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Your Money

Why Now May Be the Best Time to Buy a Home; Rising College Costs Crippling Families; Ivanka Trump on Money, Marriage and Jewelry

Aired October 24, 2009 - 13:00   ET


CHRISTINE ROMANS, CNN HOST: The housing crisis triggered the financial collapse, but with the recession ending, we'll tell you why now may be the best time you may ever have to buy a home.

The cost of four-year college is crippling students and families. A former presidential contender is here to offer a startling solution.

Ivanka Trump on money, marriage and jewelry, of course. Strike a pose; it's time to talk YOUR MONEY.

Hello, and welcome to YOUR MONEY, I'm Christine Romans. Buying a home is the biggest investment you'll likely ever make. Existing home sales jumped 9.4 percent last month, the direct results of first time home buyers. So is this the right time for you?

My co-host Ali Velshi is joining me from Los Angeles this week. Ali, last week you put me on the spot you asked me to describe in 60 seconds or less the implications of a weak dollar, I did it in 50 seconds. This week, how about you giving us a snapshot of the housing market in less than a minute starting right now.

ALI VELSHI, CNN HOST: All right. Parts of the economy are on the mend but there are still major problems. We continue to lose jobs, which means distressed home sales and foreclosures are likely to continue, but with the $8,000 new home buyers credit until the end of November, and a 30-year fixed rate mortgage at about 5 percent, people are buying houses and prices are starting to stabilize.

A new report predicts that prices will continue to drop across most of the country on average another 11 percent between now and the middle of 2010. So why rush to buy a home now?

Five percent mortgage rates is why. It's unclear whether housing prices will drop or rise next year. But with a weak dollar and inflation on the horizon, it is abundantly clear that mortgage rates are increase. You may think price matters most when buying real estate, but with a 20 percent down payment on a 15 or 30-year loan, interest matters more than price.

Wait too long for prices to drop and you'll end up paying much more over the life of the mortgage. All real estate is local. Be careful if you're in an area that is likely to continue to see major price declines. If you've got cash for a down payment now may be the ideal time to buy. Oh, man!

ROMANS: I wish I could be pushing that button. VELSHI: Close.

ROMANS: All right. So we are going to break it down for you. Because you make a very good point. Let's say you found the perfect house that fits your budget at about $177,000. This is the national median home price, right? The final price, factoring in a 30-year mortgage at about 5 percent interest would bring your home to $378,000.

So pull the price off here, blah, blah, blah, turn it like this, just like Ali Velshi. What if you wait? Interest rates are at a half century lows. You could possibly get this house later in the year for $158,000. Imagine that. That would be cheaper, right than this $177,000. Sounds like a $19,000 savings. Not necessarily.

When you consider that interest rates could be on the rise. Let's say just for argument sake this is not a forecast, but just for argument's sake that next summer interest rates go up to 6.5 percent. Well, look here. The price of your house over 30 years paying in the interest, that home is actually $391,000, so, as Ali pointed out, right, Ali? The lower-priced home, if you wait for prices to drop if interest rates go up, in the end you could actually pay more.

VELSHI: There are lots of variables to this. They include whether or not you'll be able to pay your mortgage off early, or whether you think interest rates will go down later and maybe you refinance and whether or not you're living in an area where prices are likely to drop so much in the next year that you might be able to take advantage of a substantially lower home cost. It's not a solution for everyone; it is just something to really think about.

Lots of people say I'm really interested in buying a house, got some cash, got some credit but I think prices are going down. What I say is don't worry about too much about what's happening in the next year if you want to be in a house for ten, 15 years or longer.

ROMANS: You have a job, have you a family, and have you a good school district you want to move into, those should be the most important things and the first things, not flipping a house of course. Those days are over. All right, Ali.

Time now for the money gang where we take you beyond the headlines of the week. Joining me now, Stephen A. Smith, commentator and journalist, and Andrew Ross Sorkin he is author of "Too Big to Fail." The inside story of how Wall Street and Washington fought to save the financial system and themselves.

Gentlemen, let's begin with the federal government flexing its muscles against Wall Street's pay practices this week, targeting everyone from senior executives to highly-paid traders. The White House outlined drastic pay cuts for 136 top executives of the bailout hall of shame as I've come to call them, companies like AIG, Citigroup, and Bank of America.

President Obama's pay Kenneth Fienberg the man of the bailed out companies reduced compensation for some of their highest paid employees by about 50 percent. Is the government over stepping boundaries in the private sector? Feinberg says no.


