>> president obama wants to give the federal reserve more power over the banking system, but some argue it's not a good idea, given the fed's track record. >> plus, will the momentum continue in the stock market or is it headed for a brick wall? we'll check in from two exchanging to get the buzz on the trading room floors. >> and the fdic looking to fatten up its cash reserves now that it is being wiped out by failing banked whom will be left with the bill, all ahead on this edition of "first business". >> you're watching "first business" with tom hudson and beejal patel. >> two keys to any kind of emerging stack for the u.s. and

global economy squarely in focus this week with the u.s. housing market on tuesday and the job's market on friday. tuesday is going to have the s&p case chiller home price index looking at month-over-month stability, maybe finally in home prices. >> tom, also on tuesday, the fdic, as we mentioned is meeting to figure out how to replenish the insurance reserve fund, especially at a time when close to 100 banks have already failed in 2009 and experts are predicting hundreds more could likely fail in the coming years, especially with that big wild card, commercial real estate. we don't know how bad that could get in the coming year than is going to be pretty critical for these struggling banks. >> we will talk more about the fdic and decisions ahead in the coming weeks. and it is not too early to think about third quarter earnings season, trepidation in the market because of concerns about profits. >> this week, federal reserve chairman ben bernanke heads to capitol hill to defend greater powers for the fed.

on thursday, bernanke will testify in front of the house financial services committee, which is in the process 6 overhauling rules for the banking system. the obama administration has proposed giving the federal reserve more power to oversee the nation's banks and other large financial companies, acting as a systemic risk regulator. however, on monday, a top official at the world bank said that is not a good idea. world bank president robert zalig says there are questions about how central banks around the world handled asset price inflation and significant failures of supervision. instead of the federal reserve, the world bank president says he supports greater power given to the u.s. treasury department. in monday's speech, he went on to say, quote, the treasury department needed greater authority to pull together a bevy of different regulators. treasury is a department and

congress can more directly oversee how to uses any added authority. >> even with confessed multi billion dollar ponzi schemer bernie madoff, the search continues for missing millions and co-conspirators in the scam of the century. his brother and niece for their role in the fraud. madoff's wife ruth already mace as $44.8 million suit for money she transferred over a six-year period. >> what is so confusing i think about the madoff fraud is that bernie madoff and his brother peter and his two sons ran a very legitimate, very profitable brokerage firm in new york called madoff securities, and it accounted for at one point i think at its height 10% of all the trading done on wall street. >> erin arvedlund wrote "too good to be true: the rise and fall of bernie madoff", she

started investigating madoff in a 2001 baron's argue, questioning his returns. >> madoff was filing sec filings in 2006, 2007 and 2008 which claims that the advisory businesses with only overseeing $17 billion and it was completely legitimate but that was lie. so just on that, he could probably be indicted. i think the funds they may have a -- the sons, they may have a more difficult time linking them because, again, they were working at a legitimate brokerage firm. >> the court apointed tropesty working the case has filed 13 lawsuits, seeking the return of roughly $15 billion. so far, only 1.5 billion has been found of an estimated 65 billion invested. hear more of our interview with erin arvedlund on-line and why she leaves madoff played a key role in the fraud. >> and automatic machines make

up $35 billion in the industry and sending machine sales have been hit hard by the recession but many are hoping new technology will help the business get back on track when the economy recovers. the numbers may surprise you. there are over seven million sending machines across america today. it is an industry that employs over 7 million workers. because of the recession, the industry has seen better days as employees cut back on costs. >> if i'm an employee and i'm fearful for my job, i'm going to brown bag it, i may not choose to buy that snack or soda from the machine. >> the recession has really impacted the vending machine business. operators who run these machines have seen sales drop up to 35% and that has forced hundreds of operators out 6 the business. >> the margins are very slim and there is a big capital investment, the machines cost a lot of money, so we have lost a

number of companies that have gone out of business, they couldn't be sustained withach lower sales base. >> the industry is banking on new technology help boost sales in the coming years, like this state 6 the art sending machine designed in part by kraft foods, it is a touch screen that operates like an iphone. >> you will get an information screen that allows to you see a 360° spin of the product, touch the screen for all the ingredients and nutrition. >> and it takes credit cards. 30 of these machine will be rolled out in test markets over the northeast united states in november, if it catches on, kraft foods plans on a wider launch in mid 2010. there is also this new ecofriendly machine by crystal light that dispenses beverages in a cup rather than a bought kneel this allows to you deliver a beverage without a bottle you would normally take with you and throw away and you can reuse the cup, use your own cup, basically cutting down on the ecological impact. >> and new efficient vending

