On the market--Suzy (fast)
>> welcome back, everybody. ford has got a deal for bondholders they are hoping they cannot resist. the automaker is offering investors $2.5 billion of bonds that pay annual interest of as much as 10.6%. that is the highest rate on any ford paper sold in the u.s. in the last century. they will be exchanged for debt. they start maturing in october. by exchanging the bonds, ford can hold onto more than $21.2 billion while it tries to return to profitability. a research analyst has been analyzing debt for u over 20 years and says the bond sale is a sweet deal for the investors. in houston, the jury is in the fourth day of deliberations in the enron trial. in the meantime, former enron chairman ken lay is back on the stand. he’s testifying in his own defense in a separate trial. let’s get the latest from june grasso down in houston for us.
>> suzy, the jury came in at 8:00 this morning and began deliberating on the schedule they set 8:00 to 4:00 every day monday through thursday. they are off on friday. they’re deliberating close to the place where ken lay is being tried on separate charges. and here’s a look at the jury room where they have been sitting for the last four days
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Listen NYU Stern School of Business---White, Lawrence---Professor of Economics
>> americanning are saving less than they were three years ago, have more debt, and have fewer ritirmente accounts. the senate banking committee is holding a hearing on these issues with testimony from ben bernanke as well as the chairman of the s.e.c. christopher cox. this is a live shot of the goings on in washington, but right back here in the studio, we have professor larry white at n.y.u. school of business. larry, why are we talking about that issue right now? why is financial literacy coming into the foreground now?
>> i think a big part of it is that we’ve got a large baby boomer cohort that is in the process of retiring. up like earlier generations who could rely on company pensions and social security, these are men and women who will have to be relying on their own assets, own save, and they need to know how to manage it and many don’t.
>> is there concern that 10, 15 years down the line as people are retiring and sort of facing the crunch time at that point in time that we could have a crisis?
>> crisis may be too strong, but suing people who they say misled them and turning to government, it won’t be a happy situation. >> how serious a problem, though d i know we talk a lot about the low savings rate, the negative savings rate we have here in this country. how serious of a problem is that really the biggest equity people have is their homes.
>> people have been pulling money out of their homes and rereplacing that for other forms of savings, but that can’t go on forever. also, home values seem to be leveling off. they are not going to continue to increase the way they have these past few years. and even with home values, how much do i want to refinance? you need financial literacy nar as well.
>> nonetheless, though, i mean, are you saying that people should start saving more?
>> for sure.
>> but is that going to come at the expense of this fantastic american consumer who has been who has been able to finance us through recessions and through difficult times. if indeed the american public does start to save more, isn’t that in a way detrimental for growth given that consumption and services industries now such a big part of g.d.p.?
>> sure. that is andy houstonnable argument, but first, it isn’t going to happen overnight. it will happen slowly over time and what will accompany it will be a reduced balance of payments and the u.s. economy will export more. we will import less. there will still be the same level of overall economic activity. americanning will be consuming less and exporting more to the rest of the world.
>> what is the optimum level of savings? how do people know?
>> there is lot of online calculators. you need to have a level of assets when you retire and taking into account the build-up to the point where you do retire so you are going to be comfortable in your retirement years. you want to be figuring on living well into your 80’s. and that takes assets and that’s going to take savings. again, you can go online with lot of online calculators that will give you a good idea of what you need to save in order to enjoy what standard of living when you retire.
>> who is ultimately responsible? for the lack of financial literacy or for the situation we’re in right now? who is responsible for it? are the institutions responsible or individuals responsible or does the government need to step in and do more?
>> ultimately it is an individual responsibility, but i think there’s a major role for government. first, we need to do a better job of educating young people in elementary schools and secondary school and better mathematical literacy and better numeracy and don’t start seeing a red haze when number issues come up. in the short run, what we can do is first improve all the disclosure document. for example n credit cards. you get a new credit card, you get this incredible piece of very small pribt. nobody reads it and you don’t have an incentive to improve your financial literacy because you know --
>> using good basic english language would go a long way.
>> would encourage people to learn more. raw awe professor, thanks for your time today.
>> thank you.
>> our thanks to larry white professor of economics at n.y.u.
>> the government is setting up a call center for military vets following the biggest theft of personal data in u.s. history. michelle makori has the detail.
