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Al Qaeda's Funding and the Death of Osama bin Laden; Debt Ceiling as Policy Tool/Job Creation Up in April; Where the Jobs Are; Overhauling the Fed; Good Times for General Motors; Wal-Mart Tops Fortune 500; Mortgage Rates Drop Below Five Percent; Has the Bubble Burst?; Hurting in America
Aired May 8, 2011 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, HOST: Al Qaeda has lost its leader, but has the terrorist organization lost its funding?
I'm Ali Velshi. Welcome to YOUR MONEY.
Funding for terrorists -- where does their money come from? What role does Pakistan play in financing al Qaeda? In a moment, I'm going to ask those questions to the man who is tasked for finding those answers for the U.S. Treasury Department.
But first, let's bring in Matt Levitt. He's the director of the Stein Program on Counterterrorism and Intelligence. Matt, what does the death of Osama bin Laden mean for the ability of al Qaeda to raise money to carry out terrorist attacks?
MATTHEW LEVITT, SENIOR FELLOW, WASHINGTON INSTITUTE: The fact that we were able to penetrate the core of al Qaeda has to put fear in anybody who is doing anything for al Qaeda, including the people who are raising money and the people who are donating money. That may make it more difficult for them to raise money in the short term.
On the flip side, being able to walk around with a picture or video clip of bin Laden on your cell phone may be able to be a fund-raising boon in the near term. I really don't think it's going to have much of an impact because much of the fund-raising is beyond the core.
LEVITT: Al Qaeda in the Islamic Magreb in North Africa does kidnappings. Al Qaeda in the Arabian Peninsula uses major donors. There's a lot of crime going on. Because it's been pushed (ph) out (ph), I don't think that the capture of bin Laden will necessarily affect their ability to raise funds unless the information that's been collected in this treasure trove includes great leads on finance, which it may.
VELSHI: All right, so there are a couple of issues here -- where they get their money and how they spend their money. We've spent -- we meaning the United States -- has spent $424 billion in the past 10 years to fight terrorism. It costs terrorists a lot less money to attack. The estimates are that it was about half a million dollars to pull off 9/11, $15,000 for those London bombings. The failed Times Square bombing attempt was estimated to have cost as little as $5,000.
We're hearing, Matt, that Najibullah Zazi, you know, financed his attack with credit cards and a home mortgage using the U.S. banking system. It has gotten exponentially easier to pull off an attack, has it not?
LEVITT: It has, and this is something their adversaries like to make great play of. If you look some of the latest propaganda to come out of Al Qaeda in the Arabian Peninsula, Anwar al Awlaki's "Inspire" magazine, they make this point. The Christmas day Detroit airliner attack may have failed, but look at how much money it cost you and how little it cost us.
But there are large infrastructure costs to groups like al Qaeda. The U.S. military at one point captured documents in Iraq, and al Qaeda in Iraq had a huge costs taking care of the families of their operatives. But even if it's not expensive to carry out an attack, following the money can identify other individuals within these networks, follow those trails up and down the financial pipelines, and on the flip side, stemming the flow of funds to people who need it. And if you don't capture the funds, but if you make it more difficult for them to access money where they need it...
LEVITT: ... you can make it difficult for them to carry out an attack, even if it's a relatively inexpensive attack.
VELSHI: Matt, stay right where you are for a moment. I want to welcome David Cohen. He's the acting undersecretary for terrorism and financial intelligence at the U.S. Department of the Treasury. He works counterterrorism, basically, for the Treasury Department. Matt just talked about following the money. You're looking at the guy who has to follow the money. David, tell us, where does al Qaeda get its money from?
DAVID COHEN, ACTING UNDERSECRETARY, TERRORISM & FINANCIAL INTEL., TREAS. DEPT.: Hi, Ali. Well, al Qaeda traditionally has received its funding from donors in the gulf. And we, over the last several years, have been dedicated to disrupting those financial networks that emanate from the gulf, going after the donors, going after the fund- raisers, the facilitators, the financial institutions that may be involved in moving that money, and as a result, have had some pretty good success in putting a real strain on al Qaeda core's finances.
VELSHI: How do they -- how do they move money around? We all heard that Osama bin Laden had 500 Euros sewn into his clothes, ready to make an escape. But when they do raise money -- let's say somebody in the gulf says they're giving some money. How does that money move around?
COHEN: Well, today, it is primarily moved by couriers. Once it is collected by the fund-raisers, the bundlers, it is then generally passed off to couriers, who actually move the physical currency out of the gulf into -- whether it's Pakistan or elsewhere, where the extremist groups are operating. We have had, I think, quite good success over the last several years of pushing these terrorist organizations, al Qaeda in particular, out of the formal financial system and forcing them to rely...
COHEN: ... on much more difficult means of couriering money around.
