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Government Reversing Its Course on Bailout Plan: Will Buy Ownership Stakes in Banks Instead; There's Building Support For Bailing Out the U.S. Auto Industry; Housing Industry Seeing Foreclosure Filings Slow; How to Get That Job

Aired November 15, 2008 - 09:30   ET

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

GERRI WILLIS, CNN HOST: Hello, I'm Gerri Willis and this is OPEN HOUSE, the show that saves you money.
Big news on the economy this week, call it fallout, if you will, over the $750 billion bailout plan. Treasury Secretary Henry Paulson said the U.S. government is reversing its course, and will not buy bank' bad mortgage assets as originally planned. Instead, the U.S. government plans on buying ownership stakes in banks in hopes they'll return to their normal lending practices.

What's left out of the current plan? Carmakers and homeowners. But, there's building support among Democrats for a bailout of the U.S. auto industry. It started with President-elect Obama's meeting with President Bush and continued with Democrats in Congress starting to draft legislation that will aid troubled automakers.

And the housing industry is seeing foreclosure filings slow after new legislation in some states delaying the foreclosure process. Now, that type of legislation helped California foreclosure filings decline 18 percent in one month, but the experts say, hey, it's a short-term solution and will not fix the overall problem.

RealtyTrac reports nationwide, a five percent increase in filings in October over the previous month. That's about one in every 450 houses in the U.S. States still seeing the highest foreclosure filing rates: Nevada, Arizona, Florida.

OK, let's dig in agent deeper into the current state of the housing market and the future value of your money. Amy Bohutinsky is with Zillo in San Francisco; Greg McBride is with BankRate.com.

Welcome to you both, great to have you here. Thanks for helping me out.

Let's talk about this housing market. Amy, you've got some great numbers on where we are, now. You say one in seven mortgages underwater. What do you see at Zillo about the health of the market?

AMY BOHUTINSKY, ZILLOW: Well, as you said, one in seven of all homeowners now underwater on their mortgage. For people who bought in 2006 at the height of the market, it's one in two, 45 percent of people. So, that's a really concerning fact. We also just saw in Q-3 the seventh straight quarter of declines with home values declining 13 percent since the peak of the market, nationwide. In some markets in California and Florida we're talking 40, even 50 percent since the height of the market.

WILLIS: Unbelievable. Greg, are we at the bottom? Tell me that we're going up from here, that we're going to see some sort of improvement.

GREG MCBRIDE, BANKRATE.COM: I wish I could be more optimistic on this one, Gerri, but, I mean to Amy's point, with so many people upside-down and home prices continuing to fall that certainly does not bode well for foreclosure. Now, throw in the economy. More people are losing their jobs, more people are going to go into foreclosure as a result. The fact is that we're not out of the woods by any stretch.

WILLIS: We're not out of the woods, Amy. Is there anything in your crystal ball you see could provide some positive news for homeowners? There certainly are a lot of new programs out there. Every major bank in the country has something to offer people who are having trouble with their mortgage. Will that be the key that makes this get better?

BOHUTINSKY: Certainly these foreclosure prevention programs will help, but the estimated numbers are in the hundreds of thousands, and by our numbers, there are about 12 million Americans today who are underwater on their mortgages.

The other thing is this foreclosure prevention programs have to do with primary residence residences. I was talking to someone, for example, in southwest Florida, yesterday, I Fort Myers, Florida -- 2/3 of their foreclosure filings there are not for primary residences. These are people's seconds and vacation homes and these are people who aren't going to be helped by this and therefore, the market there is not going to be helped by clearing out this glut of foreclosures. So, it's not going to help everyone.

WILLIS: Well Greg, let's talk about this plan that came out from the federal government that we heard about this week from Fannie Mae and Freddie Mac; there are different views on how effective this can be. What's yours?

MCBRIDE: Well, I think the biggest drawback is why do you have to be three months behind before you can get any help? There are a lot of people out there that are really struggling to make their mortgage payments every month, and they're struggling to stay on time. They don't want to fall behind and they're raising their hands, saying, hey, could use a little help over here. This plan isn't going to help them if they're not already three months behind.

