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What Did President Obama Bring Back From His Trip to Asia?; The Great Goldman Sachs Apology; Interview With Tim McGraw
Aired November 22, 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: What did President Obama bring home from his trip from Asia? Answers for the economy, a solution for 10 percent unemployment.
The great Goldman Sachs apology or was it? Find out what the trading giant regrets and whether $500 million for small business will buy Goldman any good will.
And country super star Tim McGraw, 40 million records under his belt. This southern voice wants to sell 40 million more and make movies, too. Lights, camera, action. It's time to talk YOUR MONEY.
ALI VELSHI, CNN HOST: Like Christine says, President Obama is back from that busy Asia trip but did he come back with answers for our economy? Welcome to YOUR MONEY, I'm Ali Velshi. On the floor of the Chicago Board of Trade, part of the CME Group.
ROMANS: I'm Christine Romans here in New York, Ali, no stop in the president's trip was more critical than China. It was the first time a U.S. president visited that country during his first year in office. It is a signal just how critical for America to work together to battle the global recession.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: As president who indicated we discussed what is required to sustain this economic recovery so that economic growth is followed by the creation of new jobs and a lasting prosperity. So far China's partnership has proved critical in our effort to pull ourselves out of the worst recession in generations.
(END VIDEO CLIP)
VELSHI: Now, China went into an economic tailspin after the United States and it recovered before the United States. It's ready to out pace the U.S. in economic growth, again, this year. So what is China doing that we're not that we can do better? Let's have this conversation with the chief economist from Mesierow Financial Diane Swonk and our good friend Richard Quest anchor of "Quest means Business" on CNN International. Welcome to both of you.
Richard, let's start with you by the international perspective first, let's answer that basic question. Things have got to change in order for the world to recover. Things have got to be different in the way China does things and the way America does things. Are we headed towards that change?
RICHARD QUEST, CNN INTERNATIONAL HOST: No, I don't think we are any time soon because what you're talking about is fundamental structural reform and the best that the president came home with is a deeper understanding of where these two countries can play out against each other. They both need each other. I think there's a common mistake of fallacy out there that somehow America goes on its hands and knees for cash and China buys the Treasury Bonds and that's all there is to it.
It's not like that at all, it is much deeper and it is much more complicated and in many ways it is much more equal than the critics would have you believe, but, substantially, the long-term economic growth sustainable in both countries. Americans have to save more and China has to spend more because, ultimately, a China that plays its role as consumers is what everybody needs.
ROMANS: Diane, this is that global rebalancing. We've heard the treasury secretary talk about it and we have heard the president talk about it. It means that the United States can't be the consumer engine for the rest of the world, but sometimes our trading partners and friends and allies and competitors get nervous when we start talking about that because they think it means that we're criticizing them for our problems.
DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Well not only that they feel we're criticizing them, it is that they rely on us to keep their growth alive. There is this dysfunctional relationship and dance that we develop in the world and unwinding out of that and rebalancing is the pretty way of saying turning all our worlds upside down. Richard is exactly right. We have to save more and produce more for export while China has to consume more and produce more for its own consumption.
China is a major export partner of ours, they do buy a lot of our stuff, in fact to build all that infrastructure that they need in China they need all of our stuff here particularly here in Illinois, we have the Caterpillars, the John Deere and all that is very important.
But I think it's really important to understand that China is now getting even more pressure from some of its partners in Asia than it is from the U.S., it's not as public. But behind the scenes meeting have picked up with china quite dramatically and so I'm a little more optimistic that we'll see movement from China. I think they understand it, but not as public because China doesn't want it to be.
VELSHI: If you believe, Richard and Diane, as I do, the nuance here is how does China accomplish that? How do they become more of the way we have become in terms of being consumers now that we become more like they have become? We know how to make American into savers, you cut off access to credit that is what has happened in the last year.
What do you do, Richard to the Chinese to make them more eager consumers, so that the Caterpillars and the companies in the United States that manufacture things can actually sell them to that market so that China is seen as the opportunity that it really is as opposed to the fear that we've regarded China with, Richard?
QUEST: What you don't do is do it overnight. It took decades for these complex financial, sociological relationships to be built up. It doesn't come back overnight because we all had a banking crises and we have had the worst recession in living memory. Diane makes a really good point when she talks about how other Asian economies are worried about China. Just look at the Chinese currency and the way that it has Yuan has managed to go down with the dollar because of the Chinese insistence on maintaining its value.
Now, we've seen other countries intervene against the dollar, but they're not really worried about the dollar. What they want to do is see a more realistic evaluation of the Chinese currency and if there is one touchstone. One touchstone to show how dysfunctional the relationship is, it is the refusal of the Chinese to recognize this disparity.
