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YOUR MONEY

Ultimate Money Questions: Where Should You Invest?; Big Bonuses Under Fire; Interview with Serena Williams

Aired September 20, 2009 - 15:00   ET

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


CHRISTINE ROMANS, CNN HOST: The ultimate money questions. Where should you invest? Did you miss out on the big rally? Should you gamble on stocks with your retirement? We have answers from the very best.

Big bonuses under fire. Punishing Bank of America for paying million dollar Merrill Lynch bonuses.

Off the court and in her own words. Serena Williams and I volley about sportsmanship, success, and money. Game, set, match, time to talk YOUR MONEY.

ALI VELSHI, CNN HOST: Welcome to YOUR MONEY. I'm Ali Velshi, I'm so happy to be back with you and I'm really looking forward to hearing what Serena Williams said directly to you a later on in the program.

ROMANS: I'm Christine Romans. The one question everyone wants answered, is it getting better really and will it last, let's take a quick look back before we move forward.

VELSHI: One year ago America's sub prime crisis became global financial crises. What had ban downturn fueled by falling home prices and mortgage default became in a matter of days something much bigger.

(BEGIN VIDEOTAPE)

VELSHI (voice over): Monday, September 15th, 200, Wall Street is in a panic. Lehman Brothers filing for bankruptcy after no one would buy it. The immediate fallout? Already skittish credit markets around the world freeze. Banks won't lend. Not to businesses, not to each other.

UNIDENTIFIED MALE: Many lenders have been reluctant to provide credit.

VELSHI: Without the flow of money the entire global financial system is at risk.

UNIDENTIFIED MALE: We begin with breaking news about the crises on Wall Street.

VELSHI: The credit system in this country is coming to a halt.

That day the Dow closes more than 500 points lower.

UNIDENTIFIED MALE: Americans are as worried about bailing out Wall Street as they are about not bailing it out.

VELSHI: Enter the U.S. government, and fast. The next morning a staggering $85 billion bailout of AIG, American International Group.

GEORGE W. BUSH, FMR. PRESIDENT OF THE U.S: Government intervention is not only warranted, it is essential.

VELSHI: Within days then Treasury secretary Henry Paulson is working on a bailout, $700 billion to keep the financial system afloat.

HENRY PAULSON, TREASURY SECRETARY: This needs to be big enough to make a real difference.

VELSHI: But many Americans are outraged that Wall Street is being saved, rewarded for its misdeeds. The economy is now the issue of the presidential election.

BARACK OBAMA, PRESIDENT OF THE U.S: Make sure that we protect taxpayers.

UNIDENTIFIED MALE: A lot of us saw this train wreck coming.

VELSHI: Congress defeats a rescue package on September 29th. The Dow has its biggest point drop in history that day. Urgency mounts. On October 3rd, a bailout bill passes. The plan? Government pumps money into banks hoping the cash will be used to make loans and get credit flowing again.

By mid October, progress. The global credit squeeze begins to loosen somewhat with banks lending to each other, though some businesses still can't raise enough money and are losing customers. When businesses lose customers, Americans lose jobs. The recession deepens. New hope, though, in early November.

UNIDENTIFIED MALE: Barack Obama will become the president-elect of the United States.

VELSHI: America elects a new president, who soon will be thrust into a new economic crises. This time it's the auto industry in desperate need of government cash.

RICK WAGONER, CEO, GENRAL MOTORS: Right now in today's circumstances we can't do it alone.

VELSHI: With mounting business bankruptcy, job losses, and home foreclosures, investor confidence craters and stock losses mount. By March 9th, the Dow is down 40 percent since Lehman filed for bankruptcy, but this marks the bottom.

(END VIDEOTAPE)

VELSHI: Well, we hope March 9th marked the bottom. A lot has happened since then and for those people who did stay involved with the stock market they've actually seen something of a gain. We'll have much more of a discussion on that on "Money and Main Street" the CNN money summit, you can watch that tonight at 7:00 p.m. Eastern.

ROMANS: Meanwhile we want to talk about just what we've gone, what we've gone through and if we've done the right things to get us out of this crises and fix it so it doesn't happen again. Ken Rogoff is a professor of public policy and economics at Harvard simply put he is the authority on financial crises and collapses.

You have studied hundreds of these crises and in fact I really want people to know, just shy of four weeks before Lehman Brothers failed you were in Singapore and you said a big investment bank is going to go down and you really raised the warning that we were on the verge of something ugly and you were absolutely right. Have we responded properly to this crisis and are we out of the woods?

KEN ROGOFF, FMR. CHIEF EXECUTIVE, IMF: Things are a lot better. I mean, we're not out of the hospital yet. I mean, we're mending, but the crisis is over. I think unemployment is still really high and there are lots of people who have pulled out of the labor force but sort of across every number things are looking better.

