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Testing the President; The Price of Fear; Debating the Future of Nuclear Energy; Guilt-Free Investing; Did TARP Work?
Aired March 27, 2011 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, HOST: President Obama is being tested on all fronts. He remains focused on a military operation in Libya and unrest throughout the region, but the problem's here at home. Unemployment and the deficit that outstanding budget, they all remain.
I'm Ali Velshi. Welcome to YOUR MONEY.
The president may not have a lot of vocal support in Washington lately, but he does have an approval rating above 50 percent.
Stephen Moore is an editorial writer for the "Wall Street Journal." Stephen, this president wrapped up his trip to Latin America with his attention focused on the rest of the world.
What does this do to his ability to lead in the United States on vital issues that remain domestically? We know about them job creation, the budget, the deficit.
STEPHEN MOORE, EDITORIAL WRITER, WALL STREET JOURNAL: First of all, Ali, one of the interesting things about history is that presidents they come into office concentrating on domestic issues, so many times get involved in military conflicts.
I mean, that was true of Woodrow Wilson and Franklin Roosevelt and, of course, Lyndon Johnson who was trying to do the great society, and then we had the Vietnam War. So the president I think is somewhat distracted.
But he can't be too distracted because it's very clear to me to voters, what matters most is not what's happening in Libya or what's happening in Iraq or what's happening in Rio, but what's happening here at home.
And they want jobs. And, of course, don't forget, Ali, two weeks from now we're going to be talking about a potential government shutdown to deal with this budget crisis.
VELSHI: Right. That will get attention back if nothing else will. I want to bring in Benjamin Barber. He's a senior fellow at Demos. He's also the author of "Jihad Versus MacWorld."
Ben, Federal Reserve found from 2007, which was the height of the housing market, to 2009, which was really a low point, families in America lost a quarter of their wealth, the result of the recession and result of an overheated housing market. How long can the president afford to be engaged in anything else other than economic problems in this country? I know on social media, Ben, I continue to get these comments.
Whenever I tweet anything out about the president and Libya or the Middle East, I get responses from people saying what's he doing about unemployment? What's he doing about the economy back home?
BENJAMIN BARBER, DISTINGUISHED SENIOR FELLOW, DEMOS: Well, he's probably got, Ali, about two hours to get his focus back on the United States not even two weeks because the reality is we know that during elections and after elections, most Americans are focused on understandably domestic issues, the domestic economy, their jobs, their houses.
While they can get excited for an hour about a war abroad, about taking down a dictator, in the long-term, what they really care about is their own jobs. So I think this is going to be a very real problem for him. Many presidents, when they're in trouble, like the distractions of foreign policy because it takes them away from the domestic problems that give them trouble.
But in this case, this president's got to deal on the ground with domestic issues, and I fear that the Libyan crisis, aside from other problems we can talk about in Libya itself, make it an intractable and difficult place for him to engage. Even where it easy I think it would be hard for him in terms of domestic policy.
VELSHI: Yes, you're both agreed on the fact that at this point this president wasn't looking for that sort of a distraction. Candy Crowley is our chief political correspondent. She's an anchor of "STATE OF THE UNION."
Candy, let me just bring our viewers this recent CNN Opinion Research poll. It shows that a majority of Americans, 54 percent support the way that the president is handling foreign affairs.
But ask the public how the president is handling the economy, take a look. Way down that list, it dips to 39 percent. Now let's go back to the time following the first Gulf War when Bush 41 had the support of nine of 10 Americans in 1991, ultimately though he was undone by the economy when he lost a year later to Bill Clinton.
CANDY CROWLEY, CNN CHIEF POLITICAL CORRESPONDENT: And undone by an economy that actually was improving.
VELSHI: That's right.
CROWLEY: In that last year. So -- and we see signs still and there are economists who can talk about this as well as yourself, Ali, but I mean, there are signs that this economy is beginning to improve.
The problem is, if the unemployment rate doesn't come down, people now looking at the deficit as well, but that's huge. But - you know, when you look at that polling, anything domestic is under 50 percent. Energy policy, health care policy, the deficit, I mean, that's bad news. So foreign policy is above the 50 percent. In rare -- I mean, I think foreign wars or wars the U.S. is involved in can bring a president down, but they rarely lift him up when he's got that much trouble at home.
So look there is a reason when the president went to Latin America and Libya was blowing up in the Middle East and things were going on that he said I'm going to Latin America because this means jobs in the U.S. so they get it. They get it.
