tv Nightly Business Report PBS October 14, 2010 12:00am-12:30am PST
>> they need to stop, they need to clean this up, and they need to start going forward on the same basis, playing by the same rules as every other party in every other case in every other court in this country. >> tom: investigators from all 50 states join forces to crack down on the foreclosure document mess. >> suzanne: the move could slow sales of foreclosed homes and threaten the fragile housing market. we'll get reaction from ohio's attorney general. you're watching "nightly business report" for wednesday, october 13. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: áfáf1f1f1c1c1c1c
>> suzanne: good evening everyone. susie gharib is off tonight. the probe into foreclosure practices is spreading. today, the attorneys general of every u.s. state joined together to investigate mortgage servicers. tom, the states will examine whether financial firms made misleading statements to evict struggling borrowers. >> tom: suzanne, investigators will initially focus on how lenders verify foreclosure documents. specifically, there are allegations of so-called robo- signing. that's when employees from mortgage companies sign hundreds of affidavits a day without reviewing them. it's alleged those documents were notarized without knowledge of the facts or verifying loan information. just how widespread is the foreclosure issue? check out these numbers: banks repossessed nearly three million homes in the past 3.5 years. according to realtytrac, banks are expected to foreclose a record 1.2 million homes this year.
>> suzanne: big banks say the problems may be with the foreclosure process, not with the actual foreclosures. earlier today, i spoke with ohio's attorney general richard cordray and began by asking how pervasive robo-signing is. >> well, we don't know at this point. we just announced our inquiry, and we're at the very beginning of it. what we do know, though, is there are several financial institutions that publicly acknowledged they did have at least tens of thousands of cases, and maybe more, infected by the submission of fraudulent evidence to the courts in order to get foreclosures. nobody can defend that. that is not appropriate and consistent with the due process of law. however widespread it is, it needs to be stopped and cleaned up as quickly as possible. >> suzanne: do you think your state, ohio, is particularly hard hit? if that's the case, why? >> i know we're particularly hard hit as far as foreclosures. dating back to 1984, we've had a record number of foreclosures, vastly
increased from the last decade. we're a judicial state. whether we're seeing more than our share of these fraudulent affidavits, and our share should be zero -- i don't know yet, but that's part of what we'll get at in this inquiry. >> suzanne: how would you like to see this problem resolved? what is the outcome you want to see? >> the first thing is that the financial institutions need to take this very seriously. they have a lot of exposure here. they need to review their practices. any who have engaged in this need to stop, clean this up, and they need to start going forward on the -- and play by the same rules as every other party, ever other court in this country. and because they do have exposure now, they could be sanctioned by courts in each individual case for submitting fraudulent evidence. they should think if they want to work out these cases with the borrower, and do some of the loan
modifications that they've paid lip service to. >> suzanne: about a nationwide moratorium. you came out and said you wouldn't support it. why not? >> because foreclosures that are based on proper evidence should not be stopped. you don't want to free up the system because you're aware there is a certain problem. the case that involve the problem should be stopped, but others should not. and there is no suggestion here that every financial institution engaged in this practice. nor do we know whether those that engaged in it in every case or just in some cases. that's part of what we're getting at and why all 50 state attorney generals are investigating. >> suzanne: doesn't this investigation free the state. aren't we el vailting if people -- elevating if people should trust the people involved. i know you are saying you don't support a nationwide moratorium, but your
investigation is, in effect, going to halt the process in any case? >> no, i don't think that's the case. by the way, let's put responsibility where it is due. if something is going to be freezing the system or causing inconvenience it is about financial institutions admitted they committed fraud in case after case. our investigation of it is to remedy the problem and make sure things are being done properly. we didn't make this problem. the financial institutions did. >> suzanne: aren't you worried that experts have said that this investigation is going to derail the fragile housing market, can which we already know is potentially in the process, you know, of a double dip, or has never even in fact recovered from the recession? >> well, we're urging the financial institutions to cooperate with us and share information freely. because the quicker they do that, the quicker we'll get this matter resolved. if they drag their feet and attempt to minimize the problem and don't face up to the seriousness of it, we'll get the
information. that's what the 50-state investigation will accomplish, but the whole thing will drag on longer. >> suzanne: do you worry at all that this case of falsifying documents could extend to reforming loans outside the road of foreclosures. >> what we do know with residential foreclosures, partly in part because of the volume, the financial institutions seemed to think it was okay not to play by the same rules at every other party and proceedings in court, and they engaged in a special practice to do mass numbers of cases. i don't think that would effect the commercial lending market, where foreclosures are not at the same level or volume, but we'll have to see. i don't prejudge that one way or the other. but i don't see any particular indication of that in anything we've seen to date. >> suzanne: mr. cordray, i think we have to leave it there. thank you so much for joining us. >> my pleasure.
