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January 30th, 2009
05:24 AM ET

CNN Money Summit

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/01/29/ali.promo.moneysummit.jpg]

Ali Velshi | Bio
CNN Chief Business Correspondent

President Obama and his administration are facing America’s worst economic crisis in generations. The recession is entering its fourteenth month, fast approaching the longest recession ever seen. Job cuts continue to mount: 2.6 million in 2008 and this week alone, 110,000 more cuts were announced. As Americans continue to cut back on their spending, companies will be forced to cut costs, resulting in further job losses, and even less consumer spending. It’s a continuous, downward spiral.

And nearly as bad: there’s little agreement on how to fix any of it.

The stimulus package being kicked around in Congress right now has proven extremely divisive: legislation with a price tag approaching $900 billion tends to do that. Proponents say if passed it will create 4 million new jobs, but detractors contend that burying the government in even more debt isn’t going to help anyone. They say the best thing to do is cut taxes and let Americans get out and spend on their own.

But would Americans even do that? Most of us are running scared right now: we’re afraid to spend a dime over what we have to. Our jobs seem less and less secure with each new round of layoffs. Is anybody safe?

And it’s not like loans are readily available. Remember the $700 billion bailout for the financial industry that Congress approved in October? Well a full half of that has already been spent- doled out to banks and automakers- and still credit remains nearly frozen. Millions of Americans can’t secure a loan to pay for college, a car, or a house, and small businesses are struggling just to make ends meet. Spending continues to drop further and further.

So to whom should we look for help? Those Titans of Industry down on Wall Street? Given that each day seems to deliver even wilder swings in the market and more dismal corporate reports, I think not. Oh, and the Madoffs of the world aren’t exactly helping to gain back the public’s trust, either.

So, I ask: how do we fix the American economy?

Everybody's got an opinion.

For real answers, watch AC360° tonight for Ali Velshi and the best money team on TV in the first CNN Money Summit.


Filed under: Ali Velshi • Economy • Finance • Wall St.
soundoff (85 Responses)
  1. Reinhold Roth

    Compliance of the TARP and other bailouts could become a costly and difficult process that merits a reserve for each loan with the costs borne by the beneficiary. The reserve remains in effect until certain compliance targets have been met.

    I would also propose personal compliance guarantees from board members, officers and key employees up to the amounts of stock and bonus payments received over the last 3 years. Another twist is to mandate personal guarantees for a certain percentage of the total contributions requested by the company.

    This serves to distribute the burden of repayment among those responsible and also it might foster fiscal restraint.

    Former CEO of multinational company

    February 1, 2009 at 9:20 am |
  2. corinne

    STOP Forclosures immediately!. Keep people in their HOMES. If this was done last year – we would have STOPPED the domino effect! Now, whats happening homes are losing value daily! People will not buy any home that is continuously declining in value. This isnt rocket science.
    Bush Adm was negligent in not addressing the Forclosures
    Also, we need work programs immediately – in 1973 it was CETA Programs JOBS and JOB Training – WWC- WPA- Hurry we are all drowing!
    Even those who have jobs are not Spending!

    January 31, 2009 at 8:43 pm |
  3. John

    how many of these mortgages are on Second homes? I think it is a lot. Also, the foreclosure rates are high in coastal states....florida, california, las vegas. Not as bad in the balance of the US

    January 31, 2009 at 8:36 pm |
  4. Arturo Duran

    The so called mortgage crisis is just a consequence, it is as simple as go back to the basics : you spend more than you have, you end up in an economic crisis... Where doyou think the money to pay for two wars was going to come from ? plus a tax break ? plus shipping jobs to other countries ? follow the money... where is al the money we spend in the war ? who do we bought war supplies from ? mostly, outsourced....

    January 31, 2009 at 8:35 pm |
  5. Jim Laney

    people keep saying businesses need tax breaks and money to grow their business and create new jobs. What if they pocket the money instead, like the banks did recently? Why would they grow their business if no has the money to buy their products?? Wouldn't giving consumers money to buy the products be more effective?? I am not sure either is the answer to our economy in the long run.

