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Rescuers Hold out Hope for Miners; L.A. City Offices to Close Two Days a Week; Time to Sign on the Dotted Line? Mortgage Rates Starting to Climb
Aired April 07, 2010 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TONY HARRIS, CNN ANCHOR: Got to go. Double time here. CNN NEWSROOM continues right now with Ali Velshi.
ALI VELSHI, CNN ANCHOR: Tony, great coverage on the scandal. Thank you for that. Tony Harris leaving us this afternoon.
I'm Ali Velshi, and I'll be joining you for the next two hours today and every day. I'm going to try and take every complicated topic that we cover and break it down for you. I'll try and give you a level of detail that will help you make important decisions about your home, your money, your environment, and your world.
Let's get started. Here's what I've got on the run down this hour.
Rescuers banging on pipes. They're drilling more holes. They're hoping and they're praying that they will find survivors two days after nation's deadliest mining disaster in 25 years. CNN is on the scene with our ongoing coverage.
Plus, if you're waiting to buy a house, your best deal may be about to get away. Mortgage rates just shot up. They'll probably go higher. I'll break down the numbers for you.
Also, Sheila Bair, do you know her? You know what she does? She's probably the one government official you should get to know. She polices your bank and keeps your money safe. I'm going to introduce you to her this hour.
Our top story. There is a sliver of hope of finding survivors inside the Upper Big Branch Mine in West Virginia. And that is according to West Virginia Governor Joe Manchin. Twenty-five miners were killed in Monday's explosion, but four others are still listed as missing.
The first order of business is getting dangerous methane and carbon monoxide out of that mine so that rescue crews can go back in. One ventilation hole has reached the mine early this evening. Here's an illustration of it. They've drilled down into the mountain.
Rescuers are planning to drill another hole. More holes. And then they can hope to start up fans, which will draw the toxic air out here. There's methane and other things in here. Then they'll take air quality readings. And once that's done they'll get in there. Listen to this.
(BEGIN VIDEO CLIP)
GOV. JOE MANCHIN (D), WEST VIRGINIA: They're trying to get those readings. Until we start getting those readings and knowing where we are and what type of air we have down there, will determine how quick and what timetable we're on. Once we do that then you'll have a better idea of when they believe that the air will be safe enough to send rescue teams in.
The rescue teams are prepared. They've been -- they're charged up, ready to go. And they will go at a moment's notice.
(END VIDEO CLIP)
VELSHI: All right. They'll go in at a moment's notice. Let's go to Brooke Baldwin. She's part of our team covering this in West Virginia. She's in Naoma, West Virginia.
Brooke, that was earlier from Governor Manchin. Is there any better sense of when these rescue teams will be able to go in and look for these four remaining miners?
BROOKE BALDWIN, CNN CORRESPONDENT: You know, we keep hearing, Ali, from Governor Manchin, you know, today is the day; today is a big day. But any farther, you know, specificity on that, no.
He said it. There are these 30 rescue members who are ready, willing, able. They're there in the mine. They're ready to go in. But you just -- excellent illustration of all the different holes that they're drilling in right now. Five holes, one of which has reached that mark at 1,100 feet in. They still have to finish four others. Test those methane levels, determine it's safe to get in there. And once that happens, and we don't know when that is, that is when they can go in.
VELSHI: Brooke, is there some sense of where these miners may be? Or are they looking for those pockets, those rescue pockets where they hope they would have gone? And how far would that be? Once those rescues can go in, how long before they might reach these miners?
BALDWIN: There is only one place, Ali, according to all these different mining officials and the governor, where they could be in order, really, to survive. And it's that final rescue chamber where they're hoping they are.
Just to give you a little bit of perspective. So from the entry of the mine into where that rescue chamber is, these rescue teams will have to go 8,000 feet. That's about two miles. The idea is to hop on what's called a man trip, one of those coal carts--
VELSHI: Yes.
BALDWIN: -- that can kind of maneuver them on in the mine, help that process. Then they'll have to walk their way in and, hopefully, find these guys in this rescue chamber, but just a side note. You know, it's frustrating when you think about it, that they were 500 feet, these rescuers, on Monday from, potentially, those missing miners when they had to pull out.
VELSHI: All right. What are they -- I guess nobody can really say what the chances are. They have no communication with these -- these four missing miners. They don't know if they're together, and obviously, we don't know whether they're alive or not.
BALDWIN: We don't know whether they're alive or not. You know, MSHA came out today, the federal mining agency, and said the only way they're alive is in that rescue chamber.
It's interesting, having covered Sago, where there was a lot of hope, you know, and the verbiage used from Governor Manchin then. And this time, it's really tampered down, not huge expectations.
And just quickly, Ali, you know, when we talk about the dangers each and every day going deep, deep down into these mines, I caught up with a 19-year-old who is fresh out of the mine this morning. Listen to what he said, admitting and acknowledging the dangers he involves himself in each and everyday.