VELSHI: Are there things, Ken, that we can take away from this crises, take away from other crises and say we can apply them here, or is this so different than those others that you studied that we don't actually know what exactly can be done and how this is going to play out for the remaining year or two years?

ROGOFF: It's not that different. Carmen Rinehart, my coauthor on our book "This Time is Different" finds that it's not that different and this wasn't. Basically there was tons of borrowing, especially short-term borrowing. It was jacking up home prices, other kinds of assets, and when the music stopped, they all collapsed on each other. That's very typical.

ROMANS: Let's talk about the reaction, the response from President Obama and this administration specifically. Let's listen to the president.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: While there continues to be a need for government involvement to stabilize the financial system, that necessity is waning. After months in which public dollars were flowing into our financial system, we're finally beginning to see money flowing back to taxpayers.

(END VIDEO CLIP)

ROMANS: Is that right? Are we going to be able to start to talk about exit strategies for all of this massive intervention into the economy?

ROGOFF: I mean, the money flowing back to taxpayers is a little bit of counting. There are really still trillions out there, lots of risk. The most important thing is that the government solved this crisis by casting this web, not just over the banks but over the whole financial system, saying we're going to make sure they can pay off. And then they're out there gambling so we're still at risk. I mean, we're not out of things. That's what we've got to figure out.

ROMANS: The banks are still out there -- you think the banks are still out there gambling?

ROGOFF: Absolutely. And the government's happy about it. That's how they're building up their capital, how they're mending themselves, but we're vulnerable in the meantime. There is lots of money shoveled at the financial system.

VELSHI: Ken, I've been driving across the United States on the CNN Express talking to people in towns all over the place about how they're feeling about the economy and while there are signs on highways that say this is a project brought to you by the American Reinvestment, Reconstruction Reinvestment Act --

ROMANS: And you're paying for those signs by the way.

ROGOFF: Yeah.

VELSHI: Really the lead question I got from most people is where is that money coming to me? How will I see the benefit? We see these jobs continuing to be lost. Is there a clear answer to that? How are Americans feeling this taxpayer money being returned the way the president is talking about?

ROGOFF: The big bucks have come indirectly. For example, the Federal Reserve has been buying mortgages and mortgage-backed securities. That's lowered interest rates to home buyers. That's cushioned the blow to home prices. They've stepped in in the student loan market, the auto market. The stimulus package is really yet to come. That's a second leg of the government's program.

VELSHI: If you're seeing benefits in the economy right now particularly, and that is one area we are seeing them, home prices, because home prices are low, because we've got low interest rates and because of this home buyer incentive, the bottom line is we're paying for that, we are all sort of subsidizing low home prices right now.

ROGOFF: We sure as heck are and we had financial crises. Our debt is soaring. A few years down the road, the big question is will the government have a problem? We've got to show that we're willing to tighten our belt, and we Americans don't have an easy time doing that.

VELSHI: Right. A week from now Christine is going to be in Pittsburgh following the G-20 world leaders who are there. They want to pick the brain of Ken Rogoff; he was the chief economist of the IMF, anoted authority on world financial markets. We're coming back with more with him. This stuff is valuable.

(COMMERCIAL BREAK)

VELSHI: Turn on the television and you'll often see guests screaming at each other about the state of the economy and what to do about it. Not on this show. We're bringing you one of the brightest minds in business to help explain what's going on and where we're headed. ROMANS: Harvard professor Ken Rogoff is the former chief economist for the IMF and he is someone that we really trust because just a few weeks before the financial market really collapsed last fall he basically predicted that a big investment bank was going to go down.

Let's take a look at the global picture. You're seeing world economies, other countries' economies start to come out of things. China for example, France, I think Germany. In some cases bouncing back a little more quickly than the United States. What's the picture like?

ROGOFF: Well, we have the broad contours of a global recovery and it looks good for a little while but we've got a long way to go. I mean, we're going up but we started way down and we have a ways to get to where we started. Certainly China is doing much better than everybody else.

ROMANS: Why is that?

ROGOFF: Well, part of it, we were ground zero. The United Kingdom, we have the big financial systems. China is much more government run economy and so governments don't throw people out of work the same way so they're providing a lot of credit, building a lot of bridges and whatever.

China is still going to face a problem in the long run because they depend ultimately on selling stuff to us. And if our house prices are still down and our consumers say, you know, we don't want this to happen again, we're not going to dig ourselves as deep a hole, ultimately China will be in trouble, too. But it's a while.

ROMANS: Let me ask you about chickens and tires, folks, it is important stuff. There are worries about the Obama administration's trade policy is saying that the Chinese weren't playing fairly with tires and China put a tariff on Chinese tires and now the Chinese are saying they might retaliate on chickens. Is this a trade problem brewing that could hurt global growth or recovery?

