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Your Money Questions Answered; Deadly Attack at the U.S. Embassy in Yemen; Kemah, Texas Took a Very Big Hit from Hurricane Ike; Teachers Tell Helicopter Parents to Buzz Off
Aired September 17, 2008 - 11:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DON LEMON, CNN ANCHOR: It is Wednesday, September 17th.
Here are some of the headlines in the CNN NEWSROOM
The federal government's bucket list. Washington bails out the world's biggest insurance company.
Terrorists strike outside the U.S. embassy in Yemen. A flurry of explosions and gun fire leaves 16 dead.
And this no ordinary traffic jam. This is the line to get gas in Houston, Texas. We're going to talk about hoping after the hurricane.
Good morning, everyone. I'm Don Lemon. You're in the CNN NEWSROOM.
And of course we begin this hour with an eye on Wall Street. The Dow Jones Industrial Averages feeling the effects of an upheaval in the financial world. And right now, two and a half hours into the trading day, well the Dow Jones is down 224 points. The Nasdaq is down 55 points.
And what is driving all of this today? The government is using your money, your tax money, to bail out AIG, the world's largest insurnace company with $85 billion loan. Now in return, the Feds get an 80 percent stake in that company.
Also today, the British bank, Barclay's, is buying pieces of bankrupt Lehman Brothers. The price, $1.75 billion. The purchase include the company's New York headquarters. And as investors on Wall Street are negotiating these latest financial speed bumps, we are watching yet another turbulent trading session, and a tough day for investors in Moscow as well.
Two key Russian markets suspended trading, both losing more than 10 percent of their value. Well, the economy of course is issue number one to us here at CNN. Of course issue number one to you. And to help you navigate this on going money, you can call it a mellow drama, we're opening the "Issue #1 Help Desks" right now. And your questions via Twitter and e-mail for our panel of experts.
The captain of our CNN Money Team this morning, of course, our CNN's Christine Romans. She is in New York.
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Hi, Don. LEMON: And she's a co-host of "Your Money." What are people asking you? What kind of questions are they asking you about? What's going on?
ROMANS: You know, they're asking a lot of questions, Don, about, you know, what is the impact for taxpayers of all this that's going on? What's the impact on their savings accounts, their mortgage? They want to know where are there -- where do you get a job that's recession proof. How do you move a 401(k)? All kinds of different questions. And it's fascinating.
I'm new at this Twitter thing. So, this is really fun to sort of -- it really is, Don, to see people sort of jumping in and asking questions minute by minute about their personal situation.
And we're lucky because we have Farnoosh Torabi, senior correspondent of thestreets.com and author of "Your So Money." We also have Hilary Kramer, an AOL money coach, and we have Greg McBride from bankrate.com, to talk about all of these things and answer your questions.
So Don, this is pretty fascinating stuff here.
LEMON: Yes, it is. You know what, and the thing is that there were some concern about, you know, what putting things on the air, what the viewer might say or what have you. But people have sent very concise, very smart questions.
ROMANS: Oh yes.
LEMON: And what's good for us I think as journalists, Christine, is we get immediate interaction with the viewer -- what they want to know, what's important to them and what's not important to them. And I've just turned around a second ago looking at my Twitter account. People are sending me e-mails and questions as well. So, I'll jump in with your panel and ask you some questions.
ROMANS: OK, excellent. Well, we can't wait for that. Let's get to the first one here because I want to take this one about college student from Traster (ph). Traster says: "I'm a college student planning to put money away to do some investing. There it is. I want to invest in the future. Is there a safer alternative?" Hillary, let's start with you.
HILARY KRAMER, AOL FINANCE EDITOR: This is the best time for someone in their 20s to be investing. Remember, when there's blood in the street, that's when you want to go in and invest and not run away. When you're older, it's a different situation. I recommend the equities markets. I recommend stocks at this point in time for someone who has time to wait because 10 and 20 years from now, this person is going to make a lot of money.
FARNOOSH TORABI, THESTREETS.COM: And to add to that, look at the areas, look at the equities that are falling right now, Christine. That are falling because everyone is selling right now, but really don't have a lot of allegiance to the subprime market. You know, companies -- some of the companies from the tax sector, perhaps, in the retail sector, in the consumer goods sector that are taking a hit now because that's where the name of the game right now. But might recover a lot faster than these real estate and financial stocks.
ROMANS: Greg, what do you invest in and how do you do it if you're in college?
GREG MCBRIDE, BANKRATE.COM: Well, first of all, build that emergency savings fund. You know, that's really the lesson that's being driven home right now is that cash is king. You have to have that emergency savings fund. Then start looking long range. And then, yes, equity market it. Definitely a place to be look for no- load index mutual funds. Keep your expenses low. The less you pay out in expenses, the more you keep for yourself.
ROMANS: There's prettyissopretty (ph) is another here: " What does all this mean for a college senior?" That's tough because she -- I'm assuming it's a she, it could be a he. That's the beauty of Twitter. You don't know who the person is. Heading off into the workforce. This is a time to start saving because you're going to have the benefit of time for your investments, but also heading into a job market.
TORABI: So what I would say to that, you know, 50 percent of college graduates this year are going back to live with mom and dad. The boomerang generation is increasing. So, if you cannot find a job right away, which is the reality I think for a lot of college students right now graduating, consider how you can save in other various ways of your life. Like maybe it means not moving to the big city and paying crazy rent. Maybe it means not going out and, you know, talking about changing control of what you can take a control of. If you can live at home with mom and dad, that can save you 50 percent.
