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YOUR MONEY

Jobs Added, But Unemployment Remains Same; What is QE 2 and Will it Work?; "Inside Job" Examines Economic Crisis; Why Has No One Gone to Jail for Causing the Crisis?

Aired November 7, 2010 - 15:00   ET

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


ALI VELSHI, CO-HOST: The midterms are over, but the unemployment crisis isn't, even though there are some positive new signs.

Welcome to YOUR MONEY. I'm Ali Velshi.

Let's have a look at the numbers. These are the numbers for October which we have just got. One hundred fifty-one thousand jobs added in October, that's better than expected.

And we're pulling out here to show you all of 2010 so far, all of 2009 and 2008 back to right in the beginning when jobs started to get lost. Look at how it has dropped and it peaked and then we started losing jobs again in 2010. Now it seems we're back on a roll.

Here is the other thing. The job creation in October all came from the private sector. We've seen losses in public sector. Government jobs are going away, private-sector jobs are coming back.

My colleague Christine Romans joins me now.

Christine, is this not the way we want thing to go? We want fewer government jobs, we want more private sector. Is this a signal that businesses are hiring again?

CHRISTINE ROMANS, CO-HOST: That's what we've been looking for, Ali, for months we have been looking for the evidence that the private-sector companies are confident enough and have enough money and enough demand to start hiring again. It is over the course of time.

Let's just look at what the private sector looks like. You now have total jobs gained of 1.1 million private-sector jobs since December 2009. That's incredibly optimistic for many people who have been watching just large scale job losses. We finally have job gains, Ali, that are not because of the Census or they are not because of government hiring. They are because companies are starting to hire.

I want to be clear, it's not enough to dig into the unemployment rate. It's not enough to make up for the jobs lost during the Great Recession.

VELSHI: That's why the unemployment rate, by the way, stayed the same, 9.5 percent.

ROMANS: But it's going in the right direction.

VELSHI: Lakshman Achuthan joins us. He is the managing director of the Economic Cycle Research Institute.

Lakshman, just picking up from where Christine was, we were told, we were told by politicians, we were told by Republicans and we have been told directly by small business owners, that government is in the way of them creating jobs and getting this economy going again.

Nothing changed in October. The government didn't get out of the way in September, didn't get out of the way in October. Nothing is different.

Why have we now seen 159,000 jobs created in the private sector?

LAKSHMAN ACHUTHAN, MANAGING DIRECTOR, ECONOMIC CYCLE RESEARCH INSTITUTE: Well, because they had to hire those people. We did not go into a recession.

Remember, not too long ago everybody was talking about double dip. It's not that the companies don't have the cash, but they had a lack of confidence.

VELSHI: Right.

ACHUTHAN: They were afraid of a new downturn. That hasn't happened. All the incoming data has been saying this economy continues to expand, albeit too slowly.

VELSHI: If -- you're saying that they had to hire because demand was up.

ACHUTHAN: They were forced.

VELSHI: Then why do we keep on thinking that the government is in the way of business, that its government that is stopping businesses from hiring? Aren't businesses going to hire when they need more people to do the work to meet demand?

ACHUTHAN: I think there are big policy decisions about the amount of government intervention with regulation and all these things. These are the things politicians have been debating and that we are voting on.

I think there's probably a little bit of a false sense of control that you could switch a regulation and then the economy will do this or that. It doesn't work that way. The business cycle is so much more powerful than any of these regulations.

VELSHI: Let's bring Karen Tumulty into the conversation. She's a national political reporter for "The Washington Post."

Karen, good to see you.

This economy, in particular the lack of job creation, has cost the Democrats big. It cost them in the midterms. But a lot of people were saying we might be at some sort of a turning point in our recovery that may continue.

Who wins as a result of that in two years in the presidential election? If right after the midterm elections all of a sudden the economy starts looking better, is that a Republican win or is that President Obama?

KAREN TUMULTY, NATIONAL POLITICAL REPORTER, "THE WASHINGTON POST": Well, you can bet that everybody is going to claim credit for it.

I really do think that it's going to depend on how the two parties conduct themselves. The fact is, if it starts looking like Washington is again able to get things done, that really does make everybody look better I think.

The Republicans are taking over Congress at a time when this institution is -- I think "reviled" is not too strong a word. At this point, I think everyone has an interest in looking like they are actually getting some things done.

VELSHI: All right, Christine, Lakshman, Karen, thanks very much.