ROGOFF: A little bit of sparring here if we look back at, you know, some of the other tariffs that Obama and Hillary Clinton were talking about during the primary campaign. That was a lot scarier. I think this is to appease congressmen somewhere and help with health care. I'm sure what he's telling the other G-20 leaders is, look. This isn't going anywhere. I'm not going to let this be a big deal.

VELSHI: All right. We were looking at the history of this financial crises. Really, the governments around the world and central bank stepped in, back stopped the problem with lots of money. And now of course what we're hearing is when will we get out of that hole that we're digging? Is it possible? Should this government and other governments when they meet at the G-20 or otherwise be thinking of ways to cut our deficits and to cut our debt or are we just too early to be having this discussion in this crisis?

ROGOFF: Well, it's not too early. I mean, there are two problems. One is we guaranteed everything. Even if the government says they're exiting we all know they'll come back. That if a big investment bank or big bank gets into trouble that they'll bail it out. That means people will lend to them really cheap and it means they will gamble and at the same time deficits in the U.S., Germany, China, everywhere have soared and what began as a financial crises could morph down the road, not this year, not tomorrow, but in a few years, into a bigger crisis with the government.

VELSHI: Ken, always a pleasure to have you here. Thank you very much for being with us, Ken Rogoff is the professor of public policy and professor of economics at Harvard University and he has many more titles attached to his name.

ROMANS: He sure does. All right.

Did you miss out on the big stock rally? Should you buy gold? Should you gamble your retirement on stocks? Answers you need to know, right now.

(COMMERCIAL BREAK)

ROMANS: In October 2007 the market hit an all-time high 14164 on the Dow that was of course followed by the severe recession that we're just now hopefully climbing out of.

VELSHI: The market searched for a bottom and may have found it this past March on March 9th. The Dow dropped to just about 6500 points and if you lost your nerve and pulled your money out you missed what seems to be about a 50 percent rally between then and now.

ROMANS: Lost your nerve, lost your cool, pulled out your hair as Ali did here begs the question. Did you miss out on this move? That's what we all want to know. A lot of people are having a little more confidence in the stock market but maybe all of that move has already happened. We don't know what's going to happen next. We want to ask three hot investing topics. Is it too late to get into this market? Should you be gambling on gold? Should you be putting stocks in your retirement?

VELSHI: If you are getting close to retirement. We have some great investing minds to help you out today. Michael Cuggino a good friend of the show, he is the president and portfolio manager at Permanent Portfolio Funds, Ryan Mack is the president of Optimum Capital Management, he is a financial advisor. Thanks to both of you for being here. Ryan, you and I talked about this routinely. Christine was there. We talked about this routinely back when markets were going down at the beginning of this year and you were telling people to have a strategy.

RYAN MACK, PRESIDENT, OPTIMUM CAPITAL MANAGEMENT: Yes.

VELSHI: What happens now?

We're up 10 percent on the year, we are up 50 percent since the lows and now people are saying maybe I should have listened. Is it too late? MACK: I think if you look back in 2000, we were up in 2000, down in 2003, up in 2007, down in 2009, now we are up 54 percent on the S&P, at the end of the day the same strategy when I was down, the same strategy when you're up. This is a discipline, you're dollar cost averaging. If you're just getting in at this point and time you might not want to put as much in before because if I was a trader trading in week-long windows I would actually be shorting this market.

ROMANS: You would.

VELSHI: Assuming that this market is going to pull back a certain amount.

MACK: Yes.

VELSHI: And making money off that.

MACK: But for long-term investors this is a time when you put a little bit in and then if you take a little bit more, maybe put in a 50 percent position then reserve that other 50 percent for if and when it does pull back. I could be wrong. The market could still go up. We have a lot of technical resistance above us but right now I still think five, ten years worth would be good.

ROMANS: You made some incredible calls when you were here last time and you gave us mutual funds, McDonald's was one of your recommendations and all of those have done very well. Here's the question. For some of us who threw out our strategy when we got really scared in the spring, you got to rebuild that strategy, you say don't put everything in stocks right away but start rebuilding this slowly.

MACK: Yes, definitely. You have to have a strategy, again, that no matter what the market is doing you're sticking to it. On the money in Main Street, one investment club they stuck to that strategy and that's what they do for better or worse and that's what at the end of the day we take the emotions out of the game and make sure our strategy wins out overall.

VELSHI: And you have other opportunities to watch "Money and Main Street" this week. We had a great decision.

Michael good to see you. I know from discussing this with you that you share Ryan's view that investors should have long-term strategies. One of the strategies that you employ in your mutual funds and you have been very steady about is you have had gold in your mutual funds whether it's up or down.

MICHAEL CUGGINO, PRESIDENT, PERMANENT PORTFOLIO FUNDS: Yeah. We view gold in our permanent portfolio fund as part of an overall diversification strategy among many different asset classes with the idea of investors protecting their down side as well as putting them in a position through that diversification to achieve growth regardless of what happens or what economic scenario plays out. You know, gold is part of that. Certainly stocks are part of that as well.