ROMANS: All right, Richest Quest, Diane Swonk very interesting. Also, there are economists who say it could take even a generation for the Chinese to start saving more until there is a better social safety net in their own country so people feel comfortable enough to start spending money and not save for a rainy day.
Diane Swonk, Mesirow Financial we'll talk to you again from Chicago. Also, Richard Quest and Ali Velshi.
OK. Is it the last chance to save the planet from climate change? Three weeks from Copenhagen where 190 countries must decide how to fix the environment. Find out why some are saying it is simply a waste of time.
ROMANS: This week Motor Trend named the Ford Fusion the 2010 car of the year. It is a huge award for Ford in a very long year for the automaker and all American automakers, frankly. Does it mean American cars are back to being the best on the planet? CNNMONEY.com Peter Valdes-Dapena may have the answer, or is it just Ford, Peter? Is it just Ford that seems to be doing something right here?
PETER VALDES-DAPENA, SENIOR WRITER, CNNMONEY.COM: It is not just Ford, I think Ford has been at this longer than anyone and they started working a long time ago on just the basics of just making their cars more reliable and making them safer and making them more fuel efficient and it is really starting to pay off.
I don't think they -- they had a good couple weeks, in fact. I don't think the Motor Trend award was the biggest thing for them. The biggest thing was a couple of weeks ago when "Consumer Reports" --
ROMANS: The reliabilities, these cars are dependable. The Ford is right there on the top of the list for dependable cars.
VALDES-DAPENA: The headline on their announcement was Ford is now world past dependability far above Detroit competitors.
ROMANS: Let's talk about the 2010 Ford Fusion what is so right about this car that put it on the top of the list?
VALDES-DAPENA: The Ford Fusion I thought was a really good car before this year, it came out in 2006. Fun to drive, nice interior, fuel efficient, it is a good, basic family car. What they did for 2010 was upgrade everything, upgrade the interior and upgrade the ride and handling, the car is quieter now and it really is a very good right smack in the middle mid-size sedan and what Motor Trend was looking at they said was how well does this car do what it is supposed to do. This car does everything it is supposed to do and it does it really well and it is kind of fun.
ROMANS: All right. Peter Valdes-Dapena, CNNMONEY.com thank you so much.
You know Ali; you have covered Ford extensively and talked to them many times over the past year during this whole crisis for the automakers. Ford did not need to take out bailout funds by the way.
VELSHI: That is right.
ROMANS: Is this Alan Mulally finally you know everything that he has done is paying off now?
VELSHI: Yes to some degree. I do give Alan Mulally a lot of credit but as Peter says, it is not just Ford, GM has the Silverado and the Malibu, they are making quality cars. Ford has a couple advantages. As Peter says, they have been at it longer. In 2005 when Bill Ford Jr. started restructuring the company, realizing that quality is job one and not resonating with American people.
In 2006 they brought Alan Mulally in and he really started to lead a team, very difficult to do in an industry where you're continually downsizing, so you are laying people off, they are afraid for loosing their jobs and yet, you're telling them they have to come back around and make world class cars. That is what Alan Mulally has succeeded in doing, it is not that he has changed this company around; it is that he has successfully led the change.
ROMANS: You know Ali by a hybrid Ford Fusion you might be cutting back on carbon emission, but is anyone else bothering to cut back? The United Nations Climate Change Conference in Copenhagen starts in just a little over a couple of weeks. Is this as UK Prime Minister Gordon Brown says our last chance to save the world. Here in New York Howard Ghoud joins me, he is the co-founder of the Clean Economy Network and in West Palm Beach Stephen Moore is an editorial writer for the "Wall Street Journal" and of course Ali is still with us in Chicago.
Let's listen to what Gordon Brown said; he is quite dramatic on what has to be done in Copenhagen.
(BEGIN VIDEO CLIP)
GORDON BROWN, BRITISH PRIME MINISTER: If we do not reach a deal in the next few months let us be in no doubt since once the damage from unchecked emissions growth is done no retrospective global agreement in some future period can undue that choice by then it will be irretrievably too late.
(END VIDEO CLIP)
ROMANS: Stephen Moore, too late. Irretrievably too late. Is it really as dire as all that?
STEPHEN MOORE, EDITORIAL WRITER, "THE WALL STREET JOURNAL:" Well let's hope not Christine. Because it looks right now like Copenhagen will be a big dud. None of the countries can agree on carbon emissions and this is the whole premise of these international treaty agreements that everybody is going to jump in the pool together and when a lot of these especially the developing countries like China and India are saying is we are not going to cut our carbon emissions we have to grow our economy.
And that is what a lot of Americans and by the way a lot of Brits are saying now, too. Every country virtually in the world has a lousy economy right now and now is just not a time when most foreign leaders want to be talking about putting a massive new tax on their economy.
