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Growing Calls for Stronger Actions Against BP; More Jobs Were Created in May, But Most Were Temporary

Aired June 05, 2010 - 13:00   ET


CHRISTINE ROMANS, CNN HOST: 431,000 jobs created in May, the most in 10 years, but there's an asterisk with that number. On most weeks, jobs of course would easily be our top story, but not this week, not with thousands gallons of oil pouring into the Gulf every single day.

Hello and welcome to YOUR MONEY, I'm Christine Romans.

ALI VELSHI, CNN HOST, YOUR MONEY: And I'm Ali Velshi. Much more on the job story and that asterisk that Christine is talking about in a few minutes.

But first, growing calls for the government to take stronger action against BP. These two men, President Barack Obama, and BP CEO, Tony Hayward, you know which one's which, are under the gun to fix it and fix it fast. How fast? We're already 50 days into this. President Obama reportedly snapped at his aide "just plug the damn hole." Tony Hayward said "I want my life back."

ROMANS: And that didn't go over so well and Hayward later apologized for that comment. But comments like that have stoked already white hot anger about this situation against this company. They are called in some corners for the government to actually seize BP. Investors are hammering the stock. That stock has fallen by as much as 40 percent since the accident. It has lost more value, Ali, than the value of the size of some countries.

VELSHI: It's a big company. But you know we have to decide what's emotion and what's important. Put aside emotion for a minute. This could be a drop in the bucket for the oil giant. It's a huge company and it's got immense resources. It earned nearly $17 billion last year. BP drills for oil and gas in 30 countries, it markets its products in 80 countries and it's the number one -- the largest oil and gas producer in the United States.

ROMANS: The question is, while the oil disaster has been devastating to families, small businesses and wildlife, just how devastating will it be for BP. Arianna Huffington is the editor and chief of the "Huffington Post." Stephen Leeb is the author of "Game Over." And Stephen Moore is an editorial writer for the "Wall Street Journal." Thanks everyone for joining us.

Let me start with you Stephen Moore first because you know Ii look at the deep pockets of BP. You talk to the analysts who put together the worst case scenario they could possibly ever think of. Is this going to bury BP? Or is BP a cash machine because it's an oil business?

STEPHEN MOORE, EDITORIAL WRITER, "WALL STREET JOURNAL:" Well, you know, Christine, when they do their worst case scenarios, I don't think this was even in their worst case scenario. This disastrous has been such a tragedy. And you know the thing that I do worry about and I'm not an apologist for BP at all. I think that's something that makes investors very nervous.

Let's not forget, BP is not only an important part of most people's 401(k) plans and so on, it's also the employer of tens of thousands of American workers.

ROMANS: When other countries like Venezuela for example, talk about putting companies with natural resources in receivership or the like, we usually say something about it, we usually say no don't do that. That's one of the reasons why a lot of people say they don't think that you are going to have U.S. government seize BP.

But I want to you listen to something, Robert Reich, a Clinton labor secretary; this is what he think they should be put into temporary receivership. Listen.


ROBERT REICH, PUBLIC POLICY PROF., UNIV. OF CALIF. BERKELEY: BP was responsible for this, and BP needs to be under federal control at least until this is cleaned up. I'm not suggesting this is a permanent receivership. I'm suggesting a temporary receivership because this is such a national emergency.


ROMANS: You guys, he's saying put them in control -- put the government in control because they can't take control of the leak. Arianna.

ARIANNA HUFFINGTON, EDITOR IN CHIEF, "HUFFINTON POST:" Well, let's look at what has happened so far. We have a situation where basically BP has regularly misinformed the public. We've had information when it comes to the disinfectants of the soil that they're putting in the water, it's turned out that a lot of workers are getting sick. So it's very clear at that the interests of BP and the interests of the American public are not aligned at the moment.

That's really why Robert Reich is talking about a temporary receivership. How can we make sure that the interest of the American public are put first. And clearly, as a good company, they should agree that what is happening right now is not good company. But in fact what BP is doing is hiring tons of lobbyists in Washington to make sure that what Congress does continues to be full of loopholes in ways that undermine their responsibility.

VELSHI: Steve Leeb, let me ask you this?

MOORE: Arianna, what would you want them to be doing? That they're not doing? I mean they are spending billions of dollars trying to fix this leak. I'm not so sure I understand what you think they should be doing.

HUFFINGTON: I would like them to be very forthcoming about all information. You know perfectly well they have not been doing that.

MOORE: And neither has the government.

HUFFINGTON: They're actually preventing the media from having access. And Congress with the pressure before they even allowed to us see the oil leak.

