>> they engaged, in their own words, in "the big short"-- that's their words, not ours. even if they lost money, they cannot deceive their clients in trying to sell securities. >> susie: senator carl levin wraps up his two-year investigation of the financial crisis. >> tom: his scathing report takes the shine off goldman sachs, blaming the bank for misleading clients and investors. you're watching "nightly business report" for thursday, april 14. 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 >> susie: good evening, everyone. harsh words today for goldman sachs from a bipartisan senate panel investigating the financial crisis. tom, this report is different from its predecessors. it directly assigns blame to the investment bank, credit rating agencies, and regulators. >> tom: susie, the report is critical of many financial firms, but it singles out

goldman for "rampant conflict of interest." the report also includes 19 recommendations to prevent a future crisis. they include requiring lenders to own at least 5% of the loans it sells to investors, strengthen bank oversight, and hold credit rating agencies accountable in civil lawsuits. >> susie: the panel is handing its findings over to the department of justice to see if possible criminal charges are warranted against goldman and possibly its c.e.o., lloyd blankfein. darren gersh talked to the chairman of that senate panel, senator carl levin, and began by asking why the investigation concluded that goldman deceived investors. >> there's hundreds of pages of evidence to support t for instance their marketing materials represented the people who might buy their securities, that goldman was on the same side of the deal as the customers they were trying to sell. as a matter of fact, something called-- a $2

billion security, goldman sachs secretly was on the opposite side of the deal. they were betting against the deal. they were going short. that was secret. but their marketing materials said that our interests are aligned. if you buy this security, that we have the same interest financially in it as you do. no, it was the opposite interest. >> let me ask you, you are going to recommend that your committee make a referral to the department of justice. i just want to be very clear s that going to have specific recommendations of criminal charges against mr. blankfein and other goldman executives? >> we don't it that way. we would send the report to the department of justice and to the securities and exchange commission and for their review. we don't make the decision as to whether or not there should be either liability by the-- enforced by the securities and exchange commission, the ask ec or whether there should be criminal liability against any of the people who

factually we've identify as misleading people or engaging in deception or doing the other kind of improper activities that we lay out in this 600 page report that is not our job. our job is a factual layout. we've done that in over 600 pages, starting from that bank and state of washington called washington mutual, that was giving out mortgages to people, enticing people to sign mortgages they couldn't afford, having people pay a lot more in interest than they should have been paying under their own rules, then a regulator, we pointed out, who didn't do their job who sat on their hands when they saw 500 times, when washington mutual was to the doing what they were supposed to do. we had credit rating agencies. >> a lot of this seems to come down to whether or not you believe that goldman had a large short position in specific areas of housing market or across the entire firm, whether they were shorting the housing market. goldman says yes, we made a

profit of $3.7 billion shorting housing, but we also lost 3.3 billion with other investments that we were long, that we owned in housing. and on net, it was not a large short position. do agree with those numbers? dow take issue with their numbers? >> their numbers are wrong. net t was a $1.2 billion gain, in the year 2007 they started off in a deep hole. they had a whole lot of securities that were betting positively on the market. they then engaged in a whole bunch of deceptive practices to get out of that hole and then go beyond and to profit. by their own words, we've got ten of pages of their own words that we're engaging in the big short. that in one of their words, they said hey, we lost money on this but then we gained more. and one other thing, there is no justification for deceiving your client. whether or not they were able, when they dug out of

that hole that they were in at the beginning of 2007, whether they climb back to even ground or made a lot of money, they made 1.2 billion which apparently is not much to goldman. they call that you know, that kind of -- >> they did testify mr. blankfein and the cfo they were trying to get closer to home, they were trying to reign in their risk, are you not buying that. >> no, they went way beyond hone, way beyond hone, 1.2 billion dollars beyond hone. read the report i think you will be satisfied that that is true. but in any event, even if they lost money, which they didn't, she made money, they engaged in their own words in the big short, that's their words, not ours, even if they lost money, they cannot deceive their clients in trying to sell securities. they made money, $1.2 billion. but assume they are right for a moment, they are to the but assume they are right for the purposes of discussion. you cannot sell securities

