>> susie: ben bernanke says the fed is ready to ride to the >> it's going to be the most conventional of the unconventional tools, buying, buying assets. >> tom: coming up, today's economic growth numbers and a look inside the fed's tool box. you're watching "nightly business report" for friday, august 27. 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. captioning sponsored by wpbt >> susie: good evening everyone. ben bernanke said today he'll do whatever it takes to prop up the economy.

tom, the fed chief's speech at an economic conference in jackson hole wyoming came just hours after the government reported that u.s. economy grew only 1.6% in the second quarter. but bernanke didn't change his forecast. he still believes the economy will grow "at relatively a modest pace" this year. he said there was only a low risk of deflation. and he made a case that the fed alone can't solve the world's economic problems. >> tom: susie, bernanke used this speech to boost confidence that the fed is on top of things, and investors bought it for today. the dow rallied more than 1.5%. the chairman outlined four actions the fed could take, if necessary: pumping up the economy with money by buying long-term securities like government bonds. better communications on fed policies. cutting interest paid on excess bank reserves held at the fed. and resetting the fed's target for inflation. while bernanke said the fed has those options, he doesn't think the last two will do much to

help the economy. >> susie: so what did fed watchers think? vince reinhart used to work for the fed and was at that jackson hole event. i talked with him a short while ago and asked for his reaction to bernanke's plan of action. >> chairman bernanke was trying to control a reputational risk. people expect the federal reserve to do something. he showed he was responsive. he showed he was even-handed, but also symmetric about the outlook. he talked the outlook up a little bit. he was a little more positive than maybe the incoming data warrant, but he also said the fed stood willing to act if necessary. >> suzanne: vince, bernanke said the fed would take action if the economy were to deteriorate. what would trigger that? would it be a higher unemployment rate? >> so the fed's got a dual mandate-- employment and stable prices. so the risks could come either from payroll

employment, or the unemployment rises and stays there or inflation coming down even further. >> susie: now, we saw this week the-- more and more economists were revising their forecast and saying the risk of a double-dip recession have gotten greater. bernanke doesn't think that way, but do you think the time is now for the fed to take action? >> i think it would be appropriate for the fed to reach into the toolbox kit of unconventional policy action. to reassure markets. the early you provide the simmulous, the sooner it kicks in. and the data has been discouraging. the fed has the tools to unwind that policy accommodation at a later date when it needs to so that's probably the time to act. >> susie: alan bind ea former vice chair of the fed,

wrote an op-ed piece this week saying the ammunition that the fed has to fix the economy, they're running out, and what they do have is the weak stuff. now, bernanke disagrees. what do you think? >> okay, so i think chairman bernanke probably disagrees on two main counts. one is there's still communication. the fed could convey they're going to keep interest rates low for a very long time. they've probably done as much as they can on that front. they maybe could do a little bit more. but that leads to one other option, which is buying stuff, buying treasury securities. now, alan blind ei think, believes that that effect isn't that great, but the way you get around that is to buy in very large volume. that's probably also why the fed is hesitant to act. it feels when the time comes to do unconventional policy action, it will have to do very large purchases of treasury securities. >> susie: now, everybody is

looking to bernanke and fed policymakers to fix the economy, and even bernanke acknowledged today that central bankers can't do everything. so is the fed being asked to do too much and ultimately, is washington going to have to step in? >> yeah, think-- it's on two levels the feds being asked to do too much. there are a lot of other policy changes that could be done that could provide impetus to growth. >> susie: like what. >> including encouraging banks to lend to small- and medium-sized businesses. maybe some more fiscal stimulus, but better-targeted, better-designed, top-down driven. maybe some tax policy changes, including more encouragement to businesses to invest. all those sorts of policies are not under the control of the fed chairman. and so -- >> do you see any of those things happening, especially with the midterm elections coming up? it's not the right political environment for those kinds of options.

