Erica Hill and Ali Velshi
AC360º

Ali Velshi | Bio
CNN Chief Business Correspondent

Despite the 4th biggest bankruptcy in US history, and the largest industrial bankruptcy ever, markets are up strongly.

The Dow started 2009 at 8776.39. It is close to that level now, nearly erasing ALL of this year's losses for the first time this year.

The S&P 500, which started the year at 903.25, is well above that level (although it has been on the plus side previously this year).

Program Note: Tune in tonight to hear more from Ali Velshi on AC360° at 10 p.m. ET.

Ali Velshi | Bio
CNN Chief Business Correspondent

It's down to the wire for GM.

The nation's biggest auto maker has until Monday to come up with a viable plan to save itself, or the government will force it into bankruptcy like it did Chrysler.

But the time probably doesn't matter.

GM's bond holders (the people who lent the company money) refused a deal to swap their debt for part ownership in the ailing company.

GM paid its hourly staff today, instead of Friday, and word is many suppliers have also been paid, paving the way for the company to file for Chapter 11 bankruptcy protection before this week is out.

I'm on my way to a bar, ironically called "bamboozled" across from a GM plant in the Detroit suburb on Warren, to talk to workers about the fact that the end of their careers may be near.

Sadly, I have made this trip to Michigan too many times. I'm rarely here for good news.

The irony is that this trip WASN'T for the GM story; it was to go for a ride around the test track with Ford CEO Alan Mulally about his (somewhat successful) efforts to turn that company around. Right now, he's a bit of a shining light in Detroit.

We'll bring you parts of that discussion later this week.

Anderson Cooper and panelists discuss whether or not the economy is rebounding, despite the increase of unemployment.

Ali Velshi | Bio
CNN Chief Business Correspondent

539,000 US Jobs were lost in April, substantially better than the 590,000-600,000 that were expected.

Notably, that number is MUCH lower than March's 699,000 jobs lost. Some economists are suggestion that the worst for monthly job losses is now over.

5,700,000 people have lost their jobs since this recession began 18 months ago, in Dec '07.

13,700,000 Americans are unemployed now. That's the highest number of people unemployed since records started being kept in 1948.

As expected, the US unemployment rate now stands at 8.9%, up from 8.5% in March. This is the worst unemployment RATE since Sept. 1983 (25 years). At this point in the recession, though, the job losses are more important than the unemployment rate.

According to economists, the US would have to ADD jobs each month to keep the unemployment rate stable. Since we're not expecting to add jobs anytime soon, the unemployment is expected to peak between 9.5 or 10%.

Some Major job loses by industry:

149,000 Manufacturing
110,000 Construction
47,000 Retail

Some Major job GAINS by industry

72,000 Govt (66k for '10 census)
15,000 in Education & Health Care

Ali Velshi | Bio
CNN Chief Business Correspondent

In a continuing trend of "less worse" economic news, Initial jobless claims for the week ending May 2nd decreased by 34,000 from the previous week, to 601,000. This is the lowest it’s been since January, and lower that the 635,000 that analysts’ were expecting.

Still - continuing claims remain at a record high of 6,351,000. That's the number of people collecting unemployment insurance. More than that number are no longer collecting benefits, but are unemployed.

Also, General Motors reported a SIX BILLION dollar loss for the first quarter, continuing its march toward bankruptcy on June 1.

Add that to the budget stuff and anything we don't already know about stress tests (due out at 5pm) and we have a bunch of money-related news today.

All of the major stock averages have rebounded since hitting frightening lows earlier this year and experts are predicting an end to the recession soon.

But is the worst over? For more from Ali Velshi, check out his interview with CNN.com about what to expect.

Program Note: Tune in tonight for a full report from Ali Velshi on AC360° at 10 p.m. ET.

Ali Velshi | Bio
CNN Chief Business Correspondent

One of America’s most reliable economic forecasters says the current recession – the longest in half a century – will end this year, possibly as early as this summer.