VELSHI: Well, there's a lot of questions, obviously, about the degree of support that al Qaeda gets from Pakistan. Do you -- have you been able to discern any specific financial support, either from Pakistani authorities or military or intelligence or from donors in Pakistan?
COHEN: No, Ali, it's far too early to make any kind of judgment on whether there's any sort of support that was provided, in particular for bin Laden's house there in Abbottabad. We are currently very much engaged with the intelligence community in going through the material that was taken from the house, using the unique expertise and capabilities of the Treasury Department's intelligence office to comb through that material and look for leads with respect to financing, wherever they -- wherever they may lead.
You know, I'm hopeful that we're going to find some interesting material in there.
COHEN: If I were a donor or a fund-raiser, a facilitator, I would be quite nervous today.
VELSHI: I'm assuming that they don't keep lists the way the sort of a congressional campaign would, but you guys know how to dig through that stuff, so hopefully, you'll find stuff.
One thing that's interesting is -- Christine and I were talking earlier in the week, that this might -- this feels a little bit like organized crime. You are involved, as well, in tracking organized crime. Are there similarities in how you combat, let's say, the Mafia versus international terror organizations like al Qaeda?
COHEN: Look, the underlying similarity is that we need to follow the money. Whether it's an organized crime group or a terrorist organization, they all need money to keep the organization going, from training, recruiting, paying the operatives, buying supplies. And if you can go after the money supply, you can substantially weaken their ability to operate.
COHEN: And so that's -- that is the fundamental theory behind what we do in my office at Treasury and that we do with others around the U.S. government, and frankly, around the world, in trying to cut off the money supply.
VELSHI: David, good to have you here. Thanks for telling us a little bit about this. David Cohen is the acting undersecretary for terrorism and financial intelligence with the Department of the Treasury.
Let's bring Matt in for a second, Matt. Levitt. You got to hear that conversation, Matt. With respect to Pakistan, what's your best educated guess as to the role of Pakistan, whether formally or informally, in funding al Qaeda?
LEVITT: My guess is that Pakistan as a country does not have an interest in funding al Qaeda. If there was support -- and we don't know yet that there was -- of any formal kind, it would be from individuals maybe who have government positions, military positions, or our biggest concern is positions within the ISI, the intelligence service. And that's something that, as David said, the government is looking into very, very carefully.
The bottom line is, even without financial support from the Pakistani government, we're concerned that the Pakistani government hasn't been doing everything it could do, and that kind of passive tolerance, the failure to do everything in your power...
LEVITT: ... that, too, would be something of great concern.
VELSHI: Matt, good to talk to you. Thanks very much, as always, for joining us.
LEVITT: A pleasure.
VELSHI: Matt Levitt is a senior fellow with the Washington Institute and a former FBI counterterrorism analyst.
All right, from the global terror threat to the imminent global financial ceiling. The debt ceiling -- time is running out to raise it. What could happen if we crash into the debt ceiling?
VELSHI: The government you want versus the government you are willing to pay for -- it's at the heart of all of our money and politics issues these days, the debt ceiling being no exception, early August now the drop-dead deadline to raise the nearly $14.3 trillion debt ceiling. That's the limit on the amount that the United States government can borrow.
Now, remember, this is not an issue of new spending. Raising the debt ceiling would enable us to pay the bills that the United States has already committed to. First question, pretty straightforward, should we raise the debt ceiling? You were asked -- this is according to a CNN Opinion Research poll -- 60 percent of you said, No, don't raise it, according to our latest polling. Just 37 percent favor raising the debt ceiling.
Now, I doubt he was polled, but Treasury Secretary Tim Geithner would be among those in favor of raising it. He says it would be a catastrophe if we don't do it. In fact, 58 percent of you say that not raising the debt ceiling would result in major problems, at the very least, if not a full-blown crisis.
This is math I do not understand because it was the same people who were polled. So 60 percent of you say, Don't raise the ceiling, 58 percent of you say, Uh-oh, if you don't raise the ceiling, things are going to be really bad.
Jeanne Sahadi, senior writer for CNNMoney. Jeanne, we elect our politicians and let them know quite clearly that we don't want the debt ceiling raised because it'll cause major problems. Has this debt ceiling debate become entirely irrational?
JEANNE SAHADI, SENIOR WRITER, CNNMONEY: Yes, it sort of started out that way, in fact because we're using the debt ceiling for the wrong reason. It's not, as Susan Irving at the Government Accountability Office said, a policy tool. It's basically the end result of what we've already decided to do.
SAHADI: So in the poll, you know, Americans are saying, Don't raise it, we want to cut spending, we want to control the debt. It's...
VELSHI: It's a little like having an argument in your house about how much credit card you've run up, and instead of saying, We're going to spend less, you say, Not paying the bill.
SAHADI: Correct. In fact, Treasury Secretary Tim Geithner equated it to deciding you're going to prioritize, you know, your mortgage payments but not pay anything else, for those who say, Well, we can just pay the interest and we'll be fine. We actually do have revenue coming in to pay the interest, but we're not going to have enough revenue to come in -- coming in to pay a lot of our non-defense discretionary spending every month.