KENNETH FEINBERG, TREASURY DEPT. SPECIAL MASTER FOR COMPENSATION: It's not a good idea for the United States government to start micromanaging compensation practices at American businesses. But that's not this case. These are under the statutes, seven specific companies that are in effect owned by the taxpayers of the United States. And that's a much different situation.


ROMANS: At the same time the Federal Reserve will review pay practices at 28 of the nation's biggest banks. The goal, to pay for performance not for taking risks. Three questions gentleman. Has the White House declared war on Wall Street? Is a new pay culture coming to Wall Street for good? And should the government even be setting private pay? Andrew.

ANDREW ROSS SORKIN, AUTHOR, "TOO BIG TO FAST:" Yes, yes, and no. Here's the problem. It's going to fulfill the public lust for blood on Wall Street and that makes sense. But you have to think of yourself as a shareholder of this company. We're the taxpayers, we're the shareholders.

And my great worry is that actually talented people, I know it's hard to call people on Wall Street talented because they put us in this mess. But there are going to be people who are talented who are going to end up walking across the street to some other firm who can pay them whoever they want. We own these companies, they are not in great shape to begin with, and we may lose the best players on the team.

ROMANS: This is why Feinberg decided to keep -- Feinberg let three people at AIG keep $4 million, $5 million and $7 million retention bonuses because he said it's in the best interest of the American taxpayer who ...

STEPHEN A. SMITH, COMMENTATOR: It is in the best interest of the taxpayer. And I completely disagree with you; I do understand that argument has been made. You'll have talented people leave and go to private equity funds, et cetera. Bottom line is they were inept. Pick your poison, inept, corrupt, or both.

When you have those kinds of people, can you not reward them? You can you not do that at the taxpayer expense. There is no way on earth you can pull that off. If they want to go someplace else, maybe if they went to one of these private firms and they rob them the way they robbed the American people, then ...

VELSHI: Hold on. Here's my problem with this. Here's my problem with this, guys. As much as I share the frustration that most Americans have with these pay packages given to people who were right at the center of the demise of the -- or the near demise of the financial system, I'm very concerned about satisfying blood lust and I'll tell you why. Number one, we did this when the CEOs of the car companies went to Washington to testify on their private jets and we wasted a private week talking about private jets. A week that could have been used to talk about saving the auto industry. Then we did it with AIG. We spent so much time talking about the bonuses that we have not resolved the system that AIG was involved in that led to this collapse of our financial system. It was so central to it.

And I think the same thing happens here. This is blood lust, it is -- it feels good, it is still not reform on any front of the financial system and the stuff that got us into trouble in the first place.

SMITH: I agree with that, and then intensify the reform as it pertains to these few executives. I'm not asking for something to be so habitual when you're looking at every bank, you're deciding as the government, want to do this to everybody. But when can you pinpoint the exact individuals who have been -- who were at the heart of this, you have got to address that.

ROSS SORKIN: The folks that were there that messed this up, I agree with you.

SMITH: That's all I'm talking about.

ROSS SORKIN: But here's the problem. If we need $400 billion back from AIG, the number's in that range. That's the number we've got to focus on right, I want Michael Jordan on my team and I can't even hire Michael Jordan if I want to now. So that is my problem.

SMITH: And I'm saying to you I don't want Michael Jordan if Michael Jordan has proven to be a scrub that can't produce and get the job done that he's supposed to do. I don't want that.

ROMANS: On that point we agree. Andrew Ross Sorkin and Stephen A. Smith and Ali in LA.

You want to cut your college tuition bills by 25 percent? How about a three-year college degree? It would save thousands of dollars, right? We have that next.


ROMANS: College costs are higher than they have ever been that is according to a new report from the college board. Tuition and fees at four year private colleges are up almost 4.5 percent this year to more than $26,000 a year. Four-year public school tuition and fees are up 6 percent averaging about $7,000 for in state students. As costs soar, financial aid is harder to come by and the college degree is even further out of reach for many American students.

Our next guest says the solution could be as easy as one, two, and three. Senator Lamar Alexander from Tennessee joins us now; he's former education secretary and also former presidential contender. Welcome to the program.


ROMANS: A three-year degree sounds so enticing and it sounds like it could save American families a bundle of money. Tens of thousands of dollars, if you're talking about private school. How feasible is it?

ALEXANDER: Well, it is feasible, about 5 percent of students graduate in three years today, and some schools offer students a three-year option. You have to be well prepared and you have to take more courses during the three years but you can save about $43,000, which is the cost of the fourth year, plus whatever you earn in the workforce that year.