There's a lot to talk about with this economy. There's also something to talk about with respect to this president's trip to India. How much is it costing taxpayers and is it going to be worth the money? We'll tell you why it might be worth every penny when we come back.

(COMMERCIAL BREAK)

VELSHI: Unemployment is at the same level that it was in September, 9.6 percent, but in October, the economy did grow by 151,000 jobs. Still, there are almost 15 million people unemployed. Forty percent or more of those people have been unemployed for more than six months.

Work is hard to find. There are all sorts of reasons for it. As we see in the midterm elections, there have been all sorts of reasons why people say it's been hard to find. But let me show you the big trends that are contributing to job loss in America.

This isn't about this recession. This has been going on for 10 or 15 years. Globalization, the one on your left, that is the big one. The world is open for business. Things are done where they can be done most cheaply and jobs are more movable. That is why we've seen jobs lost to China, to India and to other countries.

Then there's technology. We can do more with less because of technology. It takes fewer people to build a car, design a bicycle, to build a home, everything it takes fewer people.

So the combination of globalization and technology has resulted in fewer jobs in America. It has not resulted in fewer jobs in China or in India, because America has not found something to replace those low-value jobs that we've shipped to other places. In some places, we've talked about China, that's the big one. Many of our manufacturing jobs have gone to China or the Far East. But India has taken a lot of those call center jobs and in some cases, some of the higher value software/engineering jobs that are in such great demand.

President Obama is in India right now. Jobs at home are his priority. Listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: On the trip that I'm about to take, I'm going to be talking about opening up additional markets in places like India, so that American businesses can sell more products abroad in order to create more jobs here at home.

(END VIDEO CLIP)

VELSHI: Now sometimes we worry that we don't take a global enough view, Christine. What I saw last week on TV was a number of people, Republicans in particular, criticizing the president's job like on two levels.

One is that, boy, this is a troubled time in America, why is he going on this long trip? And the other one is this trip is expensive. I think the bill for it for taxpayers is going to be about $200 million. Some have said it's a waste of money.

ROMANS: In fact, the White House has said it will not be $200 million. That is a gross exaggeration by Republicans. Some Republicans have suggested it should be a conference call or a video conference for these sorts of meetings.

Bottom line here, there are some of the top business leaders in the world who will be going with the president. This is a huge and potentially growing middle class in India that is incredibly important for American high technology product.

Also, another reason why this is incredibly important, not just for purely economic reasons but political and foreign policy reasons, Ali, because we need a bargaining chip in the region with an ascendant China. We need to have the biggest democracy in the world to be very solidly tied in with American interest and American prospects going forward.

There's a lot of reasons why this is an incredibly important position and trip for the president to be taking here right now.

VELSHI: Let's bring in Rutgers University Professor Bill Rogers, he was former chief economist with the U.S. Department of Labor.

Bill, you know, it's great. We talk to you every time there's a jobs report. It's great to have good news, but it is really a bit of good news, incremental? Picking up on the conversation that Christine and I were just having, technology has eliminated some jobs, technology has eliminated other jobs, those aren't coming back. What is likely to work for Americans who are long-term unemployed, work for the next five, ten, fifteen years, as India and China continue to do more of these jobs that we can't do competitively here in the U.S.?

PROF. BILL ROGERS, RUTGERS UNIVERSITY: Along with the decline in jobs for those who still remain employed, the globalization plus technology has also contributed to stagnation or a slowdown in the earnings of many Americans and also a growing inequality.

The other piece that I want to comment on, too, is that talking with some of my colleagues in the AFL-CIO, they are finding that not only when the plant moves shortly thereafter you also end up seeing the folks adding that value here in the workplace.

So one of the things I think, particularly for younger individuals, our workforce development center, career technical areas of trade, that is very, very difficult. I can't wrap my mind around it, how you would outsource a plumber? How you would outsource an HVAC technician?

ROMANS: You know, Ali, I want to jump in, because there is one really important point.

An important point, too, those low-value jobs happen on factory floors. Factory floors are hotbeds of innovation, some of the best innovation from factory jobs. It's moving to --

VELSHI: The whole operation.

Karen, what does President Obama do in India? What could he possibly be saying -- could you send some jobs back?

By the way, if he said that, he said we had our software engineers in Silicon Valley. You didn't like them. You didn't like their visa.

What can President Obama do to tout jobs in America?

TUMULTY: Well, one thing he can do and he is going to be talking a lot about is opening up the Indian market, because there's a lot of consumers in India.

As we were talking about what is likely to actually get done after this midterm election, one of the few areas where there is likely to be some common ground between President Obama and the Republicans who are coming into office is free trade, to the consternation, by the way of some in the Democratic base.

