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Your Money

Stock Markets; Primary Elections; Walking Away from Mortgages

Aired May 22, 2010 - 13:00   ET

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

ALI VELSHI, CNN HOST, YOUR MONET: As Europe's debt crisis worsens stocks here at home are getting flat. Welcome to YOUR MONEY, I'm Ali Velshi.

CHRISTINE ROMANS, CNN HOST, YOUR MONEY: I'm Christine Romans, from the New York Stock Exchange. The one soaring stock market took a beating this week, is this fear a natural correction? Ali, what is with behind all of this volatility, I mean 500 points on the Dow, when you look at how quickly this correction has happened from those levels in April, it's really quite stunning. And also Ali, a good point to make, especially toward the end of the week, it's no one thing, it's a lot of different fears and uncertainties, all feeding together to hit bonds, to hit stocks, to move currencies wildly even commodities.

VELSHI: Yes, even hit gold. And I think this is one of those instances where investors have run for the hills and traders are now dominating this market. We're seeing a lot of volume; we're seeing a lot of volatility. Let's bring in our good friend Richard Quest, he is the host of CNNI's "Quest means Business" and spends a lot of his time covering what is going on in Europe. Richard we talked to you a couple of weeks ago we thought that the Central banks and European governments had done something to try and calm markets and that seemed to last for about a day.

RICHARD QUEST, CNNI HOST, "QUEST MEANS BUISNESS:" Barely even that and that only lasted a couple of days. The reality is it's all about risk, it's all about what is unsovereign debt and it's all about worries about whether or not the anemic recovery around the world has legs. Are we heading toward a double dip recession? What some believe is the second leg of a crisis. And that is really the environment. Now I know, Ali, it won't be long until Europe will point out that the Dow has had a very strong rally up and this might be just a correction. But it also might be a fissure; it might be something more serious. And the truth of the matter is at this point Ali no one can really say.

VELSHI: All right. The three of us can talk endlessly about markets but that is one component of the economy, so I want to bring in New York University's famous professor of economics Nouriel Roubini, who looks not just at markets, but the entire economic situation, he's the author of a book called "Crisis Economics," the author of several books, Nouriel thank you for being with us.

Give me your sense of what Richard eluded to, the idea that our economic recovery, our nation's economic recovery might be at risk? Some people call it double dip recession. What does this market activity tell us about what might be happening in the coming months and weeks and years?

NOURIEL ROUBINI, AUTHOR, "CRISIS ECONOMICS:" Well the market volatility in my view signifies that there are significant economic risks in this global economy. As my book points out, financial crisis that starts from excessive debt and leverage from the household section, leave in a second stage to a second leg where there is a releveraging of the public sector, with large accumulation of public debt, because we need the fiscal stimulus to get out of the recession. Because we decided to socialize with losses that put the losses of the financial system now on the backs of the government.

So one thing is happening is the rising sovereign race, it's not just Greece, Greece is just a tip of an ice burg, it's the UK, it's Japan, it's the United States where run away fiscal debt through out the advance economies and the market are getting nervous about that. So we're probably in the Euro zone, and problems of a slow down of growth now in China, the signal, there's also weakness in the United States, I expect the U.S. economy growth is going to slow down towards less than 2 percent toward the second half of the year when the fiscal stimulus becomes a drive on the economic growth. So there are a number of market economic downsides and that's what the markets are pricing today.

ROMANS: And after such a big run up in so many of the markets, they were priced for perfection, they were priced for a global recovery that would be without a hitch. And as you point out, sometimes the medicine you take to fix the first problem causes another set of problems down the road and many people have been warning about that for some time, so what happens here, is this just a correction for stock markets and other commodities and other things quite frankly? Or what does a correction turn into a new bear market?

ROUBINI: In my view, it could be more than a correction; we might be headed towards a bear market for a number of reasons. First of all, there's a risk meaningfully of a double dip recession in the Euro zone, growth in the Euro zone was going to be less than 1 percent, before the shock of Greece, now Greece and Portugal and consumer confidence and investor confidence, the economies in the Euro zone are going to slow down. The fear is that China is also weakening and the United States is currently more than it could be in the second half of the year. There could be a perfect storm in the second half of the year where some are going to double dip, and there is a slowdown of growth also in China and emerging markets and the markets are becoming nervous about this.