Lakshman Achuthan, Managing Director at the Economic Cycle Research Institute (ECRI), was one of the first to declare that the US was in a recession. Now he’s one of the first to say its ending. ECRI, he says, is the research group in the world that studies business cycle recessions and recoveries for a living, and has a near-perfect record of predicting. They do it by crunching various pieces of data and creating “leading indicators” which show where the economy is headed

The indicator that looks the furthest into the future actually started showing signs of future growth as early as last November, as the worst of the credit crisis started to ease. Another indicator, with a shorter lead-time into the future, started pointing toward growth in early December. Both indicators have showed steady growth since then and that, says Achuthan, is enough data for him to say this recession is ending. That’s because, over the last 75 years, when those indicators turn up, the recession ends within four months. No exceptions, says Achuthan.

Achuthan points out that these same indicators predicted the current recession, by turning downward BEFORE the recession began. Specifically, Achuthan notes, his leading indicators turned downward in Early June, 2007; the current recession “officially” began in December of that year. Because of that, Achuthan was able to announce that the US was in recession some NINE MONTHS before the National Bureau of Economic Research, which is the official arbiter of recessions, did.

But don’t buy the party supplies just yet. The end of a recession simply means that things will start becoming “less negative.” A top adviser to President Obama says the economy will again shrink in the 2nd quarter of this year – that’s the period we’re in now. But Achuthan declaration doesn’t really counter that – he doesn’t think recovery will start until the 3rd quarter – sometime after June.

But how do you have a recovery if job losses continue? The Labor Department says 6,300,000 people are now drawing unemployment benefits – that’s a record. And a number greater than that are unemployed but NOT collecting benefits, because their benefits have run out.

Achuthan worries that during a recession, we all become more productive, by working with less (we fill in when our colleagues are laid-off, for instance), and so you don’t need to hire all of those people back for the economy to recover. The danger of that is that many millions of people who have lost their jobs may not get them back in this economy – and that can create great disparity in society – “haves” who have more; “have nots” who have less.

Program Note: Tune in to hear more from Ali Velshi tonight on AC360° at 10 p.m. ET.

Ali Velshi
CNN Chief Business Correspondent

On May 4th, The Administration will unveil the results of the “stress tests” that it is conducting on the country’s 19 largest financial institutions. The goal is to figure out – in the government’s worst-case scenario – how much MORE taxpayer money the government may have to put up to prevent a major collapse. The government is not likely to detail each bank’s financial position, for fear that new of an “unhealthy” bank could trigger a run on that bank by both investors and customers, thereby hastening its demise. But it IS likely to say something like “if unemployment were to increase dramatically, and home prices were to drop by a certain percent more, we’re likely to need this amount of money.”

Until the government finishes its tests, it’s not likely to even discuss taking back any of the big money that it has lent those big banks, despite the fact that many of them have reported profits for the first three months of this year, and say they WANT to give the money back. That could put $88 BILLION back into TARP’s coffers (right now the government has about $115 BILLION left of the $700 BILLION, and is counting on about $20 BILLION coming back.); money that can be used for other banks, preventing the administration from going back to a Congress without much of an appetite to lend more taxpayer money to Wall Street.

SOME OF THE BANKS CONSIDERING RETURNING TARP FUNDS:

• Bank of America $25 billion
• JP Morgan Chase $25 billion
• Wells Fargo $25 billion
• Goldman Sachs $10 billion
• Bank of New York $3 billion

Seems like a no-brainer and, in most cases, they’ll probably be allowed to give the money back. According to recent reports, the government is likely to want answers to the following questions before allowing the banks to give their TARP money back:

• How will it affect stability in the financial system overall?
• Will it encourage banks to engage in dangerous borrowing of their own?
• Will it leave enough money in the system to provide adequate credit?

Program Note: Tune in to hear more from Ali Velshi tonight on AC360° at 10 p.m. ET.

Ali Velshi
CNN Chief Business Correspondent

President Obama delivered a speech in which he outlined what the government is doing – and has done – to get out of this recession, which is now (I think) in its 17th month. Federal Reserve Chair Ben Bernanke said today that there are "tentative signs" that the economy's slide is slowing, but that a full recovery won't come until the financial sector stabilizes.

