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Bailout Fallout; FDIC Reassures Safety & Stability
Aired September 30, 2008 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
RICK SANCHEZ, CNN ANCHOR (voice-over): Coming at you now, your question: What will America look like over the next three months if the bailout doesn't pass, your paycheck, your 401(k)? We answer it.
Also, Congressman Ron Paul joins us live. So does Neal Boortz, two guys who tell it like it is.
REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: They claim to be free market advocates, when it is really an anything-goes mentality.
SANCHEZ: She is why Republicans say they rejected the bill. Can they move past the bickering? We will have both sides on.
GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE: Well, I don't want to tell you who the vote for, but...
SANCHEZ: Palin unplugged. There's more with her and Couric, but, this time, John McCain is at her side. Your comments, unfiltered on Twitter and MySpace, and more. like nowhere, your newscast begins now.
(END VIDEOTAPE)
SANCHEZ: And hello again, everybody. I'm Rick Sanchez.
Here is what we are hearing right now, just to set this thing up for you. We understand by tomorrow at some point, Congress is going to be talking about this bill once again, maybe in a fruitful way this time, maybe with a little less bickering. Seems to be what many Americans are asking for.
And here is the question. If this bill doesn't pass, what will America actually look like over the next three months? Framing that picture, drawing it in your head is what we aim to do by some experts who are going to be joining us on our panel today as we go through this hour, people like Ron Paul, who is going to be joining us, People like Neal Boortz, who's going to be here as well.
But before we do anything else, I want you to hear what the candidates have been saying over the last hour.
First, let's start off with Barack Obama. Here it is. Hit it, Dan.
(BEGIN VIDEO CLIP) SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: Let me be perfectly clear. The fact that we are in this mess in the first place is an outrage. It is an outrage.
(CHEERING AND APPLAUSE)
OBAMA: It is an outrage because we didn't get here by accident. This was not a normal part of the business cycle. This was not the actions of a few bad apples. This financial crisis is a direct result of the greed and irresponsibility that has dominated Washington and Wall Street for years now.
(CHEERING AND APPLAUSE)
(END VIDEO CLIP)
SANCHEZ: That is Barack Obama in Reno, Nevada.
Let's get to John McCain now, John McCain making his comments today on the stump about this very issue. He is in Des Moines, Iowa. Let's take a listen.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: I know that many of the solutions to this problem may be unpopular, but the dire consequences of inaction will be far more damaging to the economic security of American families, and the fault will all be ours.
(END VIDEO CLIP)
SANCHEZ: Let's go on now with some of the comments that are being made by so many other people who are looking at this.
And the first thing we want to do as we go through this hour is try and answer that question for you. So many Americans are asking, well, do we really need this? What happens if we don't have it?
There is a key point to be made here and that is what is going on in the stock market. Remember, yesterday, it ended up, what, down 770? Well, today, it is up. Let's take a look at it. And see if we can put that up, Dan. I think this is going to be an important part of this conversation, and it's going to make a lot of people think, well, wait a minute. If the market is up, do we really need this thing? One of the questions that `we're going to be through.
First, I'm going to be joined now by Kai Ryssdal. Kai Ryssdal, as you know, and you have probably heard many times, does market watch, pardon me -- "Marketplace." He's going to joining us in just a little bit. And also joining us is Jeff Rosensweig He is a professor at Emory University. He's been here before. And he's at the Goizueta Business School, by the way.
Let me start with you and that very question that so many Americans want answered, and it is very simple. If this thing doesn't get passed, what will America look like over the next three months? Because we have heard everything from catastrophe to just fine.
JEFFREY ROSENSWEIG, PROFESSOR, EMORY UNIVERSITY: Well, it is interesting because you said something about visualize. Visualize more people on the street. I don't want to give some panic scenario, but more people will lose their home this doesn't get passed. More people will be laid off. It be an ugly job market and a housing market.
I am glad you called it this thing. Calling it bailout got voters all riled up. We need a plan to get us out of what could be a very terrible economy, which would put a lot of people on the street.
SANCHEZ: So, do you think that the administration and terminology that they used was incorrect and probably made a lot of people go against this thing right away?
ROSENSWEIG: I don't think it's at administration. I think it's everybody out there. Even in the media, we're starting to do a better job, I think.
Bailout would mean like let's take $700 billion out of the taxpayers' pockets, put it in the pockets of some fat cats on Wall Street. That is not what we're talking about. We are talking about the government buying some assets away from these banks at discounted price. They might only pay 40 cents on the dollar. If we can hold the economy together...
SANCHEZ: So, it is not a giveaway?
(CROSSTALK)
ROSENSWEIG: No, it's not a giveaway at all.
Kai Ryssdal is joining us now the phone as well to talk about this.
Kai, are you there?
KAI RYSSDAL, HOST, "MARKETPLACE": You bet, Rick.
SANCHEZ: You're hearing this, that the professor says, look, first of all, we have to understand that this is not a giveaway.
Give me your scenario, if you would, because people at home are still curious about this thing. They can't really wrap their minds around it. What is it exactly that this will make us look like over the next three months?
RYSSDAL: Well, I think the professor is exactly right.