VELSHI: All right. Let's take a quick break for a seconds. When we come back, we're going to get Richard's thought on this, and we're going to ask Nouriel Roubini if things are looking so dark, what exactly you are suppose to do with your money. Where is the safe money?

(COMMERCIAL BREAK)

ROMANS: We have just been talking to Prof. Nouriel Roubini about the new crisis spreading in Europe and what it means for the U.S. and for global recovery. "Quest means Business," anchor Richard Quest, dieing to get in on the conversation. What happens next, Richard?

QUEST: The worrying thing about what Nouriel is saying is that he's been proved right so many times and if he's right on this occasion, then frankly we're in for some particularly unpleasant days ahead. It may not be as dramatic as the events we saw 18 months ago, although if we do look at credit defaults are rising, but there is a tightening of credit across the market. It may not be as dramatic as before, but it certainly if it does transpire will be unpleasant and we'll feel the effects of it. And as Nouriel says it will be long lasting. We're digging ourselves out of a very deep hole and it ain't pretty.

VELSHI: So let me ask you this, Christine alluded to the fact that the different types of investments, different classes of investments have been moving in the same direction in the last week, similar to how they were behaving at the end of 2008, which means things are really bad. Nouriel Roubini, for people who want to subscribe to what you're saying, your cautionary tale of the environment and you have been right so many times before, what should they do with their money, how should they be thinking of their investments?

ROUBINI: It seems that markets are going to be volatile at least in the next few months because of all this market economic policy and federal regulatory uncertainty is better to be safe rather than sorry, I would say more cash and less risk of a significant bear market of 20 percent or more. I see more economic weakness in Europe than the United States in relative terms so the Euro can fall much further, so shortening the Euro and going on into the dollar.

I think emerging markets are going to tend to appreciate, I would stay away from the government debt, that very high debt and deficits because they're going to be very risky and maybe put money in those governments, markets like Germany, and a few other countries with lower deficits and that. So the environment is it's better to stay away from risky assets because there could be something more than a correction.

ROMANS: What does it mean Nouriel for how we're going to live our lives in the months and years to come, if we're talking about these huge massive budgets deficits and national debts and we are talking about moves like this in these markets, does it mean higher taxes? Does it mean fewer services? Does it mean there are going to be tough choices coming down the pike? That this isn't necessarily the end of it the market mayhem, you're seeing, but there are other financial ramifications of what we have gone through and what we're still going through?

ROUBINI: Absolutely, in the next few years, all advance economies have to reduce their budget deficits because if they don't do it, there's going to be a fiscal train wreck either through default or inflation and there are only two ways of reducing budget deficit, short of default and inflation tax, you have to cut government spending and services and you have to raise taxes and revenue, so that implies that the disposable income of the housing sector is going to shrink and therefore economic growth and advance economies is going to be slower. It is painful but of running fiscal debts are not sustainable is going to lead to fiscal disaster or inflation. But the alternative is going to be painful, raising tax and capping spending is going to imply slower economic growth and maybe continuation of recession in countries like Greece, Spain, Portugal and others. So damned if you do, damned if you don't, the options are not pleasant either way.

ROMANS: All right. Nouriel Roubini thank you so much. Also Richard Quest thank you so much. Ali, those are some serious prognostications heading toward and it just shows you that we think 2008 was the end of it. But a lot of people say 2008, that was the beginning of it. That was the beginning of what we're going to go through, not the end of it.

VELSHI: It takes a very smart guy to distill it into the problems that these governments and central banks face, damned if you do, and damned if you don't.

ROMANS: That is right.

VELSHI: Listen, primary day happened this past week in many parts of the country, people have spoken, what the results mean for the midterm elections and to the future of this country, we'll talk about it next.

(COMMERCIAL BREAK)

VELSHI: Well the elections are already underway; there were some high profile primary races in Pennsylvania, Kentucky, and Arkansas this week.

ROMANS: So what do those results show about America's views of Washington and the voter sentiment leading up to the November midterm elections? CNN's political correspondent Jessica Yellin joining Ali and I now from Washington. So what does this all portend for November, Jessica?

