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tv   Nightly Business Report  PBS  March 15, 2010 6:30pm-7:00pm EDT

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captioning sponsored by wpbt >> we will have financial reform adopted this year in the congress of the united states. >> susie: and with that, senator chris dodd proposed the most sweeping changes to the financial rule book since the 1930s. >> jeff: coming up, a look at the proposal and wall street's reaction. you're watching "nightly business report" for monday, march 15. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
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this program was made possible by contributions to your pbs station from viewers like you. thank you. >> susie: good evening, everyone. my colleague tom hudson is off tonight. the days of "too big to fail" could be over. senator chris dodd released today a bill that would dramatically overhaul the nation's financial system.
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and jeff, dodd's bill has the endorsement of president obama. >> jeff: susie, this proposal calls for tough restrictions on big financial firms on how they lend, how they borrow and trade. it also creates a new consumer protection agency within the federal reserve. >> susie: we have two reports tonight, looking at details of the dodd bill and the reaction to it on wall street. we begin with stephanie dhue in washington. >> reporter: after months of negotiations with his republican colleagues, senator dodd proposed new legislation he says incorporates their ideas, but without their support. >> we are still vulnerable to another crisis, and neither i nor anyone else can tell you with any degree of certainty that the american economy could survive another crisis of this magnitude. it is certainly time to act. >> reporter: the bill aims to make several reforms, including: ending "too big to fail" so taxpayers don't have to bail out big financial firms. a council of regulators would watch out for systemic risk, and make strict rules for
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capital, leverage, liquidity and risk management. the council would also study the so-called volcker rule which cracks down on banks trading against customers' interests. the legislation would streamline federal bank supervision and create clear lines of authority and it would create a consumer financial protection agency that would write rules governing how companies offer mortgages, credit cards and other loans. the agency would be housed at the federal reserve, a change from dodd's original proposal for a standalone agency. >> the consumer protection watchdog has the independence and the authority it needs to get the job done. >> reporter: not so, say consumer advocates. john taylor heads the national community reinvestment coalition and was on a consumer advisory group at the federal reserve. >> it's like saying the united states is independent, but we have to get permission from canada if we want to pass any laws. i mean, it's crazy. it's the consumer protections that would have provided safety and soundness in the financial
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services sector had they enforced what was on the books then. they could have nipped in the bud these loans that weren't sustainable. >> reporter: the banking committee plans to start voting on the bill next week. ranking republican richard shelby says he wants to reach an agreement with dodd on regulatory reform, but he's concerned a week won't be enough time to slog through a complex bill that's more than 1,300 pages. stephanie dhue, "nightly business report," washington. >> reporter: this is erika miller in new york. we watched money manager ken kamen as he watched senator dodd unveil the financial reform bill. given that kamen is president of an asset manager and broker dealer firm, his reaction might surprise you. >> wall street has to support this bill because confidence needs to really be restored. we all operate on the idea that integrity is paramount, and if wall street continues to have the trust of the american public and the world erode away, their business is going to be
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seriously compromised. >> reporter: in fact, he does not think any wall street firm will oppose this bill publicly even though it includes a version of the so-called volker rule. that rule could limit banks from trading their own capital, potentially reducing profits. but it would be up to regulators to enforce those restrictions, and on a case-by-case basis. so, veteran wall street money manager jim awad does not think the dodd bill is much of threat to profits at financial firms. >> i think the impact will be gradual, measured over time, not dramatic, and is not needle moving in the short term. we have to watch the impact over time, but i don't think it will hurt the inherent profitability of those institutions in the foreseeable future. >> reporter: awad also expects broad industry support for the creation of a systemic risk council. after all, wall street does not want any one firm to have the power to topple the entire financial system. >> to the extent we can minimize the probabilities or possibilities of that happening,
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if it does just that, it's a victory. >> reporter: but it is fair to say wall street is not enthusiastic about every detail in the bill. even supporters of regulatory reform worry about unintended consequences. >> we might be putting the pig too big through the python at the moment. having everything wrapped up in one bill-- the complex issues of too big to fail, new trading rules, new governance rules for banks-- it's just so many interconnected things. i'm concerned that we haven't taken the time to see how they inter-react with each other. >> reporter: clearly, wall street is hoping the bill does not get passed quickly. that's not only to delay implementation. this would be the most serious banking overhaul since the '40s, and financial firms do not want it done hastily. erika miller, "nightly business report," new york. >> jeff: while congress is working to avoid another financial crisis, the panel it has reviewing the last one is focusing on accounting tricks like the ones blamed for the demise of lehman brothers.