But let me give you a little shorter-term outlook. One of the things that started happening yesterday, right after this bill went down, is that really short-term interest rates, overnight interest rates that banks and companies charge each other get the liquidity, the (INAUDIBLE) that keeps business operations going, those interest rates basically doubled. They went up to almost 7 percent. And when you think that the Fed's short-term interest rate target is 2 percent, that number of 7 percent is astronomical. So, that kind of lending is going to dry up. Then eventually over weeks and months that will play out into the larger economy and it gets harder for people to get car loans and home loans and student loans and mortgages. That is exactly what the professor was saying. And I think he is absolutely right.
SANCHEZ: Why is that we are looking at a screen right now -- put that screen up back up, if you would, Dan -- put that screen back up -- why are we looking at a screen that is showing us the market being up today 396, when so many people were telling us that this thing would just continue to go down if this thing wasn't passed? What is going on?
(CROSSTALK)
RYSSDAL: Well, let me turn the question around to you. How many stocks are in the Dow industrials? Thirty of them, OK.
So, 30 stocks do not the economy make. Also, any day you are down 777, the next day, you are going to have some people buying, because there are a lot of stocks at really low levels. The story here is not the stock market, even though that is the thing that was on the front page of "The New York Times." It was on the front page of "The Wall Street Journal" this morning.
The story really as it has been for the past year-and-a-half is the credit markets, people lending money, banks lending money, and if that is not happening or if it slows down, or it stops, as it has in some cases, that is a real problem.
SANCHEZ: Kai Ryssdal, thanks so much for joining us. We certainly appreciate your input on this.
We're going to spend the next hour trying to break this down for people with very common, meat and potato types of issues that you have been asking us on Facebook, on MySpace, on Twitter.com/ricksanchezCNN.
The key is to try and get a full understanding of this. So, we're going to keep these guys here throughout the hour. And then we're going to go to people who have a tendency to say whatever is on their mind, people like Neal Boortz, people like Ron Paul. They are going to be joining us as well, all this and a whole lot more, plus your reaction to the Sarah Palin comments. We will have it for you. Stay with us. We will be right back.
(COMMERCIAL BREAK)
SANCHEZ: All right. Welcome back, everyone. I'm Rick Sanchez.
What we are going to be doing in this next hour is trying to bring you a full understanding of what it is that is actually going on with this $700 billion bailout.
A lot of people are truly asking, what is this thing? I really can't wrap my head around it, nor do I understand its implications. So, we are going to be trying to answer those questions, like I said earlier, from a real meat and potatoes standpoint to get your specific questions answered.
How are we going to do that? Let's get a shot over here and get a shot, if we can, Robert, of my Twitter board. And on the Twitter board, you are going to try and see what people are going to be asking, very specific questions. Will student loans be harder to get? How will this crisis affect public university tuition rates? Those are the kinds of things that we're going to be asking the professor over here to my right.
But before we do anything else, I want you to watch this now. Few people are better at crystallizing an argument than Ali Velshi, from our business sector. Here is what he does on that big board that we have put together to show you how this thing affects one asset or one factor and then to another. Watch this, as Ali Velshi presented it.
(BEGIN VIDEO CLIP)
ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: This is where the problem is. OK. You have got major investors. And I mean major, countries, sovereign wealth funds, pension funds, hedge funds, and you have banks. They send money between each other.
Now, the most direct relationship between you and this bailout and the credit market is that banks loan you money, auto loans, student loans, home loans. That is already a problem. That is frozen.
Now, you're trying to sell your house, because maybe you're being foreclosed on. Well, those same banks loan people other people money, including someone who might have bid on your house. You want to go to contract, but they can't get that loan. So, that's the second way this affects you.
The third way, these banks and these major investors loan money to corporations. It is very standard for corporations to borrow money on a short term basis to meet their operating expenses, including salary. Well, that affects you right now. If a company can't meet those payments, that means that you may not get your salary and you may get laid off.
These are just simple three ways in which this credit freeze, this credit crisis affects you.
(END VIDEO CLIP)
SANCHEZ: I hate to tease a question and then not actually answer it. So, we have got two people lined up now, a Republican and Democrat.
But, Dan, before you go to them, let's go ahead and try and get this question answered. Of all of the questions that we have had asked today, apparently, we have got a very young audience on this show, because we got have a lot of people asking about student loans and student tuition and how they are going to be affected.
Let's go over to the Twitter board, if we possibly can.
Snarky89: "Will student loans be harder to get? And how will this crisis affect public university rates?"
You're a professor. This is probably something you could weigh in on from an economic standpoint. Let's suppose this thing doesn't happen. Three months down the road, what happens?
ROSENSWEIG: Let me break it down.
Students are very worried about their jobs. If we don't get something together that will keep this economy going -- and the economy is right on the verge now, right on the precipice, they are not going to get jobs. That is their number-one concern.
Number-two concerns are loans. Loans being threatened, student and car loans, looking at a housing. Even people coming out of college, can they have the credit to get their first apartment, et cetera?
(CROSSTALK)
SANCHEZ: So, the people who loan the money are saying, hold on, take a step back, if I promised you $5,000, I am cutting you back to $2,500?
ROSENSWEIG: Yes. Yes, or even people thinking do I enter as a freshman or do I not enter? They may not be able to get a loan now.
Tuition could go up. See, again, if people think this is a bailout, like the government is taking its money and putting it into these fat cat bankers, so they are not going to be putting it into public colleges, so tuition will go up, that might not be the case. If the economy doesn't keep growing, what is happening to the state budgets for instance is they are not getting enough tax revenues. They are all in trouble. We need to make the economy grow and then we will put money back into the colleges.