I think setting the tone and setting this idea that he's open to free trade, especially since there's some big trade agreements likely to come up in Congress next year, I think it is important.

ROGERS: I'd also like to see more of this research and development-type tax credits. Some work that we did in the previous recovery after the 2001 recession, we found that foreign direct investment flows really accelerated away from the United States. That is, our European trade partners, their FTI was going to Asia. Companies here in the United States, theirs was also accelerating out.

We can utilize the incentive structure with regards to investment as a way to also minimize some of the loss and hopefully turn it into a net gain.

VELSHI: And you know, Christine, Poppy Harlow was talking to some small business owners a couple of days ago after the election and they were saying the same thing, give us incentives to create jobs here in the United States and we will. That's actually a good separate discussion that we should have.

Good point, Bill, thank you very much. Bill Rogers, Karen Tumulty, thank you very much for joining us.

Christine, stick around, we have more to talk about. The Federal Reserve is making a big bet that it says will help the economy recover. We'll explain what the Fed is doing and if it can really work, and we'll talk about cruise ships at the same time. Stay with us.

(COMMERCIAL BREAK)

VELSHI: Can't get enough of this. We've been talking about QE 2, it finally arrived this week. It is not a boat, it is not a ship. It stands for the second round of quantitative easing, a term that I think is absolutely ridiculous, but I'm going to introduce you to two people in a moment that think it's quite appropriate.

This is the Federal Reserve announcing this past week that it is going to pump $600 billion into the economy. That might be followed by another $200 billion or $300 billion a little later. Over the course of the year, here is how it works.

That's the Fed on the left of your screen. It buys bonds back from the banks and institutions it deals with. Obviously, to can take the bonds back, you give them money. So now the banks have more money and the hope is that they will lend it out to businesses and consumers.

Interest rates as you know are extremely low right now, but that's not helping because it's still hard to get loans, credit is still tight.

This is the equivalent of tight -- the opposite of tightening is easing. This is called quantitative easing, that is why it is called QE 2. And again, I think there was some really boring people that invented that name.

Let's talk about whether it is going to work. Let's bring in Richard Quest host of CNN's "QUEST MEANS BUSINESS"; Pete Dominick, "JOHN KING USA" offbeat reporter and host of CNN "WHAT THE WEEK"; Christine Romans is with us as well.

Christine, first of all -- ROMANS: It's not boring. I love it. Quantitative, it rolls right off, quantitative QE 2.

And the question, Ali, is will it be a luxury cruise liner coming into Manhattan or will it be the SS Minnow on a three-hour tour? That is, what we want to know is how the Fed does this. It could be the most important factor for whether you're going to get more jobs, more lending and business confidence next year if they do it correctly.

If it's not done correctly, there are worries about sky high- commodity prices, a very weak dollar, and inflation down the road. That could end up hurting consumers.

So the Fed chief very clear in an op-ed he laid it out and said this is going to work, don't worry. We did it once before a couple years ago and it was appropriate. This will be appropriate again.

VELSHI: That was the first time, that was QE 1. This is QE 2.

Richard, let's talk about this for a second. In Great Britain, where you are, a conservative government was elected on a platform that said they are going to cut back, they are going to stop pushing money into the economy and they are going to have this austerity program.

Here in the United States we've just elected to the House of Representatives a conservative Republican majority who say, stop the spending, end the stimulus. The Federal Reserve works outside of those rules. This QE 2, this $600 billion does not need anybody's approval and it is going in there. So it's running counter to what some people are thinking should be done.

RICHARD QUEST, HOST, "QUEST MEANS BUSINESS": Listen, between the two of you, the economics is just all over the place. For goodness sakes, guys, there are apples and oranges, pears and tangerines. And what you have been talking about, firstly, the cuts in spending were to do with fiscal deficits that can no longer be run at that level.

Secondly, the quantitative easing that you're talking about is designed to push down interest rates by the purchase of bonds.

Thirdly, it's an untested, unknown, uncharted policy pretty much to do a second time around in the way the Fed is planning them.

And fourthly just to prove that there -- there's nothing easy about QE 1, 2, or any form. It has huge international ramifications.

VELSHI: China is very upset about it.

QUEST: Of course, because you've got rock bottom interest rates in your country, so those dollars now flow to China, to Brazil, and to all those other countries that have got higher rates.

