tv Nightly Business Report PBS March 13, 2012 7:00pm-7:30pm EDT
>> susie: the health of the nation's biggest banks has improved. so says the federal reserve. its latest stress test results are in, and its passing scores for everyone from j.p. morgan to wells fargo. also on the mend, the u.s. economy. the fed says the economy is expanding. >> there are some signs of improvement, but again, there's still caution about the outlook. >> reporter: i'm erika miller in new york at one of the many small businesses that has been hiring. but will the momentum continue? i'll have the story. >> susie: it's "nightly business report" for tuesday, march 13. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> susie: good evening, everyone. my colleague, tom hudson, is off tonight. the federal reserve said late today that the majority of the nation's biggest banks are in good financial health. after conducting stringent stress tests, the fed said 15 of the nation's largest financial firms could withstand a severe recession. but four banks would need to raise more capital to withstand a shock. the firms falling short include citigroup, ally financial, suntrust, and metlife. now, keep in mind, this is a worst-case scenario.
the fed wanted to see how banks would fare if unemployment soared to 13%, stocks fell 50%, and home prices tanked by more than 20%. the stress tests were originally due out thursday afternoon, but around 3:30 today, j.p. morgan announced a dividend increase, which told investors it had indeed passed its stress test. that helped stocks close at their best levels of the day. the dow jumped almost 220 points, the nasdaq added 56, closing above the 3,000 level for the first time in 11 years, and the s&p rose almost 25 points. joining us now to discuss those stress tests, fred cannon, co-director of research and banking analyst at kbw. >> hi, how are you? >> susie: good, thank you. what do the tasks tell us about the strengths of the banking system? >> primarily they tell us that
the bank that rebuilt the capital can with stab a very tough scenario, that's really the good news behind this, is that the capital levels are back at the banks. overall it a very strong industry. and we're ready to, the stronger banks did very well on this test, they'll be able to put out a lot of capital to share olders, and some others will struggle for a while. >> susie: tell us about the ones that will struggle. there were four that we mentioned that did not pass. what does it say about their viability? >> not too much. number one the ones that really didn't pass it fellow were really ally financial, and number two was met life. met life doesn't really work in this scenario, so i'm not really worried about that, but the life insurance company is very different and ally financial has a problem. if we look at cit ti and untrust the capital ratios look okay, if they ask to deploy a lot of capital and got rejected.
>> susie: we heard today that j. p. morgan raised its dividend, a nounlsed big stock buybacks, are we going to see other banks doing the same? >> you belt. we already have seen some. just this afternoon later on we saw wells farg oh, a big dividend increase, above expectations, u.s. banks, good dividend increase for the share we purchased. american express discovered in share repurchase well pof expectations, so those banks and the strong nest the country have done very well on this test and are rae to help shareholders out with some capital. >> susie: you know, banks have been on the very bottom, bottom of people's recommendations. is that going to change? is this a time for investors to take a fresh look at investing in banks? >> i think it is, because one of the key problems with the banks is that there's been no dividend yield. investors in this interest rate environment have been looking for yeels, they like high skault namess above 3% dividend yields and suddenly we're going to get some in the banking industry, especially with these dividend increases at wells fargo, j. p. morgan
and u. s. c., i think that's going to attract investors back into this. >> susie: quickly, on wbw's buy list, which are your favorites, your top two or three and tell us the ones you'd avoid? >> okay, the top, we like the quality ones, we skinly have liked j. p. morgan and u.s. bancorp, those are our top two picks in the sector. wells fargo positively surprised me. on the other hand we've been cautious on bank of america, and i think that it does make it more cautious on sun trust. on the other hand, citi even though they didn't do well in the stress test, once we get past some of the noise that will be a very interesting stock for investors to look at. >> susie: all right, thank you so much, fred, lots of good information. appreciate your coming on the program. >> thank you, suzive. >> susie: any disclosures or ownership on these stocks you mentioned? >> no. >> susie: thanks so much again, good night.