ROMANS: Let me give you the other side of this. It's not just the young and hip who are using Twitter, because we have a 56 and hip and young in Twitter. BarBrad (ph): "I'm a 56-year-old teacher. What will happen to my retirement? If you are watching what's happening on Wall Street and you're getting close to retirement, this is pretty scary stuff?"
KRAMER: Yes. And this is the travesty, this is tragic, this is upsetting. And there are people that should be going to jail over this. The fact that there are 56-year-old people who are going to have to continue to work for 10 or 20 years more than they thought they were going to work. On one hand, yes, being in your 20s and 30s, this represents opportunity because new fields will grow and the economy is cyclical. But at 56 years old, what you want to do is put as much money aside as possible. Protect your housing, protect your home. It's very clear up to the numbers today on housing starts that we are going to see home prices drop more.
ROMANS: OK.
KRAMER: Don't worry about trying to hold out to see if it will come back. Try to be protective. And as sad as it is, try to accept the fact that you may have to work longer, but there will be opportunities.
ROMANS: All right. We're going to have to leave it there. We're going to come back. Don, we're going to come back with a lot more of these questions. We're going to let Greg answer that one as well. Because this is -- I mean, if you're near retirement, this is really serious stuff right now.
LEMON: You know, it's very interesting that you said that. IPlaw101 (ph) sent me one. And she said: "This is totally ridiculous. Why should the taxpayers have to pay for corporate malfeasance and greed?" And I'm getting a lot of those, like that, Christine.
ROMANS: Yes.
LEMON: So, we will answer her question. We'll try to answer it when we come back. Very interesting stuff, what you guys are doing. Good stuff. Good stuff.
ROMANS: OK. Talk to you soon.
(CROSSTALK)
LEMON: Christine Romans, thank you very much for that.
ROMANS: Sure.
LEMON: And make sure you send your comments to twitter.com/issue1cnn or you can send some of them to me here at twitter.com/donlemoncnn. E-mail is also an option. Send yours to issue1@cnn.com. And Christine and company will be back a little bit later on this hour with some of your answers.
OK. Well, the money crunch and the economy are issue one on the campaign trail. Here is what John McCain is talking about. He's talking about the financial crisis.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: They tried to make their own rules. But they could only avoid the basic rules of economics for so long. Now, as their schemes unravel in bankruptcies and collapse, it's once again the public who is left to bear the costs. And I promise you that on my watch, we are never going to let these kinds of abuses go uncorrected or unpunished.
(APPLAUSE)
Members in both parties must accept a share of the responsibility. Some members seemed to measure the financial health of banks and lenders by the size of their political contributions, instead of the extent of their debt. They listened to the lobbyists, instead of the accountants. I can promise you the days of dealing and special favors will soon be over, and in a McCain-Palin administration the public interest will always come first. (APPLAUSE)
(END VIDEO CLIP)
LEMON: Barack Obama issued a statement just a few minutes ago. He says the plan must protect the people who rely on AIG insurance rather than bailout the shareholders or company executives.
You can follow the crisis on Wall Street, the buyouts, the bailouts, falling oil prices, rising gas prices, all of it at cnnmoney.com. And get all the day's market news and numbers, plus expert analysis. Make sure you logon right now with all of that.
Deadly attack at the U.S. Embassy in Yemen. Ten Yemeni police and civilians were killed, plus six militants. Officials call it a failed attempt to breach embassy compound walls. Suspected Islamic insurgents disguised as Yemeni forces opened fire outside of the building. They followed up with back-to-back explosions. And witnesses report hearing at least four blasts including at least one car bomb. No U.S. Embassy workers were killed. And we have reaction from an embassy spokesperson and a witness.
(BEGIN VIDEO CLIP)
VOICE OF RYAN GLIHA, U.S. EMBASSY SPOKESMAN: We at the embassy and I think as American people, our hearts go out to those who were hurt or killed in this attack. We condemn this attack in no uncertain terms. And, really, today's events really demonstrate that these terrorist criminals will not hesitate to kill innocent citizens and those who are charged with protecting the lives of citizens in order to pursue their terrorist agenda.
UNIDENTIFIED WITNESS (through translator): We heard a big explosion. This explosion shook all the windows of the building surrounding the explosion. Then, the exchange of fire continued and we heard explosions in other areas.
(END VIDEO CLIP)
LEMON: Yemeni officials blame al Qaeda for the attacks. Media reports say Islamic jihad which is affiliated with al Qaeda is claiming responsibility.
So, who is calling the shots for al Qaeda these days? The CIA chief says it is not Osama Bin Laden. According to CIA Director Michael Hayden, Bin Laden no longer oversees the terror organization's day-to-day operations. But he says capturing or killing Bin Laden would still have a powerful effect on the group. According to Hayden, al Qaeda and its associates are the greatest security threat facing the United States.
The nation's top military commander is doing some damage control in Pakistan. Joint Chiefs Chairman Admiral Mike Mullen is vowing to respect Pakistan's sovereignty. Relations between the two countries have been tense since the U.S. Military sent ground forces into Pakistan's tribal regions earlier this month without Islamabad's permission. Now, Pakistan Army now has orders to open fire on American forces if they launch another raid on Pakistani territory.
Across the border in Afghanistan, U.S. Defense Secretary Robert Gates is apologizing for recent U.S. air strikes that killed civilians. He has agreed to the creation of a permanent joint investigative unit to probe civilian causalities.