>> suzanne: tomorrow, stephanie dhue reports on a controversial database involved in the foreclosure process. the mortgage electronic registration system, known as mers, keeps tabs on 66 million mortgages. but its legal authority is now being questioned. today, j.p. morgan chase said it no longer uses mers to process foreclosures. >> tom: here are the stories in tonight's n.b.r. newswheel: stocks saw their biggest gains in more than week, with the major indices at their highest closes since may. at the bell, the dow gained 75 points, the nasdaq added 23 and the s&p 500 rose eight points. big board volume spiked above a billion shares for the first time in over a week, while nasdaq climbed back above two billion. despite all the concern about foreclosures, the number of people applying for mortgages rose for the first time in six weeks, thanks to record low interest rates. but it was a surge in re- financing that led the way as homeowners look to lower their monthly payments. as for people wanting to buy homes, that number dropped for the first time in three weeks.
still ahead, is the recent run- up in commodities about more than the falling dollar? we'll ask our "street critique" guest. he's lincoln ellis, chief investment officer at strategic financial group. >> suzanne: j.p. morgan chase kicked off the third quarter earnings season for banks today with a bang. profits came in at just over $1 a share. that was 11 cents better than expected, and up 23% from a year ago. but the good numbers weren't enough to help the stock, or the sector. as erika miller explains, investors are now worrying about all the headwinds facing the industry. >> reporter: the scene at your neighborhood bank may not look much different than it did a few years ago. but don't let that fool you. there have been big changes in consumer behavior nationwide. americans are saving more, and reducing debt. k.b.w.'s fred cannon says this change is single biggest drag on bank earnings today. >> consumers are doing the logical thing, reducing debt loads.
that's a good thing for the long-term of the economy, and a good thing for the long-term of the banks. but in the short term it means less volumes for the banks, less business, less activity. >> reporter: but it's not just the drop in then number of loans that's the problem. lending has become less profitable as interest rates have plunged to historic lows. banks have also lost key sources of income due to tougher government regulations here and abroad. one of the most damaging is the dodd-frank financial reform law, which restricts bank profits on debit card transactions and proprietary trading, among other things. >> there are a lot of pieces to that that still have to get implemented. all of those are putting pressure on bank earnings, especially some of the fees that banks have been charging historically. >> reporter: it may surprise you that housing foreclosures did not make this list of major bank headwinds. foreclosures are a hot button issue, but bank analyst andrew marquardt does not think they will take a major toll on bank earnings-- even if there's a national moratorium on foreclosures.
>> we don't think it's going to be a massive overhang fundamentally for the group. it will simply delay a lot of the ramifications-- or dealing with-- with the housing problem. >> reporter: unfortunately for banks, experts predict these challenges will stick around until the economy improves, or banks are able to find new sources of revenues. erika miller, "nightly business report," new york.