On the plus side, you know, what's good about this is that it bases your new payment on your income and so the term we've heard over and over again is "preventable foreclosures," and, you know, what's that really geared toward is somebody who had a temporary circumstance, such as a job loss or an illness, and it's not geared toward the investors that were buying multiple properties trying to make a fortune overnight.

WILLIS: Yeah, and that is good news. We're getting back to reality here, now. Those loans would be based you on paying 38 percent of your income and in is reality because we got people paying 40, 50 percent of their income on mortgages, that's not workable as we know.

Amy, as we start to pull out of this thing, tell me what you see in your crystal ball, because you have so much data there at Zillo.com, Amy. What kinds of areas, what parts of the country do you see improving?

BOHUTINSKY: Well, we did have good news in about a dozen markets, upstate New York and parts of the South, particularly North Carolina actually see appreciating year over year, but that's just a couple of markets. So, that is good news.

The other good news is over the longer term, most markets showed annualized appreciation over five years. So, if people have held onto their homes for five years, if they plan to hold onto them for five years more, they will probably come out of this. The important thing, though, for all homeowners, especially with more job losses forecasted, is to make sure you have that savings in the bank to cover your mortgage should someone lose a job, and if so, you can stick this out for the next five years.

WILLIS: I just want to get one more question over to you about this idea of programs from the major banks, CitiBank, JPMorgan, Greg, to you. These are not -- this ain't nothing. These are some programs that will really help people out there. We see Citi reaching out proactively to help people. Can that make a difference?

MCBRIDE: It certainly can. I mean, you're talking about the largest lenders that are -- either have the most loans outstanding or the servicers of a large number of loans. It's absolutely going to have an impact. It's not going to solve the problem overnight, but it is going to help. It's a reflection of the fact that, look, there are still more foreclosures to come as the unemployment rate goes up.

WILLIS: All right. Amy, Greg, thanks for your help toy. We certainly appreciate it.

President-elect Obama has big-name advisers and even bigger plans for the future of the U.S. economy. It could affect your bottom line.

(COMMERCIAL BREAK)

WILLIS: There's no down time for President-elect Barack Obama. The transition team, it's working full speed to get the administration up and running in just over two months. And the appointments that are made, the policies that are formed, they will make a huge difference to your bottom line.

Joining us now, Telis Demos of "Fortune; CNN political advisor Amy Holmes, she's an independent conservative who was a speech writer for Republican Senator Bill Frist when he was majority leader.

Amy, I want to start with you. Let's talk about what priority number one is for the new president. It's got to be the economy. What does he need to do? AMY HOLMES, CNN POLITICAL ADVISOR: Absolutely, Gerri, and I think the first order of business is that $700 billion bailout and the global financial crisis. You know, when this was sold to us we were told it was an emergency; we were looking into the economic abyss. Credit markets were frozen up, banks couldn't lend to small businesses which would then have to lay off workers and raise the unemployment rate. And here we are now with this thing mutating in all these new directions with the auto industry, GE, all of these special interests bellying up trying to get their piece of the $700 billion pie.

WILLIS: What happened to homeowners? That's what I'm worried about. I thought we were going to help homeowners and now it's Detroit, it's every automaker in the country. What do you think of that?

TELIS DEMOS, FORTUNE: Well, I think that, you know, solving the problem for homeowners is just much stickier. I mean, you've got all kinds of committees in Congress working on this, you've got a lot of different interest groups also getting involved in that.

I think that, you know, the dollar figures is going to continue to grow, you know, when you get into homeowners and I think that's something that right now, kind of the lake duck Congress and the lame duck president aren't willing to get into, I think they're sort of waiting for Obama to get into the homeowner issues.

WILLIS: Amy, is it politics as usual? And what can we expect on the tax front out there?

HOLMES: Well, unfortunately, it looks like politics as usual. Obama, he campaigned as someone who was going to get rid of special interests and now we have unions weighing in and the auto industry weighing in. When it comes to taxes, Gerri, I hope that he suspends his idea to raise the capital gains tax. He wanted to bring it from 15 percent to 20 percent.