This comes after sharply different conclusions will reach following a U.S. air strike last month. The U.S. led coalition initially said up to 35 Taliban militants and seven civilians died in the attack. But cell phone pictures showed otherwise. Afghan and U.S. investigators later concluded 90 civilians were killed. 60 of them were children.
We have new developments to tell you about in last Friday's deadly commuter train crash in Los Angeles. Investigators say the train engineer did not hit his brakes before that crash. L.A.'s Metrolink resumed service yesterday along those tracks where the commuter train collided with a freight train during afternoon rush hour on Friday.
The NTSB says the freight train did apply its brakes. Investigators are collecting data from recorders aboard each train. They say the train operators had only four to five seconds to react before impact. 25 people were killed in the crash and more than 130 others were hurt.
Tainted baby milk kills a third infant in China. Officials there now admit the scope of the powder milk contamination is growing despite a massive recall. More than 6,000 Chinese babies have gotten sick from the formula. It is laced with melanin, the same chemical that killed or sickened thousands of cats and dogs in the U.S. last year.
Originally, Chinese officials said all the tainted formula had remained in China. Now they say the powder has also been shipped to five other countries in Asia and Africa, but not the U.S.
Waiting for relief from Hurricane Ike. Residents face another day of long lines just to get the bare necessities. And parts of the Midwest underwater and in the dark. The region struggles to recover from the remnants of Hurricane Ike.
(COMMERCIAL BREAK)
LEMON: You're in the NEWSROOM. Teachers tell helicopter parents to buzz off. When parental involvement becomes too much.
(COMMERCIAL BREAK)
LEMON: Boy, oh, boy. It is misery in the Midwest. The region is struggling to recover from the aftermath of Hurricane Ike. In Ohio alone, about 1.3 million homes and businesses are still without electricity. And many schools are closed because of the power outages. And home improvement stores are running short on generators, gas cans and other emergency supplies. Other parts of the Midwest are still under water from flooding triggered by Ike. As much as ten inches of rain fell in Indiana, Missouri and Illinois. And in Missouri, some rivers are more than 15 feet above flood stage. Several are expected to crest later this week.
Floodwaters have already swamped towns along the Missouri and Mississippi Rivers. And some Illinois residents are returning to their water logged homes. For others, the worse may not be over. In Morris, Illinois, about 100 people can't get to their homes in low- lying areas hit by flooding.
Homeland Security Secretary Michael Chertoff returns to Texas today to check on recovery efforts from Hurricane Ike. And he may get an ear full from officials who say help has been slow to arrive.
In Houston this morning, long lines formed outside a church where relief supplies from FEMA are being distributed. Yesterday, people waited in line for hours at nearly two dozen distribution sites, handing out food, water and ice. Now, drivers are also waiting in long lines to fill their gas tanks. The lines of cars stretch from blocks outside a Sam's club this morning.
Now, we have seen the images of homes along the Texas Coast wiped away by Ike. One small Texas town took a big hit from that storm. Our Susan Roesgen will have that story for us in just a little bit.
But right now, we want to get to the White House briefing. And we want to get to Dana Perino. There she is talking about the AIG bailout.
(BEGIN VIDEO CLIP)
DANA PERINO, WHITE HOUSE PRESS SECRETARY: But unemployment is up as well which is not welcome. And so, we have a very mixed picture right now, and no doubt we're going through some challenging times, and it will just take us some time to work through it.
UNIDENTIFIED REPORTER: Well, I didn't frame that in the context of the campaign. It's the president who has always said that, and I'm wondering if that assessment still stands, that the economic fundamentals are strong after this bailout and Fannie and Freddie and Bear Stearns and everything else?
PERINO: I will tell you that our -- from what I understand from the experts, that our economy has the strength to be able to deal with these shocks.
UNIDENTIFIED REPORTER: What is the administration's view of this call for some sort of a permanent agency, that's kicking around on Capitol Hill, a permanent agency...
(CROSSTALK)
PERINO: Yes, the RTC.
UNIDENTIFIED REPORTER: ...to deal -- yes, an RTC-like office.
PERINO: A resolution trust corporation, I think it's called. We're going to hear a lot of proposals in the coming days as we try to work through this. We have an open mind. We'll always review things that will strengthen the economy, but we're still working through a lot of those ideas that are coming forward. So I don't have an outline for you yet as to what we would --
UNIDENTIFIED REPORTER: Realistically, do you think there's any -- it's possible that anything like that could develop before this President leaves office?
PERINO: I wouldn't rule it out, but I'm not saying that it's necessarily on the list of issues that we're trying to deal with right now. I think people are thinking about the long-term issues, but we also have a day-to-day management issue that we're trying to deal with.
OK, Roger. I'm just going to go to -- no, I'm going to go to Roger.
UNIDENTIFIED REPORTER: Dana, you said a moment ago that there was discussion about the broader implications, as Paulson made his recommendations to the President. Can you walk us through that a little bit on some of the notions that were discussed? Was it, for example, the, perhaps, threat that other banks might topple, other businesses, other insurance companies? Can you just elaborate on that a little bit?
PERINO: I'm going to let Secretary Paulson describe that himself. But what I will tell you is, just more broadly, one of the things that they're concerned about is, with tightening of the financial markets that you'll have less capital for people to be able to get loans for their businesses or for their cars or for their homes, for their student loans -- those types of things. It's that type of tightening that could hurt the broader economy -- Keith?