JESSICA YELLIN, CNN POLITICAL CORRESPONDENT: You know Christine, I don't want to talk about polls, I don't want to talk about parties, and I want to talk about the mood of the country. Which when you're out there, what you hear from voters is such a profound disgust with Washington, D.C. That there is anger directed at anyone who sounded scripted, anybody who sounds like they're defending Congress in any way, and the winners of this year's midterm elections, I predict are going to be the people who seem the most raw and authentic and who promise to throw a bomb at Washington in a sense, voting for extreme change.

VELSHI: Jessica you saw three different races, Pennsylvania Arlen Specter who was a Republican, became a Democrat, the Democrat who was going to run against him when he was a Republican ran against him and won the primary.

In Kentucky you've got Rand Paul, the son of Ron Paul backed by the Tea Party coming in and taking the Republican nomination. And in Arkansas you have a sitting Senator Blanch Lincoln squeaking through so that she can run against a more liberal competitor. So what you've got is the edges of both parties of the political spectrum kicking out the establishment. At what point do they become big enough movements that they themselves represent the establishment?

YELLIN: That's an excellent question, and I don't know, but I don't think it's yet. One of the reasons is especially the Tea Party is very loose, you know, I have been to Tea Party events all over the country, they don't speak necessarily, they are not organized, I'm not dismissing the fact that they have national funding, but there is a grass roots quality, and in each of the races you described Ali, each of the people who either lost or suffered most were people who were part of the insider, the establishment, people who maybe voted for T.A.R.P., I mean over and over you hear about T.A.R.P., people are so angry, Wall Street got saved when regular folk didn't.

ROMANS: You know Jessica, you and I have made this point before that when a lot of people see when they look at Wall Street reform, for example, is they see the very same people who over the past several years have been sitting on committees in Congress overseeing the banking system and lending who are now saying we must do this to prevent this from ever happening again, so now you're telling us this is what we have to do, but you have been sitting there with oversight all of these years. I think the American people get that, right.

YELLIN: I think not only do they get it; they're even talking about it now. I want to play for you some sound from Rand Paul, he is the man who won the Republican primary in Kentucky, a Tea Party candidate, listen to what he said when he accepted the victory.

(BEGIN VIDEO CLIP)

RAND PAUL, (R) KENTUCKY SENATE NOMINEE: There's a movement among the country that people don't like the arrogance, the arrogance of officialdom, the arrogance of the power, Congress we think in the Tea Party shall pass no law they don't make applicable to themselves.

(END VIDEO CLIP)

YELLIN: He also went on to say that Congress needs to say where in the Constitution they get the power to make any law that they pass. The reason I'm making this relate to Wall Street reform is because he gave voice to something a lot of people are feeling when they're watching this Wall Street debate unfold. These are the same people who were feeding the housing bubble, encouraging more homeowner ship and now they're suddenly disowning it. People are disgusted with entitlement.

ROMANS: All right. Jessica Yellin, thank you so much Jessica. We look forward to more great work from you in the weeks and months to come as we get ready for more of this.

VELSHI: Christine, worth remembering though that while the establishment got voted out in these three primaries where party members, Republicans or Democrats vote, in the one election that was really an election in the 12th district of Pennsylvania, that's Jack Murtha's old seat, the Republicans won, so the White House is saying in the one election that was actually not about parties the Democrats ended up keeping that seat, whatever that's worth.

ROMANS: Interesting. We'll keep following all of this.

Meanwhile, ditching your mortgage, just because you can, even though you have the ability to make your payments every month? That's right, you can afford it, but you're going to ditch the mortgage, more and more people are doing it, they're walking away and the controversy is building. We will meet a homeowner doing just that.

Plus a law professor telling banks to take this mortgage and shove it.

(COMMERCIAL BREAK)

VELSHI: OK, one in four homeowners are under water that means they owe more on their mortgage than their actual home is worth. Most of those people Christine are going to continue to live in their home and pay their mortgage.

