tv Nightly Business Report PBS December 8, 2011 6:30pm-7:00pm PST
>> tom: with millions of dollars in missing client money on the line, former m.f. global c.e.o. jon corzine tells lawmakers he's sorry. >> i simply do not know where the money is or why the accounts have not been reconciled to date. >> susie: from missing money to a losing day on wall street. stocks tumble as european leaders try to solve their debt crisis. >> we should care about the european summit because, at the moment, the biggest financial fire in the world is in europe. >> susie: it's "nightly business report" for thursday, december 8. this is "nightly business report" with susie gharib and tom hudson.
"nightly business report" is made possible by: this program is made possible by contributions to your pbs station from viewers like you. thank you. >> tom: good evening and thanks for joining us. "devastated"-- that's how former m.f. global c.e.o. jon corzine describes his reaction to the collapse of the commodity brokerage firm. susie, under hard questioning before a congressional panel, corzine said he did not know what happened to over $1 billion dollars in customer funds. >> susie: tom, the former senator also said he never intended to break any rules, and he denied using his political clout as a former u.s. senator to win special consideration for m.f. global.
>> tom: the star witness defended his decision to invest in risky european debt, blaming the firm's collapse on a loss of market confidence. darren gersh picks up the story. >> reporter: jon corzine is not the first c.e.o. to explain before congress why his company failed, but he is the first former governor and u.s. senator in more than 100 years to testify under subpoena. his voice subdued, corzine offered his side of the story. >> i apologize both personally and on behalf of the company to our customers, our employees, and our investors. i truly know they are bearing the brunt of the impact of the firm's bankruptcy. >> reporter: corzine defended his role at m.f. global on all fronts. he pointed out the firm was losing money before he took over. he said he was worried about financial risk, reducing the company's leverage from 37 times equity to around 30.
he stressed the foreign government bonds m.f. global invested in have not defaulted or been restructured. so what happened to the $1.2 billion missing from customer accounts? >> i was stunned when i was told on sunday, october 30, 2011, that m.f. global could not account for many hundreds of millions of dollars of client money. i simply do not know where the money is or why the accounts have not been reconciled to date. >> reporter: before corzine spoke, james kobak, the bankruptcy trustee charged with finding the missing money, said some of it might have found its way into risky investments overseas. >> at this point, i would say we have suspicions, but we really don't have knowledge. >> reporter: but kobak says it is hard to say what happened during m.f. global's last days, because thousands of transactions in the chaos leading up to the firm's bankruptcy have left the books in a mess. corzine said he was not an expert in financial bookkeeping,
but thought the records were in order until the very end. >> my understanding is that... that our books and records were reflecting the chaos that occurred in the last two or three days as the firm was under severe pressure and had lost the confidence of the marketplace. >> reporter: the m.f. global trustee hopes that the firm's 36,000 customers will get roughly 70% of their money back, though he says it is still too early to tell for sure. darren gersh, "nightly business report," washington. >> tom: jacob frenkel used to be an enforcement lawyer with the securities and exchange commission. he now heads up the securities enforcement and corporate governance practice at law firm shulman rogers. >> you go after the formingerce? >> you investigate john corzinel
management anyone ha that had responsible for managing the funds and the strategy of the company and the accounting controls and you look at everybody to determine if there is culpability. that was bad business judgments says corzine but are we any closer to findin finding the missing money. >> we are no closer.to the extes of congress believe that those are going to be answered they stood to be disappointed before they walked into the committee room. what about corzine stood up about himself he made the
decision to testify. he focused on business judgment and more importantly for him and senior executives take out the equation that will make this criminal and not civil. >> we are a couple of yearsaftee legislation that has happened. the day before they went bankrupt they had a shortfall in customer accounts in according to an exchange. are we any closer to having the transparency that is apparently necessary? >> in the mf global case therei. one that comes into focus the use of offshore subsidiaries. companies that are part of the european debt activities that were outside of the direct scrutiny and more importantly the u.s. regulations.
they have done plenty to not only increase scrutiny and transparency and also the regulatory scheme and the company such as mf global which functions in the commodity space than it does in the equity space which the fec regulates that may have been missed. >> is this a failure ofcorporatd that is something we are going to find out. there are plugs that need to occur in the regulatory scheme. my biggest hope is that they should talk to the regulators and figure out what went wrong first. and then back end in what needs to be done. there are a lot of questions being asked and there is going to be accountability.