VELSHI: Should people be adding gold to their position right now?

ROMANS: Above a thousand an ounce you know. Had a really good run.

CUGGINO: It's an interesting question. I think again it gets to your risk tolerance; it gets to your time horizon. I mean certainly when you've had an asset move to the upper end of a trading range in a short term like we've seen gold go to a thousand from the high 800s in the last three to six months or so, that's a significant move for gold. There's an argument that maybe it's come too fast too far and maybe it will pull back.

That wouldn't surprise me a lot if there were some consolidation but for a long-term investor when you look at the liquidity situation out there, the amount of money that has been created, the amount of obligations our governments around the world, not only the United States but the other mature economies as well are promising people, there's a lot of reasons for gold to act as a store of value and a hedge against the creation of that paper money and so for a long-term investor it's a good place to put some of your asset base.

ROMANS: Michael, let's talk more about that. If you think that all of this government spending is going to mean a big buildup and the next big crisis is a government debt crisis that's going to hurt the value of the dollar and spike interest rates higher, that's why gold is a hedge against that?

CUGGINO: Well, it's one reason for it, yes. Because if you think about it, gold is an anchor of value. I mean, its value is to the world over. Many different populations and cultures. The more money you create the unit value of the paper money decreases as it's measured against gold. The more you create the more gold will hold its value in the long term and preserve you against inflationary pressures. That is a good reason why you'd want it in your portfolio.

VELSHI: We sure have created a lot of money right now. Michael talked about risk tolerance. This is something you talk about. Your investment should start with an evaluation of your risk tolerance. I want to remind people if you go to CNNMONEY.com/ali seven questions to establish your risk tolerance and get a little portfolio pie that'll tell you how to invest.

If you are 55, 65 years old right now, guy like you is worried for a short-term trading in the market and thinking we're pretty high. Should you be in stocks? Some people say if you are close to retirement you absolutely should not be investing in the stock market right now.

MACK: I couldn't agree with Michael more. It all depends upon your risk tolerance. If you're 55 and within five years from retirement you should start evaluating in terms of how much risk you have on the table. Stocks have a lot more risk. We don't have a lot of market cycles to be able to tolerate if the market crashes again to recoup your money back if you're retiring in four or five years so you should look at your risk tolerance, your asset allocation. If you have 90 percent stocks and 10 percent bonds in your portfolio, with many individuals in their 401(k), have that right now and they are above 50, you really start looking and seeing if this is a proper allocation for me. Maybe I can switch it around and have a more steady income stream.

ROMANS: Two great perspectives and two parts of the market that have really done well over the past few months, stocks and gold. Michael Cuggino, president and portfolio manager, Permanent Portfolio Funds. And also, Ryan Mack, a good friend and president of Optimum Capital Management.

VELSHI: And Ryan talked about "Money and Main Street" you can watch it Saturday and Sunday at 7:00 p.m. Eastern.

Coming up next another health care proposal that you need a score card to keep track of these things. That's why we've got our crack team at CNNMONEY.com. We'll head over there to help clear up everything for you.

ROMANS: And outrage over new, big bonuses. Now a judge getting into the mix.

(COMMERCIAL BREAK)

VELSHI: It is make or break time for health care reform. Senate committee chairman Max Baucus unveiled his proposed health care overhaul plan this week and he tried to shore up support from his fellow Democrats.

ROMANS: They have some questions and they had some things they'd like to see too. CNN Money senior writer Jeanne Sahadi joins us now from CNNMONEY.com headquarters. Jeanne, some people in his own party aren't pleased with how this has turned out and I'm assuming this is going to lurch and change through the horse trading that is the committee process, won't it?

JEANNE SAHADI, SENIOR WRITER, CNNMONEY.COM: Yeah. It absolutely will, because the Senate Finance Committee is going to be marking up the bill next week. It has gotten criticism from Republicans, it has gotten criticism from Democrats, and maybe even Baucus's dog has stepped in. I don't know. They are going to have a lot of amendments to this bill.

On the other hand what he was saying in his press conference is, look. This is a balanced bill. I think by that he meant we've got a lot of compromises in here. He has a lot of pressures bearing down on him. This is probably going to be the bill that sets the framework for the debate going forward but it will be changed before something final is passed.

VELSHI: Is there a simple way for you to tell us what is in this bill?

SAHADI: No, no. Its 223 pages, so invite you to come to CNNMOENY.com to read it if you're fascinated by this but there are some key features. One of the things Baucus's bill does that's different than other Democrats' plans is it does not offer a public health insurance option.

Instead, it offers what are called nonprofit cooperatives which would be consumer owned and driven -- consumer run basically. The members would elect the board. They would get any profits returned to them if the nonprofit cooperative does generate them. It's like a regular insurance plan but its run by the people who are the policyholders.