MOORE: But you know one thing that's different Ali -
MOORE: What happened when you mentioned those 91 percent approval ratings that George Bush, Sr. had. Remember, the Gulf War was a success so he was the kind of war hero president. The jury is still out about how the American people are going to feel about what we're doing in Libya.
Whether this will be a success, whether we'll be able to kill Gadhafi? You know, who knows? And the question is, if that operation does not succeed, does that interfere with his ability to get a domestic policy passed?
VELSHI: And that's a good question. Ben, let's talk about that. It's not like the president had clear sailing anyway on the domestic policy front when it came to job creation, when it comes to taxes, when it comes to the deficit, when it comes to the increasing of the country's debt limit.
Does it make any difference in the end? As you said he's got a couple of hours to get back to domestic issues. What's he going to do?
BARBER: It will make some difference whether we quote, "win," or, quote, "lose over there." That is to say seemed to succeed Gadhafi goes. Things smooth out, not too much loss of civilian life, no loss of American life, or if the opposite happens, which I fear could be likely in the complicated situation.
BARBER: Over there. So I think that is going to be in the short run at best a wash and in the long run if there is a long run, really damaging. I mean, I think those figures above 50 percent on foreign policy have to do with the fact that most Americans don't know much about it.
It's kind of a vote for America in the world, good, he's representing America in the world, but the real numbers are the numbers at home because those are numbers that reflect what in social science would be called intensity.
If you don't like him about this, it's because you're intensely not liking what's happening in the economy, in foreign policy, you like him, but not very intensely.
VELSHI: Well, here's something that' - there's an interesting outcome to all of this and that is that Congress finally rallied bipartisan support for one idea
There are people on both sides of the aisle who are angry that the president did not seek their support before committing to military action in Libya. That's not entirely true.
We're going to talk about that, but how is Congress -- how is that anger affecting already strained efforts to deal with our deficit, with job creation? We'll talk about that on the other side.
VELSHI: I don't want to overstate this, but lawmakers from both parties are voicing sharp criticisms that President Obama kept Congress out of the loop on early efforts in Libya and that the president's goals in Libya remain unclear.
Ben, I'll start with you. Democratic Representative Dennis Kucinich, a former presidential candidate himself, made headlines this past week, vowing to work against the president regarding Libya.
Listen to what he said.
(BEGIN VIDEO CLIP)
REP. DENNIS KUCINICH, (D) OHIO: In this case, it's very clear that President Obama exceeded his authority. Now, the immediate thing congress needs to do when it returns is to cut off any funds for continuing in Libya. And I intend to bring forward such an amendment.
(END VIDEO CLIP)
VELSHI: He also, by the way, Ben, said that this is an impeachable offense, and he does not really believe that President Obama should be impeached for it, but he said that.
I think the question that Dennis Kucinich is holding that I think is of interest to a lot of people and John Boehner has said the same thing, what is the endgame in Libya for the president?
And earlier you said to me it's not really the endgame we're worried about, we need to know at least what's going on in the second quarter.
BARBER: Dennis first, the second quarter next. He was always an honest man, a good man, and it's irrelevant. In this sense the United States, the last time we were engaged in a constitutionally declared war was World War II.
If we had followed Kucinich's prescriptions, which are the right constitutional prescriptions we would not have been in Korea, we would not have been in Vietnam, we would not have been in Iraq, and so on. The fact is for a very long time the imperial presidency in the hands of both Democrats and Republicans have operated the way they feel like operating on the basis of sense of urgency. So it's a good point he makes, but probably not relevant.
Much more relevant is the second point. If the U.S. is engaged in some consultation with the Congress, with the president saying it's necessary for humanitarian reasons, but on the back of a series of different expectations by different players, the Arab league, NATO, the U.N., the U.N. people who didn't vote, but remain silent, China, Brazil, Russia, India, they all have very different expectations.
We went in with the first quarter very much in sight. Repress the ground fire, save civilians, but what happens in the second quarter if Gadhafi is still standing? What happens in the third quarter if you're getting a civil war with both sides unable to put down the other, but both at war?
What if Gadhafi goes and you get an ongoing tribal war and insurgency? None of those questions as far as I can -- have been examined yet.
VELSHI: I suppose the fourth quarter is a new democratically elected government unfriendly to a bunch of people. Candy, again, I don't want to overstate it because I'm not sure.
I mean, I remember the president's speech before these activities started in Libya where he had just come out of a meeting with congressional leaders from both parties.
So I'm not sure entirely sure the criticism is fair, but how does it affect the president's struggle to get Congress behind him on these domestic issues like slashing the deficit and balancing the budget. Has the president damaged his relationship with Congress more than it was already damaged?