(BEGIN VIDEO CLIP)
JOSHUA MITCHELL, MINER: It's dangerous. And I mean, you take a chance every day, but you can get killed going down the road here. You can get in your vehicle and drive down the road and die. Ain't no different when you go underground. It's your time to die, you're going to die.
(END VIDEO CLIP)
BALDWIN: There you go, Ali. You know, that's really the reality of some of these miners. They recognize the dangers, but they do it to feed their families.
VELSHI: Yes, and a lot of people have pointed out in the last couple days that it's not -- it's not the most dangerous profession around, but it is a profession where you face that danger every day. You go in knowing something can go wrong.
Hey, listen, let's talk about the two miners who were rescued who have been injured, who are in hospital.
BALDWIN: Yes.
VELSHI: What do we know about them?
BALDWIN: We know one of them is doing well. He's OK. The other miner, according to the governor, is in the ICU. In his words, he says he is serious, but he is alive.
VELSHI: All right. Thanks so much for that, Brooke. We'll stay on top of this with Brooke. We're in continuous contact with our reporters in West Virginia, and the minute anything happens, we will tell you about it.
OK. The city of Los Angeles prepares to go dark for a little while. L.A. Will be shutting down its city offices two days a week to fight a very big budget crunch, something that's happening all over this country. We're talking to L.A. Mayor Villaraigosa right after this.
(COMMERCIAL BREAK)
VELSHI: It's a devil of a time right now in the City of Angels. Next week could see forced furloughs for thousands of L.A. city employees and drastic service cuts for residents.
Amid a war with city council over power rates, part of a broader budget crisis, the mayor's called for a shut down of non-essential agencies and departments two days a week.
Let's get our heads around this city's sad state of affairs right now. Los Angeles is sputtering along with a budget shortfall of almost $210 million. Now, that's for this fiscal year, which ends in June 30. This is actually not going to have anything to do with this, so let's get rid of that. This is about housing prices. We're going to talk to Christine about that.
All right. Let me just tell you the story. The projections for next year run as high as a budget shortfall of $600 million. The city has instituted a hiring freeze. It's laid off thousands of workers.
And the credit rating, the bond rating which determines how much it costs the city to borrow money was lowered, effective today by Moody's, Standard & Poor's -- by Moody's. Standard & Poor's, the other bond rating agency, dropped its rating of Los Angeles months ago. So it will cost L.A. more to borrow money. And for a city that's too broke to pay its bill beyond the next few weeks, that's a big problem.
Let's go straight to the top of city hall on this one. Mayor Antonio Villaraigosa -- Villaraigosa joins us now from Los Angeles.
Mayor, good to see you again. Thank you for being with us.
MAYOR ANTONIO VILLARAIGOSA, LOS ANGELES: Good to see you again, Ali.
VELSHI: Let's talk about this problem. You have a short-term problem, but L.A. has had a short-term problem for a long time. Now we're talking about cutting city services a couple of days a week.
And I guess what my viewers who are not in Los Angeles want to know is, is this a move toward fewer services in general, something we're going to see around the country, or is this an emergency move that you're going to be able to fix at some point in the near future? VILLARAIGOSA: Well, I think we are going to be able to fix this financial challenge that we're facing in the city of Los Angeles. But over the last two years, we've actually had deficits of about $700 million, $200 million plus about two years ago. And, last year, we resolved about a $500 million deficit that -- with revenues down. However, that's even though we cut $400 million of we're now looking at $212 million in this current year.
So we've got some challenges to do. We've eliminated 1,000 positions last year, not layoff.
VELSHI: Yes.
VILLARAIGOSA: We early retired 2,400 people. We're laying some people off. And, yes, we're going to have to furlough others or relieve them of their duties, because the city controllers informed us on May 5 we'll be out of cash. And that doesn't mean that we're in a situation where we won't be able to pay our bills, but if I don't do these actions now, we won't be able to pay those bills.
VELSHI: What gets you back into a situation where Los Angeles is a city that people want to be in because it offers opportunity and services like a big city should offer? Where do you get back to that? How do you get that revenue back that you've been losing for years?
VILLARAIGOSA: Well, actually, L.A. is that kind of city. We have the second safest big city in the United States of America. Crime is down seven years in a row. Tourism is up. Until last year, construction was at an all-time high, four years in a row. Housing starts in the city were up, as well.
But this financial crisis has brought us to a situation where many people have lost their homes. More than 28,000 families have lost their homes over the last two years. We have a 14-1/2 percent unemployment rate, which, all together, have really impacted the economy and our revenues, which is why we've had to make some of these drastic cuts.
VELSHI: And you're going to -- let's just explain, for our viewers who don't know this, what happens. Does something have to happen? If something happens, will you not reduce city services like libraries, parks, planning public works, or is that going to happen?
VILLARAIGOSA: There's no scenario where we don't have to trim our services and the cost of our payroll. The fact is, a big part of the city budget is payroll. You know, our employees have, you know, medical benefits, retirement. They have wages under their contract that are guaranteed. And so, unless they take cuts, which I've asked them to do, we're going to have to make these cuts.