ROMANS: Good winners here are people who, like in the other proposals, have preexisting conditions. You would not be denied from the insurance coverage because of preexisting conditions. But the idea here is to get people to get insurance either through the public market place or through an insurance company or their own. There would be penalties if you don't have insurance.

SAHADI: There is an individual mandate to get insurance and if you don't get it fines run as high as $3800 for families and up to $950 for individuals I think but it is sort of income based so on a sliding scale. The bill would also create insurance exchange where people who are currently uninsured could go and buy insurance at different levels. They've got bronze, silver, gold, platinum levels at varying prices and also offer subsidies to low income people to help them afford it but critics say the subsidies aren't as generous as in other Democrats' plans.

ROMANS: For more, CNN.com/healthcare. Jeanne Sahadi, thank you so much.

SAHADI: Thank you.

VELSHI: I know she was kind of joking about it but I do encourage people to go and read Jeanne's stuff, I think she is really one of a handful of people in this country who fully understand this. Ultimately when I make my decisions about health care every year when you do that open enrollment stuff I just go talk to her. Whatever she does I do. She understands this.

ROMANS: A good idea. If it's not understandable she'll tell you it is not understandable too.

VELSHI: Right.

ROMANS: Now it's politics. This isn't policy yet, this is still politics. She'll tell you.

VELSHI: Right.

ROMANS: All right. Time now for the ticker. Let's stay on health care. We welcome back Chrystia Freeland managing editor of "The Financial Times" and our good friend Pat Kiernan, anchor of "New York One News." All right. We just heard the latest from Jeanne Sahadi; let's get to the bottom line on this. When will the president get a health care plan passed and what will it eventually look like? We don't know what it is going to look like. Everyone says Christine; he's going to get something passed. His supporters say he is going to get something passed but we don't know what it's going to look like.

CHRYSTIA FREELAND, MANAGING EDITOR, "FINANCIAL TIMES:" Yeah and I do think he probably will get something passed just because the political stakes have been raised so high. For the White House not to have a health care plan at all would be seen as such a colossal political failure it would be sort of intentionally lining up Obama to be Carter ark 2. The big question is going to be how strong will that plan be?

VELSHI: Jean was talking about the gold, silver, and platinum. I would like the platinum.

ROMANS: You want platinum health care?

PAT KIERNAN, ANCHOR, "NY1 NEWS:" I don't know. But I think whatever we end up with is going to be a ridiculous compromise.

VELSHI: We just don't have enough common ground between the parties that have different proposals going on right now? Is that what you're thinking?

KIERNAN: Yes, absolutely. There needs to be consensus and there is no sign of that. This Baucus proposal, was there one Republican who stood by it initially?

FREELAND: The only thing I would say is I think we have to be aware that what we're watching is the sausage being made. This is not the final sausage. And in a way, actually, one way you can look at the Baucus plan is say everybody hates it. Isn't that terrible? You could also say everybody hates it. That's great because what it means is you know now have a great situation for the White House where you have moderate Dems complaining, you have moderate Republicans complaining and that allows you to play both sides off against each other.

VELSHI: Let's talk about another story that has been very interesting. You may recall at the end of last year as part of the Merrill deal to be taken over by Bank of America there were a number of bonuses that were being paid to Merrill Lynch executives and this was agreed upon but apparently Bank of America didn't tell anybody they were doing this so the S.E.C. went after Bank of America, the Securities and Exchange Commission and they came up with a settlement over $30 million worth. That settlement was thrown out of court by a judge who said it is neither fair nor adequate, very interesting.

This judge throws out the settlement, tells the S.E.C. if you thought they did something wrong you should have gone after them harder and told Bank of America if you didn't think you did anything wrong why did you settle? What do you think of this?

FREELAND: What I think is particularly interesting about what the judge said is he is pressing the S.E.C. to require the executives responsible to take personal responsibility. He is saying to make Bank of America from corporate money pay a $33 million fine because executives have allegedly harmed shareholder interests is like me robbing your house and then you having to pay some kind of compensation because it's the shareholders essentially paying the fine themselves.

That, to me, is the heart of what he is pushing at; saying executives have to bear personal responsibility out of their own pocketbooks not just out of the company's money.

ROMANS: Isn't this a knock on the S.E.C., too, isn't it sort of like what are you guys doing? This is not a reasonable --

VELSHI: This is a judge who has done this before. He's gotten involved in settlements that he hasn't thought are fair but ultimately this question does address all of our venom and anger about bonuses.

KIERNAN: But here's the problem with that. Is it a crime just to make a lot of money? And what the Fed's trying to do with what we hear as the next round of the proposal is they're trying to link the compensation structures in place in the past to the risk on the part of Wall Street and they're saying if you are going to push people to push out to sub prime mortgages that's a problem and that is what they're going to try to rein in. That's probably sensible because they're not saying we're going to put a cap on the amount you can make.