>> a lot more next week when hen capitol hill. we appreciate your insights. >> susie: president obama says he's not giving up on his pick to lead the consumer finance protection bureau. senate republicans blocked richard cordray's nomination today, citing concerns about the agency's powers. they're worried that, without changes, the consumer director would have too much unchecked power over the financial system. president obama says that makes "absolutely no sense." >> i just want to send a message to the senate that we're not giving up on this. we're going to keep on going at it. we're not going to allow politics as usual on capitol hill to stand in the way of american consumers being protected by unscrupulous financial operators. >> susie: the president added that a recess appointment was also a possibility, a move democrats in the senate say they would support.
>> tom: still ahead-- while stocks tumble over worries about europe, investors were hungry for one blue chip. we'll tell you what sparked today's buying in the golden arches. >> susie: good news about the u.s. job market couldn't overcome growing worries about europe today. the dow fell almost 200 points, the nasdaq lost 52, and the s&p 500 was down 23.5 points. new claims for jobless benefits fell 23,000 to a nine-month low. but investors are growing nervous about the future of the european union, as leaders of member nations hold a two-day summit in brussels. we'll have more on that in just a moment. but first as erica miller explains in europe doesn't solve it's debt crisis it could have serious consequence for the u.s. >> reporter: the stakes are high as european leaders try to save the euro-zone from crushing debt
and keep the union from unraveling. economist cary leahey sees serious risk europe could soon experience its own "lehman moment," the banking collapse that triggered the 2008 financial crisis. >> depending on how pessimistic you are, i'd say the chances of a lehman moment in europe are probably between at least one in three. so it's extremely high. >> reporter: with credit drying up across the region, european banks are having a tougher time getting access to money. the big worry is that the failure of one european bank could have serious ripple effects around the globe. >> then you have your defining moment, where no one trusts anyone else's collateral. you get a seizing up in the markets, and no business gets conducted, and the normal operations of business in america that ranges from manufacturing to grocery stores can freeze up because no one has credit. >> reporter: fortunately, many investors and politicians are optimistic european union leaders will hammer out a new treaty agreement. in particular, they expect new
rules requiring greater fiscal discipline and penalties if those rules are broken. among the optimists is president obama. >> europe is wealthy enough that there's no reason why they can't solve this problem. >> reporter: but whether they do or they don't, many economists think europe is already in a recession. however, economist conrad dequadros and others think the downturn there will be relatively mild and will not derail the fledgling u.s. recovery. >> the risk is that if conditions deteriorate rapidly in the eurozone and if, in fact, we do have a systemic banking crisis and a much deeper recession, then i think it would be difficult for us to avoid some sort of significant impact. >> reporter: but, for now, economists are fairly confident the u.s. economy can keep improving. they are particularly pleased to see improvement in the labor market, which could encourage consumers to spend and boost investor confidence. erika miller, "nightly business report," new york >> susie: our next guest says
he's not worried, for now, that europe's financial crisis will create problems for the u.s. economy. he's nick colas, chief market strategist at convergex group. hi nice to have you. >> thanks so much. you heard a moment ago thatt minute deal to work out a budget discipline across the euro zone to get their debt problems under control. how significant is that investment? >> -- development. >> it's probably expected by th. it's not much expected on it's own. they want the bank to come in and buy european bonds and stablize the market there. it's a step aid long the journey but not the most important step. >> >> we are talking about budgetdw would they woul work with that. >> it's going to be a convolut .
>> we are a long way from thefit the details are going to be critically important. >> today in the marketinvestigay are nervous about what is going on in europe. you are not as worried, is it because we are getting good economic news about the labor market today. >> the overall ten oor in theu.a half or 3% gdp growth rate. we have seen improvement in labor markets and the stock market has a lot of volatility. the s & p is down 2% on o on the year given the news from it's a victory. >> we have to be careful to notn the economists say.
to what extent is this situation impacting business decisions and investment decisions. >> the corporations are going to budget for more hiring next year if they are worried about a european recession which is still in the cards. from the consumer standpoint it comes down to what they read in the headlines and what the stock market has to do with their buying decisions. in if we get a big correction in december that doesn't bode well for the holiday season and the retailers expect us to make the purchases. >> we have to keep a close watc. >> what is your take on themark? investigators are standing on the sidelines. they sold out. what do you see the outlook for the next couple of weeks and
going into the new year. >> it's a balancing act with a n it. >> stocks are cheap relative to. you hear that quite a bit. that is the positive. >> everyone is worcesterfirefiw. >> i see for the next couple ofd driven by headlines out of europe and i hope the markets can hold these levels. and we are cheap based on the earnings power in america. >> tricky times for us thanksnin the program. >> we are speakin program.
