tv Nightly Business Report PBS June 25, 2010 6:30pm-7:00pm EDT
>> tom: congressional negotiators reach an historic agreement on financial regulatory reform. we'll look at what's in the new rule barclays and how it is expected to change things on wall street. >> i want thereñi to be more ofñi a need forñr the banks tió make money lending and less from financial manipulation. >> suzanne: congressman barney frank helped negotiate theñi deal. you're watching "nightly business report" for friday, june 25th. 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. captioning sponsored by wpbt >> suzanne: good evening, everyone, i'm suzanne pratt, sue susie gharib is off tonight. the toughest changeq sinceñr the great depression. >> tom:ñi they sure are, suzanne. they come less than two years after the banking system was on the virge of a collapse. both houses of congress are still expected to vote onñr the full financial regulatory billnext week. >> suzanne: stephanie dhue takes a closer look
at what is in the legislation. >> reporter: after more than a year of debate andñi a 20-hour marathon session that lastedñi into the wee hours of the morning, lawmakers agreed to a 2,000 page reform bill. president obama hailed the effort. >> president obama: the reforms making theirñi way through congress will hold wall streetñi accountable so we can help prevent another financial crisis like the one we're still recovering from. >> reporter: it is passed by the full house and senate. it sets up a new consumer protection regulator within the federal reserve. the government would have new powers to break up failing firms, and monitoring risks to the financial systems, and banks cabilities toñr trade cern interest rate swaps and other derivatives. but they could trade some futures and commodities. banks can say good-bye to the 20% juicy returns. k.d.w. experts returns to
be more like the 13%.ñi be they expect banks to adapt to the new l@u. >> it is tougher than people anticipated a few months ago, but what haunted the industry over the last few weeks have been lifted out. >> reporter: consumer advocate ed mierzwinski says it will be up to the regulators to make the rules work. >> the reform puts tools in place so regulators can watchdog and rein in wall street. but you need good regulators and good oversight by congress. >> reporter: congress still has work to do on financial reform. up next, what to do about mortgage giants, fannie mae and freddie mac. the two areñr putting uncle sam behind almost all u.s. mortgages. stephanie dhue, "nightly business report," washington. >> tom: the house financial services committeeñi chairman barney frank was one of the lawmakers pulling an all
nighter to finish the reform. he sat down with darren gersh to say how it willçó apply from everything from a mortgage to a pay-day loan. >> first of all, people will not be given loans that they shouldn't have gotten in the first place. secondly, if youñi are, for example, an average citizen, and you don't have a lot of knowledge of this, as most of us don't, and you hire a broker toñi help you find the loan, the broker will no longer be compensated on the higher interest rate he gets you. you can go to the broker, and the broker is making money to the extent he puts you into a larger loan, but a loan with a larger interest rate. we outlawed that. people who make a slight overdraftñi of a couple bucks aren't going to get hit with a $50ñi charge. they're not going to have some of the unfairness we have seen in the credit
cards. yes, people will be able to go to payday lenders, but they won't get hooked where they have to go every few months, and pretty soon they're paying more in interest. >> will subprime mortgages go away? wiíl exotic mortgages go away? >> i think they will substantially diminish, yes. we have risk retention. a large part of the problem is 30 years ago, if you made the money, the personal who made the loan, is the person you but we invented this system where you could sell the loan and that will no longer be the case for most loans. and some mortgages will flat-outaouaiout outlawed. you won't be able to get them without documenting your income. not the 2% that go up to 8% or 9%. some will be banned.