As an example, I've taken a 16 percent cut over the last two years. I've asked our employees to take a 15 percent cut. If they did, that would resolve 450 of the $485 million deficit we're looking at next year.
VELSHI: Let me ask you this, Mayor-- VILLARAIGOSA: A 10 percent cut--
VELSHI: -- we've talked to other mayors--
VILLARAIGOSA: -- would solve about 300 million.
VELSHI: We've talked to other mayors across the country where similar cuts have had to have been instituted. And I guess some of the sense that those of us elsewhere are wondering is that is this something that comes back? Are those furloughs? Are these services that go back from being three days a week to five days a week? Or are we looking at a new world where cities just can't offer all of these services for the next few years?
VILLARAIGOSA: We're coming back. There's no question about it. And whatever services that we have to cut in the next couple of months will be temporary. We don't expect that we would be closing city hall, if you will, two days a week beyond July.
But we do have to get our fiscal house in order. That's my responsibility. I've said that, you know, I take that responsibility seriously. And so you have to make the tough decisions. Nobody wants to do that.
And with respect to -- you started earlier about the counsel and I. Frankly, we agree on a lot. I think they're going to agree that, with the city controller indicating that we'll be running out of cash, we're going to have to make some tough decisions here.
VELSHI: All right. So for my viewers who face this in their own homes in many cases, the idea that expenditures are greater than income, you only have two choices. You either cut or increase the amount of money you bring in. Is there any possibility that L.A. -- what is L.A. going to do to be able to bring in more money, let's say, over the next five years?
VILLARAIGOSA: Well, I've hired a jobs czar, Austin Beutner, who's focused on trying to leverage the assets that we have in the city, the fact that we're safer than virtually any big city except for New York. The fact that L.A. has a port and an airport that are vibrant and very important for economic development.
We've moved 44 percent of all the goods that enter the -- enter the United States. We have the fifth busiest airport in the world. And we want to leverage those for job creation.
Even the debate around the Department of Water and Power that you referred to is a debate that, with the raising of rates, we can set aside money for a lock box for renewables and create some 18,000 jobs: 16,000 jobs to install solar and residences and businesses, and another 1,100 jobs with folks who can help create more energy efficiency in our businesses and our homes. So we're focused on that.
We also have -- we passed a halfpenny sales tax about a little more than a year ago to spend $40 billion over the next 30 years. We're working with the congress right now to figure out how we can accelerate that and create about 166,000 jobs.
VELSHI: You're busy out there.
VILLARAIGOSA: So we're looking at jobs. That's for sure.
VELSHI: All right, Mayor, good to see you again. Thanks very much. Mayor Antonio Villaraigosa from Los Angeles--
VILLARAIGOSA: Thank you, Ali.
VELSHI: -- joining me about that city's current struggles. Good to see you.
All right. If you are thinking about buying a home, time might be running out if you want it cheap. Cheap loans are getting pricier, and that could mean a big jump in your bottom line.
Christine is standing by. We are going to break down the price of buying a home and give you the pros and cons of buying right now when we come back.
(COMMERCIAL BREAK)
VELSHI: Just talking to the mayor of Los Angeles about home prices there. Home prices in California are kind of the poster child for national home prices over the last few years. Back when they peaked, boy, they were really expensive.
I want to give you a sense of how much it cost to own a home back then on a monthly basis and for the total cost of owning a house versus now. Let's take a look at numbers just from California.
Back in 2006, the median price for a single-family home -- that's the price at which half of all homes sold for more and half sold for less -- was $576,000. Talk about a housing boom.
In order to buy a house like that, you'd have to put down at least 20 percent. So that's $115,000 you'd put down. Mortgages were going for about 6 1/2 percent then. So your monthly payment would be $2,900, and the total cost of owning that home over 30 years would be one million -- just over a million dollars. OK. So that was what it cost to own a home if you bought one back in 2006 in California.
Now let's take a look at 2009, last year, about this time. That price had dropped in more than half. The median price for a home was $245,000. Again, your 20 percent down payment is a whole lot less money. Your interest rate was at 4.8 percent for a 30-year fixed mortgage, which meant your monthly payment -- take a look at that. It was $2,900. Now it's dropped to $1,000. And your total cost for owning that home is $370,000.
Now let's see what's happened. Mortgage prices, in fact, just today have shot up. The price of that house is up a little bit, by the way. So the median price has increased to $279,000. So your down payment, 55, $56,000. Look at the difference in the mortgage price. It's gone up to 5.3 percent. Your monthly cost has gone up from $1,000 to $1,200. And total cost of own that house over time almost $450,000.
So take a look at that. If I want to chart it, I'd say we've gone down like this until 2009, and now we're starting to go up. And a lot of people are concerned that 5.3 percent could get higher.
Christine Romans standing by with me. She's my co-host of "YOUR $$$$$," which you can watch on CNN on the weekends.
Christine, those numbers beg the question, if I think house prices might be staying flat or declining over the next year, but I kind of know interest rates are probably going up, should I be buying now, or should I be waiting, if I'm in the market?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: If you're in the market, you have money in the bank, you have a good credit score and you're confident in your job, then yes, this is a good time to buy. But those are four--
VELSHI: Yes.