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phil angelides heads the financial crisis inquiry commission. he says his investigators are pouring over a court-appointed examiner's report on the lehman bankruptcy. he wants to know if an accounting maneuver known as "repo 105" has been used by other major banks. lehman used that rule to push $50 billion in troubled assets off its books. >> speaking of lehman brothers, late today it took the wraps off a plan too repay thousands of its creditors. in fact 65,000 claims totaling $875 billion. but it's still unclear who will get what. while lehman fired paperwork with the bankruptcy court on the general outlines of the plan, there from few specifics. lehman asked the court for another month to get those details in order. >> susie: here are the stories in tonight's n.b.r. newswheel: a see-saw day on wall street as investors reacted to that financial reform bill and fresh worries about sovereign debt defaults. the dow rose 17.5 points, the
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nasdaq fell five, and the s&p 500 rose a fraction. now, on those debt defaults, moody's investors service raised a red flag today about potential downgrades on the debt ratings for big western economies. the firm warned that the u.s., u.k., germany and france are at risk of losing their "triple-a" credit ratings, but not right away. and the federal communications commission unveiled its national broadband plan today, calling for high-speed internet access for all americans. the "connecting america" plan focuses on boosting speed, expanding coverage, and freeing up more airwaves for mobile services. >> jeff: and the former president of park avenue bank in new york has been arrested and charged with fraud. charles antonucci now has an interesting distinction. he's the first person ever charged with trying to defraud the government's tarp, or troubled asset relief program. investigators say he tried to bilk it for more than $11 million. prosecutors say antonucci's actions led to the bank's failure last friday.
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his lawyer declined to comment on the charges. antonucci was freed on a $2 million bail and faces up to 30 years in prison if convicted. >> susie: it seems a.i.g. just can't escape its bonus backlash. several former employees may sue the bailed-out insurer after receiving smaller than promised retention bonuses. a.i.g. is holding back $21 million from employees at its financial products unit. that's the same department that nearly caused the insurer to collapse in 2008. now, a lawyer for those former employees says reducing their bonuses is illegal. a.i.g. has not commented. the company is also cutting back on bonuses this year for current employees to satisfy givebacks ordered by the obama administration. >> jeff: and still ahead, from squirreling away funds for a rainy day to monkeying around, tonight's "your mind and your money" reports on what the animal kingdom can teach us about saving for the future.
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>> susie: jeff, what's on tap in >> it was kind of a seesaw day on wall street but thanks to some good news about wal-mart the dow ended up in the black. >> that's right. we had that and we also had some energy news as oil prices taking a dump as we heard about exxon that prices were a bit high. it looks like the oil market agrees. let's look at tonight's market focus.
