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YOUR MONEY

The Real Cost of Health Care; The Villains and Heroes of the Financial Crisis; The Strained U.S./China Relationship

Aired March 20, 2010 - 13:00   ET

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


ALI VELSHI, CNN HOST: The villains and the heroes of the financial crisis: who saw it coming and how did they cash in on it big time?

Welcome to YOUR MONEY. I'm Ali Velshi.

CHRISTINE ROMANS, CNN HOST: I'm Christine Romans. My revealing interview with Michael Lewis coming up.

But we begin with the real cost of health care. What you and I will pay for health care now and in the future. Andrew Rubin is VP of clinical affairs at NYU Langone Medical Center and host of Sirius XM Doctor Radio. Andrew first off quickly. What do we see in the very near term the cost of my health care under reform in the next few years?

ANDREW RUBIN, NYU LANGONE MEDICAL CENTER: Up until 2014 when the reforms actually start to kick in, the actual legislation kicks in, I actually see a little bit more of the same in terms of cost to individual consumer's insurance premiums. They will probably continue to rise and the system is going to function essentially the same as it does today, until 2014.

VELSHI: Andrew the premiums are going to rise because health care costs are rising. Insurance won't have reformed itself. It is going to rise for people like us who work for big companies and rise more for people who are insured by smaller companies that don't, as we describe it, self-insure.

RUBIN: That's right. We just saw it with California, the big controversy that in fact reignited President Obama in wanting to get health care reform passed where individual policies were raised 34, 35 percent.

ROMANS: So short-term costs could rise you say but after 2014 this is when the real changes take effect. What changes in terms of cost and why?

RUBIN: This is great. We have been talking about getting into the details. Well now we actually have some details. First, I think competition; I think that would be the first component of this. We'll have the state exchanges where insurance companies are competing with themselves for business within the private sector.

I think that's good. I think secondly you will see some cost reductions. There is a lot in there. Administrative simplification, comparative effectiveness, complicated term a different show, but how to look at costs in the system and make sure we are spending money the right way. So there is a lot of meat there.

ROMANS: And less excessive testing. You think that is really going to be an outcome here?

RUBIN: I think that will come later. The legislation has money for tort reform and excessive testing is linked to tort reform, a little bit too competitive effectiveness. I think we'll see it, but it is not going to be right away.

VELSHI: Andrew, always good to talk to you. Thanks for being with us. Andrew Rubin is the VP of clinical affairs at NYO Langone Medical Center and the host of Doctor Radio on XM Sirius.

President Obama this week signing the Hire Act into law. Let's take a look at what the Hire Act actually is. Its $17.6 billion dollar bill but $13 billion of that, the vast majority is for job creation. How does the government create a job? Well, in this case, it encourages employers; it encourages the private sector to create jobs by exempting them from the Social Security payroll tax on new hires. You have to have been out of a job for two months, 60 days. That's a 6.2 percent payroll tax. It can be up to $6200 a worker.

If the worker stays employed for a year, the company gets another $1,000. So basically you're getting a discount, it is like you are hiring people at a discount. The hope is that it may create, by some estimates up to 300,000 jobs. But some people think it won't be the case.

Does this sort of thing make companies actually hire people? American Express did a survey in January asking companies why they hire, 42 percent of them said and no surprise here, by the way say they hire for the same old-fashioned reason you would think they hire, increased customer demand. Eleven percent said they would hire because of these tax credits like the one that this jobs bill proposes. Now that I think could go up or down depending on how big the tax credit is.

But look at that, 5 percent saying they would hire if they had better access to loans. We keep hearing about small businesses which are the growth engine for hiring, for new jobs not having the same access to credit and that's a big issue. So there are lots of reasons why companies hire or don't hire. This is one hope that this bill might help.

ROMANS: And of course many of the critics have said $13 billion for 300,000 jobs is a big price tag, but it's part of a very wide --

VELSHI: Although, useful to remember that, you know, let's say it creates 300,000 jobs. Then what you have is 300,000 people with more demand because they have good income. Theoretically those give birth to more jobs. But this is -- this kind of science, as we know starts to get very complicated.

ROMANS: It does. It's also very subjective. You don't know how it will turn out until it turns out. All right Ali.

The job search, this is job search advice you can't afford to miss. One of these cover letters will get you a phone call from a hiring manager, one of them. The other one is going to land you in the reject pile immediately. We're going to show you which one is the cover letter that you want to write. How to write a perfect cover letter.

