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Low Housing Prices; Some U.S. Public Companies are Being Charged with Backdated Stock Options for Senior Executives; Helpful Tax Tips; Student Inventions; Apple TV On Sale; The New Airbus Lands In L.A.

Aired March 25, 2007 - 15:00   ET


ALI VELSHI, CNN CORRESPONDENT, IN THE MONEY: Tell you about managing your cash.
Plus how you can fight back against the fall out in the home loan industry and navigating this tax year. With new deductions and some new rules. All that and more after a quick check of the headlines.

FREDRICKA WHITFIELD, CNN CORRESPONDENT: Now in the news Iran says it captured British sailors and marines, confessed to trespassing into Iranian waters. The 15 Britain's are being held in Tehran one day after being seized in the Persian Gulf. Britain denies they strayed into Iranian waters, it is demanding their return.

Iran's president in the mean time canceled his trip to the U.N. saying his flight crew didn't get their visas in time. He was supposed to address the U.N. Security Council today prior to a vote on new sanctions against Tehran for its nuclear program. The vote is set to take place two hours from now.

And fallout from the death of pro football star turned army ranger Pat Tillman. The Associated Press reports the Pentagon will recommend that nine military officers be held accountable for mistakes made after Tillman was killed. He died in a friendly fire incident in Afghanistan but the army initially told Tillman's family that he was killed in an ambush.

Triple suicide bombings in Iraq today kill at least 38 people and wound 63 others a local mayor says one of the bombers blew himself up inside a pastry shop.

And what are the odds? Democratic president's candidates are in Las Vegas impressing nurses with their universal health care plans. The nurses union is sponsoring the forum and will play a key role in Nevada's earliest caucus.

Rat poison in pet food appears to have caused the death of at least 15 cats and 1 dog. Investigators are now trying to figure out how the poison got in to the pet food. Producer Menu Foods is recalling all 95 brands of the cuts and gravy style pet foods.

We will update the top stories at the bottom of the hour. Now time for IN THE MONEY.

VELSHI: Welcome to IN THE MONEY, I'm Ali Velshi. Coming up on today's program we've got a lot of information about the general state of the economy this week. What does it mean for you? We will bring the big picture into your living room.

Plus some deductions you might not know about, as you get ready for tax day. And some incites into starting your own business from some young entrepreneurs.

But first, in spite of all the negative press about the home loan industry these days, the Fed still thinks the economy is growing. That's why the Central Bank left interest rates alone when it met this week.

Now joining me to talk about this, a couple of IN THE MONEY veterans, Jennifer Westhoven and managing editor Allen Wastler welcome to both of you.


JENNIFER WESTHOVEN, "HEADLINE NEWS" CORRESPONDENT: And Jeanne Sahadi is with us as well, our special guest from Welcome to you.


VELSHI: Jeanne spends a lot of her time, as we know explaining to people what we're talking about to talk about, the Fed sort of decided that we still got problems in the housing market and there's still inflation. They kind of canceled each other out. The housing market has been the big story.

WESTHOVEN: The housing market has been a huge story and I'd assert that there are a lot of people who get really upset if you actually start looking at how bad the housing market is doing in some places. There was a story this week that, I don't know if you saw this. In Detroit, the value of a house, these houses that are getting auctioned off is even less than the value of the newly sold car. I mean it just gives you a sense there are places where houses are selling for $7,000 and $10,000 granted they are in terrible sections of Detroit but apparently there huge sections of Detroit that are almost abandoned. You don't hear about that when you listen to economists. They say oh things are stabilizing; it is probably not going to spill over in to the general economy. There are places where things look really bad.

VELSHI: Before we figure all that stuff that Jeanne's has been telling people about what to do about it. Allen you track this stuff, what was really getting people going about the economy, about the Fed, about inflation, about housing? What are people looking at?

WASTLER: People are looking at, surprisingly enough; this is going to sound kind of wonky, but productivity. It's beginning to level off. And productivity gains are sort of what's kept inflation kind of in check. Now with that leveling off you're seeing more worries about inflation popping up.

VELSHI: You mean the fact that we all can do much more work and have much more output for the same money in the same amount of time?

WASTLER: I can do to Jeanne and say Jean you have to work six hours longer to get those stories out. OK? Suddenly she's pushing back and saying, why, Allen? I'm not going to work that long and so that is why you see productivity its all your fault, Jeanne.

SAHADI: Often it is I know.

VELSHI: What do we do about this, Jean? Have you been having to take all of these complicated economic issues and figure out what does the average person, the average consumer, the average investor what do you do about this?