ROMANS: Absolutely. For them they're going to stay in that home and they know that over 10 or 15 or even 20 years, they're actually going to recoup that investment. Those that can no longer afford to stay in their homes right now, they are at the heart of the foreclosure crisis, they're going to be foreclosed on, or they are going to have a short sale, they're going to try to work with the bank. But there's also a new trend, Ali, these are the folks who can afford to keep paying the mortgage, instead they simply refuse to spend the next 25 years paying off a home that's seen its values drop significantly. In some cases the value of these homes have been cut in half and they're saying why should I stay.

VELSHI: Jeff Horton is one of those guys. He is walking away from a mortgage, two mortgages, he's got two properties under water, one is a condo that he rents out, and the other is a home that he lives in. Jeff, help me understand this, I go to Best Buy, I buy a TV, I put it on credit, but I was the first guy to buy that new TV and six months later, it's selling for a lot less money then I paid for it. I can't stop paying the bill if I had monthly payments on it so why can you stop paying your mortgage, because the value of the house has gone down?

JEFF HORTON, WALKING AWAY FROM MORTGAGE: Fortunately, I'm in a position where I can do that. The bank owns the property, I can give it back to them, they can do with it what they choose, if they want to sit on it and rent it for five or ten years and wait until the market comes back.

VELSHI: Why is their problem? You made a decision to buy a house at a certain price, we all make decisions, sometimes we make, sometimes we loose. Why is it the banks problem because you doing that means that I have a harder time getting a mortgage?

HORTON: It's just the decision that I have made personally to do that, it's a contract, people do it all the time, you hear on Wall Street that Morgan Stanley backed out of five office buildings, why is it OK for them to do it but I can't do it. Morally, it may not be OK, but it's a financial decision that I had to make. ROMANS: Let me ask you Jeff, because you make a good point. If everyone thought like you, we would have there would be no contract law here, if people can't honor their contracts, what happens to sort of the fabric of business? And I don't know, I mean you talked about the morality of it, but do you really want to hold up Wall Street banks as an example of how you should behave?

HORTON: No, but I mean, again, it's just a decision that I have to make and -- you know.

ROMANS: I wanted to ask him, do you feel like you were deceived into that mortgage? Was there anything that was hidden? Because some people that are walking away, they say they found out they had an exploding interest rate or they found out something that made them feel like the lender wasn't honest with them. Were you misled? Or did you have some sort of predatory loan or was there something wrong with the loan or do you just not like it anymore?

HORTON: I don't think I was misled. The problem for me was that the original lender of my mortgage has gone bankrupt. That mortgage was sold to another lender which has gone bankrupt, that mortgage has been sold to a third lender who owns the mortgage now. Gosh knows what they paid for it. So they probably assumed the loan for significantly less than what it was worth, they are completely unwilling to work with me on principal deferment, interest deferment, they won't defer any principal to the back end of the loan, they won't defer the payments, and they won't do anything for me.

So in my particular situation, I had to make a financial decision to instead of paying double what I was paying, I can go rent the exact same home for half. So in my particular circumstance, I made that decision I'm going to go rent the exact same home that I live in for half and I'm going to save that money and I'm going to invest it somewhere else.

ROMANS: And I will tell you Jeff we hear there is a lot of people, I mean Ali, and I have talked to a lot of different people who have done the same thing. I'm paying $2,100 a month for a condo in Denver and I could rent it for $600 a month and by the way the bank isn't calling me back. So Ali you can see why people, they get upset about that part of it.

VELSHI: I'm on the other side of that deal, everything I try to do gets more expensive because of guys like Jeff. Let's bring in Brent White who is an associate professor of law at the University of Arizona. Although he is joining us via skype from Mongolia.

BRENT WHITE, ASSOCIATE PROF. OF LAW, UNIVERSITY OF ARIZONA: I think the point that's important is that people walk away from their homes because they're at the end of their emotional road. They're deeply under water, the average person that defaults on their mortgage is 58 percent under water, not a single person in the study I recently conducted walked away before trying to talk to their bank to get their banks to do something, they want their banks to do a short sale, or they want a loan modification, but their banks are simply unwilling to work with them. Most people are told when they call their lender if they're current on the payment; the lender says we're not going to work with you as long as you're current on your payments.

ROMANS: The point of view from the banks is that they're trying, what they say is they are trying to help the people that need to be helped and somebody that can afford the monthly payments, and in Jeff's case, he's got two properties, one of them is a rental property, if people who can afford the payments, those not the fire that are burning for them. Do you think that we are going to see more of this?