VELSHI: Hang on a second. Let me ask Stephen Leeb this for a second. I think you make good points. Stephen Leeb, you said something on this show some time ago where you said it's quite possible that we know more about the surface of the moon than we do about how to do things at the bottom of the ocean.

Christine, you said that we spend so much time and money in getting oil out of the ground we just don't have the same degree of research and science containing it in the ground or putting it back. Because we don't really aim to do that very much. Stephen, this does in terms of the access and the forthcoming nature of BP, putting all of that aside, the reality is, we don't actually have the technology to deal with the situation as effectively as we'd like to?

STEPHEN LEEB, AUTHOR, "GAME OVER:" No, we really don't. That doesn't mean BP's a good company. I mean, they're a terrible company; they were a terrible company before this has happened. They're probably even a worse company now that it's happened. They were very ill prepared. But all that said Ali, you're exactly right. We don't know enough to be drilling and to assess the risks of drilling at these kinds of levels.

I think we make a terrible mistake when they politicize this and we hold BP up as some sort of scapegoat. It was this government that had their own regulations in place that didn't allow immediate response. If you care how our government responds to these kind of things with let's say how Australia respond, they had a blowout last year. Within minutes, there were planes; there were this, there were that. They had 50, 60 people.

We appointed a commission of five or six people. They didn't even get along. We didn't even vet the commission. I mean this is not BP's fault. This is the government's fault. Everyone is to blame.

MOORE: I agree with that.

HUFFINGTON: BP's interests are very different than the interest of the American public. You see what's happening right now. Let's pretend for all of this time that we're all together, and we are not. This is the moment, that we have larger conversations, two in particular.

One is what is the role of government when it comes to regulating companies? What is the financial sector, BP, the mining companies; we have had three major disasters, one after the other. And the other one is what is the role of the media in having access to all the information?

ROMANS: Wait, Stephen Moore responds next. We have to leave it right there. But bight after the break, we get Stephen Moore's response. Arianna Huffington that is next.

But, could the oil disaster be spelling disaster for President Obama in his second term. Should he be emoting? What does that mean?


ROMANS: We're back with Stephen Moore and Arianna Huffington in a very hot conversation just before the break. So I'm going to give it straight to Stephen Moore to continue it.

MOORE: Well, my worry is that we need energy. There's no question about that. And we need to be adults about wondering where we're going to get our energy from. This past week, the Obama administration has basically imposed a moratorium on more deep sea drilling. Every form of energy that we get, whether it is getting it from the Middle East on tankers, whether it is nuclear power, all of them have risks associated with them.

I'm really worried that some Americans think that we're going to be able to get our oil supply and we're able to motor our industries and our cars with wind mills and solar energy. That just isn't going to work. We need to have better safety obviously for workers in the government but we also have to secure our energy future.

VELSHI: The disaster in the Gulf of Mexico, obviously, for many reasons have been dominating the news, CNN has been all over it. And one of the issues that we're trying to deal with is criticism that the media might have been slow to get to the magnitude of the story when it first broke.

Arianna, let's start with you. I'd like to feel that we've been on this whole thing for 46 days, 47 days, 48 days, since the explosion on the deepwater horizon. We're particularly sensitive to these kinds of stories. But generally speaking, do we think the media has been on top of this thing the way it should have?

HUFFINGTON: Well at the beginning what happened is, is what has happened with Iraq, the financial disaster, the mining disaster, we did not imagine how big this was going to be. We had the problems we already mentioned which is BP not being forthcoming with information. The government not making sure that they were forthcoming with information. But I think for me, a major problem has been with the lack of context.

We don't have enough context about how we got here, about what happened over the eight years of the Bush administration when the deregulation that went on allowed this disaster to occur. And what happened at the beginning of the Obama administration, when basically, he did not change things sufficiently. And did not bring about the oversight that is needed if we're going to have capitalism that works and has a conscious. ROMANS: I will say, too, though Ali, you and I more than a month ago, we're sitting here and we were leading our program with BP, and we were talking about how the Coast Guard said there wasn't a leak, that there wouldn't be a disaster. Remember?

VELSHI: 1,500 gallons or 1,500 barrels a day they were talking about.

ROMANS: We were still talking about this, but this just doesn't seem good that a $600 million Trans ocean platform disappeared into the ocean. And there's something going on here. We can only report what the government is telling us.

VELSHI: The problem is when you start with that, when you start down that road, Stephen Moore, let me ask you this, with out adequate information what happens is then you become what people accuse the media of being, speculators and haters and all that kind of stuff. This becomes a very tough situation.