CROWLEY: I don't think so. I mean, let's see, but, I mean, in the end let's face it, we're in a presidential election cycle. The people that are going to vote for him in the end, particularly those on the House side, including the liberals, have everything at stake in their own elections and need to be attached to him. I can't see them going against him simply because they're angry he started this mission over Libya.
VELSHI: Is it your sense, Candy, that they really are that angry about it?
CROWLEY: Sure. I mean, listen. Dennis Kucinich -- first of all, they're not going to cut off funds. It's just not going to happen. But second of all, they're venting their anger. We know that the liberal side of the Democratic Party is angry with President Obama over a number of things.
It's not always that bad to have your left wing or even your right wing upset with you when you're going for the center. So yes, I think they're angry about this particular issue. I just don't see it when it comes to the budget deficit or the budget. They may oppose him for different reasons but not because he did this in Libya.
VELSHI: Stephen, you made the point for some people it's politically convenient. It gives them cover, members of Congress, that the president didn't go in and ask them.
MOORE: Yes. They whine about it, why weren't I consulted, why didn't we take a vote, but, Ali, I don't think any of these members of Congress really want to have to stand up and take a vote because if they do, then they can be blamed for it if it doesn't work.
But, you know, I do think this is important as it circles back to the domestic agenda. If President Obama is strengthened politically by his actions in Libya, then I think it gives him clearly a better hand to work with in terms of dealing with the budget crisis, the jobs crisis with the Congress.
On the other hand, if he is seen as weakened then Republicans will ask for more. They're going to really go, you know, independently and I think it puts the president in much weaker hand.
Again, I keep going back to this. In two weeks we have got to pass a budget or the government shuts down, and then we have to pass a 2012 budget, which starts in April. So there's a lot of budget business to get done in the months ahead.
VELSHI: Candy, Ben, Stephen, great to talk to you all. Thanks very much for all this, and, of course, we look forward to seeing Candy on "STATE OF THE UNION."
High oil prices could be more than costing you cash at the gas pump, they could actually cost this country hundreds of thousands of jobs. I'll tell you how after this break.
VELSHI: Here with me now, Christine Romans, host of CNN's "YOUR BOTTOM LINE" and joining me from London, Richard Quest, host of CNNi's "QUEST MEANS BUSINESS," two of our best business minds.
First, came a crisis in the Middle East sending oil prices skyrocketing then natural disaster struck Japan igniting a nuclear crisis and a debate over nuclear energy in this country.
So there is a great deal of uncertainty about what will fuel the American economy of the future, but the economy of now seems to have taken one step forward and two steps back.
(BEGIN VIDEO CLIP)
PROF. PETER MORICI, UNIVERSITY OF MARYLAND SCHOOL OF BUSINESS: If gas stays at $3.50 a gallon, Americans will have a lot less to spend on restaurant meals, iPhones, new cars. In turn that will mean less goods made here, fewer jobs. We could lose a many as 500,000, 600,000, 700,000 jobs from higher gas prices.
(END VIDEO CLIP)
VELSHI: That's Peter Morici from the University of Maryland. Remember, this recession that we just went through was prompted by a housing crisis, a mortgage crisis, but generally speaking most recessions in the United States are prompted by oil prices.
Christine, are these high oil prices and high gas prices a major threat to our jobs recovery here in the United States?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: When Peter Morici says that if gas prices stay high and continue higher that you're going to see a second recession in the U.S..
But others say wait a second, $3.50, $3.60 for gas prices in the U.S. still hurts, but you're well off the record highs and you're even not as high as the $4 and $4.15 that many people were saying it was going to take to really hurt consumers.
So there's that point. There's also something else. People have a little extra money in their pay check and they may not feel it but they do. They have a few extra dollars.
I think $40 extra a paycheck and that's from the pay roll tax holiday. So there's a little bit of a cushion there. High gas prices are meaning, but they're not spending the money someplace else.
VELSHI: But you're taking exactly the same amount of money -- the same amount of something for more money than you were paying for it two weeks ago.
ROMANS: Absolutely. Absolutely, but also, you know, it's causing them to pull back in other places as well. But will it mean 600,000, 700,000 jobs, I just don't think we know yet.
VELSHI: Richard, take a look at this poll. I want you to see this, 64 percent of Americans say rising that gas prices cause hardship for them. OK?
In Europe, gas prices, much higher. Where you are, in London, much higher. There doesn't seem to be this recurring fear of higher prices of oil resulting in higher price of gasoline, therefore resulting in setbacks to the economy. Give me your take on this.