VELSHI: Which I think is very interesting and very appealing idea. There is also the discussion that they might want to claw back. If you are paid and given bonuses and you take undue risks and you cost your company and shareholders money you like you just suggested may have to actually give some money back. That's interesting.

ROMANS: All right. More headaches for Bank of America, Ann Minch has become a YouTube sensation of sorts. Why? Never heard her name before? She is refusing to pay her Bank of America credit card bill with a nearly $6,000 balance until the bank agrees to lower her interest rate which she claims has climbed to 30 percent. She says Bank of America CEO Ken Lewis a letter demanding he watch this video.

(BEGIN VIDEO CLIP)

ANN MINCH, REFUSES TO PAY CREDIT CARD BILL: There comes a time when a person must be willing to sacrifice in order to take a stand for what's right. Now this is one of those times and if I'm successful this will be the proverbial first shot fired in the American debtors' revolution against the usury and plunder perpetrated by the banking elite, the Federal Reserve, and the federal government.

(END VIDEO CLIP)

VELSHI: Now, she has said she's closed her accounts at Bank of America and is refusing to pay her $5,900 debt. I have to say I, all about the revolution I think its fine and the banks have done very unfair things. She got herself into debt and had a contract that said this could happen.

KIERNAN: She bought stuff. She knew the deal. VELSHI: Yes.

KIERNAN: Sorry.

FREELAND: The part that she is particularly complaining about is the interest rate going up.

KIERNAN: That's a valid point but she still got the stuff she bought with the credit card.

FREELAND: Yeah. And ...

ROMANS: I said this one time on the air. I said, look. You can't justify -- if you are overdrawn you're overdrawn. They charge you 39 bucks you shouldn't have been overdrawn. People were very angry.

KIERNAN: There is no excuse for Bank of America but make the YouTube video but pay the bill.

VELSHI: I have to agree. Whomever your favorite personal financial person is, they all have the same thing to say. You don't get a free ride for spending someone else's money. You may not like the terms. I think it's fantastic that she cuts out her banking arrangements with whatever bank she's got but the bottom line is you do have a credit card. And they're allowed to do that.

FREELAND: The only thing I would say in defense of our debt protesting gal and I love the language she uses like we're in the bible here in the temple complaining.

ROMANS: Right.

VELSHI: I got to say 30 percent is getting up there.

FREELAND: What I would say in her defense is it's a two way relationship and the banks definitely have an incentive to get people addicted to debt and they do their best actually the kind of customer they want is exactly like this woman Ms. Minch. They want someone who continues to run up debt, who does the financially not very smart thing of borrowing money via her credit card rather than at a cheaper rate.

VELSHI: Right.

FREELAND: So it does take two to tango. The politics here that I think are really interesting; the U.S. government now has a big financial stake in Bank of America.

ROMANS: That's right.

FREELAND: And in Citigroup. And what kind of political pressure are we going to see on these banks as congressmen see people, you know, they see videos like this and they say, hang on. Those are my voters. I'm going to call Ken Lewis. I'm going to call them and say you guys can't do this.

ROMANS: I know that Barney Frank and others are trying to push forward the deadline for these new credit card rules.

VELSHI: We just have to remember not to take away the responsibility for individuals for that part of this crisis that we have all been responsible for. We all share responsibility.

ROMANS: Everyone has had their bailouts and their debts wiped off except for the little guy and that's what makes people so mad.

VELSHI: Well coming up next it's a tale of two towns just 150 miles apart in North Carolina. One is thriving. The other one is trying just to survive. We're going to have that story plus Christine takes on Serena Williams. Why the tennis star flipped out on Christine -- no she didn't. Why the tennis star flipped out at the U.S. Open and why her future is all about Serena, Inc.

(COMMERCIAL BREAK)

VELSHI: It's not all doom and gloom. We like to tell stories on this show about folks who reinvent themselves after being laid off. Maybe they changed careers or they start their own business. What happens when a town has to completely find a new identity?

ROMANS: We visited two towns that lost a lot of the industries that built them. One that found new economic prosperity and another that's still searching.

CNNs Allan Chernoff has the story.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT (voice over): Terry Maness opened his flower and gift shop in Ashboro, North Carolina more than three years ago. He says business is good. Better than last year. But he notes his town is struggling.

TERRY MANESS, OWNER, SUNSET FLOWERS & GIFTS: The town has lost jobs. We're still strong. We're not a dying city, no. Not by any means.

CHERNOFF: Ashboro grew as a manufacturing town but has lost about 10,000 factory jobs in the last ten years. The Christians United Outreach Center is helping family is here cope with loss of income.

JERRY HILL, CHRISTIANS UNITED OUTREACH CENTER: We are seeing numbers now greater than we ever have. We are seeing 75, 80 families a day. We broke a record last Thursday with 104. There were 104 families that came in looking for food, financial assistance, with some type of basic need.