MOORE: I don't think any; all of us were really caught with our pants down on this. None of us had any idea how significant --

ROMANS: Stephen, speak for yourself about your pants. We all were still clothed. I don't know exactly where you were planning the news.

MOORE: But I will say this, though, when Arianna says, look, this was the Bush administration. I mean come on, if this were the Bush administration right now, everyone in the media, and this is where I thought the media would be saying doesn't George W. Bush care about the environment? What's wrong with the EPA?

VELSHI: But they're saying that ...

MOORE: Why are more people blaming Barack Obama? They are not.

HUFFINGTON: I was going to say that the Obama administration has not done enough. But we also need the history of how we got here. The kind of cronies that are allowed to lead the oversight commission that their fault, allowed BP to not have a proper plan in place.

VELSHI: Well quick answer on this, because Christine talked about it, a lot of reporters complaining that the president isn't emoting enough, he's not banging his hand on the desk.

ROMANS: He's not mad enough.

VELSHI: Arianna, what do you think?

HUFFINGTON: For me, it's not about emoting. For me, it's about doing. More clear regulations, more clear oversight. An absolute ban on offshore drilling and an absolute priority on developing renewable energy resources. That has to be the Apalo project for the next decade.

MOORE: My goodness, if we have a moratorium on our offshore drilling, Arianne where are we going to get our oil from the Middle East? I mean we have to have domestic supplies of oil in this country, it is vital to our economic future.

ROMANS: All right. Stephen Moore, Arianna Huffington, thank you so much both of you for joining us. Ali, I'll just throw in something and say the president is acting the same as he did with the AIG bonus scandal. This is the president you elected. He's cool and balanced.

VELSHI: He's not a guy who bangs on desks. That is exactly right.

All right. The hunt for jobs that is the important story again this week. Hundreds of thousands of Americans heading back to work. I think this is fantastic. Christine Romans keeps reminding me there's a catch. We're going to duke it out on the other side.


ROMANS: 431,000 new jobs created in May. The most in decades.

VELSHI: Hooray!

ROMANS: But for how long? Those were almost all temporary census jobs, Ali.

VELSHI: Party pooper.

All right. They were.

Another telling number out of this jobs report. The average length of an unemployed worker remains without a job nearly 35 weeks. That is very, very long. Take a look at the jobs created over the last year or so. Let's take a look at this chart. You can see, a year ago, we were in tough shape. We were losing 500,000 jobs in the month of June. Then it was starting to even out.

You could see it was starting to get better toward the end of the year and then this year, we have created about 900,000 jobs, 431,000 created just in May. But these are the May numbers, here is the issue that of the 431,000, 390,000 on balance, there were some lost and some created. But 390,000 were government-related jobs. Only 41,000 in the private sector. We've talked for a long time to say an economy like ours; you need the private sector to be creating jobs for a healthy economy. That's your cloud inside my silver lining, right?

ROMANS: That's exactly right. But you know I want to see more jobs than that and I want to make sure that they're going to last beyond next month. And I really would like some of them to pay more than $19 an hour. Chrystia Freeland is the global editor at large at "Reuters." Bill Rodgers is Rutger's University professor and formal chief economist with the Department of Labor.

Let's start with you, Bill, because you used to work in the Labor Department when these sorts of numbers came out.

VELSHI: Identify yourself, Bill, are you a party pooper or are you going to be a glass half full guy on this one?

WILLIAM RODGERS, FMR. CHIEF ECONOMY, U.S. DEPT. OF LABOR: I'm going to start off being a party pooper but I'm going to end on a positive. But you refer back to 2000; it's a very different period. The Labor Department back in 2000, we had unemployment rates in the 4, 4.5 range and they'd been like that for months. And they were really stretching across not only just Main Street, but even helping people who work on the side street of America. Those are African-Americans, young people, new college graduates looking for jobs.

But this is a report; it's even tougher, if you take out the temporary employment that knocks you down to 10,000 new jobs that were created this past month. And as you said, Christine, it's clearly not enough to be above that threshold that's going to start to really pull down the unemployment rate.

ROMANS: Two hundred forty one days, the duration of unemployment is 241 days. That's a long time, you know. I worry about the people who are marginalized. I do think there's going to be some job creation, Ali, in some areas. But I think that are people, Crystia, I know, we talked about, people you called it a two-speed recovery. Where there are going to be some people who are going to profit from it and participate in it. And there are a big chunk of others who won't.

