
CHETRY: You've made steps to reach out to your bank. Can they -- does that foreclosure process stop while you're trying to do that or no?
WILLIS: You got to get your lender to agree. They stopped the foreclosure process. It's their lawsuit that they're bringing against you. So once you get them to agree to a new loan or some other kinds of terms for your deal, that means that you get a new loan. The foreclosure process goes away.
ROBERTS: Gerri, thanks so much for that good information this morning.
WILLIS: My pleasure.
ROBERTS: Rhode Island is one of the state's hardest hit by the housing slump. And later on this hour, we take you to a community in Providence, it's coming together to try to stop the flood of foreclosures.
CHETRY: Also ahead, Wall Street's modest winning streak is over, but is it a sign of an economic turnaround? We're going to ask two of the best economic minds whether or not consumers have a reason to be confident right now.
It's 25 minutes after the hour.
(COMMERCIAL BREAK)
ROBERTS: Twenty-eight minutes after the hour. Welcome back to a special edition of AMERICAN MORNING "ROAD TO RESCUE," a CNN survival guide. And here are some of the top stories making news right now.
South Carolina's governor, Mark Sanford, not taking no for an answer. Today, he'll submit another request to use a portion of South Carolina's stimulus money to pay down the state's debt. Yesterday, the White House rejected Sanford's first petition saying the money is meant to be invested in education and public works programs. Sanford, perhaps the most outspoken Republican opponent of the stimulus bill, has threatened to reject the funds all together if the president does not grant his request.
This morning, more evidence that having diabetes increases your risk of getting Alzheimer's disease and it may speed dementia once it strikes. Researchers studied nearly 3,000 diabetics and found brain function slows subtly as blood sugar rises but doctors say don't panic if you're a diabetic. Genetics are still the prime risk factor for dementia.
And former Vice President Dick Cheney's wife, Lynne, expected to return to Washington today after being released from a hospital in Philadelphia. She was taken to the emergency room yesterday after fainting in her hotel room. Mrs. Cheney underwent a series of tests before leaving the hospital last night. Her spokeswoman says she is doing well -- Kiran. CHETRY: All right. Well, all this week we're tackling the economy head on with "Road to Rescue." It's a CNN survival guide and this morning, a closer look at your stocks and your money.
Wall Street's winning streak ended Monday after four days of gain. Not heavy losses, the Dow only down seven. But was last week's rally a sign of a turnaround? Was it just a blip? And if you're sitting at home, how do you make sense of all of this?
Well, joining us now from Washington is Eamon Javers. He's a financial correspondent for "Politico." And also here in New York, senior editor of "Business Week," Diane Brady.
Great to have both of you with us. Thanks for being with us this morning.
EAMON JAVERS, FINANCIAL CORRESPONDENT, "POLITICO": Good morning.
CHETRY: So, Diane, what do you make of this right now if you are sitting at home? We've heard the president as well as his economic team come out trying to boost some confidence a little bit. We're expecting two reports today one on housing and one on inflation, and we saw the Dow pretty much hold steady.
DIANE BRADY, SR. EDITOR, "BUSINESS WEEK": Well, I think it's probably too early to be predicting a bottom at this point. The markets are -- everybody we talked to say the markets are going to move up and down for awhile and there's a lot of mixed news out there. You've got the automakers hat in hand going to Washington. Jobless figures. Yes, we're getting some good news from the banks but I think people are still largely on the sidelines unsure about what to do.
CHETRY: In the meantime, what is the -- what is -- Eamon, what do we say about the populist outrage over the AIG bonuses. We talked about it a lot yesterday, but it's certainly not going away.
JAVERS: Yes.
CHETRY: A pew research poll, 87 percent of people said they're bothered by the bank bailout in general.
JAVERS: Right.
CHETRY: And that was before word of the AIG bonuses.
JAVERS: Right.
CHETRY: And you have a president who -- well, he says, hey, I'm just as outraged as you are. It doesn't look like they can do anything about it.