ROMANS: Four or five different variables that you have to make sure you're in the market for. And you have to be in the market for a home for the right reason: that you're going to live in it, that you like the school district, that it's right for your life and for your family, and that you don't think you're going to flip it in three to five years, because you could see home prices go down again. I mean, the MoodysEconomy.com, you remember that--
VELSHI: Yes.
ROMANS: -- fascinating study that showed that maybe there could be a 10 percent pullback, maybe even more, in some of these formerly hot markets, and the economy's still--
VELSHI: Well, that's the key thing, right? It's local.
ROMANS: Exactly. And if you think that prices in your neighborhood are not going to fall anymore but might actually rise, then, yes, you want to buy a home if you meet all of those other -- all of those other qualifications.
But I want to be clear, from BankRate.com, Greg McBride always says, if you're not going to buy a house because you're afraid of a 6 percent mortgage rate, you're not ready to buy a house.
VELSHI: That's right. We all -- we all know people who paid--
ROMANS: That's a very, very low mortgage rate.
VELSHI: -- 15, 16, 17 percent for mortgages in the '80s. So 6 percent is low. So is 4.8. So is 5.3.
ROMANS: Yes. VELSHI: That said, there's a lot interesting (ph) here if you think, in your area, houses are going to go up. There isn't a lot of "ifs" about interest rates. Most people who study these things think interest rates will go up, to maybe 6 percent. Again, not -- not treacherous, but it's up.
ROMANS: Right. But moving -- moving higher. And you know, rising -- rising mortgage rates and rising interest rates, you know, they'll have a ripple-on effect in the economy.
For example, if you're -- if you're somebody who's a saver and you're living on a fixed income, rising interest rates might be good for you, especially if you've already paid off your house or you're at the end of a 30-year loan--
VELSHI: Yes.
ROMANS: -- that you've refinanced, and you have very low interest rates. So it's a really interesting time here, isn't it, Ali?
VELSHI: Let me ask you this.
ROMANS: A lot of people are hoping that the worst of the price declines are over and that now interest rates might start moving up.
VELSHI: Well, you and I were -- we always chat early in the morning, because I get up early. Christine is up early for "AMERICAN MORNING." We were chatting this morning about this whole thing.
And then I came in and talked to -- talked to our show staff, and one of the producers said to me, "Can you even get a house?" I mean, if you decide this is a good time and we -- and you listen to this conversation, is it easier or harder to get a house this year than it was a long time ago?
ROMANS: It's -- I mean, it's harder. It's harder to get the loan. It's interesting that you had that conversation, because Fannie Mae just published a survey where people, overall two-thirds of people are -- they want to own a home. They're confident about homeownership, but 60 percent said it's harder to get a loan than it was for their parents. And 68 percent said it will be harder for their children to buy a house -- excuse me -- than it was for them. And the obstacles are bad credit, income, and no down payment.
And again, Greg McBride, he always says, from BankRate.com -- you know, he's an economist who studies this all the time. He says there is no substitute for money in the bank.
VELSHI: Yes.
ROMANS: Money in the bank is the -- is the starting point for this discussion about whether you're ready to go in and buy.
VELSHI: Well--
ROMANS: Interesting you showed those numbers from California in 2006.
VELSHI: Yes.
ROMANS: A lot of that house-price increase was billed not on -- not on 20 percent down and a 30-year fixed loan, too.
VELSHI: Yes. On nothing down.
ROMANS: It was a lot of crazy stuff.
VELSHI: Right. And that's an interesting point.
ROMANS: One of those reasons that those prices had gotten up.
VELSHI: If you buy a house -- if you buy a house today, even with good credit, in many markets you can't put just 20 percent down. You've got to put more down. Whereas in 2005-2006, you could have been buying that $500,000-plus house with very little down. Very interesting point.
Lots to consider. This is not to tell anybody to go out and buy a house. It's to tell you that, if you're thinking about buying a house, here's more information to put into that--
ROMANS: And Ali, there are some FHA-backed loans where you don't need the highest credit score and you don't need the full 20 percent down.
VELSHI: Yes.
ROMANS: And those are typically smaller loan amounts--
VELSHI: Yes.
ROMANS: -- in certain parts of the country. So you can check on the FHA-backed loans. If you -- if you don't qualify but you think that you are a good candidate, you might qualify for one of those loans. Check those out.
VELSHI: Christine, great to see you as always. Christine Romans, my colleague. You can watch us. We co-host "YOUR $$$$$" Saturdays at 1 p.m. Eastern and Sundays at 3 p.m. Eastern.
Here is a check of some of the top stories we're following right now.
Rescue crews are drilling more vent holes trying at a West Virginia coal mine today, trying to air out poisonous methane gas. Four miners are unaccounted for after an explosion on Monday that killed 25 other miners. We're going to go live to the screen for an update in the next hour.
