stock Market

Aug. 16, 2007

Transcript:

Jose Cardenas:
A recent controversial vote on immigration and Harry Mitchell casts one of the deciding votes. We will talk to the congressman about that and much more. The housing market is starting to hurt the stock market. An analyst will tell us what's happening. All that's next on HORIZON.

Jose Cardenas:
Good evening. I'm Jose Cardenas. Welcome to HORIZON. Earlier this month, chaos erupted in House of Representatives when republicans seemed to be succeeding in sticking an amendment on to an agricultural bill. That would have prevented the federal government for paying for housing for undocumented farm workers. A handful of Democrats switched their votes when it appeared the Republicans' amendment was about to win. That resulted in a walkout by republicans. One of those to switch his vote was Arizona congressman Harry Mitchell. Congressman Mitchell will join us shortly to talk about that vote and other issues going on in congress. But first here's some excepts from the congressman's visit to the Arizona veterans' hospital along with house speaker Nancy Pelosi and Congressman Ed Pastor yesterday.

Ed Pastor:
During the bush administration as he went further into his administration, we saw that there was less and less money being spent on veteran affairs facilities, doctors, and we saw a real drop in services. And a commitment that we have made in the new congress is to ensure that our returning veterans have the facilities, the services, in order they can meet their medical needs.

Nancy Pelosi:
When we walk into a medical center, V.A. Medical Center, we are walking on hallowed ground. We are walking in a place where we are honoring our promises to our veterans. That's the way it should be. In the military, it is said that on the battle field, we will leave no soldier behind. And when they come home, we in congress promise that we will leave no veteran behind. And with Harry Mitchell and Ed Pastor in the lead we are able to appropriate the biggest increase in veterans funding in the 77-year history of the veterans admission. Over $6.5 billion. [applause] you will see -- as soon as we can get the president to sign the bill, you will be feeling the effects of that increased funding. We come here and we had the privilege of seeing this beautiful facility, seeing the dignity with which you treat the veterans here. We owe it to them. They have all said that they are very pleased with the attention that they have received.

Ed Pastor:
This structure is 50 years old. But they have, and we have been rehabbing it to the best of our ability and we were given this morning other improvements that the administrator, Mr. Moore, would like to have for this facility. One deals with the mental health facility, a building. We are also going to do more work to assist the homeless veterans.

Jose Cardenas:
Here now is Arizona Democratic Congressman Harry Mitchell who represents the state's fifth district. Welcome back to HORIZON.

Congressman Mitchell:
Thank you very much, Jose.

Jose Cardenas:
Pretty high delegation shown in that clip, you, Congressman Pastor and the speaker. What was the purpose of the visit?

Congressman Mitchell:
I think it's to show and highlight the importance of the veterans. The very fact that we are doing more now for veterans than we have ever done. There's a lot of focus on veterans and veterans' care. As the speaker said, we have voted for more money for veterans' health care than we have in the 77-year history of the veterans admission. We took a tour of the Carl T. Hayden Medical Center. It's in pretty good shape. Everyone person we talk for very pleased with the service they are getting but one of the things we need to dies increase the size of it. We saw some plans to increase the size as well as the staffing. Both of those are important. This is a sun belt area. And half of the patients in the Carl T. Hayden Medical Center are over 65. And people come here in the winter. And they have not on the snowbirds but also people moving here plus all the new veterans. So there's a great pressure on this particular hospital for services. And so we have got to provide more money. And I think part of the funding that we just voted for the veterans administration will be put here in Phoenix.

Jose Cardenas:
Now, this is a facility that you had visited some time earlier this year. Were there any particular areas of improvement that you noted when you went back?

Congressman Mitchell:
Just a couple. And one is that when we were there before there was not even an MRI machine in the building. If they used an MRI machine, they had to go to another hospital. That's been recommend deed. There's going to be another one in place. They are doing some remodeling to put these machines there. There have been improvements and I think it's just because of the pressure of the new veterans coming in from Iraq, and Afghanistan, again, as well as the older ones that are coming here.

Jose Cardenas:
You mentioned some of the things that congress has done for veterans. You chair a subcommittee of the veterans committee. It's on oversight investigations. Is there anything specific that you have done and your committee has done for veterans?

