>> tom: with only days left to get a deal to raise the debt ceiling, there's still no resolution in sight. we look at how the markets are responding to the uncertainty and get advice on what investors should do. >> susie: and, the plight of george bailey symbolizes what many small banks are going through. why it may not be "a wonderful life" for real small bankers. it's "nightly business report" for wednesday, july 20. 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. it was a day of watching and wondering on wall street. watching for progress in washington on debt talks. and, tom, wondering what would happen to financial markets if there's no deal by president obama's friday deadline. >> tom: susie, so far the u.s. stock market has been fairly resilient, supported by a steady stream of strong corporate earnings. after yesterday's huge rally, the dow dropped only 15 points today. the nasdaq lost 12 and the s&p 500 slipped almost a point. >> susie: still, many experts say investors should brace for a wild ride if lawmakers are unable to reach a deal and the u.s. defaults on its debt.

erika miller reports on just how violent that reaction might be. >> reporter: in midtown manhattan, the national debt clock looms, highlighting the amount of money owed by the u.s. government. the clock is also ticking on politicians to work out a compromise to raise the nation's borrowing limit, but strategist jim awad warns just raising the debt level won't be enough to raise stock prices. >> the market wants two things. it wants the debt ceiling raised so that we don't default, and it wants a credible deficit reduction plan so the dollar gets some support so you don't >> reporter: if there is no agreement and stock prices plunge, strategist vadim zlotnikov says "buy". >> i do believe that if the reaction is anything more than 5% or 7% to the market, i believe investors should be buying the market at that level. >> reporter: what about treasury bonds? their yields have been hovering at historic lows despite the threat of default, and the loss of the nation's aaa rating.

but some strategists see little reaction in treasuries regardless of what happens. >> in the prior periods, when you've had effectively technical defaults-- when the government failed to raise the debt ceiling-- the interest has always been repaid. so, it's really just a timing issue. >> reporter: gold has been the biggest beneficiary of worries about the debt ceiling, surging to a record $1,600 an ounce this week. but analyst george gero does not see a major move, even if an agreement is reached. >> you could go from $1,600 down to $1,500 in gold very quickly if there is a resolution to the debt ceiling and the eurozone. and you could also see gold immediately go up $50 to $100 if there's no resolution and there >> reporter: the debt ceiling has created uncertainties for investors, so wall street is hoping an agreement will be reached soon, so it can shift

its focus back to the economy and corporate profits. erika miller, "nightly business report," new york >> tom: some say another source of uncertainty for investors is the sweeping dodd-frank financial reform. tomorrow marks one year since the president signed it into law. for more on dodd-frank's economic impact and to check in on the debt limit, darren gersh spoke with treasury deputy secretary neal wolin. darren began by asking what's changed for the financial system in the year since dodd-frank became law. >> through a series of actions we and predecessors have taken, the financial system is a lot stronger today than it was after the crisis. homes are better capitalized. they're taking less rick. their funding is more secure, and overall, they're in a better place to help our economy grow and to create jobs. so we always knew that we needed to change the framework within our financial system operates. the old trax*im work costs

millions of jobs, and homes and the destruction of wealth'm >> tom: the critics are saying it created uncertainly. all these rules had to be implemented t. made it more burdensome, and making banking a more difficult business to be in. is there some truth to those arguments? >> in this country we shouldn't have to choose between a strong financial stomach and onystem and one tha country to grow. the worst law is one that led us to the crisis and to the brichk of the abyss that we had before. so we will, of course, be mindful as we continue to implement this statute, and the various pieces. we need to have a financial system that does cause us to have and allows us to have an economy that is strong and grow. >> tom: the banking system caused a lot of problems for the economy. but homeowners, -- a lot of

homeowneders are surprised that one of the things dodd frank is a higher down payment to get a mortgage. they talked about 20%. the banks made a mistake, but why should it be harder for me to buy a house. do they have a point? >> it's important for americans to be able to afford homes and for them to be able to find housing, but i think one of the thing that is we found in the midst of the financial crisis were homeowners buying homes and taking out mortgages that they simply couldn't afford, often times because they didn't nld the essential choices that they had to make. so we feel like it's very important to make sure that tay are better protected and that the financial infrastructure that surrounds home ownership is one that makes sure that the system doesn't take on risks that put of home ownership in jeopardy. >> tom: other issue. i hear from house republicans.