JAVERS: Yes. The White House is really struggling to figure out what they can do about all of this. And folks I talked to over there yesterday were saying one of the plans that they're considering is attaching some strings to this $30 billion payment that was announced on March the 2nd. That money hasn't actually gone out the door yet. So the plan now is they'll restructure that agreement and get more stock, more equity in AIG to pay the taxpayers back for that $165 million in controversial bonuses for AIG executives. So that's one way of doing it. That way the taxpayers haven't actually paid for these bonuses, but the people who received the bonuses are still going to get that cash. You can't block that according to what folks at the White House were saying yesterday.
CHETRY: Yes. And that's what I think people were asking about. Diane, they're certainly asking of us via Twitter and some of the online blogging that we've seen. Why can't they say, stop the bonuses or you don't get any more of our money?
BRADY: Well, I think it's a good question but I can't imagine you could take the U.S. president to court, for example, for breaking your contract for your bonus, when the taxpayers own 80 percent of your company.
So I think - you know, yes, technically, maybe these are contracts but these are very turbulent times and AIG, frankly, is a company that's imploded. What outrages people is that the people in that unit in London that are getting these bonuses, the unit that brought down the company. So I can't imagine they're not going to be stopped somehow.
CHETRY: And Eamon, maybe you could talk a little bit more about that. Why is it that in the AIG that they're sticking to this, that they're defending this practice, and the bottom line, the government having an 80 percent stake in this company really means nothing.
JAVERS: Well, because they don't have a good political radar for one thing. I mean, clearly - I mean, this is a huge outrage across the country. I mean, as you said in that Pew poll, even the people in that poll who support bailouts are angry about the banks and angry about the behavior here. And by sticking to their guns here on these bonuses, AIG really risks currying just the wrath of voters who say, we won't forget it, the next time you need some money, forget it, we're going to just cut you off here.
That could be really dangerous not only for AIG but for the nation and the global economy. That's what has people worried here is that Barack Obama is in a position now where, as he goes back to Congress for more bailout money if he needs to later this year, the cupboard will be bare because the politicians will just throw up their hands and say, we can't give any more money if it's going to be wasted on things like these kinds of bonuses.
So this has more implications than just AIG itself. This has implications into how the government can actually manage this bailout and recovery process throughout the rest of this year.
CHETRY: All right. Eamon Javers as well as Diane Brady, great to talk to both of you this morning. Thanks so much.
BRADY: Thank you.
JAVERS: Thank you.
CHETRY: John?
ROBERTS: From the courtroom to the showroom. We'll tell you where professionals, who have tumbled down the economic ladder, are now finding work.
And a reminder that we would love to hear from you. Call our new show hotline 1-877-MY-AMFIX. That's 1-877-692-6349. Leave us a question or sound off on whatever's on your mind as "ROAD TO THE RESCUE" on AMERICAN MORNING continues.
(BEGIN VIDEO CLIP)
GARY BRADFORD, CALLER, LOS ANGELES, CALIFORNIA: My name is Gary Bradford. I live in Los Angeles, California. I work at Commerce Casino. The only people you should be bailing out is the poor people downtown, poor people in Missouri, poor people in New York and poor people all over this land.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
ROBERTS: Welcome back to a special edition of AMERICAN MORNING - "ROAD TO RESCUE: A CNN SURVIVAL GUIDE." And this morning, if you're unemployed or facing a job loss, we are here to help guide you through the tough economic times.
Since the recession began, more than 4 million jobs have been lost. So who's hiring right now? Retail, believe it or not, is the second biggest sector accepting job applications. And because of it, a lot of folks with professional backgrounds could now be found out on the retail floors. CNN's Jason Carroll joins us now with one particular story.
Good morning to you.
JASON CARROLL, CNN NATIONAL CORRESPONDENT: Good morning to you.