But first, how can you describe the cause of the financial collapse on Wall Street in just one word? My revealing interview with Michael Lewis next.

(COMMERCIAL BREAK)

ROMANS: Ali, for the weekend for you I have a Romans numeral to ponder.

VELSHI: Tell me.

ROMANS: It's 40 percent. It's the share of global wealth destroyed during the financial crises, 40 percent. How do we make sure that doesn't happen again, financial reform? Senator Dodd announced his plan for financial regulatory reform this week. He says it's critical to avoiding another collapse like that. The Fed would oversee consumer protection.

There would be new rules for too big to fail. An early warning system, kind of a panel of regulators, the House and treasury to see these problems as they are coming and begin to dismantle companies that are too big to fail and that are a problem. And also shareholders will get a say on executive pay but Ali on this it's not binding. So a little concern that some of these details are weaker than consumer advocates would like.

VELSHI: It's a complicated bill. They should be obviously. But I think it comes down to a couple of things. One is we need to, as a nation, save more money. Because if you save money and you get into a financial situation it gets you through to the other side. When we got into this downturn, Americans weren't saving much.

ROMANS: I sat down with the author Michael Lewis, Ali this week. He is the author of the very first book I ever read about money "A Liar's Poker."

VELSHI: Excellent book.

ROMANS: It's a '80s classic and his new book "The Big Short, Inside the Doomsday Machine." I asked him how we can fix this financial system when the people working for reform are the very same people who are in positions of leadership when we got into this mess.

(BEGIN VIDEOTAPE)

MICHAEL LEWIS, AUTHOR, "THE BIG SHORT:" That's probably true of almost any financial crisis. The mess happens and the people who happen to be in the seats are the people who have to deal with it. By definition they didn't see the mess coming because that is why it happened. But this is a pretty big mess and it was pretty seeable.

So it's kind of amazing that not more people at the top of the system have been discredited. But never mind, you know give them a mulligan. If they get it right, fine. But that is true. By definition the people who were sitting around the table figuring out what to do in the crises were people who had not seen it coming.

ROMANS: There was this big grand illusion that everyone bought into -- this idea that we needed to lower lending standards so more people could have access to the American dream. This idea that financial engineering was going to provide innovation in finance to free up money and free up capital so that we could grow together and be richer. Everyone kind of believed that and different ideologies played into it.

LEWIS: Yes. What was really going on is that lots of really bad loans were being made and the machine was being built to disguise the risk of those loans. The machine was exquisite. I mean it did it so well. It's a story of a kind of financial dystopia for the last four, five years. It is like Wall Street is meant to price risk and allocate capital efficiently.

What they did was misprice risk and misallocate capital in the most dramatic ways. And yes both sides of the political spectrum had a story to explain why this was good. But now, you know, the reverse is both sides now have a story to tell of why it's bad. So maybe the politics may have changed pretty dramatically.

ROMANS: It's interesting. You talk about this, the perverse risk and reward on Wall Street. In a way, Wall Street turned itself inside out so that its success would eat it alive in the end. Its short-term success would actually undermine capitalism.

LEWIS: Yes. This is a riveting story. Because the capitalists tried to destroy capitalism without knowing that's what they were doing. If you had to say, what's the one word that describes the problem on Wall Street? It's short-termism. It is all the incentives are to maximize short-term returns at the possible expense of long- term benefits.

So if you look at this very broadly at the risks that were on the Wall Street balance sheets when the crisis happened, why they have these losses and why they would dump money at the table, essentially the Wall Street traders were incentivized to sell cheap catastrophe insurance, to take in premiums now and not worry about the risk later. They all did it.

They dramatically mispriced insurance because they were allowed to keep a little slice of the premium. It makes you wonder why, one, the system was structured this way. It's so screwed up. The idea that these institutions taking big risk should be public corporations is insane.

But nevertheless they are. Why should Wall Street firms be paying rating agencies to rate their bonds? That creates this horrible incentive. Why are people paid on such short-term results when the consequences of their actions really can only be judged in the long term? It's curious.

ROMANS: You wrote "Liar's Poker" with a snapshot in time you thought you were kind of peeking in on the world of Wall Street in the '80s and that $3 million to run a financial company, can you imagine? It just kept getting bigger and bigger and more complicated until now. You could probably never have imagined that it would blow into this.

LEWIS: I thought someone was paying me a couple hundred thousand dollars was a signal at the end was near. That this was unsustainable because no one should have been paying me anything to do it. What happened was actually more interesting that it just got bigger and bigger.