CHERNOFF: About 150 miles east from Ashboro to Greenville, North Carolina. You'll see a different situation. Greenville was a tobacco town. But today it's found new vitality. Meet Uncle Yammy otherwise known as Steve Johnson. He and his daughter opened Uncle Yammy's Rib Shack in February. So far he's seeing success.

STEVE JOHNSON, CO-OWNER, UNCLE YAMMY'S RIB SHACK: We had our best month in July, which is really unusual for this and August was even better.

CHERNOFF: Greenville benefits from a large university and medical school and hospital that make it a hub for eastern North Carolina.

RICK NISWANDER, DEAN, ECU COLLEGE OF BUSINESS: In Pitt County and in Greenville we have about 75,000 people that are in the work force and about 15 to 18 percent of those come from the hospital and the university.

CHERNOFF: Greenville is growing. East Carolina University has added nearly 10,000 students in the past ten years, a 50 percent growth, and the hospital has added a new cardiovascular center. But Greenville still has problems.

BRIAN COLLIGAN, EDITORAL PAGE EDITOR, THE DAILY REFLECTION: You still have high levels of poverty, location levels. We have a high dropout rate that we need to deal with.

CHERNOFF: Still, residents here are hopeful about the future. While in Ashboro, many remain uncertain about the economic road ahead, there are still some manufacturing jobs here. Its home to the North Carolina Zoo and the town council has worked to revitalize the downtown area.

BOB WILLIAMS, SENIOR EDITOR, THE COURIER TRIBUNE: Ten years ago you would do the same little walk we're doing now and 2/3 of these shop fronts were empty. So in a little more than a decade, it's gone from that to what you see today and that's pretty impressive.

CHERNOFF: Still, Ashboro is looking for the new industry that will create good paying jobs and a stronger economy.

Allan Chernoff, CNN, New York.

(END VIDEOTAPE)

VELSHI: It really is interesting. I've been on the CNN Express for several weeks and it is one of those things you can't generalize by state. You really can ...

ROMANS: That's right.

VELSHI: Drive a hundred miles down the road and see an entirely different economic situation. There are some trends we generalize when we talk about unemployment or housing. It really does vary.

ROMANS: And in so many of these different towns they're like a thumb print. There are no two that are exactly the same combination. They all have their own identity. Ali, I got to sit down this week with Serena Williams.

VELSHI: I know.

ROMANS: Just days after the huge outburst at the U.S. Open that really launched her into the headlines. We'll go off the court and on the record about everything from her temper to her wide variety of businesses and her business savvy that is next.

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ROMANS: I spent time this week with Serena Williams. She's on a book tour. There's more to her than just tennis and obviously that outburst last weekend at the U.S. Open. She owns a stake in the Miami Dolphins. She has two clothing lines. She has Nike sponsorship and others. She has sort of Serena, Inc. That is really laying the groundwork for when she is done playing tennis so a real foresight about money. I asked her a lot of questions Ali; about the transformative power of coming up from really humble beginnings in Compton, L.A.

VELSHI: Did you ask her about the whole tennis I'm going to shove the ball down your throat thing?

ROMANS: Yes.

(BEGIN VIDEOTAPE)

ROMANS (voice over): The timing is interesting because you've got this incredible book, talking about taking a positive attitude about, you know, just telling yourself that you're going to win, that you're going to try, that you're the best. That you're on top. This amazing message and then these pictures of you not maybe living up to some of those messages.

SERENA WILLIAMS, PRO TENNIS PLAYER: Well I definitely feel like I live up to all messages I try to project. I don't think one moment in someone's life can make their whole career and you look at all the stuff I've been through from being booed by hundreds of thousands of people to being, I mean, cheated literally out of tournaments at the U.S. Open, cheated again, you know, so I don't think one -- I think people can realize and everyone out there knows that one moment doesn't define a whole person's career at all.

ROMANS: You said you were in the moment. Now that you step back, do you wish you had done something differently and do you wish you had apologized sooner?

WILLIAMS: I actually did apologize before.

ROMANS: Sure. So you thought you said I'm sorry and you moved on.

WILLIAMS: Yeah, way before him being like that, so that was, first of all, first and foremost and then second -- so I couldn't apologize any sooner and then also I learn from my mistakes. I think it's important for everyone to make a mistake or make an error or make a bad judgment. Maybe it wasn't even a mistake, just make a bad judgment and then learn no one is perfect and everyone is, you know, doing things that are not perfect.

ROMANS: Did you see the tape, yourself? I mean, have you watched the tape of the event or do you remember it from being in the moment? WILLIAMS: I don't remember. I was talking to Michael earlier today. He said when he's out there, he's so intense and you want, obviously when you get a bad call, it's like what's going on. When you are in the moment, you are just there and you are in the moment. You don't quite remember it.