VELSHI: All right...
SAHADI: So that's what Americans say they want.
VELSHI: Mark Skoda is the founder and chairman of the Memphis Tea Party. He's a friend of our show. Mark, to those who say that raising the debt ceiling is not a policy tool but an obligation, something we have committed to already, what do you say?
MARK SKODA, FOUNDER & CHAIRMAN, MEMPHIS TEA PARTY: Well, I think we disagree, clearly. Let me say this. Look, I understand the policy issues, and certainly, we've made the decision to spend. But this has now gotten to the point where we see a Congress which is incapable of making rational decisions around our debt and deficit. And I think, at this point, while traditionally, the debt ceiling has not been a policy issue, it must be a policy issue this time.
And frankly, the notion of credit card debt -- of course, you're right, you pay your debt -- we will not default as a nation. We can pay our foreign creditors and domestic creditors and absolutely... (CROSSTALK)
VELSHI: ... stop you there. I hear what you're saying. I hear what you're saying. But the fact is, when you don't raise the debt ceiling, somebody won't get paid. So I guess, technically, that's not default, but it is not living up to your obligation. That speaks to the full faith and credit of the U.S. government, the thing that has been at the heart of faith in the United States for decades.
SKODA: Well, it's called a layoff. Corporations do this all the time. When their revenues go down, their profits are decreased, they lay off people. They restructure organizations and they restructure their operations. The government has never restructured its business. It has never lost a program. It has never downsized a program. It is -- it is by itself a problem in the sense of the discussion that's going on now.
The debt ceiling must not be raised unless there is substantial commitment to reduction in spending. We're at one point -- look, we have spent nearly $6 trillion in stimulative spending in terms of TARP, the stimulus package itself. We certainly had the GM-Chrysler bail-out. We had $600 billion this last six months in QE2...
SKODA: ... $300 billion the first...
VELSHI: Yes, but that's not debt spending. Most of that doesn't come out of the debt but the Federal Reserve. Hold on for a second, Mark. Let me bring Will Cain in. Will's a CNN contributor. Will, you're a conservative, and you feel that minus the Tea Party, Republicans and Democrats would have been able to hammer out a deal to raise the debt ceiling.
WILL CAIN, CNN CONTRIBUTOR: Well, I don't know that I necessarily feel that, or if it's true. Look, you're telling me the Tea Party threw a wrench in the little Democrat-Republican Party that racked up $14 trillion in debt and $100 trillion in unfunded liabilities? Gee, that's a shame they disrupted that party.
What I have said is I don't think that the debt ceiling is the proper point at which -- or it's not the proper thing to hold hostage for what would likely be minimal gains. Now, if Mark's right that you can come out of this debt ceiling debate with serious spending cuts, well, then maybe it's worth it. But you have to understand the cost side of this, and that is you will send tremors throughout the world debt markets that the United States is a little iffy on paying its bills. And that's not worth small spending cut measures. It's worth it if you get real spending reform, and I'm doubtful that will happen.
SAHADI: Can I just jump in, too?
SAHADI: It's not going to happen not necessarily because people don't want it to happen, it's not going to happen because we don't have the time between now and August 2nd to get all of that done because, basically, what lawmakers are looking at is fundamentally overhauling how we run this economy, fundamentally overhauling our entitlement programs, our defense spending, our discretionary spending. It is -- it's not going to happen overnight.
VELSHI: OK, so...
CAIN: Let me say this, Jeanne. You're absolutely right, there's not time. But it's not just time that's a problem. We have history as a judge, as well, and there's been no willingness from either party to make real spending reform. And you said early on, Jeanne, the debt ceiling is not the proper policy point at which to try to achieve spending cuts. Here's the problem with that thought process. There was only three opportunities. In the current political...
VELSHI: ... the last budget?
CAIN: That's right. Let me say this...
CAIN: The reason there was only three opportunities, though, is because Democrats have shown an unwillingness to cut any dollars...
CAIN: ... Ali. They really have said every spending dollar is sacrosanct, from high-speed rail to Medicare. So with that being said, you have to force them into...
CAIN: ... spending cuts, and there were three points at which you could do it. This is one of those points.
VELSHI: Right. And after this is gone, Mark, there's one more, which is really the place where we should have it, and that is the 2012 budget.
SKODA: Absolutely. Look, I would prefer a rational discussion on real substantive overhaul of the budget process because then I would -- I would be very supportive of a debt ceiling increase if I saw mature congressional delegates talking about the real problem here, unsustainable deficits. We are not going to be able to continue to fund what is going on in Washington today, and regrettably, people in this country have to recognize that if we don't restructure, it'll be restructured for us. Look, S&P, as you know, fired the warning shot with a decrease in, quote, unquote, our...