Because the Wall Street I described in the 1980s was colorful, it was exotic; it was filled with eccentric people behaving on the surface badly. On the surface, Wall Street became more sanitized, more corporate, more buttoned-up. People learned not to behave in ways that would attract attention.

ROMANS: You couldn't use the expense report anymore to go to a strip club in the '90s but it didn't mean anything was cleaner.

LEWIS: The financial stuff got more obscene. Underneath the surface the financial got more and more obscene. The behavior was more socially destructive even as it got seemingly more acceptable.

(END VIDEOTAPE)

ROMANS: We all know about the villains in financial crisis but you may not have heard about the heroes who called the crisis and then cashed in on it. Who are they? More of our conversation with Michael Lewis next.

(COMMERCIAL BREAK)

ROMANS: Michael Lewis is an expert story teller. He can deconstruct even the most complicated money story like the financial crises into a tale of villains and heroes. In this mess, he sees lots of villains, a few heroes and a clueless government.

(BEGIN VIDEOTAPE)

LEWIS: Goldman Sachs went to the casino and placed a bet with AIG. And the bet paid off in billions. However, the bet also sunk AIG, a fact Goldman Sachs should have been aware of. It was socially irresponsible. The government steps in to pay off the gambling debt in full.

Without even starting to negotiate with Goldman Sachs and with out even saying, look, yes, they owe you a hundred cents on the dollar, but if we let them go you will get zero. Maybe we'll give you 50. That, I can't understand.

ROMANS: You're a storyteller. There are heroes and villains in every story. There are so many villains. You know, there are villains and there are dupes and villains, but who are the heroes in the story? Some of the people in your book, in a way are heroes because they saw what was going on.

LEWIS: And shouted about it.

ROMANS: And then profited from it.

LEWIS: Yes, they made a fortune from it too. They're complicated heroes. I do think that the protagonist, the people I wanted to follow and the people I thought the reader would want to follow were -- they were kind of oddballs, people who were kind of outside the system who realized that they couldn't do their normal business of investing in the stock market side because this thing was happening in the subprime mortgage market that was going to overwhelm everything.

They kind of craw fished their way toward this bet against subprime mortgage bonds. It is true that they are betting essentially on the collapse of the financial system. But the mere fact that they saw it coming and that they were shouting about it and their perceptions were accurate, to me, in nobles them a little bit. And the shocking thing to me when I walked into this story and decided to write another book about Wall Street, which I didn't think I would ever do, was that the whole system had organized itself around this bet.

I mean, the whole system was basically on the other side of the bet. The whole system was betting on the subprime mortgage market in one way or another. So few people were on the other side. So few people saw what was happening. But they really did see what was happening and they really could describe it and persuade you, even in real time what was happening, but nobody wanted to hear it. To me, it's a finance story. It's also a story of human perception. Why certain people are equipped to see certain things.

(END VIDEOTAPE)

ROMANS: You know, Ali, after "Liar's Poker" which was a famous book from the 1980s about his time at Solomon Brothers he couldn't believe that here he was in the middle of this writing another money book about just how incredible things have become for a person on the outside to say, how could this happen? This is ridiculous. He couldn't believe he was writing another money book like that.

VELSHI: It is kind of fascinating where you see a lot of authors from that period who had written about the big crazy things going on on Wall Street and you would have thought that was the golden era for writers who dealt with scheming and things like that on Wall Street, because we're never going to see that kind of stuff again. It looks like we have and guess what. We probably will again.

ROMANS: It was just the appetizer. That period was just the appetizer.

VELSHI: Yes, we just got more sophisticated and better at scheming.

ROMANS: Yes. VELSHI: Well listen here's an interesting story, talking about scheming. A behind the scenes look at the financial collapse that you were just talking about to a behind the scenes look at corporate espionage. Our next guest says past and present CIA officers have been and could still be moonlighting at companies all across the country.

Eamon Javers is the author of "Broker, Trader, Lawyer, Spy: The Secret world of corporate espionage." I have been reading that for the last couple nights. Eamon joins us now to talk about it. Good to see you Eamon. Congratulations on the book.

EAMON JAVERS, AUTHOR, "BROKER, TRADER, LAWYER, SPY": Thanks for having me. I appreciate it.

VELSHI: Listen. So here's the thing. I wasn't surprised that former, not just CIA, but former spies from agencies around the world are involved in corporate espionage, spying on other companies to try to get information. What I was a little surprised at is that some of these people are current CIA employees. Tell me about this, I don't understand it.