machines will revolutionize a quickly changing industry. >> a lot of machines are moving to an led lighting system that takes less power. a lot of machines are programmed to turn off in off hours. some refrigerant gases in the machines are environmentally friendly so there is a lot of progress in that area, too. >> experts say we could see an annual 3 to 5% growth in the sending machine industry if the economy recovers aspected. >> on tuesday, lots to look forward to, including the latest read on real estate. also, consumer confidence figures due in, earnings ahead of the bell from walgreens after the close, it will be nike. still to come on this program, the fdic in need of a rescue of its own with more banks going bust. and will the markets continue to go higher? we will catch up with a couple of market pros, after this. >> billions for bankers and auto makers but what about you? get ready for a virtual town

hall meeting. join "first business" on voice mail or e-mail to be heard, we want to hear your ideas for fixing the u.s. economy. interestsinterest trillion -- ts of dollars in taxpayer money, we will be holding a virtual town hall meeting. submit your questions on youtube and find out howoñweb site, firstbusinessx.com.

>> hi. who said september was for selling here? wear seeing nice gains in the market as september is coming close to a close. ben lichtenstein is here, traders audio. matt shapiro with mws capital. september is known for selling here but it has been a bullish month. since march the double digit gains are still holding. what do you think? >> we have seen an extreme run-up. i feel like this rally we've been seeing is slowly running out of steam at this point. in order to get up above dow 10,000 we need a little bit 6 a pull back and gain a little bit of strength. i think we will see dow 10,000 before the end of the year but we need to pull back a little bit, maybe see the low 1030s, lower 1020s in the s&ps before we can get up

above 1070. >> matt, the pause that refresh, we've seen buying on every dip in this last 72 hours worth of trading is no different. >> well, really, you know, it has become almost impossible, tom, to get in new portfolios with the market, you know, racing higher as it did. but finally, with the fed announcement there is a lot of good news baked into the market so 1075 is the highest i sold a future in the s&p 500 pit and went straight down from there the volatility, i have to agree with ben, the volume till see it so sensitive, tom -- volatility is so sensitive, tom, the last week from a trading perspective i was guarding against a deeper sell-off. the light volume, they come zooming back fran an investment perspective we look great with dividends and economic growth coming forward. >> and we've seen a renewed interest in merger and acquisition activity this week, xerox involved, abbott labs

involved, the cusp of earnings season beginning over the next three weeks and the federal reserve beginning to take its foot of the gas a little bit. what is not to like. >> what we saw yesterday was chalk it up to one very thin volume with the jewish holiday. also as you mentioned the m&a activity this market hasn't seen with names like that in a while so it is very positive, responding to that information. but if you look across-the-board, you've got unemployment still peaking out which will continue to go higher. gas and crude, as well. so as long as we're seeing some numbers reflecting how the economy is doing on trading on the lower side, again, crude oil coming off that $70 a barrel level and possibly going to test $60, we will see things pull back and ton take a breather, one step back and two steps forward. i'm always a big fan of that and right now we're one step back. we finally hit a stopping price we've been experiencing in the s&ps here, the stopping price

at 1070 as we mentioned here@this point we need to gain a little bit of composure here at this point before we can make that next hurdle up above 10,000 dow. >> you sold the future at 1075, have you covered that short? >> absolutely. honestly, thursday and friday trading, the option volume was very heavy, very, very bearish paper flow in the s&p 500. so we were getting short a lot of puts, just a mad scramble to guard against a sell-off but we never really seemed to get it and all the sudden there is a surprising, you know, 150-point rally that really just sent the bears screaming yesterday. so i think one of the issues that the bears have to con tend with is sort of the structural money on money positives in the market which are good earnings, good dividends, very low interest rates, and economic growth that is stubbornly okay. >> so matt, we heard from ben

earlier, dow 10,000 before the end of the year. what about 1100 for the s&p 500. >> it is very, very possible. i mean, traders come quickly for the s&p 1100 calls. i mean, tat is not too far away. dow 10,000 could be a couple trading days, if this is the end of the sort of micro burst sell-off. >> thank you so much for telling tales off the floor. matt shapiro from mws capital at the options exchange and ben lichtenstein from traders audio at the cme. >> on our web site, why government intervention may be artificially propping up home prices. plus, why it is becoming more expensive to insure board rooms, especially those of financial institutions. and hear what viewers are saying about bailouts on employment and why they hate the u.s. government. you can find it all on our web site as firstbusinessx.com. straight ahead on the show, regulators scramble to figure out how to help the fdic's anemic cash reserve.

what are the options and how much will it cost. that is coming up next.