Markets are having a rough day, largely because of some economic indicators that show things aren’t all that rosy. Retail Sales for March, as measured by the government, were weaker than expected, after seeing what seemed to be an uptrend. And inflation continues to be lower, as consumer demand fails to pick up.

So where do we stand right now?

Banks are starting to show signs of life, but it may have something to do with the fact that they got low interest money from the government and got to loan it out at higher interest. TARP only has about $135 BILLION left (of $700 BILLION) and there’s no appetite on Capitol Hill to be giving Wall Street more money. BUT, a number of banks (Wells Fargo, Goldman) are talking about giving back their TARP money – this could end up adding $50-$100 BILLION to TARP. Still, we don’t know how this Treasury ‘Bank Plan’ is going to work.

The market has been up each week for 5 straight weeks – pretty impressive by any measure. Will the winning streak end this week? Is this just a “bear market rally” or is it time to get back into this market?

Unemployment is at 8.5% and most (including the administration) expect it to go higher; potentially, millions more jobs may be lost. Unemployment was at 4.9% when the recession started. Best case scenarios have us back down to those levels around 2013.

Housing prices continue to fall. Best case scenario is that they could bottom by the end of this year. Interest rates remain at more than 50 year lows. More houses are being sold, but at lower prices, because there are so many distressed and foreclosed homes on the market.

In the most recent CNN Money Summit, Ali Velshi and panelists discuss the good news from Wall Street last week and how much the economy has improved this year.

Ali Velshi
CNN Chief Business Correspondent

We’ve seen a week of positive indicators, capped with news that personal spending is up a bit.

- Mortgage rates remain at lows we haven’t seen in more than 50 years

- Markets are down for the day, but strongly up for the week – we are likely to see the 3rd back-to-back week of gains, which would be the first time that has happened since Roman Times (not really, but it’s been a long time)

- In fact, markets are up almost 20% from the lows that we hit on March 9th

- Have we hit a bottom, or just an “emotional” bottom (we’re over the complaining and are actually starting to look for deals.)

- The President is smokin’ the peace pipe with major financial CEO’s at the White House

BUT, unemployment is up in 49 states, and we’re a week away from an unemployment report that is expected to show that more than 600,000 people were laid-off in March, and that the nation’s unemployment rate increased from 8.1% to 8.5% (it was 4.9% when the recession started.)

AND, we have a CNN Money Summit tackling all of this tonight at 11pm ET.

Ali Velshi
CNN Chief Business Correspondent

The free-marketers are all over the government's "power grab" to more closely regulate large non-bank financial companies.

We've heard everything from it's "unconstitutional" because it violates unlawful search and seizure laws.

Others say the idea that there is a regulator encourages failure because someone will bail you out.

These arguments hold little water.

The FDIC is universally seen as the most effective and most successful regulator through this entire recession.

Geithner today is using the argument that that is the model he suggests using.

He's right on this one.

Program Note: Tune in to hear more from Ali Velshi on AC360° at 10 p.m. ET and make sure to catch CNN's Money Summit on Friday at 11 p.m. ET.

Ali Velshi
CNN Chief Business Correspondent

Get this: Markets are now higher since Barack Obama became president.

I mean the broader stock market. The Dow is still down slightly. But the S&P 500 and the NASDAQ are both up since their Jan. 20 close.

And the S&P 500 is on track for its best monthly percentage gain since - wait, are you sitting down? – since 1987.

What should we make of that?

Ali Velshi
CNN Chief Business Correspondent

What we saw happen in the hours after the Fed injected a trillion dollars into the economy last Wednesday was confirmed today.  Rates for a 30-year fixed mortgage dropped to 4.63%.

"Mortgage rates fell sharply to low levels not seen in six decades following the Federal Reserve's announcement on the Treasury bond and mortgage-backed securities purchase programs," the Mortgage Banker's Association reports.

But that's not all: on TOP of the uptick we saw on Monday in existing home sales, and on TOP of the banking plan that was finally detailed on Monday, orders for durable good were up.  Durable goods are manufactured goods that are built to last more than 3 years.  Everything from washing machines to military equipment.