VELSHI: Right, which makes their currency inflate in value verse the U.S. dollar. PETE DOMINICK, HOST, "WHAT THE WEEK": Richard Quest, guys, is obviously a lot more intelligent than I am on this and his British accent makes him sound that much smarter.

The first time I heard this phrase quantitative easing, to be honest with you, was the last time I was in my gastrologist's office. I agree with Ali that it is a weird term.

But let's take a look at it real quickly. This is great. This is classic Milton Freedman on this side, Thomas Kane is on this side. Let's get it together. We always talk about inflation. It's a bad thing, now apparently it's a good thing.

The other thing, they are printing money out of thin air. But guys you answer this, not me, can't they also take money out of the stream? Can't Ben Bernanke also burn some money, take it out of the stream to decrease that inflation?

VELSHI: It's a good question. It's the only tools the Reserve has or central banks have, they can increase interest rates or they can decrease them. Right now, they are trying to decrease them.

I'm with Pete, they need a better term and most people are confused about the economics of the whole thing, so I'm just running with the crowd.

Richard, Christine, Pete, stay right there. Pete was just talking about inflation, largely not a concern but in some cases your food and your clothes, the prices of those could be going up. Why now and what can he do about it?

Plus, we're going to take you inside a new movie, inside the financial meltdown, this movie is called "Inside Job." Listen to this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Bear Stearns was rated AAA like a month before it went bankrupt.

UNIDENTIFIED MALE: More likely a 2.

UNIDENTIFIED MALE: A2 is still not bankrupt.

UNIDENTIFIED MALE: It's a high investment grade, solid investment grade rating. Fannie Mae and Freddie Mac were AAA when they were rescued. All of them had investment grade ratings.

UNIDENTIFIED MALE: How can that be?

UNIDENTIFIED MALE: That's a good question.

(END VIDEO CLIP)

VELSHI: Good question, not so funny. We'll get to the bottom of this with a new explosive film about the industry on the other side. (COMMERCIAL BREAK)

VELSHI: OK. So prices are actually lower on most things than they have been for a long time. Everybody is worried that if the Fed does this QE 2 and printing all this money, there is going to be inflation. We are all worried about inflation, we are worried about the deficit causing inflation and there isn't much inflation.

However, in some of the things that you use regularly, food and clothing, there might be. The Bureau of Labor -- the U.S. Agriculture Department says that food prices are rising or expected to rise 2 percent to 3 percent in the first half of this year, 2011.

It is not just food. Cotton prices are going out to bring back the polyester. According to the Bureau of Labor Statistics, there are all sorts of issues going on in the world. There was a lower demand for cotton because of the recession and then there were natural disasters in places that grow cotton.

The bottom line is cotton and foods are going to make things more expensive for you. Where do we sit on this whole inflation thing, Christine?

ROMANS: Well, you know, it is interesting. One of my very first jobs, Ali, I was a corn reporter, and I really was calling the markets for corn. I was watching these corn prices and it astonishes the kind of rallies they have had for corn, wheat, meat, because you put corn and beans into your feed.

So all of these things filter through the food chain, quite literally. Caffeine, for example, coffee is at a 13-year high, silver a 25-year high, gold at an all-time high.

I'm wondering what Richard Quest thinks about this. Is it because demand is going up for these things or is it because demand is going up from the money as the money gets cheaper in your pocket and you're looking for investments and places and things that are hard assets?

QUEST: It's a combination of things. It's obviously fundamentals as we like to say. That it's bad weather, industry supply and demand, all those sort of things.

But then, you do have speculative aspects in the market. People do perceive these commodities as being a way to make good money.

I don't have a huge amount of sympathy with this cotton question and with food issues. The reason is you can't be a free marketeer and love the capitalist free market way but the moment things start raising, you want to massage the market and have a fixed rate and all those sort of things.

Cotton is going up for justifiable reasons and that means we'll have to pay more for quality clothing like my suit.

ROMANS: No one's asking for a fixed rate. We are just saying there are other things to use besides cotton.

VELSHI: Pete, that's what polyester is for.

DOMINICK: Let's be clear about --

QUEST: Hang on, hang on. One thing before you go down your polyester, what is polyester made of?

VELSHI: Oil.

QUEST: Exactly, plastics.

DOMINICK: Let's make one thing clear about Richard Quest, he doesn't have a whole lot of sympathy, period. I'm not sure Quest has a beating heart at this point.

Do what I do, I'm an elitist. I don't dress as well as Richard Quest or Ali Velshi, clearly. We've stopped eating meat during the week in our house. I believe whatever Woody Harrelson says. Why not legalize hemp and then we can use hemp. I know Richard Quest might not wear a hemp suit, but I certainly would.