VELSHI: Senator Alexander, Ali Velshi, I'm in Los Angeles. I read with great interest the story that you wrote for "Newsweek." It is an area that has been a great interest to me because we are losing ground. Americans are losing ground in the one area that they continue to be ahead in and that is higher education, university education.

We're losing ground to places like India which are actually doing more of what are you suggesting. Let's talk about the downside of compressing a four year education into three years or less. You pointed out some of these things. Less time to mature, less time to be involved in extracurricular opportunities, less time to travel abroad. How do we mitigate that if we try to compress the school year?

ALEXANDER: Thank you for bringing those points up, you could certainly make a good argument that in a world that is more complex we need more education not less. But the way you do that is first you have -- this is only for well-prepared students. A three-year degree is not for every student any more than a hybrid car would be for every driver.

Second, you take the same number of courses; you just work harder during that period of time. And then you have to make sure that the students have those courses available. So the campuses would have to work pretty hard to make those options available to students.

VELSHI: Let's talk about a couple of other advantages to that, Senator Alexander. One of them is you describe what people would save in terms of tuition, but then there's also the opportunity cost gain, if you can be out in the workforce a year earlier, the money you could be earning.

But more importantly, again, as we struggle to find out what is going to drive our economy in the future, the one area that we excel in in the United States is higher education. And this can encourage people to take further degrees and get higher education if they're spending less time and less money on their undergraduate education.

ALEXANDER: That's exactly right. Actually it might help on both ends. The end of high school for many students is boring and a waste of time. If you could hook that up with the first year or two of college, that would make a lot of sense and might motivate the students, they would learn more there. Then students looking at years of graduate school or medical school are well prepared enough when they arrive at undergrad to finish in three years and get on to medical school. That was even true when I was in college. So it's a better use of all of our facilities at a time when, you're right. We have the best higher education in the system in the world by far; we just need to keep it that way.

ROMANS: The most important thing here I think we would all agree is that we have got to make sure that our kids who are graduating high school have the skills so that when they get to that four-year or three-year university program they are ready and ready to get going.

In too many cases, it's that small minority who are able to graduate from high school with AP credits or with college credits because they happen to be in a school district that is very aggressive on these sorts of things. Would you agree that if this is going to be viable we need to also focus further on down the food chain to make sure our kids are ready when they get out of college?

ALEXANDER: You're absolutely right. The fact that our high schools aren't preparing as many students as well as they should is a limit on our ability to do well in college. I'm at the University of Tennessee today. What they do here is they made the freshman and sophomore classes smaller and the junior and senior classes larger.

They're saying to community college students, get well prepared, finish your degree there, and then we'll save a place in the third year of college for you. So that's another efficient use, less expensive way to help well-prepared students go through.

ROMANS: It's an incredible read in "Newsweek." Thank you so much. We both enjoyed it; we've been talking about it all week. We really hit on a topic with a lot of interest. Thanks so much for joining us.

All right. What does the steel industry have that prostitutes in America battle? That answer direct from the freakonomics team next on YOUR MONEY.


ROMANS: You think you know, but you have no idea, that pretty much sums up the startling conclusions in "Freakonomics," The book that turns common sense on its ear. They super freaks are back with a new book "Super Freakonomics." Global cooling, patriotic prostitutes and why. Suicide bombers should buy life insurance. And we'll start by talking about -- we'll start by talking about those patriotic prostitutes with co-author Steven Dubner.

So how did patriotic prostitutes land on the title of your book, and does the steel industries have that would be instructive for this group?

STEVEN DUBNER, CO-AUTHOR, "SUPER FREAKONOMICS:" Well the patriotic portrays of the street prostitutes in Chicago when we studied using data, their favorite holiday is the forth of July and the reason why is all these big family reunions in Chicago that dry up demand for street prostitutions. So they love the fourth of July and therefore, ergo, they must be a little bit patriotic.

In terms of what prostitutes could learn from the steel industry is this, we looked at prostitute wages now versus 100 years ago and found that they've plummeted. It's a horrible job. We wouldn't wish it on anyone we know and yet they still do it. We wonder why they do it. They make four times what they could make otherwise. A 100 years ago, women earned 10 or 20 times what they could otherwise. We ask why and the answer seems to be the wages of prostitutes were depressed by the sexual revolution, which is to say demand for sex didn't go away; men still want to have a lot of sex.

But there was a much greater availability of free sex. In other words there were women who were willing to have sex with men even outside of marriage, and that increase of supply, of free sex, meant that the prostitutes' wages fell. So if prostitutes had a lobby the way the steel industry had a lobby, they'd go to Washington, they would say, hey, we're being encroached upon here by this terrible competitor, premarital sex and we want to you do something about, it put a tariff on it, the way that the steel industry gets foreign steel to put a tariff on it.