SAHADI: Well I think unless you're living in Detroit, you shouldn't worry that much about Detroit. Because real estate is so local, your job is a local issue. A personal issue pertaining to your industry, you're company, your home, and your neighborhood. That's what you need to worry about. The headlines give you only the most general lessons. For instance the sub-prime debacle, don't get in over your head when you got to buy a home. When you go to sell a home, when home prices are soft, then you want to be really realistic about pricing it up front, because if you let it sit in the market for awhile it is like stale bread, people won't be as interested. You are going to get the most number of buyers in the early days.

WASTLER: Jeanne you know I'm getting ready to sell a house here, I am. That is why I want the Fed to cut rates. I was like come on, lets get some more. I don't care. I'm selling.

SAHADI: You do care if there is subprime. Because you don't want --


SAHADI: You don't want to make a deal with somebody who then has to back out at the last minute. You've wasted time and energy. They have made a deal but then their lender says you know what your credit score isn't high enough, it was high enough last week, but this week it's not high enough.

VELSHI: And you though you had a deal, and you might lose that. The sub-prime thing affects even if you're not a sub-prime --

WESTHOVEN: Right. Harder to get a loan.

SAHADI: Home pricing is softening. It's there a sub-prime issue in your neighborhood, maybe you're not the borrower but you have someone on the block who might be foreclosing or in default, that might affect prices in your neighborhood. Basically, I really am of the mind that headlines are headlines. They're not about your life, per se, unless the headline is about you.

VELSHI: The headline that we've got the stock market, we're back up to where we were almost at the beginning of the year, or there about, and we've seen 500 point drops and 100 point gains. That's what makes people say, does my 401(k) look the same? Is it doing the same thing as the market is doing? Is that how we should look at it?

SAHADI: Certainly the 401(k), that is such a long-term investment. The truth is we're about where we were at the beginning of the year. Yes the last month has been kind of a headache and an ulcer, but that is the market. And if you're investing smartly to begin with, lets say you have index funds or you are at a target date retirement fund, which does allocating for you, don't worry about it. Your biggest concern is how much you are going to save. There are examples that show that no matter how good your investments are, they can't do nearly enough for you as you're saving on a regular basis and increasing the amount that you save over time.

VELSHI: When you say saving, you mean putting money away?

SAHADI: Putting money away.

VELSHI: Not just savings accounts?

SAHADI: Putting a small amount away and hoping your involved in a mutual fund is not as good as putting more away and being in a mediocre fund overtime. So don't worry about the short-term blips in the market that is going to happen always. This is not post-9/11, where the economy is blowing up in the short term and everyone's panicked. This is an economic cycle.

VELSHI: This is what happens. Jennifer and I work on a similar schedule, we do a lot of stories on a given day. It doesn't always give us the perspective of what is the broader picture of this economy? The Fed said if the housing market continues to slow down, inflation is still there. These are kind of opposite trends. So it's hard to know what the big picture is for the average investor. You have a picture of it by doing this every day?

WESTHOVEN: Well it is really; I mean you got all these moving parts. That is why Congress can never get the numbers right. One of the things that I've really noticed though is that we used to talk about the job market every month. That thing's just falling out of the news lately.


WESTHOVEN: So I kind of wonder what your take is on that. I've also noticed economists saying you can't even trust that number any more because it gets revised so much.

SAHADI: The unemployment rate?


SAHADI: Yes, it's a mixed picture. We have a pretty low unemployment rate historically. On the other hand, people say if I lost a job, and I got another job, I'm not getting paid what I was at my older place. On the other hand, if you're in an industry that is doing well, if you are in a company that had a great year last year, you're hiring prospects; your prospects to getting a raise are pretty good. Don't worry about the nation. Worry about your cubicle. VELSHI: Right so average price, whether its houses or gas and things like that, don't necessarily apply. One of the things that does come back to haunt us, though, particularly when talking about loans and interest rates is how much debt we carry.

SAHADI: Right.

VELSHI: Good debt on a house usually, but we carry other sorts of debt, and something I think is -- something we miss is how much debt should you be in? How much debt is the too much?

SAHADI: You don't have to be in any debt if you don't want to be.

WASTLER: That's just not true!

SAHADI: Even if -- OK, if you have a house you certainly can be in debt. Yeah. There are all sorts of measures out there when you go to buy a home. Lenders optimally will say your debt should not exceed 36 percent of your gross income. The truth is if you have other plans for your money besides just buying the house, forget what the lender says. Maybe your debt should be 24 percent because you have a lot of other financial expenses coming down the line you don't have to put in your application. You have to be the one driving the bus here. You're the one who says what can I really afford? Likewise when you are signing on to a loan. Rates are great for buyers by the way we should say that, this is what it means more home buyers with great credit scores, you are very desirable. Mortgage rates are low, there is great inventory, and home prices are softening. You're kind of in the captain seat, enjoy the moment. The problem is really for sub-prime borrows who are stuck not getting a loan. Or who are getting a loan with really odorous terms, or if you're a homeowner with a sub prime loan and you are about to not be able to afford your payment. When it resets.