VELSHI: Pete that is what we love about you, you always make it a little more creative and you didn't even make a comment about Richard Quest.

DOMINICK: Fair enough.

QUEST: Quality. Quality, guys. It even matches. Christine, I'm color coordinated.

VELSHI: Richard, good to see you.

Pete, I bet we'll see you in the same shirt if we join us again next week, but always a pleasure to see you.

Christine, I will talk to you in a minute.

Can't find a job the old-fashioned way? Try searching for a person not a position. I'm going to explain that to you next.

But first, a Washington, D.C. liquor store owner gets in the spirit of reviving his business in this week's "Turnaround."

(BEGIN VIDEO CLIP)

SANDRA ENDO, CNN CORRESPONDENT (voice over): On Saturday mornings in northwest D.C. , winemakers can grab a plastic cup, pull up a wine box and hear from a specialty wine distributor from New Zealand --

TONY QUINN, OWNER, CLEVELAND PARTS, LIQUORS AND WINES: We have experts that handle the vineyard management and winemaking.

ENDO: -- or a Sommelier from a fine D.C. restaurant.

UNIDENTIFIED MALE: This winery only grows Italian.

ENDO: -- and they describe the best way to buy, drink, taste and enjoy wine.

These tasting classes are the brainchild of Tony Quinn who runs Cleveland Parts, Liquors and Wines in Northwest, D.C.

QUINN: For me this was a good way to bring people in the store.

Quinn says the classes cultivate loyalty in a tough iconology. Where new competition is cutting into business.

QUINN: This is all about doing smart business, and it is what keeps us hopefully what keeps us, distinguishes us and also what ultimately keeps us in business, because the economy is very difficult right now. People a lot of times are voting for convenience.

ENDO: After talking to customers Quinn decided to take the competition head on by using his 20 plus year of personal connections with wine producers offering something the competition can't, inexpensive but distinctive wines from small vineyards.

ELEANOR STABLES: It is a family owned vineyard. My grandmother owns the vineyard. It's right in the best part of the world for Sauvignon Blanc.

THINUS KRUGER, WINEMAKER: Working with people, dedicated people we have got in the vineyards every day. Whatever help they need right through the growing season.

ENDO: On this Saturday students try wines from New Zealand, South Africa and virtually unheard of varietals from Texas, Idaho, and even Arizona.

ANDREW STOVER, SOMMELIER, OYA: There are approximately 35, 40 wineries in Arizona.

ENDO: And while some of these wines are off the beaten track, Quinn is gambling that teaching customers to appreciate and ask for nontraditional wines will boost sales and keep customers beating down his door for years to come.

Sandra Endo, CNN, Washington.

(END VIDEOTAPE)

VELSHI: OK. We just had the unemployment numbers for October. We've seen that there are some jobs out there. The bad news is that you can't always find them. Christine Romans talks about this in her new book "Smart is the New Rich."

Christine, look there are some people who have jobs, who are looking for jobs and those jobs don't exist, but there are others who can be a little more creative about getting them.

ROMANS: We all have to be more creative quite, frankly, because the margin for error is pretty slim here.

You know, when Generation X was getting into the workforce, Ali, there were 24 million jobs created over 10 years. Generation Y, 8.4 million jobs were lost. A lot of people, Baby Boomers who had jobs in manufacturing or in the trades, have found themselves sort of pushed out of this economy. So there are a lot of things people have to do to be very strategic right now.

Among them is, don't just send cover letters and resumes willy- nilly. You have to know somebody who knows somebody to get you a job. Eighty percent of the job openings out there aren't even advertised, it is because someone is looking for somebody. He knows you or your reputation, she knows you and your reputation and they hire you this way. You have to work a little harder, quite frankly.

If you can't get a job, Ali, I hate to blame the victim, because some people are very good at what they do. They take all the advice we put on TV, Ali, they take all of it and they still can't get a job. That's a problem with the economy, not a problem with the work force.

VELSHI: Sure, we have to distinguish. There are some jobs out there for a lot of people that there aren't.

But you bring up this interesting point about finding somebody. Brad Karsh is a good friend of ours joining us. He is the president and founder of Job Bound.

Brad, you bring up this point, don't look for the position, don't even look for the HR people, look for the employee. Use social networking if you have to, but look for somebody who works in that company who you can connect with.