CHRYSTIA FREELAND, GLOBAL EDITOR AT LARGE, REUTERS: Yes, I think that's absolutely right. I mean going back to Ali's very unfair question about are we party poopers or are we cheerful. Optimist as a person, I'm an optimist. But looking at this jobs reports I'm less thrilled. I think that Christine's point about the census is really, really significant, 411,000 jobs were census jobs and that's great for people doing those jobs, that is wonderful.

The census is a good and virtuous thing. But those jobs are going to come to an end. And let's also not forget there are some politics here, right. It's kind of nice to have that bump ahead of the midterms in November. But it is sort of time for perfection.

ROMANS: Well, the White House can't take credit for those.

VELSHI: Chrystia, they didn't do it? They didn't plan. The census was around. That was planned way before they were around?

FREELAND: Yes, I mean, it's kind of convenient though, isn't it? It's nice to have all those people going out there. I'm not saying it's bad. It's good to have the census and it is good to have people having these jobs. That's all great. But in terms of our vision where the U.S. economy is going. I think we still need to be worried about two things. Christine and Bill's point about are/is there really serious private sector jobs creation?

VELSHI: Right.

FREELAND: And then let's not forget the really scary thing that has happened over the past few weeks, which as we remembered maybe the financial crisis is not over. Remember Europe, remember Sovereign debt, and remember European banks. I think that has had a chilling effect on business confidence worldwide.

VELSHI: I'm going to pick up on that point. So in April, we actually had good private sector job growth which indicates it's possible. There are some people hiring. And then in May, we saw that slowing down. I do think I do think that businesses look to Europe and said, oh, my god, this looks like the end of 2008 when we had a credit crisis, could this be coming again? Maybe the future isn't as bright as it seems and they pulled back.

RODGERS: But I think what's interesting about the issue with Europe is that it hasn't really hit mainstream. It hasn't hit the typical American yet. But it has affected the political landscape that this administration is trying to talk about. We have to address the jobs gap. But now through the blue dogs and the conservatives, it's a combination between deficits. It is not only the jobs deficit we have to address but we also have to address the budget deficit here and now. The problem there is to do both you have two very diametrically policy descriptions.

VELSHI: Both of you thanks very much. Williams Rodgers is a former chief economist at the U.S. Department of Labor; he is a professor and chief economist at the Heldrich Center for Workforce Development, Rutger's University. Chyrstia Freeland, global editor at large at Reuters. Thanks to both of you.

ROMANS: All right. Next big economic troubles in Europe, we just talked about it. You're going to hear from one man who says the U.S. could be facing the same situation six months from today.


VELSHI: We were just talking a couple moments ago with Arianna about how Europe's debt crisis has rattled markets around the world. A lot of people wondering whether Europe is going through what the U.S. went through back in 2008. In fact, May for the Dow was the worst May in 70 years, Christine. The question is, is this Europe copping what happened in America, or are we in this vicious cycle where what is happening over there could come back and hurt us again later?

ROMANS: We just don't know. And that means where's the market headed next. We know it is headed for some very, very volatile. And it's been frankly unnerving; I was just talking with Keith McCullough, CEO of Hedgeye Risk Management, who is here with us Ali. I said you know it's been crazy, since about 2006, he laughed and said, yes, it has been. That's a technical economic analysis term. It has just been crazy.

Keith, you are incredible a bearish. You think what's happening in Europe could land on our shores, why?

KEITH MCCULLOUGH, CEO, HEDGEYE RISK MANAGEMENT: I think what's happening in Europe is just a preview as to what's going to happen in the U.S. It all basically starts with debt. So if you believe as a government official that you can solve the problems that are anchored in debt with more debt you are going to end up with the same problems that the Europeans are facing. And I think that we are three to six months away from that coming home to roost here in the U.S.

VELSHI: Why is it that lots of people go out of their way, Keith, to tell us how the U.S. is not the same as Europe? Our debt issues are certainly are not the same as Greece's, as Italy's, as Portugal's, why are you suggesting that we will get into the same pickle?

MCCULLOUGH: At the end of the day from a deficit perspective, the U.S. -- the deficit as a percentage of your GDP is exactly like Greece. It's going to be pushing close to 12 percent. And anytime we have an issue, like today, for example, with the jobs report what is the answer? The answer is more government, more government spending which is going to simply keep pushing that deficit?

VELSHI: Hold on. What are you talking about? When you have a jobs report like this week, the answer is more government, more government spending? Where did you hear that from?

We've been discussing that endlessly. That has not been anyone's suggestion.