>> reporter: this morning you gave an interview where you said if wall street don't go down, this last year would have been a waste of time. why do you want wall street points go down. >> i would like to see them go down to the extent they come from overdraft fees. but it goes even beyond that. banks, particularly banks, are supposed to be intermediaries. they are supposed to raise money from large amounts ofñi people, bundle it up and give it to people who will use it productively. some of the banks were just in there to make money on their own. to the extent that banks were swapping derivatives to each other, i don't see any great social toñr that. i believe some of it resembled fantasy football. it had no more reality to the economy thunder fantasy footballx> reporter: one of the concerns on wall street is that thisñi bill would cut into industryçó profits, and therefore banks would have less money to lend and
that would hurt the economy. i want to hear you respond to that. >> that is conscious nonsense. in the first place, we think we're driving them more to lending. because we are shutting down -- not shutting down all together, but restricting other profit centers. banks will have to do more lending. i disagree with that completely. the fact that banks are not engaged in sophisticated c.d. o. swaps with each otherçó doesn't stop them from lending money. i want there to be more of a need to make money lending and les from financial manipulation. >> reporter: and rather than breaking up bigthem go on r business as usual. and i want to give you a chance to respond to that. >>ñr blatently untrue. one is you'roi going to stop them from doing activity because they won't have any money.ñr and, two, they'll be doing what they've done before. no, they will not be able
to do what they've been doing before. at rs point, with theeconomy shakyo and break up every large bank -- i'm not sure what that means and how large is large. >> reporter: house services committee chairman barney frank, thank you for your time. >> thankñi you. >> suzanne: still ahead, fun in the sun. despite the threat of oil on the beaches, some gulf tour towns are doing what they can to keep tourism alive. >> tom: it was a quiet end to the week on wall street. the dow fell nine points, and the nasdaq up six, and the s&p 500 inked out a three-point gain. the volume more than doubled on the bigçó board, and up moreñ;than 70% on the nasdaq. the commerce department says the gross domestic product rose by 2.7% between january to march. but economists expected it final reading to hold steady at 3%. as scott gur gur -- scott
gurvy reports. >> it has taken the g.d.p. down 2/10s of one percent. it is not enough to create new jobs. >> 2.5% to 3% g.d.p. is consistentent with 1.3 million jobs a year. that sort of keeps pace withñi population growth. it doesn't do a lot for the eight million jobs lost since the begin of the recession. >> reporter: but duñr mackie says signs leadñr him to think it will increase in the months ahead.çó >> double dip recession is quiteñr unlikely. corporate profit growth is very strong, and that is allowing firms to invest and to start to higher. and consumer incomes are
improving allowing for consumer spending to grow. >> reporter: politicians can use them to support seemingly contradictary arguments on policy issues. >> the problem is as we look at the debt picture, it is becoming har 2 andharder to get these things passed through congress. we saw more evidence of thatñi this week with a failure to extend unemployment benefits. for politicians looking to try to create more stimulus to try to get the®j&unt seems like they have their hands tied at this point. >> reporter: the forecast doesn't help the decision-making process. i've seen the growth rates running anywhere from 0% toçó 5%. scott gurvey, "nightly business report." >> tom: it was a mixed market. the week had a negative tone to it. let's get to it in tonight's "market focus." on the onset,ñr we should note we've been have a few graphic data problems in terms of the most actives.
you can find that information on our website at nbr.com. for the first time in a couple of weeks, the three major indices are in the red. over the past five sessions, the dow, there it is, off by 2.9%, with a couple of big losses on tuesday and thursday. the nasdaq lost 3.7% since last friday's close. it was a similar pattern with one day of gains for the s&p 500. for the week, though, off by 3.7%. investors bought some banking stocks after congress reached a deal on new financial regulations we told you about earlier. the financial sector was the leading in the market area. the k.b.w. bank rallied almost 3%. this is a 6-month chart showing the rally through april, you note the high point there. since then, though, dount 14.5%, and that is down more than the overall market.ñr breaking apart some of of the=america express and b of a
andñi j.p. morgan, each seen heavier than usual buying. we sawi a coupleñi of weaker housing numbers. those were echoed by c.b. home. theyñr lost more money than expected in the second quarter. but new homeowners increased from the second quarter from the first quarter. that wasn't enough good news to stop the selloff. shares dropping 9%, falling to a new low, and on better than twice its normal volume down to a 52-week low. faulty homes, d.r.horton and toll brothers werexd weaker, but by a 1% lower. a new guy in charge of b.p.'s day to day operations has not helped out b.p.'s stock. shares continue sinking. tonight, justñi below $27 a share, which is a new 14-year low for shares of b.p. drilling stocks found buyers despite a federal
judge rejecting the moratorium on deepwater drilling. d¥kwj pride and roanwere allñr up. r.b.c. capital markets notice that new safety and regulations are impacting new shallow drilling permits. berkshire hathaway did more than 85 million shares trading. in fact, the "b" shares are at their highest price sinceñi march. inxd january, the stock split 50-1 as part of theñi berlingtonçó northern buyout. it was added to the russell 1,000. and a followup, oraclebeating th shares with 2% move. and research in motion disappointing.ñr r.i.m. 's stock fell to a new 52-week low.