    January 31, 2009 at 8:33 pm |
  6. Terry

    Mr. Velshi...you talk too fast....and sound too alarming. The sky is falling ....the sky is falling. Yeah...Yeah...Yeah...we've heard that already. I have a little bit more faith in this country. How come you haven't mentioned how these companies in January and February in a recession will cut back employees to protect the companies and so that at the end of year they are not so much in the red. They are doing good business. They will rehire ....probably at lower salaries....but they will come back.

    I don't believe the White House team is being totally truthful....I believe if you say the sky is falling enough times.....it's a diversion...and foolish programs will be slipped in as Pork and Pay for Play. Listening to Obama life is over as we know unless he saves us.

    Young and experienced.

    January 31, 2009 at 8:29 pm |
  7. Shirley Vinette

    I agree with Lanre, reduce the interest rate for primary homeowners, not rentall properties. Also, when did "Giants Get To Big To Fall??? The Giants should fall, at least they wouldn't be stepping/stomping on the Ants (taxpayers).

    January 31, 2009 at 8:05 pm |
  8. PG

    Why is the Govt. taking on banks/FIs bad assets? (BTW they should make great bonuses for their chiefs)

    Why not take the whatever $ x Trillion that would be necessary for these assets and create a couple of new banks around the country (away from NYC), with well defined model of governance, risk-reward benefits, and slowly sell their shares on the market.

    These new banks can start lending immediately and will succeed/fail based on their performance.

    All former and current executives and board members of the banks/FIs that accepted TARP funds should be barred from serving in any capacity on these new banks.

    January 31, 2009 at 2:12 pm |
  9. Joe Manuel Real Estate Broker Michigan

    Borrower Rate Reset to 3% will be like a Magic Wand to the Economy

    We all recognize that the United States economy is paralyzed and it would take trillions of tax payers dollars to re-kick started. My idea will change and turn around the economy in 3 month instead of a decade.
    The president need to order the banks to have a mortgage rate reset for every borrower in residential, commercial, industrial and investment real estate from the current rate to three percent (3%) This reset to be effective within 30 days after the president orders it into law and it should be for next 5 years. Some negative impact but the positive will over power the negative.
    Increase cash flow, this will increase spending and saving to retirements
    This will be an incentive for home owners to stay in their homes and save their property from foreclosure.Banks will reduce the inventory of properties that are being taking due to default.
    Less stress on government paying out stimulus packages.

    January 31, 2009 at 9:40 am |
  10. SJC

    “The American Dream is in jeopardy” maybe it’s time for a new dream? Maybe instead of a car in every garage and a large house and the feeling of entitlement needs to re-examined. The economy cannot grow forever the earth is finite and as such we can only extract so much from it before we can no longer extract anything else.

    On the note of credit and something for nothing, these days need to end. If you cannot pay you don’t get to play. It’s all about setting realistic levels of consumption and expectations.

    The banking system based on John Law’s idea that money needs to come to an end. The Mississippi Bubble was a scam and a failure yet we still use this idea. It is time to re-evaluate everything from the ground up.

    January 31, 2009 at 2:55 am |
  11. Susan Blanche-Kappler

    Please do some analysis comparing home price inflation to the stagnant average family income, and the roll this played in the development of creative financing to get the average family into a home in a market artificially inflated by speculation.

    January 30, 2009 at 11:58 pm |
  12. Charles R. Pickle

    Why not give $200,000 to every person in United States? We will pay our mortgages, credit cards, car loans, electric bills, heating bills, taxes and other charges that will help the United States Economy. This will in turn, help banks, the housing industry, retailers and the list goes on and on and on.....

    January 30, 2009 at 11:54 pm |
  13. Sandra Shelton

    The Wall Street executives who have just received billions of dollars in bonuses should be forced to pay it back. The excuse given, that a bonus is really a part of their salary and paid from the profits, is ridiculous. THERE WERE NO PROFITS, so they should not be compensated at the tax payer's expense. Their failure to understand such a simple concept indicates criminal stupidity.