SANCHEZ: Let's talk about the political aspect of this now.
And certainly there has been a bevy of that. In fact, the political aspect of this has had one conversation that people have been talking about and maybe one word that best describes it, bickering between Republicans and Democrats over this. And many Americans are saying, we don't like this.
In fact, the great majority of responses that we have getting on Twitter, MySpace and Facebook have been angry Americans because of the behavior that they saw yesterday.
Two people joining us now, one a Republican, one a Democrat. Scott Garrett is good enough to join. He is a Republican from New Jersey. Also joining us is Chris Van Hollen. He's a Democrat from Maryland. I guess it's all about Pelosi's comment.
Scott, what was it about Pelosi's comment that made your colleagues or perhaps you so angry to choose to vote against this, as we heard from your representative?
REP. SCOTT GARRETT (R), NEW JERSEY: Well, I would say that, as for me, it had absolutely nothing to do with her comments.
My position was made the day that the secretary came out with his proposal a week ago Saturday, when he gave us a three-day bill that gave the administration $700 billion of authority, without any checks, balances, or even court oversight to spend as he would see fit. I said on that day that I had real concerns with that bill. And I wanted to see some alternatives.
And for the next weeks, we never got the chance to give those alternatives. So, her speech and the politics of that sort of stuff had absolutely nothing to do and I would say, in reality, had nothing to do with any of the members' votes of the floor.
SANCHEZ: So, why, then, would Boehner come out to say that? He held a news conference yesterday. He was surrounded by many other Republicans. And that is the message they gave to the American people, that this thing would have passed had it not been for Nancy Pelosi's comment.
GARRETT: Well, I guess you would have to speak to the leader on why they brought that press conference out.
I guess, at best, you can say it is just pointing out that, in these tough, difficult times that we are going through right now -- and I think both sides of the aisle would agree that these are tough times, that what happens on Wall Street does affect Main Street -- the best thing we can do is actually come together, work together, and not have such statements made by either side of the aisle.
And I guess they were pointing out that, maybe on the floor, the speaker's comments were maybe not the best place to do it, but now let's move ahead with that and try to come up with something better.
SANCHEZ: All right.
Congressman Van Hollen, let's move ahead.
Tomorrow, apparently, you all are going to be getting together once again. What are you going to be able to do? And how confident are you, you will come up with a resolution?
REP. CHRIS VAN HOLLEN (D), MARYLAND: Well, that is right. There are lots of discussions going on.
They began, in fact, right after the vote failed yesterday. Speaker Pelosi called Secretary Paulson, called others, and said, it's time to get this thing back on track. But you have to understand that there was a bargain that was put together. I have great respect for my colleague Scott. And I respect his decision. I disagree with his approach on this, but I respect his decision.
But the Republican leadership did say that, in putting together a deal, they were going to bring half of their caucus together, and they failed that test. And then, as you heard...
(CROSSTALK)
SANCHEZ: Well, who do you blame for that? Everybody has been blaming everything from John McCain for saying he would able to help, to, you know, Boehner himself for not being able to bring the horses together.
VAN HOLLEN: Well, again, I mean, John Boehner said he was going to bring half of his caucus to the table for the vote. And John McCain said he was going to go to round up Republican votes. In fact, they issued a statement essentially taking credit for the vote before it happened, expecting that it would pass.
And then John Boehner went on and really insulted a lot of the members of his caucus, like Scott and others, suggesting that, on this issue of national importance, that they decided to vote no because they were dissed or felt bad about something Nancy Pelosi said, when in fact that was just not the case.
(CROSSTALK)
SANCHEZ: We have covered that ground. Let's move on to something else.
I want to ask you about the -- this is a proposal that is coming from a Republican president that was backed by a group of Democrats, but not backed by Republicans. I don't know. Is there an irony there?
VAN HOLLEN: Well, this was a proposal that first was made in the form of requesting a blank check, as you know, for $700 billion. The Democrats and others in Congress said, no, we are not going to give you that kind of authority. We think you are...
SANCHEZ: Yes, but...
(CROSSTALK)
VAN HOLLEN: Well, and we established some very important conditions, which is what allowed us to get a substantial number of Democrats on board. There were still a lot of things...
(CROSSTALK)
SANCHEZ: But we have got issues here.
Scott Garrett, let me go back to you, if we could. GARRETT: Sure.
SANCHEZ: This is what you told our booker. I'm going to read it to our viewers, because I was going through my research as I prepared for this interview.
GARRETT: Sure.
SANCHEZ: This is what you told her: "We should not go to the administration, who has brought this problem to us through their actions in the past."
You are a Republican essentially saying something that is almost akin to what Nancy Pelosi was saying yesterday about this administration.
GARRETT: Well, there you go. See, we can work from -- have the same positions on both sides of the aisle in the House, and maybe that is a good thing, that we should not go back to the original proposal that the secretary laid out, and that the president laid out, one which, as we have said already, was a failed proposal, does not really get to the underlying problem, which is a -- the tight credit marketplace.
And there are so many other alternatives that are out there being discussed, such as an FDIC arrangement, an insurance backstop arrangement, all the things that the administration said they didn't want to discuss, but we would like to discuss. And I think the American people would like to discuss them. And, hopefully, Chris would like to discuss them, too.