They're still not great for gas mileage, but they will be a collector's item soon. GM is shutting down the Hummer brand. You probably heard that already. It's trying to unload its last 2,200 vehicles. The company announced a big rebate plan today to try to make that happen. They suck a lot of gas, though.
And the Space Shuttle Discovery is docked up with the International Space Station, despite a busted antenna that affected the shuttle's radar. The two crews will be working together for the next week or so, installing and repairing equipment. This is among the last group of shuttle missions before NASA retires the fleet in favor of a new space mission.
And straight ahead we're going to talk more about coal mining and why it's one of the most dangerous jobs in the world. Stay with us.
(COMMERCIAL BREAK)
VELSHI: "Since the earliest days of coal mining, the job of digging coal and other useful materials out of the earth has been considered one of the world's most dangerous occupations." Those aren't my words. Those are straight from the Mine Safety and Health Administration Web site.
Tragedies like this week's at West Virginia's Upper Big Branch Mine make headlines. What doesn't is the day-to-day ways that mining can be hazardous to your health, the ways it can kill you slowly.
Maybe the most insidious is something called black lung. You've heard about it. It is exactly what the name suggests. It's a disease that takes a healthy lung, it blackens your lungs. It makes you cough. It basically steals your breath. It's an incurable disease that is caused by coal dust. Just imagine your body trying to filter air through clogged lungs like this. Black lung typically kills over 100 people in West Virginia every year.
We'll be covering that more extensively and all of the things having to do with coal mining and the rescue in West Virginia throughout the afternoon.
Let's go over to Chad Myers. He's covering our weather situation for us. Hi, Chad.
(WEATHER REPORT)
VELSHI: Hey, Chad, this is one of the weekends I'm not traveling. I'm staying here. I'm riding my motorcycle this weekend.
MYERS: Awesome!
VELSHI: Is that going to be okay? I'm not going to get rained out, am I?
CHAD MYERS, AMS METEOROLOGIST: No, we have a helmet law here.
VELSHI: I have lots of helmets. This melon needs lots of protection.
MYERS: Showers this weekend, but not to cancel your plans.
VELSHI: All right. We're going to check in about hurricane season. We're going to get some forecasts -- who is that little guy next to you in the vest?
MYERS: He's my mini-me that I've been trying to keep off the air. But he's a little ham.
VELSHI: What a fashionable guy. And he's wearing a vest. I love that.
MYERS: He's wearing a vest for you, sir.
VELSHI: I love it. I didn't know you had such fashion in your family. Chad Myers, good to see you. Thanks, my friend.
MYERS: Take care, buddy.
VELSHI: All right. Listen. This is a country you may not know much about. May not have heard the name or know how to say it. Kyrgyzstan. Deadly anti-government protests have swept through the former Soviet republic. We're going to tell you why this country plays a strategic role in the U.S.'s role in Afghanistan. We're going to bring you a live report on the latest.
There's Matthew standing by to tell us what is going on in Kyrgyzstan and why you need to know about it. Stay with us.
(COMMERCIAL BREAK)
VELSHI: This is one of those stories that you may end up hearing a lot about, you may not. But it's important that you know what it is so when you hear references to it, you will have some sense of why we're talking about this.
A key U.S. ally in the war in Afghanistan is under attack by its own people. It's happening right now in the former Soviet republic of Kyrgyzstan. Anti-government protesters -- and this is some remarkable pictures here -- took to the streets first yesterday. They're angry about corruption. Recent price hikes for electricity. And heating gas.
Those demonstrations are now sweeping the country. As you can see, they're fairly serious. Thirty-five people have been killed; around 400 people have been wounded. A live report on what triggered the protests in a moment.
But first, let me give you a little background on Kyrgyzstan. It is a mountainous region in central Asia. It's a former Soviet republic. Has about 5 million people in it. It is one of poorest countries from the former Soviet Union. It is also the site of a strategic American air base that supports U.S. and NATO troops in Afghanistan.
Russia also has military facilities in Kyrgyzstan. Its president was re-elected last year. He first came to power in 2005 after the so-called Tulip Revolution. Since then, he has consolidated his power, he's cracked down on the opposition and on media.
So, we're going to go to Moscow to talk about this. Matthew Chance is standing by right now. Matthew, understanding that -- really think it's a safe bet to say for many of our viewers, they've not seen that name spelled, they've not heard the name of this country. And all of a sudden something explosive and potentially very, very important is happening there.
MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes. It is. I mean, it is one of those countries you don't hear anything about. Normally, it's a difficult country to place as well geographically because it comes from the former Soviet states that simply don't have much of an international profile.
But of all of those states, this one, the United States is perhaps the most crucial because it does have that strategic Manas air base. It's called a transit facility by the Kyrgese government. They want to downplay the American presence on its soil.
But it is crucial to the effort in Afghanistan, the war effort there because it's where U.S. forces in Afghanistan are resupplied from. It's just a two-hour flight to the Afghan capital Kabul from there, so you see a lot of ammunition and personnel go through the Manas airbase into Afghanistan to fight the Taliban and other forces there as well.