After six straight months of decline, orders for durable goods suddenly rose, and rose unexpectedly.

All of these things signal some change.  Markets should react positively.  BUT, remember that as we start to regain some ground on markets, some investors will sell off to capture their gains, and choppy water could lie ahead - and, because I want to use one more analogy - the economy is an oceanliner, not a speed boat, according to the President.

Program Note: Tune in tonight to hear more from Ali Velshi on AC360° at 10 p.m. ET.

Ali Velshi
CNN Chief Business Correspondent

Basically the Govt has set-up a structure to allow it to partner with large private investors to buy the "toxic assets" from the banks. If it works, it will free-up up to a TRILLION dollars, which banks can then use to lend to businesses and consumers.

Follow-up questions:

"What's in it for the Americans?"

These are investments in the so-called "toxic assets." These are assets (real estate, other investments based on the value of that real estate) that are expected to increase over time. These are not "bailouts" but rather, purchases of things that are "taking up space" at the banks, but could be of value to others (think about selling your old, out of style ties on ebay, to someone who'll dry clean them, put them in nice presentation boxes, and wait until the come back into style). When the joint government-private funds that bought these assets sell them, it SHOULD make money for the taxpayer.

"Is this enough?"

Estimates for how much the banks need are as high as $2 TRILLION. Critics say this money may not be enough, but others say what's more important here is that a structure has been set up that hasn't been set up before. If it works, it can be expanded.

Program Note: For more from Ali Velshi on Geithner's plan, tune in tonight for AC360° at 10 p.m. ET.

Ali Velshi
CNN Chief Business Correspondent

...Timothy Geithner shows his hand. Coming out with MOST of the rest of the banking plan (final details will come at the end of April, when the results of the "stress tests" on the bank come in).

So far Wall St. likes the deal, putting the Dow above 7,500 before noon. The plan basically allows private companies to partner with the government to buy some of these so-called "toxic assets" at a good price, with government backing.

It's sort of like the government telling you it'll set aside the best, undiscovered antiques at every garage sale – the stuff that's taking up space for homeowners but the experts know are hidden gems, once they get cleaned-up and displayed properly. Not only that, but the government will come up with half the money if you want it (although when you polish-up and sell the antique, you split the winnings with the government). And if you don't have enough money to take part in this plan, the government will lend it to you.

It might look as if the government's giving up the ranch but, fact is, no one really knows how much the ratty old dresser is worth until someone actually buys it, and that could take time. Same thing with these toxic assets – they'll be worth something but the government needs to provide some incentive to get investors to buy them from the banks, so the banks can use the money to lend it to consumers and businesses.

Oh, by the way, there was a surge in the sales of existing (used) homes (as opposed to "newly-built" homes) and the market seemed to like that, too.

Timothy Geithner explains when he knew about the bonuses paid to AIG executives. To see more of Ali Velshi's interview tune in to AC360° at 10pm ET tonight.

Ali Velshi
CNN Chief Business Correspondent

While everyone is carrying on about bonuses, the Fed is actually doing three things:

"Injecting" $300 BILLION into the system by buying that amount of bonds back from the governments creditors. That puts $300 B into the world's economic system for use, possibly making some of that money available for large companies that continue to have trouble borrowing.

Buying up another $750 Billion in mortgages from Fannie/Freddie (bringing the total to $1.2 trillion). That gives F/F that much more money to buy mortgages from banks, meaning bank lending standards can loosen up a smidge. People looking to buy a house might now get the mortgage, at a good rate, that they couldn't get even a week ago. That means more people can buy homes, and home sales and value can increase.

And a third thing that is a little more obscure, but basically adds money to the system that offers up consumer credit – car and student loans.

Three REAL things that will have a direct impact on credit for real people while we continue to obsess about bonuses that make up less than 1% of the mountain of money that we've given AIG.

Ali Velshi
CNN Chief Business Correspondent

Markets were up on news that the Fed will inject more than $1 TRILLION of money into the economy.

The idea that this extra money will reduce the cost of borrowing, and help home buyers and consumers generally, lifted the Dow up 14 percent higher than the low that it hit during this recession.