Tell me why. BRAD KARSH, PRESIDENT & FOUNDER, JOB BOUND: Well, a lot of times people think when they are looking for a job that if they are going to network, they have to network with the president of the company or the HR director. But the way networking works is that you need to get somebody, anybody in the company to pass your resume onto to HR. It doesn't have to be a senior person.

In fact, when I use to be a recruiting director, I liked referrals from more junior people or people who are closer to the ground, because they really knew the candidate that they were referring. So they might send me somebody, say hey, I worked with this guy in the last company, he's fabulous, next time we have an opening let's consider this person. That's when you're talking about in that regard.

ROMANS: Oh, yes, absolutely. As a hiring manager you want a known quantity even if someone else knows if that person can deliver, because there's so many people who are out there looking for jobs.

Ali, in the book, I give this example of a top tech company where they put in a mid level -- they put out an ad for a midlevel worker. They got 4,000 e-mails, 4,000 resumes overall. You know what they did? They hired from within someone they knew because you always want to go with a known quantity.

So make sure you're keeping up your network, and keeping up your ties with people. You never know when that's going to be something that will help you get that job.

VELSHI: So, Brad, how do you find out about job openings if they are not out there, if they are not posted? If people are getting jobs because they know somebody in the company, what do I have to do if I want a job?

KARSH: Your strategy is to be the person who is networking so that when they do sit in the meeting and say does anybody know somebody, you have someone as your agent, if you will, saying hey I know this person or this candidate.

So don't be shy about networking. Get out there and talk to people. Make it a meaningful networking relationship. Who can you connect with? How can you help them out and then have them help you out as well?

But you have to get out there, don't just go behind your computer and link up with people on linked in. Not a bad strategy, you have to follow up with those folks.

VELSHI: Good to see you both. Brad Karsh, it is always a pleasure, president and founder of Job Bound and the author of "How to say it on Your Resume." And of course, Christine, the author of "Smart Is the New Rich."

All right, this is an unlikely Oscar contender with a starring cast. It is made up of economists and numbers crunchers. We'll go behind the scenes with the director of "Inside Job" right after this break.

(COMMERCIAL BREAK)

VELSHI: "Inside Job" a new documentary that opens nationwide November 12th. It's a movie you've got to see. It delves deeply into the causes behind the financial crisis, the credit crisis in a way that I haven't seen done before.

The movie is called "Inside Job." In a moment, I'm going to talk to the director of the bill, but here is a clip that sets the stage for what happened in our financial crisis.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, FORMER PRESIDENT OF THE UNITED STATES: So help me god.

UNIDENTIFIED MALE: By the time George W. Bush took office in 2001, the U.S. financial sector was vastly more profitable, concentrated and powerful than ever before. Dominating this industry were five investment banks, two financial conglomerates, three securities insurance companies and three rating agencies. And linking them all together was the securitization food chain, a new system which connected trillions of dollars in mortgages and other loans with investors all over the world.

(END VIDEO CLIP)

VELSHI: A movie like this is candy to a guy like me who follows money all the time. But I actually think everybody in America who thinks they were affected by the financial crisis needs to see this, Charles, because the number one question I think that is out there is who caused this and can it happen again? And your movie basically says that our regulations on how to do business safely were loosened to the degree that that's what caused it and yes, it can happen again.

CHARLES FERGUSON, DIR. & PRODUCER, "INSIDE JOB:" Yes, that's absolutely right, unfortunately.

It's a heist film. It was a heist that was committed by the presidents of the banks and they spent 10 years, 20 years, in fact, basically disconnecting the alarm systems, lobbying for deregulation and basically eliminating the ability of the government to control the financial system.

VELSHI: But in some way you say lobbying for the inability, contributing to the inability of the government, the government with the backing of intellectuals in your movie seemed to all work in lock step. Everybody seemed to be agreeing that this idea that there should be less and less regulation of the financial system, because it will result in greater profitability and that will trickle down and make everybody richer.

FERGUSON: Yes, one of the most unique things in the film was something that I discovered in the course of making it, which is that the academics economics discipline has in a very substantial way been bought off by Wall Street. We go through that in the film looking at a series of famous economists who have been on the board of AIG and receive hundreds of thousands of dollars a year and sometimes millions of dollars a year.

VELSHI: Basically you're saying that they gave it a stamp of approval, they gave it legitimacy, so it wasn't just politicians or Wall Streeters saying we should have less regulation, academic America in some way gave it the seal of approval.

FERGUSON: Yes. One thing that not many people realize and therefore that we go into in the film, is that at the same time this issue of the revolving door between industry and government was arising, Wall Street was also co-opting and corrupting the economics discipline and the academic arena.