Congressman Mitchell:
I am very proud of that. It kind of started with the problems that Walter Reed. And I think you remember the conditions of some of the physical facilities there. And as a result of visiting Walter reed we checked in to see if things have been passed on to the veterans administration, if they are similar type of problems. And I introduced a bill which was called the dignity for wounded warriors act. And I am very proud to say that act was incorporated into the wounded war warriors assistance act which passed 426-0. And this is to facilitate a transition from the military, of the D.O.D. Hospitals into the veterans administration. We found that there was a difference in culture in the way they did things, the two departments. Computers didn't talk. There was a lack of communication. And I am very proud that in more recent bill, one of my amendments was to make it much easier for medical records to be transferred. You know, they can go from being in a military hospital to veterans hospital in one day. We found it was very difficult to move the records. So I am very proud to say we are making some head way there. We have had about seven or eight hearings just in my subcommittee. And we are finding that there's been all kinds of -- not abuses but just plain neglect. A lack of oversight. A lack of accountability. And one of the great things about serving on this committee is that it's really nonpartisan. Everybody wants to make sure that our veterans get the dignity and respect that they deserve. When they go and future their life in harm's way the least we can do is take care of them. Not just on the battle field but also we have an obligation to look at their needs from then on. And so I think we have done a great deal to help veterans and call attention to areas that have been deficient.

Jose Cardenas:
Congressman, as you indicated, there doesn't seem to be much debate on matters that affect veterans. It's hardly the case on anything that has to do with immigration. And we mentioned in the introduction a rather controversial vote by you on an agricultural bill, an amendment that had something to do with immigration. Explain that to us.

Congressman Mitchell:
That's one of the old partisan games being played. If it was just an amendment by itself, there would have been no problem. But attached to this amendment was a way to kill the bill.

Jose Cardenas:
That was one that dealt with agriculture and I understand a number of other things.

Congressman Mitchell:
Agriculture bill had seven titles, only one dealt with agriculture. Other dealt with, you know, reimportation of drugs from Canada, the country of origin label on foods, school lunch programs, all the other things that are very important to Tempe. And our district. Scottsdale, district 5 and the whole state of Arizona. But I think what this bill did was to say you could not allow illegal immigrants to have housing assistance. It is already illegal for them to have housing assistance. It would have killed the bill. And, of course, I was not going to allow a vote like that to kilt bill. Bill was too far for Arizona. It was just redundant piece of amendment. I don't think anybody wants to give illegal immigrants services or benefits. But that wasn't the heart of the bill -- the heart of this amendment was to kill the bill. And that's why I switched at last minute.

Jose Cardenas:
Force people to take a position on immigration even though it may not be directly related to that?

Congressman Mitchell:
Exactly.

Jose Cardenas:
Is this something that's happening fairly frequently in.

Congressman Mitchell:
Very frequently. It's a partisan type of atmosphere. It's one that the minority can always use towards the end to ask for a bill, to add an amendment. And then the kicker is to kill the bill. That's what it would have done.

Jose Cardenas:
What does this say about the Democratic majority's promises to end the partisanship, to end the bickering now that the democrats are in control? It seems to be it may be worse.

Congressman Mitchell:
Well, it is I don't know if it's worse or not being new but most of the pieces of major legislation that have been passed so far in the house have been done in a nonpartisan way. Some of the things we did early on, sweeping ethics reform, which is now before the president, passed the house and the senate, we passed the 9/11 commission report. We had energy was the an important bill. So we could become energy independent at the same time promote alternative sources of energy. And, of course, we rayed the minimum wage and that was signed into raw. So there are many things that have been done in a nonpartisan way. Hopefully after this break, people will come back after being at home, and because I think most people want this congress to work for the American people. I don't think they want to partisan bickering going on. And hopefully people will tell their representative when they go back, let's get to work and move this country a little bit further down road to some good things.

Jose Cardenas:
Now, something that certainly caught the attention of the American people and of congress before the break was the bridge collapse in Minnesota. You were here on this visit. You reviewed a -- the process by which the Arizona Department of Transportation reviews bridges and makes an assessment. What can you tell us about that?

Congressman Mitchell:
That was really a very enlightening little trip I had with the department of transportation. I am on the transportation and infrastructure committee. And chairman oberstar has said when we come back the first bill we are going to talk about in September is going to be bridge safety. And so that's going to be one of our hearings. So I want to become informed about how we do the inspections here in Arizona. And I think Arizona is going to be very proud to know that Arizona's bridges are classified as about an a minus. It is just terrific. Our bridges and none in district 5 are in any kind of danger at all. Bridges are new and when they were built they were built with new technology, new kinds of materials. And they have a life span now according to the department of transportation from anywhere to 75 to 100 years. But what they showed us is every two years, a team goes out with engineers, and they inspect these bridges. I saw what they were looking for. They are look at joints, taking pictures and measuring joints to see if they moved at all. See if there are cracks in the bed the bridge that would allow water to get in and affect the rebar and the reinforcement. They do this every two years. And a real credit to the legislature, the governor this year. There were two more engineers added to add more teams for bridge inspections. And the important thing is to continue to inspect these bridges as a result, we can maintain them and they will last a much longer time. But Arizona is one of the lucky states. Our bridges are in great shape.