>> suzanne: so, tom, a nice rally here today. broad-based, good volume, what's going on. >> tom: yeah, we haven't seen this is a long, long time, at least in terms of the volume and the broad base part of this. let's get everybody updated in >> tom: u.s. stocks continue to add to their recent gains. the major indices are at their highest levels since early may. leading the market today were three sectors tied directly to the global economy-- materials, industrials and energy. each of the sector exchange traded funds added at least 1% today. china reported a jump in commodity imports, really helping out this trio, which helped the broad market. technology has gotten a lot of "market focus" lately, with intel's earnings last night and a couple of biggies tomorrow.
but how about apple? shares saw a big round number today for the first time. $300 a share for apple. a new all-time. it comes ahead of next week's fiscal earnings report on monday. also next week, apple will unveil its newest computer operating system. meantime, wal-mart's sam's club stores will start selling apple's ipad and iphone. already, it is the second biggest publicly traded company by market capitalization in the u.s., worth $274 billion, second to exxon mobil. and it has been widening its list, microsoft. lead over number three on the list, microsoft. yahoo shares got a lift, in part thanks to microsoft's interest in the chinese online search market. first let's take a look at a chart of yahoo. yahoo jumped almost 6% on twice its usual volume. this is yahoo's highest share price since july. here's what's going on: yahoo owns 40% of the chinese online shopping site alibaba. alibaba began testing a chinese- language search engine version of microsoft's bing. yahoo and microsoft already have a search partnership.
of their own and that got yahoo shareholders excited today. there may be some market expectation the two could go after google in china, with its recent troubles with the beijing government over censoring search results. we will hear more about google overseas tomorrow during its earnings call. the results are due to be released after the close. ahead of the numbers, google stock is at its highest price since late april. google was up a fraction today. earlier, we mentioned the j.p. morgan earnings results, which were better than expected. but the share price performance was a drag today. j-p-m shares were among the weakest of the dow industrials today, losing 1.4% on strong volume. wall street-focused profits, like those from investment banks and trading, were down as intel was the weakest of the dow industrials, falling more than 2.5%. volume spiked to almost three times its usual pace. its pop in its third quarter profits last night weren't enough to fuel buyers today. competitor advance micro devices releases its earnings tomorrow morning. after the close tonight, for-
profit education operator apollo group received a failing grade on its quarterly report. or at least its outlook. earnings were a penny more than anticipated, but more worrisome for investors, it withdrew its fiscal 2011 outlook, citing the "uncertain regulatory environment," referring to new government rules on student loans. it also warned new enrollments could drop as much as 40% in the first quarter. with that, it may bear watching several in this industry. apollo shares closed at $49.50 before the report, but fell below $45 after the close. devry and strayer education saw fractional moves during the session, but each fell 5% after hours in sympathy. finally, it's not uncommon to see sirius x.m. satellite radio among the most actively traded stocks. tonight it is at a two-year high. a nickel gain is almost a 4% rally, as shares still trade below $2 per share, but the stock saw heavy trading, even for it. the company said new subscriber growth tripled last quarter.
and that's tonight's "market focus." >> tom: copper hit better than a two-year high, oil prices remain over $80 a barrel and the dollar has been falling. some point to expectations the federal reserve will do all it can to stimulate the economy. but tonight's "street critique" guest thinks economic growth is fading. lincoln ellis is the chief investment officer at strategic financial group, an investment adviser. >> tom: welcome back to n.b.r., always nice to see
you. >> thanks, tom. >> don: we have the s&p 500 at six-month highs. if the federal reserve decides to buy bonds, do you think it will help or hurt u.s. stock investors? >> certainly stocks were pricing in that expectation for some time now. it seems to me that the fundamentals of the fed actually expanding its balance sheet is stimulative as it lowers its interest rate, but it is the end, aggregate demand that will determine the stock prices going forward. >> tom: this is the demand versus more dollars in the market. you wrote a report recently with the new american foundation called "recovery of risk" and saying the public is in a re-evaluation. in other words a weaker dollar. >> it does for dollar dominated currencies. we've seen that in ore and in the precious metal