>> that's why all the focus is on the fed because everyone appreciates that the fed is the only policymaker around that can actually change its instrument for any time soon. >> susie: we're going to have to leave it there. vince reinhart, thank you so much your time. >> thanks for having me. >> tom: as we've been discussing, today's revision to the g.d.p. report showed the economy wasn't as strong as first indicated. but, the data looks back. so, what does the future look like? we sent our scott gurvey to find out. >> reporter: the forecast calls for sluggish, with a high probability of more sluggish in the quarters ahead. sounds like a gloomy weather report, doesn't i? the recovery began one year ago, but seems to have peaked in the fourth quarter. since then, the trend has been down. economist beth ann bovino does not expect a double dip. but she doesn't see much of an improvement in the near term. >> the most recent readings, for example, housing and durable orders, suggest that the third

quarter is going to come in pretty much in line with what we're seeing for the second. we're looking for about 1.7% growth. again, very subpar growth given that we are in a recovery, but you know, we've got to take what we can get i guess. we are buying things. and consumer buying usually leads the way out of a recession. but consumer spending is not exploding as it has following past recessions. economist jerry webman says that's because this time we are afraid of using credit to satisfy our pent-up demand. >> this time, consumers are, in the aggregate, trying to reduce the amount they owe, not increasing their borrowing. so, that means that it only increases at the rate of increase of income. and that's slow. it's not pushed by further leverage, by further borrowing. and so it is not the kind of recovery that we're used to over many decades. >> reporter: businesses do seem to be more optimistic and are buying equipment, especially if they believe it will help increase productivity.

that helps them meet demand without hiring new workers, a fact certain to encourage more finger pointing in this election year. but economist dan greenhaus says there is no evidence a different outcome in the 2008 election would have led to a stronger economy. >> it's totally unfounded. would we be better in certain respects, sure. but we'd be worse in other respects. and in the larger sense, the economy would be more or less right were it is because, again, the unemployment rate is 20% in the construction sector. what would be different with a different president and different policies? nothing. >> reporter: also out today, a downward revision to the university of michigan's consumer sentiment index. it still showed a gain for the month. scott gurvey, "nightly business report," new york. >> tom: here are the stories in tonight's n.b.r. newswheel: wall street welcomed ben bernanke's pledge to support the economy. the dow jumped 165 points, the nasdaq added 35 and the s&p 500 was up 17 points. trading volume edged up slightly

from yesterday's pace on both the big board and nasdaq. >> tom: standard & poor's ratings service said today, while it thinks the worst is over for the banking sector, it doesn't see a quick rebound on the horizon. instead, it believes the bank financials will continue to be pressured by the weak housing market. white house adviser and former federal reserve chairman paul volcker rolled out options for fixing what he called a deeply flawed u.s. corporate tax system. the 126-page report is aimed at improving corporate taxes, cutting the corporate tax rate and limiting businesses' ability to deduct interest costs. >> tom: still ahead, hundreds of people showed up for this foreclosure prevention event in florida today. we'll hear some of their stories from the recession. >> susie: the bidding war for data storage firm 3par is starting to feel like a tennis match. things heated up again today, as hewlett-packard volleys with dell, lobbing another offer at 3par. h.p.'s bid now stands at $30 a

share, valuing 3par at $2 billion. that tops dell's most recent offer of $27, made early this morning. dell has the endorsement of 3par's board, but analyst michael holt says h.p. is better positioned to make the deal work. >> first of all, they're much larger in the enterprise hardware and services business. so, they have a lot more cross- selling opportunites. secondly, they also already play in the high-end storage space, and so they can-- where they already have relationships and are putting hitachi equipment into customer's shops-- they can go ahead and start putting 3par equipment in those shops right away. as opposed to dell, who would have to start building that base of high-end storage customers from scratch. >> susie: if h.p. is successful in its pursuit of 3par, dell could still profit. it's entitled to a $72 million breakup fee on the deal. holt thinks dell will take a break from the bidding battle this weekend and come back with a higher offer early next week.