In this current economy, with unemployment going up, possibly to eight percent, jobless rate being at an all-time high in seven years, we need for our free markets to be able to function properly, to grow and invest and hire people and keep people on the payroll so that we can move forward.

WILLIS: Telis, there's a lot of talk about a middleclass tax cut. What do you make of that?

DEMOS: I think that Obama is definitely going to go ahead with that. I don't know if he'll go ahead with the tax increases he's talking about. I think a lot of that stuff will wait until the sunset of the Bush tax cuts in 2010 and capital gains taxes, he hasn't really said yet about that.

But, you know, Rahm Emanuel, you know, speaking to some reporters the other day, said that the middleclass tax cut is absolutely going to continue to be a priority for them because they see that as a driver of economic growth. You know, they think, well, you know, doesn't make any sense to give businesses tax, you know, cuts if nobody's out there to buy stuff. So, I think they're going to try and start from the bottom up and say let's get some money in consumers' pockets, starting with that tax cut.

WILLIS: A-No. 1. OK. Obviously, you know, we've talked a lot about that, but one thing that we're not talking about, Amy, is healthcare. What happened to healthcare?

HOLMES: Indeed. And I think for Barack Obama, healthcare, he might have to put that off for a couple of years, When you have this $700 billion bailout that might just be growing, will there be money for the healthcare reforms that he's been proposing?

Where he can start, though, where there's bipartisan consensus is cutting healthcare costs. That's health information technology. When I worked for the Senate majority leader, Bill Frist, who's a doctor, that was something that you could reach across the aisle and try to get done. That will help lower costs.

Also, portability so that employees can take their healthcare from one employer to the next. These are a few things to get on the road to health care reform. His big plan about offering government health insurance, that might have to wait.

WILLIS: Well, do you agree, Telis?

DEMOS: I don't think so, no. I think that one thing that, you know, Obama and his economic team have been saying is that this is not a time when the government needs to scale back, when it needs to worry about, you know, keeping the budget balanced. I think right now, they're looking at, you know, kind of -- people are calling them Keynesian, you know, they think that they need to spend money in order to get us out of this economic crisis.

So, I don't think that Obama is going to be shy about tackling some of his bigger initiatives. You know? Obviously, cutting costs on healthcare is kind of a no-brainer, everyone's on board with that. But, I also think that he might, you know, push some of his bigger, his more ambitious pieces as well, you know, and I think that you're going to see that also with infrastructure, with energy. You know, he really, I think, wants this to be -- this is an opportunity for him, he thinks, to kind of do a lot of big things.

WILLIS: All right, Telis, Amy, thank you for that. We appreciate your time, today.

HOLMES: Thank you.

WILLIS: Take control of your life. How some folks are actually regain power over their bottom line.

(COMMERCIAL BREAK)

WILLIS: We talk a lot about saving you money on this program, but in low income communities, hey, it can be a struggle just to buy food. Saving money, well, it seems like a luxury. This week, we took a look at one program that's working to help low-income citizens get a leg up on financial success.

(BEGIN VIDEOTAPE)

RYAN MACK, OPTIMUM CAPITAL MGMT: The facts say you should be discouraged. The facts say that you should be upset and maybe you should even lose hope, but that's not the truth. The truth is the facts don't show the will and the spirit of the people that are in this room.

WILLIS (voice-over): These are tough economic times for people across the country. But in the New York City housing projects, hard times have been around for years. On this night, residents are looking for advice on what they can do to help themselves.

MACK: We have a problem in the community when our income rises, but our net worth does not rise.

WILLIS: Ryan Mack is a frequent guest on CNN and owns a financial advisory business. He and his colleagues are visiting low- income communities across New York City. Their goal? To help residents learn the basics of personal finance and inspire them to start businesses.

DAMON JENKINS, SMALL BUSINESS OWNER: A lot of us don't know exactly what's out there. What we have out there to offer. So, you know, with us not knowing, there's no reason for us to go out there and look for it.