RICHARD QUEST, HOST, CNNI's "QUEST MEANS BUSINESS": No, no, no, it's exactly the same argument certainly in the U.K. and we have the budget just this past week in which the finance minister, the chancellor actually cut a proposed increase in fuel duty deliberately because he wanted to give motorists some relief, if you like.
But you know, crying against the high price of gasoline when you live in a free market economy is a bit like doing the proverbial at the wind. There's not a lot you can do about it. You're not going to tap the strategic reserves, you're just not. Those reserves are there for serious, major crises.
VELSHI: Actually shortfalls of oils going into refineries, not prices going up.
QUEST: Absolutely. And the truth is that the -- of course it's going to hurt. Of course, people are going to feel poorer as a result of it, of these price rises.
But the reality is that the percentage of oil price in manufacturing in our everyday lives is far lower than it was in the 1970s, for example, during the Arab oil crisis.
No. The truth is this is going to hurt, but there's not a lot you can do about it and Ali and Christine, get used to it.
VELSHI: That's right.
QUEST: Everybody I speak to tells me they're not coming down.
VELSHI: We learned something from the Europeans, Christine?
ROMANS: You know - the bellyache in this country about high gas prices so on the one hand you have this big political dynamic saying get the government out of my life.
And then two seconds later, you hear them say, wait a minute, what is this administration going to do about high gas prices? What are they going to do? So you're right. You live in a free market. Do you want governments -- you could argue about this, but do you want governments setting prices for things you really need or do you want to leave that to the markets? That's a big question.
VELSHI: And then there's that whole question of speculation driving the market. You know what? Speculation drives markets. Richard, always our pleasure to see you and our condolences for the amount you have to pay to fill your tank over there. Christine, great to see you as well.
And coming up next, the future of energy in America. What role, what role will nuclear power play in this country? Plus, how close do you live to a nuclear reactor?
VELSHI: As Japan reels in crisis, the future of nuclear energy in this country is once again in the hot seat. Robert Kennedy, Jr., has earned a reputation as a staunch protector of the environment, as an activist and attorney specializing in environmental law.
While putting everyone's obvious initial reaction to Japan aside, Robert, is it time for more nuclear energy in the United States or less?
ROBERT KENNEDY JR., ENVIRONMENTALIST: Well, you know, I've always said this, Ali. A nuke is good if we can ever make it safe, if we can ever make it commercial.
John Roe, who's the head of Exelon, the CEO and president of Exelon, which has the biggest fleet of nuclear power plants in North America said 10 days ago that there is no commercial case for nuclear power in our country.
And this was before the big catastrophe in Japan. The problem with nukes is it's too expensive. It cost a conventional power plant either solar, wind, natural gas, oil costs about $3.5 billion a gigawatt.
Nuke cost $9 billion to $15 billion a gigawatt. Most recent one built in Finland cost about $10 billion a gigawatt. It's just too expensive and then it's not safe. Anybody who says it's safe, I always say to them then get an insurance policy.
VELSHI: All right, well --
KENNEDY: If you can't get an insurance policy, the insurance industry in a capitalist system, which we have, is the final arbiter of risk and they've effectively priced it.
They've passed the price Anderson Act in our country, which absolves them from accidents from the cost of accidents at nuclear power plants so that if it were radiated by a nuclear accident, you have to pay for it.
VELSHI: Well, let's get a look, Robert -- let's take a look at what we have already in this country. About a fifth of our electricity is generated by nuclear power. There are 104 nuclear reactors in this country right now.
You're looking at a map with commercial nuclear power plants in the United States. The majority of them as you can see are along the east coast. Some in the Midwest, a few in California, half of them, by the way, half of the 104 nuclear reactors in the United States are more than 30 years old.
Three million people live within 10 miles of an operating nuclear power plant. Nils Diaz is the former chairman of the U.S. Nuclear Regulatory Commission. He's managing director of ND2 Group that advances nuclear development in the United States and around the world.
Let's just talk about this. It's been said for a long time that people don't have to be concerned about the safety of nuclear plants and that things that go wrong with them are rare.
Should people be concerned, given what we've seen in Japan, that something happened and now it seems that they are having great difficulty in getting it under control?
NILS DIAZ, FORMER CHAIRMAN, NUCLEAR REGULATORY COMMISSION: Well, I think a little bit of rational concern is adequate. I think in our democracy we can see how that works in the favor of the people. But I do believe that nuclear power plants, if you look at the history of operation and compare it to any other industry, they're safe, and they are secure.