ROMANS: You know Velshi was so cool about this book is they take all these sort of things you wouldn't think about normally and put it to the test of economics in cash studies, and it really does sort of turn common sense on its ear or at least conventional wisdom.

VELSHI: And people end up talking about it including people who understand what you would think of as traditional economics, quite well. It kind of makes me ask Steven, what's the difference between what you write and the way -- and traditional economics?

DUBNER: Well, it's a great question. My co-author on "Super Freakonomics" is with the University of Chicago. He does what we call boringly applied micro economics. And what that means is it's very different from what most of the folks that you have on the show to talk about, which is macro economics.

Predicting or even describing the events of the macro economy are incredibly hard. It's a bit like describing the events of climate, or the human body. There are all these different -- it's a complex, dynamic system. All these things moving. We set the bar much lower. We try to only write about things that we can really understand by using data that already exists. So instead of trying to predict interest rates, for instance, which I know you do, and we know how hard it is, we try to describe behavior as it's produced by incentives.

ROMANS: Let's talk about some of the things health care related things; we're in this big health care debate. But the fascinating things in there, cardiac deaths are down. Not because of some of the things you would normally think of. Women doctors, male doctors, difference there's. Also, why it's so difficult to get doctors and nurses, but doctors to wash their hands well enough.

DUBNER: It's an incredibly interesting riddle. We've known for 160 years that one of the best things a doctor can do in a hospital is wash his or her hands frequently. We find that they often fail to do so. Bacterial infections are passed along and people die as a result. What's really interesting about this and the way we look at it is within the context of behavior change versus some other kind of incentive, we depend on people to change their behavior to improve the world.

So right now we're seeing a huge push to change global behavior to fight global warming. Our argument is even simple behavior change, often is very hard to do. So to get a doctor to wash his hands, if it's so hard, how hard will it be to incur worldwide behavior change to produce the lessening of greenhouse gas emissions that we're now trying to do as the chief way to fight global warming, which is why we write about other cheaper, simpler, more direct ways to address global warming than necessitating global behavior change.

ROMANS: Like what? What's one thing people can do to negate or lessen the global warm something?

DUBNER: I'll give a tiny example. Eating local is thought to be a great thing, it turns out it's not because most of the greenhouse emissions associated with food are in the production phase and the farming phase, not the transportation phase. When you drive your Prius to whole foods and buy hamburger, you're canceling it out. Because beef, cows emit methane which is much more potent greenhouse gas than carbon dioxide. Kangaroos for instance don't emit methane if you really love the earth; learn to love to eat the kangaroo.

VELSHI: I had a really good question, but the kangaroos don't emit methane sort of got it out of my head.

DUBNER: Are you hungry. Is that the issue?

VELSHI: I just -- maybe I can stop in for a kangaroo burger somewhere.

ROMANS: You have to come back because there are so many other things that we --we have to find out why suicide bombers should buy life insurance. You'll have to come back. Steven Dubner, co-author of the book "Super Freakonomics, global cooling, patriotic prostitutes and why suicide bombers should buy life insurance," thank you for joining us.

DUBNER: Thank you.

ROMANS: Why some say the home buyer tax credit is a total waste of your money. That is next.


ROMANS: All right. We're back with the money gang. Joining me again, journalist Stephen A. Smith and Steven Dubner, the co-author of "Super Freakonomics." Gentlemen, the $8,000 tax credit for first time home buyers may be good politics but is it good economics?

Well according to the National Association of Realtors, some 350,000 homes will be bought this year solely because of this tax credit. But is that enough to stimulate the housing market as the program intended? And it is enough to offset the $15 billion price tag it comes with?

Which was broken down, by the way, it will cost us, the taxpayer, $43,000 per home, bought with an $8,000 tax credit. Starts to get a little sticky but was it worth it, the $8,000 tax credit? Should we extend it? Some in the industry want it even bigger.

DUBNER: Someone like me that is never say you should include all these kind of artificial incentives, because they skew the incentives that are going on and they change the market. Personally I have nothing against the National Association of Realtors but we've written a lot about the ways in which their information doesn't really serve the public so well.

That said, it's an incentive. People respond to incentives. There is no surprise that there is a big demand now, it's an artificial demand, maybe to some degree, and it's kind of like cash for clunkers. We saw a lot, we will see a drop off, who is that good for? If you buy a house with that credit, it's good for you. What's that goods to do for the market?

