>> susie: add the federal reserve to the list of agencies investigating the foreclosure document mess. >> we are looking intensively at the firms' policies, procedures, and internal controls related to foreclosures and seeking to determine whether systematic weaknesses are leading to improper foreclosures. >> tom: but what happens to housing and how we pay for it, once we get past the current foreclosure crisis? some answers coming up. you're watching "nightly business report" for monday, october 25. 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. the foreclosure fiasco is now

getting ben bernanke's attention. the federal reserve chief said today the central bank is "looking intensively" at lenders' policies, procedures and internal controls. >> tom: susie, bernanke's comments come less than week after the obama administration's top housing official said there are no systemic problems in the mortgage market. but now it appears the fed is weighing in, trying to figure out whether problems with the system led people to lose their homes to foreclosure. >> susie: speaking at a housing conference in virginia, bernanke also talked about the impact of risky lending on the american dream. >> homeownership is only good for families and communities if it can be sustained. home purchases that are very highly leveraged or unaffordable subject the borrower and lender alike to a great deal of risk. >> susie: that conference aimed to tackle the future of housing finance. but as stephanie dhue reports, while everyone agrees the foreclosure mess needs to be

fixed, there's dis agreement on just how to do it. >> reporter: with payments on five million home loans now more than 90 days late, more foreclosures are inevitable. robo-signing, failed loan modification programs and investors trying to force banks to buy back bad loans are all symptoms of a loan servicing system that's broken. f.d.i.c. chairman sheila bair says foreclosures are a necessary part of working through the mess. >> i think we're going to get into more and more problems with the issues that are surfacing now on servicing, which is why i've tried to throw out a few ideas about perhaps how we can triage the process, make sure it can continue moving forward. >> reporter: bair's ideas include continuing foreclosures on vacant properties and greater payment reductions on modified loans. ideas she says won't require legislation. but some say fixing the problem won't be that simple. legal uncertainty surrounding the mortgage electronic registration systems, known as mers, has complicated the process.

the center for responsible lending c.e.o. martin eakes says that's making it difficult to know who has the right to foreclose. >> i don't know how you fix that, i think it will take legislation to set up a national electronic registry if the problem of doing local filings is really such a big problem. >> reporter: but paul willen, a researcher for the federal reserve bank of boston, says cutting mortgage payments won't solve the problem either. >> we cannot prevent millions of foreclosures by changing the incentives with intermediaries, or come up with some previously unimagined shared appreciation scheme that makes everyone better off. that's been the roadmap for three years. >> reporter: it will take years and a lot of tough decisions to redesign the mortgage finance system, but harvard business school professor david scharfstein says the system can be fixed. >> if we do the system right and reform it-- which will involve, i think, more regulation of securitization and a more limited role for government

guarantees for most borrowers-- there should not be much of difference and i think we can avoid the kind of crisis that we ended up with. >> reporter: new consumer protections should make mortgages of the future safer, but they will undoubtedly be harder to get, if not impossible, for the 10% to 20% of americans with scarred credit histories. stephanie dhue, "nightly business report," arlington, virginia. >> tom: meanwhile, the u.s. housing market may be starting to perk up. sales of existing homes jumped 10% in september, to just over 4.5 million units. a third of those were distressed sales, which include forclosures. the results were much more than economists expected, and mark the second straight month of rising sales. but as suzanne pratt reports, the housing market is getting hammered by headwinds. >> reporter: yes, there are finally signs of life in the housing market. and they even include a few signs like these. the lowest mortgage rates on record, coupled with more affordable home prices, are

attracting buyers. still, economist michael gapen says september's recovery is just a bounce back. >> we saw a very sharp dropoff in sales and activity in the summer months. so, we believe what we're seeing now is just a more normalization of activity-- a stabilization of activity at low levels. >> reporter: experts agree the residential market is likely to remain depressed for the foreseeable future. stubbornly high unemployment reduces the pool of willing shoppers. on top of that, the supply of unsold homes is just too big. total housing inventory fell to 10.7 months in september. that's down from august's hefty 12-month supply, but a long way from the six-month level seen in a healthy market. economist yelena shulyateva says supply will soon be even greater, as millions of additional distressed properties come to market. >> if we add shadow inventories to that, it will probably take