SANCHEZ: Sounds like there's alternatives out there. And it sounds like you guys are going to be taking up some of those alternatives tomorrow.
Quick, quick one-word answer, if you can. Do you expect that we will hear some more of the, I guess, bickering is the word that was used yesterday, or do you think that will be put aside tomorrow?
VAN HOLLEN: Let me say, I agree with Scott, that it is time for everybody to come together. Again, we thought we had done that, but obviously the votes were not there. And so...
SANCHEZ: Tomorrow?
VAN HOLLEN: We're going to right -- it's already -- the discussions have already begun today. No one is waiting until tomorrow.
But when we can get the votes will of course depend on the ability to come to agreement. So, you don't want to artificially schedule a vote for a certain date until you have got an agreement that you're going to go forward and try and get the votes.
SANCHEZ: I will tell you, Americans are going to be watching. We thank you both, gentlemen, for being with us and taking us through this, interesting conversation.
(CROSSTALK)
SANCHEZ: I am going to be taking this to you in a little bit to find out exactly what they said are proper alternatives. Are they really alternatives? Can it be done?
Hold on just a minute. We're going to come back with this and obviously some of the new tape that we have been talking about in the Sarah Palin story, that and a whole lot more. Stay with us. We will be right back.
(COMMERCIAL BREAK)
SANCHEZ: And we welcome you back. I'm Rick Sanchez.
Other items in the news, obviously the politics of all of this. And one of the things that many Americans are going to be watching this week is the vice presidential debates that are going to be taking place Thursday.
First up, we have got a series of videotapes that we want to show you. We want you to go through these and take a look and make your own decision.
First is Joe Biden and a comment that he made eight days ago. This is Joe Biden confusing exactly when the Depression happened, and also who was actually the president at the time. Let's take a listen.
(BEGIN VIDEO CLIP)
SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENTIAL NOMINEE: When the stock market crashed, Franklin Roosevelt got on television and didn't just talk about the princes of greed.
(END VIDEO CLIP)
SANCHEZ: Correction about Biden. It was not during the FDR administration. And also he was not there as president after it happened, also the time.
Now, let's talk about something else. This is Sarah Palin. She is in Philadelphia. And she is ordering a cheesesteak. Video up. Take it, Dan.
(BEGIN VIDEO CLIP)
GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE: I would like two of them.
UNIDENTIFIED FEMALE: Anything else?
PALIN: No, that's it.
UNIDENTIFIED FEMALE: And your name?
PALIN: Sarah.
(LAUGHTER)
(END VIDEO CLIP)
SANCHEZ: Shortly after that, she is stopped and she is asked by one person, just a citizen, a series of questions about Pakistan.
Pay particular attention to what she says and how it may mirror in the eyes of many people what Barack Obama's policy is. Also, she is talking about Waziristan, which is that mountainous region where everybody seems to think that bin Laden is hiding. She talks about the economy of Waziristan. Take a listen.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Should we do cross-border, like from Afghanistan to Pakistan, do you think?
PALIN: If that's what we have to do to stop the terrorists from coming any further in, absolutely, we should.
(END VIDEO CLIP)
SANCHEZ: Now, McCain goes on to tell George Stephanopoulos this about that comment by Sarah Palin.
(BEGIN VIDEO CLIP)
MCCAIN: She understands and has stated repeatedly that we are not going to do anything except in America's national security interests. And we are not going to -- quote -- "announce it ahead of time." That is the important part of it, is that you do what you have to do, working with these countries. But to announce you're going to attack another country is not a mature way to address the issue.
GEORGE STEPHANOPOULOS, ABC ANCHOR: So, she shouldn't have done it?
MCCAIN: She did fine. She did just fine.
STEPHANOPOULOS: What do you make of all...
(CROSSTALK)
MCCAIN: You know, this business of, in all due respect, people going around and -- with sticking a microphone while conversations are being held, and then all of a sudden that's -- that's a person's position, this is a free country, but I don't think most Americans think that that's a definitive policy statement made by Governor Palin.
(END VIDEO CLIP)
SANCHEZ: And, as you know, Sarah Palin had been on with Katie Couric. She goes back to Katie Couric. This time, she is there with John McCain at her side. Take a look at this.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Should we do cross-border, like from Afghanistan to Pakistan, do you think?
PALIN: If that's what we have to do to stop the terrorists from coming any further in, absolutely, we should.
KATIE COURIC, CBS NEWS: Are you sorry you said it, Governor?
MCCAIN: Wait a minute. Before you say is she sorry she said it, this was a gotcha sound bite that -- what?
COURIC: It wasn't a gotcha, she was talking to a voter.
MCCAIN: She was in a conversation with a group of people, and talking back and forth -- and I will let Governor Palin speak for herself.
PALIN: In fact, you're absolutely right on. In the context, this was a voter, a constituent hollering out a question from across an area asking, "What are you going to do about Pakistan? You better have an answer to Pakistan." I said, "We're going to do what we have to do to protect the United States of America."
(END VIDEO CLIP)
SANCHEZ: There it is. You judge for yourself.
We would like to hear what you have to say about this on Twitter, MySpace or Facebook.
And when we come back, more of your questions about what is going on with this $700 billion bailout that many Americans don't seem to understand.
We're going to help you do that -- that and a politics. We will be right back.