WHITE: What do you mean by affordable mortgage? Can you afford your mortgage if it means you can't afford money for your retirement? Or can you afford the house if you can't pay for your children's college? The reality is that most Americans bought their house as an investment, because they were told by the government, they were told by the financial industry, and they were told by the media that buying a home was a good investment.

So for the middle class, their homes often their only investment. When that investment has now lost 50 percent of its value, people are faced with the question; do I stay in this house and sacrifice my family's financial future? Perhaps lead my family to financial ruins or do I try to work something out with the bank.

Most people who are deeply worried about their mortgage because they're so under water, they call their banks and try to work something out and they are turned away at the door. Those people, who aren't turned away, are given the run around for months and months often years.

VELSHI: I think both Christine and I both get the part that is the run around, I guess what we're having trouble with is the people who can afford it. And you're saying what does afford mean, afford means you decided to take a mortgage when you bought that house and you knew how much it was. We want to hear from our viewers on this, we want you to e-mail us, send us information at Christine's twitter or mine, at Christineromans or at Alivelshi or go to our facebook pages. I think we need to continue this discussion. Brent when you are back here, state side we will have more. Brent thank you for joining us today about this very interesting discussion.

ROMANS: And Ali, I'll tell you, I think more and more people are really considering this two years into it. You get the e-mail and I get the e-mail too, and an equal number of people are saying it's absolutely morally wrong if you can -- if it's the same mortgage payment you had two years ago, you have the same job you had, but just the value of the home is less, then what really has changed for you if you're going to stay in that investment?

VELSHI: But you can understand why people see everybody else that got a bailout, and everybody else that got their debts cut, but the home owner didn't. I can see that there are sides to this thing, but what Jeff does, does affect your and my ability to get a mortgage because now banks are more careful about it.

ROMANS: And one last point Ali about this and this is the bigger question that we need to get answered. What happens when you have widespread numbers of people from Wall Street bankers to people who own homes to people who pay their taxes to people who are working in small business who decide that the rules don't apply to them and they're not going to be the good guy in the economic standard.

VELSHI: You have economic anarchy is what you have.

All right. Whether or not strategic defaulting on your mortgage is a good idea is debatable and we'll continue to debate it, we want to hear from you, but so are some of the programs that the Department of Housing and Urban Development has created to boost homeowners or to help homeowners out with their mortgages. I'm going to talk to the secretary of Housing and Urban Development Shaun Donovan when we come back.

(COMMERCIAL BREAK)

VELSHI: I have got a special guest with me, this is Shaun Donovan, and he's the secretary of Housing and Urban Development with the U.S. government. Now listen housing prices are remarkably affordable right now, mortgage rates are near record lows. So if you have good credit, and you have money to buy a house and you were planning to buy a house this may be a good time to buy it. About 75 percent of homes are substantially more affordable than they were before this economic crisis started, which is probably is the one silver lining around this big cloud that hasn't fully moved out.

Now on the other hand, government efforts to help struggling homeowners modify their mortgages or refinance their home haven't played out as they were intended to. Let's examine two of the biggest programs outlined about a year ago. The Home Affordable Modification Program, the goal there was to modify the mortgages of struggling homeowners who met certain criteria, it was expected to help three to four million homeowners, in reality 295,000 borrowers have seen permanent modifications, 640,000 borrows are in trial modifications where they make their new payments for a number of months until it is finalized.

There was another program it was announced at the same time, The Home Affordable Refinance Program. That was to allow people who were underwater, who had mortgages that were bigger than the value of their home, and who were current on their payments to refinance at a lower interest rate. That too was expected to help 4 million to 5 million home owners. That one hasn't been all that successful. About a quarter million loans have been refinanced. I've got the secretary of Housing and Urban Development with me now and I want to ask you about that because I have seen a lot of criticism about this was supposed to be the big program that was supposed to help everybody, where it's helped, it's helped, but it seems to have helped fewer people than were expected. What do you have on that?