ROMANS: What do you tell your young fans who believe in you as a real fighter, who watched the controversy the past few days and want to move past it with you. What do you tell those kids about being in the moment and being a competitor and about good sportsmanship?

WILLIAMS: Well I think those kids can probably see those great to be a competitor and great to see how passionate someone is. Making the right decisions at the right time and realizing that hey, everyone falls. Wow. She's human. She made a bad decision, a bad choice. Wow, OK, I can be like her for real now. I'm not a robot. I have a heart. I bleed.

ROMANS: You said it earlier that your father used to give you grief when you would get break a racket or get aggressive.

WILLIAMS: He would give me grief because Venus was always so calm. My name should be Venus and she should be Serena. I'm the total opposite of my name, like this little fire thing. My dad would be like Serena, you need to be better on the court. I want to win so bad and do it so perfect. I don't want to make a mistake. If it's not perfect, I get angry. It's just, you know, I think differences that everyone has.

ROMANS: How do you approach Serena as a business from the way you have been grown up to sort of seek this excellence?

WILLIAMS: When I approach Serena as a business, I think long term. What do I want to do? What are my goals? What is something I want to ultimately be a part of? It's how I start different business ventures or if I want to partner with someone, I have charity aspects. If I partner with Nike, I want to know what can I do charity wise. They have wonderful followings with that. That's why my partnership with Nike is so well. Another one is Gatorade. They are good with my beliefs and long term goals.

ROMANS: There's a stake in Miami Dolphins. There's a couple clothing lines. You are in fashion. There's a book. There are so many different things. How do you manage it all?

WILLIAMS: I find the time, I don't know how. I do somehow and it works out.

(END VIDEOTAPE)

ROMANS: All right. Coming up, bad behavior and big bucks. Does it pay for celebrities like Serena or Kanye to act out?

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ROMANS: Yeah, the ticker is back. Chrystia Freeland, managing editor of the "Financial Times,", and pat Kiernan, anchor of "NY1 News." We want to discuss bad behavior, present company excluded; of course, Joe Wilson called President Obama a liar last week. Since then he and a Democratic opponent have each raised more than $1 million for their campaign. Kanye West, he offended Taylor Swift at the Video Music Awards and we just heard from Serena Williams about her U.S. meltdown.

VELSHI: Kanye has a new album coming out; Serena Williams has a new book that Christine talked to her about. Is the public going to make them pay for their bad behavior or will their public outburst actually bring money in for them?

Pat.

KIERNAN: You know these laws they have, that say someone convicted of a crime can't profit from a book about the crime. It's what we need.

ROMANS: A bad behavior isn't illegal.

KIERNAN: You shouldn't profit from bad behavior.

ROMANS: It's showbiz. I feel it's all show bizness. Isn't it our fault, the reason they capitalize on it is because we are talking about it. We wouldn't be listening to -- how long was that Serena interview? Would you have played that if she hasn't --

KIERNAN: Would you have had more questions about the business?

ROMANS: We had that interview actually scheduled before her outburst. It just turned out that --

VELSHI: Here is my analysis of this. Kanye West was behaving badly. Everyone agrees.

KIERNAN: Poor little Taylor Swift.

ROMANS: She's the real winner.

VELSHI: Joe Wilson was doing something they didn't allow for. He was behaving badly. Serena Williams, I give her this much credit. She appeared remarkably focused and passionate.

ROMANS: Focused ...

VELSHI: I thought it was highly focused. She wasn't going to shove that tennis ball down her throat; it looked like it was a possibility. She looked like she meant business. I give her credit.

ROMANS: Saying a naughty word to an umpire. I think the difference, a lot of people said; she was actually threatening this line judge. That makes -- you know, that make as difference.

VELSHI: Joe Wilson made a lot of money of this. He raised a lot of money. FREELAND: Absolutely. I think Serena's book will do better. I found the most objectionable about her behavior was the non apology apology.

If you take its understandable anger in the heat of an intense moment, maybe understandable. Afterwards, you have to come clean. It wasn't a mistake, it was a misjudgment. I behaved poorly. I'm sorry.

ROMANS: When I read the ft, I don't find this on the front page.

FREELAND: If she was a Goldman banker, we would definitely have played that.

KIERNAN: The other big winner is Jay Leno. The Hugh Grant thing years ago was the turning point. Now, he's got another controversy that helped him, 17 million viewers on the Kanye West.

VELSHI: I don't know if Barack Obama got any money for saying what he thought of Kanye West.

ROMANS: I think Barack Obama got credibility for saying that.

VELSHI: Good to see you both. Thank you for joining us on YOUR MONEY. You can follow me at Alivelshi on twitter.

ROMANS: You can follow me at Christineromans.

VELSHI: Make sure you join us every week for YOUR MONEY Saturday at 1:00 p.m. and Sunday's at 3:00 p.m. You can also log on 24/7 to CNNMONEY.com. Have yourself a great weekend.

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