look, we are headed for default anyway. we have to solve the problem now. and we're preventing a future crisis. what do you respond to that? >> we're not headed for default. this is a country that has always made good on debts of the obligations. we've always recognized the full faith and credit of the united states, and of our various obligations. what we need to do now, and the leadership of the congress, both democrats and republicans recognize that this is an issue that needs to be dealt with, and the debt ceiling needs raiseed and we need to avoid defaulting for the first time in the country's history. to allow ourselves to fall into default would be catastrophic for all americans and increase the financing of homes and cars and credit cards and so forth. that would be a horrible result. it would put in question the core economic streng of our

country that's unavoidable. neal wolin, thank you for your time. >> tom: sales of previously owned homes unexpectedly dropped to a seventh-month low last month as the industry struggled to overcome rising unemployment and foreclosures. existing home sales decreased eight-tenths of a percent from a month earlier, according to the national association of realtors. it was the third-straight monthly drop. meantime, mortgage applications jumped 15.5% last week. the mortgage bankers association says that's the biggest increase in four months, helped by a flood of refinancing applications. >> tom: mortgage lender wells fargo will pay $85 million to settle civil charges that it steered borrowers into high- cost, subprime loans. it's the largest fine ever imposed by the federal reserve in a consumer-enforcement case. wells fargo did not admit or deny wrongdoing as part of the settlement. the bank agreed to compensate borrowers who were pushed into higher-priced loans or whose income was exaggerated. >> susie: meantime, help is on

the way for small banks and small businesses. the u.s. treasury said today it's giving $214 million to 17 community banks to help finance local businesses. the money comes from the small business lending fund. community banks are often the lenders of first choice for small firms, but many of these institutions have gone under during the recent banking crisis. as diane eastabrook reports, the ones that remain are battling for customers in an environment of spiraling costs. >> reporter: in the hollywood classic "it's a wonderful life," small-town banker george bailey fights to keep his family's ailing savings and loan from the hands of greedy businessman henry potter. >> this town needs this measly one-horse institution where people can come without crawling to potter. >> reporter: at community banks across the u.s., life seems to be imitating art. but the villain isn't mr. potter. small lenders say they're being threatened by new consumer protection rules under the

dodd/frank act. daniel watts is president of forest park national bank and trust company in forest park illinois. watts says notices to customers about rule changes and additional compliance officers are costing banks like his millions of dollars. >> it's not only sending it, it's drafting all of those changes and making sure the customer understands them. it used to be a bank under $200 million would have a compliance officer that would be part time. now we have almost two people doing compliance. >> reporter: community banks with assets under $10 billion have been pummeled by the sour economy. many made loans to developers that went bust. they've also seen demand for mortgages and other consumer loans dry up. last year, 157 u.s. banks failed. all but one was a community bank. so far this year, there have been 51 bank failures and all

had assets under $10 billion. >> community banks are the lifeblood of small towns. they help local businesses get off the ground and expand. and, when these institutions struggle, the communities around them struggle too. >> reporter: local lenders complain bank examiners are now too rigid about who can get loans. they say some small businesses are being denied loans if their property values have declined or cash flows have slowed. paul merski, executive vice president and chief economist for the independent community bankers of america, thinks the new rules need restructuring. >> what we need is a tiered regulatory system that matches up with the types of products and services that community banks are providing to have reasonable regulation there so that they can do what they do best, and that's lend in their communities. >> reporter: analysts doubt washington will relax the new rules that emerged from the recent banking crisis anytime soon. so, morningtar's james sinegal thinks that could lead to more industry consolidation. >> a lot of these smaller

community banks are going to find themselves wanting to merge, wanting to grow, maybe buy other community banks and get larger, just to have a larger base to spread those new costs across. community banks fear consolidation will mean fewer choices for consumers and they say that could deprive small towns of lenders who understand them best. diane eastabrook, "nightly business report," forest park, illinois. >> susie: tomorrow, we'll look at banks from a different angle. kelly king, c.e.o. of b.b. and t. bank, joins us to talk quarterly earnings, growth plans and what he expects from the new consumer financial protection bureau.