VELSHI: OK, it is a very interesting part of the movie. I want to show another clip that encapsulates what happened when the new regulation on Wall Street collided with the mortgage market where the rest of us live. Take a look at this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: In the old system when a homeowner paid their mortgage every month the money went to their local lender. Since mortgages took decades to repay, lenders were careful. In the new system, lenders sold the mortgages to investment banks. The investment banks combined thousands of mortgages and other loans, including car loans, student loans, and credit card debt to create complex derivatives called collateralized debt obligations or CDOs.

The investment banks then sold the CDOs to investors. Now when homeowners pay their mortgages, the money went to investors all over the world. The investment bank paid rating agencies to evaluate the CDOs. Many of them were given an AAA rating, which is the highest possible investment grade. This made CDOs popular with retirement funds, which could only purchase highly rated securities. This system was a ticking time bomb.

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VELSHI: OK. Another great piece of this movie that really breaks things down for you. Charles, this president, Obama just got a shellacking in his own words in the midterm election. He came in with what you might have read as a mandate to get tough on Wall Street. Now he's seen as an anti-business president. What is supposed to happen? If you're a 90-minute perp walk in there, and you have apportioned blame across the board, no one has really gone to jail for this?

FERGUSON: Nobody has gone to jail for this. I think that's part of why President Obama, in fact, got the shellacking he just did. One of the most astounding things about this entire crisis is that it is literally true that there has not been a single criminal prosecution in spite the fact that we know that there was an amazing amount of unethical and almost certainly illegal behavior.

It's in contrast to prior financial crisis and financial scandals. Enron, World Com long ago in the 1980s, the SNL scandals where hundreds of financial executives went to jail. Not a single senior financial executive or company has been criminally prosecuted in the last two years.

VELSHI: We're going to look into more of that a little bit more in this discussion.

Charles Ferguson is the director and producer of "Inside Job" great movie. Thanks very much. Charles. I wish you good luck with it.

But Charles just said a lot of wrongdoing in this financial crisis. Why no one prosecuted? We'll talk about it next.

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VELSHI: We just finished a conversation with Charles Ferguson, he is the director and producer of this movie "Inside Job" that's going to be released widely on November 12th, and we ended up with a discussion about this mystery about how no one has gone to jail for what happened in the financial crisis.

Let's bring in Eliot Spitzer, my colleague here at CNN, co-host of CNN's "PARKER/SPITZER."

Eliot, you, as the attorney general in New York, were actually the face of opposition to this. You were a guy who was trying to shine a light on things that were being done in the financial system that were bad for consumers. This seems to even be worse than the stuff that you were dealing with.

ELIOT SPITZER, CO-HOST, PARKER/SPITZER": Well, it's the continuation of exactly what we were shining a light on. We began, full disclosure, I appeared in the movie and the role I play is to basically say look Wall Street is, to in many respects, a Ponzi scheme. Wall Street is so rife with conflicts of interest that the consumer will always get the short end of the stick and that the brokers and the folks at the top will take away their multimillion dollar bonuses, doing anything they can to pad their own pockets. Don't trust them.

When we made those cases years back the opposition was furious. It was powerful. It's precisely what Charles Ferguson describes in what I think is a spectacular movie. It's a must-see movie for every person in this company to understand what happens. He shines a light on the power of Wall Street and the outright falsehoods and that lies emanating from Wall Street and the academics to buyers (ph) to corrupt system.

VELSHI: Gillian Tett is the U.S. managing editor of "Financial Times." She also appears in the movie.

Gillian, Goldman Sachs went through this long investigation about its role in the financial crisis. No real punishment there. In fact, they paid a fine. Businesses thriving, we know that America's businesses have lots of money on the sideline, this country is still reeling from this mess.

So I watch this movie and I think, what's changed? No one was looking out for me before. And it appears that Charles has underscored, as has Eliot that no one is really looking out for me right now.

GILLIAN TETT, U.S. MANAGING EDITOR, "FINANCIAL TIMES:" As Eliot said, it is a fantastic movie and it will make people pretty angry. And frankly, they should be angry because if you compare it to the days of the savings and loans crisis, then they did have hundreds, if not thousands of people, being prosecuted, going to jail, and there was a sense of retribution.

This time around that hasn't happened. And I don't think it's going to happen, because one of the problems people need to recognize is that to go to jail you need to show that someone's broken the law. And the last few years there has been a veritable army of people on Wall Street who have been developing products under name of innovation which basically go to the edge of the law.