ROMANS: Howard you say, I mean everyone is looking to China and the United States, we are the two biggest carbon emitters in the world and they're looking to see what we're doing and we have agreed to talk about these things. But are we setting a hard target because we said we're going to make some painful choices? Where are we?
HOWARD GOULD, CO-FOUNDER, CLEAN ECONOMY NETWORK: Neither the U.S. nor China have set actually hard targets. A few months ago at the U.N. conference President Hu Jintao (ph) said they were going to make significant cut backs in carbon emissions.
ROMANS: But didn't say how much.
GOULD: They didn't say how much. Other countries are actually putting down kind of drawing the line in the sand right now. But on Tuesday of this past week basically in a joint statement between both President Obama and Hu Jintao (ph) basically said that we are going to start putting some lines in the sand for our country. So I'm not overly optimistic that some hard targets are going to come out of Copenhagen but I am optimistic that it will be heading in the right direction.
ROMANS: You know Ali, it is so interesting, these international treaties. There is so much process, the working behind the scenes and they are doing all the hard work up the mountain and then you hope you reach the summit. But I kind of had this notion of 190 leaders all looking over their shoulder trying to figure out who is giving up more than I am giving up. It is very difficult to get a consensus in these things.
VELSHI: And more than process, this is about moral suasion, this is important. And there have been a lot of enemies here in the United States that have not been cooperative, including the U.S. Chamber of Commerce. The reality here is that a lot of Americans have come to see carbon emissions control or cap and trade as something that's going to make things more expensive and it is entirely likely that it will. It may be costly but the reality is this is our life, this is our future.
We need the moral suasion and the absolute discussion to have smart discussions about what cap and trade means and what limiting carbon emissions means and what holding back climate change means, we have to do this because if everybody's not doing it, then everybody's got a right to say this is the reason I can't do it.
The fact that we're in an economic pickle at the moment may mean that this is exactly the right time to do it because we have to build factories and we have to build plants and we've got to build energy plants and it would be better to know what the regulations are worldwide going forward in order to do that. I think it is very, very dangerous. I agree with Stephen that it will be a problem to get this done in Copenhagen. I don't think it is going to happen, I think it is very dangerous to continue to move on; it is bad for business to not know what the rules are and to not start fixing this planet.
ROMANS: Your final thoughts?
GOULD: I think Ali is exactly right. This is a problem that needs to be addressed. We can not be an ostrich and stick our head in the sand and just hope it goes away. We have done certainly during the last eight years in the Bush administration. The problem facing us right now in the United States is that the Democrats have come up with a plan but the Republicans don't like it but they don't have an alternative plan.
So, we can't really come to some negotiation on it. The rest of the world is willing to negotiate, but here in the U.S. we're kind of at odds with each other and the problem is the future of this planet may wind up in the hands of a few Republican Senators and that's very dangerous position.
ROMANS: The president can go make promises in Copenhagen but he does answer to you know, there is another branch of government that is equal to him and that is, of course, Congress and that's what you're talking about, the fighting back and forth.
We have to leave it there gentlemen. Howard Gould thank you so much. Stephen Moore, you're coming back. Ali, you are coming back.
We are going to be talking more about hot air, carbon emissions all of that stuff in the weeks ahead of Copenhagen. So we'll revisit this again.
Lots of you will likely buy gift cards to give away this holiday season find out why the Fed wants to protect consumers from strict gift card rules and why Ali says the Fed should just butt out.
(BEGIN VIDEO CLIP)
SANDRA BULLOCK, ACTRESS: He already has a very well-established career and he doesn't need to butt into ours but guess what he is going to and he does it so beautifully and he does it with such ease. (END VIDEO CLIP)
ROMANS: We'll tell you who Sandra Bullock is talking about and we'll talk to him ourselves. That's next.
ROMANS: Let's take a look behind some of the week's headlines. Ali Velshi is in Chicago with Terry Savage, personal finance editor "Chicago Sun Times" and author of "The New Savage Number" also Diane Swonk, chief economist for Mesirow Financial.
All right, everybody. Feel like the interest payments you owe for your credit card debt or your loan are piling high consider Uncle Sam's bill. More than half of the $9.5 trillion of debt the government will incur over the next decade will be interest. That is $4.8 trillion according to the Congressional Budget Office.
Now, much of the borrowed money, of course, is going to stimulus and rescue programs to prop up the economy, but can we afford this and what happens if our interest rates go up? It's a tricky situation when we look at our debt payment, right, Ali?
VELSHI: It is. And this is a big problem. If you want to look at what the problems are in this economy, some people will tell you it's entirely jobs and some people will tell you it is the climate that we have to deal with. But there are some people Stephen Moore will tell us this a little later, because I know he's hot on this topic, and that is the amount of debt that we have got ourselves into. It is not even just the amount of debt we got ourselves into, Christine; it is how exactly are we going to get out ourselves out of this kind of debt. Is there a plan?