more than two years to work off those excess inventories. >> reporter: and now the recent foreclosure freeze and document investigation is creating a new headwind for the housing market. both factors are making potential buyers nervous, and could keep them on the sidelines. >> potentially, it could be a very big factor for sales. depending on how you slice the numbers and what region of the country that you're sitting in, foreclosures or distressed sales can account for anywhere from a third to a half of all transactions in the market. so, existing home sales in particular may be strongly affected. >> reporter: to be sure, there are still vast regional differences in the housing market. if you live in florida, nevada, arizona and parts of california, experts say you could be waiting years for a recovery. suzanne pratt, "nightly business report," new york. >> susie: here are the stories in tonight's n.b.r. newswheel:

a weak dollar helped stocks move higher. the dow rose 31 points, the nasdaq added 11 and the s&p 500 up 2.5. trading volume picked up, with over a billion shares moving here at the big board and 1.7 billion on the nasdaq. the obama administration unveiled the first-ever fuel efficiency standards for big trucks. the new standard isn't miles per gallon, but cutting greenhouse gas emissions. the rules affect every kind of truck, from delivery vans to tractor trailers. and the new head of b.p. blames the media, lawmakers and even rival oil companies for escalating the oil spill crisis in the gulf of mexico. c.e.o. bob dudley said "some in our industry" joined the clamor against b.p. before the facts came out of any investigation. >> susie: still ahead, ikea. the blue and yellow retailer is going green. we'll show you why the world's largest home furnishings chain believes helping the environment

is good for business. the world's biggest computer chip maker also has bun of the biggest corporate savings account. intel is spending billions of its cash on acquisitions but other companies have been reluctant despite criticism they may be hurting the economy by holding on to so much cash. stacey smith is along with us. he's with us from intel headquarters in santa clara california. welcome back to nightly business report. nice to see you. >> nice to see you as well. >> tom: let's talk about cash. at the end of the third quarter your company had more than $20 billion stashed aside. have you felt pressure to spend it or return it to shareholders? >> well, you know, we don't look at cash as a pressure to spend. what we do is we grow cash when we believe that we have competitive and strategic reasons to grow the cash balance. if you look at our history we started to grow cash a little bit when the downturn hit in early 2009. that was really in order to protect it. and then as we got into 2010,

we were triangulating on a couple of strategic opportunities to go off and buy some companies that we think add value to our shareholders so we continue to grow cash in order to pay for those acquisitions. >> tom: i want to talk about those in a moment. you mention the building of cash. let's look at the past four quarters of your cash building that's happened from about $14 billion a year ago, over $20 billion in the last quarter. you'll see in blue here we have the dividend payouts from just under $800 million back in the fourth quarter of '09 to just under $900 million. cash has grown 3.5 times faster than the pace of dividends. why is that. >> if you look at our dividend strategy it's to increase the dividends at a pretty regular basis in a nice, compounded annual rate. our dividend has doubled since 2005. so dividend is by far our biggest priority in terms of how we return cash to shareholders. >> tom: when you're looking at that dividend you have doubled it since 2005 paying over 60 cents per share i think this year is what the anticipated

dividend is going to be. >> correct. >> tom: when you look at that, what part of your cash reserves plays in to that look at the year ahead in terms of whether or not to increase the dividend and if so by how much? >> one of the fix that we focus on is how do we grow our business in a way and how do we drive efficiency such that we're generating sufficient cash flow from operations. i think you saw in the third quarter that just ended, you know, we generated over $3.5 billion of cash flow from operations just in that one quarter. we then used that cash to fund the capital that we have to spend to grow our business organically. we use that cash to pay the dividend. we're going to use some of that cash when we get into 2011 assuming that these acquisitions close. >> tom: mention those acquisitions likely in early 2011 assuming all regulatory and shareholder approval. let's look at these. you're going to write a couple of big checks. $7.3 million for the security software firm and a wireless chip unit. $1.4 billion. how much cheaper is it to use

our cash this way and grow it as opposed to invest it in current infrastructure? >> well, we do both. we're going to spend over $6 billion this year in research and development. that's bringing great products to market. in addition to that, we're going to go off and do a couple of key acquisitions. >> tom: do you think companies have any moral obligation to spend excess reserves? >> i think companies have a moral obligation to do the right things for their constituencies. for us, our constituencies are our owners. we're always looking at how do we create shareholder value? our employees. and then where we have operations we want to do the right things for the countries and the environment. you know, that constituency as well. >> tom: stacey smith is the chief financial officer at intel. >> my pleasure, thank you.