VELSHI: That's an important point to recognize, that the laws, the laws accommodated what we did. And this is something that Eliot used to talk about and Allan Sloan, editor at large at "Fortune" Magazine.

You know, Allan, people always tell me why didn't you people in the media blow the whistle on this thing, and Christine and I are proud to say we were there, but so were you.

In your 2007 article "House of Junk," you rang the alarm bells about the subprime mortgage market earlier than many people had done it. Everyone was else still saying it was OK, it's hard to believe that you did it then and it didn't -- it didn't ring any alarm bells. It didn't cause anybody to do anything.

So the bottom line is, as this economy recovers, what's to say that we're not going to go back to this world where people are unscrupulously lining their pockets again?

ALLAN SLOAN, EDITOR AT LARGE, "FORTUNE:" Well, of course we'll go back to that world. Because that's what always happens, and it's happened before and it's going to happen again.

And in 2007, I decided at "Fortune" that we would go out and instead of writing about subprime mortgages, find one issue that showed what was wrong with the system. And we went and found it, and wrote it. And there was a whole lot of scurrying around, but by then, it was really sort of over and the whole thing just collapsed.

VELSHI: All right. So you got Allan Sloan at "Fortune," who's also in the movie, Eliot, you have a movie that's out there, and you have -- had you as the attorney general of New York going after them in the court.

Why so untouchable? What has to happen to actually get the system to change?

SPITZER: Let me give you a little vignette. When we tried to pursue the subprime crisis against many of the national banks, the administration, the Bush administration, went to court not to join us but to oppose us and tell us as the state we couldn't do it and we had to litigate this all the way to the United States Supreme Court. Even to get the opportunity to look at what Allan properly called, and the Gillian's newspaper was calling a corrupt system. We knew it was bad.

The Bush administration, Wall Street closed ranks and it continues even today. The new, incoming probable chair of the House Financial Services Committee, the Congressional Committee that oversees all this, wants to roll back the minimal protections that were put in to the Dowd/Frank Bill passed just a few months ago.

VELSHI: Really, what this movie shows is that most people shown in that movie did operate within the law. The law was just too accommodating.

SLOAN: Well, this is a case where everyone was tempted. Homeowners who borrowed money they never should have borrowed, they were tempted. The institutions that were buying the securities created out of these home loans, they had no idea what they were doing. And even Goldman Sachs which is now everybody's villain, Goldman Sachs didn't figure out until mid-2007, I think that there was a real problem with the securities, and then it went out and covered itself, and of course, did not bother to pick up the phone and call the clients and say, by the way, we changed our mind and stuff as garbage. They take care of themselves and the clients took care of themselves and Goldman prevailed and the clients lost their money.

SPITZER: There is one other element to this. I think there is an opening here to make cases. Probably won't send people to jail in great numbers but can get money back from the people who improperly profited. And that is to dig deep into the credit history of the mortgages that were being made; the banks knew these mortgages were bad.

VELSHI: Right.

SPITZER: They still lent the money. They securitized the debt, created this time bomb that ultimately blew up that the taxpayer had to pay off. The people who got the bonuses based upon this information that they had that they didn't share with people, give back the bonuses, it is simply not fair or right that they're still keeping that money.

TETT: And it's also an issue going forward, which is if you are dealing with a problem of enormous complexity of law and people on Wall Street dancing around the laws, people also ought to be asking hard questions about whether having an unbelievably complex set of financial regulation today is actually going to create more innovation, i.e. more unethical behavior, that we will come to regret.

VELSHI: Right. Well it's great to talk to you all about it. You're all in the movie. I'm not in the business usually of promoting people's commercial enterprises but I do think it will help us all to see this movie to get a very clear understanding of what happened.

Thanks to all of you. Gillian, good to see you again. Gillian Tett of the "Financial Times."

Allan Sloan, always a pleasure to see you of "Fortune."

And Eliot, you've got a platform where you can bring this to light. You can watch Eliot on "PARKER/SPITZER" every weeknight Monday to Friday, 8:00 p.m. Eastern.

Thanks to all of you for being here. Movie opens November 12th, it is called "Inside Job."

That wraps it up for our show, but you can stay in touch with us on Twitter @Ali Velshi and @Christine Romans. Christine and I read everything you write.

We're back here next weekend, same time, Saturday at 1:00 p.m. Eastern, Sunday at 3:00 p.m. Eastern.

Logon 24/7 to CNNMONEY.com and have yourself a great weekend.