Jose Cardenas:
But the suggestion from all the reports that came out after the bridge collapse was that most of the country is in pretty bad shape, not just bridges but other vital parts of the infrastructure. And it's going to be a pretty big price tag. What do you expect to see by way of legislation coming out of Congress?

Congressman Mitchell:
Chairman Oberstar has made this a priority. He want to have some hearings to find out what we can do to find a dedicated source to take care of all the bridge infrastructures. Most of the bridges that are in the midwest or in the eastern part of this country had a life span of about 40 to 50 years. They say we have got new materials, new construction techniques. We have changed that in Arizona. And there's going to be a high price to pay for all these bridge improvements or maintenance. But you are right about other infrastructures. We also found that there was a problem with dam safety. And Arizona has a number of dams that don't necessarily hold water right now, but they are flood control dams. And there was money put aside, and I don't remember the exact amount of money, but as I looked at it, the money put aside for the whole nation is what Arizona could have spent themselves for our dam safety and our dam inspections. Have got some problems with infrastructure. It's dams, bridge, all the infrastructure needs to be taken a look at. They were built 40, 50 years ago. Not too long ago in New York itself they had an explosion with a steam pipe right downtown.

Jose Cardenas:
A couple months ago.

Congressman Mitchell:
Right. So we are having to look at all the infrastructure. And it's something that I don't know if we paid attention to. We keep building new and not looked at maintenance.

Jose Cardenas:
Congressman, you talked about a high price to pay. That seems to be the message in another area, immigration that's coming from the bush administration, which says the failure to enact comprehensive immigration reform is going to have consequences and they seem intent on showing the country what those consequences are with fairly severe enforcement. What's going on there?

Congressman Mitchell:
I think you summarized it very well. And unfortunately, states are getting so upset and so frustrated with the failure of the federal government to enact some type of comprehensive plan that there's going to be a mishmash of different kinds of pieces of legislation to deal with, with immigration. I think the president is, the people are saying that the illegal immigrants are coming in because of the jobs, we are going to make it so there are not jobs available. One of the reasons we need some comprehensive plan is to take Arizona for example. Maricopa county, where we have about a 3% unemployment rate, and the businesses that, the drive this economy Maricopa county and district five are hospitality, tourism and construction. When you have that low of unemployment, there is a need and it's going to affect our economy. And so hopefully we can come up with some immigration plan that not only protects our borders and that's the first thing. To be a sovereign nation, you have to protect our borders. Particularly in this day and age. We need to protect our borders and we also need to take a look at how we can allow the labor supply we need.

Jose Cardenas:
Congressman, we are almost out of time. One last month. We are going to talk about this with our next guest. The news that dominated today's reports in the last few days is the stock market. And its ups and downs. Do you see congress coming up with some kind of a bailout for the lending industry?

Congressman Mitchell:
You know, I have not really heard that yet. I am sure when we come back from the break there's going to be a lot of talk about this. But I understand the stock market did recover quite a bit today. It didn't go back to where it was. The housing market in Arizona is probably better than the rest of the country but that doesn't mean it's extra good. I read just recently that in Coolidge, there was not one building permitted issued in the month of July. And this is going to have an effect on our economy because our economy in Arizona is built around growth. And Coolidge and penal area had great deals of growth. I am sure there's going to be some pressure to do something because this housing market and the collapse of the subprime market has affected the stock market. And you know, over half the American people now have some interest in the stock and stock market.

Jose Cardenas:
I am afraid we are out of time. Thank you very much, Congressman Harry Mitchell.

Jose Cardenas:
For the first time in four months the stock market closed below 13,000 yesterday. Today it bounced back losing only 15 points after being down 340 in earlier trading. What's scaring invest isers is the liquidity cries assist driven by the lackluster housing market. The nation's none one mortgages lender is being scared off. And First Magnus Financial announced it is shutting down operations and is stopping lending. Possibly the worst the problems may not have yet hit. Subprime loans are made to people who are higher risk. I am talk to the stock analyst about the problems but first here's more on the housing market.