What happened in Japan is really a triple whammy. It's the earthquake, the tsunami, and then the devastation that (INAUDIBLE) that in many ways prevented the resources of the country from being deployed and supporting the infrastructure of the power plants to go back to a normal situation.
In the United States, we have actually taken that into account. We are a much larger country, and we have after 9/11 deployed the resources to take care of these issues in a manner that will be very responsive and that will ensure additional protection of the plants.
VELSHI: Well, let's talk about what Americans -- you mentioned our democracy. Let's talk about how Americans feel about this.
David Gergen is CNN senior political analyst.
David, take a look at these polls. Even after the nuclear disaster in Japan, Americans remain roughly split on whether they favor or opposed the construction of nuclear power plants here in the United States. Forty-four percent are favor. Forty-seven percent are opposed. Nearly forty percent, however, say they're a lot more concerned that a nuclear disaster could occur here.
Take a look at that. And that's since the disaster. About 30 percent are a little more concerned. Almost that number are not more concerned.
David, President Obama has been a proponent of nuclear energy. What is this crisis in Japan going to do for efforts on the part of those who would like more nuclear energy in this country?
DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: The Japanese crisis is a body blow to the nuclear industry in this country, Ali. I think that's clear to everyone. If you went through -- if you lived through Three Mile Island, you remember how that eroded confidence in nuclear power so much. And we were just in the last few years getting over our fears and people in the nuclear power industry were talking about a renaissance of nuclear power in this country.
We had leading environmentalist Fred Crupp (ph) of the Environmental Defense Fund, for example, seriously entertain conversations about nuclear power because of the cleanness of nuclear power versus fossil fuels. And it looked as if we were just starting to go over the hump and there were going to be investors and public confidence in the politicians. When a Democratic president came out and embraced nuclear power, as President Obama did, that was a big milestone.
But all of this now, I think, has been dealt a body blow. And I would be surprised if we build another nuclear power plant in this country in the next 10 years. VELSHI: Wow. All right, Robert, in the last few years, nuclear energy has been branded as a cleaner, better alternative to coal, which is a serious pollutant -- I think you would agree with that -- oil, which is volatile and exposed to geopolitical problems and is not endlessly in supply. Wind and solar, great, but strictly supplemental. Despite what some people have said in the last week about how we can replace all of our electricity with solar and wind, we do not have the infrastructure or the geography for that right now. Tell me the best solution to this.
KENNEDY: Well, that's wrong. You know, we built a nuclear power fleet in about 25 years in this country. We can move and build a solar fleet and wind fleet much, much faster.
Right now, one of my companies, I'm on the board of Vantage Point (ph), which is the biggest green tech venture capital firm in the country. One of our portfolio companies, Bright Source, is building the biggest power plant -- one of the biggest power plants in North America ever built of any kind, 2.7 gigawatts. It's almost three times the size of a nuclear power plant. We're going to build the whole plant within three years. It would take 10 to 20 years to build a nuke plant, takes 10 years to build a coal plant.
We're building it at a cost of about $3.5 billion a gigawatt. Nuclear power plants cost $9 billion to $12 billion a gigawatt. So they just can't compete against us in the market --
VELSHI: What kind of power are you using to generate electricity at that (INAUDIBLE)
KENNEDY: Solar (INAUDIBLE) we're building it in the Mojave Desert, mainly, in California. The main problem that we have, Ali, is transmission. And we need a smart grid in this country that can intelligently store and deploy solar energy at night, wind energy during the daytime, and that can do long-haul transmission of electrons.
VELSHI: Well, that's definitely a problem on any front for using any alternative energy, whether we want to go to more solar or more wind. That's a big deal. Nils, let me ask you. Do we, can we go further without expanding nuclear generation in this country?
DIAZ: Can we go further? No. Nuclear generation needs to be part of this mix and it needs to be at least in the 20 percent to 30 percent park (ph). And you know, the numbers and economics, we can have a long discussion about that. But the reality is that nuclear power plants operate at 90 percent capacity factor, while solar is at the very most 20 percent and wind is at the very most 30 percent to 35 percent.
So they are intermittent. They have to come and go. We have to have other sources to come in. We have to have storage. We have to have transmission. They're good. We like them. We want them to come on, but we also need to have nuclear power to anchor the grid, to provide reliable electricity all the time. And it's competitive. It is not cheaper, but it is competitive. VELSHI: Very good to hear you, though, say that you can get that much out of wind and solar. There are some people who think those numbers might even be a little high.