    January 30, 2009 at 11:50 pm |
  14. Wes Snypes

    We are forming a group that withdraw all our banking and brokerage accounts from those firms awarding excessive bonuses and redepositing them in more humble firms.

    JOIN US!!!!

    January 30, 2009 at 11:25 pm |
  15. judy

    Rather than give the bail out to one bank, give it to small local banks. Let the big ones fall, they are the reason this has happened in the first place and they show no mercy to the consumer who is bailing them out.
    Twenty years ago we didn't have mega banks and we did just fine.

    January 30, 2009 at 10:28 pm |
  16. Ben P

    Regarding wall streets Bail-out Bonus Stucture – this story should not fade away and needs futher inquiry. What firms – what percentage went to average workers that require a bonus to sustain a actual living wage – and What percentage went to those whom enginered this mess in the first place. Shameful is one way of putting it – finding the money and getting it back is another. Accountable and transparency should be the headline

    January 30, 2009 at 10:11 pm |
  17. KatchProFILMS

    Great dialouge, by the way... I look forward to this.

    January 30, 2009 at 10:10 pm |
  18. Phil

    Think out side the box
    1st. remove all credit card credit; then people will have to save then spend. not spend then pay. But that is in a dream ; because
    most of use are not rich have forgotten the golden rule
    (the rule is ) S/HE HAS THE GOLD MAKES THE RULES;
    the gov & wall st are the law & rule makers. that is why we
    have 700 billion bailout (good buddies take care of each other)
    2nd make interest simple not compound 100,000 loan @
    20% interest = 120,000 '/. 120 months = payment of 1,000
    to simple; the common people will know when they are being cheated
    by our now legalized mafia loan shark interest rates
    simple is the key = K.I.S.S. ( keep it simple stupid )

    January 30, 2009 at 9:55 pm |
  19. elainemarie

    Hello.......If the stimulas bill is not going to do anything till 2012 its not a stimulas bill. That is because only 3% of it is for a stimulas for jobs. it is sreaming oink oink! Do your research and look at the facts.

    January 30, 2009 at 9:53 pm |
  20. Don

    Jobs baby jobs.

    The Small Business Administration has a “bag of worms” from reduced funding. It needs time to rebuild. Census Bureau facts about Small Business (SB): 89% of SB has < 20 workers, and 98% of SB has < 100 workers.

    These 2 categories have been given the “Texas Two Step”. Stepped on, and stepped aside.

    Solution: Inserting a 2 tier system, with mandatory percentages of participation, into all Federal funded construction contracts will level the playing field and put the genuine SB to work.

    January 30, 2009 at 9:18 pm |
  21. John O-Canada

    Ali,
    I do not understand why you agree to these bogus statement from wall street executives and bankers,that BONUS is important because the BASE PAY for these worker(Bankers) are small.

    It is a complete lie and outrageous statement,look these guys negotiate a decent base pays for themselves and get on top of that a decent bonus(we call that GRAVY)

    I know this because,I am in the same line of work,where you are rewarded with bonus if you perform.

    I did not make bonus in 2008 because business was slow and poor,but I have consistently made bonus for the last 6 years. These wall stReeters should be able and willing to sacrifice in order to get us all out of this mess.

    These people have residual income and can whether this turmoil and that is why you see them on CNBC all day complaining and criticizing President Obama for trying.

    Lastly,don't go MR SOFTY on RUSH LIMBAUGH give it to him,take him on and argue the point in the public arena.......use your medium for the debate (CNN).......RUSH does not get people loosing their home and jobs, it since he has a multi million dollar contract.