VELSHI: Jeanne and Allen both on the Web site do a great job of translating this for people who want to know what the big economic stories do for you. Jennifer and I don't. We just --

WESTHOVEN: Hey now, speak for yourself.

VELSHI: Jennifer does a fantastic job!

All right. When we come back, why scandals over CEO stock options and pay matter to you as an investor or as a consumer.

Later on we'll see how Wall Street's reacting to rising oil prices.


VELSHI: All right. Something like 200 U.S. public companies under investigation over charges of backdated stock options for their senior executives. Tom Ajamie is going to explain why all of this or how all of this might have an impact on you. He is a partner at Ajamie LLP in Houston; he is a securities fraud attorney. Tom thanks for joining us.

TOM AJAMIE, PARTNER, AJAMIE LLP: Hey Ali thanks for having me.

VELSHI: You and I have had this conversation before. I'm a shareholder. As a shareholder I'm an owner of a company, which means that company owes me a debt of responsibility. When I hear about these stock option back dating scandals as an investor, as an individual, have I've got any recourse or do I just hope that sort of justice works its way through?

AJAMIE: Well you at legal recourse, you probably don't have a whole lot, unfortunately. It's hard to bring a lawsuit in these circumstances. I think the recourse you have, though, is to sell your stock in these companies where their executives are cheating and back dating the stock options, granting themselves huge, multimillion dollar pay packages and really is not honestly paying themselves. It shows a lack of integrity by certain companies and I say, you move on. Because when you're a shareholder you're voting for the company, you are saying hey I like this management and I trust them with my money. Why would you want to trust your money with someone who's, frankly, just cheating?

WESTHOVEN: OK. I got that you can say, you know, I'm taking my ball and I'm going home. I'm not playing with you guys you're cheaters. I'm wondering if there's something else can you do? And that is because I'm interested in the concept that instead of me having to be responsibility, I know, weaseling out here, for every single company that I invest in, can't I go a socially responsible fund, where someone like me, we pool our money together and that way we know that this is an activist group, that they're calling that company and that they're really doing something to change? Because you know we can leave, that's true, but how do you really affect change? You might care about that company. People who work for Home Depot for years they really care and were really upset at what happened there.

AJAMIE: If you're a shareholder, obviously you have some rights, there are annual meetings that all companies have and a lot of individual shareholders actually show up at those meetings and make statements of such. Of course you can write to the company and things like that. So you do have some power as a shareholder, of course.

WESTHOVEN: Don't you look a little bit like a kook, though when you are holding up a sign at the stock market?

AJAMIE: Right. Standing in the back of the room holding a sign up? Well, that's the degree of your power. As an individual shareholder, as a smaller shareholder, it's not as though you have clout to vote the bad guys out that is for sure. That is the extent to what you can do. Now, in some of the really major cases, I'm going say like United Health, where the stock option grants were so huge, the company had to actually come back and restate its earnings over a billion dollars.

VELSHI: That was outrageous!

AJAMIE: Outrageous. And there's class action there's now. So if you are a shareholder, you may recover some money through the class action process.

WASTLER: Tom, what about an honest shareholder? Like Home Depot I shopped there all the time. Until they drove all the other hardware stores out of business. But shop there; I don't own any of the stock. Should I care about astronomical pay packages and things like?

AJAMIE: Actually you should care about it. When an executive is taking $80 million in paying himself, or $100 million and paying himself, that's money that's not going in to improving the store. That's money that's not going to pay the employees. That's money that's not going in to the pension funds for those people. And that does have an affect on a store. If you have a bunch of unhappy employees, if you have a bunch of employees who maybe don't have good healthcare programs and such, you also have a lot of turnover, right? People that don't want to work for that company. So you will see these types of things actually do affect service at companies, and so the quality of the company.

VELSHI: Tom, correct me if I'm wrong, you've actually represented people in some of the biggest settlements in the securities industry. When people do get settlements, when they successfully sue, whether it is a class action or in the case of some of your clients, individuals what kind of money do they ever see in these big fraud cases?

AJAMIE: Well look, Ali, if it's a shareholder class action case, I think the general rule of thumb is you might recover 5 to 10 to 15 cents per dollar you lost. If you go to a lawyer and he or she just takes you on individually as a client and sues, just a one-on-one, those recoveries are often a lot higher. You can see 50 cents, 75 cents; even sometimes you can get all of your money back.

VELSHI: Tom good to talk to you. Thank you so much for being with us.

AJAMIE: Thank you, guys.

VELSHI: Tom Ajamie, securities attorney joining us from Houston.