(COMMERCIAL BREAK)
SANCHEZ: And welcome back. I'm Rick Sanchez, trying to take you through the $700 billion bailout. The Senate may be discussing it. In fact, they have been in session parts of the day, not with this specific bill, obviously, because it was rejected by the House. And they can't get it until after it's been through the House.
The House may be dealing with it again tomorrow. We are going to checking in with some the legislators who are going to be talking. If they come to the camera, you will hear what they have to say.
We are also watching the market. And, curiously enough, take a look at the market. And what you will see is that it is actually way up today, certainly in comparison to what it was yesterday. Dan, see if you can get that shot right there. Now it is up 424, which is somewhat mind-boggling for people who have been watching this, thinking that this thing would take off today, just as it ended the day yesterday, down about 777 points.
Your questions. Let's go first to the Twitter board, if we possibly can.
And there, we're going to see a question that is coming in from Paradiva (ph). She says, "What happens, professor, if employers can't meet payroll because credit market is frozen?"
Will they not be able to get paid is what they want to know.
ROSENSWEIG: There could be that possibility. And...
SANCHEZ: How soon?
ROSENSWEIG: Probably within a few weeks. I don't think this week, but two to three weeks. And that's why I think a bill might pass within the next two days.
My opinion, it's going to go against others who might come up on this show, is the reason the market is up so much, is the lawmakers woke up yesterday. No more time for partisan bickering. They said that almost 800-point fall was a judgment on them.
SANCHEZ: And folks on Wall Street get the sense that tomorrow they are going to go in and they are going to get to work.
ROSENSWEIG: I think so.
SANCHEZ: Let's get back to the salary thing. Why would to market affect -- or why would to credit market affect my particular employer? I am not making the leap.
ROSENSWEIG: A lot of times the employer, for instance, needs to get short term credit and the other thing is that a lot of the jobs, now, and most of the job creation are in small business, who really live on a very short term lease, where they have to get credit in from the bank quickly. Sometimes the payments they are going to get, or on their sales won't come for a few weeks. So they really live almost day to day, dealing with their bank. Banks, as I say, now, everyone is thinking that cash is king, banks don't want to let cash out.
SANCHEZ: You say it could happen in a couple of weeks.
Here is another important question -- AML106 wants to know: "My 401(k) keeps losing money. What would the option be to some how lessen my losses?"
ROSENSWEIG: Yes, I wish I was on a few weeks ago to tell people to sell. Although, I probably would have given them the wrong advice. A lot of people jumped out of the market. A Often when people really panic, people who probably should be doing their job and not worrying about the market everyday, they sell. And it could be almost like a last paroxysm of panic and selling.
SANCHEZ: So, should they sell? Should they sell?
ROSENSWEIG: No. I don't think they should. I don't think they should plunge back in, obviously, some people got back in today. But those are probably market professionals. The scary thing also is if they sell -- take a retiree. Let's say they sell out of the stock market completely. So they put it in some short-term cash thing, whether it is a bank or anything, interest rates are collapsed down toward zero for what people can earn. As Kai Ryssdal said very appropriately, for a bank to go borrow it is very expensive, but individuals are so dying to get their money out of the stock market and shove it, that interest rates are almost zero for what they can get.
SANCHEZ: Here is another question that we have gotten, really, asked a lot.
Let's go back to the Twitter Board, if we possibly can, Dan. She asks, Terry does, "What impact on pensions, reserves? Public servants, for example, police, fire, et cetera, and what does this mean for communities? In other words, there is a lot of money out there that they are depending on that they don't have yet?
ROSENSWEIG: Yes, one of my best friends manages money for pensions, police and firemen. And, you know, because we have had to take care of them over long term retirements, again, they just cannot sit around earning 1 percent or 2 percent. They need to be in stocks for instance. So his job is to put them the stock for the long run, so again the single is most important thing to do for them is to solidify the economy, bring back the stock market, because otherwise, they are heavily invested in stocks. Even a lot of citizens are, who don't know it, through their pensions.
SANCHEZ: Yes, exactly.
Peta, says, as a matter of fact. Let's go back to the Twitter board. This is the question that a lot of people are worried about their retirement plan. People about our age now who have something going, retirement plans? How long until they recover? Again, people are looking for these windows?
ROSENSWEIG: Yes.
SANCHEZ: Can you give us a sense?
ROSENSWEIG: Yes. I am thinking that things will be better in a year or two and I am looking to buy real estate in a year. Maybe not in the next week or two.
SANCHEZ: One year, or two?
ROSENSWEIG: Yes, things will be better. Yes, but I have been telling people that if they have the guts to either stick it out or slowly buy now, in five years from now they'll be a lot richer. I do believe that this country will come back up. There is a lot of factors that are here that are going to be very good for us in the long run.
SANCHEZ: But not without this $700 billion bailout package? You said, your opinion?
ROSENSWEIG: Well, I don't want to call it a bailout.
SANCHEZ: All right, $700 billion package.
ROSENSWEIG: A package to keep things a float. And that can have slightly different forms. But we need it quickly. Let me give you one example.
SANCHEZ: We're down to about 20 seconds.
ROSENSWEIG: The market is not up today because this thing crashed. When this thing -- when the bailout package fell apart -- Brazil's stock market down 10 percent, Europe's went down dramatically, because they were still open.