VELSHI: ... our credit outlook, not really the rating but the outlook. SKODA: Outlook, the outlook. That's right. And so -- and I believe that -- and they based that not on the basis of the debt ceiling, they based it on Fannie Mae and Freddie Mac and the unfunded liabilities of our government, largely. At least, that's what's suggested by a number of the writers.
So look, I think -- as a mature individual, I want people to actually understand we can't spend this money. Now, the truth of the matter is the tax system is broken. It is completely untenable. And part of this is restructuring the way we raise funds to pay for our government. And there are many discussions out there around that. Certainly, the -- I will tell you, the president's own debt commission had a heck of a lot better ideas than we're seeing being floated right now.
VELSHI: All right, that's -- we'll leave it there. We're going to have a lot of opportunity to discuss this. Mark Skoda, good to see you, as always. Thanks very much for joining us. Mark is a founder and the chairman of the Memphis Tea Party. Will Cain is a CNN contributor, and Jeanne Sahadi, senior writer at CNNMoney.
All right, every month, the jobs data comes out. We ponder. We cringe. Sometimes we cheer. What does it really tell us about the true state of being employed in America? I'll tell you on the other side.
VELSHI: All right, we just got the jobs report for April. The unemployment rate is up to 9 percent from 8.8 percent. But I want you to forget that, and I'm going to tell you why in just a moment. This is what I want you to look at, the number of jobs added. We've gone all the way back to May of 2010, a year ago. Take a look at that. We had a nice pop back in May, but look what happened. That was after stimulus money ran out. That was after the census workers stopped working. We had a rough summer last year, and then we started to see things happening.
In February of this year, we started to get into those numbers that start to matter. And now in April, we had 244,000 net jobs created. That, by the way, was 268,000 in the private sector minus 24,000 government jobs lost. I never like it when jobs are lost, but I do like it when the growth in our jobs are coming from the private sector. That's where it's supposed to come from.
I want you to worry about that number with me, the growth in jobs. We are within striking distance of the number of jobs that this economy needs to be creating on a monthly basis to actually get our unemployment number, our rate, back down to where we were before the recession.
Let me bring in my colleague, Christine Romans, to give you some analysis on these numbers. Again, this is a much more hopeful set of numbers. Certainly not in a great place yet, but we're going in the right direction. CHRISTINE ROMANS, HOST, CNN'S "YOUR BOTTOM LINE": Right, moving in the right direction. Now for three months in a row, you're seeing the momentum at least hold. And you're right, the key here is to keep growing jobs like this and more to try to dig out of that hole that we made from the recession.
What (ph) we look here at some broad-based jobs gains -- retail, business and professional services. Manufacturing jobs were created. You saw mining jobs created, leisure and hospitality, health care. That's been a star performer throughout the recession.
VELSHI: (INAUDIBLE) yes.
ROMANS: Manufacturing even 29,000 jobs gross. So what the economists were saying, Ali, to close out the week was this was broad-based...
ROMANS: ... job creation, not as much as we need, obviously, to support everyone in this country who wants to work...
ROMANS: ... but moving in the right direction. Longer-term -- a couple of things in here. Long-term unemployment went down a little bit. The number of discouraged workers went down a little bit. Still got a lot of problem spots...
ROMANS: ... but that's the momentum that we're watching right now.
VELSHI: Manufacturing and leisure and hospitality, both could be led by the fact that we've had a low dollar for a while.
VELSHI: People are coming into the country. It's -- it becomes more effective for us to be exporting things. Hold on a second, Christine, because you and I get a lot of flak about this discussion. We are pleased about the way this trend is going, but there are a lot of Americans who say, This seems very out of touch with my reality.
Former "New York Times" columnist Bob Herbert is an author and a journalist. He joins me now. He knows this stuff inside and out. Bob, people are right to get a little frustrated with the media about this.
BOB HERBERT, FMR. "NEW YORK TIMES" COLUMNIST: They are. You know, we made the point off-camera that when people see gas prices talked about on television, it correlates one-on-one with what they're experiencing at the pump. With job creation, not so much. So you can have a good job number one month, and if someone has been out of work for six months or more, they're like, What are they...
(CROSSTALK) VELSHI: ... disconnected from them.
VELSHI: So we want you to stay because we're not disconnecting from you. We think it's important to talk about where these trends are going and let you know where the jobs are coming.
But take a look at this, Bob, the CNN Opinion Research Corporation poll, eight out of ten Americans now feel that the economy is in poor shape.
VELSHI: All right? Only 18 percent think it's good. Now, when we break down what the more important issues are, they are, absolutely -- the number one has been unemployment for a very long time. It's been years going on where unemployment is the number one concern. The number two concern is debt and deficit. The number three concern is gas prices, and that's relatively new because of this run-up in gas prices.
We've had a recovery. We've been in recovery technically for two years now. What's wrong with this picture?