It is, that is the case in the end. Your view is interesting that if you get under the front end of this and make investment decisions wisely at the front end, it is going to be a whole lot easier to recover lost money.

WASTLER: Down the road.

WESTHOVEN: Can you imagine these people at Enron that lost their jobs and their life savings? To get 10 cents back on the dollar? That is everything they ever had. It's horrible.

VELSHI: Good advice to think ahead about the companies that you want to invest in.

All right. Lets take a break. When we come back, oil prices sadly on their way up again. Find out who's hurting from that and who is making something out of it. We'll be right back. (COMMERCIAL BREAK)

VELSHI: Never a dull moment on Wall Street. Susan Lisovicz joins us now with a look back and a look ahead. Susan welcome. The market started with some big gains, but then we saw oil prices going up again.

SUSAN LISCOVICZ, CNN CORRESPONDENT: Yeah, but it's still the best week of the year for the Dow Industrials. But yeah no question about it, just as the stock market Ali has been volatile, so has oil. Something involving some British navy personnel seize by Iran, certainly creates a little bit of heightened tension in a that market. Also gasoline inventory has been going down and of course, that's right before peak summer driving season. Yes, oil prices are at three- month highs right now.

WESTHOVEN: Susan, one of the most maligned industries, I would say, in Corporate America, at least by Wall Street, the auto industry finally got a visit from President Bush last week. He went to go and visit some plants for General Motors and Ford. He hadn't been to visit any plants of U.S. companies, right, since he became president?

LISOVICZ: That's right. You know, it's not like Michigan has been a key supporter of the president. I mean, he voted for Kerry last time around. And he did, as you noted, has been elsewhere. He's been to visit a Nissan plant in Mississippi; it's a red state. Also a BMW plant in South Carolina another red state. But, yes. What the president is trying to promote is this energy plan. He says he wants to reduce America's addiction to imported oil. Well, one of the best ways to do that is to reduce our dependence on gasoline. That accounts for about 50 percent of the oil we use. So he has been meeting with -- he went to two plants in the heartland a few days ago where he looked at American hybrid, fuel cells. All this technology that could ultimately very dramatically change the way we drive cars and he's meeting with executives from the big three on Monday, where he's certainly going to be talking about energy again.

WESTHOVEN: They may want more help from him besides talking about energy.

LISOVICZ: Absolutely.

VELSHI: Susan, I've been reconsidering my career this week, because I was looking at the earnings from other Wall Street investment house.

LISOVICZ: That would be Morgan Stanley perhaps?


LISOVICZ: Yeah, not bad for one quarter. Three months, it's profits up 70 percent. But it should be noted that they run not on a calendar year, on a fiscal year. The Shanghai shock, the mortgage meltdown, all that is not reflected in there. Having said that, Morgan's CFO said he -- it's a reasonably limited event as far as Morgan Stanley is concerned. They did acquire a sub-prime borrower last year and Morgan also did provide some financing for New Century. So the next quarter I think may be more telling.

WASTLER: Susan, one thing that caught my eye going on down there is Starbucks. The performance seemed a little so-so. And then all of a sudden they say they're going to expand by like 10,000 new outlets. Was there much buzz about that down there?

LISOVICZ: Starbuck has been a real disappointment; its shares are down 11 percent this year. It's clearly lagging, and I think it's its chairman Howard Schultz is trying to straighten out what was, he said, misinterpreted. He said that, yeah, he's not happy with the way the stores, some people are complaining about Starbucks stores having a sterile feel, but he says that's is not going to slow the growth. That they are on track to open 10,000 more Starbucks over the next four years, basically doubling its stores worldwide.

Also, it is leveraging its bet. Not only going to sell those high-priced lattes. It's signing Paul McCartney, Sir Paul McCartney as its first artist, and big coup on its own record label here. So it's trying to sell more stuff when you go buy that expensive latte, you know whether it is a book, movies, whatever, that's what Starbucks is trying to do, but on Wall Street this year, it's been a disappointment.

VELSHI: Susan good to see you. We will see you again next week.

LISOVICZ: You got it.

VELSHI: Susan Lisovicz at the New York Stock Exchange.

Coming up on IN THE MONEY, deductions so new you might not even know about them. And some more tips for tax time. Stay with us on IN THE MONEY.


WHITFIELD: Hello. I'm Fredricka Whitfield. Happening right now, the U.N. Security Council is expected to approve tough new sanctions on Iran over its nuclear enrichment program. The vote is set to begin in an hour and a half. The U.N. Security Council is expected to approve those tough new sanctions. Our Richard Roth is in New York with the latest.