american airlines calls it the biggest airplane order in history. its parent company, a.m.r., is buying 460 aircraft from both boeing and airbus. the deal is worth more than $38 billion and breaks a.m.r.'s longstanding monopoly with boeing. a.m.r. was also out with its second quarter results today. the company lost $286 million as fuel costs offset higher revenue from ticket prices and fees. >> tom: stocks held on to yesterday's sharp gains as investors digested more earnings. let's get to tonight's "market focus." after the close, focus was on semiconductor maker intel with

better-than-expected results. beating the street despite slowing personal computer sales, intel's p.c. chip business grew by double digits, as did sales of chips for mobile devices and computer servers. chief financial officer stacy smith echoes what many companies credit for growth-- developing markets. >> they're already more than 50% of our revenue. when i look at the p.c. market, two out of every three units incrementally over the next couple of years, i believe, will come from emerging markets. and there's a simple phenomenon going on there, which is the technology we sell not only is important in people's lives but has become very affordable. >> tom: shares were down a fraction during the regular session. last 12 months of intel. after-hours, they dropped another 2%. this jump we've got in april

to 52 week high came off of its previous quarterly report and in improved outlook. this time around, intel's guidance is slightly above estimates. financial stocks led the market today, and bank of america's 3% gain was the best performance among dow industrial stocks. look for it way down there! this is just the past 90 sessions, but today's buying came off of b. of a.'s lowest price in two years. since the beginning of july, bank of america is down 11%. the big loser of the dow was united technologies, the company behind otis elevator, carrier air conditioners and pratt and whitney jet engines. shares fell almost 2% on heavier volume. two weeks ago this stock was at an all-time high. earnings were strong and the firm raised its forecast. its chief financial officer say they're seeing a broad-based recovery. a couple of merger stories. clorox regained more than 2.5% as investor carl icahn increased his buyout price to $80 per share. that's now what he's offering. earlier this week, clorox said

no to an offer of $76.50 per share. the stock here continues trading below even that lower offer as the market seems to be skeptical of a deal. meantime, it is a deal for chemical company nalco. the offer is $38.50 from eco- lab. shares jumped more than 24% on big volume but settled below the purchase price. part of that difference can be explained by the drop in the stock of the buyer. since it is offering either cash or stock, a drop in its price can impact the buyout price. shares fell 7%. two others. e-trade stock shot up almost 14%. its largest shareholder is pushing the company to explore its options. and after the close, staffing firm s.f.n. announced it will be bought by a dutch company for $14. the stock jumped above that price after the close, anticipating a better offer. and that's tonight's "market focus."

>> susie: it's a bittersweet day for the u.s. space program. 42 years ago, nasa and the entire country celebrated the first apollo moon landing. but tomorrow, we'll see the final chapter of the space shuttle's 30-year program when "atlantis" makes its final landing. the shuttle program's total investment? $200 billion. did the u.s. get its money's worth? joining us now, scott hubbard, professor of aeronautics at stanford university, and michael mandel, chief economic strategist at the progressive policy institute. >> welcome to you, gentleman. >> thank you. >> glad to be here. >> susie: scott, let me begin

with you. was the shuttle program worth it? >> the impact of the shuttle program has been significant and mixed. on the one hand, it gave the u.s. unquestioned leadership in space for 30 years. it launched the hubble space telescope and serviced it. it carried out construction of the space station. but it also was high risk. we lost two crews. and we learned it's very expensive to operate. >> susie: did we get our money's worth? what do you think? >> i think the economic impact was far less than expected. if you go back what was supposeed to happen, we were supposeed to have manufacturing in space, and the amounts were in the multiple billions and none of that happened. we've been going through diminishing expectations and diminishing expectations. in the end, i think it turned out to be the wrong road. >> susie: you know, mike. the program is still going to continue on. it's going to get some government funding and teaching in the private

