Market Selloff Puts Spotlight on Obama's Economic Policies

NEIL CAVUTO, HOST OF, “YOUR WORLD”: Well, it turns out that investors are not the only ones losing confidence. Companies will -- even higher. So are the folk who do the hiring. And nothing they are hearing out of the White House or anything else is making them feel any better.

Just ask Mort Zuckerman, the media and real estate tycoon, keeping his money very, very tight.

What is going on with businesses in general?

MORT ZUCKERMAN, EDITOR-IN-CHIEF & PUBLISHER, U.S. NEWS & WORLD REPORT: Well, I think this is not just an overnight or a one-week story. This has been going on for a couple of years.

We have a huge increase in unemployment, which, in real terms, is up to 19 percent if you measure it properly. We have a huge drop in home equity, which is two-thirds of the home equity of the American public has dropped. That’s a huge drop in their equity, even bigger than the drop that we had in the Great Depression.

You have a drop in consumer confidence that we haven’t seen. It’s 20 percent below the low levels of every previous recession measured by the National Industrial Conference Board and the University of Michigan.

CAVUTO: So, does that make a guy like you, who hires a lot of folks in a lot of various businesses, less likely to do so?

ZUCKERMAN: Oh, without question.

CAVUTO: What do you need to see?

ZUCKERMAN: You have to see something really positive happen in the economy that is not going to be generated exclusively by the deficits or by monetary policy. There has to be organic growth in the economy, and we are not seeing that.

In fact, what we are seeing, if I may say so, is the modern-day equivalent of a depression. The only difference is, instead of having soup lines; you have 10 million people getting unemployment checks in the mail so you do not see them, but those numbers that are just terrifying in fact.

And I won’t not say we are completely out of tools in the toolbox from the government, but there is very, very little that they can do.


CAVUTO: You are not encouraged what you’ve seen thus far?

ZUCKERMAN: No, absolutely not.

CAVUTO: The president’s latest initiatives don’t go far enough for you?

ZUCKERMAN: No. I don’t think they’re going to work. That is the problem.

We have a chance. There is a time when this kind of a program can work. That is much, much earlier in the process of the decline. At this stage of the game, there’s something else going on that I think is absolutely essential to this, and that is, it is not that we have a stock market crash or even a residential market crash.

We have a crash in confidence. And that’s not going to turn around quickly. This has gone on for too long. The attitudes have hardened. We have seen the government unable to do anything about it. There’s a real loss of confidence in the government, never mind in the administration but the role of the government, and there is a loss of confidence in the income and in the net worth of most people.

You look at their personal balance sheets, and they will start saving because they don’t know what’s happening.


CAVUTO: Well, they are going back to that. The latest numbers, they were opening up the wallet and they have closed it.

ZUCKERMAN: Absolutely.

CAVUTO: Let me ask you. We are on track right now, Mort, unless something changes big time tomorrow, for the worst weekly drop-off in the Dow since I think October of 2008, which was the middle of the last meltdown. Do you envision that happening again?

ZUCKERMAN: Yes. I do think that what are seeing in Europe, I don’t know how they will deal with it. They are kicking the can down the road. I don’t know how they keep it under control. Their problems at the banking levels is both an issue of liquidity and solvency, and they have made loans that are just preposterous and those loans are going to have to bite them at some point.

And everybody’s trying to keep those banks solvent or at least going on. Something is going to give at some point. That’s one thing.


CAVUTO: What about commercial real estate? You’re very big in that. People don’t know you beyond the publishing world. That’s where you are really big, and I’m wondering if that is the next proverbial shoe to drop?

ZUCKERMAN: I think to the extent that there has been a real decline, it’s already taken place.

If you look at it, the commercial real estate market has to be disaggregated. It’s in the smaller towns where the commercial real estate...


CAVUTO: Not in New York City?

ZUCKERMAN: Much less in New York City. New York City is actually doing relatively well. All of our -- we have a very low level of vacancies. And we have over 10 million feet in New York City alone.


ZUCKERMAN: And we’re in Washington, and that’s very strong, but the smaller markets and a lot of the other bigger markets are really having trouble. And that’s not the only part of it.

Residential real estate and commercial real estate, all of these represent values that in a sense are being wiped off the balance sheet of America and that’s really hurting. They’re getting very nervous about that and nobody can blame them.

CAVUTO: Mort Zuckerman, thank you very, very much. All right.

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