That's why Washington is watching this situation with such alarm because even know there's no suggestion that if a new government takes over in Kyrgyzstan, any instability that could perhaps threaten the status of that air base is something that Washington is deeply concerned about.
As well, of course, Ali, the fact there's been a very severe human cost in these protests. Thirty-five (INAUDIBLE) casualty figures. Four hundred injured. So by any measure, that's something that Washington would normally be concerned about anyway.
VELSHI: What's the feeling in Russia about this, as you look at it from that end, is this country in danger of losing the government or changing the government?
CHANCE: I think there's certainly a danger of that now. It's happened before in Kyrgyzstan. It happened just five years ago. You referenced it a few moments ago, the Tulip Revolution. This government, this president came to power under very similar circumstances as what we're seeing today. Protests, popular protests, in the streets of the country.
The Kremlin have urged calm. They've been uneasy about the U.S. military presence in Kyrgyzstan but essentially signed off of it and allowed the Kyrgese government to give them access that base. But they don't want to say instability on that region on their southern bank (ph), and, you know, the U.S. and Russia are a lot closer than they were a few years ago when they were prickly, their relationships.
VELSHI: That's right. The leaders of both countries are in Prague getting ready to sign this agreement.
Matthew, good to see you. Thank you very much. We'll keep an eye on this story for you if there are any developments.
Okay. Now, this was bound to happen. It's going to make you stark-raving mad. A U.S. airline is going to charge you for baggage. Not the kind you check, the kind that you carry on. We're going to tell you how much and who's doing it right after this.
(COMMERCIAL BREAK)
VELSHI: Taking some of the top stories we're following here on CNN.
Starting in August, Spirit Airlines will become the first major U.S. carrier to charge passengers to carry their luggage onboard. You will have to fork over up to 45 bucks for the bags, if you want to put them in overhead bins. In a tripadviser.com survey -- no surprise here -- 90 percent of those questions say they're not interested in paying the fee.
In Washington, President Obama leaves tonight for the Czech Republic, where he'll sign a major nuclear arms reduction deal in Russia. If ratified, the treaty will slash nukes by nearly a third and place new limits on missiles and bombers.
In West Virginia, rescuers are drilling more holes into a coal mine where 25 people were killed in an explosion on Monday. They hope to vent enough poisonous methane gas to safely get inside to look for four miners who are still missing. Investigators believe a build-up of methane contributed to the explosion in the mine has repeatedly been cited for problems with its ventilation.
All right. When we come back, Tom Foreman is going to tell us what was happening inside the Upper Big Branch Mine at the time of the explosion and where. It's a revealing look. We'll have a look at it when we come back. Stay with us.
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VELSHI: Rescue crews in West Virginia are waiting to reenter the Upper Big Branch Mine. Monday's explosion there killed at least 25 miners, making it the worst U.S. mine disaster since 1984.
There are still slim hopes of finding four missing miners alive. Right now, crews are drilling a second ventilation hole into the mine. They're planning to drill additional holes, as well. Once the air inside is cleared of methane and carbon monoxide, rescuers can go back in.
Tom Foreman has a closer look at what - at that mine and what that explosion took place. Listen to this.
TOM FOREMAN, CNN CORRESPONDENT: This is the main entrance to the mine, where you see CNN reporters around the clock. But let's move into the mountain itself to talk a little bit about what was going on underground.
And three areas of sharp concern here. This is the general explosion area we know about. Let's start over here, though. This is called the mantrip (ph). You've seen these in video from time to time. Little train cars that carry workers back and forth inside the mine, because we've mentioned it's quite a distance inside there.
We know that there were workers leaving the mine at the end of their shift on one of these mantrips (ph), and at this location, seven of them were found dead. About a quarter mile away is this central work spot. What were they doing here?
This is what they were doing. They were using a giant grinding device to go along a great wall of coal and cut huge amounts of it loose, which fall into a conveyer belt and are carried out. Notice the water spraying here. That's just pressed coal dust. And to help blow away methane, both of which are by products of this and both of which are hugely explosive.
We do not know if the explosion actually happened near this work, but we know it was in the general vicinity of it. We also don't know how close it was to the 18 miners who were found dead in that area. But we know they were about a quarter of a mile away from the others we mentioned earlier on the man trip.
And lastly, one of the things we're thinking about these days is this. The drilling effort to try to get down and let some of the poisonous gasses out of the mine that have collected since the explosion and possibly let some more fresh air in and hopefully communicate with anybody who might still be alive down there. It's a huge effort, and it's a desperate effort to try to make something good happen.
We do know that we're talking about four miners in that case. So, three locations underneath the mountain in this vast complex of this mine that both rescuers and investigators want to get a look at.
VELSHI: We are in continuous contact with our reporters in West Virginia. The minute anything happens, we'll let you know about it.
All right. Forty-one banks have failed so far this year. Could yours be next? When we come back, I'm going to introduce you to this woman whose main job is to keep your money safe if your bank goes under. This is someone you need to hear from.