>> tom: it was a choppy trading session for the major indices, as they continue hovering around six month highs. >> tom: it was a choppy trading session for the major indices closing near their lowest prices of the day but still higher compared to the last session on friday. let's get you updated in tonight's market focus. continue hovering around six month highs. the strength was in material stocks. eastman chemical jumped 5% on very strong volume. it is selling three plants that make chemicals used in certain plastic products.

the price tag is $600 million. the buyer is a mexican conglomerate. also, we may hear more about a restructuring plan when eastman releases earnings thursday. speaking of chemical makers, the largest one in the u.s., dupont, is due with its earnings tomorrow morning. dupont stock was the leading percentage gainer of the dow industrials, up amost 2%. strong demand is expected to help tomorrow's results. the company raised its 2010 guidance in late july. the weaker dollar also helped out the materials sector. expectations continue building the fed will try to pump more money into the economy at its meeting next week. the dollar drop helped precious metal prices. these three exchange traded funds concentrate on individual metals. the palladium e.t.f. was the strongest performer today, up more than 3%. the silver e.t.f. added 1.5%. and the gold trust was up about

1%. some buyers see precious metals as a play against future inflation, but the bond market doesn't seem to be too worried. there were plenty of buyers of inflation-protected bonds auctioned by the government today. demand was so strong for these five-year tips, or treasury inflation protected securities, that they came with a negative interest rate-- a first. it signals strong demand, as well as low inflation expectations for the next five years. speaking of bonds, goldman sachs hopes to take advantage of low market interest rates by issuing 50-year bonds. yeah, goldman plans to sell $250 million of bonds that mature in the year 2060. thomson reuters suggests they could yield about 6.25%. goldman stock was little changed today on this announcement. still, the big drag on the market was banking stocks, including bank of america. b. of a. admitted to some foreclosure documentation mistakes in its review of how it has handled the paperwork. shares continued diving, down another 2.5% on very heavy volume. this is the lowest price for b. of a. stock since the spring of 2009.

this being a monday, there was plenty of merger talk for the market to get caught up on. and it did with these four stocks. telecom equipment maker commscope jumped 30%. it is talking with private equity firm carlyle group about a deal that could be worth $31.50 per share. pre-paid legal services rallied almost 12%. it is looking at its options after getting a buyout offer from a private equity firm. defense contractor applied signal was up 7% as it considers a possible merger or sale. and savient pharmaceuticals saw huge volume on its 44% fall. it hasn't found a buyer yet, despite its efforts. finally tonight, you heard our conversation with intel's chief financial officer regarding cash investment management company value line is giving a chunk of its cash back to its shareholders with a special dividend. shares rocketed 19% higher. instead of a regular quarterly dividend, shareholders will get a $2 payout in a couple of weeks. and that's tonight's "market focus."

>> susie: when most people think of ikea, they think of hip, modern, affordable furniture. but the world's biggest furniture chain says there's another reason to shop there: its commitment to the environment. as erika miller reports in tonight's "shoptalk," the company says being eco-friendly is a major business advantage. >> reporter: ikea hopes that when customers consider buying its furniture, they won't just think of the hassle of do-it- yourself assembly. instead the company wants them to see the advantages of flat packing.

it helps lower prices, and is better for the environment. ikea u.s.a. president mike ward says those have been core values from the start of the company over 60 years ago in sweden. >> we've always been a company where we are obsessed with doing more with less-- not wasting resources. and that's about getting a low price. >> reporter: the company believes in a culture of humility. that's reflected in ward's open workspace in conshohocken, pennsylvania. though ikea is routinely named as one of the top green brands worldwide, its initiatives are not always obvious to shoppers. for example, there's no indication that sales of this solar-powered lamp support students in india and pakistan. >> every one we sell in our stores, we donate one to save the children and unicef. and what they do is distribute them in countries where young children are trying to study at home, where they don't have electricity. >> reporter: and there's no sign near these florescent lightbulbs illuminating that ikea is the first major u.s. retailer to phase out incandescents.