UNIDENTIFIED REPORTER: You didn't directly answer the question about whether the fundamentals of the economy are sound --
PERINO: I answered it the way I was going to answer it, and I'll answer it the same way again. So -- and if you --
UNIDENTIFIED REPORTER: Why are you -- why won't you direct --
PERINO: Because, Keith --
UNIDENTIFIED REPORTER: I've never heard someone not answer that question directly, from the podium here, that the fundamentals of the economy are sound. Are they, or not?
PERINO: What I said is that we have the strength to be able to deal with this crisis in our economy. And I know that you're not asking the question in the forum of a 2008 campaign, but I know as soon as I say something you're going to turn it around and it will be a part of the 2008 campaign, and I'm not going to play the game. UNIDENTIFIED REPORTER: But that's not a game, though. That's a very important statement for the President of the United States --
PERINO: I answered the question. I said our --
UNIDENTIFIED REPORTER: Whether the fundamentals of our economy are sound. You're not answering that question.
PERINO: I did answer it the way that I was going to.
UNIDENTIFIED REPORTER: He was saying it long before any of the candidates did.
UNIDENTIFIED REPORTER: Yes, for years.
PERINO: What I have said is that our country has the strength to be able to deal with it. And remember, we have a mixed picture. On one hand, we have home sales going up in some parts of country. In other parts of our country they're still having a hard time in the housing market, such as in Florida. We have a mixed picture.
And retail sales can be up one day, but inventories will be down. And so there's just a lot of issues that we have to work through. It's not clear-cut in terms of all the -- is it all positive, is it all negative. There's a mixed picture. But we do have the strength to be able to deal with it.
(END VIDEO CLIP)
LEMON: White House spokesperson Dana Perino, a contentious moment right there in the press conference. Someone asking about the state of the economy. And whether or not it is strong. And she said you're trying to ask me questions in more than one different way. I'm going to answer it the same way each time you ask me. We'll continue to follow this.
We want to tell you, we also have our CNN Money Team, our "Issue #1" people there taking your comments and your information online, twitter.com/issue1cnn. They'll answer all of your financial questions.
Meantime, we want to move on and talk about the aftermath of Ike. We've seen the images of homes along the Texas Coast wiped away by Ike. One small Texas town took a very big hit from this storm, though. And our Susan Roesgen, she joins us now from Kemah, Texas, with that part of the story.
This town is just devastated, Susan.
SUSAN ROESGEN, CNN CORRESPONDENT: It really is, Don. You know, talking about the economic woes on Wall Street. That's one thing. Then there are the economic woes on main street, because of all the natural disasters we've had in the country this year including Hurricane Ike. We're here at an amusement park.
I want you to get a look at this, here. This was one of the rides at this big amusement park at the Kemah Boardwalk, one of the top ten tourist attractions in Texas. This is the ride, Pharaoh's Fury. But pharaoh was no match for a 17-foot wall of water that came through.
Now, this tiny town of 2,300 people, Don, Kemah, depends on this entire 50-acre entertainment complex. It's been in the works for about ten years now. They started with just one building which was that restaurant. That's about 40 years old. And then they came out and they started building all these different rides and different things for people to do out here.
I want to show you where the pharaoh's head wound up by the way. We tried to get a hold of it before they swept it away. Parts and pieces of all the rides out here were blown for miles. There, again, was this huge tidal surge. And this is the economic engine for this local economy here. 2,000 people work here. And there are only 2,300 people in the entire town.
So, this area has been devastated in a way you wouldn't normally imagine. Don, I also want to show you, there are some rides -- this isn't what you see in any hurricane, you might see one house badly damaged, another house seems to be just fine.
If you look at this ride, it looks as if it's ready to start up again tomorrow. What they're trying to do here now is to save the local economy here. In the distance that's part of Galveston Bay. So, that's sort of shows you where we are. About 45 miles driving from Houston right along the coast. And what they're going to do is they're going to try to redo this boardwalk, redo the rides and try to get the local economy going again.
Don?
LEMON: I hope they can do that soon, Susan. Thank you very much for you reporting there for us in Texas.
Many national and local organizations are stepping in to help those affected by Hurricane Ike. If you need their services or would like to get involved, please visit our "Impact Your World" page where you can find more details. That's at cnn.com/impact.
A California town is calling a little girl a big hero. So, will you when you see what she did.
(COMMERCIAL BREAK)
LEMON: We have a truly amazing story to tell you about. It's out of California. A 9-year-old girl, the only one around when her pregnant mom went into labor. Well, she helps deliver her little brother.
Well, she should get an honorary doctor's degree after this. Mom's contractions came unexpectedly since she was just seven months pregnant. Well, Jaden called 911 and operators talked to her through the delivery. Mom says she was very brave, calm as could be and took great direction, trying to shoe lace around the baby's umbilical cord before paramedics arrived.
(BEGIN VIDEO CLIP)
JADEN LUJAN, HELPED DELIVER BABY BROTHER: You know, I think my face was the first face he saw, because his eyes were open when he came out. So he was like staring up at me, then he started peeing.
(END VIDEO CLIP)
LEMON: Mom and the 3-1/2 pound little boy are said to be doing just fine. We're glad for that.
All right. Well, Meddling moms and dads, we all want our kids to succeed. Everybody does. But these days more and more teachers say some parents are simply crossing the line. Stop it, parents.
Our medical correspondent, Elizabeth Cohen is here.
And, Elizabeth, what are teachers telling you -- first, are you helicopter parent?
ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: No, I'm not. I'm proud to say, I'm not a helicopter parent. You may want to ask my kids' teachers that. They may have a different opinion.