WILLIS: This is one of Mack's proteges. He turned his life around after serving time in prison. Now he owns a construction company and tells his story to encourage others.

JENKINS: I came right out the projects, like everybody else, you know, gang-banging, and, you know, just real crazy for me. You know? And when I got in touch with these guys, they showed me so many different things, showed me how to build my company. I started my own company.

RYAN: So we have to understand what do we have and how can we use what we have to create wealth for ourselves?

WILLIS: Raliek Rivers works as an insurance salesman, but he wants to start his own green technology business.

RALIEK RIVERS, POTENTIAL BUSINESS OWNER: I definitely have a goal. I just didn't know how to achieve it. So this seems like a good, a good place to a good place for -- these guys have it, so you only ask people who know and I found it. I found people who know.

WILLIS: Mack and his colleagues hope passing on their knowledge will empower Rivers and others to reach for their own financial success and lift the entire community in the process.

(END VIDEOTAPE)

WILLIS: All right, this story happened to take place in Brooklyn but folks in towns near you could be facing the same challenges. Ryan Mack joins us right now.

OK Ryan, what was interesting about that, because I sat through your whole presentation, was that folks were on the edge of their seats listening to you, they were eager and really wanting this information. You say that there are special obstacles in the way of some of these people trying to get ahead. What are they?

MACK: Well first of all, it's lack of resources. It seems like sometimes whenever there are budget guts, it seems like the community centers and those things are the first to go. And there are a lot of individuals who say, Ryan, you shouldn't go into the various neighborhoods in which we go into because their certain fears or certain, you know, whatever.

WILLIS: We have to use a pass just to get into the community.

RYAN: Yeah, well you know what? I think there are a lot of stigmas and stereotypes about public housing communities. And I think that if we're going to really try to help the entire community, we have to be not afraid to go into those communities who need it the most. And it's, quite frankly, it's a crime that the politicians only really come around when there's a -- the camera's rolling or during election time.

So, we have to make sure that we have to be very proactive about making sure they get the resources that they need before something of a disaster happens.

WILLIS: Two things that were interesting: Folks are interested in starting their own business. That seemed to me to be the thing that people wanted to do. That, and they were most interested in building community. You know? It wasn't necessarily about, you know, savings, methodologies, it was really about how do we bring the whole community together.

RYAN: Well, the thing is, none of us are as smart or as strong as all of us, and together we can really make a difference, if we all come together, I think if we learned anything from this election is the power of the voice of the people, if we really try to come together and to create change.

And we might have not enough resources individually, but if we come together we can purchase homes, we can start businesses, we can intellectually have conversations and empower each other through conversations and training courses and we can create for ourselves. A lot of these things we don't have to wait for legislation to pass or other things to make the decisions...

WILLIS: Start now.

RYAN: Yeah, we can do these things for ourselves.

WILLIS: Now, one thing interesting you were telling folks to be weary of, that there are some institution, some businesses in their communities, that are really trying to take advantage of them. RYAN: Well, the bottom line is, you know, there's sometimes the lack of information and the lack of resources and knowledge in the community can bring about these predators who really prey upon individuals who don't...

WILLIS: Who are they?

RYAN: You know, we have these prepaid debit cards, you know, the Rushcard. You know, I always speak out against the Rushcard, because it has so many -- and other prepaid debit cards...

WILLIS: What is the Rushcard?

RYAN: Well essentially, the Rushcard and prepaid debit cards, what they do is essentially they charge -- they have a $20 initiation fee, they have a $5 fee if he want to return items off of it, they have a $3 a month inactivity fee, they have...

WILLIS: Why wouldn't I just open a bank account?

RYAN: Well, exactly. So, the main thing is that if we educate our individuals in the communities to open up our own bank accounts, to start our own business, so we don't have to rely upon these individuals who are preying upon the lack of knowledge we have, then we can really take a step forward in true empowerment.

WILLIS: Well, Ryan, great presentation. I just love what you're doing, it's fascinating. Thank you so much for sharing it with us.

RYAN: Well, I would just like to say kudos to you and your staff and the rest of CNN to really coming out there and telling this story of all America. It really tells a lot about you guys, as well. Thank you.