JAVERS: I was surprised, too to be honest with you. When I was doing the research for the book I was looking into these private spy firms that work in the corporate context and you do find them staffed by veterans of the CIA, British mi-5 and even old KGB veterans who are still floating around out there.

But what I found here is that the CIA actually has an active duty moonlighting policy where if you are in the CIA and feel like you want to make a little extra money on nights and weekends they allow you to moonlight in the private sector and the CIA told me they do this because they feel they need to have a retention option for employees. People can make so much more money practicing intelligence in the private sector than they can for the government. They feel like they need to let them moonlight and make a little extra cash on the side.

VELSHI: I assume all of these jobs are vetted in some fashion.

JAVERS: They are. Right, the CIA told me they have, you have to get your manager's approval and you also have to fill out the paperwork certifying there is no real conflict of interest here. But one instance of this where I found these guys working was at a firm called BIA or Business Intelligence Advisers from Boston.

Now that's a firm that was founded by a core of veteran CIA interrogators and they are working for hedge fund clients and other financial clients and they are doing interrogation-style techniques, and applying their techniques to analysis of companies, annual reports, corporate earnings calls and the like.

VELSHI: So let's look at it in terms of local police. You may call them rent-a-cops; they are working at events or facilities. We don't generally think about that as a conflict of interest. But there are some people who say police getting paid by anybody but the government does present a conflict. If they can be paid more money to turn a blind eye. Does that come up in this kind of discussion? JAVERS: Yes. I mean you have rent-a-cops and in this case with the CIA you really have rent-a-spies. The question is where are these people working? The CIA wouldn't give me a list of the companies they are working for. So we have a lot of questions here about this, we don't know the answer to. But the CIA said, you know, we make sure that there is no conflict of interest of here. We make sure that nobody is being taken off the Bin Laden unit to go work nights and weekends for a big company.

VELSHI: Eamon good to see you again. The book is a great read. Eamon Javers is the author of "Broker, Trader, Lawyer, Spy, The secret world of corporate espionage."

All right. The Chinese are mad at the Americans. Mild manner economists are insulting each other and the heat rises on the most important trade relationship in the world. Why that could mean that you pay more for just about everything you buy.

(COMMERCIAL BREAK)

ROMANS: It was a difficult week in the strained U.S./China relationship. It began with the Chinese premier blasting the Americans for selling arms to Taiwan and scolding President Obama for meeting with the Dalai Lama. Then word Google may shut down its China business because of cyber attacks and censorship. Now new conflict over China's currency which economists and some politicians say is artificially low. Then disputing Chinese businesses and hurting American business.

VELSHI: The Senate is now considering a bill that would slap tariffs on Chinese goods to make up for the currency edge. That prompted some tough language from the Chinese who say China's currency is none of the U.S.'s business and that Americans should focus on their own problems and not blame China.

Let's bring in our good friend Richard Quest, host of CNNI's "Quest Means Business" and CNN senior political analyst David Gergen. Welcome to both of you.

Let me start with something that Paul Krugman wrote in the "New York Times" on March 14th. Obviously everybody thinks because China is such a big trade partner of the U.S., is that it holds the U.S. over a barrel because if it decides to sell U.S. currency, it will make the U.S. dollar drop and everything will go bad.

Listen to what Paul says, he says if China dumped the U.S. assets the value of the dollar would fall against other major currencies such as the Euro but that would be a good thing for the United States, because it would make our goods more competitive and reduce our trade deficit.

On the other hand, it would be bad thing for China which would suffer large losses on its dollar holdings. In short, right now America has China over a barrel, and not the other way around. David, I know you both have something to say about this. David lets start with you.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Well, it's very counterintuitive, isn't it?

VELSHI: Yes.

GERGEN: That the world's largest borrower has its biggest creditor over a barrel. Most of the world doesn't see reality in that way. And of course Paul Krugman's views as we drew a sharp rebuke from a leading economist over at Morgan Stanley, Steven Roach, who worked a lot on Asian issues. We are clearly in the midst of a serious debate here at home about what the U.S. approach ought to be toward China.

VELSHI: Richard, what do you think about that quote?

RICHARD QUEST, CNN HOST, "RICHARD MEANS BUISNESS:" This is a classic beggar thy neighbor policy. When ever you get one country attempting to use its currency, either appreciating or depreciating, to actually gain a trade advantage you always end up with two people in the same bed in a very uncomfortable position. That's exactly what the situation is with the U.S. and China.