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well, the major averages all opened marginally lower this morning. but as the price of oil kept dropping, it woke up the markets, which just last week were worried that $80 a barrel oil might derail the recovery. oil, by the way, closed down over a dollar to just under $80. here's one of the oil e.t.fs. it dropped nearly 2%. it doesn't help that the oil ministers from opec are meeting in vienna on wednesday. so a lot of oil traders are exiting here and waiting on the sidelines for news. also shaking up the energy business today was consol energy. the stock fell after it announced the purchase of a big chunk of natural gas properties in the u.s. analysts like the deal, but consol's going to issue $4 billion in stock and bonds to pay for it. and the big gainer on the dow today was wal-mart. one analyst sees a price-war breaking out between wal-mart and your local grocery store chain. walmart wants to hold on to the low-price shoppers it gained during the recession. and as you can see, investors
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are betting wal-mart will ultimately gain market share against the regional grocery chains. long-term, the analyst at citigroup sees walmart grabbing up to one-third of the u.s. retail grocery market. it controls 20% today. she upgraded w.m.t. shares from "hold" to "buy." another big player in the food biz: pepsi. it's a money machine, and today the company's board approved a 7% dividend increase and will also repurchase up to $15 billion of its own stock in the next three years. from the grocery store to the apparel market, phillips van heusen rising nearly 10%. it's expanding its brand portfolio, buying tommy hilfiger for $3 billion. hilfiger is owned by a private equity group. and the purchase of hilfiger is setting off all kinds of speculation about other m&a activity that might occur in the fashion world. take a look at shares of quiksilver, the surf-and- skatewear brand, up 11%. the dow jones newswires said
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quiksilver is rumored to be one of those apparel-retail takeover targets. last week, quicksilver posted pretty good earnings. and the drug and medical-device makers also saw a lot of activity. let's go to shares of amylin pharmaceuticals. the stock soared nearly 16%. amylin makes a twice-a-day injection drug for diabetes but wants to bring out a once-a-week version. the f.d.a. basically said "we want more data, but no new clinical tests are needed." that made investors happy. and that once-a-week product uses controlled-release drug technology from alkermees, which received a nice pop today. eli lilly would also benefit, with increased sales. next up, boston scientific, and the news is not so good. the f.d.a. told the medical- device maker that two of its defibrillator devices are not approved for sale because the company made some changes in how it does the manufacturing. so boston scientific is pulling those devices, which account for 15% of its annual sales, off the market. also, friday was the first day to order apple's ipad from apple.
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the stock fell today, but if some early projections are to be believed, apple should hit wall street's sales targets for the ipad in 2010. and finally, google mulling pulling the plug on its operations in china. shares of baidu, the made-in- china search engine, moved as high as $628 but couldn't hold that price. and that's tonight's "market focus." >> susie: american workers say they're saving less for retirement than they did last year, and they mainly blame the economy. but that doesn't explain why
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saving for the future is hard for many americans even in good times. as we continue our series "your mind and your money," dan grech says the problem may go back to our animal roots. >> reporter: have you ever wondered why a few animals, like squirrels, save for the future while most other animals only consume for today? and where do we humans fit? are we more like the squirrels or the tigers? >> we care about the future, but we care a lot more about today. >> reporter: david laibson is an economics professor at harvard university. he says people want to save, but they push it off. >> and the basic story is humans, like other animals, place full weight on what happens now and half weight on what happens even a few days away. so we have a hard time doing what we should today, and we push it off to next week. >> reporter: it's easy to
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understand why people who don't have much money put off saving, but what about multi- millionaires like pro athletes? for them, saving should be as simple as holding onto the ball. but many of them fumble their finances. >> many of these athletes are coming straight out of high school or leaving college early and are getting handed these huge amounts of money, signing bonuses and whatever. and that's part of the problem. >> reporter: ira spiegel is a c.p.a. who specializes in bankruptcy. one of his more famous clients is n.f.l. quarterback michael vick. in december 2004, vick became the highest-paid player in n.f.l. history. he signed a $130 million contract and made millions more in endorsements. still, it took vick just three and a half years to burn through his mountain of cash. poor money management and legal problems landed vick in bankruptcy court. >> this happens with a lot of the athletes. it happens with people who are born into wealth also because they don't see an end to the
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stream and so they put themselves at risk. >> reporter: overspending and undersaving often catches up with athletes when they retire. take pro basketball players. the n.b.a. players association estimates that within five years of retiring, 60% of players are broke. of course, professional athletes aren't exactly ordinary people, but if they can't resist over- spending, can we do any better? yale university neurobiologist daeol lee is searching for an answer in an unexpected place: the animal world. in an experiment on rhesus monkeys, he found the more a reward was delayed, the less likely the monkeys were to take it. >> when you give an animal choice between large rewards and small rewards, they will always choose the large reward if both rewards are available without any delays. but if you introduce delays to these rewards and make the large reward delayed more and more, then they'll start choosing the small reward more frequently, >> reporter: and because the brains of monkeys and humans are