Diane, I would say that we're probably in an agreement that this administration inherited a lot of these problems and this debt would be a result of things that have happened in the past, but the reality is, do we even have a plan for a day when we're debt free or at least deficit free?
SWONK: Not even close. One of the issues is that as the debt builds, right now the treasury is trying to lock into a lot more 30- year debt and 30 year inflation protective long-term treasuries and we're trying to lock into these low rates. That is good news.
The bad news is there are a lot of debts issues and the debt that we are going to be issuing over the next ten years is going to be enormous and at that point in time you do start to see some real upward pressure on real interest rates and we don't have the Chinese out there, we can't rely on them it is one of the reasons why there is no choice but for consumers to help fund that debt and high saving rate in the U.S. we need corporations to be continuing to buy.
VELSHI: Hard for people to understand, Terry, how that affects them. We know how our credit card debt or our mortgage debt affects them, but this is our debt. TERRY SAVAGE, PERSONAL FINANCE EDITOR, "THE CHICAGO SUN TIMES:" It stands for my eyes glaze over, most people don't realize the second largest category of spending in the whole federal budget is interest on the national debt, only after social programs. Now think about it, this past year we spent $383 billion on interest and that's with interest rates at historic lows.
With ten-year treasuries under 2.5 percent. Now, what happens when the rest of the world, what looks at all the money we're spending on our deficits and says, I don't think we want to buy these pieces of paper for ten years at 2.5 percent? We'll have to bribe them to lend us money by buying higher interest rates.
ROMANS: All right. Let's talk a little bit here about the holidays and gift cards. We want to get your thoughts on this. We're committed to making sure that you're mastering your money. So you know this when you're buying a gift card, think of this, more than one in four gift cards won't even be used. Many also come with fees and expiration dates that are just as tough to figure out as the fine print on a credit card.
Terry, the Fed was directed by Congress to set new rules for gift cards. Is it worth the Fed's time and my question is, why is it going to take months to put it into effect in the first place? How does that really help anybody?
SAVAGE: Well first of all that has been the joke of the whole credit card legislation. Congress can get something done in a minute, but it gave them 18 months to raise interest rates, basically.
VELSHI: And they did it. They all did it.
SAVAGE: And of course you give people incentives and they do that. For the Fed to be worrying about gift cards now is the joke of the day. The fact is that most Americans are scrounging around for spare change in the bottom of their purse or wallet and they're going to use the gift cards they have, but it was a bad idea in the first place to give gift cards because people did let them go to waste, so to speak, or charged the high fees and that's not the problem for the Fed to worry about. The Fed should worry about why the banks aren't sending money out the door and why we're taxing the banks.
SWONK: They are worried about that. In all fairness to the Fed, they were asked to do this.
VELSHI: We as, Congress has to think about not wasting the Fed's time on stuff. First of all gift cards are the domain of the lazy. Maybe people should go out and make people buy gifts. If I want to buy Terry a gift I should find out, for four minutes I should do some inquiries and find out what she wants.
SAVAGE: You should just hand them cash. Crisp, clean new bill.
VELSHI: With that said, I'll buy food from street carts and if I get sick doing that I have to learn not to do that. I don't think I need the Fed worrying about this , I'm sure the Fed is very capable, I think this is the kind of thing that after we have gone through about 800 things that the Fed has to properly regulate and look at, we can get down to this. So on one level I'm happy someone is looking into it, but we have a lot of other bigger problems out there. I'm not too concerned.
ROMANS: You know what I love about this Ali, is sometimes we agree and sometimes we don't agree. We really agree on this one, I also think the gift cards are a little bit lazy.
VELSHI: We often agree on food.
ROMANS: We do agree on food. Maybe I will get you a Chipotle gift card for the holidays.
VELSHI: Food gift cards I always accept.
ROMANS: Everyone stays, so don't go away. Also tracking the stimulus and counting or miscounting the jobs. The White House reported 1.4 million dollars went to Utah's four congressional districts. The trouble is Utah has three congressional districts.
ROMANS: Counting or miscounting the $787 billion stimulus. Hearings this week and a report by the Government Accountability Office questioned the White House math. Inaccurate data posted on recovery.gov, that is the government-run Website tracking the stimulus it shows stimulus money flowing to congressional districts that do not exist and jobs created where no stimulus funds were even spent. Now, the White House says it can count the number of the jobs created by the stimulus 640,329. But can it?
Earl Devaney was appointed by the White House as chair of the Recovery Accountability and Transparency Board.
(BEGIN VIDEO CLIP)
EARL DEVANEY, CHR. RECOVERY ACCOUNTABILITY AND TRANSPARENECY BOARD: And I think there is enough inaccuracy in here to question the 640 number it might go down.