gold. and it has been supportive to the grain complex of late. >> tom: does the federal reserve have to act next month, with the market the way it is, would you prefer to own stocks or commodities, neither or both? >> we probably prefer to own commodities. hard assets. we think that the inflation trait has gone a little too far too fast, and we certainly would be expecting a pullback of some sort over the course of the next couple of weeks. >> tom: currently your focusing on heavy currencies, and australia and canada have been rallying nicely. does this speak to further gains in energy and metals? >> i would suggest to investors that most of those gains are probably already priced in now, much as the fed action as been in equity and bond markets in the u.s. so be cautious about those places. and, yes, they would signal higher prices both in the energy complex and
in the ag complex. >> tom: back on june 3rd you were here and you talked about oil and gold then as dollar exchanges. you talked about the fear of oil slowdown. today over 11% concern. gold, you said you would stay away from the metal. it is up almost 13.5%. does you still dislike these trades? >> yeah. i think those trades are sort of at the end of their rope here, unless we get what we continue to see, and that is this competitive devaluation of the dollar. you'll note that the dollar is down a similar percentage equivalent to those gains of those two commodities. >> tom: you also liked grains back then, and it sounds like you still like them here. j.j.g. is corn and soybeans and some others, up 42%. why do you still like grains? >> there is a fundamental story that we really understand. it is a supply-driven market, one in which
supplies have been cut back in their estimates for the 2010 harvest, first in wheat over the summer, and then corn, and there continues to be a demand out of the emerging markets for soybeans. the stories we understand are stories we can invest in. >> tom: any positions tonight in grains or shorts in energy and metal. >> positions in corn and soybeans. >> tom: our guest tonight is lincoln ellis with strategic financial group. >> thanks, tom. >> suzanne: here's what we're watching for tomorrow: quarterly results from tech giants advanced micro devices and google. we'll also see weekly jobless claims; september's measure of wholesale inflation; the producer price index. also, should the federal reserve buy trillions of dollars of treasuries? we'll take a look at both sides of the quantitative easing debate with minyanville's kevin depew. federal agents have broken up
what they say is a huge, nationwide medicare fraud. dozens of people were arrested today and charged with racketeering. they're accused of stealing more than $100 million by submitting fake bills for medical procedures that were never done. law enforcement officials say the group appears to be an armenian-american organized crime ring. arrests were made in ohio, new york, georgia, and new mexico. >> tom: your gasoline may have more ethanol in it soon. the environmental protection agency today agreed to let the corn-based fuel be up to 15% of mixtures sold at the pump. change applies to newer cars and trucks. the current level is 10%. the news was welcomed by farmers, but it's opposed by other groups, because it makes animal feed more expensive and eventually raises prices at the grocery store.
>> suzanne: in the "money file" tonight, thoughts about the estate tax coming back to life. here's eric schurenberg, editor- in-chief at bnet.com and editorial director at cbsmoneywatch.com. >> 2010 offers a tax-avoidance opportunity that is to die for. literally. this year, for the first time since 1916, the heirs of people who die will face not a penny in estate taxes. draw a breath in 2011, however, and under current law, your heirs would owe the government 55% of your taxable estate above
$1 million. out of that grows one of the most macabre tax incentives in history, making 2010 the year to throw mama from the train. as we record this, you still have three more months to seize the opportunity. but, wait. after this election, there may be no need to rush. nearly two thirds of americans favor permanently repealing the estate tax, including 55% of democrats. this despite the fact that the threshold for owing the tax is so high that only 2% of the families will ever have to worry about it. this is partly a case of brilliant political marketing. calling the estate tax a death tax seems to make it everyone's problem, not just rich peoples'. opponents also claim that the estate tax falls most heavily on family businesses and farms. very effective emotionally. never mind that it's not true. so as we head into midterm elections, popular will on estate taxes is almost as absurd as the current state of the law. americans say they want to close the deficit and they think that wealthy should bear most of the burden. and yet, they oppose a tax that
would raise an estimated $1.3 trillion over ten years, solely from the wealthy. death and taxes are certain. death taxes? apparently not. i'm eric schurenberg. >> tom: and finally tonight, can't put that cell phone down, even when you're driving? now there's an app for that! it's called safe cell, and it can detect when your phone is moving faster than five miles an hour. when it does, the app sends you a message reminding you to drive safely and intercepts incoming calls. if you stay safe, the app will reward you with points that can be used at national retailers. but answer that call on the interstate, and the points vanish. the safe cell app will cost you about $12 a year, suzanne. but i guess we still have to read the message while you're driving to know whether or not you're going to get the points. >> suzanne: i can't figure this one out. i think it is a better idea to put the cell phone in the trunk. >> tom: or leave home without it, for that matter.
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