A lot of professionals very happy that retail is hiring. If you were to ask what Paul Semenza what his profession is, he's likely to say he's an attorney. But that doesn't mean that's what he's doing for a living right now. The 51-year-old went from a courtroom to a showroom. His job, like so many other white collar jobs, lost in the recession.
(BEGIN VIDEOTAPE)
CARROLL (voice-over): For years, Paul Semenza practiced law as a defense attorney for a small firm near Boston, often having to work at home after hours but he still loved his job. Then a year ago, everything changed.
PAUL SEMENZA, ATTORNEY TURNED SALESMAN: I was laid off, and I couldn't find a position with a law firm or any type of company even with my litigation background.
CARROLL: Semenza thought his 25 years of experience would quickly bring him another offer.
SEMENZA: Probably about eight, nine months into not being able to get back into a law firm or a company doing litigation work, I decided I can use my skills in other areas. You're not stuck in the package.
CARROLL: Semenza finally found work as a salesman at this Bob's Discount Furniture outside Boston.
(on camera): Was there any sort of concern as you were looking and even coming and applying here that, wow, I hope I get this gig?
SEMENZA: Absolutely, absolutely. I thought they would tell me I was overqualified.
CARROLL (voice-over): National statistics show educated and experienced workers like Semenza are not sheltered from the economic downturn. The number of professional and business services jobs fell by 180,000 in February. Some research shows white collar workers make up more than 43 percent of long-term unemployed, that is workers out of work for six months or more. Recruiting firms say placing even qualified attorneys is tough these days.
CAREY BERTOLET, BCG ATTORNEY SEARCH: Those are law school graduates from 2007-2008 who have been laid off, and I've seen very senior attorneys who are laid off as well.
CARROLL: But here at Bob's Discount Furniture, they're not laying off. They're hiring. Sales are up. Part of the reason, they say, the bad economy has produced a better crop of qualified sales people.
BOB KAUFMAN, BOB'S DISCOUNT FURNITURE: We don't typically get lawyers with 25 years experience but we certainly see a different caliber of people.
CARROLL (on camera): What sort of adjustment has it been?
SEMENZA: I still wear a tie. I still wear a jacket. I'm not digging ditches somewhere, but it's an adjustment psychologically. It's been -- it's been different, it's been different.
(END VIDEOTAPE)
CARROLL: I also asked Semenza about his future. He said he's just going to take it one day at a time. He's going to try and enjoy his new job but he hopes he can someday return to what he really loves, which, of course, is practicing law.
ROBERTS: You know, I don't quite understand this idea of being overqualified. You would think the hiring person's qualifications are, even if they way excel the job, it would be advantageous to have them in that position. CARROLL: You would think so. And - but you know, I think a lot of these retail outlets are maybe finally starting to see that, starting to hire some of these people. You saw what happened there with Paul. He ended up getting a job, but the worry was there that he might be overqualified or too old.
ROBERTS: Great story, Jason. Thanks for bringing that to us this morning.
CARROLL: All right. Thanks.
ROBERTS: Kiran?
CHETRY: Well, still ahead, we're answering questions about your money online and from our new show hotline, which is 877-MY-AMFIX, and we've been getting a lot of calls. Gerri Willis and Christine Romans are back next talking about those big AIG bonuses and also what happens when your retirement account takes a hit. Some good advice, still ahead at 41 minutes after the hour.
(COMMERCIAL BREAK)
ROBERTS: Forty-three and a half minutes after the hour.
Welcome back to our special "ROAD TO RESCUE" coverage all morning long, where here you sound off on the money meltdown. Our Christine Romans, Gerri Willis answering your questions on the phone and online this morning. Join Gerri for the next three hours on Twitter at AMFix.
But first, let's listen to a question about AIG from our new show hotline 877-MY-AMFIX.
(BEGIN VIDEO CLIP)
CLARKE CORDELE (ph), CALLER, CHICAGO: My name is Clarke Cordele (ph), calling from Chicago. I'm calling in regards to the bonuses that are being issued by AIG. My only question is, if they hadn't received the bailout money, how would they have paid the bonuses then?
