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tv   Nightly Business Report  PBS  August 7, 2013 1:00am-1:31am PDT

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this is "nightly business report" with tyler mathisen and susie gharib brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures. viking river cruises, exploring the world in comfort. home economics, the president wants to phase out the two government companies at the heart of the financial crisis, fannie mae and freddy mac. will it make mortgages costlier and harder to get? is that the price to get uncle sam out? how vulnerable are the nation's utilities to a cyber attack. experts say it's not if but when. the cost could be high. compete and beat. how mom and pop manufacturers
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once left for dead are making a big come back and competing against foreign rivalers. our made in america series continues tonight on "nightly business report" for tuesday, august 6th. good evening everyone. president obama taking aim today at boosting homeownership by proposing an overhaul of the massive mortgage market. his targets, long-term political hot potatoes. diana olick joins us from washington with more on what all this might mean. >> reporter: suzy, it should come as no surprise mortgage is front and center, as interest rates are rising, credit is the last barrier to full housing recovery. >> our housing market is beginning to heal. >> reporter: president obama returned to arizona, one of the hardest hit states in the housing crash four years after using this dessert backdrop.
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>> we got to turn the badpage o the bubble and bust. we need a housing system durable and fair and rewards responsibility for generations to come. >> reporter: it's reforming the nation's 10 trillion dollar mortgage market making it easier for home buyers and putting capital at the center of housing finance ask pulling government out. that means a gradual wind down of giants fannie mae and freddy mac, which together with the fha back over 90% of new loans. >> i believe our housing system should operate where there's a limited government role and pry vent lending should be the backbone of the housing market. >> reporter: the president's plan to make investors pay up front for a limited transparent government guarantee of mortgage securities mirrors a bill in the senate. that is put forth but senators warner so far has the most support of any proposal.
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>> we're really at a critical time for housing finance reform. if they can't get a bill through the senate banking committee this fall, you may be able to write off housing finance reform for the entire obama administration. in many ways, it's new or never. >> reporter: the concern is winding down the mortgage giants will make loans more expensive. low rates have been credited for much of the housing recovery. >> the fact interest rates were so low, it made buying a home affordable for a lot of people. >> reporter: in audition to overhauling mortgage finance, president obama called on congress to allow borrowers that don't have government backed loans to refinance through fanny, freddy and the fha. that would transfer risks to taxpayers yet again, something congress is unlikely to do. >> i got a complicated double-header question for you. if freddy and fanny stop buying mortgages, who would buy them and second, you say the
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president's plan would require investors to pay up for a limited government guarantee of mortgage backed securities. how would that work, and who would pay the cost? >> reporter: it would be investors that would have to buy the loans. right now there is very little private market. there is some. but for conventional loans, really, fanny, freddy, the fha. the idea is to get private investors back. how much would it cost and how would it work? the devil will be in the details. these are broad spectrum propels and a lot going on in congress and we don't know how it would work but we know it will have to be carefully done and there will be over lays for investors and could, critics say, at least, make mortgages more expensive passing the cost that investors have for borrowers. >> thank you very much. appreciate the report tonight. joining us with more on this top pick is the co-director for economic and policy research. the president says he wants to
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end fanny and freddy or at least the business model and says private capital should be the backbone of the market. do you agree? >> it's a mixed story. private capital is there in the sense that who buys the mortgage backed security sns he wants it to be issuing the mortgage backed securities, which is what we had during the peak of the bubble. but this time they will actually be guaranteed by the government. so he doesn't want to get the government out. he wants the government to guarantee the mortgage backed securities with some first dollar payments, first dollar losses absorbed by the issuers and inver tors. it a mixed bag and to my mind it's problematic because you get a lot of hazard issues here with private profit government risk. >> dean, what does all of this mean to the person that's looking to get a mortgage? is this going to be more expensive? is it going to be more available?