SANCHEZ: Russia closed theirs.
ROSENSWEIG: Russia had to close theirs, as did Brazil.
SANCHEZ: Right.
ROSENSWEIG: So, in other words, the whole world is waiting for some kind of package. We can wrangle over the details, but we need something and we need it soon. And people's pensions are invested in places like Brazil and Russia, also.
SANCHEZ: They ended up buying a lot of the things that we were doing, during the housing situation.
ROSENSWEIG: That's right. That's right.
SANCHEZ: Professor, thank you so much.
Stick around. We will continue this on the backside. We are going to be talking now to Neal Boortz, Ron Paul. Stay with us.
(COMMERCIAL BREAK)
SANCHEZ: Welcome back. We are trying to get a discussion going on some of the answers to the questions that so many Americans have about this $700 billion -- non-bailout plan. How is that?
ROSENSWEIG: Don't call it a bailout.
SANCHEZ: We are joined by Professor Rosensweig from Wyswetta (ph) University, one of the finest at Emory University. And look who just showed up, Neal Boortz is joining us now. He just got here.
NEAL BOORTZ, RADIO TALK SHOW HOST, WSB: You put me in here with a professor?
(LAUGHTER)
SANCHEZ: That's when things get good.
But before we get to both of you, and everybody is dying to know what both of you have to say about this, let's go now to Congressman Ron Paul, from the great state of Texas, who is joining us to tell us why he -- professor -- I mean, Congressman Paul are you there?
REP. RON PAUL, (R) TEXAS: I am here.
SANCHEZ: Good. Let's start with this --
PAUL: OK.
SANCHEZ: Your president is telling you that you need to pass this thing, and he is a Republican, you are a Republican, and yet everything that I'm reading in your blogs and everything else says that you are dead set against it. Why?
PAUL: Well, because I think that you are punishing the wrong people for some bad mistakes. I think that even if they were trying to solve the problem, they are doing the wrong thing.
I see the problem coming out of the fact that Congress spends too much, taxes too much. The Federal Reserve inflates too much, and we over regulate. And that is what we are doing, a lot more of the same, but all the pain and suffering is passed onto some people who had nothing to do with the problem, trying to bail out some people who ended up with a lot of illiquid assets.
SANCHEZ: So what would you suggest we do then, as an alternative.
PAUL: Well, of course, we should have done a lot less a lot sooner and prevent the problem, but we have the problem now, which is not something brand new. We have had this throughout all of history, where people participate in these bubbles. It shows that the sooner you liquidate (ph) the bad debt and the mal investment and get it over, the better we are.
SANCHEZ: Well, that is interesting. Let me read something. I just went to your Web site, and on the very first page of your Web site, RonPaul.com, is that right?
PAUL: Well, I have several. That would the congressional probably.
SANCHEZ: RonPaulforpresident2008.com, my producer just told me.
All right, here is what it says, from your Web site, quote, -- I think we may have this. Angie, did we put this together. "What a heroic day. The people rose up against a coalition of every evil group in America, the central bank, Wall Street plutocrats, and politicians, banksters, think tanks, including pseudo-libertarian sort, big media, and big academia and big business and won. Today, we get a taste of what things may look like when the regime is finally toppled and its theft and killing stops." Wow! Do you agree with that?
PAUL: Well, I think that those are -- I don't know exactly which words you are quoting from where and when, but, yes, a lot of innocent people, you know, were getting blame and they stood up. The bill went down yesterday not because Pelosi gave a speech that annoyed some people, it went down because millions and millions of American people said they don't want to participate in that, and the politicians in Washington finally woke up, and saw that this was a deal for special interests and was not going the help the average citizen.
SANCHEZ: So it was a populist decision on the part of the elected officials?
PAUL: Well, I think so. On some part it was purely political, and on another part it was very philosophic, it was, you know, tough on some and not so tough on others. It wasn't very hard for me to know what I was supposed to do.
SANCHEZ: Yes, well, it's in keeping with much of the statements you have made in the past. Many of which you castigated for, in criticizing this particular administration in the past by people like Rudy Giuliani, for example, in one of the debates. It is interesting the way things -- by the way, we're down to about 10 or 20 seconds. Given what is going on, do you feel somewhat vindicated?
PAUL: Well, in a way, but you know, ideas -- nobody has a monopoly on ideas. I don't feel like they are my unique ideas. I have followed Austrian free-market economics for a good many years. And they have been correct on their predictions so just because I predicted this was coming about doesn't mean I was clairvoyant, as much as I understand the business cycle.
SANCHEZ: Got it.
PAUL: And I think others get credit for this.
SANCHEZ: Congressman Ron Paul, we thank you, sir, for taking time to talk to us today about this most important, pressing issue.
PAUL: Thank you, Rick.
SANCHEZ: All right. The markets will close in 20 minutes. When we come back, we are taking it to the professor. We are also taking it to Neal Boortz. They're flanking me here, as you can see. Maybe we can get a shot there. They were listening to what Ron Paul had to say. I know you will disagree, you are going to agree in many ways.
BOORTZ: Agree in many ways, but almost everything he said.
SANCHEZ: OK, we will hit both of the gentlemen up. Stay with us. We are coming right back.
(COMMERCIAL BREAK)
SANCHEZ: All right. Here we go. We have some new information coming in on this whole situation that America seems bent on trying to figure out, if some of its congressmen would stop fighting among themselves, as many Americans will tell you -- or have been telling us all day long.