(END VIDEO CLIP)
ROBERTS: Good question this morning. Gerri, you want to field that one?
WILLIS: I'm going to give it to Christine because she's been reporting the AIG story.
ROMANS: That's right. You know, that's a very good question, Clarke, because if they hadn't received the bailout money, they couldn't get those bonuses. The company would have imploded. It would have taken down the global economy. And you would have -- everybody who's a creditor of this company would be lining up in a bankruptcy court in a very messy bankruptcy to try to get their money back. So these guys and women, I presume, would have been lined up trying to get their money back from a company that had gone under just like everybody else. The American taxpayer money helped them get paid, period.
WILLIS: You know -- can I just add one thing. We were talking about how much they are getting paid, how much are the bonuses. Big debate, right? I said $2 is too much at this point, right?
ROMANS: I know. You're right. I agree.
CHETRY: Well, another one of our viewers has a question about money lost in his IRA. Let's listen.
(BEGIN VIDEO CLIP)
BOB WILSON, CALLER, ST. LOUIS, MISSOURI: My name is Bob Wilson from St. Louis, Missouri, and my question is, the money that we lose in our IRA, in our pension fund, where does that lost money end up? Who gets that money? Where does that money go?
(END VIDEO CLIP)
WILLIS: Hey there, Bob. Yes. OK. Well, think of it this way. You know, if you were to go to the grocery store, say, and you were to buy some apples, they might change in price over time, right? And you wouldn't think a thing about it. You wouldn't be asking where the money is going. You know, those prices change over time.
Well, that's what happens with stocks and other investments. They change over time. So, at one day, you might pay $100 for a share of a stock. The next day, you may pay $50. It changes over time. It's a commodity. It fluctuates in price. So, sorry to tell you...
CHETRY: So it's just the value that's in your account.
WILLIS: That's right.
CHETRY: That's extracted, it's not actually real.
WILLIS: That's absolutely right.
ROBERTS: You only lock it in when you actually cash it out, right.
WILLIS: That's right.
ROBERTS: All right. Gerri, Christine, thanks.
ROMANS: Sure.
CHETRY: We want to hear more from you at home so head to our homepage at cnn.com/AMFIX. And that's where you can send us an e- mail. You can link to our Twitter page. Gerri has been answering questions all morning. You got a bunch of people, I think, signing up just today, Gerri, so that they can get some input and advice from you. A lot of housing questions, a lot of foreclosure questions as well.
So go ahead and send us any type of e-mail or go ahead and log on to Twitter or you can call us, 877-MY-AMFIX, leave a message with whatever is in your mind. Try to keep it to around 30 seconds if you can, and we will try get it on the air. Thanks so much.
Forty-six and a half minutes after the hour.
Bad hair days for hair salons. What women are cutting back on and what they'll never give up?
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UNIDENTIFIED MALE: People have decided that, you know what, going to a salon is a luxury.
(END VIDEO CLIP)
CHETRY: What to cut in a bad economy and still have great hair.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I had what you call the recession grow-out.
(END VIDEO CLIP)
CHETRY: Recessionista hair. You're watching the Most News in the Morning.
(COMMERCIAL BREAK)
CHETRY: Welcome back to the Most News in the Morning and our special "ROAD TO RESCUE" edition of AMERICAN MORNING.
There are some 80,000 hair salons, speaking of needing a rescue, right, most of them are small businesses. They generate about $16 billion in sales, but in these tough times many women are cutting back on visits to the hair stylist.
Lola Ogunnaike is looking at that for us.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: I used to come every four weeks.
UNIDENTIFIED FEMALE: I come every six to eight weeks.
UNIDENTIFIED FEMALE: I'm probably going to do like a box dye, cheaper, more inexpensive.
UNIDENTIFIED FEMALE: I had what you call the recession grow-out.