RICHARD ROTH, CNN CORRESPONDENT: Fredricka, it's a step-by-step sanctions approach by the Security Council designed to put more pressure on the Iranian government to stop, freeze its uranium enrichment program. They've been debating wording on this resolution all week, but finally an agreement was reached. This as Iran's president announced through his foreign ministry and spokesman that he's not coming to the debate to confront his accusers despite weeks of saying he wanted to be there to present his views in front of this illegitimate body. Last evening, reaction from the acting U.S. Ambassador to the cancellation of the president's journey here.

AMB. ALEJANDRO D. WOLFF, ACTING U.S. AMB TO U.N.: President Ahmadinejad still has time to come and attend the meeting which is scheduled for 3:00 p.m. tomorrow, and not only does he have time to do that, but I hope he has time in his schedule to attend and visit the Holocaust museum in New York as well.

ROTH: It is expected that the Iranian foreign minister will speak for the Iranian government at the vote. The debate over visas really raged for the last 48 hour, the Iranian government saying they didn't get all of them that they needed in time to fly the president there in time for the vote. The U.S. saying they got the necessary visas and that Iranians failed to fill out the proper paperwork, which the Iranian ambassador in New York denied.


WHITFIELD: And Richard exactly what are the sanctions that are being considered?

ROTH: Well these new sanctions are designed to stop the export of small arms weapons from Iran that might be used by Hezbollah or maybe in Iraq. It also puts some asset financial freezes on some 28 individuals and companies that have something to do with Iran's nuclear or missile program.

WHITFIELD: All right. Richard Roth in New York. Thanks so much. We know you're watching it and of course, will be carrying that vote live here on CNN.

On another front now, frantic diplomatic efforts are under way this hour to free 13 British sailors and marines held captive in Tehran, Iran. Iran says they strayed in to Iranian waters in the Persian Gulf and a state news agency reports they have confessed. Britain insists they were in Iraqi territory, not Iranian waters.

Coming up in 30 minutes a growing diplomatic crisis as Britain pushes to secure the release of those forces being held captive in Iran.

And did a small town go too far in its efforts to get rid of illegal immigrants? That and more straight ahead in "The Newsroom." Now back to more IN THE MONEY.

VELSHI: All right, tax time and there are new rules and some new deductions that you won't find on your IRS form. Jack Otter is here to help us figure it out. He the deputy editor and resident financial expert at the men's magazine "Best Life" which I enjoy reading good to see you again.


VELSHI: What did I need to know about? I try to stay away from tax time as much as possible, but there are some interesting things to talk about. What's interesting this year?

OTTER: The fun thing is that three very important deductions were left off of the forms. Congress passed them after printing the forms and sending them out and the big one is the sales tax deduction if you live in a state that does not have state income tax, it's a no- brainer. You get to deduct your sales tax; you don't have to keep all the receipts from McDonald's. There's a sliding scale, depending how much you make. You can just choose the recommendations by the IRS and you're done. If you live in a state that says has a low state income tax, you have to guesstimate or run the numbers. You pay more by deducting your income tax or with the sales tax that they estimate for your income level.

VELSHI: Do any of you do your own taxes?

WESTHOVEN: I help a lot.

VELSHI: Do you?

WESTHOVEN: My dad does them, but I know every moving piece.

VELSHI: You have some good questions to ask?

WESTHOVEN: I wanted to ask about donations and first of all I want to confess that I'm cheap. So really kind of upset at the IRS. When I buy things that are one of the ways I really like to give money, I just take my change and put it in the sick kids and the sick puppies tin. That does not give me a receipt and now they're saying, the IRS is saying, you've got to have receipt for every little thing, in the church basket, they don't give you a receipt for that. I'm wondering I don't know if this is beyond the scope for you is that public policy? You can see I'm a little angry about this.

OTTER: Well some charity are quite upset about it, because they think people just won't bother. With the church it is actually not so hard. All you have to do write a check or just use one of the envelopes. Put your name on it.

WESTHOVEN: Write a check for $2?

OTTER: Well you got to give more!


VELSHI: A donation. No problem.

WESTHOVEN: If you're rich it works. If not --

VELSHI: I put a note in to the IRS, challenging my donation with the church? You take that up with the higher power.

OTTER: They'll come after you and say --

WASTLER: Ali said that. It was him. One quickly IRAs and 401(k) s things that are near and dear to our heart. What are the change there's?

OTTER: Well the big thing is for people who are over 50, because the jump is huge. You're able to it's called a catch-up provision. You're able to put as much as $20,000 in to a 401(k). If you had that kind of change to divert from your paycheck that is great. Put $5,000 in to an IRA, which is real money, also.

VELSHI: The idea here is a catch-up. If you are getting closer to retirement, you haven't put enough away you have that opportunity to do a little of that.

OTTER: Exactly.