MCCULLOUGH: Well I think that that is definitely going to be the suggestion. If you look at this mornings ...

VELSHI: Keith, this isn't an opportunity to just come up on TV and bash government. What are you talking about?

MCCULLOUGH: This morning's number, if you look at the job ads, 400,000 of them were government-hired workers.

VELSHI: So no one has come out and said, oh my god, let's have 800,000 government jobs next month. Everybody has said, this is not the way we actually want things to go. We want more private sector hiring. Christine, have you heard one person telling you that this is fantastic; we should have more government hiring? I don't know what Keith is talking about.

ROMANS: No. But I think where you two probably agree is if you had more private sector hiring then you would feel a little better about American's finances. Am I right Keith?

VELSHI: I don't understand what your premise is, Keith, because that's not the answer. What should we be doing differently?

MCCULLOUGH: Well the answer will be, from a political perspective, that is a forecast, Ali. That is a forecast. That is what government's do that have problems, they spend more and more money, taxpayer money to hire.

ROMANS: Let's bring in Richard Quest; he is the host of CNNI's "Quest means business."

RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS:" Time-out, all of you on that side of the Atlantic.

ROMANS: I'm not fighting. QUEST: Hey, listen, I hate to tell you, we may have a crisis, but we're not a basket case yet on this side of the Atlantic. Keith, I can see where Keith is coming from. He's added one and one and he's come up with five. It's the argument that basically says debt is growing. It has to be rolled over. It happened in Europe. It will happen in the U.S. and there are people who say that unless the U.S. doesn't start to exhibit an exit strategy then there are rough times ahead.

But what he ignores, Keith, and what you singularly ignore is that the U.S. will grow this year by more than 3.25 percent. The growth has returned, the total debts to GDP numbers in the U.S. are still way lower than they were in Greece and in Spain. Both countries of which by the way are not out of recession. And finally, just to put the boot in to prove that we can gang up en masse, the United States has monetary fiscal and political union. The European problem is because there's only one of those. And it's the little one. It's monetary union.

ROMANS: All right. We are going to let, since both of you ganged up on him, we'll let Keith have the final word before we take a more polish view after the break. Keith.

MCCULLOUGH: I think that, look, the market's ganging up on the three of you because at the end of the day the market doesn't lie, politicians and people do. And the American government said they were going to solve this than you can go do that. But risk management Ali, starts with watching what the market is telling you.

VELSHI: I hope the market is as cruel to me next year as it was last year. I hope I suffer through another 70 percent gain in the broader markets, Keith. If that's your biggest plague that you wish on me, I'll take it.

QUEST: I think he has a valid point. The warning signs are there.


QUEST: There is a question of debt, and what worries me, looking over from this side of the Atlantic, is that we're seeing too many U.S. states and too many cities starting to get into really serious financial problems. That can only escalate. And when the federal government, of course, is unable or unwilling to rescue, that's when you have a real problem.

ROMANS: All right. Gentlemen, Keith McCullough, CEO of Hedgeye Risk Management, thank you so much for joining us. Richard, you're going to stick around. Because we're going to talk to Dick Grasso on the other side of this break, he is the longest serving chairman of the New York Stock Exchange. We're going to get his take, plus what he has to say about the possibility of another flash crash. It's been a month since that flash crash. Could it happen again, Ali? After the break.

(COMMERCIAL BREAK) ROMANS: So, Ali, about a month ago, about a month ago, we had that infamous flash crash at the stock market. So we thought we'd bring our next guest on for some perspective, because he was the CEO, the chairman actually of the New York Stock Exchange, the longest serving chairman of the New York Stock Exchange, worked there for 35 1/2 years. He's got some opinions about how to make sure something like that doesn't happen again.

VELSHI: He would certainly know. Joining us now, Dick Grasso, former CEO of the New York Stock Exchange. Back with us, Richard Quest from "Quest means Business." Richard good to have you back. Dick good to see you. It's been a long time.

RICHARD GRASSO, FORMER CEO, NEW YORK STOCK EXCHANGE: Ali, great to be with you, you're looking well, same barber I take it.

VELSHI: The barber is good. Thank you for that recommendation.

ROMANS: Ali, he is just saying something very interesting about this big discussion we were having with Keith McCullough before the break. And he said, Christine, where would you rather be in Greece or the U.S., in terms of the outlook. His outlook is much different than Keith McCullough's, Dick, isn't it?

GRASSO: It is, Christine. I think people have got to step back and remember that Greece and the neighboring countries that are having difficulty now have spent and borrowed well beyond their capacity to pay back and to pay benefits. The United States clearly can take a less from what we're seeing in the EU, and I think it can be a very positive turnaround.

