captioning sponsoredy wpbt >>usie: from retailers to manufacturers to the cner deli hundredsf thousands of small businesses depend on fancing from cit gup. but the nati's leading small businessender is fighting for survival and a bankruptc filing could tear through the economy. >> jeff: a triion dollars and unting. what stoodt just $286 billion at this time last year has ballooned. the deral budget deficit now tops a trillion doars thanks to bank and auto bailouts. >>usie: speaking of bailouts, we meet auto parts firm not waiting r a helping hand from uncle sam. johnson controls is going ba to basics from the past, to build business for the future. >> jeff: then, the futurof the markets, now that the ecomic recovery's not so ceain. our guest, market rategist joe

battipaglia of stifel nicous. susie: i'm susie gharib. >> jeff: and i'm jeff yaste. paul kangas isff tonight. thiss "nightly business report" for moay, july 13. "nightly businesreport" is me possible by:

thisrogram was made possible by contributions tyour pbs statiofrom viewers like you. thank you. >>usie: good evening, everyone. anher major financial firm is fighting for survil tonight: is time it's cit group, a bi new yo-based company that lendto small and medium size businesses. its shares plummeted a its credit ratinfell today on eculation the 100-year-old mpany will be forced into bankruptcy because ican't meet its credit obligations as scott gurvey ports, a collapse of t could hurt thsands of american businesses. >> reporter: is the little guys the neighborho hardware store. e dry cleaner. thlaundromat. the cal deli. these all businesses. the kinds customers the big banks don't want to be bothed with. sameer gokhale of keef bruyette and woo, which provides invesent banking services to t, says these are

the sinesses that will suffer most if the lender gs under. >> if cit goes bankrupt you ve a lot of retailers that wi face financial cllenges. you'll have a t of small businees facing challenges. and, you know, some pele have argued you knoif cit goes unde they go bankrupt they'll be lger banks that will come in to fill the void. and i thk that could be rtially true. but cit has been arod for a hured years and traditionally larger banks have gone aer larger fish. >> reporte cit is the north ameran leader in factoring and small business administratn loans. it ithe sole or main provider of revolving les of credit to hundre of manufacturers and hundds of thousands of retails who need between 10 and 50 million dollars trun their busine. but with theecession many of ose borrowers have been hit rd and cit has seen many of its loans go bad. sie becoming a bank holding company last december, cit h received fds through the tarp program.

but the federal posit insurance mmission is concned about deterioration of cit's assets. the agency's been sitting onhe company's apication for help a a temporary liquidity program. s&p analyst matthealbrecht ys cit's problem is that washington does noconsider it too g to fail. >> i think tt's a pretty good indicator from t government that, that they're ctainly not convinced that cits an important pler. i think, and tt's really what i think cit's applicatn to that program think it really pends on that. you know, can they convincthe gornment that they're an important cog in t economy, especially from a small d medium sized biness standpoint >> reporr: secretary timothy gehner has the authority to handle the c.i.t. cris. but won't y what, if anything, the government might do toelp. scott rvey, "nightly business report", new york. >> jeff: here's a riking developmen the deral deficit has topped $1 trillion for the fit time ever. d we are only nine months in the federal fisc year. darren gersh has some

perspective on ts fiscal mileston >> reporter: $1.1 trlion is enough to give every workein the united stes ten and a half weeks of paid vacation. $1.1 trillion is also abt enough to provide health ce coverage to every unsured american for a dece. but is $1.1 trilon too much debt for the united stes to pile on th year? budget expert stan collend doesn't think so >> everyone, chill out. this is extly what we should be doing right now. be grateful that the goverent is getting iright. >> reporter: right, collenr says, because we havan economy to fix and that requires government snding to boost dend. but $1.1 trillion is dramatic symbolith 11 zeros. each one telling budt watchdog maya mguineas the day of fiscal reckoning is coming sn. >> what we're doinis we are borrowinto keep the economy loat and this is a short ter strategy. the probm is that the trillion dollars is a reminder at we