also from the fed today, policymakers made no change in interest rates. wrapping up a meeting in washington, the fed said the economy is improving, but decided to keep its key short term rate near 0%. the fed's policy statement said the economy has been "expanding moderately". policymakers also noted that the "labor market is improving" and unemployment has "declined notably". consumer spending and business investments are up, and while "oil and gasoline prices will push up inflation," the fed believes it will be only temporary. but the fed also pointed to some potential problems-- while it said "strains on the global financial markets are easing," it acknowledged they still pose a threat to the recovery, and the housing market remains "depressed". for more analysis on the fed and those bank stress test results,
we're happy to have with us randall kroszner. he's a former fed governor, and now a professor of economics at the university of chicago booth school of business. let me begin about those bank stress tests. for the average american who has been living through this whole financial crisis, can they now say we tonl have to worry about the banks any more, this financial crisis for the banking system is over? >> well, certainly given my years on the fed, i never say never about anything. but i think this is a very positive sign that the banks have really built up their capital, they now have stronger capital levels than when they went into the crisis in 2006. in many cases. and they are able to undertake stresses that are even greater than what we saw. so i think this is a good sign. but there's still could be some prox lurking out there. >> susie: you know, some bank regulators have been calling for even tougher regulations on the banks. do you think banks need to do more to be even safer? >> i think it's very important to really improve risk management, that's one of the
things that was astonishingly poor during the crisis and into the crisis. i think there have been important improvement there's, there's a lot more that can be done, but we made a lot of head way with respect to capital and on a number of other aspects of banking stability. >> susie: now that the banks are more stable and they are stronger, should we expect them to be lending more money, making more loans to businesses and individuals? and helping the economy. >> it will make the banks feel more comfortable, and i also think it will be help until to make people feel more comfortable that start tomorrow. one of the reasons the banks, that many people wanted to borrow, part of the uncertainty was the potential instability of the banking system. if people feel that the banks are more stable, both the banks will be able to be more comfortable lending more, and more people will want to borrow to invest and hire. >> susie: randy, let's turn to the fed policy meeting today,
and the interest rates. do you think the fed did the right thing? you were fed governor for many years. is that how you would vote? >> yes. i don't think there was any reason to change the policy right now. they still have a lot of accommodation, a lot of support for the economy, because the economy although we've got some good signs, things turning around, we've had a few false stalls before in early 2010, early 2011, where the employment situation seem tobd improving and then we got very disappointing numbers for subsequent months. so i think it's right for the fed to be taking a wait and see attitude right now. >> susie: so what happens next? a lot of people are saying the april and june meetings of the fed could be critical. what's your prediction? >> i think it's really going to start to get interesting, because we'll get one more employment report between now and the next meeting, which is in mid late april, so when we we'll get some information but not a lot of information. so my guess is the fed will be still somewhat cautious in its
outlook. but by june we're going to get a lot more information and we'll get the employment numbers for two more months, we'll get gdp numbers, so i think that's the point where the fed will really have to make a decision, does it need to continue this extraordinary support or start to taper that off. >> susie: what do you think, in a few words? more support or just lay low? >> well, i think it all depends on what will happen in the data. i think if the economy continues to grow like this, i think tapering off very gradually will be a reason al way to go. >> susie: we'll have to leave it there. hope to get you back in the spring to talk more about this. >> great. >> susie: we've been speaking with randall kroszner, professor of economics at the university of chicago booth school of business. >> reporter: coming up-- i'm erika miller in new york at one of the many small businesses that has been hiring. but will the momentum continue? i'll have the story.