(END VIDEO CLIP)
ROMANS: Ali Velshi is in Chicago at the CMU with our good friend Diane Swonk, chief economist at Mesirow Financial and Stephen Moore is editorial writer for the "Wall Street Journal" and is in West Palm. Diane lets start with you.
Listen to Republican Congressman Darrell Issa.
(BEGIN VIDEO CLIP)
REP. DARRELL ISSA, (R) CALIFORNIA: The administration continues to try to cover up its mistakes with misleading job plans. The whole jobs created saves metrics is not only troubled, but it is entirely deceitful. No government agency private sector group or research economics has any idea what the reliable calculation track for these numbers would be.
(END VIDEO CLIP)
ROMANS: Diane, does this hurt the credibility of the stimulus, do you think? I mean you've told us before that you think the stimulus has been helpful to the economy overall. Does it face a credibility problem every time we have these arguments over what the number really was?
SWONK: Absolutely. I mean, the reality is that although the stimulus has been helpful, the composition of the stimulus was not ideal because it was highly politicized. On top of that the best the government could do was mitigate losses as we went deeper into this recession trying to overt a great depression and it is no wonder why people are feeling so dissatisfied today. Because here we are at 10.2 percent unemployment rate, significantly higher than we were a year ago, 5.6 million people had been unemployed more than six months.
And these are the issues that Main Street's grappling with although they may have mitigated some job losses, they're very hard to count when you are talking about mitigating, frankly it is hard to count net creation, and who created it, as well. I mean at the end of the day, it's very hard to measure these issues and it does hurt credibility when you start nit-picking at the data.
VELSHI: Christine, the government has to really get better at managing these expectations. For instance 10.2 unemployment might not be where the government thought we were, but many private sector economists thought we'd get to this point. Most people would not have guessed that the market would have performed the way it has since March 9th. Christine you and I did calculations back in spring and we thought you know after a bear market like that if we saw a 30 percent run that would have been fantastic.
This government has gotten itself into a position where it can't take credit for the good stuff and it gets nailed on the estimates that didn't work. Diane's right and Congressman Issa is right, this is a weird metric. This business about saved versus gained jobs. Why don't we be honest with people, that's not a metric that you can use?
We are in a terrible situation and this government needs to say that they didn't get us into this terrible situation but give us metrics that we can work towards so we can all say, boy, this is going to get substantially worse but I'm going to muddle through it because on the other side it is going to be better. They really just need to change the way they present these things.
ROMANS: It is even alarming what the Republicans say and what you have even told us many times, is that look, they promised if we passed the stimulus we would peak at 8 percent unemployment and now 10.2 percent unemployment and, also, 1.2, 1.4 million stimulus dollars flowed to the fourth congressional district of Utah. Wait a minute, there is no fourth congressional district in Utah. What do you think about the credibility problems at the White House of the stimulus now?
MOORE: Well first all, you know what has happened with Recovery.org the Website here has been a total public relations catastrophe and Diane is right about that. The fact is that they haven't been able to count the numbers and a lot of the federal contractors that got the money that are being asked how many jobs you created, you know they have a financial incentive to say oh we created five or ten times more jobs than we really did and so I think that's a big problem.
The bigger problem though is the one that I think is unavoidable and that's where Diane and I disagree. I don't see how anyone can rationally look at this. We spent $200 billion and the unemployment rate has gone up every month and it has just been a catastrophe and we have lost 3 million to 4 million jobs.
And my attitude is that maybe we should stop spending the money right now and either use that money for debt retirement or for small business tax cuts to get hiring back because you know right now about one out of every six Americans when you count people who are discouraged workers don't have a job.
ROMANS: Listen everybody, I mean Ali, you and I have spent some time with the treasury secretary in the months of the crisis, he publicly is very measured, quite measured about the economy and the financial system and ...
VELSHI: But he got pushed a little bit this week.
ROMANS: He got pushed this week; he got angry at a powerful congressional hearing committee this week. Two Republicans called for his resignation, one blamed him directly for the bailout. Listen to the Treasury secretary.
(BEGIN VIDEO CLIP)
TIMOTHY GEITHNER, TREASURY SECRETARY: We are working to put the TARP out of its misery and no one will be happier than I am. See that program unwound and I want to point out that we are moving very aggressively to close down and terminate the programs that define TARP at the beginning of the crisis.
(END VIDEO CLIP)
ROMANS: I've seen that look in his eye, but never in front of a camera and never publicly, Ali. He, this pounding from some of the Republicans on this committee saying TARP was terrible and TARP was a problem. You have given us this horrible, America this horrible problem and he says this was bequeathed by the Republicans before him and he was quite angry.
SWONK: You know, can I jump in here a little bit.