don't have any plato stop borrowing at aunsustainable lel. >> reporte some perspective re: the us economy's annual output is $14 trillionand the national debt is n north of $11 trlion. that's a l, but what really matters is the cost of carryg that debt, a that is dropping. wn 25% so far this year to $143 billion. with interest ras at rock bottom, the u.s. gernment is gettinquite a deal on nancing. but that won't ctinue if, in two to three yrs, the rest of the rld loses faith in our fiscal backbone. >> at some point, e chinese, the pers in the country that's buying the most amount ou.s. debt at the ment, are probly, for either foreign poli, or economic or financial reasons,oing to say, "no mas." now, they'll say it in cnese, but they're just going to sa "no mo" for one reason or another. what the government eds to do, what our government needs too, is get ready f that day. >>eporter: $1.1 trillion is a mind-bgling amount of money, but in a few mons, we may be askingow much is $1.8 trillion

or eve$2 trillion? after all, t federal deficit still climbing. darrenersh, "nigly business repo", washington. >> jeff: wl street was looking past the budget deficit,o the flowf analysts reports for ues on upcoming report cards from theation's banks for guidance. and bus liked what they saw. goldman sachs received a upgrade from an influeial banking analyst, a that set off a ampede into the nancials. by noon, the ind was up 130 pointsnd stairstepped its way back above the 8300 lel by the closing ll.

>> susie: r guest tonight says even though the markets raied today, he does not tnk this is e start of a bull market. in fact, he's putting most o his clients' money in ca, not stocks. joining now, joe battipaglia, market strategist of therivate client gro at stifel nicolaus. hi, joe. >> hi, susie. >> well, say it ain't so. why are you cautious? >> i'm cautiou for the u.s. economy isn very weak foing. the finanal sysm still we leverage -- deleveragin and the conser won't be back foruite some time. so when you lookhe an riment where wes are actually if decline, job losses continue,he nsumer is to the coming back anyime soon. businees have overbuilt and overborwed. we'rjust now going into th corrective phase of that. you casee by way of what is hapning atcit that

there are mo shoes to drop in that regd. as a result, the economy doesn't t back to gwth untinext year. the growth is very ow. and think earning expectations are jusoo optimist. and the euphoria abo bk stocks comes about simply because thereasury and the federal reserve ha designed to set of sps to prop up theanking system. it's an artificl prop, we'rstill not fully healthy ye and investors will sell them o on the her side. >> spe of those bank stocks there i a lot of earness this week about banks reportingtheir earnings, today a prominent analyst upgraded gdman sachstock so aot of people are thiing that the coast is car for the financials. what are you saying on tha well, our upgradeas on a shorterm basis because indeedwhen the federal resee usesuantitative easing to ge 0% were rate, when the treasy, fdic and deral reserve provide nks guarantees for losses. when they change the accounting rules sthey don'have to take sses on mark to market you can create any earngs power

you want. but forlong-term call that the banks are going to have much ls leverage than they had before. they are going to be more highlyegulated than they wereefore. whenhere raitt interest rate goes to their nural level, they run natul now, will change the dynamic of the interest rate rgins inuch a way tt now all ase banks wille very profitable. sodding to that an exslended recessionary condion and i thk that the banks still have a long way to go before they are trauly healthy. now you told me that your set allocations two-thirds cash, and one-thirdtock. soou are puttingome of your client money into stocks. know you can't talk about specificbut what sectors do you fd attractive ght now . >> yes, this is our equity program. we are pai to go out and take ris for iestors. back in january and februy we were actually 95% in cash. so we've actuay loosened up a little bit if you will. and what we're loong to find are companies that ha strong balance sets that we can withstand recessions, mpanies when they pay vidends can continue to pay it dung recession we wancompanies that are