>> susie: if you use high-tech products or own shares in high- tech companies, you'll want to keep an eye on the trade case the u.s. filed against china today. it targets chinese exports of rare earth minerals. those minerals are critical to high-tech manufacturing, and china controls the world's supply. darren gersh reports. >> reporter: your cell phone wouldn't power up without rare earth minerals, and military hardware like this drone wouldn't hit its target without rare earth minerals, which is why the president wants u.s. companies to have access to these vital materials. >> now, if china would simply let the market work on its own, we'd have no objections. but their policies currently are preventing this from happening, and they go against the very rules china agreed to follow. being able to manufacture advanced batteries and hybrid cars in america is too important for us to stand by and do nothing. >> reporter: manufacturers of glass for touch-screen computers have moved to china, in part, because it produces almost all
of the world's rare earth minerals. and the u.s. complaint filed with the world trade organization claims china uses quotas, duties, and red tape to restrict exports that might help high-tech companies move back to the united states. jeff green represents companies that want to mine for rare earth minerals in the united states. he says today's trade complaint may result in lower prices for manufacturers, but it won't break china's lock on the market. green says the trend to china is one reason molycorp, a large u.s. producer of rare earths, is now expanding overseas. >> the largest producer of rare earths, just last week, announced the intention to buy a company with operations in china, which will actually exacerbate the export of rare earth materials from the u.s. into china, further feeding their supply chain. that's a capability we need to develop here at home. >> reporter: the chinese say they are trying to conserve a scarce natural resource and protect their environment. but the obama administration dismisses those arguments, and seems determined to broaden the
pressure on what it calls "unfair chinese trade practices." >> until now, the battleground used to be currency issues and the fact that china was restricting imports of goods from the u.s. and other economies, but now, the battleground has shifted to china's export restrictions. >> reporter: the european union and japan joined the united states in requesting negotiations with china at the world trade organization, a strong signal to china of just how important the world's most advanced economies consider a trade fight that goes to the heart of their high-tech economies. darren gersh, "nightly business report," washington. >> susie: if you want to know the outlook for the economy, think small. small business has been the engine of job creation over the past 17 years, generating 65& of net new jobs. erika miller gets the outlook for hiring, and begins at a small business in manhattan. >> six weeks ago, we just added an engineer.
and we are also looking for more people. as of right now, we are looking for a marketing and sales coordinator, and we are also looking for salespeople. >> reporter: jennifer walzer is the owner of back up my info!-- "bumi" for short. her eight-person company helps other companies avoid data disasters. >> we provide a completely automated and very secure off- site data backup and recovery service. the chances that your services are going to crash is 100% guaranteed-- it's just a matter of when. and when it happens, you've got one shot to do a restore. >> reporter: she's not the only small business owner hiring lately. according to a national federation of independent business survey, 12% of small businesses added workers in the past few months, 14% cut jobs, the rest held steady. economists have been waiting for small businesses to step up hiring, with the hope of reducing the nation's high unemployment rate. unfortunately, the latest feedback from small firms is not encouraging. according to the nfib, the net
percentage of small businesses planning to hire is 4%, the third straight monthly drop. many firms can't justify taking on an extra employee until they see a bigger pick-up in revenues. others are relying on existing workers to work extra shifts, or using technology to enhance productivity. but it may be bigger than that. >> they're not that comfortable that the future is going in the right direction, and that has a direct bearing on their desire or willingness to hire. john krubski is an advisor to small businesses, and thinks the fact that it's a presidential election year is increasing anxieties. but he also says many firms simply don't want to grow in size. >> there's an interesting thing that happens to a company as it grows in size. when the business grows too big, they're no longer having any fun, and when you talk to small business owners, having fun, really enjoying the business, it's a big component. >> reporter: so what's stopping the firms that want to hire from doing so?
a common problem is finding suitable applicants. >> in our job descriptions, we always state we are looking for a cover letter-- "why do you want to be with us? why do you want to join our team?" and about 99% of the resumes that come in don't come in with a cover letter. >> reporter: so, ironically, most resumes end up deleted by a firm that wants nothing more than to save your info. erika miller, "nightly business report," new york. >> susie: there's one american city that doesn't mind high oil prices, houston. the oil capital of the u.s. has been on a hiring frenzy in recent months, thanks to healthy profits at petroleum producers. diane eastabrook reports, while much of the u.s. is still struggling out of the recent recession, houston is firing on nearly all cylinders. >> reporter: at the port of houston, chinese steel is offloaded from a ship at one end, while 1,300 german cars disembark at the other. 220 million tons of cargo moved in and out of the port last year, making it the busiest one
in the nation. from dockside to downtown, houston's economy is humming. rising petroleum prices are part of the reason this city, home to big oil, is on a growth spurt. >> if i took a ruler and laid it across here, you'd actually see that we employ more people here than we did prior to the recession. >> reporter: economist patrick jankowski from the greater houston partnership shows how resilient houston's economy was during the recent recession. he says when crude tops $80 a barrel, as it has the past couple of years, oil companies add jobs. but petroleum isn't the only energy source creating jobs. the nation's gargantuan supply of natural gas is making it cheaper to make everything from glass to plastic. >> last time i heard, there were companies that had 10 or 12 projects that were going to be built somewhere on the gulf coast between lafayette, louisiana, going all the way south to corpus christi.