LEMON: What are you hearing, though?
COHEN: But what we're hearing from teachers is that they're called helicopter parents because they hover over their children and they are driving some teachers crazy.
(BEGIN VIDEOTAPE)
COHEN (voice-over): Cindy North has dedicated her life to teaching young minds. But rather than finding grateful parents, she says more and more of them are actually blaming teachers for their kids' poor grades. Some parents take it to extremes.
CINDY NORTH, TEACHER: The one that stands out is a parent who went to a U.S. congressman and made a complaint about a homework assignment that I gave.
COHEN: These helicopter parents as they're known, sometimes try to bully teachers into changing grades and for giving late homework.
NORTH: A lot of them feel that they have to be involved in every aspect of their child's life in order to make sure that their child turns out the way that they think that he or she should.
COHEN: North was even forced to get a restraining order against one parent.
NORTH: The parent was a professional boxer and came to school looking for me.
COHEN: North is far from alone. Teachers across the country have similar complaints. So, what's going on? Hara Marano author of "A Nation of Wimps" says being too involved can turn a child into a woos. And she says without coping skills, kids can become depressed and worse.
HARA ESTROFF MARANO, AUTHOR, "A NATION OF WIMPS": We're talking about panic attacks. We're talking about self-mutilation.
COHEN: Psychologists say if parents get too involved in every facet of life, kids won't learn to be independent.
NORTH: They're learning that I don't have to do my best because somebody will always save me.
(END VIDEOTAPE)
COHEN: Now, teachers tell us that most parents are not helicopter parents. But the ones who are are making some teachers want to leave the profession.
LEMON: OK. So I would imagine though that some parents would have legitimate concerns. So, how do you bring it up without someone saying you're the dreaded helicopter parent?
COHEN: Right. What teachers told us is -- look, if you've got a problem with the teacher, go right to the teacher first. You don't have to go to the teacher's boss, certainly not a member of Congress. And also, think twice, three times, four times, before you ask a teacher to change something, like a grade or a homework assignment.
LEMON: OK. Are you sure?
COHEN: I'm pretty sure I'm not. I'm pretty sure.
LEMON: All right, Elizabeth, we appreciate it. Thank you very much.
COHEN: Thanks.
LEMON: Our medical correspondent. Go to our Web site if you want to check out more information on what Elizabeth talked about. To read about helicopter parents and to get your daily dose as we would say here, health news. Log on. It is there. You will find the latest medical news, a health library and information on diet and fitness. The address, again, cnn.com/health.
Hello everyone. You're in the CNN NEWSROOM. I'm Don Lemon.
Let's talk about Congress now, taking steps toward lifting the ban on offshore drilling. Yesterday the House passed an energy bill allowing oil companies to drill in new locations off the coast, but there are some limits with this. We want to break that bill down for you right now.
The bill only allows companies to drill if the state approves it and the rig is at least 50 miles away from the coast. The bill gives incentives for renewables, requires the government to release oil from the reserves, and it also forces oil companies to drill on land already leased from the government.
House Speaker Nancy Pelosi says this bill is a new direction in energy policy because of its focus on alternative fuel. But some Republicans are calling it a charade.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: The American taxpayer has been ripped off for years on this offshore drilling. And this bill rearranges that financial arrangement, to use the same word.
Now we say, yes, you want to drill? You can drill. But you're on your own. You have record historic profits. We're not subsidizing that drilling. And as far as our royalties are concerned, we want our back royalties, and we want you to pay royalties into the future, using that money to invest in renewable energy sources.
REP. JIM JORDAN (R), OHIO: No real offshore drilling, no drilling in ANWR, no nuclear power, no lawsuit abuse reform, no revenue sharing with the states. But you know what's in the plan? Tax increases. Think about that.
(END VIDEO CLIP)
LEMON: Well, the White House says President Bush will veto the energy bill if it passes the Senate.
Ike may be gone. But you're still paying for the storm every time you gas up, every time you put that gas in your pump. Pump prices are up for the eighth straight day. The national average, $3.85 a gallon for regular unleaded. Ike shut down refineries and offshore platforms along the Texas and Louisiana coast.
Now, that's only half the story there. Many places in the southeast are seeing prices above $4, even $5 a gallon. There are also spot shortages in some places.
You've got questions about the government's rescue of the world's largest insurance company? Go to Twitter.com/issue1CNN and talk to us there.
And look at the Dow. Down 347 points, just about three hours into the trading day. The CNN money team will join you in just a moment.
(COMMERCIAL BREAK)
LEMON: All right. The issue No. 1 help desk is open for business now. Your questions via Twitter and e-mail about the government rescue of AIG and other companies and your stake in these bailouts. Believe it; you have a stake in it, as well.
Christine Romans and the CNN money team join me now from New York.
So that -- Twitter earlier asked me why -- why are consumers or why are the taxpayers paying for what feels like corporate malfeasance to some of them?
ROMANS: And you know, it's interesting you got that one. Because you know what? A lot of people here are not fans of bailouts. They do not like what they're saying. And they want to know, hey, is this going to affect me, all of the shenanigans, as they see it on Wall Street?
I want to ask you, Greg, first and foremost, a lot of specific questions about AIG. Why are we helping out a huge insurance company with taxpayer money?
MCBRIDE: Well, first of all, if you're a taxpayer you have to like the way that this was structured. They did not hand them an envelope full of cash, pat them on the shoulder, and walk the other way. This is a secured loan at a very high interest rate. There's a chance the Fed may actually make money on this loan.