to even get even, which deceive your client. >> senator levin, thank you very much shall appreciate it. >> this government report is the second this year on the causes of the financial crisis, and the second to point to regulators, lenders and credit rating agencies as playing central roles. rebel cole is with the federal reserve board, currently professor of finance with defall university. nice to see you, welcome to nightly business report. >> thanks for having me. >> tom: so do you agree with senator leff thane the crisis comes down to a conflict of interest on the part of lenders. >> i think he is dead on there and we're sooing that play out in the courts where you are having a lot of wall street firms such as the monoline insurers and all state suing the investment banks for selling them a bill of goods, for selling them that really didn't meet the warranties and representations made for them. >> tom: so with that kind of blame and the kind of

lawsuits that continue to be adjudicated does today's report in the january report from the financial crisis inquiry commission finally settle the causes of the countries is three years ago? >> i don't think they settle it. i think they lay out a lot of the problems involved. in my view, the real root cause of the cries sis all about compensation and how you pay people. and when you compensate people based upon sales you are going to get a lot of sales. are you not going to get quality mortgages or profitable corporations. >> tom: you're not talking about, necessarily, executive pay here, you're talking about those mortgage lenders and mortgage broker pay. >> well, i'm talking about both. i'm talking about executives that get compensated on having firms that are ever larger as measured by sales revenues. but more importantly i'm talking about the loan originators who got compensated based upon commission for the volume of sales, so they made a lot of loans. a lot of mortgages. a lot of dollar volume. they got compensated without regard to the quality of those mortgages. >> tom: so what is your recommendation to fix that kind of practice and are you seeing that put into place? >> what which would

recommend is they be compensated based on the future performance of the mortgage, so instead of giving a loan mortgage a $20 grand for $200,000 mortgage, you give him 5 this year, 5 next year and 5 the year after that if the loan is still performing. then you don't end up with mortgages that go belly up after one month. >> professor we have seen a lot of recommendations from this report the. dot frank has a lot. did they address the results of the cries his that we continue to deal with today namely foreclosures and underwater mortgages? >> absolutely. they don't even come close. the lasting legacy of this crisis is going to be how wall street has sidestepped 400 years of real property loss and polluted the legal system with thousands if not tens 6 thousands the forgeries and perjured affidavits that will cloud the title for millions of properties going forward. >> to that point, just yesterday the federal reserve released some new requirements for big banks, more than a dozen of them to change their foreclosure practise and prove communications and oversight. with those guidelines along

with today's senate recommendations, what is the picture that really developing of mortgage lending today and more importantly in the years ahead? >> well, you know, they are kind of closing the barn door after the horses are gal vanting out not field and into the sunset. the problem we have is we have about $2 million mortgages in the process of foreclosure and another 2 million seriously delinquent that will head into foreclosure and yet we are only resolving about one million of those a year. we are looking at at least four more years before those properties can work their way through the inventory and back into private hands. in those four years will you see continued downward pressure on housing and lack of mortgage lending and dragging the economy down with it. >> tom: certainly a dire forecast from rebel cole. we appreciate the insight. our guest from chicago is professor cole with defall university. >> susie: lawmakers in the u.s. house and senate have approved the budget agreement that prevented the federal government shutdown. it's now on its way to president obama.

the measure funds the government until september 30. but now, there is some dispute about how much the compromise will actually save. the white house and republican leaders said they agreed on over $38 billion in cuts, but the nonpartisan congressional budget office says the bill would really cut about 1% of that, or roughly $350 million. >> tom: here are the stories in tonight's "n.b.r. newswheel." stocks finished the day mostly higher, despite a 107-point slide in the blue chips this morning. the dow added 14 points, the nasdaq lost a point, the s&p 500 gained a fraction. big board volume back above 900 million shares; nasdaq traded 1.7 billion shares. the number of americans filing first time claims for unemployment benefits rose unexpectedly last week. 412,000 applications were submitted. that's up 27,000 from the previous week, and the highest number of claims since mid- february. processing delays put a temporary lull in foreclosures

