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Business news correspondent discusses racism in the subprime mortgage crisis. (2:12)
 

Full interview. (10:11)
 

Tavis: More tonight on our Road to Wealth series with Stephanie Elam, business correspondent for CNN, "Headline News" and "CNN International". She's also the former co-host of the syndicated program, "Black Enterprise Report". She joins us tonight from, where else, New York. Stephanie, nice to have you on the program.

Stephanie Elam: It is good to be here, Tavis. Thanks so much for having me.

Tavis: I'm delighted to have you. Let me go back into this week that was where money matters are concerned. Of course, some of the big news this week, the Fed cut those interest rates on Tuesday. As I read this - and you're the expert, not me, - the cuts were not as deep as people had hoped or thought they might be.

Elam: Yeah. You know, this is a case, Tavis, where for two weeks before the Fed meeting, everyone was sitting there going, "You know what? They're going to cut rates." They've got to cut rates and we saw the markets go up by a thousand points. That's a pretty big run-up.

So that means, for the most part, a lot of people were looking at the markets and saying, "Hey, it's already factored in. A quarter-point cut is going to come through when the Fed meets on Tuesday, as the case may be, right?"

Well, sure, that came through, except for now we saw more decline in the housing market. We saw Washington Mutual, a big company, showing that they still had some weakness because of what's been going on with the subprime mortgage market. So because of that, there are many on Wall Street who were hoping the Fed would cut more.

When that didn't come through, the quarter-point cut already being factored in, the market sold off. Also, the other issue, the Fed made it sound like it's possible that they don't see what's going on on Wall Street as badly as many people on Wall Street feel it is going.

As far as the economy is concerned, that means the Fed may not cut rates moving forward. A lot of people really do take a look at what the Fed is saying going forward and, if it doesn't look like they're going to move there, that's what they're concerned about. So we saw the market sell off when that report came out on that day.

Tavis: The movement by the Fed earlier this week means what, you think, for everyday people?

Elam: For a lot of everyday people, you will see differences when it comes to your credit card loans. You know, if you go to get a loan from the bank right now, it's going to be cheaper. Right away, the banks start cutting that rate, so that is why this is a number that we all care about, your auto loans, your credit cards.

That's everyday people kind of stuff. Even though it has the titles that a lot of people don't know how to relate to, Fed funds rate, it's actually something that really does pertain to what we do every day.

Tavis: President Bush, late last week, unveiled his plan to help borrowers. Tell me what you make of that and what the impact has been in the business that you are in around what he had to say over the last few days.

Elam: Well, obviously, when the president steps in, it shows that it's become a problem that everyone is watching. At this point, a lot of people feel like it doesn't go far enough. Some people are like, "Hey, at least it's a move in the right direction." There are a lot of people who are affected by this subprime crisis. It's basically adjustable mortgages.

So you have your rate, it sounds great when you first start, right? And then as time goes on, it gets higher and higher and it becomes more difficult for everyday people to go ahead and pay their mortgage rates. Well, obviously, this freeze will hold those rates in place for five years, but there's a lot of rules about who this applies to.

Some estimates say that it's only going to help out like twelve percent of the people who have been hurt by the subprime mortgage crisis. So there's still work to be done here. You've heard a lot from people like Jesse Jackson, Marc Morial of the Urban League, coming out and saying, "This really needs to do more because it disproportionately affects a lot of Black people, Latino, people of color."

Also a lot of single women are being hurt by this. It's something that's been affecting people who are also perhaps not the wealthiest members of our society as well. So that's why so many people are concerned about it.

Tavis: I wrote these numbers down, Stephanie, because I didn't want to get them wrong. To the point that you make now, let me just put some - pardon the pun - put some color to these numbers.

Elam: (Laughter)

Tavis: Where this subprime crisis is concerned, fifty-four percent - we'll put this up on the screen here - fifty-four percent of African Americans who took out loans in 2006 used higher cost loans. For people who think that this does not impact, that these numbers don't really impact, that racism is no longer an issue in America, get this.

Fifty-four percent of African Americans who took out loans in 2006 used higher cost loans. Forty-seven percent of Hispanics who took out loans in 2006 used higher cost loans. And eighteen percent of Whites who took out loans in 2006 used higher cost loans.

So what do we say to people who think, again, that where these money matters are concerned, where this crisis is concerned, that people of color are not being hit any harder than anybody else?

Elam: You know, it's an issue that, if you look at - I don't think a lot of people want to look at it this way, but the problem in this country is largely poverty. There are a lot of people who are impoverished who are of color. The one way that we've all learned to get out of poverty is to buy a home. That's the first way we all learned how to do it.

So here are people who are looking at an opportunity where they can go out, do something good for themselves, for their families, and get help. Unfortunately, there were some shady dealings, it seems, with people going out and getting this information to people and then reeling them in with something that sounds like a great idea at the time.