David, let me ask you -- you mentioned that it was a real milestone when President Obama, a Democratic president, decided to embrace further construction of nuclear power plants in this country. In the aftermath of Three Mile Island, which you mentioned, or Chernobyl, as Robert mentioned, no American president would have come out that same week saying nuclear power is a key part of our energy future. Why is President Obama feeling secure in saying this now, and is he right?
GERGEN: I'm not sure he feels secure. I think he's trying to push it along and preserve it. But the truth is, Ali, he's got -- his energy policies right now are incoherent because he's had so much trouble. When he came into office, he -- and his people in the administration thought he was in the driver's seat on energy and environmental policy, and they started off with a lot of good ideas. But look what's happened. You know, they wanted to do more in offshore oil. Along came the BP power (ph) spill, blew out that tire. They wanted to do more with renewable energy, and along came the question of cap-and-trade, couldn't get it through. That's fallen apart, blew out that tire.
There's a lot more natural gas that's now available to us, available because of new technologies, expensive, but we could do that. Environmentalists are opposing it. That tire is very weak. It's almost blown out. And now nuclear power, the other part of this, that tire blew out this week over in Japan.
So when you look at it, what's going to -- beyond the deficits, one of the most important things the political leaders in Washington now must do is go back to the drawing boards. What is going to be the national energy policy of this country that is both clean and provides enough energy for a growing economy? Those are hard questions today.
VELSHI: Yes. There's nobody who this doesn't affect -- the cost of heating your home, running your business, operating your car, the air you breathe, your health care. This is -- this appeals to everybody across the board. Thank you for a great discussion.
Maybe you think it's bad form to make money off of natural disasters. We'll tell you why you're wrong and how you do it guilt- free next.
VELSHI: In the days after natural disaster struck Japan, the Nikkei, their index, took a nosedive before bouncing back about halfway. Take a look at that. That is investors seeking opportunity. Non-professional investors -- us, for instance -- often feel guilty profiting from someone else's misery. But my next guest argues that they, we shouldn't. Doug Hirschhorn is an investment psychology adviser and coaches financial professionals.
Doug, how should investors think about this?
DOUG HIRSCHHORN, INVESTMENT PSYCHOLOGY ADVISER: The basic premise is, is that to make optimal decisions, you have to think rationally. You didn't cause this event. I didn't cause this event. People did not cause this event. It's a natural disaster. And as a result, if you think about it in a pure logical sense, when dealing with money, you have to realize that we aren't responsible. Feeling guilty is natural, but we're not responsible for it.
VELSHI: All right, well, one of the things you point out is it's not a zero-sum game. You don't either have to lose or win. Investors can make money and help at the same time. Explain that to me. I love the way you explain this.
HIRSCHHORN: It's an excellent idea. People have to realize that when you purchase something, you're transferring money from you to a company or organization. That company then takes the money and they're able to put it to use to rebuild or grow or build schools or clean up, whatever it is. If you're buying into a company that's a Japanese-based company or a company that's helping with the clean-up, if it works out and they do a good job, you're actually helping their economy, helping them clean up. Along the way, you profit, but they're also benefiting. It's a pure win-win situation.
VELSHI: And if you're still wracked with guilt, you point out, take the money that you made, the profit that you got, and give it to the Red Cross or give it to somebody else who's doing some work there.
HIRSCHHORN: I would say do it more specifically, not just the Red Cross in general, not that that's bad, but go to a specific organization and give it to them so you can have specific results.
VELSHI: Excellent advice. Good to talk to you. Thank you for this.
HIRSCHHORN: Thank you.
VELSHI: Let's turn now to our good friend, Jim Awad. He's the managing director at Zephyr Management. Jim, you have picked a fund where investors can make money and potentially help Japan at the same time. Tell me about it.
JIM AWAD, MANAGING DIRECTOR, ZEPHYR MANAGEMENT: Yes. This is an environmental services ETF. The symbol is EVX. And it's involved in companies that are involved in the recovery, remediation, removal and recycling of hazardous waste, and then to a lesser extent, solid waste. So the theory here is that in the long term, as the emerging markets grow and they pollute more and they create more waste, there'll be more demand for these products. But specifically now in Japan, there's going to be huge clean-up. And if you want to invest in that clean-up right now, this would seem to be an efficient ETF to invest in companies that will benefit from that.
VELSHI: And you're saying long term, five-plus years. This isn't a quick play.
AWAD: Yes, no. This is -- this is -- you never should invest for the short term.
AWAD: And this is a long-term investment. But in the short term, there should be a pick-up in demand over the next year or two as a result of Japan, and then other countries taking proactive actions to minimize the chance that if any of their reactors get hurt or involved, that they are well provided and prepared for that.