Remember the old joke, Ali; you owe the bank $100. That's your problem. You owe the bank $10 million, that's the bank's problem. An analogy of that goes along with what the problem is with China and the U.S. Of course China can't afford to have the dollar crash with its trillion dollars worth of U.S. debt and, of course, the U.S. needs to have China because that's where it's getting its cheap goods from.

ROMANS: Well here let's talk about those cheap goods. Because listen a lot of people say if you are going to have this leveling of the playing field, that means Americans are going to have to give up 20-odd years of buying cheap stuff on very low interest rates that this unbalanced relationship has fostered.

I want to ask you, David, politically is there a sense in Washington that this is an unsustainable relationship as it is right now with China and that the Senate will do something, that there may have to be or there may will be for political reasons there may will be surcharges or tariffs on those goods?

GERGEN: I think the threat of Senate action is good for President Obama. It gives him more of a club in the closet in negotiating with China and his administration in the next few weeks. Because let's go back to fundamentals, this is the single most important bilateral relationship in the world. It is extremely important it be a win-win for both sides and not a beggar thy neighbor kind of thing as we have been hearing.

It is important to work this out. They're not banging each other over the head and we get into a deterioration over Taiwan and over Tibet and all the other ...

ROMANS: But David it's interesting that you bring that up. Because Colin Powell speaking with Judy Woodruff this week on Blumberg said, he said that usually you smooth those things over on Taiwan and Tibet. We have our public say and then behind the scenes the diplomacy works, but this time we have Google, the new wrinkle of Google and now you have these two very famous economists who are going at it. I wanted to bring this up really quickly.

So Paul Krugman on China this week said Chinese currency policy is adding materially to the world's economic problems at a time when those problems are already very severe. It is time to take a stand. And then Steven Roach from Morgan Stanley when asked, well, isn't that sort of taking a baseball bat at China's policy, he said, we should take out the baseball bat on Paul Krugman. David I have never heard eminent economists insulting each other over China policy. I feel like it's almost a metaphor for what's happening in economic relations.

GERGEN: Well, they have been listening to the politicians too much. That's the language of politics and sort of late night food fights on television. Look, my expectation is that we will work this out. I will bet that the Chinese over time do appreciate their currency some. They will not completely capitulate, but they are going to go back to more of a managed currency. They have to, they are under enormous world pressure, but it is important we do this in a way we don't break too many egg shells in getting there.

VELSHI: Guys thanks very much. Always a pleasure to talk to you both. Richard Quest and David Gergen.

Listen, does a cover letter grab a hiring manager's attention the way a movie trailer grabs yours? It should. When we come back, we're going to tell you how to write one that actually does that.

ROMANS: And check out this picture. Which one of these life insurance salesmen was the lead singer of a very famous '70s rock band? Probably the most famous '70s rock band, now an insurance salesman. We have him here on set next.

(COMMERCIAL BREAK)

VELSHI: The cover letter is considered the single most misunderstood aspect of the job search.

ROMANS: But with more than five applicants competing for every open position the cover letter is an opportunity to grab a hiring manager's interest, it is an opportunity you simply cannot afford to miss. Brad Karsh is founder and president of JobBound he is going to tell Ali and I how to really polish up that cover letter out there.

You have two examples for us Brad and you say that most people do this wrong. It's too dense, it is too much information. I want to show you the do not try this at home version of the cover letter. This is Joe somebody. Boy, Brad, I see an awful lot of print there. I see four big dense paragraphs. What is this person doing wrong?

BRAD KARSH, PRES. & FOUNDER, JOBBOUND: What this person is doing is what everybody -- and I mean truly, virtually every single person who puts a cover letter together. It's long and it is boring. I equate it to the back side of a pharmaceutical ad in a magazine. Do you read those?

ROMANS: No.

KARSH: No, but you have to have them.

VELSHI: I have read them, but I guess that's not the point, right? The hiring manager won't do it.

KARSH: We're not going to read them. The fact of the matter is if someone's spending 10, 15 seconds on your resume, they are not going to spend three minutes reading what's essentially a sentence version of the resume and that is what most people do. Four paragraphs block type, single spaced and they just take what's already on the resume and re-say it in a longer format. No one reads them.