SHAUN DONOVAN, HUD SECRETARY: Let's start with the modification program. We said 3 million to 4 million people over three years. In the first year in getting the program started we were able to reach 1.2 million people with trial modifications, on average those families are benefiting, on average their payments are about $500 a month lower. So I would say we are still on track to try and reach that 3 million to 4 million over the three years, that's one thing that often people forget.

Remember, this is the largest scale effort that's ever been undertaken. There were a number of efforts under hope for home owners in the last administration that reached literally in the hundreds of people. Are we satisfied yet? Are we concerned about the pace of services early on? Absolutely, but we have made substantial, substantial improvements. Last month, for example, we had 70,000 permanent modifications that were done and so if you look at the overall foreclosure problem, there were about 90,000 foreclosure completions last month, still at too high a level, but if you combined the 70,000 permanent modifications, you also look at the other efforts that we're doing. I think to often the media focuses just on hand to the exclusion of what we --

VELSHI: The modification program--

DONOVAN: Thirty thousand FHA modifications in addition to the 70,000 in the HAM program and then we have servicers doing other modifications about 95,000 last month.

VELSHI: They're not part of the program.

DONOVAN: They are not part of the program.

VELSHI: These are banks, when you say servicers who are of their own accord making arrangements with borrowers.

DONOVAN: If you look at that, that's almost 200,000 just last month, compared to 90,000 foreclosures but the scale that we're getting to really is having an impact on the problem.

VELSHI: You talk about the FHA, the FHA used to be responsible for a small percentage of mortgages out there, now it's responsible for a huge percentage of mortgages out there, is that a program that's working? And tell me what the best part of it is.

DONOVAN: And this is again something I think is often missed, our program wasn't just about modification, it was about a broad comprehensive set of efforts to get the mortgage market moving again, to get home prices stabilized and that has worked. FHA was created by Congress right after the depression to do exactly what it's doing. When private capital retreats, FHA steps forward and we have gone from about 20 percent of the market to depending on the month about a third of the market and it has been absolutely critical to make sure that capital is still available out there.

VELSHI: Great conversation, we hope you come by and talk to us when ever you are here. But we will talk more again. Thank you for joining us.

DONOVAN: Good to see you.

VELSHI: Housing and Urban Development secretary Shaun Donovan.

Coming up next, which NFL team wants tax payers to foot the bill for a new stadium or they are leaving town? Plus why searching status updates on face book just jumped to a whole new level.

(COMMERCIAL BREAK)

ROMANS: Time now for the ticker where we move beyond the headlines of the week, joining us is CNN contributor, Max Kellerman, Max welcome aboard.

MAX KELLERMAN, CNN CONTRIBUTOR: What is up guys?

ROMANS: We got a tough one to start off with. So let's get right to it. Over the last 23 years, the gap in net worth between whites and African-Americans in this country more than quadrupled. That's according to a study by researcher at Brandice University and that brings me to this weeks "Romans Numeral." And Ali, you and I spoke with the lead researcher on this report. The number is 95,000. That is, the Roman numeral, drum roll, please. The average white family has approximately $95,000 more money in assets than the average African- American family and a quarter of African-American families have absolutely no financial assets whatsoever. So what's going on here? And Ali, specifically, what can be done to close this gap?

VELSHI: So just to be clear. This isn't an earnings gap, this is the gap in how much money you've accumulated, but that's a lot of money to use for an education for your kids, retirement, things like that. But what the researcher told us the other day, weather gets health, if you don't have that to start with; it's much harder to create wealth for the next generation.

KELLERMAN: First of all I feel like George Castanzo in "Seinfeld." If there are no black people around, should we even be talking about this? I'm not sure if we're allowed to be talking about this. Inevitably studies like this are used in the culture wars, because on the one hand if you point to historical and contemporary factors, historical stuff, we all know what that is and contemporary factors like three times the number of kids in African-American households born out of wedlock compared to white households.

If you talk about that, it sounds as though you're attacking African- American culture, and if you point to institutional things like, for instance, access to mortgages and what rates you get on your mortgages, it sounds like you're an apologist, and the truth almost always is in cases like this it's some of both. There is some institutional disadvantages if you're African-American and there are some cultural disadvantages born from past institutional disadvantages and to have an honest discussion about that is difficult when it's used in the culture wars studies like this so quickly.