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VELSHI: Remember a year ago we were talking about banks failing? Every week, we'd hear about more and more banks failing, and it was sort of contributing to the larger panic about the economy and wondering where we were. Some of you had money in those banks that had failed. And you got to know very well the name FDIC, the Federal Deposit Insurance Corporation.
Let me give you an explanation what the FDIC does. You walk into a bank. You probably see it on a door at the bank that it's an FDIC- insured bank. What you do is you deposit your money with a bank, and at this point, up to a quarter million of it is covered. You've got your money in the bank. Now, what happens when that bank in the middle fails? It does happen. Not a lot of banks fail in the grand scheme of things, but sometimes they do. Well, the FDIC has insured the money that you have in that bank, which means you get it back. In many cases, the bank shuts down on a Friday night, and Saturday morning you can have your money, up to $250,000. I want to talk about whether that's going to be the limit that stays.
But bottom line is, when a bank fails, you get your money back. In many cases, that bank is either shut down, acquired by another bank, or taken over by the government in what is a remarkably smooth process.
Let's take a look at the number of banks that have failed over the past two years. Back in 2007, when the economy was still strong and just starting to weaken, only three banks failed. In 2008, 25 banks failed. And then last year, 2009, 140 banks failed.
To this point in 2010, 41 banks have failed so far. There are about 8,000 banks in the United States, more than 8,000 banks in the United States.
And there's somebody whose job it is to monitor what's going on at the banks and to make sure there's enough money to pay you out if those banks fail. Her name is Sheila Bair. You've probably heard about her before. She's one of the regulators in the government who handles your money. She's the chair of the FDIC. Great to see you.
SHELIA BAIR, FDIC CHAIR: Happy to be here.
VELSHI: We, unfortunately, had to talk a few times during financial crisis.
BAIR: That's right.
VELSHI: And it really did seem that we were in danger. When banks fail, people really worry about their money and about the economy.
BAIR: Right.
VELSHI: Are we at a different place now? Are we much safer than we were last year?
BAIR: Yes, I think things are much more stable. There are still some challenges in the banking sector, and there will be more banking failures this year. But it's this very small proportion of the number of banks. Eight thousand banks in the country that we ensure, and no one has ever lost a penny of insured deposits. We've been around 76 years. No one has lost a penny, so they really don't need to worry.
VELSHI: It's $250,000 per account right now. That was an increase. It used to be $100,000.
BAIR: It was $100,000. And it's per institution, so I think if you have more than $250,000 in a single institution, you should go to myfdicinsurance.gov. Our deposit insurance rules are very clearly spelled our to make sure you're fully covered.
VELSHI: All right. That's a simple thing to do --
BAIR: Right.
VELSHI: -- tell me about the process. We hear about the banks typically it's after business hours on Friday. They get shut down. We just hear a bank's been shut down. What happens? What's the process?
BAIR: Well, you know, "60 Minutes" did a really good piece. I think you can still find it on YouTube and the link on our Web site that walks through the mechanics of how this works. But generally, because the institutions are regulated, we'll have advance notice when they start getting into trouble.
So, we can plan. We'll bring people in to determine what the deposit amounts are, and start actually marketing the institution to see if we can sell it to a healthier bank. In which case -- and usually this is what happens. We sell the failed bank to a healthy bank. They take all of the services, the deposits as well as the loan relationships.
And it really is a seamless transaction. You're just dealing with a different bank under new management the next day.
VELSHI: And unlike AIG, which didn't fall under your purview, when you take over a bank or you move in and that transaction takes place, you don't have to be stuck with anybody who says they had a contract and make them stick around.
BAIR: No. The bank fails, that's right. So, we have the ability to accept, repudiate employment contracts, cancel bonuses. Typically, the top management and the boards are replaced, absolutely. And -- but the little people, we generally try to keep them in place --
VELSHI: But that's your choice.
BAIR: That's the nice thing about an acquisition. That's right. Generally, it's the acquiring banks in that position. When it's an acquisition, it usually is. But you don't get into the same kind of impediments like you did with AIG, where the institution is still open, you have to adhere by all these contractual obligations.
VELSHI: You are a very calming influence, but the reality is, there are many, many banks on a watch list that you're worried about. I want to come back. Take a quick break. And I want our viewers to get a sense of how you -- what you're monitoring and what they have to worry about.
BAIR: Okay.
VELSHI: Stay with us. Sheila Bair, the chair of the FDIC, when we come back.
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VELSHI: Sheila Bair, who is sitting next to me is the chair of the FDIC, the Federal Deposit Insurance Corporation, and is said by some people to be one of the most influential people in government today. Your job is to look after the money we put in banks, and we put it in the banks so it doesn't burn down in the house.
Throughout the financial crisis, I had people telling me they were withdrawing money from the banks and keeping it in their homes because they thought it was safer. You told me then you didn't think that was good advice, you certainly don't think it is today.
BAIR: No, I certainly don't. Your money can be lost, it can be stolen. If it is in an insured account in a bank, it is absolutely protected. There's no way you're going to be able to lose it. So, I do think -- for money that needs to be absolutely safe and you need to have quick access to -- an insured depository account is the best place.