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what does it all mean? >> it's vir actually guaranteed to be somewhat more expensive. in the introduction you said the private market disappeared because they can't compete. it's not because someone wants to issue mortgage backed security today they can't do it, but they can do it in a way to compete with fanny and freddy. if we get them out, it will be higher costs. goldman sachs is making a profit. all those people want money and that will add to the cost of mortgages. >> there is a lot of people, i suspect, that say the government really has no role or right for role in the mortgage market at all, either standing behind companies as it did implicitly and in the case of freddy and fanny or to guarantee mortgage-backed securities at all. what do you say to that? why should the government be involved in subsidizing or standerizing the mortgage market at all? >> i would say the government can be very efficient in
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creating a secondary market, which we know from the history dating back from fannie mae, we know from the present. when you get this mixed story with the government guarantee you have the worst of all worlds. it would make much more sense to say leave it to the private sector. we have the jumbo market. it's not like mortgages and 30-year fixed rate mortgages. people would pay more for them. so i see this as a story the government subsidizing mortgage-backed securities. i don't see how that's good public policy. subsidize homeownership? maybe. >> you heard in the report, you know, one of the people that dianna interviewed said it's now or never to put the overhaul through. do you think it will happen? do you think we'll get a reform of fanny and freddy? >> if i had to take a bet, i would say no. the details are complicated and i hope people ask the good questions. i don't think they have a plan that gets rid of the hazard problem. that's what everyone has to ask
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about. we don't want the government taking the risks that private banks can profit like in the past. >> dean is with the center for economic and policy research. comments from two federal reserve officials weighing on the stock market today. the president of the atlanta federal reserve bank said the central bank should start reducing the bond buying program as soon as september but cautions the fed might wait longer if economic growth fails to pick up in the second half of this year. then later in the day, it was the chicago fed president's turn, charles evans, said much of the same stuff. he sees a pull back in the stimulus program sometime later this year, also, depending on the economic data. >> well, those comments by lockheart set the tone and stocks didn't recover but they weren't the only factors. ibm, the worst performer in the doe falling on a downgrade to sell. big blue confirms it is requiring the hardware workers to take a week off with reduced pay. mixed signal on the jobs front
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according to government data. the number of job openings in june hit the highest level in five years. this added to a second day of losses for stocks. the dow fell 9 three points to close at 15,518, the biggest to decline since june 28th. the nasdaq down 27 and s&p down 9. the department of justice fi filing two civil lawsuits relating to the sale of $850 million in residential mortgage-backed securities. they date back to the beginning of the global financial crisis, january of 2008. last week bank of america warned investors about possible civil charges linked to the sale of one or two mortgage bonds. ubs agreed to pay about $50 million to settle charges it misled investors. they are accusing switzerland's
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biggest bank for risk mortgage bonds. under the terms of the settlement, ubs did not admit any wrongdoing. cybersecurity is top pick a in washington these days. security officials from some of the largest utilities met to discuss the threat of a cyber attack and figure out how to prepare for one. as hampton pearson reports, most believe it's not a matter of if but when. >> top security officials from some of the nation's largest utilities told a washington forum it's only a matter of time before the power grid is hit with a major cybersecurity attack. one official views preparations on par with natural disasters. >> we have to treat the cyber threat with the same respect that we give to forces of nature that impact our grid. hurricanes, floods, ice. >> reporter: the power grid links some 3200 utilities,
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generating units, a distribution network serving millions of customers. the kind of prolonged power outages and devastation that followed super storm sandy our experts say were the worst-case scenario following a major cyber attack might look like. >> the starting point of a cyber event may not be known into well into the event and the systems the utility relies upon for critical operations may be the target. >> reporter: better information technology and data sharing between utilities and the federal government are on the cyber sesecurity short list but michael hayden says the cost of beefing up cybersecurity is a challenge for the utility industry. >> it's really hard to build a business case for this. okay? i mean, it really is. okay? so it's more of a broader responsibility case. >> reporter: at some point, increased cybersecurity for the grid will mean higher costs for the rate fairs and that could be
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a very tough sell to the customers. i'm hampton pearson in washington. still ahead, investors eating up food stocks. some are hitting all-time highs. others are struggling. we'll separate winners from losers but first, how the international markets closed today. the war of words between cbs and timewarner heats up. the ceo fired back at timewarner's proposal to end the black out dismissing it as a
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publicity stunt. they said after reviewing the letter we conclude there had is not a sincere or hopeful decision in it. they said it offer was sincere. it's affecting 3 million customers in the largest u.s. markets. we're learning more today about the deal to sell "the washington post" to amazon ceo. chairman and ceo donald gram of the washington post says the newspaper that his family owned for 80 years could survive the growth. bazos called it a personal endeavour. took a few meetings, and the deal was done. >> we met at a conference face-to-face twice the second week in july. we spent an hour together. he asked for time to study the numbers. we spent another two hours together, and at the end of it, he said he thought he wanted to go ahead. >> looks like investors want to
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go ahead. two shares of "the washington post" rose today. a late testify day earnings from disney. profits rose 1% from a year earlier as revenue grew at them parks and media networks that helped offset weakness from the studio division and high marketing cost for the box office flop the loan ranger and the company now say s expects t take a fourth quarter loss on the film of $200 million. the stock finished to $63.05 but it fell after hours, as you see there. 24 century fox murdoch's separated company missed earnings estimates by three cents a share but revenue beat expectations thanks to growth at the cable operations and film studio. they hold murdoch's properties. the stock closed lower to 3
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1.29. michael kors hit a high with may sees and nordstrom. the company has plans to open stores in india and brazil. the stock up almost 4% to $70.39. a similar story for fossil. it's shares surged almost 18%. the fashion accessory maker and retailer, which has been revamping the affordable luxury image surprised investors with better than expected earnings on stronger watch sales in europe and asia. the company raised the full year profit forecast. the stock was the best performer in the s&p 500 closing at $126. $126.55. american eagle outfitters, sells fell sharply especially in the women's department and reported weak traffic in the
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stores, down 12%. tenant healthcare site add drop in patient admissions. this is a trend across the industry as consumers choose not to see a doctor because they lack insurance or face higher deck duckbles. the company buying smaller hospital operating van guard posted a loss for the second quarter. the stock fell more than 3% to 42.9. well, are you hungry for stocks hitting new highs? hershey, smuker, hotyson are hi and trading at record numbers. others in the group aren't as appetizing. courtney regan tells us why. >> reporter: the average u.s. supermarket carries nearly 40,000 different products, including national and private labels brands. getting consumers to choose one product over another is nothing short of a monumental task for
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food makers. many of the century hold food companies are topping the shopping lists of both consumers and investors. despite the attraction of lower prices on grocers private label brands. >> by offering innovative new products and by supporting their brands with marketing, these big companies are better able to fend off the threat of private label alternatives. >> reporter: companies like jm smuker and hershey have huge budgets to offer promotions and blast with advertising to make sure shoppers know about new products and remember old favorites. in audition to stable sales growth, food company stocks are relatively low risk. as a group, food company stocks are up 30% so far this year, bettering the returns of the benchmark s&p 500 index.