We're all unhappy with the jobs report today, or at least some of us are unhappy. But I think there's some embedded positives in what we're seeing over the last few months, I am, as you said, at the outset, quite bullish on this turnaround and quite bullish for the future of this country.

VELSHI: Separate this for me, Dick; because it is an important issue, a month ago, we had this flash crash. It happened on a day where the market was very low because of issues going on at the time in Greece. So you couldn't really separate it, a lot of people think that the Dow dropped 999 points at one point during date. It was down 350 or something just because of Greece. Separate those two for us. Are the markets problems going to be resolved?

GRASSO: Excellent observation, Ali. I think the first four hundred points of decline are clearly attributable to what was happening in Greece and the fear of containment to Italy, Spain and Ireland. Separate that from the fact that once you're down 400, and the New York Stock Exchange's rules require a slow down in price discovery, and I would say very appropriately so, you then had two very principal markets in this country, New York and NASDAQ, trading on a different set of rules, the same securities. And that is the making of a disaster.

Remember, New York no longer controls 80 percent of its business. That business is dispersed among 80 different markets centers, all playing by different rules, all if you will in a hurry to gain competitive advantage. And what we saw from the fall down 400 to down a 1,000, to close only down 350 is the result of disparate rules in the same securities.

I'm very encouraged by the speed at which the S.E.C. has taken on this problem has proposed new initiatives. I believe the leadership there is steeped in knowledge of the markets and market structure. And Mary Shapiro has said publicly, not just the rules they oppose, but anything they need, will be put on the table to make sure a May 6 doesn't recur.

ROMANS: Well that's why Richard, there's a big concern is, you know any day there's a lot of volatility in the market you're concerned that you're going to have the computer trainers, the computers, the high frequency traders, the algorithms take over. And you have as Dick said 80 different places where the same stocks are trading. We still haven't closed the loop on this, I don't think.

QUEST: I think that Dick makes a very good point. And all of us in this debate are old enough to remember 1987, when of course the problem was exacerbated by program trading. And we said it would never happen that the computers would trade without human intervention. And the numerous reports came out after that.

All that's happened is the computers have gotten faster. We've withdrawn the human element, and really if you speak to the traders that took place in flash crash, what they all said was they longed for a big red button that they could push that said stop.

ROMANS: And they didn't have it. All right. Richard Grasso, last word, will we have another flash crash?

GRASSO: Well I think there's the possibility of a severe market decline in a single day, but I don't think it will parallel what we saw May 6. And certainly, as we see the new initiatives from the S.E.C., I'm very confident we won't have that kind of admiration.

ROMANS: All right. Dick Grasso thanks for stopping by. Richard Quest thank you so much.

VELSHI: By the way, I don't really remember '87. I remember being a 7-year-old kid getting ice cream.

ROMANS: Oh, stop. Well you know the thing about '87, you can trade a lot faster today than you could in 1987.

VELSHI: Which may be the problem?

ROMANS: All right. Thanks guys.

VELSHI: All right. Are the biggest banks in America actually solid enough to withstand another financial crisis if it comes our way? We will talk to one of the few people who might actually have the answer to that when we come back.


VELSHI: Americans have several big questions about our big banks. Is the bailout plan working? Will our banks be safe going forward? You night know Neel Kashkari is the man on the inside of the economic crisis. He was overseeing the T.A.R.P. bailout program. The one from the fall of 2008, the big one back before the days of the stimulus there was T.A.R.P.

ROMANS: That is right. These days, Kashkari is managing director and head of new business initiatives at Pimco in Newport Beach, California. Pimco for those of you who don't know is basically the bond kings of the world. He's over there at Pimco now where he's still in a position where he's watching the banks, watching the economy, watching the European debt crisis and watching the volatility and trying to figure out where it all goes from here from Pimco's point of view.

VELSHI: And apparently using the same barber that Dick Grasso and I continue to use.

ROMANS: Yes, I would say so. Neel, thanks for joining us, really appreciate it.


ROMANS: First of all, do the bank bailouts work in your view? Are these banks much healthier today, I mean we are in a solid position with the banks do you think?

NEEL KASHKARI, MANAGING DIRECTOR, PIMCO: Absolutely. We went to Congress to get the T.A.R.P. authority to prevent the financial system from collapsing. I'm really pleased sitting here today that it seems that our actions worked. We avoided a financial collapse. Nonetheless, the shock was a very serious shock to our economy and it is going to take years for our economy to fully recover from that. But the risk of a collapse is now behind us and we should all feel good about that.