a little anxiety over europl tonight's market focus. we saw a late day sell-off with word of early dissent coming out of the european summit. after two sessions of marking time, stocks were moving today, lower. we spent the entire session in the red. what would have been positive news of an interest rate cut by the european central bank was
offset by the central bank not buying more government bonds. today's selling in the s&p 500 picked up into the close. no surprise when european debt is in focus, the financial sector led the market. today, that meant selling. this financial sector exchange traded fund fell almost 4%. just yesterday, it was at a six- week high. with the sell-off, it continues this trend of lower highs. among the leading financial losers, insurance giant hartford financial services. the stock dropped 8%. volume almost doubled. while its 2012 guidance came within the range expected by analysts, the firm says the tough situation in europe and low interest rates will make next year challenging. banks and materials weighed on the dow industrials. j.p. morgan and bank of america reversed gains earlier this week. both finished lower by more than 5%. alcoa shares dropped 4%.
bucking the weak market was mcdonald's. today's half a percent gain was big enough to be the best gainer inside the dow industrials. it also was enough to push m-c-d up to an all-time high, just shy of $97 per share. the company reported a very strong november across geographies in developed and emerging markets. global same-store sales jumped almost 7.5%. that's almost double what was anticipated. among the drivers, higher menu prices. mcdonald's has been able to successfully raise prices three times this year. after the close tonight, we saw a couple of semiconductor makers cut their outlook for the rest of the year. both texas instruments and altera shaved their financial guidance, thanks to lower demand. during the regular session, t-x-n fell 2.5% to just below $30 per share. the stock fell another 6% after the close. altera shares were down 2.5% before the news, and dropped another 4.5% in after-hours
trading. there was another deal in the world of cloud computing. "big blue", ibm, will buy demand-tec, which sells software services to retailers that analyzes prices. it is a $440 million deal. ibm dropped a little more than 1%. demand-tec shot up 55%, closing a nickel below the purchase price of $13.20 per share. an f.d.a. panel approval for an anemia drug sent shares of affymax soaring, up 36%. volume jumped 20-fold. it goes to a full regulatory review in march. in commodities, oil dropped below $100, falling 2% to $98 and change per barrel. that's its biggest loss in two weeks. metal prices also fell with traders pointing to anxiety over europe. gold and copper fell more than 1.5% each. with the european central bank not buying bonds, that put pressure on inflation sensitive gold. and that's tonight's "market focus."
>> susie: an early christmas present for ford investors-- the auto maker announced its dividend will return after a five-year absence. as ford's sales and financial condition get healthier, the company is reinstating its quarterly dividend of five cents a share. with about four billion shares outstanding, that quarterly payment will be about $200 million. ford's big rival, general motors, has not yet decided to restore its dividend. >> tom: here's what we're watching for tomorrow: we'll see the october trade balance and get a first look at the university of michigan's december reading on consumer confidence. also tomorrow, our friday "market monitor" guest says put some stocks in your christmas stocking. he's duncan richardson, chief investment officer at eaton vance management. >> susie: zygna's roadshow is underway, and today, the social game maker's c.e.o. told potential investors the company
can double its number of paying players but wouldn't say how soon. zynga is expected to go public next week, and it's hoping to raise over $900 million. the company, known for its facebook games like farmville and mafia wars, is expected to be the biggest internet i.p.o. since google debuted in 2004. >> tom: a potential blow for the controversial energy drilling technique known as "fracking." the environmental protection agency today issued a draft report showing fracking likely polluted a small wyoming town's drinking water. the e.p.a. found benzene, alcohols, and glycols in the town's aquifer, the report said. industry groups claim that fracking has never polluted water supplies, because the drilling occurs far below the water sources.
>> tom: new data on california's economy shows just how hard the state was hit by the housing bust and the great recession. just under half of california families were middle income last year-- that's a new low for the state, and it was far below the national average of almost 55%. meanwhile, 36% of california families were considered low- income-- earnings below $44,000 a year-- and just 13.5% high income, earnings more than $154,000 a year. >> susie: and finally, for the
first time in 86 years, coca- cola's secret formula has been moved. the company took the formula out of the bank vault where it has resided for decades and moved it to a new specially built vault at the world coca-cola museum in downtown atlanta. coke made a big show of the move, with c.e.o. muthar kent saying, "the time has come for our secret formula to come home." tom, while the new vault will be a centerpiece at the coke museum, the formula itself remains hidden and closely guarded. that's "nightly business report" for thursday december 8. we want to remind you this is the time of year your public television station seeks your support... >> tom: ...support that makes programs like "nightly business report" possible. >> susie: thanks for joining us, and don't forget to support your public television station. i'm susie gharib. good night, everyone. you, too, tom >> tom: good night, susie. good night, everyone. i'm tom hudson. we'll see all of you again