We'll get this little bit of a low rate here and we'll pull you in. Then later, you've got whole communities, whole streets, who are now foreclosing on their homes. So obviously, there's a problem here. I actually heard one person say, "Did these people ever take a look at a mortgage application before?"

That is totally part of the problem. People who look at this stuff all the time, they can make sense. They think it's very clear to everyone because it's clear to them. I remember when I bought a place the first time, I definitely thought it was pretty crazy to look at all the information coming through and being a little confused by it.

So obviously, a lot of people are going to be that way. It was easy to get people who were not looking at this brought into this. Obviously, Black people and Latinos beings affected by this disproportionately. There's no way you can deny that at this point.

Tavis: Let me shift gears and talk about the market and what we are to make of these large, and I do mean large, fluctuations.

Elam: There's been some volatility this year (laughter).

Tavis: That's an understatement of the night (laughter).

Elam: (Laughter) There has been. I mean, you know, it's getting to the point almost that no one seems to really freak out if we see a drop of like two hundred points or more because there has been so much of this fluctuation that we've seen. Just to give you sort of an idea here, the idea of a correction, that is when the market drops ten percent from its all-time high.

We actually saw that a few weeks ago, but then the Fed, interest rates, cut, those words started coming together and then we saw the Dow take back off by a thousand points going back up the other way, so we are swinging a lot here. But for the year, just to put things in perspective, we're up about ten percent on the Dow.

So while you're sitting there thinking, a lot of people are going, "Dude, I may have lost a lot of money this year." You may not have because your 401(k) generally tracks along with some of these bigger indices that we tend to look at here. So it's one thing to see these fluctuations, but overall, if you take a look, settle back, calm down, take a sip of coffee, calm back down, you'll see that probably you will be okay for the year.

Tavis: I see you may be okay for this year. Let's talk about next year and talk specifically about the "R" word. No, I don't mean - somebody said you already did that. Racism. No, no, no, not that "R" word. The other "R" word, recession. You can't accurately forecast these things, but what's the talk about whether or not we're going to find ourselves in a recession in 2008?

Elam: You know, the weird thing is, recession is one of those things that we can tell when we've been in one. We know afterwards. Because the way you define a recession is two-quarters of negative growth. That's taking a look at the gross domestic product from the country. Well, we haven't had that.

Just to put this in perspective, for the third quarter, we're up almost four percent, a little bit less than we were in the second quarter, but still we've had growth this year. It's not that the economy is slowing down. Also on top of it, the jobs report came out and, for November, we still added jobs. It was more than expected. Sure, we did see a decline from the previous month, but we are seeing jobs coming into the economy as well.

When the recession comes around, usually it's marked by employment going down and consumer spending also going down. So people are losing jobs and, therefore, they're not spending. We haven't quite seen that yet, although holiday sales seem to be tracking a little bit lighter at this time.

So you take a look at some of the bigger firms, Merrill, Morgan Stanley. They're saying that it's likely we'll see a slight recession. We may slow down here a bit, but there are a lot of people who still believe that the economy can weather this housing storm even if, at the end of it, when it's all said and done.

We did hear today one CEO saying, "Hey, maybe that will mean that, from the peak, home prices will drop ten percent, those existing home prices." So we are going to see some bumpiness going into 2008, but it doesn't look like it will be as egregious as some may have thought previously.

Tavis: I got about a minute and fifteen seconds to go. I want to shift gears dramatically and ask you a personal question. Don't get scared, don't get scared.

For those persons watching right now who happen to be of color and are turned on by the fact as I am, which is why I watch you on CNN every day, that an African American woman can do what you do as well as you do it. Maria Bartiroma, who I like and who's a friend, ain't the only one that can do what she does. How does a sister like you end up doing this kind of reporting, money reporting?

Elam: I think it's kind of a hodgepodge of things that landed me here in New York doing business news, but it has worked out. I've also had a great mentor in Valerie Morris who was a CNN anchor and she helped me out a lot.

But I definitely think it's one of those things that, once you learn the ins and outs of business news, you do feel like you can conquer a lot of things. There's a lot of numbers coming at you, a lot of fluctuations, a lot of changes, but I'm aware, I guess, every single time I go on the air who I am representing. It's not just me. It's not just Elam's. It's a lot of things.

You know, as a graduate of Howard University, I realize that I am representing a lot of not just Black people, but Black women. It's something that I'm proud of because I do really, really enjoy the job I do and I try to make sure that comes across when I'm on television.

Tavis: It does indeed and you should, in fact, be proud of the work that you are doing. Her name is Stephanie Elam. You can catch her weekdays on CNN on "Headline News" from the floor of the Stock Exchange. Stephanie, thanks for your insights tonight. Glad to have you on our program on PBS.

Elam: Glad to be here, Tavis. Thanks so much.

Tavis: My pleasure.