VELSHI: Let's take a look at the top three -- top five holdings in this fund. What are the down sides to investing in a fund like this? You can see some major names there -- Stericycle, Waste Management, Republic Services. What's the down side?
AWAD: Right. The down side is it's a very concentrated fund. It's levered to a particular industry. It's involved in high-growth, high-PE stocks, and it's only got about 25 names in it. And it's not a big fund. So it can have volatility. You got to make sure that this is what you want to invest in and that you understand you're investing in a concentrated portfolio of companies.
VELSHI: And portfolio -- you should look at your own portfolio, too, to see where it fits in. This doesn't replace the fact that you have -- your risk tolerance says that you should be diversified in a number of funds. You don't take out all your retirement money and stick it in here.
AWAD: No, this is a bolt-on because you want to invest in environmental clean-up and environmental technologies and remediation going forward.
VELSHI: Jim, always good to see you. Thanks for joining us.
AWAD: Thank you.
VELSHI: Billions of taxpayer dollars went to save the banking, insurance and auto industries during the financial crisis. Where's your money now? I'll tell you next.
VELSHI: 2008 -- the banks are in big trouble. The Fed steps in with emergency money. But which banks took money, and how much did they take? That we don't know, but we will in the coming days, thanks to a Supreme Court decision that paves the way for disclosure by the Federal Reserve.
Neil Barofsky is outgoing inspector general of TARP. You'll remember that different, better-known bail-out program that provided $70 billion worth of funds to hundreds of banks and others.
Neil Barofsky joins me now for an exclusive interview. Neil, thanks for joining us. Tell us, first of all, whether this disclosure, this decision by the Supreme Court to have the Fed tell us which banks took money and how much they took, good or bad? NEIL BAROFSKY, SPECIAL INSPECTOR GENERAL, TARP: Well, it's great from a perspective of transparency. And throughout this financial crisis, we've heard different government entities, as well as the industry itself, constantly sound the alarm that if there's a degree of transparency, the sky is going to fall. And time and time again, when these disclosures were compelled, when they came out, nothing really happened, other than we had a more informed debate.
And I think at this point, so many years removed from the crisis and the release of, really, this final piece of information of government support -- I think it's a good thing. And I think it'll contribute to the historical record and we'll be --
VELSHI: Although, those who opposed it said that it would weaken the Fed's ability in the future to go out there and do what needs to be done. I don't know that our viewers would understand that argument. Why would people say that it was a bad thing to have this full disclosure?
BAROFSKY: Well, I think the idea is that because the -- this facility is thought of as the last resort, for a struggling bank or financial institution to get this type of money from the Federal Reserve, and therefore, if there's the promise or the threat of disclosure, that a struggling bank may otherwise not go to it.
But these were extraordinary times, when you go back to late 2008. Everyone went to the well. And we're so far removed, I really think that those arguments -- to the extent that they may have had some weight at the time, the time has passed. I think -- I really don't think those dangers are real at this point.
VELSHI: Let's talk about TAR, which you were responsible for overseeing insofar as figuring out whether everything went to where it was supposed to go and what the government's getting back. To date, more than 60 percent of the TARP money has been repaid. But your accounting, is it all going to be repaid?
BAROFSKY: Well, I think the current projections are that there's going to be somewhere between a $25 billion to $50 billion financially on the TARP program, which is far less than was anticipated just a couple of years ago, but still a significant amount of money.
VELSHI: Let's talk about something else that really concerns us today, and that is the continued issue of foreclosures and short sales. You've criticized the federal modification program for mortgages, the money to keep Americans in their homes. Why do you not like what was done, or do you just don't think that it wasn't very effective?
BAROFSKY: Ali, it's not effective. I mean, this program has been a failure. When you look at -- now, look, the program has helped some people, you know, a few hundred thousand people, and that is a good thing. But you have to look both at the scale of the mortgage foreclosure crisis, as well as what the program promised to do, as well as what TARP was supposed to do. TARP was supposed to help preserve home ownership. This was part of the bargain that was cut with the Congress that got this bill passed. And when the president announced this particular program, he said it was going to help three to four million people --
BAROFSKY: -- stay in their homes. We're looking at a foreclosure crisis where over the life of this program, we're a looking at between 10 and 13 million projected foreclosures filings. So the program to date has about 540,000 ongoing modifications, which is great for those people. But what does it say about the two-and-a- half to three-and-a-half three million people who were supposed to get assistance and never did? And this is such a deep problem, and really, one of the deep failures of TARP because TARP wasn't just supposed to help the banks --
BAROFSKY: -- return to profitability. It was supposed to help people stay in their homes.
