captioning sponsored bwpbt >> susie: from retailers to manufacturers to t corner deli hundds of thousands of small businesses depend financing from c group. but the tion's leading small busiss lender is fighting for survival and a bankrtcy filing could tear through the econy. >> jeff: a trilln dollars and coting. what sod at just $286 billion at this time last yearas ballooned. e federal budget deficit now tops a trilliodollars thanks to bank and auto bailouts. >> susie: speaking of bailou, we mt an auto parts firm not waitg for a helping hand from uncle sam. johnson controls is goinback to basics from the past, to bud a business for the future. >> jeff: then, the fure of the markets, now that theconomic recovery's not scertain. our guest, mart strategist joe

battipaglia of stifel colaus. >> susie: i'm susie gharib >> jeff: and i'm jeff stine. paul kangais off tonight. is is "nightly business report" fomonday, july 13. "nightly busess report" made possible by:

is program was made possible by contributio to your pbs stion from viewers like you. thank you. >> susie: good evening, everyone. another major financial firms fighting for svival tonight: this time it's cit group, big neyork-based company that nds to small and medium size businesses. its shares plummet and its credit ring fell today on speculation the 100-year-o company will be forced int bankruptcy becau it can't meet its credit obligatns. as scott gury reports, a collapsef cit could hurt thounds of american sinesses. >> reporter: it'the little guys. the neighborhoodardware store. thdry cleaner. the undromat. the lol deli. these sml businesses. the kinds ofustomers the big nks don't want to be bothere with. sameer gokhale of keefe, bruyette and woodswhich provides investmt banking services to ci says these are

the bunesses that will suffer most if the lender goeunder. if cit goes bankrupt you ha a lot of retailers that will face financial chaenges. you'll have a loof small business facing challenges. and, you know, some peop have argued you know cit goes under,hey go bankrupt they'll be larr banks that will come in to fill the void. and i thinthat could be paially true. but cit has been arounfor a hundd years and traditionally larger banks have gone aft larger fish. >> reporter:it is the north americ leader in factoring and small business adminisation loans. it is e sole or main provider of revolving lin of credit to hundredsf manufacturers and hundre of thousands of retailerwho need between 10 and 50 million dollars to n their business but with the ression many of the borrowers have been t hard and cit has seen manyf its loans go b. since becoming a bank holdin company last december, c has receiv funds through the tarp program.

but the fedel deposit insurae commission is ncerned about deterioration cit's assets. the agency's been sittinon the company'application for help via a temporary liquidity program. s&p analyst mahew albrecht says cit's problem is that washington doenot consider it o big to fail. >> i thi that's a pretty good indicator fr the government that, that they' certainly not convinced thatit is an importanplayer. i think, a that's really what i think cit's applation to that proam i think it really depends on that. you know, can they connce the government that they're an important cog in theconomy, especially from a small an medium sized busess standpoint. >> reporte secretary timothy geiter has the authority to handle the c.i.t. cris. but won't sawhat, if anything, the government might do to hp. scott guey, "nightly business report", new york. >> jeff: here's a stking development. the feral deficit has topped $1 trillion for the firstime ever. anwe are only nine months into the federal fiscalear. rren gersh has some perspective on thifiscal

milestone. >> reporter: $1.1 trilon is enough to give every worker the united stas ten and a half eks of paid vacation. $1.1 trillion is also abou enough to provide health car coverage to every uninred american for a decad but is $1.1 trilli too much debt for the united stat to pile on thisear? budget expert stan collender doesn't think so. >> everyone, chill out. this is exacy what we should doing right now. be grateful that the gernment is getti it right. >> reporter: right, collender says, because we have economy to fix and that requires government speing to boost dema. but $1.1 trillion is aramatic symbol wh 11 zeros. each one telling budgewatchdog maya macineas the day of scal reckoning is coming soo >> what we're doing we are borrowing keep the economy afat and this is a short term strategy. the probleis that the trillion dollars is a reminder th we don't have any plan stop