sector. does that make more sense to you? >> the fact is i'm very much in favor of more investing in space, but i'd like to see it private investment or public investing leveraging private investing. i'm not sure if nasas has constituted can manage this. >> susie: as a person who worked in nasa, scott, what are your thoughts? >> first of all, when the shuttle was picked by president nixon it was part of a shuttle space station where all the manufacturing was supposeed to occur, and ultimately a trip to mars. nasa is the mission agency and supposed to be exploration and science, and we've yet to see if they are going to carry out the biological work that was promised. on the other handled, i do support the next phase of low earth orbit. up and down to the space station by buying services

from the commercial sector. i think that's a good idea. soox*uds we have just a few seconds left. let me ask you both this. countries like canada and india are heavily investing in their space program. can the u.s. afford to give up its >> i think from an industrial and military point of view, i think the u.s. has to keep investing in space because it's extremely important, so maybe not the same way we've been doing it. >> susie: scott? >> yeah. we are a great nation and we serve a space program worthy of a great nation. >> susie: we're going to leave it there. thank you for joining us. >> thank you. >> thank you. >> susie: and we've been seeking with scott hubbard and michael mandel. >> tom: here's what we're watching for tomorrow. it's another big day for quarterly reports. we'll hear from amd, at&t, microsoft and pepsi. u.s. air and united also report quarterly numbers tomorrow.

airlines have been flying high this summer with full planes and some fare hikes. we'll look at whether they could be headed for turbulence this fall. >> susie: the government shutdown in minnesota is over. governor mark dayton made it official today. he signed a new budget, ending the nation's longest state government shutdown in the past decade. since july first, the state's parks have been closed, highway rest stops blocked off and the capitol closed. it may take weeks until state offices, including licensing services, are up and running again. >> tom: danielle chiesi, the one-time confidante of convicted hedge fund manager raj rajaratnam, has been sentenced to 2.5 years in prison. chiesi is the first major defendant in the massive insider trading case to be sentenced. prosecutors called her "the consummate wall street insider." rajaratnam was convicted in may. he'll be sentenced in september.

technology and health care have been two areas of strength for investors. tonight's "street critique" guest is putting the two together. she's hilary kramer, editor of

gamechangerstocks.com. health care plus toj equals biotechnology, and here you look at aria, the ticker symbol up near an 11 year high. what pushes it up into the teens? >> aria pharmaceutical has two important compounds. one is for lung cancer. extremely important, ap 113, and it is other compound is to fight bone sarcomas and skin. it's a joint venture with merck pharmaceutical. in the $12 region. it could go to 18 or $20 because of the huge revenue potential in the applications for other cancers that these two compounds have for aria. >> tom: you've looked at biopharmaceuticals for some time. you looked at amylin, and i know you were waiteding on a meeting a few weeks ago, but

ymi dropped. is it still a buy? you mentioned it on february 9th at 2.5 a share. it's up 7%. it's dropped off in june after the oncology meeting. is it still a buy at these prices? >> why i am at the grape vine right now. we're waiting to find out the phase two trials as well as who is going to be the marketing partner. >> just like aria. a partner to fund you and take you to the next level. that's the overhang on them right now. >> and from sandi. how is it possible that hillary owns every stock she recommends. how can you own all of them? >> well, you can't own every stock. i own a lot of stocks because professionally, i'm in the stock market, and i have three newsletters where i'm writing and talking about stocks.

however, for an individual, optimally, you never want to own more than 25 stocks. there's research that you want to supplement it with etfs to be in sectors that might interest you. there's great mutual fund managering on morningstar. and keep powder dry for the days when the stock market really gives some back, and then you can come in and buy stuff your interested in. >> tom: how about disclosure. due own the two we mention ?d >> i own aria and yni sciences. you can email us, streetcritique@nbr.com. or you can send us a note via twitter at my feed, @hudsonnbr, or n.b.r.'s feed. and facebook too. we'll feature some of your questions next wednesday. our guest this evening on "street critique," is hilary kramer with gamechangerstocks.com. >> susie: that's "nightly business report" for wednesday, july 20. i'm susie gharib. good night everyone and good night to you too, tom. >> tom: good night susie. i'm tom hudson. 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. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> more. pbs.