SMITH: I think it's good for the individual, I think it's potentially catastrophic for the country. When you look at the fact that Congress had budgeted $7.5 billion for this, but it's going to -- it's projected to cost the government $15 billion, that's twice as much, well who ultimately does that cost? It costs the taxpayers money.

What I'm getting sick and tired of is I'm looking at this administration far be it for me to be critical, but I'm really getting sick and tired of every single idea that we come up with or that they come up with, ultimately ends up costing us. It's supposed to be good for us. $8,000 tax break first-time home buyer, and then at the end of the day, it still always ends up costing the American people money.

VELSHI: I think you've got to say what you really feel.

SMITH: I'm trying. It just drives me nuts.

VELSHI: Guys, there are two things driving this housing market right now. Three things, one is that there are foreclosed homes and distressed sales that are out there, so houses are cheap. Number two is the $8,000 credit, which is working like a gift card; it really is creating the incentive. But number three are these historically low interest rates. And guess what? That is costing us money too.

The Federal Reserve has pumped so much money into the agencies that guarantee mortgages that's what has kept the interest rates low. Now, that is money that contributes to our national debt and that causes our interest rates overtime to go up, that causes the value of our dollar to be lower.

So we are subsidizing every last thing that people are benefiting from in this country. When people tell me there's no benefit in the average American, it's just the Wall Street fat cats, cash for clunkers, home buying credits, low interest rates, that is the government helping you and it is very, very expensive.

ROMANS: All right. Let's move on to another topic here I want to get your thoughts on guys, an interesting byproduct of the recession, it's killing the death penalty. Studies show the death penalty costs -- can average $10 million more per year per state than a life sentence. Because of that, 11 states are now considering to repeal the death penalty. Think of that, it's cheaper, especially with strapped budgets to let somebody be life in prison so you don't have the costs.

DUBNER: Here is the thing; I'm going to let Steven address kind of the moral and even legal implications of this, which are huge. One very narrow term. If you were relying on the death penalty as a deterrent against serious crime, you're making a mistake. We written about this, the death penalty does not deter violent crime.

And the reason why is partly because it takes so long to be -- for it to be carried out and there for incurs all this cost. Whatever your moral or political leanings are on the death penalty itself, and we all have them, the single fact is that if you're thinking about it as a crime deterrent it's already not a good idea.

SMITH: Well I'm glad you told me about that and informed me about that. I had an idea about but it is good to hear you say that. What I will say is this; I'm one of those guys that I believe in pulling the switch. Get rid of you, take you out.


SMITH: I'm serious.

ROMANS: Really.

SMITH: In special circumstances, I don't believe that a Charles Manson should be in jail all of these years costing the taxpayers money. I don't believe a Jeffrey Dahmer should have been -- special circumstances. I do emphasize special circumstances, not to mention the death penalty being distributed equitably as opposed to one ethnic group over another. But what I am saying is if you commit a heinous crime, off with you, good-bye; let the lord deal with you. I ain't got time.

But then when you see a state like Florida, a particular execution costing $24 million, I never imagined something like that was possible. So when you consider how costly it is to the American people, well then obviously that makes you rethink things a little bit and say, you know what to heck with it. Let them spend life in prison, that way we don't have to go through appellate courts and appeals and all that.

ROMANS: The appellate process I mean that is a very expensive procedure. All right, guys lets leave it there.

Another quick one I want to get to, Berlin brothel is saying guten tag to the environment offering a five euro discount, about $7.50 if you're wondering, to customers who arrive by bicycle or public transit, going green when you go to the brothel.

It is all in an effort to lure in customers who are more frugal because of the financial crisis or who just love the earth. Those arriving on foot however, are out of luck. According to the owner it's too hard to prove you walked to the establishment or again just maybe just drove and parked a block away. Ali, I'll let you start with this one from LA.

VELSHI: I've got to say, I'm glad we're a year away from where we were last year we've talked about prostitution twice in this show, we are talking about the death penalty, clearly the economy is getting better. But let me tell you everybody can go green. This is just proof of that.

This area that used to be in East Berlin where they're doing this, the proof you need is you need to show up to the receptionist with a bicycle padlock key or proof that you used public transit to get to the neighborhood. I think there will be a lot of people walking around in East Berlin with a bicycle padlock keys in their pocket.

ROMANS: Is that a bicycle padlock key in your pocket? This is a dispatch from the Associated Press, not our reporting.