now, maybe not all ten or twelve of those are going to get built, but many will be. they are going to be drawing that natural gas. >> reporter: within the next month, this will be an assembly line where 50 workers will be putting together l.e.d. lights. neutex lighting is just one company capitalizing on houston's booming economy and cheap natural gas. john higgins president and c.e.o. of neutex advanced energy group says moving production of the lights from china to texas was a no brainer. >> our powder-coating machines use the natural gas. because of the cheap pricing, it allowed us to offer this to our clients at a much cheaper price than we could have ever done at any of our locations, in helsinki or finland or macedonia, or even china. the natural gas that we get here, and the volume that we get here, allows us to basically offer that product almost for free. >> reporter: last year, houston added 75,000 jobs. the greater houston partnership thinks the it will add another 84,000 this year. and that could make houston the shining star in the lone star state.
diane eastabrook, "nightly business report," houston. >> susie: here's what we're watching for tomorrow: we head to pennsylvania, where state funding cuts are creating new budget challenges for public colleges. boosted predictions for the year to 106 million tablets, that's up sharply from its original forecast. sales of around 88 million tablets. while apple's ipad still dominates the tablet market, ibf credits the kindle fire for igniting sales. you may not know her name, but she could be the next big thing to hit the golfing world. she's 17-year-old lexy thompson, she went pro last year and at 16 was the youngest golfer ever to win an lpga tournament. thompson has placed in others,
bringing home almost $600,000 in tour money over the last two years. we meet her in tonight's beyond the scoreboard, with rick horrow. >> reporter: so here's your chance, give us your elevator speech, about your sponsors, who are they? >> my sponsors are cobra, red bull and rolex, and they've been with me since i turned pro, and just always there for me supporting me, even there my bad times. >> reporter: so those are different kind of sponsors, what is the brand of lexi thompson what does it really symbolize? >> well, they're all fun and young lifestyle brands. that's what i wanted. >> reporter: what about globalization? i know you played in the women's australian, you've been traveling around the world. is your brand global? and how do you make sure that you expand your appeal beyond north america? >> it's important to be known worldwide, you can't just be known in one spot. i just came back from australia and thailand. so i'm all over, and i love
traveling, just to see different cultures and different people. it's a great thing, having the game of golf. >> reporter: you've been successful both on and off the course, thank you. >> thank you. >> susie: finally >> susie: and finally, over the next few weeks, high school students will be hearing from colleges on where they got accepted. our commentator tonight says college may not be for everyone. he's harry lin, executive in residence at idealab, a technology incubator in pasadena, california. >> i have a colleague whose brother is having a tough time in college. apparently, his grades in many of his classes are very poor. but he's doing well in his computer science courses. this is because he is spending all his time on a computer game- - specifically, his own game. see, this college kid owns his own game company, and created an online game that's developing a small but fervent following. some of his friends and family are urging him to leave school
and focus fully on his company. they say that the future is bright, perhaps lucrative, if he seizes on the momentum. unsurprisingly, his parents and others are telling him to stop playing games and concentrate on school. leaving college to drive his game company forward might seem risky, but the capital efficiency of software development, combined with the reach and virality of the internet, give this young man power and speed-- power and speed that were unimaginable a generation ago, when getting a college diploma was the smart thing to do. today, i think the smart move might be to stop accruing student-loan debt and keep playing games. i'm harry lin. you didn't notice all the stuff that happened in the markets today, we ran into some technical problems where we couldn't bring that to you tonight. but go to our website and you'll get all the numbers and the stats for the day. and that's it for us tonight.
that's "nightly business report" for tuesday, march 13. we want to remind you this is the time of year your public television station seeks your support, support that makes programs like nbr possible. thanks for joining us. i'm susie gharib. we'll see all of you again tomorrow evening. "nightly business report" is made possible by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org