And no doubt it's to tide them over in the short term. If they would have let them fail, then we would all be hurting really badly. So who did they bail out? They bailed out all of us. They didn't bail out management, and they certainly didn't bail out the common shareholders.
ROMANS: Not a lot of fans of bailout on here. But I want to talk about Thorswitch (ph). I know you replied personally to this one. Thorswitch (ph) wants to know, if none of your insurance saving, mortgage, et cetera, are with the failed companies, how worried should you be, Hilary?
KRAMER: OK. You shouldn't be worried because you aren't in those particular companies going bankrupt. But you have to worry about the macro picture: the value of your home, the security of your job right now, the savings that you do have in case you do lose your job. And you have to think about the bigger world.
It's also an opportunity to think about where you are going to make money and how you want to be strategic. So the answer is it affects all of us. Every single person in this country on every demographic level is affected by what's happening now in the bankruptcies on Wall Street.
ROMANS: Kay in Winterfield wants to know, "What about my Merrill Lynch account?" A lot of questions about this. Merrill Lynch acquired by Bank of America for $50 billion earlier this week, that announcement made -- Greg.
MCBRIDE: Brokerages have what's known as SIPC insurance. That's Securities, Investors Protection Corp. That protects you in the event that a brokerage goes under.
In this case, Merrill Lynch didn't go under. They were acquired by Bank of America. So there's really no worry. You're going to have access to that money. And it's business as usual from the consumer's standpoint.
ROMANS: Farnoosh, let me ask you about another big acronym we keep throwing around, FDIC. There's also insurance for your money. If you're lucky enough to have a bunch of money sitting pretty in a bank account, just sitting there waiting to deploy to buy a house or you cashed out of the market or you've got some money there, should you be worried about your money in your bank that's not one of these banks that we're talking about in the news of the day?
TORABI: You should be worried if you have more than $100,000 in your account. And so the FDIC is there to help us out, but only to a certain extent.
Individual accounts, that includes all of your, say, maybe a CD, or a checking account, a savings account, all of those accounts are insured up to $100,000.
Separately, if you have a joint account with a spouse or partner, that's another $250,000 -- I'm sorry, it's another $100,000. And a retirement account, like an IRA, is insured up to $250,000. So you have to know all the provisions. If you have too much, move them over.
ROMANS: Let's look at Remedy (ph): "I'm 25, a mother, no college degree. How can I get ahead of the poverty line? I feel very paycheck to paycheck." I don't think Remedy (ph) is worried about whether she has $100,000 in the account right now that's insured.
TORABI: She's young and she is a mother. So that's a responsibility that most people don't have right now. But she is young, and I want to focus on that.
I always want to say to young people to invest in yourself. She has time to perhaps take some courses if she can. There's a lot of free education out there, online courses.
Also, people are learning how to monetize their skills, Christine. If you are a great cook, if you have a second language -- if you're skilled in a second language, think about how you can monetize your skills. Maybe you can work on the weekends. You know, there are opportunities on the Internet, as well. So take as much advantage as you can of your free time and your youth.
KRAMER: It's also an opportunity and a time for families to band together and for friends and communities to support each other. There are -- there is community support. But again, it goes back to the concept of maybe moving home, using parental support...
ROMANS: Wow.
KRAMER: ... depending on the generations. We're going to see a lot more of this.
TORABI: Make friends with your neighbors.
ROMANS: Don, as you...
TORABI: Pot lucks are great. ROMANS: As you can tell, it's all about protecting your money, protecting yourself. And there could be some really tough choices for people as we go forward here, Don.
LEMON: You know what? I'm going to save the answer part of this for the next time we talk.
ROMANS: OK.
LEMON: The question that I want to ask is, do you think -- would it have been better or worse -- would it have been worse, I should say, if the government hadn't bailed out AIG? Might it have been worse for consumers? Because we're asking -- you know, the consumer seems to feel like this is a bad thing that we're paying with our tax dollars. But perhaps it could have been worse. We'll get back to you guys in just a little bit.
ROMANS: OK. We'll ask that question.
LEMON: Yes. We're going to move on and I'll ask -- you guys can answer when we come back.
OK. It is a financial lifeline tied to your wallet. Issue No. 1 is always your money. And as we've been reporting this morning, it's our top story again here in the CNN NEWSROOM.
The federal government is saving insurance giant AIG from possible collapse with an $85 billion loan, all of it your tax money. But what does it mean for you, the taxpayer? Our Josh Levs is figuring it all out for us. And he joins us now from the big board, the smart board, with the answers for that -- Josh.
JOSH LEVS, CNN CORRESPONDENT: It is a smart board. Yes, you know, it's interesting. We were talking about this, this morning. And the relationship between your money and this crisis at AIG, what the Federal Reserve is doing, gets kind of confusing.
So our executive producer had a pretty cool inspiration, Don. She thought of "Schoolhouse Rock" and said, "Hey, let's make a story book, picture book out of it." So that's what we're going to do. Work for you?
LEMON: Works for me. do you remember the "Schoolhouse Rock"?
LEVS: Are you kidding?
LEMON: Old enough, Josh?
LEVS: I know them by heart, and I'm not going to sing. Don't worry.
LEMON: I'm only a bill.
LEVS: But we're going to start off, our first frame here within this story is a picture of you. Let's go to this. This is you working. And you get paid. See? There you are. Let's go to the next one, which shows the basics that we all know. You take money, you get paid, you pay your taxes. It goes to the IRS. Now, what does the IRS do with that money?