    January 30, 2009 at 8:40 pm |
  22. David Burnham

    I have an idea for getting the economy going. What we are losing is the backbone of America. If the Government did a 90 day moratorium on foreclosures and make the Banks find a way to keep the people in the houses because they already have too much of an inventory of homes, condos, apartment complexes, Ect. If the Government started with giving $10,000.00 to each home owner (that is their only home) and lives in that house a grant with a prevision that they have to spend the money to fix, repair, upgrade their home. It won’t cost the Government that much money; in respect to some of the money they are wasting in this stimulus, to enact this project rebuild America. If we as Americans start rebuilding our homes, all the small business that buy products from the larger Corporations and everybody in between that makes a living. The sales people, the delivery people, Ect. If the Government doesn’t find a way to get money to the people to spend on goods we will lose the backbone of America.

    January 30, 2009 at 8:37 pm |
  23. Mike, Zephyrhills, FL

    Ali,

    Do you think it would be wise for Wal-mart to allow the unions to come in and start getting the plan down and live with it, versus being forced to accept it?

    January 30, 2009 at 8:31 pm |
  24. David Jones, Las Vegas NV

    Curious as to why we focus billions of dollars on large companies that only want to get larger. Why doesn't the government look to help more small businesses?

    January 30, 2009 at 8:31 pm |
  25. Teegy,Atlanta

    The most forgotten ones are the elderly living on SS alone.They worked hard hoping to have a peaceful quiet life.A lot of them have lost their life savings also because of the greed in the society.With out any shame or prick of conscience some appeared on the TV as if nothing happened.I am afraid we are too forgiving.The SS will not cover even the medical expenses leave alone the other expenses.They contributed their share now it is our duty to take care of them.I strongly suggest the SS should be doubled on monthly basis until the economy grows normal.Then the recipients will receive only the original amount.

    January 30, 2009 at 8:18 pm |
  26. Jan

    Is there no way for the media to publish names of all the recipients of these Wall Street misuses and bonuses and embarrass them into returning them to the fund or immediately lending out that amount? Can the feds not demand this money back? Can the feds not demand that banks who are sitting on their rescue funds rather than lending them, start to lend them out immediately?

    January 30, 2009 at 8:15 pm |
  27. Mike, Zephyrhills, FL

    Bonuses ,.

    Its not only Wall Street, its Corporate America !!

    CEO’s for example, Steve Fishman, of Big Lots, he makes a 1million a yr salary, but after options and bonuses he makes 9 million.

    Thats $4024 dollars an Hour, while he employees makes on ave $7.50 an hr, and can not get benefits, nor full time, no stock, nothing, juts a small weekly check and they still want you to do more everyday.

    Fishmans, car allowance and his benefits coem to more than $50,000 a yr, more than any store mgr makes.

    Wal-marts around $13,000 an hr, on and on!!

    This is wrong!!! This is the reform and stimulus we need, make it fair again. We will work , but it has to be fair!!

    January 30, 2009 at 8:07 pm |
  28. kalyn

    The stimulus pkg money should be divided out to help main street and create jobs and that is all!!
    ..No more money to the banks, they got their bail out and they need to figure out how to fix their own problem. Since the TARP bailout, banks have done nothing to assist people who are in foreclosure, they have not loosened the credit crunch so let them suffer. they knew very well when they got their cut of the TARP funds what it was suppose to be used for..they are like children who just continually break the rules.
    A $500 tax credit is not gonna help to stimlate the economy. A big chunk of this $850 Billion needs to go to average Americans & small business. How many more bail outs & deficit are we going to run up to keep the banks in there luxury offices, corp jets??

    January 30, 2009 at 8:04 pm |
  29. April Venegas

    I purpose that in order to pump some real money into our staggering economy that we Introduce a Green Global Bailout Fund, and each person that chooses to, donate $2.00 of they're pay check each week,(it averages to about $104.00 per year} at the end of the year they can take a write off for that donation, at least some of the money would come back to them. This would create an instant cash flow to pay off this $800 billion dollar Bailout and pay down our current deficits, once that's done we can channel the monies into Health Care, Schools, Renewable Energy, think of the possibilities! The Preamble to the Constitution reads" We the people in order to form a more perfect Union " we are the people and we need to keep this country strong in the face of adversity! What say you?

    January 30, 2009 at 7:51 pm |
  30. Mike, Zephyrhills, FL

    Whats wrong with protectionism?