>> the banking insurance fund in the united states need as bailout of its own now, banking to the boom in banks going bust the fdic, federal insurance agency, guaranteed millions of savings and checking accounts, meets on tuesday to figure out how to can raise money to protect bank deposits and depositors. phil hablutzel is now with us, professor of law at the chicago-kent college of law. nice to see you?

>>: thank you are bank deposits at risk assurance funds are running dry? >> i think the answer is no. politically, depositors are fine. >> so taxpayers stand prepared to stand behind any failed banks. >> taxpayers will be forced to sand behind any banks. >> the insurance fund was nearly $40 billion and now $10 billion. how risky is it to have the federal depository insurance corporation bailout fund be as low as it is? >> it has happened before. part of the problem is congress keeps raising the limit on what is in sured. they went from 40,000 to 100,000 without really asking the fdic and last year went from 100,000 to 250,000. >> it is an unfounded mandate now. >> that is right. >> when you look at how much the fdic is holding against reserves, it is normally a buck and a quarter for every dollar, now 2 is a quarter in the insurance fund for every $100. it is basically insolvent. >> you don't know if it is insolvent because

that would take a production of how many banks would go under but the predictions were that enough will it probably can't cover it. >> with this in mind, the agency is meeting on tuesday trying to take a look at its options, which we will look at in a moment, but does this problem with its insurance fund put the fdic more gun shy as taking over bank it is normally would. >> most of the banks they've taken over in the last 20 5 years have been banks they've been willing to sell to another bank so they didn't use the fund. seldom have they done an actually bailout of a bank, but the problem is you don't have a lot of buyers for banks and some aren't good buyers. >> is the shortage in the fund and the lack of buyers in the marketplace have the agency perhaps become a bit more reluctant to be as aggressive it as normally would about failed banks? >> well, they've changed their style about what aggressive is they've changed the numbers.

they have, say in the last 10 years more aggressive when a bank looks like it is going to become insolvent before it does, they have a better chance of finding a merger partner. >> when we mentioned options, there is four basic options the feds will point to the feds this week. a credit line from the treasury department, like a home equity line of credit. >> two lines, 100 billion and 500 billion. >> so significant dollars there. sell bonds to the banks, basically borrow from the entities which it regulates. >> right. >> that has got to be politically unpalatable. >> probably, yes. the big banks like it. >> what is at risk there? what are the unindented and intended consequences. >> the lender can control you, they have the option they may not pay so you have to be more careful with them and it is hard to regulate someone you've more careful with. >> that is not borrowing from taxpayers but

borrowing from bank customers themselves? >> not sure it suspect bank customers but the bank shareholders. >> number two, leveeing emergency fees on banks which we've done once this year to shore up this fund, or pre-pay next year opt next two years worth of insurance fees due by these regulated banks. >> if you prepaid, the accounting rules would let you do that, and it would probably be all right for a year or two but the problem is if you thought the problem would go away in two years then that is not a bad idea. if you think we're in a long-term problem, that is not a good idea. >> that gets down to a matter of assumption and banking and borrowing is about assumption. >> right. >> do you think the assumption being made on the part of the agency are accurate enough to make the decisions in the short-term? >> i don't think they've articulated those assumption, i don't think they will predict we will be out of this mess in the next two years and i don't think we are neither we are at 95 and counting. >> probably another 100.

there are a little over 400 on the list of problem banks, and if we're lucky there are small banks that can be merged. if we're not lucky they are larger banks. >> and get into regional and systemic risks. thank you, phil hablutzel, professor of law at chicago-kent college of law. >> coming up in chart talk, we take a closer look at one retail etf that has made back all the lost ground from a year ago.

thats coming up next.

>> take active look -- taking ak at two different retail traded funds, a tale two of different et fs. a specialty etf which is xrt and the big box department stores. >> far underperforming the specialties. special is where the money has been made this year. forget about making the retail and u.s. consumers, dead and buried. when it comes to spending money, spending it at specialty retailers. xrt up this year better than 60%. the big box, brand name stores that everyone associates with the retailing space, collectively in the rth, up less than 20% this year. >> an he exchange traded fund that tracks car max, group one auto motive, t.j. maxx. and xrt made back all the lost ground since september of 2008 so it is pretty remarkable.

it is actually close to making 52-week highs, if it hasn't already. >> a lot has been made about march lows, go back to july and draw that trend line, connect the bottoms and we're basically at bottom of that trend line. if that continues to hold here, you will see the move of higher highs and higher lows, technically speaking is still in fact, when it comes to xrt. >> and quickly, rth really has not been able to make up all the lost ground from last september although it has made up a somewhat large part of that. >> we want to hear from but the sense of retail you've got in your community. send us an e-mail comment at firstbusinessx.com. wewe will see you on-line and back here next time.