not involved with government arantees it or bailout because the vernment crowds them out. as a result, look very favourab on areasike heth care technolog, consumer staples companies. because th have this dynamic. we take a relavely dim view of financials because of the qonoing oblem. energys a all over the map but with a low energy pre many of these mpanies don't ha the earnings por they had in the past. and industrials ve a long way to g inrder to right themselves f credit coitions first and then expaion in the united states at so point ile anem for the foreseeable future. >>o joe, for investors who are listeng to what are you sang tonight and they have someoney on the se and they're wonderi what do with it, should they put new ney into thetock market nowr should they wait? >> ihink the right strategyeres to ideify these companies th that financial strength that i talked about. because the market clearly isuch more attrtive now at these lels than it was at the highs a year and a half ago. but you want to enterthose investments ov time

because the market wl be bumpy inhe meantime. sotrong balance sheets, ability to pay the dividend dung recessions. and staying away from governnt involvement in their business is the right forma for building out yo portfolio. and i'm not going to discriminate between big ocks or small stocks or onsector or another cause this bear market that we are working through has leveled all these sects. and so you are given an opportunity to rebuild a portfoli into strength as opposed to weakness. >> you can give us any glimmeof when you see that the stock maet will pick for rl, that itill be a realally? >> well, we ve an estimat for earnings this year on the s&p 500, 50 to 55 dollars, nt year 6to 65 dollars in rough terms, thative fws the market a range between 750 and a thousand in rough terms. so we came close to the upper-end of that rang we havbeen selling off f that. i can understa why we are doing. ase continue to work through recsions, that nge stays in place. and i think the best thing to do is keep broadening out on the basis of financial strength so when we ok at

2011, 1 and 1these coanies will have imuch better profilen the marketplace. >>ll right, interesting alysis. thank yoso much for coming on the program. >> you are very welcome. >>ie guest joe battiglia >> sus: my guest tonight: joe battipaglia of stifel colaus. >> jeff: n, let's take a look at some stocks in the news tonight.

and ose are the stocks in the news tonight, susie. >> susie: jeff, now thateneral motors andhrysler are out of bankrupt, the head of the present's auto task force is stepping down. steven rattner ireturning to prive life in new york city. replacing hiwill be former stlworkers union leader ron bloom. the taskorce's main job now is to oversee the governmens ste in chrysler, g.m., and its g.m.a.c. financialervices arm. >> jeff:eanwhile, just four days out of bankruptcy andhe new general motors igetting down to siness. g.'s working with a private equity firm to buy key asss from delphi, helping its fmer parts makingivision get out of chapter 11. if approved,he deal could save the parts maker from liquidation. g.m.ould get delphi's steering business and four otr plants that makparts. california-based ptinum equity woultake the rest of delphi's operations. the prictag: almost $4 biion. >> susie: delphi's pdicament is o example of how the

meltdown in the au industry has spad to parts makers. some suppliers are surving by looking for new busine, while othersre getting back to basics. johnson contro is doing just th. for twdecades it's been one of the rgest makers of auto seats and interiors. but, it's also been keepin buildings rm and cool for more than a century. diane eastabrook explainwhy the milwaukebased firm is tuing up the heat on that busiss. >> reporter: johnson conol's 42-year-d headquarters has become the company's hottest marketing to for what it cal its building effiency business. c.e.o. stephen rll delightin shing off a renovation at the massive office cplex which includ solar panels. >> they prove basically what s a fourth of the energy for our campus. >> reporr: a geothermal system warms d cools the facility-- and sky lights help illunate work areas. roell thinks the world is ly beginng to embrace energy conservation and thacould mean big bus for johnson controls. >> i think people reallyant to go to reneble.

i think it's just function of whenhey get into the economics they need tonderstand that it is a part of an energy conservation plan in tot. >> repter: johnson controls made its mark in heatingnd coolg 125 years ago when founder warren johnsonnvented the therstat. througho the twentieth century e company built, installed, and serviced heating andir conditioning stems. dung the past twenty years johnson controls made st of its money king vehicle inteors. but as i own plants became more efficient and auto sale started slowing e company gan trimming its automotive division about a yr ago. ell admits he had no idea ho smarthat decision would be. >> no onwould have ever projected and certainly didn't that the market wou decline by almoshalf. >> reporter: now, hnson control's turn to its roots is starting to pay off. the company is retrofiing the empire state building with a n climate control d lighting system it also coulcash in on governmenttimulus projects king everything from schools to office buildings re energy efficit.