Here is the breaking news. Let's go to it. Professor, pardon me for opening up the laptop, but I am literally going to read it right off the laptop, because it just came in.
Here it is: Washington, D.C., is the dateline, the Associated Press is now reporting that Federal Deposit Insurance Corporation is asking for a temporary hike in the $100,000 cap on insured deposits.
Does it sound to you, professor, like they're saying we need to increase that cap?
ROSENSWEIG: It is just to give people in the short run to not to decide to have to pull their money out of the bank. And do something really, what I think would be silly, is to take your money out of the bank and dig a hole in the ground and bury it or something like that.
SANCHEZ: Because we have been telling everyone in the last couple of months, now, since this thing started, we started seeing all the problems with the banks. You are OK up to $100,000.
ROSENSWEIG: You're insured.
SANCHEZ: Well, not they are trying to make sure Americans think, not just $100,000, I'm OK. The government is going to back my money.
BOORTZ: You might have some poor guy out there that just sold a business and maybe until he figures out what to do with the cash, he has $225,000 more sitting in an account somewhere. This guy is panicking. And what do I do? Where do I take this money? And if they kick the FDIC insured limit up to either a quarter of a million or just make it unlimited, then that guy sits back, he breathes a sigh of relief and there is one little element of panic taken out of the marketplace.
SANCHEZ: Let's go to some of the question that we are getting from our viewers. And man, we are really getting a lot of them. Let's go here.
This is going to be on MySpace. There we have this first question. "How will" -- let me get the right one here. "How will this economic crisis affect those in lower to middle income homes, especially those with no investments. We keep hearing in the news all the investors are upset, this will dry up the market, but what about the people who do not invest?"
Neal, to you.
BOORTZ: Well, I mean, if they are living in their home. And here is an amazing statistic that a lot of people don't realize, but 37 percent of homeowners in this country don't have a mortgage. They own it free and clear. Well, if you are living in this home and you don't plant to sell it, it is business as usual for you. You don't really, right now, for the short term care what the house is worth.
SANCHEZ: Are these the people say are talking about, when you say to people like the Professor Rosensweig, --
BOORTZ: I don't talk to Professor Rosensweig.
(LAUGHTER)
SANCHEZ: Well, you guys are diametrically opposed on this thing.
ROSENSWEIG: Yes.
SANCHEZ: You are saying we need this thing desperately, and you are saying, we don't need this thing?
BOORTZ: I -- I -- one of my colleagues on the radio this morning, came up with a perfectly -- we are privatizing profit and nationalizing losses. And I don't see how that is going to work in the long term.
SANCHEZ: Sounds socialistic, right?
BOORTZ: Well, just a bit. Gee, we don't have a socialistic candidate for president right now, do we? Let me think about that and I'll get back to you.
SANCHEZ: So, you are saying, don't do this?
BOORTZ: It has been a long time coming. I didn't make up my mind immediately. I am not an economist. I'm no -- you know, I'm just a guy with a microphone. But the more I think about it, the more I watch this, the more I think that there is a little bit of the sky is falling.
Look, did you hear about this meeting at the New York Fed where we have a former Goldman Sachs chair, meeting with the present Goldman Sachs chair, and they are figuring how to use taxpayer money to bail each other out?
SANCHEZ: Well, you are referring to Henry Paulson?
BOORTZ: Yes, soon or later you start to think are these guys playing us for fools? Are they using the police power of government to plunder the pockets of taxpayers to save each other?
SANCHEZ: I will let you answer that question. We are going to go to a break and then we're going to come back. And we're also going to take more of your questions. And we are watching the market. Let's put it up as we go the break. I can't see it there, it is just too small there, 463. Look at how far back they put the camera on me today, Neal?
Is that 463 is actually steadily continued -- and there it goes up again.
BOORTZ: The people are panicking, aren't they? SANCHEZ: We are coming back, Mr. Snarky.
(COMMERCIAL BREAK)
SANCHEZ: We welcome you back to the world headquarters CNN. I'm Rick Sanchez. I am flanked by Professor Rosensweig, to my right, and Neal Boortz, over here to my left.
Neal Boortz would want you to pay particular attention to the market and what it is doing right now. It is going to close in about 11 minutes. As it stands, right now, we are looking at 495, almost approaching 500. That's surprising. I know what you're going to say, Neal. Hold it. Because we've got a question coming in from somebody.
Let's go to our Twitter board, if we possibly can. This is RMRphoto, saying, "Keep it real, Rick. How will the bailout affect my chance of buying a house now?"
People are really interested in what's happening with the housing market, even some people want to go out there and do it. Professor, to them, you say what?
ROSENSWEIG: The single most important thing is what is their credit rating. Neal and I were agreeing during the break, maybe the only thing we'll agree on, that --
SANCHEZ: Aren't they being real choosy?
ROSENSWEIG: Yes, if you have good credit, I've got three applications from banks yesterday for mortgage, four for credit cards. Because I've always been cheap. I've always kept good credit. The most important thing, said this talking to
(CROSSTALK)
ROSENSWEIG: The other day, I took out, look how many credit cards I have. I won't show.
SANCHEZ: One.
ROSENSWEIG: One. I said all of you in this church, Rick, a lot of them had 15 or 20. I said, we're not going to leave here until you cut up all but one.