HERBERT: What's wrong with this picture is that we do not -- we tend not to focus enough, both in the media and the politicians, on employment, which is the most critical factor. That's why people think that the economy is not doing well because so many people are unemployed, nearly 14 million people unemployed, a great number underemployed, working part-time, because they can't find full-time jobs. And a lot of the jobs that have been created in the so-called recovery have not been great jobs. They're service sector jobs, low paying, without much in the way of benefits.
And then one quick point on the latest job numbers -- 244,000 is obviously a very encouraging number.
HERBERT: It's an improvement over what we've seen. We need more, but it's an improvement. But you know, if I recall, 50,000 or 60,000 of those jobs were McDonald's jobs.
HERBERT: These are jobs that average $8 an hour, sometimes less, and some of those jobs are actually part-time jobs.
HERBERT: So you know, you can't get too giddy about this stuff.
VELSHI: OK, you have worked at this and you think that there is a solution. We're all ears. HERBERT: Yes. Well, we're moving in what I think is the wrong direction because I think the obsession with the deficit in the short term...
HERBERT: ... is not a good thing to be doing. We need to be investing in job creation because we need to create much more jobs, even more jobs than the latest numbers, per month if we're going to make a dent in those 13.5 million or so...
HERBERT: ... people who are out of work. And you're never really going to make a real dent in the deficits if you don't get a lot of people in the middle class working and paying taxes. That's how in the long term you begin to take care of some of these things.
ROMANS: Two things I think I know that we're all concerned about is teen unemployment, and when you look at minority teen unemployment, it's going up and up and up. Also about the long-term unemployed -- Ben Bernanke, the Fed chief, recently said in his press conference that people who have been out of work for six months or longer, they are -- they're at risk of atrophying their skills, losing an edge, losing their contacts. Yet does it feel to you like both parties have abandoned the long-term unemployed...
HERBERT: There's no...
ROMANS: ... and the youth unemployment, especially as we gear up here for another election season?
HERBERT: There's no question about it. First very quickly, the long- term unemployment -- I talk to so many people across the country who are in their 50s or so, let's say mid-50s, who have been out of work for six, eight months, a year, and they're absolutely worried that they're never really going to work again and...
VELSHI: That's very different from being 24 and being out of work.
HERBERT: Exactly. And they have reason to worry. To your point about youth unemployment, teen unemployment, and then now it's creeping up so that people coming out of college now...
HERBERT: ... are having a tough time...
ROMANS: That's your first step into the workforce.
HERBERT: ... finding a job -- that's exactly right. And the research has shown over the years that if you get a slow start in the employment market, that stays with you. Your earnings underperform for the rest of your life. And you hear the folks, when they're talking about the deficit, saying, you know, We have to look out for our children and grandchildren, the coming generations, and that's absolutely. But if you don't have jobs, if you don't have the kind of employment where they can raise families, where they can buy a home, then you're really damaging their future prospects.
VELSHI: Well, we are all on exactly the same page on this, that we think that jobs and the ability to retrain (ph) people is the -- should be the number one priority. Things have been a little muddled lately by a lot of political talk, but this needs to be where we focus on.
Christine, stick around with me. Bob, great to see you. Thank you for being with us.
HERBERT: Thanks so much. Really appreciate it.
VELSHI: All right, who is hiring, what fields, what areas of the country? We're going to get very specific on where the jobs are next on YOUR MONEY.
VELSHI: As I promised, we're going to give you some sectors that are hiring and tell you where those jobs are. Take Gilliam. You've seen him on the show, he's the CEO of Adecco one of the world's largest employment services companies, so he knows where they're hiring.
During the recession, you were here, you pointed out that temporary jobs serve as a leading indicator for permanent job growth. In other words, they come first and then jobs come later. This recession, this recovery, has been unusual in that we've seen these temporary jobs continue to grow for much longer.
TIG GILLIAM, CEO, ADECCO: Yes. I mean, look, the temporary jobs have definitely showed the recovery, they've led the way. We've seen the wave through the industrial category of jobs into office and clerical, now we're seeing strong strength in the professional skills and those are translating into permanent jobs. They've translated at the fastest pace through conversion of temporary workers. Clients have had experience of individuals, they have seen their demands solidify and they've said, hey, come join me on a permanent basis and then they've reached out for more.
VELSHI: So advice for our viewers -- a temporary job - you may not think you want temporary work but you've seen temporary work leading to full-time work.
GILLIAM: The best way to get a permanent job today is to get a temporary or contract opportunity and prove yourself with the client, that's the best path to a permanent job.
VELSHI: Are companies not hiring permanent workers because they're concerned about the economy. Are they not doing it because we've got a trend toward temporary work, because it costs the company less in terms of benefits? GILLIAM: It's not a benefit statement most of the time. When they have demand, they have to fulfill the demand in the capacity they need. They do that first on a flexible basis because they're looking for the skill sets they need on hand, and they can do that best with temporary workers. Then when they've got the confidence that their business prospects are good, the economic recovery is strong, then they're willing to bring them on full-time.