earlier this year. but that trend could change. foreclosure listing firm realty trac says there was a bump in bank repossessions between february and march, as a backlog of paperwork was cleared. still ahead in tonight's "market focus"-- google. the internet search giant reported a rare earnings disappointment after the closing bell. >> susie: inflation worries heated up today, as fresh data confirmed a continued rise in wholesale costs. higher gas prices pushed the producer price index up seven- tenths of a percent in march. that follows a much steeper increase in february. excluding food and energy costs, the core rate rose three-tenths of a percent last month. meanwhile, the world bank warned today that further spikes in global food prices could push millions more people into poverty. suzanne pratt takes a look at whether the u.s. economy really has an inflation problem. >> reporter: it's hard to imagine these tasty fruits and vegetables could potentially

cause so much trouble for the economy. but higher oil costs and bad crops due to severe weather have caused a spike in food prices around the world. prices for some fruits and vegetables fell here in the u.s. in march, but wholesale market manager jimmy cortes says many remain pricey. >> red peppers, plum tomatoes, and what else? cucumbers are still expensive. >> reporter: the world bank's food price index is 36% higher than a year ago, while wholesale prices here in the u.s. have jumped 5.8% over the past year. on top of that, the national average for unleaded gasoline topped $3.81 a gallon today, 25 cents more than just a month ago. economist milton ezrati says there's good reason to worry about inflation. >> the tremendous liquidity that the federal reserve has poured on the economy in the past few years... and i'm not here to

criticize them-- i don't know what else they could have done. but it has planted an inflationary bomb-- that's "b-o-m-b," not "balm"-- inflationary bomb in the system. >> reporter: most fed officials believe the recent spike in oil and commodities prices will create only a temporary increase in overall inflation. that's because we've yet to see workers get higher wages, which are needed for inflation to really become a problem. but some experts say the fed needs to be more pre-emptive about inflation and consider hiking interest rates soon. n.y.u. professor richard sylla says, among fed policymakers, the debate about price pressures is heating up. >> the good sign is that the people inside the fed are a little bit worried about inflation. so, i don't think that the federal reserve will be the last to know when inflation becomes a problem. in fact, i think they will be the first to get on the case. >> reporter: as for the price of fruits and vegetables, experts say, "ask mother nature." if there's a good harvest this

year, we could easily see food prices become a lot more affordable and inflation worries retreat. suzanne pratt, "nightly business report," new york. >> tom: the closing print with the big stock indices today showed just those minor changes but it doesn't show the volatility through the-- throughout the trading day. let's get you updated with tonight's market focus.

>> tom: the major indices climbed off their worst levels of the day after the u.s. house of representatives okayed the budget compromise to fund uncle sam through september. at its worst level of the day, the dow industrials saw a triple-digit loss. but through the late morning and early afternoon, buyers stepped back in, especially right after 3:00 p.m. eastern time after the house okayed the budget bill. after the close, investor focus fell on google. the internet search giant saw first quarter profits come in two cents under estimates. it is a rare earnings miss for google. revenue, however, was stronger than anticipated. weighing on profits was a jump in expenses, due to hiring almost 2,000 new employees and pay raises across the board. morningstar analyst rick summer says the key is if those expenses are adding value.

>> we like to understand that those investments in social which they specifically identified and in mobile are actually tying to revenues that are from those new employees. we're seeing a lot of robust growth in core search and it's not always readily apparent it is coming from the new investment. >> tom: google came into the report with a small gain today. it's been trading in an $80 range since october. shares popped higher back then on a strong earnings report. shares were down as much as 4% after the close tonight. that would take it below its november and march lows. before the opening bell today, grocery store chain supervalu said its latest quarterly profits came in a dime above estimates, even though revenue fell short of expectations. its guidance for this year came in above forecast.

that guidance helped s-v-u surge almost 17% as volume jumped seven-fold. supervalu stock has been in a tough down trend for more than a year. here's the past five years. it's down more than 70% from its 2007 highs as it goes up against competition like walmart, costco, and target in the grocery business. helped by supervalu, the consumer staples sector was the strongest today. fellow grocer safeway rallied 3.4%. leading the dow industrials was kraft foods and coca-cola, each up at least 1.5%. on the heels of the senate report on the economic crisis, the financial sector led the losers. among the worst today, goldman sachs, which came under intense scrutiny in the senate report. shares fell 2.7%. but even with that drop, the stock continues holding above

its lowest price over the past 180 sessions. next week, we will hear more about the financial operations at goldman. its earnings are due tuesday. as silver prices continue hitting new 31-year highs, a couple of miners saw heavy volume selling. pan american silver fell 9%. coeur d'alene dropped almost 8%. the worries center around the bolivian government threatening to take back rights on four mines. coeur d'alene, though, tells reuters its property title already belongs to bolivia. and that's tonight's "market focus."