VELSHI: It's an interesting study; it has a lot of layers to it. Listen to this one, you want to talk about which side to take on this, this is a tough one. After the fallout from the Senate Bill 1070, this is Arizona's illegal immigrant bill, Arizona is having a bit of a pr issue, the governor of Arizona has formed a tourism task force to try and change the state's image. But boycott groups are popping up all over the place, Los Angeles, Austin; they have both joined these boycotts, not to mention the comments by current major league baseball players that the league should move next year's all-star game out of Phoenix. Now here's the issue, is a boycott of Arizona going to work? And have these boycotts ever really worked?

ROMANS: Boycotts have worked. And let's be clear, one of the reasons why the boycotts are so exciting for people who are supporters of amnesty or comprehensive immigration reform is because they feel like this is the modern day Civil Rights Movement and if they need boycotts they need to get people energized. But what businesses people will tell you is that the first thing that happens when you start canceling concerts and when you start canceling corporate retreats and you start canceling big conventions, the people who make the beds in the room, the people who serve the food, the people who clean and move the cars, the people who are the entry level workers are the people who are hurt first before the companies that are hurt.

KELLERMAN: That's always management's excuse, actually labor is getting hurt. And in fact I think conservatives in particular should love what's going on in Arizona right now because it's a market based solution. Isn't that the idea? Market based solutions are good. Here's a market-based solution. It is interesting, some of the noise coming out of Arizona right now is that as states like Pennsylvania and Utah consider similar laws to the Arizona law, if they adopt those laws, then Arizona doesn't look so bad, maybe the boycotts will at least abate. The fact is to me is that these boycotts make it less likely for states like Pennsylvania and Utah to adopt similar laws. Here the market is speaking loudly.

ROMANS: All right, let's switch gears here. We have one more for you, Max. Minnesota Vikings, this is really in your purview, this is sports stuff, guys. Minnesota Vikings looking for a new home, and if they don't get it, they're just going to leave town perhaps, despite a $5 billion budget deficit estimated in 2011 in Minnesota and state wide employment at 7.2 percent, granted better than the rest of the country, but 7.2 percent, the Vikings want taxpayers to pony up and pay for a new stadium to the tune of about $800 million, this just a year after construction finished on a brand-new stadium for the baseball team, the Minnesota Twins. So is an NFL team in your state or city really worth $800 million dollars?

VELSHI: I want to say this, this always happens when a team threatens to leave, unless they do this, and in many cases the team gets what it wants; in some cases they have left. But the reality is good sports complexes do bring money into the state. Why does it have to be public money? Why can't the state or the city make a deal for somebody to come in and build that stadium and get some preferential tax treatment for doing it?

KELLERMAN: In one word I think it is leverage, I think leverage is the word. And we see this even with sports networks why they're able to extract so much money from cable operators to carry the channel when a relatively small percentage of the population are rabid sports fans, the fact is that relatively small percentage of the population is a highly desirable demographic with disposable income, and they're rabid fans, so you can leverage that kind of devotion to the team among that small desirable percentage of the population, into things like very high rates from cable operators for all sports networks or public money to finance stadiums, you're right, why should it be public, as a sports fan I like the fact that it is.

I like the fact that many of you are carrying the freight for my interest, but if you are looking at it objectively, there's no good -- and they also leverage the cultural cache. This idea that Los Angeles is without an NFL team and the NFL likes that because all these other franchises can always threaten hey give us what we want or we are going to go to L.A. But the cultural cache is are you a major league city or a minor league city.

VELSHI: There are cities who have nothing else to recommend them except that they have good sports. Max stick around, we have to talk about some other stuff including this. Christina and I are big facebook fans. I love it. It is fun for me and it is useful, but if you update your status on facebook and you think only your friends can see it, you have not thought this through. We're going to explain.

But first, in this week's "Turnaround," one small business shows us fresh ideas have kept them up and running and working through the recession.

(BEGIN VIDEO CLIP)

ROMANS (voice over): This is Lateral League, a legal recruiting firm. And this is where they hold their weekly team meetings.

T.J.DUANE, PRINCIPAL, LATERAL LINK: We use office space, but we have different relationship with the office space. We use Redistribute as a property management company and there's office space all over the world. And we use it and we pay for it only when we do use it.