VELSHI: Let's look two specific sectors that Christine and I like to talk about, health care. Health care added 37,000 jobs in April. Health Care has been a big gainer throughout the recession, before the recession, since the recession. This year alone, 295,000 Health Care jobs added in this country. Where in the country and what kind of jobs are we talking about?
GILLIAM: This is across the board in Health Care and a lot of this is driven by the demographics also due to the aging population and it's also a question of how much will be driven by the Health Care reform that's coming. So it's been very strong across the board. The one area that historically has been weak lately has been the nursing segment and now the nursing segment has picked up. We're seeing even on the temporary nursing assignments, more of an impact on that as well.
ROMANS: During the '80s and '90s there was Just In Time manufacturing, right? So inventories were just in time and companies would get something when they needed it so they wouldn't have warehouses full of stuff. Now there's a feeling that companies are just in time employment. When they need something they're going to the contract worker or the temporary worker or to companies like yours to fill. So they're more nimble. They can be more nimble on both sides of economic growth. Do you think that trend stays?
GILLIAM: Absolutely. Look at the recession. Companies had to cut so deeply into the work force that they were very committed to. They don't want to go through that again. In addition to having flexibility, though, a temporary contract worker allows a company to really narrow in on the skills and capabilities they need that month, that quarter, that year, and make a commitment. Engage that person and then allow for adjustment a quarter or a year later.
VELSHI: When you first got here, you said something. You talked about professional and business services, let me just put up what we've got in that. In April there was a gain of 51,000 workers for the year. Look at this. More than half a million jobs created in professional and business -- what is this?
GILLIAM: This is IT, this is Finance and Accounting, this is Engineering. These are all the higher qualification skill sets and higher pay, too. We see a large trend for this type of job in the U.S. that's obvious. But this is also the area where as the jobs recovery strengthens, this is where you see the growth. The hottest job right now continues to be Engineering. We now see the point where the engineering supply, supply of qualified candidates is narrowing. We're at two and a half percent unemployment. Now these people are able to negotiate for better pay. This is the first place we're seeing pay raises.
ROMANS: That's why the student loan debt is good debt because you're going to be able to get a job that pays decent and there's going to be good progression on that pay.
VELSHI: We've been talking about where the jobs are. Tig good to see you as always, thanks so much. Christine, thanks to you and we'll be seeing you every day as we always do.
Listen the way the Federal Reserve operates is about as close to set in stone as you can get, but maybe not for long. One of the most vocal politicians in Washington wants to restructure the Fed and you'll hear directly from him, next.
VELSHI: Representative Barney Frank took on Wall Street last year with a major reform bill. His next target is the Federal Reserve. Congressman Frank joins us from Durham, North Carolina. Stand by, Congressman. Let's break down your proposed bill for our audience first. The Federal Committee that votes on interest rates and monetary policy is made up of 12 members. Seven are chosen by elected officials, five are appointed by community business leaders. Now Representative Frank's bill aims to eliminate the five members that are not selected by elected officials. This committee has considerable power over our economy. It has the ability to set short term interest rates which has huge implications for credit conditions, inflation and employment. Representative Frank, the Fed works. The Fed has done more to get us out of this economic mess that we got ourselves into than anyone else. Why is the Fed in your sights?
REP. BARNEY FRANK (D), MASSACHUSETTS: The Fed is not in my sights, the structure of voting is. I have been a supporter of Federal Reserve, and in a bill last year, there were some that wanted to dismantle it. In fact, I agree with you that the Federal Reserve system has worked well to get us out of this recession. We've got very good jobs numbers today. The people who I don't think should be voting on the open marketing committee, many of them have been critical of the Fed. So, in fact, a couple of these regional bank presidents have been the ones who led the resistance to precisely those actions by the Federal Reserve that you correctly credit.
VELSHI: Do we, in doing what you are saying, limit voices and perspectives that are, as much as it's hard to swallow, remarkably important in the Fed's decision-making process?
FRANK: No, it's not hard to swallow. I would say two things. First of all, we're not limiting their voices. There are like 12 regional presidents, some that vote, some don't. I think their voices should be heard. They ought to be able to go to the meetings and speak. The question is, do you give people elected votes, especially when they're not randomly selected by good citizens. They are selected by people who predominantly represent financial institutions, and that's why they tend to favor that part of the Fed's mandate that says fight inflation and underplay the unemployment part. I think you need to do both. VELSHI: And they did do that in that first and legendary press conference that Ben Bernanke held. There was definitely that sense that if you're my viewer and you think, as the majority of Americans do, or the highest number of people polled think unemployment is the number one issue in this country, second is debt and deficit and then gas prices, to hear the Feds say that inflation is their number one concern ahead of unemployment does sound a little puzzling to the average person.