there's also the batry business. johnson controlsurrently makes the lion's sharef lead acid car tteries. now it's moving into lithi ion batteries foplug-in hybrids. the company is ming some of those batteries in francfor mercedes ben in a couple of years it will build them in the s. for ford. and roell sa those batteries uld provide a bonus. >> what people are pceiving is that y could actually drive the vehicle during the d and then do o things: charge it at nit, but you could also potentially have somof that battery power transferd from the vehiclto the home and then the home could actually ha power that it cod use during the y. but, diane thas a very early ste. >> reporter: le most u.s. compies, johnson controls has struggled in the fst half of the year, but excts sales and profits to rebound in e second half. morngstar auto analyst david whiston thinks the comny diversity makeit a good bet in y economy. >> you combine that with healy balance sheet, a healthy divide, and a steady dividend that has bn around since 1887

it could be a good play fosome investors. reporter: and roell is confident joson controls is building a more pritable future, by making buildis energy efficie. diane eaabrook "nightly siness report" milwaukee. >> jeff: tomorrow, cret unions serve 79illion customers in e u.s. a look at how they're doing in light of e financial cris. >> sie: there could be a settlement in the works inn irs crackdown secret swiss ba accounts. a federal jue today delayed a trial whe the tax agency hoped to force swiss banubs to revealhe names of americans who hold secret offshore accounts. e feds say 52,000 americans are usinthe accounts to avoid paying taxesere. the bank says revealing thr names would breach swiss pricy laws. >> jef employees of social networng site facebook are tting a chance to cash in on their success. russn investment firm digital sky technologies h started buying empyees' common shares in facebook.

the price: $147 per share. but there's a catch. employees can on sell part of thr shares to the russian firm, since facebook isn't expected to go publianytime soon. >> susiehere's a look at at's happening tomorrow:

tonight's commentator sayshis is t right time for health care reform. she's alice rivlin, senior fellow at broongs and former vi chair of the federa reserve. >> with the economy in dee receion and the budget deficit off the arts, should the president postpo his ambitious qut for health reform? absolutely not: hehould push harder tget comprehensive reform enacted now. millio of workers are losing health cerage along with their jobs a many more fear this will happen to them. bunesses are reducing health coveragend workers with diminished incomes are struggling to pay eir doctor bills. how could weave a more dramaticllustration of why we need basicealth coverage for evyone that does not depend on the ups and downs of emploent?

moreer, currently soaring deficits relate to the ression itself andinancial system pair. these deficits will rece as the economy improves, t the long runudget picture remains grim. the be hope for reducing the rate of growth of federal spending in the fure is making health care deliry more efficient so tt we get more ca per dollar. reducing waste requires investment in formation systems, analysis of effecve treatments, and new reimbursement syems that favor efciency. without mprehensive reform the wastefulness of r current health care syem will continue both the recession andoncern about futu budget deficits argue for celerating comprehensive health reform,ot retreating froit. i'm alice riin. >> sus: and finally tonight, talk about the power of sitive thinking. new polls show thadespite americans out ofork, home values plunging, and 401-k looking ke 201-k's, we are feeling less stressed abou debt.

the receion is forcing us to take stepso get out finances in better shape. and as a result, experts say we're king charge of our lives, and feeling better out it. but, we' still a nation of borrowers. if you run the nbers, jeff, for evy $100 an average household earns, it owes124 in some kind debt. >> ouc,ulling the belt and wait for the economy t tu around, i guess. >> good aice. >> jeff: that's "nightly business report" foronday, july 13. i'm jeff yastine. goodnight, everyone d good night to y, susie. >> susiegoodnight, jeff. m susie gharib. hope to see all of you agai tomorrow evening "nightly business reportis made possie by:

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