VELSHI: There was some fear -- what were we saying last year? One hundred and forty banks closed. There was some fear at some point you would run out of money.
BAIR: Right.
VELSHI: How do you not run out of money if the banks fail?
BAIR: I don't think that would ever happen. As an added precaution, we increased our - we had borrowing lines with the Treasury. We can actually borrow up to $500 billion if we needed to. I don't see a scenario where we would have to do it. We are industry self-funded, and went into the year with $66 billion in cash.
VELSHI: Is it sort of like -- to highly oversimplify, is it like an insurance policy?
BAIR: It is. The banks pay for the insurance. The banks a premium to us for the deposit insurance, and that's what we use when we close banks. And we'll obviously take losses when we have to. We pay off the losses.
VELSHI: Sometimes you don't take a loss. Sometimes you sell off the bank.
BAIR: No, sometimes we don't. Sometimes we don't. Usually we do, but not always. It's nice when we don't have to. That will depend on how good the franchise value is with the bank. But, yes, we are funded with the industry reserves, which are quite strong right now. So, I don't think we'll have to borrow from Treasury.
VELSHI: According to your Web site, there are 702 banks on your watch list which is more substantially more than there was last year at this time, when things felt worse in the economy. Why more banks on the watch list than last year? BAIR: Well, it's a lot of smaller banks. There will be more bank failures this year than there were last year. They'll tend to be smaller banks, but there will be more of them.
It takes time for the credit losses to work through the banking system, so typically, even when the economy starts to recover, there will be more bank failures. The banking sector will lag economic recovery, and that's typical.
VELSHI: You were involved in some very large bank bankruptcies --
BAIR: Yes, we were.
VELSHI: There was a fear there could be larger ones. At the time -- I mean, a year ago, we were still talking about CitiGroup. And I remember talking to you saying, what would happen if CitiBank -- could you handle big banks? Nobody is saying those banks are going under.
BAIR: Right. We're not talking about individual institutions, but yes, we have tools available for banks of all sizes. We did resolve WAMU (ph) --
VELSHI: Which is huge, yes.
BAIR: Yes. We know big banks well, we insure trillions of their deposits, so we have a debt guarantee program for them. We did participate in stabilization matters -- for measures for a number of large megabanks in the crisis. So, we know them well, understand them well, and, yes, our tools are available now, but only, unfortunately, just for the insured depository part of the larger banks -
VELSHI: Well, that's a bigger discussion, right? Because there are a number of people who have said of all the regulatory agencies that handle -- it's an alphabet soup of agencies that handle financial matters. Yours seems to have a pretty clear process.
BAIR: Right. We do.
VELSHI: And some people have said why can't be run everything else like that? Why can't the insurance industry be regulated the way you regulate banks?
What's the answer to that?
BAIR: Right. Right. Well, we think some of the tools can be extended more broadly. And actually, the bill that passed the House, as well as the bill approved by the Senate Banking Committee, do have tools that can be used for the non-bank parts of a financial intermediary, similar to what we do with banks now in terms of a resolution mechanism.
So, you mentioned AIG. Under these type of bills, if you had an AIG situation occur again, there would be available to regulators a resolution mechanism which would -- again, you can impose losses on shareholders and creditors, repudiate the employment contracts, require derivatives of counter-parties to continue to perform opposed to paying them off. There are a lot of advantages to our process that have worked well.
VELSHI: Yes, because while most people are mad about the bonuses that were paid at AIG, the real story was that something was going wrong that we should have been able to stop before it went wrong.
BAIR: That's right.
VELSHI: I'm more interested in the regulation than the bonus issue. We want to make sure before a big bank or a big financial institution fails, somebody is saying we are headed toward a cliff and we need to veer in a different direction.
BAIR: That's right, and that's what we do with banks. You can identify it early and try to prevent it. But then if it does fail, you have a process and a mechanism and a structure that's well understood by the market for dealing with it.
VELSHI: You have a very even demeanor, and it was that way even during the worst of the financial crisis. But does it feel like a different world to you today?
BAIR: It is a different situation, yes. I think we're dealing more -- you know, last year we were dealing with a lot of loans that should not have been made, a lot of structured finance, complex securities products and derivatives products that were going bad very quickly. And there was a sudden shock to the system.
This year, it's more about the overall economy. Still having some troubles, and that's leading to traditional credit distress. People don't pay their mortgages or other loans, if they lose their job or their businesses go under, or whatever. So that's really more of what we're dealing with now. And it's very challenging, too, but it's more of a traditional credit distress environment.
We'll get through it. We'll get through it.
And the good news is the banks are lending, especially the smaller banks are doing, actually, the best job, it looks like, at lending right now. So, the insured deposits are there, and that's another good reason to have deposits in an insured account. That money can be intermediated and loaned back into the community.
VELSHI: Right. It gets money back into the system. It's the oil in the system.
Great to see you again. Thank you so much.
BAIR: Nice to see you. You bet. Bye-bye.
VELSHI: Sheila Bair is the chair of the Federal Deposit Insurance Corporation.