VELSHI: Here's that middle point that you have there, no substance. This is a tough one for me. Because I figure I put all this time into the resume. That's where the story is. This thing is just something that I have to do. It's perfunctory. What is the substance supposed to be? Isn't the substance supposed to be in the resume? What can I put in my cover that is going to make you want to read it?

KARSH: What you want to do is think about your cover letter very differently. Think about it like a trailer -- like a movie trailer for your resume. You don't have to tell your whole story, but you have to tell a story that's going to intrigue somebody enough so that they do, indeed, read your resume. So you want to make sure that it's short, it's personal, it's attention-getting, but it should tell some story and maybe it's a story about why you are interested in the field or maybe a story about a cool experience that you had. But it's almost like your elevated pitch, what sets you apart.

ROMANS: Or a hook or a little pitch, something the narrative hook that is going to bring people in to want to learn more about you. You have an example of a good cover letter here. It's much shorter, it is very concise. I love the second sentence. It's easy, passion. Answering the question why would an established stock broker go back to school to become an editor. Tell me what Jane Smith here has done right in her cover letter.

KARSH: What she's done is she's addressed in this particular case an issue that she was facing over and over again. So she was someone who was a stock broker now she wanted to go back and become an editor. A total career change and a lot of people are doing that right now. As a recruiting director when you pick up a resume and the first thing you see on there is someone's a stock broker you throw it away instantly.

Why would a stock broker want to work in editing? She kept getting asked that question over and over again, so we decided to hit it head on in the cover letter. The first question is why would a stock broker want to go back into editing and then she tells her story.

VELSHI: I like that part; I like the fact that it has an interesting hook. It ties her into why she'd be good for the job. A lot of the movie trailer you were talking about. But you have a point on your list there which says the last one from the bottom. It needs to be personal. How do you make it personal without it sounding too personal? What's personal? KARSH: There is a fine line between too personal and intriguing enough to get somebody to read it. For instance, we talked about the bad version where people just fill it with empty words. They write I'm hard-working; I have a great work ethic. Tell me, give me an of example of how you are hard-working.

So say something in your cover letter like I'm the kind of person who comes in every day before my manager and waits until my manager leaves until I leave. I get more work done than everybody in the group. This is why I do it and why I love to do it. It is something takes one of those skills and brings it to life in a personal way that is just about you.

VELSHI: Excellent. Brad always a pleasure to see you. Thanks so much for being with us. Brad Karsh is the president and founder of JobBound.

ROMANS: Not the usual YOUR MONEY theme music. That is "Rock and Roll All Night" by Kiss. Being a rock star and selling life insurance? Couldn't be farther apart but our next quest has done that and much more. Buy the way he's not an insurance salesman. He calls it estate planning.

VELSHI: Yes. We wanted to make the point that Gene Simmons who many of you will know. I was a big Kiss fan. There he is. Good to see you.

GENE SIMMONS, KISS: Good morning.

VELSHI: You know Gene from Kiss, but he has since his Kiss days built a vast business empire, reality TV show, record company and now a life insurance company. He's a cofounder of Cool Springs Life. Now, Gene just sit there for a second. Christine and I are pretty smart about business, but Christine I have to tell you I have difficulty understanding life insurance, universal life insurance. It's a complicated issue.

SIMMONS: It is.

VELSHI: Let me try and spell this out and this is how most people experience the world of life insurance. You decide on a benefit that either your estate or your beneficiaries are going to get when you die. You decide how long you're going to pay for that insurance policy. So let's say you're 40 years old, you may want to not pay after you're 55, so over 15 years you have to cover all the premiums. So they give you a price for what that premium is that will cover that insurance policy.

Typically those premiums are invested by the insurance company. So there is some risk and inflation comes into it. Bottom line is if you want an insurance policy that's paid up when you're 55 or 60 you have to pay a certain amount every month and then when you die, hopefully that gets paid out to the estate or beneficiaries. Now, Gene, you have something going on here with this new company. I have to start by saying it's for the very rich. But we are hoping someday it will be for everybody. SIMMONS: Let me explain something.

VELSHI: You get to do that but you don't pay for the insurance?

SIMMONS: Ali Velshi is a powerful and attractive man and you're a high worth individual. Because you worked for it, everyday you come into work and you deserve it. You want to make sure your loved ones and your family have as much of that estate money as possible. You don't like paying the yearly life insurance premiums.

We give no cash out of pocket to you, we loan you as much money as applicable in your life insurance policy. What that means is since you're going to be paying a rate of 1.25 percent, the escrow is in your name. We don't control it. You do. You will be able to get much more on the interest you get off of that. You can pay off your life insurance premium and even minimize your estate taxes. This has never existed before.