>> tom: between ben bernanke's comments and the merger action in technology, buyers came back. let's take a look at tonight's "market focus." stocks shrugged off the weaker g.d.p. number and seemed to be assured by the federal reserve chief's comments. still, the indices lost ground this week.

the dow closed back above 10,000. still, it lost 0.6% this week. it's down three weeks in a row. the nasdaq saw more volatility, slipping 1.2% over the past five sessions. and the s&p 500? it fell 0.7%, its third consecutive weekly loss. investors ignored some disappointing intel news. it cut its quarterly revenue target. computer sales are less than it expected. just last quarter, intel reported record revenue. here's today's trade of intel. trading was halted twice, once when it announced the lower outlook-- that's the flat line on the left side of the chart-- then again when shares hit the circuit breaker-- the violent swings just after it re-opened. trading is halted if a stock moves more than 10% in five minutes. the trades that triggered the breaker were eventually canceled. here's the past 12 months of intel. today's rally comes after the stock hit a new 52-week low

shares up 1%. intel has put a spotlight on security software with its buyout of mcafee. arcsight keeps being mentioned as a buyout candidate. shares jumped another 8% on 10 times its usual volume. reports first surfaced yesterday it may be shopping itself around. shares are up more than 40% in the past two sessions as speculation has heated up. speaking of buyout speculation, with the heated bidding for 3par between hewlett-packard and dell this week, other data storage stocks continued rallying. netezza benefited from the buyout talk and better-than- expected quarterly profits. while margins dropped, the company had record revenues. shares soared to a new high, up more than 33%. others that we've reported on this week continued rallying. compellent technologies jumped another 15%. isilon and comm-vault had smaller gains the takeover talk isn't confined to technology. life insurer lincoln national is the target of rumors too. shares jumped 10% after hitting a 52-week low earlier this week. the stock has fallen twice as much as the overall market since

its april high. not all of the takeover talk was speculation. there was some real mergers. medicare provider healthspring is buying a private competitor, bravo health, for $545 million. investors like the combo, with healthspring stock hitting a new high, up more than 11%. healthspring will become the biggest firm focused exclusively on medicare advantage. and that's tonight's "market focus." >> susie: boeing's 787 dreamliner is not living up to

its name. the company says a new delay will push delivery of the first dreamliner to early next year. the latest snag involves british engine supplier rolls royce. apparently, boeing says it can't get its hands on the rolls engine in time for test flights this fall. that means the 787's first customer, japan's all nippon airways, will likely have to wait until the first quarter of 2011. the dreamliner is now two years behind schedule. >> tom: here's what we're watching for next week: our friday "market monitor" guest is chuck carlson, c.e.o. of horizon investment services. we'll also see the august unemployment numbers. plus, auto sales and chain store sales. monday, five years after hurricane katrina and now coping with the aftermath of the b.p. oil disaster, we get the outlook on new orleans' economic future. >> susie: the number of babies born in the u.s. has fallen, and there's new evidence the poor economy could be to blame. four million babies were born

last year. experts think it's likely because many people can't afford to have children right now. the national center for health statistics says the drop in birth rate could also be attributed to a decline in immigration. >> tom: microsoft co-founder paul allen wants his day in court. if he gets it, it could be a big day. the billionaire is suing 11 tech giants for patent infringement. they include apple, google, ebay and facebook. notably missing from the list are amazon and microsoft. the patents owned by allen's "interval licensing" use technology to recommend products to a user based on their searches. facebook said it will fight the suit. the other companies haven't commented. auputuuuuuub

>> tom: the u.s. economy grew by less than 2% in the second quarter. developing countries are expected to grow by better than 6% this year. all this week, we've been looking at the bric economies-- brazil, russia, india and china. tonight's "market monitor" says the higher growth comes with stronger corporate profits. jeff everett is founder and portfolio manager at everkey global partners. always nice to see you, jeff, welcome back. >> thank you. >> tom: so you have found emerging market companies are providing much bigger profit margins for investors,

like yourself, than developed markets, some household names here in the u.s. why is that? >> higher profitability in terms of return on equity, a better balance sheet-- less debt. comes from the fact that they're run very, very efficiently. they have low-cost factors of production, not just low waejs, but they also have cheaper engineers, cheaper designers, and the entire process is streamlined to suchave agree that they can develop better profits and generate better profit growth with the same revenue growth than developed market companies. >> tom: is the trajectory sustainable? >> it is sustainable, and one of the great myths of this crisis is that emerging market companies and economies, as you've been talking about all week are, more vulnerable. we did not see one currency topple over completely, as we did in the asian crise just 10 years ago and i think that's a sign these economys are maturing tremendous he. >> tom: talk about the internal economies, something we have been focusing on all week on n.b.r. many are outward looking,