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similar, lee says the impulse to spend now rather than save for later may be common to both species. so if we humans have a built-in preference for immediate gratification over future needs, how can we counter it? david laibson says one way is to make saving automatic. >> for example, automatic payroll deduction. your employer takes the money out of your paycheck and puts it in a 401(k) plan. consequently, the individual who has a hard time resisting temptation, it doesn't matter. >> reporter: new research from an international team suggests another approach. every time you take out your wallet, stop and ask yourself: "do i really need this?" the researchers found if you do that, you'll be less likely to give in to impulse buying and you'll be more able to squirrel away for the future. dan grech, "nightly business report," miami. >> jeff: and here's what we're watching for tomorrow: the february reports on import prices and housing starts; and federal reserve policymakers
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meet to decide what's next for interest rates. we'll talk with nouriel roubini about the fed's decision and ask the economist known as "doctor doom" just how the recovery's going. he's economics professor at n.y.u.'s stern school of business. >> susie: well, toyota isn't buying it. the automaker is challenging a california man's claim that his prius lost control last week, reaching speeds of more than 90 miles per hour. the car eventually stopped with help from a california trooper. well, today, toyota said the accelerator pedal and rear brakes were tested and both were working fine, but the car's front brakes were severely worn from overheating. government regulators are also investigating the incident but haven't found anything to explain the sudden acceleration. >> jeff: booking a coach seat on continental airlines? if you're packing your appetite, make sure to bring some extra money. this fall, continental will stop serving free meals to coach
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customers on shorter north american flights and start charging for them instead. continental was one of the last major airlines to offer free meals, which typically include sandwiches and salads. the move is expected to save $35 million a year. >> susie: when it comes to growing the u.s. economy, tonight's commentator says a lot of what happens is up to you,
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the consumer. he's alan blinder, professor of economics at princeton and former vice-chair of the federal reserve. >> everywhere i go these days, people ask me where the u.s. economy is heading. the only honest answer is to echo mark twains quip, "i was glad to be able to answer promptly, and i did. i said i didn't know." but i know what it depends on: the consumer. during the fourth-quarter growth spurt, investment, especially inventories, carried the day. but that can't persist. to keep the economy growing steadily, american consumers who account for over 70% of g.d.p. must pull their weight. the pessimists don't think they will. americans, they argue, have been traumatized by recent events, are less wealthy than they were, are worried about jobs, and are therefore afraid to spend. i wonder about that last part. here's what the data show. americans saved 1.7% of their incomes in 2007, 2.7% in 2008, and 4.3% in 2009. that looks like an upward trend,
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but such a modest shift is a pretty small reaction to the most frightening economic events since the 1930s. and the quarterly pattern during 2009 shows no trend whatsoever. my guess-- and yes, mark twain, it's just a guess-- is that the savings rate will stabilize somewhere near its current level, which will be good enough to keep the economy growing at a healthy pace. it's also my hope. for if americans suddenly turn thrifty, we are all in trouble. to paraphrase st. augustine, "lord, make us frugal," but not yet. i'm alan blinder. >> susie: coming soon to a mailbox near you: the 2010 u.s. census. the census bureau mailed 120 million of the questionnaires. most should arrive this week. now, the simple, ten-question form will answer the question: just how many people live in the u.s.? it also allocates seats in congress and helps lawmakers figure out how to dole out $400 billion in federal funds to cities and states.
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if you don't send it back, a census worker will come knocking on your door. and jeff, those home visits come at a price; they cost taxpayers $57 each. >> they add to be real money. >> i guess i need to fill that one out sitting on my table at home. >> already, i haven't gotten mine yet. >> jeff: that's "nightly business report" for monday, march 15. we want to remind you this is the time of year your public television station seeks your support. >> susie: support that makes programs like "nightly business report" possible. >> jeff: thanks for joining us, and don't forget to support your public television station. i'm jeff yastine. good night, everyone. you, too, susie. >> susie: good night, jeff. i'm susie gharib. we'll see all of you again tomorrow night. "nightly business report" is made possible by:
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this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh >> more information about investing is available in "nightly business report's" video "how wall street works". to order this dvd, call 1-800- play-pbs or visit online at >> we are pbs.
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