ROMANS: Go ahead.
SWONK: I was with Tim just a couple of weeks ago and one of the issues is that, first of all, once Lehman went down there was no where for this economy to go but into the abyss. And the question was how deep and how long the recession was going to be and would it be a great depression? I think everyone has really lost sight of how desperate the situation was a little over a year ago. We really were within 24 hours of a global economic meltdown. I have no doubt about that. I have been in the middle of it.
I was watching things going on and most Main Street Americans don't know about it and I know it was really hard to swallow the TARP but that really is reckless of the Republicans on that aspect of it. I didn't approve of the composition of the stimulus bill but it would have been nice if they had done the lame duck Congress and the lame duck president had done a stimulus package when Ben Bernanke asked for $400 billion before Thanksgiving after the elections last year.
We would be much further along on stimulus. It's really not fair to say that without stimulus we wouldn't be here, 3.5 percent growth in the third quarter and 1.7 percent due to cash for clunkers, 0.6 percent of that due to the housing recovery with the first time buyer tax credit supporting that. We would not be even seeing positive growth and the run up on Wall Street that we see today if we have not seen action.
ROMANS: Stephen Moore, what do you think? I will point out that TARP was a brain child of Henry Paulson under the Bush administration.
MOORE: There is no question. I think there is a little hierocracy on the Republican side of the isle right now. Because of course, many of the Republicans voted for this, remember, it passed under George W. Bush. But, look, I just disagree with Diane. I think everything we've done in the last year here in Washington has been a catastrophe. We would be well out of this recession if we had done nothing, just let it burn itself out and all the spending ...
SWONK: This is a spending crisis.
MOORE: Diane, all the spending and the debt has put us in a financial hole that will take 20 years to dig out of.
SWONK: The cost of unemployment alone, if we had 20 percent unemployment today which is what we would have, unemployment insurance next year could count for as much as 10 to 20 percent of GDP alone. That is a major cost.
VELSHI: We may have to agree that both of you are right and we have -- I don't even know if it's disagree. I think Diane's point about what the cost would have been is right and I think Stephen makes a big point. We're in a big, big hole and we need a very specific reason, a specific way to get out of that. What I think is happening is that Americans are not seeing a light at the end of the tunnel don't know how they're supposed to get through it. So I actually think you're both right.
SWONK: A political quagmire. The reality is that when you're running 10.2 unemployment, its politics. And it is not good politics. Going into 2010 that makes it worse.
ROMANS: We leave it there. Diane Swonk, Stephen Moore, Ali Velshi in Chicago. Next up, Goldman Sachs. The words make you think two things right, money and controversy. Why the CEO is apologizing again and what Goldman plans to do with $500 million.
Plus, I ask country music star Tim McGraw about his new management, his new ideas and his strategy for the next 40 million records and find out what else is in store for this southern voice.
ROMANS: Goldman Sachs this week making an apology and an offering. First, Goldman pledged $500 million over five years to help small business. That is $100 million a year, how about some perspective? Over five years that is an average of $100 million per year. Goldman earned every day more than $100 million from trading on 36 separate days in the third quarter alone.
Is Goldman a bank that was bailed out in a big way during the financial crisis really doing enough to help Main Street? CEO Lloyd Blankfein knows Goldman has an image problem. On Tuesday he issued this for Goldman's role in contributing to the bubble collapse.
(BEGIN VIDEO CLIP)
LLOYD BLANKFEIN, CEO, GOLDMAN SACHS: Certainly our industry is responsible for things, we are a leader in our industry and we participated in things that were clearly wrong and we have reasons to regret and apologize for.
(END VIDEO CLIP)
ROMANS: On Monday protesters railed outside Goldman's D.C. Office this $500 million small biz investment may not cool their disgust for Goldman. Ali is in Chicago unplugged, so to speak, away from his magic wall but not without his tricks and, Ali, I have a number for you, a numeral if you will, a roman numeral. It's 3 percent. Any guesses for me? It has to --
VELSHI: Three percent of Goldman's bonus pool is what they're giving to small businesses.
ROMANS: That is absolutely right. Put it in perspective for you. What that offering for small biz is about 3 percent of what they have already set aside for compensation, compared to what those big bonuses at Goldman critics hate the small biz effort is, well, small, Ali.
VELSHI: Christine, let me tell you, no water to carry for Goldman Sachs. I was quite amazed when I heard that Lloyd Blankfein had said that it was god's work. I think it was questionable as to whether Birk banking is even a public service. Let's at least talk about what it is, first of all. I wanted to draw a little picture; investment banking serves a few purposes. We're talking about investment banks we are talking about Goldman Sachs, JPMorgan Chase, Morgan Stanley, Merrill Lynch and some others but that's what they are. They raise money or they help companies raise money, these might be companies that you invest in and more importantly they may be companies that you work for. Now, one way they raise money is they take that company public on the stock market. But another way they raise money and this one is very important and central to their business is they raise money for companies wanting to borrow. Let's start with this example here. This is a U.S. company, can be any company. It could be your employer. This company needs money. It needs to raise money so that it can expand and build other plants and it can hire more people or pay its staff.