Well, we'll show you here, the IRS gives it to the Treasury Department. And this is where we're getting really close to what happens today. What does the Treasury Department do? See those little pieces of paper coming out of the treasury? The treasury issues securities, and then the Federal Reserve buys those securities. And the money that it makes from buying those securities is responsible for most of the Federal Reserve's operating budget.
So right there you can already see, we just traced you through the relationship between your money and the Federal Reserve. Now, what the Federal Reserve decides: "You know what we need to do? We need to go prop up one of these desperate businesses," like we were just talking about.
They give that money that they have, in this case this whopping sum -- it could be up to $85 billion -- to prop up that desperate business. But see how the arrows are going both ways? That's because the business is supposed to pay back. So what we're supposed to be seeing here is them gaining interest over time and, in the end, it could work out in the Federal Reserve's favor. Because if they make the interest, if it pulls through the way everybody wants it to, then what we're going to see is the Federal Reserve do pretty well on this, in the end come out ahead financially.
The question is will that happen?
LEMON: Will it happen?
LEVS: I mean, look, they're talking about what today's terms would be, 11 percent interest over two years. There's a lot that can happen and not happen. They have collateral in the company, so if the company goes caput, they can pretty much take over what the company owns and say, "You know what? This is now ours," sell it, keep some money. But they could lose money.
The upshot of all this is, you know what? It is taxpayer money, but if everything goes well, we shouldn't be seeing taxes increase because of this. We shouldn't see any impact that way.
LEMON: We shouldn't. But we still don't know? It's all a gamble?
LEVS: Right. I mean, it's ideal terms. Because what if something goes really, really wrong and they lose a whopping sum? It could impact the economy. It is public money. We have every right to opinionize about it, because it's our money.
But the truth is, you know, what I'm saying, hopefully, it won't be a disaster.
LEMON: Joshua Levs with the "Schoolhouse Rock" version of -- an explainer on what is going on. LEVS: If we were going to sing...
LEMON: If anyone can do it, Josh can do it. He's just a bill, yes, he's only a bill.
LEVS: That's my favorite one. And the adverbs one: "Lolly, lolly, get your adverbs here."
LEMON: All right. You can follow -- conjunction, junction, my producer told me.
LEVS: Oh, yes, conjunction, junction, what's your function?
LEMON: Hooking up words and phrases and clauses.
LEVS: Oh, man. Is that on YouTube? I've got to go watch it now.
LEMON: You can follow the crisis on Wall Street: the buyouts, bailouts, the falling oil prices, the rising gas prices, all at CNNmoney.com. Get all of the day's market news and numbers, plus expert analysis. Just logon to CNNmoney.com.
All right. Thanks but no thanks. Senator Hillary Clinton backs out of attending an anti-Iran rally in New York after she learns Republican vice-presidential candidate Sarah Palin is also invited. Clinton aides say they were never told it would be a partisan political event.
Clinton is supporting Democrat Barack Obama for his run for the White House, while Sarah Palin is courting former Clinton supporters.
Tracking the candidates: how are Senators John McCain and Barack Obama faring in the battleground states? We are releasing the latest polls from Florida, Ohio, Wisconsin, North Carolina and Indiana. Join us this afternoon at 4 Eastern right here, the best place for politics.
The candidates, the issues. With just six weeks to go until Election day, our Roland Martin looks at where candidates stand on issues most important to voters. Saturday and Sunday night, 8 p.m. Eastern only here on CNN.
Another global giant saved by the taxpayer. How the government bailout of AIG is playing on Wall Street. The Dow down 303 points.
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LEMON: Well, the collapse of insurance giant AIG could have been catastrophic for investors because of its ties to so many banks and other institutions all around the globe. But investors aren't expressing confidence on the government's bailout.
Susan Lisovicz at the New York Stock Exchange with Wall Street's reaction. And Susan, Wall Street's reaction, I guess it is obvious: it is not good, if you look at the Dow. And you could probably say, "Don, back to you."
SUSAN LISOVICZ, CNN CORRESPONDENT: Yes. Back to you. I mean, it is just a terrible sell-off, you know, with a couple hours into the session. You know, this certainly -- I think the one thing you can take away from this is it has not restored investor confidence in the financial sector, and it's so critically important to -- to our economy and the global economy. You need to be able to have faith in your financial institutions. You need to have access about capital.
And what you're seeing is a big sell-off in financial stocks. AIG continues its collapse. Its shares are down 45 percent, trading at $2. This was a $70 stock over the last -- over the last year.
And not only that. I mean, you're seeing, you know, Goldman Sachs shares down 30 percent. Morgan Stanley, which reported better- than-expected earnings, moved them up to try to calm down the markets, moved up its earnings a day early, better-than-expected earnings. It's shares are down 31 percent.
And what you're seeing play out is big losses on Wall Street. Right now, Don, you're seeing the Dow off its lows, but down 280 points or 2.5 percent. The NASDAQ is down 3 percent. Broad-based sell-off.
One strategist, a veteran, reminds me that there were actually worse times in terms of the economic fundamentals, when unemployment was higher, interest rates were higher, inflation was worse. But right now it's hard for people to remember that, I suppose. He said panic is not a very good investment strategy.
We're not seeing panic. This has been, you know, a pretty orderly sell-off so far, but it has accelerated in the last hour or so, Don.
LEMON: OK. And we still have some hours before the closing bell. Susan Lisovicz, we appreciate that. And we'll keep watching the Dow. Susan will, as well. And she'll join us a little bit later on in the CNN NEWSROOM.