SANCHEZ: What about the people, Neal, who are out there who are worried that this situation with the housing bubble and problem with all these houses is only going to get worse?
BOORTZ: If it could! For over a year I've been talking on my show about the way the economy is going. And government said make your escape plan. Develop and escape and then people call up and say, well, I mean, what is your escape plan? I said, number one step in your escape plan is get completely out of consumer debt. End all of it. Do not borrow money for lifestyle.
SANCHEZ: So, you mean, don't be like our government? BOORTZ: So if you have somebody now with a good job history, a good credit rating, they're putting a down payment on the house, the house has a good loan-to-value ratio, in a decent neighborhood, there were loan companies, lenders out there that are tripping over themselves to find you and to loan you money for that house, right now.
SANCHEZ: There is another question that we have coming in. This is another one that people are really worried about because they don't know what to tell their congressmen.
"If this bill passes and a bailout does not work as intended, is there another backup plan?"
Is there another plan, whether you want to call it a bailout or not? Hold your answers. We're going to answer that when we come back. We're also counting down right to the final bell.
Stay with us. We'll be right back.
(COMMERCIAL BREAK)
SANCHEZ: Here's what Americans wants to know. In fact, let's re- ask this question if we possibly can.
Welcome back, by the way. I'm Rick Sanchez.
A lot of folks are saying, look, OK, suppose I let you go ahead and pass this -- quote -- "bailout plan". A bill passes and a bailout does not work as intended. Then what? Is there a backup plan or a bailout number two plan? Is there --
BOORTZ: Another bailout! Do you think this is the only time Wall Street's going to go to this trough? If they get hundreds of billions of dollars now, do you think the next time they get in trouble they'll say, I tell you what, guys, this time let's handle it on our own.
SANCHEZ: So, maybe the question is this. Do you think this would be enough, $700 billion?
ROSENSWEIG: I think Neal is right. They'll keep going back to the trough as much as they need to. When you ask them why it was $700 billion, it's pretty scary. Basically it is 5 percent of some numbers like our economy is $14 trillion and it's 5 percent. Maybe it should be 8, maybe it should be 4. That doesn't need we don't need to do something.
I think as Neal said, it could go to a trillion. I couldn't disagree with him. There's no way to say. My biggest fear is people losing their homes. For instance, we talk about this guy making $20,000.
SANCHEZ: Let me help you there. You're saying your biggest fear, if it doesn't happen?
ROSENSWEIG: If it doesn't happen.
SANCHEZ: How many Americans will lose their homes? How big would that number be?
ROSENSWEIG: It could be quite big. Because the banks are not going to give them another month or two. The banks are going to foreclosure on them, throwing the home into a real estate market that is glutted with homes. Now, none of us really like the government getting in more than they need to but if the government buys the --
(CROSSTALK)
SANCHEZ: Fifteen seconds.
BOORTZ: Let me interject here. Banks don't want to own homes. If they do foreclose on homes they'll take these homeowners and turn them into renters.
ROSENSWEIG: Yes.
BOORTZ: And there is a lot of homeowners, right now, that need to be renters. They don't have any business owning a home.
SANCHEZ: That's an interesting question. The market itself may provide a solution that we're not used to looking for, so we're simply not seeing it. That's what a lot of people are raising a question about well.
The market, when we come back. Stay with us. And one more question from you.
(COMMERCIAL BREAK)
SANCHEZ: All right. Breaking news, once again, coming from the FDIC. I want to be really sure about how I read this to you. I'm going to let you hear. I'm going to just go ahead over here to my laptop and read you the statement as it comes again.
"Federal Deposit Insurance Corporation Chairman Sheila C. Bair says insured deposits remain fully protected and the FDIC guarantee remains rock solid. The same as it has been for 75 years. In addition, the overwhelming majority of banks remain well capitalized and safe and sound."
Again, that came over just moments ago. I wanted to make sure all of you watching us now hear that. Your quick comment on that before we go back to the market. Give me 10 seconds.
ROSENSWEIG: I think that's very constructive. With everyone else pointing fingers she's actually doing something, making people feel confident, keep your money in the bank, relax.
BOORTZ: Good for her. Now, that we've done that end mark to market, end that accounting procedure, and kill capital gains taxes completely for six months.
SANCHEZ: That's your recommendation. All right. Susan Lisovicz standing by.
You're taking us down to this closing bell. How does it look right now?
SUSAN LISOVICZ, CNN FINANCIAL CORRESPONDENT: Hey, listen.
SANCHEZ: Surprise, surprise, as Gomer used to say.
LISOVICZ: Well, yes, we're closing the books on the worst month of the year, September. And with the Dow down 6 percent for the month, but a nice big rally with the help from that statement from the FDIC.
Sheila Bair went on to say she does believe it will be helpful for the FDIC to have the temporary ability to raise deposit insurance limits. It is all about confidence when a bank is in trouble. And you see what happened to day. We didn't gain back everything, but close to it. A nice rally for the final trading day of the quarter.
See you, Rick.
SANCHEZ: A nice big chunk of it, you might say. My thanks to you Susan Lisovicz, as well as you Neal Boortz, Professor Rosensweig. Thanks for being with us. Great show, lots of good information.
John Roberts standing by now with "THE SITUATION ROOM".
John, over to you.