LOLA OGUNNAIKE, CNN ENTERTAINMENT CORRESPONDENT (voice-over): Salon owners across the country have been hearing statements like this a lot lately and they're not happy about it at all.
JOSE EBER, BEVERLY HILLS SALON OWNER: They're stretching the services. Instead of getting their haircut every four to six weeks, they will come every 10 to 12 weeks.
OGUNNAIKE: All that stretching is trimming many of salons' bottom lines.
EBER: The good news is I'm not closing my door. I've been here in Beverly House for 30 years. Never felt it the way we're feeling it this time around.
OGUNNAIKE: They've noticed that customers are cutting back on everything from blowouts and highlights to hair weaves and extensions.
YASMINE CUMBERBATCH, HAIR STYLIST, "JUST BECAUSE": Some clients are now keeping their extensions in a lot longer than 10 weeks.
OGUNNAIKE: Meanwhile, the do-it-yourself business is booming according to industry observers.
ALI DIBAOJ, V.P, SR. RESEARCH ANALYST, SANFORD C. BERNSTEN: For most people hair coloring has become a necessity. How you do it is the variable. And people have decided that, you know what, going to a salon is the luxury. The necessary is just coloring my hair so I can do it at home.
OGUNNAIKE: To pump up business, some high-end places like the J. Sisters Salon in Manhattan are offering major discounts.
(on camera): So you all decided that you're going to give your customers 10 percent, 15 percent, 20 percent off. And what was the reaction?
MAGGIE SANTOS, GENERAL MANAGER, J. SISTERS: Oh, with the clientele, sweetheart, I got to tell you, they're crying. They couldn't believe it.
OGUNNAIKE: At The Ted Gibson Salon a haircut can cost as much as $950, but on "Recessionista Tuesdays," cuts and dye jobs are only $75.
TED GIBSON, OWNER, TED GIBSON SALON: It gives the opportunity for women and men to come into the Ted Gibson Salon and have that five-star luxury experience, but not necessarily having to pay a lot for it.
OGUNNAIKE: The New York chain Dramatics recently introduced a $10 haircut, and bargain hunters have been trooping in ever since.
"ROCK," OWNER, DRAMATICS NYC: We have received about 500 to 600 new clients over the past two months that we've started our special. Hopefully, when the economy gets back rolling again that these clients will stick around.
(END VIDEOTAPE) OGUNNAIKE: Kiran, the key is to haggle, haggle, haggle. The client is in a prime position right now, ask for a discount, ask for the special rate day, and make sure that you get a good deal because you don't have to pay a lot of money to look good now. CHETRY: I could never do that, but I hear you.
OGUNNAIKE: Just say it's a recession people. I can't afford $500 for a haircut anymore.
CHETRY: It's true. And I just want -- can I -- wondering about St. Patrick's Day, you're wearing green.
OGUNNAIKE: Yes.
CHETRY: I'm wearing green. I'm laughing that all the actual Irish people today did not wear green. One of our -- people who work here, one of our producers, Maura Daley (ph), she's as Irish as you can get. She's wearing purple.
OGUNNAIKE: Purple.
CHETRY: You're Nigerian, I'm half-Nepalese, and we're supporting the green.
OGUNNAIKE: I'm Lola Ogunnaike today. That's Brian Bell's (ph) idea. Shout out to our producer, Brian Bell (ph).
CHETRY: Thanks, Lola.
Fifty-two minutes after the hour.
The AIG bonus fiasco. America is enraged.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Stop the AIG bonus payments.
(END VIDEO CLIP)
CHETRY: Furious iReporters sound off.
(BEGIN VIDEO CLIP)
DIMMITT: We mortgaged our children's future for the likes of this AIG.
(END VIDEO CLIP)
CHETRY: Plus, nobody's more wired to you in the morning on the phone, twittering. Your direct connection to a financial fix, "THE ROAD TO RESCUE" in action, helping you. You're watching the most news with your amFix in the morning.