VELSHI: One thing we used to talk about a lot, Jack, which we don't talk about now with markets going generally higher is that when you have investment losses, even in previous years you should take advantage of that on your taxes?

OTTER: I'm amazed how few people really understand that. Exactly. If you lose money in the stock market, the first thing you want to do, put it against any gains so you don't pay capital gains. But number two, if you don't have any gains unfortunately you get deduct up to $3,000 against ordinary income. The crucial thing for you to remember is you know everyone thinks, oh; gee I had that tech fund. When it gets back to even I'll sell it, very bad plan. Sell it now, take that loss, and if you think tax-free, buy something that's slightly different. But you can't buy the exact same thing. It's called the watch sale rule. Invest in tech stocks, take the deduction and you still have the money invested in the stock market.

VELSHI: Folk are still investing in some of those things that they were invested in 2000 in the hopes that it will get back to $80. The stock doesn't actually care what you paid for. It it's not going there just because you bought it for $80.

WASTLER: Another thing that I get fed up about, the AMT Alternative Minimum Tax. These juicy deductions go bye-bye. How big a bite is that going to be this year?

OTTER: They sure do, it gets bigger every year. What Congress is doing is it is passing an annual band-aid to help out the few people. But the number keeps on creeping up. And by 2010, if they don't pass a really big band-aid, it's going to be about half of all taxpayers. Not quite half excuse me but anybody making over $75,000 a year --

VELSHI: This was a tax supposed to be for "the rich."

OTTER: It was I think there were something like 200 people who didn't pay any taxes and --

VELSHI: And now it is millions.

WESTHOVEN: Like a yacht tax.

OTTER: Yes, exactly. The problem is that there aren't many ways to get around it. It you have a lot flexibility, maybe you could get your bonus put off until next year or so forth.

VELSHI: All of the ways to get around it surround deferring your compensation, so you have to be in some kind of job to be able to defer your income.

WESTHOVEN: Are there any signs that the new sheriff in town in Congress will plan to do anything about this?

OTTER: Well that is a good question.

WESTHOVEN: I mean you-doctor.

OTTER: There's a lot of talk that they are. The problem is, we're talking about 790 billion dollars of revenue from the government. So they either have to stop spending or find somewhere else to get that money. The only chance is a tax overhaul. That's not going to happen before the presidential election.

VELSHI: Jack, thanks for being with us. Jack Otter of "Best Life."

Coming up next on IN THE MONEY, get a lesson in raising cash for a start-up for a bunch of college kids. IN THE MONEY coming right back.


VELSHI: On college campuses across America there are some bright people out there with some very bright ideas but in order to develop those ideas they need money. That's where S.E.E.D comes in, S.E.E.D in this case stands for Spirit of Entrepreneurship and Enterprise Development. It is a competition where everybody shows up to play but some people end up with money to make their ideas a reality.


TIA GAO, STUDENT ENTREPRENEUR: We are asking for a $6 million investment.

VELSHI (voice over): Tia Gao is a bio medical engineering student at Johns Hopkins University.

GAO: We expect to grow that to over $140 million company.

VELSHI: She teamed up with brainiaks from the University of Maryland and the University of Virginia to develop a wireless monitor. It would be worn by patients in the waiting areas of an ER, monitoring their vital signs and sending that information to a nurse's station.

DR. ARJUN CHANMUGAM, JOHNS HOPKINS UNIVERSITY: So while they're in the waiting room we're actually getting information.

VELSHI: Which could save lives. Every year according to Gao, patients die needlessly in hospitals because they aren't being monitored.

DR. PETER PRONOVOST, JOHNS HOPKINS UNIVERSITY: It was price prohibitive to do that for every patient because the existing monitors were somewhere around $10,000 a patient.

VELSHI: This device will cost around $2,000, but $6 million to develop it. So Tia's team headed to Santa Barbara to face other schools at the Spirit of Entrepreneurship and Enterprise Development Competition or S.E.E.D, as in S.E.E.D capital. Each team adopts a company name; their participation at S.E.E.D has huge potential upside. That is because judges open their wallets for ideas they like.

DR. DAVID NEWTON, S.E.E.D. FOUNDER: Have a nice honor roll now of nine companies in the last three years up and running, funded, with revenue, five of those are profitable.

VELSHI: Over two days teams make their pitches.

UNIDENTIFIED MALE: Our device captures neurological information from the brain.

UNIDENTIFIED FEMALE: We can tell you whether a restaurant is better on Thursday or a club is hopping on Saturday night.

UNIDENTIFIED MALE: Describe how you actually hook someone up.

VELSHI: GAO's team believes it can turn $ 6 million in to $140 million. At least one judge agrees.

RICK IFLAND, ATERA PARTNERS: What I like about this group is that they have a broad range of experiences, and talent, and aptitudes, and they collectively made that in to a pretty good team.