borrowing at an sustainable leve >> reporter:ome perspective he: the us economy's annual output is $14 trillion, d the national debt is noworth of $11 trilon. that's a lotbut what really tters is the cost of carryin that debt, andhat is dropping. do 25% so far this year to $143 billion. with interest rateat rock bottom, the u.s. govnment is getting ite a deal on fincing. but that won continue if, in two to thr years, the rest of e world loses faith in our fiscal backbone. >> at some poi, the chinese, the rson in the country that's buying the most amou of u.s. debt at e moment, are obably, for either foreign licy, or economic or financi reass, going to say, "no mas." now, they'll say it chinese, but they're just going tsay "nmore" for one reason or another. what the governmt needs to do, what our government needto do, is get rea for that day. >> reporter: $1.1 trillion ia mi-boggling amount of money, but in a fewonths, we may be asng how much is $1.8 trillion orven $2 trillion?

after al the federal deficit is still climbing. daen gersh, "night business report washington. >> jeff: walstreet was looking past the budget deficit, tthe flow oanalysts reports for cls on upcoming report cards from the nion's banks for idance. and bullliked what they saw. goldman sachs received an upgrade from an influentl banking analyst, andhat set off a stpede into the fincials. by noon, the indexas up 130 points a stairstepped its way back above the 8300 leveby the closing be.

>> susie: ouguest tonight says even though the markets ralld today, he does not thi this is thstart of a bull market. fact, he's putting most of his clients' money in cashnot stocks. joining usow, joe battipaglia, market strategist of the pvate client groupt stifel nicolaus. hi, joe. >> hi, susie. >> well, say it ain't so. why are you so cautious? >> i'm cautious for the u.s. economy is o very weak footg. the financi syste still we leverage -- deleveraging and the consum won't be back for qte some time. so when you look t an riment where wag are actually if decline, job losses continue, t coumer is to the coming back any te soon. business have overbuilt and overborrod. we're st now going into the corrective phase of that. you can e by way of what is happeng at t that

there are more shoes todrop in that regar as a result, the economy doesn't geback to groh until xt year. e growth is very sl. and ihink earnings expectations are just t optimistic and the euphoria about ban stocks comes about simply because the tasury and the federal reserve have designed to set of ste to prop up the bking system. it's an artificia prop, we're ill not fully healthy yet and investors will sell them offn the otr side. >> speakf those bank stocks there is a lot of eageess this week about nks reporting eir earnings, today a prominent alyst upgraded golan sachs ock so a l of people are thinkg that the coast is cle for the financials. what are you saying on that? >>ell, our upgrade w on a short-rm basis because, indeed, en the federal reserv uses qntitative easing to get 0% wereate, when the treasur, fdicnd feral reserve provide bas guarantees for losses. en they change the accounting rules so ey don't ve to take loes on mark to market,ou can create any earnis power

you want. but for long-term call that the banks are going to have much les leverage thanthey had before. they are going to be more highly rulated than they were bore. when tre raitt --nterest rate goes to their natal level, they run natura now, itill change the dynamic of the interest rate mains in sh a way tha now all tee banks will bery profitable. so aing to that an exslended recessionary conditi and i thinthat the banks still have a long way to go before they are trauly healthy. >>ow you told me that your ast allocations two-thirds cash, and one-third sck. so y are putting se of your clientoney into stocks. i ow you can't talk about specifics t what sectors do you fin attractive rit now in >> yes, this isur equity ogram. we are paid to go out and take risk for invtors. ck in january and februar we were actually5% in cash. so we've actuall loosened up a little bit if you will. and what we're looki to find are companies that have strong balance shes that we can withstand recessions, coanies when they pay didends can continue to pay it duri recessions. we want mpanies that are