VELSHI: Neel, let me take you back for a second. Let's take a look at whether its politics today or whether it is the crisis in the Gulf coast with the oil or whether it is Europe. It all comes down to an issue of confidence. That was the big issue. When T.A.R.P. was going through, there was this whole issue of your former boss, Hank Paulson, Treasury secretary going to Congress asking for this money and then putting you in charge of all of it.

There are lots of good arguments as to why you were the guy. But you're a young guy, you had a past at Goldman Sachs, then there were questions that came up, should we be having these guys who are from the inside trying to solve these problems. Did that filter your way? And did you ever address that issue that people think that the guys on the inside are running this program?

KASHKARI: Look, I understand those concerns and those concerns about perception. But reality matters more than perception. And we had a wonderful team of nonpolitical people working around the clock to try to stabilize the financial system and avert a collapse that would have led to a great depression. I think we had the right team; Paulson was obviously from Wall Street. But Chairman Bernanke was an academic. Secretary Geithner was a regulator. They made a great team and it was very effective.

ROMANS: Let me ask you about when you look over at Europe now and it seemed a hiccup, if you will a couple of years after we did our big bank bailout here. How concerned are you about what's happening in Europe? Do you worry that could weaken the U.S. or weaken U.S. banks again and come back to haunt us?

KASHKARI: Sure. I'm concerned about Europe. The situation with Greece, Spain, and these other countries are very serious. The ECB has announced what amounts to a bridge loan. But what is it a bridge to? We haven't yet seen a solution and we need to see a solution. I'm less concerned about the U.S. banks' direct exposure to Europe.

But we all, as your earlier guest have said, we need to learn from what's happening in Europe. Our fiscal situation is very serious. It's going to get much more serious over the coming decade. We need to address it before we have a crisis on our door step.

ROMANS: What do we need to learn? Everyone keeps saying we need to learn from Europe. Ali is pointing out that there are a lot of differences actually between some of their issues and ours. What is the lesson, really?

KASHKARI: The lesson is that these growing deficits cannot grow forever unsustainable. We need to address them. This is fundamentally a political challenge. If you look at our entitlement spending, there's no way we can tax our country enough to pay for all of our promises.

So somehow, we need to get the political leadership together to reach consensus and to cut our spending that is a political challenge more than it is an economic challenge. But if our leaders are unwilling to take the political bullets for going and doing that, then we have a real problem. We're not Greece today, but we could be.

VELSHI: You studied this from so many different angles, from the banking side, from the government side. And now as you look at you what do at PIMCO. Tell me how bad it could get for us.

KASHKARI: Well, again, if our deficits grow unchecked the way the current law is written over the next decades, then we could see people really raise questions on the U.S.'s ability to service its debt. You could see failed auctions in the U.S. treasury markets.

VELSHI: Slow down so our viewers can follow this.


VELSHI: Failed auctions mean people don't buy our debt; we try to raise money by issuing bonds. People don't buy them so we then have to do what Greece did; raise the amount that we pay.

KASHKARI: On the short term its raise the interest rate. So a bigger percentage of our GDP, our country's earnings go to just service the debt. That becomes a bigger and bigger share. That's a problem. If you look at what's happening in Greece, there is not just concern about the rate that they're paying, but whether Greece can ever pay back all the debt that they've accumulated.

Some people think that Greece needs to default. Just like a homeowner who has taken on a mortgage he can never hope to pay back. At some point he has to walk away and default on that mortgage. If that were too happened, then that would severely undermine the U.S. economy and our growth.

ROMANS: You know, one thing though that I just want to bring up, in the '90s, a lot of people under estimated the American ability, the value of our assets, just the value of the American economy to suddenly grow suddenly quickly again. You can't rule out that the U.S. economy something really starts growing strongly, right, Neel?

KASHKARI: That is absolutely right. There is upside which is new technologies, new innovations, maybe it is green technology, maybe it is Nano technology. Those things could surprise us. Our expectation for the out look is continued volatility. You talked about this. The stock market is gyrating up and down.

We think that is going to continue to happen for the foreseeable future. We would love to be surprised that there is some new technology that all of a sudden enables us to grow much faster than we've been growing. We can't count on that. We need to manage our risks and not just hope for the best. We need to prepare for the worst.

VELSHI: I want to ask one other thing. If we do get into another mess like this, would you ever go back and do the job you did for treasury again?