This entity over here could be anything. This could be a hedge fund or it could be a pension fund or an overseas government. This is a bunch of people with money to lend and they know that the banks are paying them 1 percent interest or 2 percent interest. They want, les let's say, 8 percent on their money. These two people can't find each other, this business needs money, this entity wants to lend money. That's what the investment bank does. So this U.S. company goes to a Goldman Sachs and says, we need money.
Goldman Sachs goes to this entity and says I have somebody who is a pretty good credit risk who is prepared to pay you 8 percent for this billion dollars that you have to borrow. So the money flows that way through Goldman Sachs back to this company and Goldman Sachs makes a profit on making this deal and making business continue and helping credit flow. That's the traditional role of an investment bank.
But as you know, this is an important role. I don't know if its public service and I don't know whether it is god's work but an important role in the flow of money. The issue is in the last year all those massive profits that the investment banks and Goldman Sachs made didn't come from this traditional investment banking business, you know where it came from?
VELSHI: Pure old-fashioned trading. A mug like me could have made money in 2009 just by buying stocks early in the year when the market was really low, January, February, March 9th the bottom of the market, sat on it and been diversified and I would be anywhere from 30 to 60 percent richer just by doing that. So any fool could have made money. These are not fools running these investment houses, these are investment professionals. That's where they made the big money this time.
ROMANS: We will be talking more about Goldman Sachs, its trading machine; it's public relations strategy, whether it really will be helping small business with this $500 million investment. There's a lot here and over the days and weeks ahead, Ali and I are going to keep covering just what is happening this difference between Main Street and Wall Street and what it means for you and just what is fair and maybe not fair about it.
OK. How do you follow up 40 million records? If you're Tim McGraw you make more records and some movies. I sit down with the country legend and one of sexiest people alive. But first a business man downsizes to protect his company and his future. He found a way to keep going even after his cash flow ran out. It is this week's "Turn Around."
ROMANS (voice over): Dennis Belfiore has spent the last 30 years working on large architectural projects. First, with major global firms and then with his own small business.
DENNIS BELFIORE, OWNER, BELFIORE ARCHITECTS: I wanted to be much more involved with full dimensions of the projects and the business part of what we do and in my own way have been able to find projects that I find just as interesting.
ROMANS: Belfiore was working on retirement homes, libraries and tropical resorts. But then the recession.
BELFIORE: A lot of work that we had cued up to start up wasn't really starting up. For most of 2008, we were in a subsidy mode. I guess you call it being in the red.
ROMANS: Belfiore laid off three workers. He cut pay for the remaining three staff by 25 percent. And he took out a second mortgage on his home. He had to find new projects or the firm would go out of business.
BELFIORE: Public work was going to be the area that I felt was going to be the beneficiary of these stimulus programs. So, we started looking at that much more aggressively.
ROMANS: Belfiore landed a contract to inspect school buildings in New York City. It's completely different than a large architectural project he's used to. But the income keeps his company going so it will survive until the economy picks up.
BELFIORE: I never did anything quite like this, but it has a lot of the elements that are of interest to me and I'm glad I found it. It's an interesting thing to be doing.
ROMANS: If you're a fan of country mega star Tim McGraw, you're in luck. You'll be seeing a lot more of him that is because brand McGraw is getting a reboot. Fifteen years after his first smash, McGraw has a new album and new movie with Sandra Bullock and new management the people behind Dave Matthews Band and Phish.
ROMANS (voice over): This southern voice is just getting started. Country music star Tim McGraw has sold 40 million records.
Are you pressing the reset button to try to broaden out bigger audience a new Tim McGraw for next year and beyond?
TIM MCGRAW, COUNTRY MUSIC STAR: I don't know if it's a reset button as much as it is an advancement button. We have laid a tremendous platform. It's time to expand from that platform.
ROMANS: That platform includes his biggest movie yet, a staring role opposite Sandra Bullock in the new movie "The Blind Side."
BULLOCK: You were right.
MCGRAW: Excuse me? You're right. How do those words taste coming out of your mouth?
BULLOCK: Like vinegar. He already has a very well established career and he doesn't need to butt into ours. But guess what he is going to and he does it so beautifully.
ROMANS: For 16 years, you have been on top of the world and now you are stretching. You are Tim McGraw the grown up trying new things.
MCGRAW: My wife would probably beg to differ with that.