    Right about now I could use a little protection!!

    So its to make sure we dont start a trade war? Is that really the items we need to worry about?

    So if we made our own clothes, shoes, towels, furniture, etc... Things we need and use, not the things we want, that a bad plan? why?

    Guess we would rather send billions to China, like the Middle East for Oil, and then we can borrow the money back and pay them interest.

    So we are trying to get off foreign oil, why not foreign goods?

    Guess it is too simple for my small brain to comprehend!!

    What happens after the everything is green? upkeep wont keep us all employed and its specialized like utility workers now.

    Hmmm!!!

    January 30, 2009 at 7:49 pm |
  31. Mike, Zephyrhills, FL

    Green JObs!!

    Thats all wonderful! Today Biden says Green Energy means more disposable income for americans.

    Well lets see the facts, Utility Companies and Investors have foreseen this, so almost all companies asking for on average, 25% rate increases and extra fees. So many items listed on your bill now , for this fee or this cost etc...

    Solar and Wind Power , State officials are now being lobbied by utility companies and big oil to stop and pass or enforce little known laws , prohibiting regular citizens from installing and selling energy back to the grid.

    Here in FL, every home could have a solar panel and cut utility costs in half or more. Where is the stimulus to get us these panels?

    I dont trust any company , some now owned by Big Oil and other cronies to ever let us have cheap energy.

    In MI we have to pay securitization charges, to protect reactors, hope they dont charge to protect wind turbines and solar farms. Look Out!!

    I hate to be so negative on such a wonderful thing, but its business as usual unless we change it!!

    January 30, 2009 at 7:37 pm |
  32. Albert L. Mole II

    Ali Velshi i personally think M.r Lambach needs to quit being a loudmouth and get off his OXi prone soap box and stop attacking others

    January 30, 2009 at 6:56 pm |
  33. Dot

    Please, Please, please tell Rush that you will not response to him because his lack of interest in getting an college degree. He was giving a push by his day money and uneducated GOP cronies. Please tell him that him that GOPs follow uneducated people but the rest of the world will rely on you the expert!!!!

    January 30, 2009 at 6:53 pm |
  34. Don S.

    To jc, If you mandate the Gov. to make a 4% interest rate for people in good standing, that really doesn't do as much good as you think. It leaves a lot of people out of that plan.

    Those in good standing can still be upside down on their mortgage, bank just won't refi people for 100%+. And those that are not in good standing, well the underwriting especially now just won't allow it.

    I was as a first time home buyer, in April 2006 got approved for a $0 down at 6.5%. Couldn't find the home I liked and kept looking. Got re-approved in May of 2007, Couldn't get a $0, had to have 3% down min. and the rate was 6%. Kept looking, now I can get a 5.5% rate, but I need 10% down Minimum. With a Fico of score of 800+ and I am looking at the $170 to $190K, which in my area doesn't get you a whole lot.

    Point is homes droped some, but not enough cause the upfront cost are now much more. You can drop intrest too 3%, the fact remains when the banks get to requiring 20% down, Saving up $38K for a down takes some time.

    January 30, 2009 at 6:15 pm |
  35. Don S.

    Liken to an avalanch, it takes a certain order of events to make the snow unstable. Yet there usally needs to be a trigger. A skier, hiker, a snowmobile going across the unstable snow.

    The trigger highly inflated house prices. That was the trigger that caused this financial avalanch. You want to dig out of this mess that is what has to be fixed first. Stop our officals from trying to keep home prices inflated. Let the market run it's course. It's gonna hurt, and it's gonna hurt bad. But the quicker the house prices fall the quicker we will hit the bottom, and can stablize that market. Instead of trying to backstop house prises and further dragging this out.

    Our elected officals have tried just about everything to stop the bleeding, Lower interest rates, give tax cuts on homes, House buying programs. But with leanding tightening up it's lending underwriting. The houses have to become more affordable. THAT IS HOW YOU WILL SELL THE GLUT OF HOMES ON THE MARKET!

    January 30, 2009 at 6:00 pm |
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