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hershey, smuker, tyson and hormel hit fresh all-time highs today. they are investing in areas to make sure shoppers and investors stay hungry for what they offer. general mills is launching 200 new products and hershey will increase marketing by 20% in the second quarter. not all food makers are tasting so good. kellogg is blaming sagging cereal sales saying sometimes consumers don't have time for a bowl of serial. more americans choir away from cashes and sugar at break fest, though, it does offer healthiei alternatives. >> i want less sugar and low cashes. i also like to get special k cereal because i know it's healthy and tasty. >> reporter: many think there is good news ahead in the grocery
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aisle, as the cost in ingredients fall, so, too, will prices. tom graves thinks lower prices could lead to consumers stocking pantries and an overall up tick in sales volume, another cater for invast tors feasting on food stock. for "nightly business report," i'm courtney regan. and coming up, how a small american manufacturer is competing with and beating the larger foreign competitors. the made in america series continues with a look at the secret to this firm's success. first how commodities, treasuries and currencies faired today.
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get ready for a price war for electric vehicles. general motors is knocking $5,000 off the sticker price of it's new 2014 chevy volt. that reduces the starting price on the car to $35,000. incentives on electric cars have been getting more aggressive as auto makers are trying to improve sales. gm offers steep rebates on other versions of the volt. americans are holding on to hold cars longer. the average car and truck currently on the road in the united states is more than 11 years old. slightly higher than last year and almost two years holder than a decade ago, an all-time high. the average age will continue to rise, even as new car sales increase. for more than two decades, small american manufacturers have been closing shop. it's just too hard to compete against larger foreign rivals. today all that is changing as
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more mom-and-pop manufacturers stage a come back. phil shows us how one cabinet maker is undergoing a renaissance. >> reporter: in zealand michigan has never been busier. >> we added 18,000 square feet. >> reporter: with employees working two shirts, they make custom cabinets for home and offices. sales are up 20%, a far cry from 2007 when suzanne and her husband bought the bankrupt company and carved out a new business plan, design, build and ship custom cabinets quickly. >> we can compete globally because a customer can call us. we can do a design and have it on the machine in an hour. >> reporter: wood ways and small shops are finding they can compete and beat foreign manufacturers with machines like
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these that can quickly crank out products. they cut specific designs and parts. for years these machines cost well over $100,000, too much for small companies but not anymore. new cn cdot come in holland michigan sells them for $40,000. demand is so strong, it's expanding hiring workers. the key to the success, sourcing components globally. >> there is components from germany, italy, japan, obviously from china. we're trying to do is cherry pick the very best component. >> reporter: automation and robotics, once feared allows them to do more, sell more and add more workers. still, job growth for small manufactureers has been tempted. >> existing small manufacturers have learned they sometimes have to turn on a dime. >> reporter: suzanne says her cabinet company is proof small
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manufacturers can adapt and grow. >> we're inventive. we come up with ways to use the cnc. we come up with new ways to design cabinets, and that inventiveness is what we have here in america, that's why we're growing, and that's why the jobs can be here and manufacturing can be here. >> reporter: for "nightly business report" i'm phil lebow. tomorrow we continue the made in america series when jane wells shows us how difficult it is to buy american in the economy. you ask, we answer, we'll take questions about your favorite stocks. tell us which one you would like him to discuss by logging on nbr.com. please do keep your question to one single, just one and include from where you're from. >> it is hard. >> it's hard to resist. that's "nightly business report" for us tonight. remember, please support your public television station. >> on behalf of your public
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television station, thank you very much for your sup pormt. good night, everybody. see you here tomorrow night. "nightly business report" has been brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures, viking river cruises, exploring the world in comfort.
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