FRANK: That's right, and I think that's probably because Mr. Bernanke gets pressure from the people who shouldn't be voting. If you look at way that the efforts by the Fed known as quantitative reading --
VELSHI: That's when they throw money into the economy so that there's more money and more credit available.
FRANK: It's been these regional presidents from a couple of the regional banks that have been critical of that. That's not surprising. They represent financial interests. Their interest is more in fighting inflation, keeping interest rates high. These are people who do better when interest rates are high. They're in the business of lending money. And yes, I think there was a rhetorical retreat, almost, between Mr. Bernanke, so when you say why take on the Feds, no, I'm trying to defend Mr. Bernanke's ability to continue doing what he's doing against the people who disagree with him. Now we got good job numbers today, very good ones but this fight against unemployment isn't over and I don't want to see the Feds get out of the fight prematurely.
VELSHI: Barney Frank, good to talk to you. Thanks for being on the show.
FRANK: Thank you.
VELSHI: Representative Barney Frank of Massachusetts. Gold, silver, oil all had a rough week. What's good for your portfolio and is it time to buy? Up next.
VELSHI: Give me 90 seconds, I'll give you some of the biggest headlines of the week. So much for Government motors, General Motors joined American auto parts Chrysler and Ford in posting a profit. It's the first time in seven years that Detroit's big three have been in the black at the same time. GM is getting aggressive, investing $131 million to build the next Corvette. The last time the Corvette was revised was in 2005. No official images revealed yet, but the new version is expected to be out in a couple years.
Well for the eighth time in the last ten years, Wal-Mart rules the fortune 500. They rule out ExxonMobil to be named the world's largest company. It hasn't been easy for the retailer though. U.S. sales continue to slide with fears that rising gas prices could further slow consumer spending. Instead Wal-Mart has been relying on gains in global profits. Mortgage rates have been low. They're getting lower, dropping below five percent again for a 30-year fixed mortgage. Rates remain low as concerns that this economic recovery is fragile. It's not going to last. I continue to say that if you can afford to buy a home and are in the market, focus on locking in the lowest mortgage rate you will get in your lifetime instead of trying to time the bottom of the housing price decline.
Now to a meltdown in commodity prices this week. Silver was the first to crack, at one point down more than 27 percent from its high last Friday. That silver panic forced traders to sell other hard assets to raise cash. Oil and gold now well off their highs, investors trying to make sense of whether to buy on the dip or pull out entirely. Stephen Leeb is President of Leeb Capital Management. Charles Lieberman, Chief Investment Officer at Advisors Capital Management. Gentlemen, let's start with gold and silver. Stephen Leeb, this sudden sharp decline, what is it? Is it profit taking or is it the commodity bubble bursting? We're looking at silver, that's the big line on top, we're looking at gold taking a little bit of a drop. What is it?
STEPHEN LEEB, PRESIDENT, LEEB CAPITAL MANAGEMENT: I think it's basically profit taking and speculators getting a little bit ahead of themselves and the CME raising margins dramatically. If you double margins, you're going to have basically people who were in there for the wrong reason getting out. I don't think it signifies anything, Ali, about the long term. I wish I was wrong. As far as gold, the drop was really insignificant. It was only about four or five percent from its high on a closing basis. Ditto for oil, maybe ten percent. These are the kinds of drops you see all the time in commodities. Silver was a one off event in my opinion, and I think the uptrend in silver is very much intact.
VELSHI: All right, so you think it's got higher to go. Charles, the last time we were together, you, Stephen and me talking about precious metals. You got some people saying you didn't go far back enough to give a good comparison. So take us back starting with gold.
CHARLES LIEBERMAN, CHIEF INVESTMENT OFFICER, ADVISORS CAPITAL MANAGEMENT: We saw a huge run-up in gold, obviously, more than 20 years ago. It followed a period in which gold prices really hadn't done very much for quite a while, and then all of a sudden they really popped and then came down pretty sharply. Again, we had a very long period in which gold prices really didn't do much. These are speculative bubbles. Once they develop momentum of their own they just, sort of keep on going until they run out of buyers, usually a raise in margin requirements has an impact, Stephen is right in that regard. In the case of silver, the original run up more than 30 years ago was driven by the Hunt Brothers who tried to corner the market, if you remember. They drove the price up dramatically and then once margin requirements were increased, prices pretty much crashed and stayed down for a long time.
VELSHI: Margin requirements mean that investor speculators, whoever it is have to put more of their actual own money up in order to buy futures in any commodity and in this case in silver, which was up for a big run, people had to put more money up to invest it. That obviously pushes people away. Stephen, another area of your specialty is oil. You've written a great deal about energy. You've been our go- to guy on it. Oil dipping below $100 a barrel this week, posting a biggest one day drop in more than two years. Long term, you and I are on exactly the same side of this argument. We think prices are going to remain high. If you're an investor, if you're watching this, you've got a 401(k) or IRA, what do you make of this volatility?