(COMMERCIAL BREAK)
ROBERTS: Welcome back to the Most News in the Morning. Continuing our special coverage "ROAD TO RESCUE: A CNN SURVIVAL GUIDE." We're talking to the experts, but also listening to you, our iReporters, finding ways to save cash.
Alex Canton (ph) from Panama sent us in this iReport.
(BEGIN VIDEO CLIP)
ALEX CANTON (ph), IREPORTER FROM PANAMA: The first thing that we have to keep in mind is, try to save our homes. Second, we need our food. We need our medications. If, by any chance, there's any extra money, ask yourself, do I really need it? And if you don't need it, don't buy it.
(END VIDEO CLIP)
ROBERTS: That one coming to us all the way from Panama this morning. We want to hear from you, too. What are you doing to save cash during these lean times? Logon to ireport.com or cnn.com/amFix, and send us your ideas - Kiran.
CHETRY: All right. Well, as of January, year-to-year foreclosure rates increased for 37 straight months. That's according to RealtyTrac. In Rhode Island, people are being hit especially hard because of soaring unemployment. Our Stephanie Elam is live in a state capital, Providence, this morning, where she found one community trying to pull together against the odds to help stop foreclosures. It really is a terrible situation right now for people in Providence.
STEPHANIE ELAM, CNN BUSINESS CORRESPONDENT: No doubt about it. That's so true, Kiran. And if you take a look at the unemployment rate here in Rhode Island, they're dealing with unemployment that is above 10 percent and it's expected to climb. So it's not too much of a surprise that they're dealing with such a huge amount of foreclosures.
Still, there are some people here in the ocean state that said that they can do something about it to make the neighborhood sustainable.
(BEGIN VIDEOTAPE)
ELAM (voice-over): Here in tiny Rhode Island, there's a big housing problem.
RICHARD GODFREY, EXECUTIVE DIRECTOR, RHODE ISLAND HOUSING: We've seen foreclosures steadily rise really since mid-2007.
ELAM: One of the neighborhoods in the state capital is doing something about it. Councilman Michael Solomon grew up in the old section of Providence. Solomon says the neighborhood began to decline in the late '80s, but over the last ten years, several nonprofits began working together to find solutions.
(on camera): What is making it so much better now?
MICHAEL SOLOMON, OLNEYVILLE BUSINESS OWNER: I think the fact that families that are living here, the businesses that are here, are all getting together and working on a plan where we could have affordable housing, where we can track businesses, where people could live, work, shop, play, all the things that make a neighborhood a stable neighborhood.
ELAM (voice-over): Olneyville is focused on providing more recreation for families and safer streets. Here brand new houses stand shoulder to shoulder with urban decay, and a leading local group, Olneyville Housing Corporation is making homes more affordable.
JORGE BURGOS, OLNEYVILLE HOME BUYER: I never thought we were going to be able to afford this house.
ELAM: Meet Jorge Burgos and Casilda Pelero (ph), a young couple expecting twins. They just bought this house, thanks to a community development agency. The couple doesn't worry that some of the homes on their block are still boarded up, neglected and empty.
(on camera): By the time your sons are 10, what do you think the neighborhood will be like? How do you think that will affect their development?
BURGOS: It's going to be positive. It's going to be very positive for our kids. The neighborhood is looking good, and hopefully, ten years from now, 20 years from now, everything will be better.
ELAM (voice-over): A better place to raise children, and the foundation of a stronger community.
(END VIDEOTAPE)
ELAM: Now you really don't have to go far, Kiran, to see just how close some of these rundown homes are to the new homes. In fact, if you look right behind me right now, you can see that there's one building here, it's boarded up, and if you look back right past that, you've got a brand new home. And a lot of that can be seen throughout this section of Providence.
And what they believe here, it's more than just the houses. You also have to have parks and safe streets. And so they're working here in Olneyville to make sure that everything is better so that people and businesses want to come here.
CHETRY: Stephanie Elam for us this morning in Providence, Rhode Island, thank you.