VELSHI: Let me see if this makes sense. So basically you're loaning me the money to pay these premiums until this insurance policy is paid up. And you will take that money back out of that loan once I die and once that benefit is paid out. So basically you're giving me a life insurance policy without me paying the premium.

SIMMONS: With no cash out of pocket to you.

VELSHI: Gene, you stay right there. When we come back we're going to take a look at how much is being spent per child for education in this country. Gene has a particularly interesting perspective on education, something more personal than most of you would have known, but the numbers on how much we spend per child in this country might just surprise you.

(COMMERCIAL BREAK)

ROMANS: Public school spending out of control. Often hiding the real price tag. That's according to a new report out by the CATO Institute. CATO looked at school districts in the nations five largest metro areas. An average $18,000 was spent per student but only $12,500 per student was reported. New York spent the most per student coming in at $26,900, Washington, D.C. $22,400, Los Angeles invests $19,000 per student; L.A. underreported their spending by a whopping 90 percent.

This is according to CATO. This leading official data is one expensive lesson for states trying to avoid billion dollar budget shortfalls. Let's see what our guests have to say about this. I'm joined by author and satirist Joe Queenan and back with us is rock star and business mogul Gene Simmons who used to be a teacher.

SIMMONS: 6th grade.

ROMANS: 6th grade teacher in ...

SIMMONS: Spanish Harlem, yes. ROMANS: You're the educator of the bunch. Why all these disparities in education spending across the country? Why do you think they are vastly underreported?

SIMMONS: Which one of us?

ROMANS: You.

SIMMONS: Me. There is a very simple idea. We are weak, we are weak-spined. I wanted to take off my glasses just for the impact. We don't have the guts to hold teachers accountable. We don't have the guts to hold young people accountable. If you don't make a grade there is no repercussion. You know, in other countries they throw you out of school.

VELSHI: Here's the issue that I have. I think the president is being particularly tough on teachers and teachers unions, particularly in public schools.

But Joe, let me ask you this. How much of it can we heap on the teachers? How much of it is not effective spending in schools? How much of it is kids not getting the support at home that they may need? How much of it is the tens of millions of kids who go to school hungry and we know that affects your ability to get educated? So how much of it can you say is the teachers and how much of it is stuff around the student?

JOE QUEENAN, AUTHOR, "CLOSING TIME:" Public schools are hard to run. People are involved in a great social experiment. That's not true with private schools. First of all, remember, the CATO Institute that hates public education, hates public schools. So let's not forget that. Some people might say, we have to have a second look at those numbers. Be that as it may, with public schools, if you have a special needs child you don't send your kid to private school.

You send them to public school. That raises the cost. You have to have buses going into all kinds of neighborhoods; you have to have all kinds of security. So the idea of comparing these numbers with private school, I question that. Now when you talk about the fact that the numbers are, that they're not accurate, that's a shock that our government is lying to us. It's a shock.

ROMANS: Or can't keep track.

QUEENAN: Our school board is not telling us the truth. Unions are not telling the truth. Frankly, I find that hard to believe.

VELSHI: We know that we are advancing toward the idea of schools being run a little bit more like businesses.

SIMMONS: Run it like a mom and pop. You know when your mom and pop opened a grocery store they live and die by whether or not that store makes a profit every week because they have to pay their rent. Privatize some schools with government, you know, looking over with some guidelines. Government text books and so on so you have this unity. A school has to be able to deliver the graduating classes. If not, we've got to fix what's not working. A union has its own agenda to protect its own. The government is protecting its own.

ROMANS: I think what we could agree on is that this should the great equalizer no matter who you are when you get to school, no matter what the disparities are of your background or your socioeconomic status, whatever. This should be the thing that could launch you, give you the same leg up as everyone else. For many it's just not working right now.

QUEENAN: If you believe that, for a lot of people including a lot of people at the CATO Institute don't believe that. There are lots of people in the United States who do not believe in public education. There's lots of people, private schools that this is a way of opting out of the system.

I don't want my kids to go to school with those kids. I want my kids to be on the fast track. I don't want my kids to go to school with minority, with working class white people. Those are people who do not believe in the public school system and those of us who do believe in the public school system understand yes it's a mess, it is an absolute mess. Philadelphia is a mess, New York's a mess.