but customers probably will notice that ikea doesn't give out free bags at checkout any more. instead it sells reusable ones for $0.59, with all proceeds going to an organization that plants trees. but for ikea, going green is also about making green. the company says its socially responsible image makes people feel good about shopping here. >> if we can provide people with great products that also have an environmental aspect-- saving water, saving energy, helping sort waste-- at a fantastic price, then that's good business as well. >> reporter: the proof he says, is in the profits. earlier this month, privately held ikea released its first- ever earnings report in a new spirit of transparency. the company said its fiscal 2009 earnings rose 11% from the prior year, totaling $3.41 billion. there are over 300 ikea stores in 37 countries.

however, not everyone is impressed by ikea's environmental efforts. ellen ruppel shell is the author of "cheap: the high cost of discount culture." she says ikea's low prices come at a high social cost. >> it should raise questions in all our minds at how that low price was arrived at. is the quality lower? is the production of these goods-- sometimes in faraway lands, usually in faraway lands- - as responsible as we would like? >> reporter: she believes ikea's philanthropy is often motivated by business goals, including the solar lamp program. >> the question is, is this the most important thing for these kids in india and pakistan? you have to remember that ikea has been trying for years to get a foothold in india. >> reporter: ikea is also often criticized for contributing to a culture of over-consumption by creating disposable furniture. but mike ward thinks that view is unfair. >> our belief is that will change-- the perception that people have about our brand-- over time. that ikea isn't just for my

college years. ikea is for me now, if i move beyond that. and ikea lasts. the furniture lasts. >> reporter: so let's check out ikea. the company offers low-cost, eco-friendly merchandise and is phasing out incandescent lightbulbs and charging for reusable bags. but critics say ikea's low- priced furniture has hidden social costs, and is often poorly made. but for many ikea customers, what really matters is buying high style at a low price. and craftsmanship? well that depends on how handy you are with an allen wrench. erika miller, "nightly business report," conshohocken pennsylvania. >> tom: here's what we're watching for tomorrow: we'll get another look at housing, with the august s&p case shiller home price index. our word on the street is "online." james rogers from thestreet.com will be here with some under- the-radar internet stocks. and as ford reports quarterly results, we'll talk to c.e.o. alan mulally about those numbers, plans for hiring and going global.

>> susie: the head of insurance giant a.i.g. has cancer. late today, c.e.o. robert benmosche said he feels fine and plans to continue to work a normal schedule. a.i.g. said he's undergoing aggressive chemotherapy. but it did not disclose what type of cancer he has. the bailed-out insurer credits benmosche with helping stabilize the company. benmosche also re-affirmed his commitment to staying with a.i.g. until it emerges from government control. >> tom: americans are still passing on the paper, but the drop in newspaper circulation is slowing down. new figures show average circulation at the nation's daily newspapers fell 5% in the six months ending september 30. the audit bureau of circulations says that compares to a drop of more than 10% during the same time last year. the bureau also says, of the nation's 25 biggest papers, only the "wall street journal" and "dallas morning news" added subscribers.

>> susie: the bush tax cuts are a hot topic in the lead up to the midterm elections next week. but tonight's commentator believes the tax debate needs to be re-focused. here's alice rivlin, senior fellow at brookings and former vice chair at the federal reserve. >> the election has filled the air with angry shouting about marginal changes in the top

bracket-- income tax rates paid by a small number of upper- income people. candidates argue about whether a family with an income of $250,000 should be described as wealthy-- or merely better off than 97% of the population. this is the wrong tax debate. all the tax cut extensions should be for no more than two years. letting all the tax cuts expire now would weaken the recovery, and extending them permanently would give away future revenues we desperately need to reduce the debt. a temporary extension would give time for the economy to recover and for debate on the far more important question of transforming our complex, unfair tax system into a simpler one that favors economic growth. the sky wouldn't fall if the top bracket rate went back up to 39%. however, if we phased out the myriad exemptions, deductions

and special provisions that complicate both the individual and corporate income taxes, and reduced the tax base, we could bring tax rates down for everyone, reward work, and help corporations compete. that is the tax debate we ought to be having. i'm alice rivlin. >> tom: that's "nightly business report" for monday, october 25. 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. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you.

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