i.p.0s, fabrinet makes components for companies like jds uniphase. it was up by 75 cents. california office real estate trust has gained from its thursday's priceçó of $17 per share to goñi out at $17.61. andñi that's tonight's "market focus." ñrñixd >> suzanne: coast guard officials in the gulf of mexico are bracing for a possible strong storm to hit the area next week. if that happens, oil collection could be delayed for about two
weeks. that means 35 million gals of crude would be awash in the gulf. in the meantime, some gulf coastal cities are not letting the spill deter their summer plans. as our series "jeopardy in the gulf," the future continues. jeff yastine looks at how they're doing it. >> jeff: you'd never know that hundreds of thousands of gallons of raw, crude oil have been spewing into the gulf waters. this region has been lucky, favored by tides and winds so far and no oil on the city's beaches. but something else has had panama city beach. let's call it attitude. you can feel it when you come to the local water park and talkç?sa)ud generalñr manager buddy wilkes. >>ñpi we're fighters around here. we're not ready to file açó claim with b.p. and roll over and talk about how bad it is.>> reporter: and wilks is not prepared to say all is lost even if the oil arrives. >> we haven't thrown in
the towel yet. we're a long way away from that. we haven't had any huge direct hits, but even if we do, i believeñi you're going to see a community that comes together and still continues to fight to bring people to these beach. >> reporter: those aggressive efforts to bring people here start with billboards like this one. showing updated photos of the beaches. >> two years ago, business owners decided they would double down on their bets about the summer season. they'll spend about a half million dollars creating and promoting a mardi gras-style summer of fun that will last the rester of the summer. it is a chance to build esquimalt and give people something to do whetherñi the oil comes ashore or not. the idea, says the tourism manager, this community is not giving up its profitable tourist system to the oilñi without a fight. >> the businesses here have a resolve. they're rolling up their sleeves saying we're going to do everything we can to make sure we do okay this
summer, and this is a real fun beach, and we'll invite our visitoxsñ to come and have a good time ghthis is not a beach that tends to say woe is me. this is a beach that will help get it done. >> tom: the threat of oil comes at axd time of transition for this beach resort town.ñi a month ago an international airport opened here, which many hope will bring more visitors. a decade ago, this was a destination of mom and pop hotels, and now high rises dot the coastline. most businesses earn most or all of their profits in an 80-day to 90-day window of the summer. so being aggressive, even with a spill over the horizon, is important, is marty mcdaniels, c.i.a. of oaseas resorts. >> weçó recognized pretty early on this is going to be something that wasn't going to go away in a few days. we were going to have to deal with.