VELSHI: But is it enough to win?

UNIDENTIFIED MALE: The second best emerging company investment opportunity out of S.E.E.D. this year is from John Hopkins University of Maryland and the University of Virginia.

VELSHI: Second place. But the consolation prize was pretty good.

UNIDENTIFIED MALE: Three investor groups already contacted me about, Monday morning; they want to be in touch with these folks and start talking about some things. So congratulations.

VELSHI: In this case, talking means doing business.


VELSHI: Ironically, the first place in this competition went to a team from the University of Illinois, which translates brain signals in to some form of speech. This is --


VELSHI: These are smart folks all around and we've heard from somebody who watched that story and said, I've got a son who's severely disabled and they may be able to use this device. Can we be put in touch? Really interesting, these are really people thinking about the future. They're not sort of devising the next thing that might be on sale next year.

WESTHOVEN: Right. That's great for student's right? So I guess the big question is what do you do if you're not connected to the university? VELSHI: And you know, there are these venture capital forums all over the country. I think the lesson out of this is there's lots of money for good ideas, but if you have a good idea, package it somehow. Find someone who can take that and run with it, because there's money for good ideas out there.

WASTLER: That is a new model, too. If you're trapped in a corporation, like some of us, and you know good idea, there is a certain amount of corporate bureaucracy that weighs down on you that stops ideas.

VELSHI: What a great idea.

WESTHOVEN: Every time they have a competition for ideas and people put up the prizes they generate far more responses and they are likely to be successful than if the government just maybe has a subsidy saying we need this.

VELSHI: If you have a good idea, let us know about it, we'll help you make it in to a reality.

WESTHOVEN: Classic American dream.

VELSHI: It is the American dream. Gets those ideas out there.

Coming up next, Allen Wastler is going to look at weather Apple is going overboard with all its hot new gadgets. And don't forget you can always let us know what is on your mind or what inventions you have. Send us an e-mail we are at


VELSHI: Did you hear the news? That I-TV, the Apple TV thing is on sale.

WASTLER: Oh, goody!

VELSHI: People get very, very excited by Apple product releases.

WESTHOVEN: OK. I get really excited by Apple product releases. This one is not lighting me up.

VELSHI: What do you think, Allen?

WASTLER: I think this one is a little -- you get the Apple product on the --

But this one, it's not sounding too thought me. OK. I haven't seen one up close. But they say it won't work with old TVs. that's a problem with me.

VELSHI: For your, video, for your TV.

WASTLER: What it does, it wirelessly takes the stuff on your computer and sends it over to your TV set. Say if you download a TV show on iTunes you can watch it on the big, wide TV. VELSHI: I don't want to watch it on my computer or my iPod. I like watching on big TVs. This is the gizmo that gets it there.

WASTLER: But it won't do it on your old TV you better have a wide screen big high def new TV. That's a problem with me. I'm working my 15-year-old TV and praying it keeps holding on. Yeah, man. It won't record off cable and satellite.

VELSHI: It is not like a DVR or tivo, this is stuff you downloaded to your computer.

WASTLER: The big drawbacks for me are you can't use the Apple remote apparently to control the volume. I hate when you are watching TV and you have to shift remotes. I hate that. A lot of -- Apple is so consumer friendly. I love my Nano, but in this case it sounds like maybe it's just not quite there yet and it also doesn't stream stuff on the Internet. If you go over to YouTube or something --

WESTHOVEN: You got to just burn it on a CD and put it in your DVD player.

WASTLER: Yes basically.

VELSHI: Now speaking of YouTube, like a 100 million downloads a day or something? Well obviously we've all heard the controversy, the media companies are saying you guys can't be streaming our stuff and not copyrighting it, and not paying us. Now News Corporation, NBC getting together to come up with what some people are dubbing me too tube. And they are not going to bother with those dumb home videos which is what everybody is looking at on YouTube, because I really that's not interesting to me.

WASTLER: I don't think it's the dumb home videos everybody looks at.

VELSHI: I think it's the real contents.

WASTLER: It's the real -- the Colbert report, the daily show, things like that. So NBC and News Corp will have a little advantage. They can throw little reels out there.

WESTHOVEN: Is that the plan, though? Or is it mostly news?

VELSHI: No. They call it premium content, which is code for current television shows. You'll be able to down load them, via com, which is suing YouTube and Google for more than a billion dollars; it is saying they might contribute to this new organization. Saying they're going to deal with Microsoft or Yahoo! or AOL. It looks like everybody else versus YouTube. The consumer might be the winner in this one.

WASTLER: Yeah. Could be fun to watch.

VELSHI: All right.