If you have questions about the government's rescue of the world's largest insurance company, go to Twitter.com/issue1CNN and talk to us. There you see them, the CNN money team. They're taking your questions and they're answering them. And they join us, next.
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LEMON: All right. The economy is issue number one here at CNN and for all of you, as well. The "Issue #1" Help Desk is taking your questions right now. Our CNN money team is standing by with answers.
Let's send it over now to Christine Romans. She joins us in New York.
Christine, would it have been worse if the government had not bailed out AIG?
ROMANS: I think -- I think they think, Don, that Greg McBride thinks it would be if the government had not bailed out AIG, right?
MCBRIDE: Without a doubt. I mean, you would have been looking at a global financial disaster. I mean, you think Monday was bad. I mean, if they would have let this company fail, as interconnected as they are to companies and economies around the globe, it would have been a disaster. That's why they acted to prevent that.
ROMANS: These folks are writing in, and they are ticked off. IndieTV (Ph) says with the bailout of AIG, do the executives at that big company still get fat paychecks and bonus? People are talking about Fannie Mae and Freddie and what happened there. I mean, there's a lot of anger about those bailouts.
KRAMER: Now, some -- some may have bonuses. And again, it's egregious, if that's the case. But the point is well taken that, if we hadn't bailed out AIG, we would have seen other banks just blow up immediately, because this is where the counterparty risk comes in. And so this gives our government and this gives the world economy time to recover.
ROMANS: OK. Let's talk about savings bonds. I want to ask you, savings bonds, I've getting them since I started working 24 years ago as a way to save. Should I stop, asked Jackie? What do you think, Farnoosh?
TORABI: You know, savings bonds, it's a relatively secure place to be. People are looking for safe havens right now. But I mean, she's been in them for how many years? Twenty-four years ago? I wonder how much she's actually accumulated and, you know, how beneficial that's been. Maybe it's time to get a little bit more aggressive with a lot of the depressed assets out there right now.
MCBRIDE: You can still preserve your principle and get out of the uncompetitive returns in savings bonds if you look for high- yielding money market deposit accounts at banks. The NCDs. Both are FDIC insured and will pay better returns.
ROMANS: Let's get to Beth Barrow (ph): "I just rolled over a 401(k) to a UBS IRA. I'm all cash now. Shop I keep it all cash? What is my risk with UBS? I'm 43." Hillary? If you're young, there's such a great opportunity, but as you start moving longer into your, closer to retirement, you've got to play it safe.
KRAMER: I would say the next day of ultimate capitulation, if we have another 500-point drop day, that's a day to go into the S&P 500 and ETF (ph).
ROMANS: Really?
KRAMER: Because timing does matter. It's makes a difference. If our S&P and our Dow are going to be down more than 20 percent, you have the long-term opportunity, and you have time on your side. It's all timing in life. MCBRIDE: The big risk is inflation. Over the next 50 years of her lifetime, inflation is going to cut the buying power of $1 to 25 cents.
ROMANS: Let's talk about D. Gospel (ph). D. Gospel (ph) says, "I'm concerned about my child's 529 plan." Aren't we all? "She's 8. I have ten more years under this plan. Should I stay or place it in a mason jar?" Keep plowing away for the kids to go to college?
MCBRIDE: Absolutely. And a lot of plans offer what's known as an age-based plan, meaning that it's geared for children about the same age. It grows more conservatively as that timetable approaches. So it automatically takes care of that asset allocation issue.
TORABI: I would actually make sure that your retirement bases are covered, as well. Because it's more important in some situations (ph) to invest towards retirement than your child's saving's account. A lot of parents pay for their children's education through their retirement savings accounts.
ROMANS: I want to take a political question, because there's a lot of politics in these. "Can the candidates really do anything about this financial crisis over the next four years?" This is A.K.A. S-Y-A-P (ph). How can their tax plans help?
KRAMER: They can create confidence. It comes down to confidence. And if we have an administration that creates a level of confidence, that can jump-start the whole system. This is all emotional. The market is one big brain. It's psychological. And so I think we're going to see some real effects there as we change administrations.
ROMANS: They both have these big economic plans, and tax plans, and health care plans: "I'm going to do this, and we need to deregulate that." But don't they have some firefighting to do, very, very near term, Farnoosh?
TORABI: Yes. And I think what's missing right now in the equation is, really, proper oversight. What happened after the Great Depression, what happened after the Savings & Loan crisis, the reason we got back on our feet, was because there was federal intervention.
And so the government absolutely needs to play a role. And I think one of the biggest ways to start in that role is to create more oversight, more watchdogs to make sure that, you know what? If a financial investment firm wants to sell off a security, and they have no idea what's involved in that derivative, they shouldn't be allowed to sell it.
ROMANS: All right. We've got to go there. Thanks, you guys, so much. Farnoosh Torabi, senior correspondent for TheStreet.com and author of "You're So Money." Also Greg McBride and Hilary Kramer.
Back to you, Don. We're going to keep doing this.
LEMON: Yes. ROMANS: Keep sending in questions. These guys are answering them right -- right now. So keep sending them.
LEMON: Christine, they were very good.
ROMANS: I know. They are.
LEMON: Yes. Learned some stuff from them. So give them the congratulations. I think they can hear but -- good going, guys. We'd love to have you back all the time.
All right, Christine, thank you.
Waiting for relief from Hurricane Ike. Residents face another day of long lines just to get the bare necessities.
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