VELSHI: Well, we're not out of the problem yet. We're certainly -- as you said, we're far enough away from 2008, when we were all worried about banks failing across the board. We still have this problem. So what can be done now to get those who might still qualify for modifications back into the mix and stem some of these foreclosures and try and protect our housing market?
BAROFSKY: Well, this is a tremendous source of frustration, Ali. I mean, what you need to do is you need to fix this program. This program is not working. It's riddled with conflict of interest. The incentives that are built around are not sufficient enough. And that's not my opinion, that's what Secretary Geithner himself testified recently.
But Treasury continues to celebrate the status quo of this program. They don't -- they're not willing or ready to make the necessary changes. And without the necessary changes, just pretending that this program is successful because it has helped some incremental number of people --
BAROFSKY: -- it's not going to fix, and this program -- this problem -- this crisis is going to continue.
VELSHI: Listen, when you testified before Congress last month, you said that the government's safety net -- and I think you were referring to things like TARP -- they provide these large financial institutions with a motivation to take greater risks than they otherwise would. And this was a criticism we heard before and during the implementation of TARP.
Does that mean that the success of this program, which is going to repay all but $20 billion or $25 billion, could also mean, you know, a continued failure of our system? BAROFSKY: Absolutely. You know, one of the things that we've been saying -- and you look again (INAUDIBLE) talked about earlier, about the projected financial cost -- you really can't do a final accounting until you at the bigger picture of Tarp. And part of that big picture -- when -- when the government came out in late 2008 and early 2009 and said, We're not going to let our largest banks fail, sure, it absolutely helped save the financial system. But it also gave these banks this incentive to take greater risks. It removed market discipline.
And we're in a very, very dangerous place right now. These banks are still too big to fail. There's still this implication that the government is going to bail them out.
And let's be very clear. When we say "too big to fail," it means that. It means that if these banks, you know, hit the rocks again, if we have another financial crisis, which we inevitably will, it's not a question of are we going to be weak or strong-willed about letting them fail. We're going to have to bail them out again in order to preserve the financial system.
And without taking the right remedial approach to try to deal with this problem, which so far has just not happened, at least from the perception of the markets, we're looking at a much more dangerous system, ultimately, and probably a much -- far more devastating financial crisis. That's the risk. That's the stakes.
VELSHI: What we used to call moral hazard in two words. Neil Barofsky, good to talk to you. Thanks for being with us.
BAROFSKY: Oh, it's my pleasure. Thank you.
VELSHI: While many folks have been quick to point out the dangers of nuclear energy, why I think everybody should take a step back before jumping to conclusions. My "XYZ" is next.
VELSHI: Time now for "The XYZ of It."
Two weeks after the tsunami, the nuclear crisis in Japan is still unfolding, and so is the debate over the future of nuclear energy in this country. Thirty-foot tsunami waves knocked out the power to the facilities, causing fuel rods in the reactors to overheat. That sent radiation in the atmosphere. Nuclear industry insiders tell CNN they're frustrated by the media coverage of the event, which they fear will put a halt to what many, including President Obama, were touting as a nuclear renaissance in the United States.
Well, that nuclear renaissance is now in danger. Right now, one fifth of America's electricity comes from 104 nuclear reactors in this country, half of which were built more than 30 years ago. Now, they are expensive to build, and companies were already loath to build more of them, given the tangle of regulations. So the federal government offers loan guarantees to get operators to invest their money in nuclear power plants. In fact, President Barack Obama is asking for $36 billion for nuclear power in next year's proposed budget. And there are up to 20 sites around the country that are being proposed for construction of new nuclear power plants.
Well, like what happened after the BP oil spill last year, the nuclear industry is going to have to address the real safety issues that arise from these unforeseen catastrophic events. Just saying it's safe doesn't work anymore. But before we jump the gun and say good riddance to expanding nuclear-generated electricity in the United States, let's assess the facts about the industry's safety record and the regulations in place to ensure it.
If we do decide that it is not good for America's future to expand nuclear energy, then let's make that decision not on fear or emotion, but on the facts and only the facts because it is a fact that America's energy security requires a mix of sources. And so far, nuclear-generated electricity has been an important part of that mix.
That's my "XYZ."
Thanks for joining the conversation this week on YOUR MONEY. We're here Saturdays, 1:00 PM Eastern and Sundays at 3:00 PM.
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Have a great weekend.