not involved with government guantees it or bailout because the gornment owds them out. as a result, we look very favourablyn areas le heal care, technology, consumertaples companies. because theyave this dynamic. we take a relatily dim ew of financials because of the qon gng prlem. energys arell overhe map but with a low energy pric many of these coanies don't havehe earnings powethey had in the past. and industrials ha a long way to go in oer toight themselves forredit condions first and then expansn in the united states at some point whe anemicor the foreseeable future. >> sjoe, for investors who are listenin to what are you sayi tonight,nd they have some mey on the sid and they're wondering what too with it, should they put new moy into the sck market now oshould they wait? >> i tnk the right strategy he i to identy these companies wi that financial strength that i talked about. because the market clearly is mh more attracve now at these levs than it was at the highs a year and a half ago. but you want to enter ose investments overime

because the market wil be bumpy in t meantime. so song balanceheets, ability to pay the dividend duri recessions. and staying away from governme involvement in eir business is the right formulfor building out yourortfolio. and i'm not going to discriminate betweenbig stks or small stocks or one ctor or another beuse this bear market at we are working through has leveled all these sector and so you are given an opportunity to rebuild a portfoliootrength as posed to weakness. you can give us any glimmer when youee that the stock mark will pick up for rea, that it wl be a real rly? >> well, we ha an estimate for earnings thisear on e s&p 500, 50 to 55 dollars, nex year 60 65 llars in rough terms, thative fws the market a range between50 and a thousand in rough terms. so we came close to the upper-end of that range. we have en selling off for that. i can understandhy we are doing. as wcontinue to work through recesons, that rae stays in place. d i think the best thing to do is keeproadening out on the basis of financial strength so when we lo at

2011, 12 and 13 ese compies will have i ch better profile o the marketplace. >> a right, interesting anysis. thank you much for coming on the program. >> you are very welcome. >> p guest joe battipaia >> susiemy guest tonight: joe battipaglia of stifel nila. >> jeff: now, t's take a look some stocks in the news tonight.

and thosare the stocks in the news tonight, susie. >> susie: jeff, now that genal motors and chrler are out of bankruptcy, e head of the presidens auto task force is stepping down. steven rattner is rerning to private fe in new york city. replacing him wi be former steelwkers union leader ron bloom. the task for's main job now is to oversee the government's ake in chrysler, g.m., and i g.m.a.c. financi services arm. >> jef meanwhile, just four days out of bankruptcy a the new general motorss getting down tbusiness. m.'s working with a private equity firm to buy key aets from delphi, helping itsormer parts maki division get out of chapter 11. if approve the deal could save the parts maker from liquidation. g. would get delphi's steering business and four her plants that me parts. california-basedlatinum equity wod take the rest of delphi's operations. the price ta almost $4 billio >> susie: delphi's prediment is one emple of how the

meltdown in the auto iustry has spreado parts makers. some suppliers are survivingy looking for new business, ile others areetting back to bacs. johnson controls idoing just that. for two dedes it's been one of the largt makers of auto seats and interiors. t, it's also been keeping buildings warmnd cool for more an a century. diane eastabrook explains wh the milwaukee-bad firm is turninup the heat on that buness. >> reporter: johnson ctrol's 42-yeaold headquarters has become the company's hotte marketing ol for what it cl its building eiciency business c.e.o. stephenoell delights in showinoff a renovation at the massive office compl which includes sar panels. >> they provide sically what was fourth of the energy for our campus. >> reporter: geothermal system warms and ols the facility-- and sky lights help illumina work areas. ell thinks the world is only beginning embrace energy conservation and that cod mean big bucks r johnson controls. >> i think people real want to go to rewable.

i think it's jusa function of wh they get into the economics they need understand that it is a part of an energy conservation plan in tal. >> rorter: johnson controls made its mark in heati and coing 125 years ago when founder warren johns invented the thmostat. througut the twentieth century the mpany built, installed, and serviced heating and air conditioning syste. ring the past twenty years johnson controls madmost of its monemaking vehicle inriors. but asts own plants became more efficient and auto sas started slowinthe company began trimming its automotiv division about aear ago. roell admits he had no idea w smart th decision would be. >> no e would have ever projected anwe certainly didn't that the market wld decline by almt half. >> reporter: nowjohnson control'return to its roots is starting to pay off. the company is retrotting the empire state building with a new climate control and ghting system. it also could ca in on governme stimulus projects making everything from schoo to office buildingmore energy effient.

