Fridays Live in Chicago with Guest Suze Orman - Show Recap

Friday, October 3, 2008

Guests:

• Suze Orman
• Ali Velshi from CNN
• Gwen Ifill
• Dr. Maya Angelou
• Plus an update on the family addicted to heroin

Oprah welcomed Gwen Ifill, journalist for PBS, who served as moderator for the VP debates via satellite. Gwen shared how she was relieved that the debates were over because she took so much time preparing for them - she also slipped on a book while researching and broke her ankle which she now has to have surgery on. Gwen started researching the candidates when they were announced; reading biographies, watching previous debates and studying their history in office. Writing the questions herself, Gwen wanted to be sure to teach Americans about both candidates and their views.

Some people questioned Gwen's bias before the debate because of a book she is writing that focuses on the breakthrough generation of black politics, civil rights and turning points of African American politicians. The book was referred to as a pro-Obama book one day before the debate, calling in to question whether Gwen should be moderating the event. Gwen wanted to make it clear that while there will be a section on Obama in the book, she has not written it yet since she doesn't know how the story ends. She did receive support from many who trust her 30 years as a journalist.

Ali Velshi from CNN joined the show to talk more about the financial crisis and how it happened. To start, Ali explained that most people have 3 assumptions: 1)if you own a house it will go up in value 2)your wages will go up over time 3)your investments will increase over time. Ali explained that rarely to all 3 of these assumptions fall short at the same time, which is happening now. Because of these assumptions, Americans believed that the situation would get better and so continued to spend as usual, so now the banks, government and people of America are heavily in debt.

Ali's first explanation involved how people getting into mortgages they couldn't afford allowed an entire economy to fall apart. Ali described how when Annie, any average person, applied for a mortgage, the bank allowed her to take out more than she really could afford because of interest rates keeping payments low. As long as Annie made her payment the bank made some money, but wanted more. The banks then sold the mortgages to Wall St. who in turn bundled the bad mortgages to global investors - everyone was making more money as long as Annie made her payment with the 6% interest rate.

The trouble came when millions of Annie's could no longer make their mortgage payments and their homes were foreclosed and repossessed; the banks now owned houses that weren't work the original mortgage amount. Because of this action, the entire system fell apart and the global investors, Wall St., the banks and the Annie's lost millions upon millions of dollars, homes and the security of a stable economy.

Ali pointed out that there is plenty of blame to go around - the original problem goes back to banks telling Annie's that they could afford a bigger mortgage and Annie buying a house she couldn't afford

The second issue Ali explained dealt with understanding credit. The banks are now scared and have lost trust in individuals, stores, suppliers, etc and have started reducing credit lines even for people who pay bills on time and have not abused their credit. This reduction in credit effects stores and suppliers who then have less business and cut jobs which drains money out of the economy; nearly 1 million jobs have been lost in 2008 which hurts the economic system. People who have their credit reduced will also see their credit score reduced even though they don't deserve it.

The benefit of the bailout for everyone is to put money back into the system so that it can trickle down allowing people in middle America to keep their jobs and credit and not make the situation worse.

Friday Live - Suze Orman on What to Do:

Suze Orman joined the show to give her take on what steps people need to take now in simple terms that everyone can understand. Suze first started by saying she feels this crisis stems from the banks greed in wanting to make more money and convincing people that they could afford what they actually couldn't.

It used to be that people needed a 20% down payment to get a loan, but that requirement was eliminated so that more people could get loans and therefore make the banks more money. The banks should have told people that they couldn't afford a home or the cost of house they actually could afford, but instead they made money in the short term and caused the system to break.

Suze then explained 5 things that people can do right now. Before going into the list, Suze made sure that people know not to panic - meaning, don't sell everything in stocks or withdrawal money and keep it in your homes. Instead:

1. Make sure your savings are safe: be sure that your savings are kept in FDIC institutions meaning banks, money market accounts, or money market deposit accounts. If you are not insured, move your money somewhere that is. To check, go to myfdicinsurance.gov and use the provided calculator. If your money is in a credit union, be sure it is one of the 98% backed by the NCUA. If you need to move money, it is always an option to use government backed treasury bills or money market accounts that are guaranteed by the US taxing authority.
2. Pay down credit cards and debt: this is not the time to pay late because lowered credit limits and late payments will reduce your FICO score.
3. Get health and term life insurance: unpaid medical bills are the #1 reason for banktrupsy in the US so it is vital to have insurance no matter what. It is also important to have term life insurance, not whole/variable/universal.
4. Continue contributions to your retirement plans: this includes 401K and Roth IRA accounts.
5. Stop spending what you can't afford: start valuing who you are more than what you have!

Update on the Family Addicted to Heroin:

Oprah updated everyone on the Hawk family and Merry who appeared on the show with Lisa Ling and were offered help for their heroin addictions. After the show, everyone called and went to treatment after doing heroin for the last time. Mike transferred from TN to NY to be with his wife Darla and their son while their son Michael left treatment after 13 days to return to Ohio. Michael was arrested for burglarizing his grandparent's home. Brother Matt planned on completing his program and moving into a halfway house. Merry, now 6 months pregnant, has 20 days left with her treatment program.

Friday Live - Dr. Maya Angelou:

Maya Angelou appeared on the show via satellite from her home in NY to talk about her new book Letter to My Daughter a book dedicated to the daughter Maya never had but sees all around her. The book describes lessons that Maya has learned through her life and the conditions to which she learned them, but presents them in a way that readers can learn their own lessons. Maya hopes that people begin to realize that we are all more alike than we are different and want the same things out of life; to be happy, safe, provide for our families and be loved.