we started toñiñi see volume drop, and we started seeing the impact around or destinations, we decided that what we needed to do was be proactive, and figure out how we can preassure guestsñi to keep coming. >> reporter: that effort has largely paid off with most businesses generally holding their own. we visited three states, alabama, mississippi, and f@if there is one thing that all of the people we spoke to had in common is a sense that they can get through this. yes, from is real worry, fear about the economy, about jobs, about money, about property values. people are getting hurt. and yet people know here in the gulf coast that they've weathered other natural and man-made disasters before, and people here say they will weather this one as well. jeff yastine, "nightly business report," panama city beach, florida. >> suzanne: here is what we're watching for next
week, our friday "market monitor" guest is marki gini. and we'll see june's report on employment and auto sales and personal income and spending. monday, we'llñr go into how the government isçsw handling future oil leases in the gulf of mexico. kellogg's company wants some ofñi its cerealñi back, 38 million boxes of apple jacks, corn pops, froot loops, and honey smacks. the company is recalling the products because ofçó a waxy smell and flavor there is little chance the cereal will make you sick, and kellogg's will refund your money. >> tom: the f.c.c. today froze the assets of a florida consulting firm that promised safe
investments to law enforcement agents and government workers. but the bond funds the firm invested in did not exist. the federal employee benefits group and its founder, the late kenneth mcleod is believed to have ripped off those federal employees for more than $30 million.çóçóçó ñi >> tom: tonight's market
mact guest is sandy lincoln. he joins us this evening from the c.m.e. evening group in chicago. great to see you. >> i'm glad to be back. it has been a heck of a six months since i washere last. >> tom: so what's the setup for the rest of theñr year for investors? >> i think the first half is pretty telling in a lot of ways, tom. we came off that great run in 2009, and people had expectations for 2010. believe it or not, we've been getting them. the microdata is very good. we've have very good year-end numbers. and we got sales of 13%, and aggregate 14% to 15%. the market loved that. ate up 8 or 9% returns. >> tom: and then it rane@6cjúinn about the mediterranean and greek debt, and also concerns about chinese
currency hitting the market since april? >> absolutely. though macro events kind of swamped the equity vote. but people saw weakness in europe, and saw maybe slowdown in asia, from a very rapid growth rate to a slower rate of growth, and couldn't see good news in north america and the u.s. we think that is overdone. at the end of the day, europe was never expected to be a big contributor to the global economic growth story in 2010. and we still like the good u.s.a. where weñmicro and the ss will support higher numbers. >> tom: what is it going to take to get this market#h6co fundamentals. >> i think it is going to take just that. it is going to take a bit of the economic backdrop to soften up. but we're going to see the juneçó numbers, and they're going toñstrong.ñi that continues on through the second half, and people are going to say maybe it is a good idea to buy companies that make
profits in gross sales. >> tom: let's look at the companies you like 6 months ago. technology exchange rated fund, down by 10%, highlighting some ofñi theñi economicñrñi cyclical problems. you didn't pick the e.t.f., but we're using this as fill-ins for your sector likes. do you still like these sectors? >>ñr for the most part, with do, tom. we were in theçó sectors well before january, so we had 50%, 60% andñi 70% returns. weñwe think the economic sensitive areas have further ways to go. are we watchful of those? absolutely. are we looking for other opportunities? absolutely. but we're still overweight in tech andñr energy. >> tom: one of the energy picks you like,
n.b.r., not afraid to put money to work in the industry,ñr despite likely new regulations because of the b.p. spill? >> well, the important thing on neighbors is they're a land operator of rigs. they're goft a -- they've gotñr a great geographical footprint. and we think the premier player, andñiñr stronger pricing ahead. we like this name quite a bit in neighbors. >> tom: and you like h.m.s. holdings, a cost containment company. look at that chart, 11 months and it has been rallying. $55 a share. would you still put money to work at these prices? >>ñi weñr think there are still more left in there. they're in the epicenter of cost containment and health care. they're only a billion and a half dollar company, but they've got a good story withñi medicare and medicaid, andñi state agencies contain costs, and making sure they're making proper payments for
insurance reimbursement. >> tom:ñi a disclosuresxd for the stocks, sandy? >> the company owns them on clients' behalf, but i personally own none of those. >> tom: a busy weekñi ahead, suzanne, we've got the beginning of the third quarter and thfr latest jobs numbers. that is "nightly bus[ngss report" on this friday, june 25th, and thanks for joining us. i'm tom hudson, and have a great weekend, suzanne. >> good night, tom. i hope everyone has a warm and sunny weekend. i'm suzanne pratt. we hope to see all of you again monday night. ñi
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