there's also the btery business. johnson contro currently makes the lion's sha of lead acid cabatteries. now it's moving into litum ion batteries r plug-in hybrids. the company is makinsome of those batteries in frae for mercedes bz. in a couple of years it wi build them in thu.s. for ford. and roell ys those batteries could provide a bonus. >> what people areerceiving is thatou could actually drive the vehicle during theay and then dtwo things: charge it at ght, but you could also potentially have se of that battery power transfred from the vehie to the home and then the home could actually ve power that it uld use during thday. but, diane tt's a very early age. >> reporter:ike most u.s. coanies, johnson controls has struggled in theirst half of the year, but pects sales and profits to rebound ithe second half. moingstar auto analyst david whiston thinks the cpany diversity mas it a good bet in any economy. >> you combine that wi a hethy balance sheet, a healthy divind, and a steady dividend that haseen around since 1887

it could be a good play r some investors. >> reporter: and roell is confident hnson controls is building a more ofitable future, by making builngs energy efficnt. diane stabrook "nightly business report" milwaukee. >> jeff: tomorrow, credit ions serve 79 milon customers in the s. a look at how they're doing in light of the nancial crisis. >>usie: there could be a settlement in the works an irs crackdowon secret swiss nk accounts. a federal dge today delayed a trial ere the tax agency hoped to force swiss bk ubs to reve the names of americans who hold secret offsho accounts. the feds say 52,000 american are usg the accounts to avoid paying tax here. the bank says revealing eir names would breach swiss pvacy laws. >> jf: employees of social netwking site facebook are getting a chance to cash in their success. ruian investment firm digital sky technologiesas started buying eloyees' common shares in facebook.

the price: $.77 per share. but there's a catch. employees can ly sell part of eir shares to the russian firm, since facebook isn't expected to go pubc anytime soon. >> sus: here's a look at what's happening tomorrow:

tonight's commentator sa this ishe right time for health care reform. she's alice rivlin, seni fellow at brkings and former ce chair of the federa reserve. >> with the economy in dp ression and the budget deficit off thcharts, should the president postne his ambitious est for health reform? absolutely not: should push hardero get comprehensive reform enacted now. millns of workers are losing healthoverage along with their jobsnd many more fear this will happen to them. sinesses are reducing health covera and workers with diminished incomes a struggling to patheir doctor bill how could have a more dramat illustration of why we need bas health coverage for eryone that does not depend the ups and downs of empyment?

moover, currently soaring deficits relate to theecession itself a financial system repair. these deficits will rede as the economy improvesbut the long r budget picture remains grim. the st hope for reducing the rate of growth of federa spending in the ture is making health care devery more efficient sohat we get more re per dollar. reducing waste require investment iinformation systems, analysis of efftive treatments, and ne reimbursement stems that favor ficiency. withoucomprehensive reform the wastefulness oour current health care stem will contin. both the recession a concern about fure budget deficits argue foaccelerating comprehensive health refor not retreating fm it. i'm alice vlin. >> sie: and finally tonight, talk about the power opositive thinking new polls show tt despite americans out work, home values plunging, and 401's lookinlike 201-k's, we are feeling less stressed abt debt.

the ression is forcing us to take ste to get out finances in better shape. and as a result, experts s, we'rtaking charge of our lives, and feeling betteabout it. but, wre still a nation of borrowers. if you run theumbers, jeff, for ery $100 an average household earns, it ow $124 in some kinof debt. >> oh, pulling the belt and wait for the economyo rn around, i guess. >> gooddvice. >> jeff: that's "nightly business report" f monday, july 13. i'm jeff yastine. goodnight, everyonand good night toou, susie. >> sus: goodnight, jeff. i'm susie gharib. we hope to see all of you agn tomorrow eveni. "nightly business repo" is made posble by:

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