DUBNER: From an economic perspective, firms like to engage in what they call price discrimination, that is they love to charge different kinds of customers different prices if they can. They make more money doing it. That's why if you book an airline ticket late you're going to pay triple than the person next to you. If you can price discriminate you always do better, if you can set one price for the green customers and a higher price for the driving customers, anything you can do to gain an advantage if you're a business is great.

That doesn't mean it's going to have any kind of environmental effect. Because I think if anybody is abandoning the car to take the bus or to get out the padlock key to go to the brothel, to save $7 is probably not really doing it for green purposes. That's what I'm going to say.

SMITH: Only the -- that's right. The only thing obviously both you and Ali are right on point. The only thing I'll add to it is something very generic if you're riding a bicycle to the brothels, obviously your blood is flowing, you're energized, you're ready to go and that's something that would benefit both sides. I see nothing wrong with it. That's all I have to add. That's all I have to add. Exercise before exercise.

DUBNER: This is not what the founders of CNN saw when they drafted the constitution here, but I like it.

SMITH: But CNN is very innovative so they understand.

ROMANS: I will see if we don't edit any of this out. If you're hearing it, you'll know we didn't. All right. What was really behind the financial collapse that rocked the world, the author of "Too Big to Fail" is here with those answers. (COMMERCIAL BREAK)

ROMANS: Just one year ago, Wall Street faced a near death experience. Cornerstone institutions like AIG, Lehman Brothers, Fannie Mae and Bear Stearns were either on the ropes or down for the count. One year later and the recovery may be upon us but how do we prevent the next crisis which some believe may be imminent.

"New York Times" reporter Andrew Ross Sorkin is the author of "Too Big to Fail," the inside story of how Wall Street and Washington fought to save the financial system and themselves. The book is big. I mean, it's sort of the -- it's big and heavy, just like everything we've been through.

ROSS SORKIN: Hopefully it reads like Danielle Steele and goes quick.

ROMANS: A couple of quotes, Timothy Geithner, before he was treasury secretary, saying we've got to get foam on the runway. The plane's going to crash. Jamie Dimon getting his people together at a dinner before Lehman went down and saying, we've struck the iceberg.

ROSS SORKIN: Only twenty four hours in advance by the way and he saw the writing on the wall. It was remarkable.

ROMANS: Let me ask you about now, because this is still playing out. This book is still playing out, this week these big huge pay cuts that some of these firms are going to have to take like AIG, Citi, Bank of America. Are we going down the right path here? The whole pay cuts thing? Is this too late to be addressing this?

ROSS SORKIN: It's not too late, but this may be a band-aid. The goalposts will keep changing. What I think we're all looking for in the end is going to be some real financial regulatory reform coming out of Congress, and the real question that I have going forward is, as the economy gets healthier, as we start thinking about health care reform and other issues, whether when we get a bill on the table, whether it's really going to have any teeth because people, as you know on Wall Street, seem to have a short memory, as you can imagine.

ROMANS: Big pay checks with short memory.



VELSHI: Hey, Andrew. I want to ask you something.


VELSHI: We've been facing a lot of criticism about the lack of regulation, the fact that some of these companies are bigger than they were and nothing has fundamentally been done since this near death experience.

ROSS SORKIN: Absolutely. VELSHI: I'm of the view that the kind of regulation we are going to need to see is gong to have such an impact on the future of this country, I'm not sure there should have been a rush to do it. In other words we have seen the worst of it; we may need to take our time to do it properly. Do you share that view?

ROSS SORKIN: I do share that view, but I do think we could have done it quicker and I do think, you know, Rahm Emanuel always says you don't want to lose the crises of the opportunity, and I'm a little worried that we are. I think we know what needs to be done. You talk about a systemic regulator, that makes sense on its face, you talk about the resolution authority, the idea that you can take over a bank that's in trouble, not send them in bankruptcy.

VELSHI: Let me stop you on those two points. Those are very, very important. Systemic risk regulator is one who says the failure of this company or this entity is so big that it could be like AIG, it could mess up the rest of the system and a resolution authority is what the FDIC has.


VELSHI: When it shuts a bank down, it can throw everybody out and every last contract out if it wants to. These are two important keys to reforming the financial system.

ROSS SORKIN: I want to add one more to the list which I think is the most important and it takes care of a lot of the problems we have today, which is we need higher capital requirements. That means they have to have bigger reserve. They need a rainy day fund at these banks, and it needs to be a lot bigger.

What that would mean, by the way, is that all these profits you hear that these firms are making these days and they are taking those profits and giving them to their employees as bonuses, they have to take that money, put it back inside the bank, and that would actually make the system a lot less risky and a lot less -- you would have less firms that are, quote, too big to fail.