LEEB: Ali I just think that again it's part of the normal course that commodities take. We've seen this before. I want to come back if I could. I think oil is definitely going higher providing the developing world stays intact. I think you can divide -- picking up on Chuck's point, which I think is a good one, I think a lot of investors buy into it. Basically what we have here is a little history lesson. Between 1960 and the end of the '90s the U.S. basically controlled its fate. Every time commodity pricings went up we were able to raise interest rates, get them back down and the economy sailed off. We got a little bit off track in the '70s. We didn't raise rates fast enough. Commodity prices got way ahead of themselves and we suffered a pretty severe recession.
What happened after the '90s, the developing world got very, very strong. Now when we see oil prices go way up, it's not because of us. We're not paying over four dollars at the tank right now with nine percent unemployment. And that's why gold is rising. It's reflecting new realities. If you take a dollar and go to buy t-bills, you know what your interest is this morning? One penny per $100.
Gold has been an 11-year up trend not because of some speculative mania but because the U.S. and other Western economies have lost control of their fate. Until we develop alternative energies, coming back to oil again, until we figure out a way of controlling this gold will be the currency of choice. Currency is the keyword.
VELSHI: Chuck, separate when we talk about commodities, that part of commodities that are being driven up by real demand in the developing world, in India and China, and that part which is speculation. I'm not judging speculation. I'm just saying what part of it is speculation and what part of its demand?
LIEBERMAN: Well virtually all of it in the gold market and the silver market is speculation. I'm not sure there's anything to the view that gold is a currency. It was once used as a currency but it's been many decades since that's been the case. I see gold as absolutely nothing but a pure speculation. There's a bit of speculation in the energy market. Certainly in the oil market. There's no shortage of oil. But because of developments in the Middle East, specifically in Libya, some disruption in other parts of the Middle East, there's a little bit of concern on the part of consumers and users, so there's a bit of speculative demand in oil. It's driven up the price. But the inventories are plentiful. There's no shortage of supply. If the Saudi's really were honest and lived up to their public statements saying that oil prices above $100 a barrel is too high and that it ought to come down, all they have to do is increase production. If they drill more oil or open the spigots a bit more and sell more oil, they'll drive the price down pretty quickly.
VELSHI: All right.
LIEBERMAN: They're in a quandary. They love having the higher price. They love to generate the revenue.
VELSHI: I got to stop you guys there. I know this conversation is going to go on further. We will make this the place for you to have it. You two guys have a lot of great opinions on this, Stephen Leeb and Chuck Lieberman. Thanks for joining us. We're going to talk more about oil, gold, commodities and speculation in the weeks to come.
There are reasons for you to feel good about your financial future. I'm going to tell you why in my XYZ next.
VELSHI: Time now for the XYZ of it. Maybe one reason people were dancing in the streets after Osama Bin Laden's death is we haven't had much reason to celebrate lately. Let's face it, economists talk about recovery, one that I believe is real but so many Americans are not participating yet. The growth of employment in April shows some real promise. Nearly two years after the recession ended 14 million people remain jobless. Many without real prospects for getting a job soon. Wages for most Americans have stagnated for the last 20 years. Americans are making more money, but the bulk of that income growth has largely gone to the highest tier of income earners.
Since the end of the recession, prices for many of our basics -- food, energy, clothing -- have been increasing. It is a bifurcated economy. Some parts are working. Some parts really aren't. How do we move some of those people who aren't participating in the recovery into the other column?
First, by investing. Stocks have doubled in the last two years. Global companies are prospering. The fastest growing parts of the world are consuming more. I know some of you will e-mail me or tweet or post on my Facebook page that real or average Americans don't have money to invest. That's false. About 54 percent of working Americans have an IRA or 401(k) or are somehow invested in the stock market and that is a multi-year low. In fact, most working Americans are investors. They just may not be active investors. That can change.
On this show every single week, I'll give you insight into investing from the best minds out there.
Secondly, there are jobs out there. Not enough for everyone. But there are a few million unfulfilled positions in this country. They may not be in your backyard. They may not even be in your area of specialty. But they may be your best bet. So you may have to relocate or retrain. Go back to school. That's not easy. But for millions it may be the only solution. That's easy for me to say because I have a job. I don't face this dilemma. For those of you who don't have a job it may be better to take the leap now than to wait around for the next few years hoping the job you used to have will come back.
That's it for me. Thanks for joining the conversation this week on YOUR MONEY. We're here every Saturday 1.00pm eastern, Sundays, 3.00pm eastern. Catch Christine on "YOUR BOTTOM LINE" 9:30 Eastern. Stay connected 24/7 on Facebook and on Twitter. My handle is @alivelshi. I read every one of your tweets. Have a great weekend.