Mike Sauceda:
The sales of existing homes fell by 41% in the quarter from April to June, according to National Association of Realtors. The association said the current housing slump is the worst in 16 years. Despite a drop in the sale of existing homes prices were up in the survey. The national median sales price of an existing home was $223,000, down a 1.5% from the previous year. The state with the biggest drop in home sales in the second quarter was Florida with a respect drop of more than 41%. Nevada saw a decline of 38%, Arizona's existing home sales were down 23% in the second quarter. Meanwhile sales for new homes are down as well according to the U.S. Census Bureau. Sales of new homes in the u.s. Were at 834,000 in June, down 22% from the year before and nearly 7% from May. Median price of a home in June was $227,000. The seasonally estimate at end of June was 537,000. Census bureau says that's a supply of eight months at the current sales rate.

Jose Cardenas:
Here now to talk about the housing market is Bob Parker, first vice president of investments for Merrill Lynch in Phoenix. Thanks for joining us on HORIZON.

Bob Parker:
Thank you.

Jose Cardenas:
We talked about the liquidity crisis. Does that mean the national credit card is maxed out?

Bob Parker::
For some people, yes. Unfortunately. And more than the credit card. A lot of people have used their homes as sort of a.t.m.'s over the last few years and money was easy, credit was easy. There was a lot of loans made that were not necessarily as credit worthy as they should have been. But that is what's affecting the market. And the crux of the argument is, what is the impact on the u.s. economy? When there is a lack of available credit, business slows down and consumer spending slows down. Consumer spending is about two-thirds of the economy. So the draininger is the economy will slow and that's what the stock market is reacting to right now.

Jose Cardenas:
It's not just some concerns about Countrywide, First Magnus, there's something beyond that that the market is reacting to?

Bob Parker:
It isn't just in the United States. The credit crisis went global this week. A big French bank announced they were holding bad mortgages paper as well. Part of the problem and how we got into this problem is mortgages lending used to be sort of a local activity. Your s&l down the street would making a mortgage loan, keep the loan, service the loan and so they had a invested in whether you could repay the loan. What happened in the last few years is hmm of these loans were securitized which means they were packaged and sold to someone else so the maker of the loan had less incentive to make sure that it was a credit worthy loan because --

Jose Cardenas:
Those were the subprime loans we are talking about?

Bob Parker:
Yeah, mainly subprime. The problem is we don't know what we don't know. We don't mow how widespread the problem is. The mortgage market is much less visible. Idle more opaque than the stock market. We don't mow how keep deep the hole is. And uncertainty is what the stock market is reacting to.

Jose Cardenas:
Do we have a sense, though, how you apportion the program? How much is subprime lending and how much the overexuberance of the housing market.

Bob Parker:
There was a lot of overexuberant but the numbers are muddy. Nobody can get their arm around the size of the problem. And that's why Wall Street is acting the. We did have a rebound today. Additionally the stock market had a pretty quick trip between 13,000 and 14,000. It took only about three months to cover that 1,000 points on the dow. That's historically as fast as that's ever happened. We did it without much volatility. It was a slow steady climb at 14,000. We closed at 14,000 and then the troubles began and what bev seen over the last month or so is volume tillity. We will have huge up days followed by huge bad days. That signals the market is not sure.

Jose Cardenas:
One of the other uncertainty how much much is do not simply to bad loans but fraudulent loans and the worst may yet to come?

Bob Parker:
It's hard to know what kind of lending practices were used. And I think that some of the things you are reading in the wall street journal, I read something in the los angeles times along the same lines over the weekend that people were enticed to take loans they probably should not have taken. And that's going to be a big problem. And, of course, on the level of homeownership, you are talking about the American dream. Nobody wants to see people lose their homes. But by the same token, people who made bad decisions in a capitalist system really have to feel the pain. It's going to be interesting to see. I heard you talking to the congressman about possible federal action. Might start with the fed. Will the fed lower interest rates?

Jose Cardenas:
What exact that will have if they do?

Bob Parker:
It's a good question. Normally, that would provide more liquidity and stimulate the economy. But the question many are asking is, what if it doesn't help? What if the fed decides to cut. Where do we go from there? There's also something called moral hazard. If the fed bales out market and bails out people who made risky and poor decisions won't they repeat the behavior? Knowing there's a safety net.

Jose Cardenas:
Some of that's a political issue.
This has been very helpful. We are out of time. It's been good to have you on the show. Bob Parker , Merrill Lynch, talking about the issues and how they impact Arizona and the country. Good to see you.

Are Difficult days ahead for the Republican Party? Some new poll numbers are causing concern as we head into the next national election. And a new policy from the white house on illegal immigration. And businesses and what it means in Arizona. The journalist roundtable Friday at 7:00 on HORIZON.

Jose Cardenas:
And that's the Thursday edition of HORIZON. It's good to have you here. I'm Jose Cardenas. Have a good night.