ROMANS: That is his wife singer Faith Hill. Their 2006 tour was the best selling country music tour ever. But he is stretching, like this unexpected collaboration with hard rock group, Def Leopard.
MCGRAW: I like cotton candy or I like to go jump off a building. Stuff in between doesn't move me that much.
ROMANS: He's moving in a new direction under the management of the people behind the Dave Matthews Band and Phish. He is keying on a new savvy digital audience, online and sampling new sounds.
MCGRAW: You know that's part of having new management and a fresh go at it. To have all those things that I don't know how to do.
ROMANS: The Tim McGraw for the next 16 years, how is he going to be different the Tim McGraw that sold 40 million records?
MCGRAW: Yes. Hopefully 40 million more records. That would be nice.
ROMANS: Until then, he's one of "People" Magazines sexiest men alive with a new album, new movie and a new tour in February.
MCGRAW: I think it is all of a sudden you sort of reached this plateau and you can see other places to go to. For so long, you look at this peak that you think that you want to get to, then you realize it's the first peak of many to come.
ROMANS: McGraw says he won't quit his day job. He's excited for his tour beginning in February. It's unlike anything he's ever done. He starts filming a movie at the beginning of the year. Look, McGraw doesn't have to reinvent himself, he's on top. He says sometimes you have to get uncomfortable to get better and that is what he is doing.
All right. Chicago without Oprah Winfrey? The "Oprah Winfrey Show" standing in the cold for the tickets out side Harpo Studies, the media mogul will end her TV show in 2011. Next a closer look at her empire and her influence and everything from the presidential election to the recession.
VELSHI: All right. Back with me in Chicago, at the Board of Trade, part of the CME Group, Diane Swonk, chief economist with Mesirow Financial and Terry Savage with the "Chicago Sun Times" and the author of the new book called "The New Savage Number".
SAVAGE: It's different now.
VELSHI: These are good friends here. Ironically in Chicago, there's some big news happening today. Oprah Winfrey, the queen of all television, the queen of talk announcing with about two years notice that she is ending her epic run on television to do something else.
Now, a lot of people presume it's to do something on her own network, the network that she's started. It's the Oprah Winfrey Network, which was the old Discovery Health Network that she took over and rebranded. Here is Oprah in her own words.
(BEGIN VIDEO CLIP)
OPRAH WINFREY, HOST, "THE OPRAH WINFREY SHOW:" These years with you, our viewers have enriched my life beyond all measure and you all have graciously invited me into your living rooms, into your kitchens and into your lives.
(END VIDEO CLIP)
VELSHI: Now, when Oprah speaks, the whole world listens. I'm not just talking about her TV show or her satellite radio channel or "O" Magazine for that matter. I'm talking about something people call the Oprah effect or Oprah's global reach that actually affects the way people live their lives. Oprah can drive consumers. She drives spending. We have seen this in Oprah's book club; it started back in the 1990's. It has literally turned titles into best sellers.
When Oprah likes something, everybody knows about it, Oprah has turned ordinary people into TV stars, Dr. Oz, Dr. Phil, Rachel Ray, all household names brought to you initially by Oprah. It goes beyond that. Oprah influences ideas, calculating Oprah's exact influence on the presidential election is difficult, but some studies show that Oprah Winfrey's endorsement of Barack Obama translated into real votes.
According to a study from the University of Maryland, Oprah's endorsement was responsible for 1 million votes to President Obama over his Democratic primary challenger, Hillary Clinton. There's no way around it. Oprah is a phenomenon. SWONK: A force of nature. I don't think there's anything in modern history that we can compare to what she has done in terms of her impact on the way we spend and the way we think about the economy and the way that many Americans, particularly women, but many Americans think about their future and their current conditions.
VELSHI: It has been -- she's had a lot to do with personal finance and she has had a lot to do with taking people's concerns and as you said again mainly women. But women are the personal finance drivers in most households.
SAVAGE: They are the spenders. I have been on her show a number of times. Oprah has force. Because she makes people believe. It's not just financial facts or the facts she has. If Oprah sits there and says I can get this, you can get it, too. It's a change in force for America. She's built an empire. That, in itself is good.
VELSHI: Well Christine and I can only hope that when we are talking about complicated financial things we can make it as appealing as she has. Because that's exactly her stock and trade.
ROMANS: All right. Thanks for joining Ali in the windy city, me here at the big Apple. You can follow both of us on facebook and twitter at Christine Romans and at Ali Velshi. Make sure to join us every week for YOUR MONEY, Saturday's at 1:00 p.m. Eastern and Sunday's at 3:00. You can also log on 24/7 to CNNMONEY.com. And don't forget to tune into our very special Thanksgiving edition of YOUR MONEY, it's called "Give Me My Job Back," it is Thursday, 3:00 p.m. Eastern.
Have a great weekend. Good-bye, everybody.