making much of their money by exporting products and services. the. >> the domestic economy is coming in all of these companies. the domestic stocks in many of these markets have done very, very well-- the beverage stocks, the food stocks, the retail stocks-- from china to india to russia. so they've been wonderful performers. in many cases they're not undervalued which is a little bit disappointing to me. although we were in some of them early. the consumer economy is expected to continue because wages are growing. >> tom: february 12 is the last time you were in this seat and gave us three picks. we'll begin with two of them. cannon, up by important 4.5%. do you still like these after the rally? >> we do and own both of them. >> tom: you also liked china mobile, chl, an 8.6 return, and even with that return, it's also a new pick here. we're going to pull up a 12-month chart and see the rally we've seen in the summertime, up 2% on this

friday friday. >> we own stocks for multiple years, ideally, so recommending it a few months ago, still recommending it now. it's a wonderful franchise, dominant market share, 70% market share position in china, 554 million subscribesers and as they morph to smart phone, as smart phone innovation continues to reach tipping points, critical points, we expect wonderful profit growth from this. the market is expecting very pedestrian growth, and we're generating 4% yield while we wait. >> tom: mobile telesystems, the american repository the united states ticker m.b.t. we heard earlier in the week about russia and really some concerns about the sustainability or perhaps the return of volatility in that economy with public policy concerns. do you share that? >> we do share that, and that's reflected in a very low valuation for m.t.f.s. i've often invested in markets in my career, that look very unstable, look very risky. but that's why you sell at

an emerging market discount. we really like the valuation and love the broth. >> tom: also like brazil here and we're going to repeat a choice that came from one of our other analysts. czz, a nice rally back in the spring and summertime as well. what makes sugar ethanol worth it? >> they're the largest exporter of this in the world. and because of brazil's advanced agriculture industry it has made them a global leader in the biofuel boom. it is real. it is taking hold we believe in it very strongly. you have a wonderful story in an emerging market that's actually benefiting from developed market trends. typically, it's the other way around. >> tom: disclosures on these stocks, jeff? >> we own all of them and we expect to make good profits. >> tom: pretty clearly bullish there. jeff. jeff everett, he runs everkey global partners.

>> susie: while we heard from ben bernanke about the state of the u.s. economy today, what about the 300 million americans who make up that economy? we caught up with a few of them at a foreclosure-prevention workshop in west palm beach, florida today. over 10,000 people showed up, all looking for help on staying in their homes. jeff yastine has their stories: >> reporter: the people you see in this room are statistics of the housing crisis. people behind in their mortgage payments, some without jobs, all looking for help. like doug harris. >> in my trade, which is the construction industry, it's fallen off 60% to 70%. the things that are out there to do-- there's just no money to be made in it. you're working for basically nothing right now. >> reporter: harris, like everyone else at this event sponsored by the neighborhood assistance corporation of america, is hoping to get a modification on his mortgage. gina perez came to tears telling us her odyssey. >> and it's just that the price we bought... the home value went down so fast. now we're stuck with a mortgage we can't pay. i was also pregnant-- very challenging times.

i was left without a job. my husband was also for a time without a job. and we've been for some time without paying our mortgage. >> reporter: for many people here, the actions of ben bernanke and the federal reserve don't matter. record low mortgage rates aren't beneficial unless banks will actually modify their existing home loans. >> i just refinanced the house back in january, because that's all the bank said they could do for us. and we're still up to our necks in mortgage payments-- i'm down to 5.5% in interest rates. they could go even lower, and lower my payments... it would make it more affordable for us to stay in the home. >> reporter: among the thousands of people here, everyone has a slightly different story-- but there is a main theme. these people, like selvin grant, want to stay in their homes. >> the reason i'm not walking away from my house is because i know the mortgage company can fix it.

that's the reason why i'm not walking away. they can fix it. and i love my house. it's for me and my family. >> reporter: and you want to stay there? >> i want to stay there. >> jeff yastine, "nightly business report," miami. >> tom: that's "nightly business report" for friday, august 27. i'm tom hudson. good night everyone, and good night to you too susie. >> susie: good night tom. i'm susie gharib. good night everyone, and have a great weekend. we'll see all of you again next week. "nightly business report" is made possible by:

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