SIMMONS: You know gas guzzlers aren't working, introduce a little electric, a little gas, sometimes it's the hybrid of these things that makes it work. Nothing drastic, nothing happens very well with revolution. Evolution is a good idea.

ROMANS: We have a lot more to talk about with both of you. You two looking for a very specific type of person out there and it could help you earn extra cash. We'll explain.

But first, starting a business isn't easy. Doing it alone is even harder. In this week's "Turn Around" Allan Chernoff brings us the story of one partnership of success.

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ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT (voice over): The opensea.com was Gary's Druckenmiller's second shot at a start up.

GARY DRUCKENMILLER, FOUNDER, THEOPENSEA.COM: The beginning was tough getting this up and going. Got the site launched, was having a tough time with the operations.

CHERNOFF: It was then that Druckenmiller realized his dream of a social network for boaters would never set sail without another hand on deck.

DRUCKENMILLER: I knew eventually that I was going to need a partner, somebody to kind of help along. Come to the realization that I was not going to be able to push this through by myself. I began to start to do some research on what to look for in a partner.

CHERNOFF: He discovered Partnerup.com.

STEVE NIELSEN, CEO, PARTNERUP.COM: Small business owners want to get together and find an answer to their problem that they are facing right now or find a person to fill a role that they need. So we help them network with each other. But the networking all happens around their business need.

DRUCKENMILLER: It showed me the difference between what I needed and what I thought I needed. And at the end of the day me being more of a technical person and somebody who was going to be building the site out, I needed someone to help on the operations.

CHERNOFF: He didn't partner up on site but it leads him to find a partner in old friend and boater Todd Russell. Russell came on board in 2008, and since then traffic on OpenSea has grown over 200 percent.

DRUCKENMILLER: Within the site right now we have several thousand users and several hundred businesses. We are beginning to see that growth. And I will ad the marine industry itself is going through its own turnaround.

CHERNOFF: Allan Chernoff, CNN, New York.

(END VIDEOTAPE)

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ROMANS: Time for one more headline with Gene Simmons and Joe Queenan. Making a buck in the music industry can be tough, but a new Youtube service could prove to be a money maker for Indy Artists. It allows people to upload their videos and get paid when people view them, including views on external sites and they'll get a piece of ad revenue. Good for musicians but is it good for Youtube? What about the music industry? What do you think, Gene? Is this the new way?

SIMMONS: Well in the interest of full disclosure before the fact, I never claimed to be a musician. Those are guys that play in Holiday Inns and get paid $50 an hour and all the drinks they can have. I'm an entertainer. I can do anything. I can juggle; I can do all kinds of stuff. Musicians just go la-di-da-di-da. Having said that, it is the music industry's fault for being spineless and not holding all those freckle-faced college kids who downloaded music for free accountable like the criminals that they are.

The reason the music industry is out of business is because the foxes were allowed to come into the hen house and steal as many eggs as possible. Here is what happens the farm is out of business. The guys that produce all the feed for the chickens are out of business. The truckers who brought the eggs to market are out of business.

The stores who sold the eggs and the chickens out of business because this farmer was going, its a little fox. Let it in. This little hole in the ship, it's just a little water coming in. It will sink. Who is responsible? The music industry is responsible for the mess they got themselves into. Why? Because they didn't have this.

ROMANS: Ali is not a musician, but he is an economist.

VELSHI: Well Joe let me ask you this, if Gene is right and he probably is, he knows a lot about this stuff, are the Youtubes of the world going to be the place where musicians, and entertainers and artists can actually make the money they've been done out of because people were stealing their stuff?

SIMMONS: Crooks.

QUEENAN: People always said to me those OK go videos you watch on Youtube and they are great. But I don't pay any thing for them; I mean I don't pay anything for any of this stuff. So I love it. If musicians want to put that stuff up there for free, that's great. What David Bowie said, if you want to be a musician and make money, you better get used to touring. If you think you are going to retire in style or send your kids to private schools from what you get off your Youtube videos, there are a lot of bands out there.

VELSHI: We have covered a lot of ground with Joe Queenan and with Gene Simmons. Thanks for joining us. Christine.

ROMANS: Ali you want to know more about all this stuff? Want to learn about money and investing? Join our constant conversation on facebook and twitter at AliVelshi, at ChristineRomans.

VELSHI: Great comments from all of you. Make sure you join us every week for YOUR MONEY Saturdays at 1:00 p.m. Eastern and Sundays at 3:00. Also, log on 24/7 to CNNMONEY.com. Have a great weekend.