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CNN Saturday Morning News

Interview With Jerry Idaszak

Aired January 12, 2002 - 08:29   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: Is the Enron collapse a sign of broader trouble in the economy and when will the overall economy improve for consumers, a couple of questions without easy answers, of course. And for some economic insights we turn now to our guest, Jerry Idaszak of "Kiplinger's Personal Finance" magazine.

Jerry, good to see you.

JERRY IDASZAK, "KIPLINGER'S PERSONAL FINANCE": Hello. Good morning.

PHILLIPS: Before we get to Enron, I want to talk a little bit about Greenspan and what he had to say during his speech. And that is that he talked about these significant risks that are about to, or to, going to happen. As we look at our future, he mentioned that there were short-term significant risks. Can you speculate on what those are?

IDASZAK: Well, there's a lot of speculation about when the economy is going to start to improve and several economists in recent weeks have been saying that the bottom seems to have been reached in December and that we're back on a slight, gradual incline that's going to take us into the spring and that things will be picking up even more in the summer.

Some people see the economy more, moving more slowly in terms of a recovery. If you look, if you think of the alphabet, the people who see a slow recovery seen an "L." The people who see a strong recovery see a "V." And I think what Greenspan was warning or was thinking was, not to put a letter on it, but more of a W. That is, we'd get a bounce upward in the first quarter or toward the spring but it wouldn't be sustained.

He's concerned that business, company profits are still hard to come by and business confidence is low. Businesses aren't buying new equipment, new plants. There's still a lot of excess capacity. And he's worried about the economy sort of taking off and then sputtering again and he's just trying to be cautious.

PHILLIPS: Well, he talks about encouraging signs of stabilization also. Do you see the same thing?

IDASZAK: Well, if you look at the jobless numbers, unemployment is still going to rise, but that always does rise, even as a recovery comes about. The claims for unemployment compensation and unemployment insurance seem to be leveling off, decreasing a bit. There's some indications from the manufacturing and purchasing managers survey that manufacturing is showing signs of kind of picking up. The stock market has been a kind of a positive in the last two or three months, more days up than down. Consumer confidence is up. Housing prices are still rising.

And so those are all, if you take them all together, there are a lot of good signs, positive signs.

PHILLIPS: Well, let's talk about the Enron fiasco. Three things I want to try and tackle in the short amount of time that we have, Jerry, and that is how it's going to affect the economy, also the energy sector, and even more so, 401(k)s, not only for the employees, former employees of Enron, but also folks that have invested in Enron.

IDASZAK: Well, those are all really complicated questions and you're right, we could go on quite at length about any of those. Short answers on all of them, the economy, it doesn't, there were some concerns in October and November that the collapse might affect interest rates and the bond market similar to long-term Capital Management's collapse or near collapse in 1998.

That didn't happen. There's some interesting phone calls that were made by, apparently by Secretary, former Treasury Secretary Rubin, by Enron officials toward Treasury officials. They didn't, they didn't take any action toward the bond market or toward the rating agencies.

So the effect on the economy doesn't seem to be that large. It's going to have an effect on, I think, going forward, on energy policy, what companies can do and how they go about doing their business. The impact also will be large on accounting, securities oversight, and, as you mentioned, 401(k) investing, all of which put it in the legislative arena. Many of those things would require change in laws by Congress and I think you'll see a lot of hearings through the rest of the year looking at various aspects of this.

PHILLIPS: I think it's going to go even longer than a year, that is for sure.

Jerry Idaszak from "Kiplinger's Personal Finance" magazine. Thank you so much, sir.

IDASZAK: Thank you.

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