KASHKARI: Look, it was a really tough three years I spent at Treasury. It was a privilege to serve. I hope in 10 or 20 years I get a chance to serve again. I hope no one has to live through what we all lived through in 2008.

VELSHI: Amen. I'm with you on that one. Thanks so much for joining us, Neel.

KASHKARI: Thanks for having me.

ROMANS: Get this, make money for working out. How to find out if your company is going to pay you to hit the gym.

VELSHI: I don't have to do it for free any more? But first. Barbering is one of the oldest concepts in business. In this week's "Turn Around" Poppy Harlow shows us how in an uncertain economy some businesses are going right back to basics.


POPPY HARLOW, CNN CORRESPONDENT (voice over): Jenna Zilincar is the owner of a designing marketing firm in Asbury Park, New Jersey. She is in the business of being creative. But in an uncertain economy, she's had to be creative with how she does her business, too. When her clients began to cut back on their marketing budgets, Zilincar turned to the age-old practice of bartering.

JENNA ZILINCAR, OWNER, M STUDIO: We don't like to push people away. So we bartered with a few of our customers. In turn we get services from them.

HARLOW: Mike Carr is one of those customers; he is a local carpenter who knows Jenna through another area business owner. Mike's business slowed during the housing bust, but started to pick up again earlier this year.

MICHAEL CARR, OWNER, CARR CUSTOM: My business started to grow a little bit. It was getting to the point where I kind of needed to revamp my logos and kind of brand my business a little better. So I approached Jenna and I said would you be interested in doing barter work? It so happens she was getting ready to move into this space and the timing I guess was perfect.

HARLOW: Mike built desks and shelving for Jenna in her new space. In return his company got a new logo. In the coming weeks he'll get business cards and a website, too. But Mike is not new to bartering.

MARILYN SCHLOSSBACH, RESTAURATEUR: I'm really pushing to get the kitchen together in the next week.

HARLOW: Local chef Marilyn Schlossbach is an old friend of Mike's. She owns several restaurants in town and regularly barters with area businesses. Over the years Mike has helped her with design and construction and he's gotten free meals in return. Schlossbach says bartering can give a big boost to a small business community.

SCHLOSSBACH: Why not give people in your community the benefit of what you do and in return support what they do? We've bartered everything from fit out on our businesses with Mike to my attorney right now has bartered all of our leases for the past two years on food trade.

HARLOW: Not every barter makes business sense. Veterans like Jenna Zilincar know there are limitations.

ZILINCAR: Can I receive a barter from every business? Probably not. So it has to work. It's not something I offer everybody, but if it works for us and for them, it's something that we like to do.

HARLOW: Poppy Harlow, CNN.



ROMANS: All right. Ali how much money would it take to get to you lose some weight or to go to the gym? If you got the money, would you be more inclined to make it to the gym three days a week? VELSHI: Yes, I probably would. I need some incentive. I can't do it with no incentive. Apparently just being healthy, living longer and looking better is not enough incentive for me.

ROMANS: Well when you look like you ...

VELSHI: Go on.

ROMANS: At least 1/3 of U.S. companies offer or are planning to offer money, financial incentives to get their employees to lose weight and get healthy. Can a cash offer even put a dent in the country's obesity problem? This is fascinating that companies want to get their workers out to the gym.

VELSHI: I think it's a great idea. The one way I sort of thought about this is offering incentives whether it's on insurance or discounts or things like that for the gym. I think that makes a lot of sense. It's not the only impediment. For a guy like me, I'm not sure if someone said I could do it for free. We've got a gym in the building here which is very inexpensive to use, still doesn't get me there, but at least I can stop using that as an excuse.

ROMANS: Some companies have been doing this for years. I can remember the company that my dad worked for. In the '80s, you got a discount on your share of health insurance if you went to a jazzercise class twice a week. There were 50-something engineers with sweat bands in this jazzercise class.

VELSHI: The science is pretty clear on this. I mean fit people do better health wise. So it's in the company's interest. They are not necessarily being benevolent, but it makes sense.

ROMANS: That is true. If you could lower your own cost some way.

VELSHI: Great. I'd do it.

ROMANS: Unless you need a babysitter to watch your kids while you are going to the gym. Now it is starting to add up again.

That wraps it up for this show. You can join this running conversation on facebook and twitter at Alivelshi and at Christineromans.

VELSHI: Yes, tell us what you think about this. Make sure you join us every week for YOUR MONEY Saturday's at 1:00 pm Eastern and Sunday's at 3:00. You can log on 24/7 to Have a great weekend.

ROMANS: Bye Ali.