>> susie: if you drive a ford f-150 pickup truck or lincoln mark lt, your car may be headed to the repair shop. ford today expanded the recall of those vehicles, because the airbags could deploy due to a short circuit. back in february, ford told federal transportation officials that about 144,000 vehicles would need to be fixed. today's recall ups that number to just over a million. the trucks involved were model year 2004 to 2006; the lincolns, model year 2006. >> tom: here's what we're watching for tomorrow: quarterly results from bank of america, along with the march reports on consumer prices and industrial production. also tomorrow, our "market monitor" approves of the government facing its growing debt problem. he's randall eley, president of the edgar lomax company.

>> susie: call it the incredible shrinking big box. electronics retailer best buy is going to open up smaller stores in the next few years in an effort to be more competitive. on the drawing board-- stores with about 10% less square footage than they have now, and stores that only sell mobile devices. best buy wants to boost its online sales, as well, hoping to ring up $4 billion in revenue in the next five years. >> tom: postal rates are going up on sunday. but if all you're mailing are birthday cards and the occasional bill payment, it won't affect you. the 44-cent first class letter rate stays the same. what's going up? rates to mail packages, magazines, and advertisements. the postal service has been losing money as more and more people use the internet for things that used to be mailed.

>> tom: you have an extra weekend-- this weekend-- to file your income taxes this year. before monday's deadline, some last-minute tips. tonight-- a tax idea to help future generations. here's kevin mccormally, editorial director at "kiplinger's personal finance." >> full disclosure-- this is one

of my favorite tax tips, but rather than save you money, this one will cost you. of course, it also promises to be one of the best investments you could make for your children or grandchildren. i'm talking about funding a roth i.r.a. for a youngster. now, you can only do this if the child made some money during 2010-- you know, working retail or fast food, for example. it doesn't necessarily have to be formal employment-- baby- sitting or doing yard work for neighbors counts. the key is that you can only contribute to an i.r.a. if you had earned income from working. now, the last thing most teenagers or young adults want to do is tie up their cash in a retirement account for 50 years down the road. that's where you come in. although the law says the child has to have earned income, it doesn't say their own income has to go into the account. you can make a flat-out gift, or maybe offer to match the child's contribution two-for-one. let's say you give your 18-year- old granddaughter 2,500 bucks for her i.r.a., half of the $5,000 maximum. if it grows at an average of 6% a year, tax-free, between now

and the time she's 65, the account will hold about $40,000. if it grows at the long-term stock market historical average of 10% a year, the roth will hold over $220,000, all from that $2,500 seed you plant this year. there's no deduction for a roth contribution, but considering a youngster's low tax bracket, that doesn't matter. what matters is that all withdrawals in retirement will be tax-free. 2010 roth contributions can be made as late as april 18, even if the i.r.a. owner has already filed his tax return. i'm kevin mccormally. >> tom: just a reminder: our web site can be a resource if you still have last minute tax issues. go to nbronpbsdot.org and check out our archive to see if kevin's already helped solve a problem like yours. >> susie: and finally tonight, some sad news to report about a longtime guest of, and friend of, "nightly business report." joe battapaglia died suddenly today.

he had been a fixture in the wall street investment community for decades, working with stifel nicholaus, ryan, beck, and gruntal and company. joe had been on our program for almost two decades, with his most recent appearance as my guest just seven weeks ago. tom, he had a very positive outlook on life. he respected the value of money and what it could bring. and his youngest son once told me that what he learned from his father is that bulls are better than bears. and you know from interviewing him yourself, that for many, many years, joe was very, very bullish on the markets. and then the past couple of years, surprisingly pretty bearish. >> tom: and always gracious with his time and insights. our heartfelt sympathies for the entire family. >> susie: we will miss him greatly. >> tom: that's "nightly business report" for thursday, april 14. 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. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org