ROMANS: Prize winning economist just recently told me that we're in a worse situation, we have a worse too big to fail problem today than we did before the crises. Do you agree?

ROSS SORKIN: I think it's true because now we have firms that are too, too big to fail. We do. Because we've merged a number of them together. People talk about an imminent problem, I'm not sure I see that. I think if we don't have additional regulation, two, three, four, five years out especially when memories get short. That is when invariably we'll have a problem. We have problems virtually every five, six years these days. In the business world it seems to have an implosion and this one is worse than the next.

ROMANS: All right. Andrew Ross Sorkin thank you so much.

ROSS SORKIN: Thank you. ROMANS: Hurricane Katrina devastated New Orleans in 2005. Lives were lost, families separated, entire neighborhoods destroyed. Also victimized small businesses. Getting those businesses up and running again was vital to the recovery of New Orleans. Rock and bowl a New Orlean's institution that opened in 1941 is one of those businesses.

CNN's Sean Callebs reports.


SEAN CALLEBS, CNN CORRESPONDENT (voice over): It's a bowling alley, restaurant and a place known for its live music. It's also a beacon of light in New Orleans. And proof those businesses can return and do.

JOHN BLANCHER: My name is John Blancher and this is my turn around story.

CALLEBS: When hurricane Katrina destroyed his business, Blancher did what he does best. He went back to work.

BLANCHER: What really helped me turn the thing around; it was a combination of my faith, my family, friends and goodwill from a lot of people that wanted to help me and wanted Rockin' Bowl to not die.

CALLEBS: Blancher's family pitched in and so did the Idea Village a nonprofit that supports local entrepreneurs.

TIM WILLIAMSON, PRESIDENT CO-FOUNDER, THE IDEA VILLAGE: After Katrina we were tasked with going through the community, in the streets, through every single neighborhood to find the true change makers, those entrepreneurs that if we can get their business up and help them start, not only would it create jobs and revenue but the social impact to our community.

CALLEBS: Blancher and Rockin Bowl fit the bill.

BLANCHER: I got a $2500 grant; it helped me buy a refrigerator and freezer. Every little bit helped.

CALLEBS: The rest of the money to rebuild came from insurance, $50,000 later and only six weeks after Katrina, Rockin' Bowl was back in business.

BLANCHER: Six weeks after the storm. That first night, 700 people showed up.

CALLEBS: That first night, John knew his business would make a turnaround. Since reopening Rockin' Bowl, revenue is up 50 percent, according to Blancher, enough to move to this more modern location. His hard work has taken a toll.

BLANCHER: Let me see how you fare here. This is only the second ball I've thrown here in six months. But we'll see how I throw. If I can even stay on my feet. See.

CALLEBS: Well, you got Barack Obama tied.

Sean Callebs, CNN, New Orleans.


ROMANS: Rockin' Bowl.

All right. Wedding bells are ringing for Ivanka Trump this weekend. Before she walked down the isle she sat down with me to share her secrets to success. That is next.


ROMANS: She was an international model, a graduate of Wharton Business School and she was the youngest director ever of a publicly- traded company. She currently makes regular appearances on a hit TV show, has a line of luxury jewelry and is a real estate mogul in her own right. And did I mention she's just 27 years old? Now Ivanka Trump is also an author.

I recently caught up and asked her why she decided to write about career advice.


IVANKA TRUMP, AUTHOR: There was really nobody that was writing for somebody my age about those initial career moves, about those first steps, about, you know, the interviewing process, that at least they could relate and remember the experience themselves. So I talk about things that I believe are relatable and there are issues and questions faced by my generation, you know, being young in an older workforce, being female in a predominantly male workforce.

So I really wanted to write a peer to peer book, not in a condescending memoir or bible of best practices, but, you know, almost a story from the standpoint of an older sister.

ROMANS: You were born with a certain set of advantages, and you took those things and moved on to build a personal brand that is Ivanka Trump. What do you tell people who might say that you had a -- you had a leg up to start and that makes things easier for you?

TRUMP: I acknowledge it. I did. And I know a lot of people who have know a lot of people that have legs up and choose not to climb the ladder. It's about harnessing what you have available to you and making it work for you. I'm really not one to dwell on some of the challenges that I face given the fact that, you know, people will always undermine and underestimate me. I view the family I was born into as a tremendous asset for me. That doesn't bother me or chain me to admit.