ROMANS: Hourly office space is not the only way Lateral Link cut back; they use a voice-over IP phone system and G-mail Enterprise e- mail. The low-cost setup couldn't have come at a better time.

DUANE: The last 2 1/2 years were unlike any that the legal profession has seen in terms of the fall off in business, we have seen a real surge in the number of attorneys signing up to join Lateral Link, but unfortunately at the same time, we saw a falloff in the number of openings. And those openings became much harder to get. As the economy tailed off, the hiring tailed off and that had a significant impact on our business as it did to most other businesses.

ROMANS: To help those out-of-work attorneys and its own business, the company began developing a series of educational panels.

DUANNE: We have law firm partners and general counsels come in and sort of discuss, what were the best practices to really position the attorney.

ROMANS: And identified a way to keep a glut of out-of-work attorney clients in the game.

We thought about what if we place them in our in-house clients, and the in-house clients that are strapped with the budget constraints as well, then we can work out a relationship in a way where these attorneys can work there for a year, get paid supplements in addition to their severance package or whatever the program was at their firm they were participating, and they could build their connections and keep their resume fresh and have some real work experience.

DUANNE: The downturn, as much as it hurt business, created opportunities.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

VELSHI: All right. Max Kellerman is back with us again. By the way another time Max you and I will talk about boxing. I dabbled in that for a while. You are a boxer, right?

KELLERMAN: I'm a boxing analyst for HBO, actually. Very different from being a boxer.

VELSHI: Me too. I'm not really a boxer. Christina, take it from here.

ROMANS: All right. How concerned are you about your facebook privacy? Probably not concerned enough. There's at least one website out there, gentlemen, probably more to come that allow you to search for potentially harmful status updates. Just type in a word or phrase and the site returns every person who is included those terms in his or her status updates regardless of your privacy settings.

Makes you think twice before telling your friends that you hate your job in your next update or talking more about that booze cruise. But hey, if it brings up everybody who uses the phrases, maybe there will be so many people you won't be able to sift through to find mine.

KELLERMAN: Right. There's no such thing as a free lunch. This is the -- facebook is a $22 billion company, it is free. You don't use the telephone for free, you don't use your TV -- your cable for free, but facebook is completely free. You are not even overwhelmed by advertisements. So why is it a $22 billion company?

It is a $22 billion company because there's a tremendous amount of traffic there. And facebook, in order to monetize itself, needs to traffic in your information. In this case, I think a lot of the reaction to the privacy settings is the arrogance for which facebook goes about it. They don't tell you ahead of time, they have a certain sense that your privacy is really our issue, but people shouldn't be surprised by this. How else are they going to monetize?

VELSHI: Yes, I mean, while people may be able to look up your private information about things that you are embarrassed about, the reality for services like what we are talking about a more helpful for finding out what people like to spend their money on, but ultimately, it does come down to you have issues with twitter or facebook, but the reality is you need to deal with privacy yourself by being cautious about what you put on the internet.

KELLERMAN: Think about how awesome facebook is for a second. Think of anything else in your life that's that awesome and is free. It doesn't exist. Even the public library, the funds are coming from your tax dollars. There's no such thing as something as anything that's really completely free, but especially something like facebook.

ROMANS: You know, all I got to say, if you don't want your mother to know, don't put it on there, because she's going to find out.

KELLERMAN: I don't let my wife post pictures of our kid on facebook without me seeing. I have to approve the picture.

ROMANS: I know. The thing about the kids is they know how to get around us. I know they do. I know they do. All right, guys. Ali Velshi, Max Kellerman, great to have you on the program. Max, come back again.

KELLERMAN: Thank you so much, a pleasure, thanks for having me.

ROMANS: That wraps it up again for this show, but join our running conversation on facebook and twitter at Alivelshi and at Christineromans.

VELSHI: You can join us every week for YOUR MONEY, Saturdays at 1:00 p.m. Eastern, Sunday's at 3:00 pm Eastern. You can see Christine and me all week on my show at 1:00 Eastern on CNN. You can log on 24/7 to CNNMONEY.com. Have yourselves a great weekend.