WILLIS: Thank you.

Finding a job right now is a tough task especially if you haven't been in the workforce for a while. How to get that job, next.

(COMMERCIAL BREAK)

WILLIS: Well, for anyone looking for a job right, it's a tough time, and for folks leaving the military and transitioning back into the workforce, hey, it's even a bigger challenge, but it can be done. Rosemary Haefner is the vice president of human resources at CareerBuilder.com. She joins us from Chicago.

Rosemary, I've got to think, out there, with unemployment running at 6.5 percent, that veterans are having a particularly tough time, right now. You actual surveyed veterans of all ages. What did you find?

ROSEMARY HAEFNER, CAREERBUILDERS.COM: It is a tough time out there, Gerri, 17 percent of those we surveyed said it's taking on average six months to find a job when they return from active duty.

WILLIS: Wow!

HAEFNER: And even more challenging, one in 10 saying a year or more. So, it's definitely a tough time for them.

WILLIS: Wow, wow, wow. OK, well, what kinds of challenges, what kinds of obstacles are they finding? Is it discrimination? What's the problem when they're in the job market? Just not enough opportunity?

HAEFNER: Well, the No. 1 challenge they gave us was this inability to translate their military experience into civilian language, but they also cited not having a college degree and just generally not being experienced in the civilian job interview process.

WILLIS: Well, interesting. Well, you know, the flipside of this is that you also interviewed employers who said, you know, they're interested in hiring vets. What sit about vets and employers that they like and what are they telling you about their hiring plans?

HAEFNER: Right. Some employers are saying 20 percent of those employers are saying in the next 12 months are actively targeting veterans because of the unique qualities veterans bring to the table, 73 percent said, you know, they're good with their work ethic, very disciplined. Others talked about leadership qualities, good under pressure, so there are a lot of things specifically that veterans are bringing that other candidates may not be as strong with.

WILLIS: Well, you know, you say that to veterans out there, looking for a job, don't limit your options. What do you mean by that, Rosemary?

HAEFNER: Well, obviously, veterans have wonderful experience, they know how to secure areas, they have firearm experience. A lot of people traditionally think that limits them to working for government or law enforcement. Think broader. Again, employers are looking for that ability to do well under pressure, to take the lead in the workforce. So sales roles, any sort of management roles, those are some things that are very, very good for a veteran to apply their experience.

WILLIS: I would think that that whole leadership element would be critical to employers out there, particularly right now as you're coming up against, you know, slower, sluggish sales, you're trying to find somebody out there who can really make a difference and use anything in their environment to help them.

HAEFNER: Absolutely. So, veterans definitely have that training, that experience already, many candidates don't and employers don't have the funds they once did to invest in sort of formal leadership training, so veterans, they definitely have an edge up on a lot of candidates out there.

WILLIS: What should they do on their resume to translate their experience to the real world?

HAEFNER: So, one of the things we see veterans missing more than other candidates out there, they're not quantifying. So, you have great experience, but you do need to make it easier for the employer to see it. So, if you've lead a team or squadron, make sure you day how many people were on that team. So, some really practical, easy things to do on the resume, but definitely, quantify.

WILLIS: Quantify, quantify, quantify. And ultimately, what is your best tip to veterans, if you had to summarize everything you're saying to them, today?

HAEFNER: The best tip is, be very confident. You have incredible experience that really translates well into the civilian workforce, but like any candidate out there, you have to connect the dots for employers but practice, practice, practice, always be ready for that one time you've got that interview.

WILLIS: Rosemary, great information. Her Web site is called CareerBuilder.com. Thank you for that.

You can hear much more about the impact of this week's news on YOUR MONEY with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. Eastern and Sundays at 3:00, right here on CNN.

As always, we thank you for spending part of your Saturday with us. OPEN HOUSE will be back next week and you can also catch us on HEADLINE NEWS every Saturday and Sunday at 3:30 p.m. Eastern Time.

Don't go anywhere, your top stories are next in the CNN NEWSROOM. Have a great weekend.