ROMANS: You came into the business at a great time for real estate. Things turned a real 180 for the business. What has it taught you? What are you seeing in the workplace and the economy that you are still learning from? TRUMP: Truthfully, I have learned more in the last 18 months than I have learned in my previous 26 years on the planet just in terms of the business and of life and of just the flow of opportunity. It is a tough economy out there by any stretch of the imagination. In that economy emerges some of the greatest opportunities.

When things are piping hot three years ago that was not the time to be doing deals. Many people who transacted at the top of the market are now realizing that there wasn't a lot of value in the deals they were buying into and the companies they were inquiring. Really, today is the time to shore up your resources and to start to look for that opportunity amongst the turmoil.

ROMANS: The jewelry business is now 2 years old. It's a little different than the real estate business. It's a passion of yours.

TRUMP: It's been terrific. Despite the challenges we faced opening our store and our doors of our boutique, it's been great. I wanted to create a jewelry concept that was geared toward and empowered woman. I would look at my mother and I would look at her friends and realize the luxury jewelry was not hospitable towards the female consumer.

ROMANS: You are becoming a household name, either it is because of the TV show or it is because of all your businesses. They wrote a story about the spatula you registered for your wedding. When your spatula is news, I know you said you wanted a houseful of babies. That all comes later?

TRUMP: Yes. For now, I'm going to be focused on continuing down this road on growing as a young developer and on creating a home with my new husband.


ROMANS: She will be married on Sunday, some 500 guests expected to be there. She's marrying her millionaire boyfriend Jared Kushner who is a publisher in New York City.

A sheriff wants Craig's List held liable for prostitution advertised on its site; a federal judge has made a decision. What does the future hold for sex on the internet? Find out next.


ROMANS: All right. Ali Velshi and Stephen A. Smith, we have time for one more story, it is a pretty good one for you. I can't wait to hear what you guys think. A federal judge dismissed an Illinois sheriff lawsuit which thought to eliminate the ads for adult services posted on Craig's List. The sheriff contends Craig's List is fostering prostitution. Claiming quote the site has been hijacked for criminal purposes.

The judge says Craig's List can't be held responsible for people misusing its site. Bottom line a victory for Craig's List but outside the court and to our money gang for their verdict should Craig's List be responsible if prostitutes are advertising their services on this site? Prostitution is illegal. Craig's List is not facilitating the prostitution, really.

SMITH: Yes, they are. In my opinion, they are. Because if prostitution is illegal and you are providing the conduit for prostitutes, or adult services, if you are providing the conduit, you are playing a role in this. It's not like Craig's List is innocent in all of this. I think that is the impression the judge gave.

VELSHI: Hey Stephen, I don't think they are any more responsible than we are then when we run a ad for a group that has anything to do with what CNN has to do. We have emerged from newspapers and magazines into the web. Now I think Craig's List can do things to stop itself from being hijacked by adult ads, they changed their erotic services section over to adult services. I don't know. That might be semantics. I wonder if the sheriff and others are going after the wrong group in order to deal with the fact there's a lot of prostitution out there.

ROMANS: It's as if Craig's List is the road that the prostitutes and the johns are driving on.

VELSHI: Go on the Internet and type in prostitute or prostitution or escorts in whatever city, there are many, many rogues, not just Craig's List.

SMITH: That doesn't make it right. I guess what I am saying to you is use your analogy Ali. I mean the reality is if something were illegal, they couldn't come on CNN and advertise it. Prostitution is illegal.

ROMANS: What about drugs. Put that in there. Are you a party girl? Would you like 15 tablets of e? Would the DA be down on it?

SMITH: Yes they would. Most certainly a DA would be down your throat if you were to facilitate something like that.

ROMANS: It's an interesting debate. I wonder if one sheriff and one judge or if we're going to continue to hear more about this sort of thing.

SMITH: This sheriff could have put his efforts to a better use. He's more right than the judge is.

VELSHI: Craig's List they have taken some efforts in the right direction. So if they can continue to try to be cooperative. It's not the last we hear of it but it may evolve into something else.

ROMANS: All right. Stephen A. Smith nice to see you, again.

SMITH: By the way, Ali, that is a nice tie. I'm proud of you.

VELSHI: I knew you were coming on the show.

ROMANS: Thanks, Ali. Thanks every one for joining us today on YOUR MONEY. You can follow Ali Velshi and me on Facebook and Twitter. We're doing a lot of tweeting these days. At Christine Romans and at Ali Velshi. Make sure you join us every week for YOUR MONEY, Saturdays at 1:00 pm Eastern, Sunday's at 3:00. You have a Twitter, don't you?

SMITH: I do.

ROMANS: There you go, log on also 24/7 to for us. Have a great weekend.