Well let's turn to a story of a former Washington power broker who throughout most of the 1990s had his finger on the pulse of the financial world. He's no longer a public servant. But Robert Rubin continues to work on improving the lives of people in some of the poorest neighborhoods in the country in this week's "Life after Work."


VELSHI (voice over): The Bronx, Southeast Washington, D.C., the Mississippi Delta all stark images of poverty and a sharp contrast to the life of a former U.S. treasury secretary, but Robert Rubin made one trip to the Bronx that completely changed his perspective.

ROBERT RUBIN, FMR. TREASURY SECRETARY: It was astounding. Because what I saw in the south Bronx which in the sense was the art symbol of urban decay at one time, was block after block after block after block after block of renovated housing, that was the beginning of new business activity, the creation of a real community. I said, how did this happen? That's what I heard about Lisc.

VELSHI: LISC is the Local Admission of Support Corporation, it is a nonprofit organization that helps community groups fund projects to redevelop run down neighborhoods.

RUBIN: I left treasury in July of 1999 and Michael of LISC came to me and said our chairman is going to step down we'd like you to be chairman. That was the first thing that I did. The reason I did it was I think that these problems in the inner cities and in the distressed rural areas are critical issue for our country. Socially, morally, but also very much economically.

VELSHI: Rubin in still active in the for-profit world. He's a senior adviser for financial giant Citigroup and he sits on a few corporate boards but says working with LISC is what really drives him.

RUBIN: I think the best way to get a sense of how important this is, is to go on a little tour of project sites, and it really is interesting. Because what you see, we have pictures what it looked who before and you'll see what it looked like after. You get a sense of how great these accomplishments have been.


VELSHI: We will be right back with more IN THE MONEY.


VELSHI: We decided to end today's program with big finish, a really big finish. I'm talking about the new airbus 8380. Check it out. Touchdown of the a380 in Los Angeles.

UNIDENTIFIED MALE: That's a big airplane.

UNIDENTIFIED MALE: You see how small that 74 looks next to that 380!

VELSHI: It's big. Two full decks, space for between 500 and 840 passengers. Depending on the onboard amenities. JOHN SCHOLLE, AIRLINE ANALYST: We are talking about things such as shopping mall, bars, showers, and exercise equipment.

VELSHI: But don't expect the fancy digs yet.

SCHOLLE: When it comes down to what airlines will take as many seats to the plane as they can and they are not going to make the revenue off of just exercise equipment and malls.

VELSHI: These U.S. flights are just tests and public relations. Singapore Airlines will take delivery of the first a380 in October followed by the number one buyer, Emirates, but Airbus hopes all the publicity will lead to some U.S. buyers. You see, development of the a380 has been fraught with problems. The plane is two years late and that delay cost the European Aircraft maker up to $7 billion, 10,000 workers and their only two U.S. buyers FedEx and U.P.S. had together ordered 20 cargo versions of the plane, but canceled those orders after the delays. U.S. Airlines, some of them in bankruptcy protection and others not long out of it, are somewhat risk averse. Beside you may have noticed that in recent years they shifted to flying smaller planes and flying them full.

SCHOLLE: The first thing they'll do is look to replace the aircraft they use all the time, which is the smaller single aisle aircraft.


VELSHI: Jennifer was just saying that's why they seem to be doing that. Airlines, certainly American airlines, American carriers don't seem to be interested in big, big planes. They seem to be interested in small planes that always run full.

WESTHOVEN: Yeah. Instead of flying to Dallas-Ft.Worth and then going somewhere you're getting these point-to-point things. You hear about these air taxes coming out now, real tiny, it is almost like not only are they late with the physical plane, maybe they missed the trend.

VELSHI: What do you think?

WASTLER: I think business traveler these day, when I'm setting up a trip to go somewhere, I don't want a one ride on a big honking thing. OK. I have a meeting at 11:00. so I can catch one at 12:00. You want frequency. That's what American Airlines seem to be playing to. The others just don't get. It's too big.

VELSHI: It's working well for the carriers who are buying, the Emirates and the Singapores, where they do a lot of big, long hauls.

WASTLER: Where you have to fly across the Sahara Desert to get your point. Maybe it will work there.

VELSHI: One final note. We do this program for you; so if there's something you'd like to see on a future show or a topic you'd like to know more about, drop us as a line at We would love to hear form you.

And with that thank you for joining us for this edition of IN THE MONEY. We're here every weekend, Saturday at 1:00, Sunday at 3:00. For Jennifer Westhoven and managing editor Allen Wastler, have a great weekend.

WHITFIELD: The U.N. Security Council both in one hour from now will it will impose new sanctions on Iran over its nuclear power program.

And British troops are still being held in Iran, their government wants them released.

And presidential candidate John Edwards gets personal in Los Vegas about his family --