captning sponsored by wpbt as americans save more and chinese are able to spend re, we can put growth on a mor sustainable undation because just as china has benefid from substantial investmentnd ofitable exports, china can also be an enormoumarket for americ goods. >> paul: with at, president obama kicked o two-days of strategic economicalks with the chese. he says our relationshipill shape the 21 century. >> suzanne: up, and away. the dohas tacked on almost 40% since march. but wi the economy still in cession, many on wall street are wondering if stos have gone too f too fast. >> paul: from the failure of lehman brothers tohe demise of beartearns.

congressants to know how, and why, the financial crisi happened. we talk to a member ofhe new financial isis inquiry commsion, former u.s. senator bob graham. >> sanne: then, verizon dials up weak results. the telecogiant posts a big drop in profits. and ramps up layoffs, now cutting 8,000 jobs ts year. >> paul: i'm pl kangas. >> suzne: and i'm suzanne pratt. susie gharib is off toght. this is "nigly business repo" for monday, july 27th. "nightly businesreport" is me possible by:

thisrogram was made possible by contributions tyour pbs statn from viewers like you. thank you. >> suzanne: go evening everyone cooperation, notonfrontation. th's how president obama sees the future of s., china relatis. the president spoke as the t countries began o days of talks economic and security issues. both nations are ueat about globalrowth, pointing to signs the world is moving tord recovery. as darren gersh rerts, the questions how to keep the world's largeseconomies headed in theame direction. >> reporter: it wachinese

state councilor i binguo who summed up the self-interest at brings the u.s. and china together in massive etings like this. >> ( translated ): we are in the same big boat, that has en hit by fierce nd and huge waves. >> reporte as massive economies, both untries are critical to the emerginglobal recovery, and both couries also have coon interests and oblems. see why, l you have to do is walk acro the street from this meeting to thu.s. treasury. the u.s.overnment is selling a record $115 billion in debthis week. the chinese, of cose, are the biggesholders of that debt, their stake topping mo than $800 billi. economist uri dadu says that means ina doesn't want to see either too much inflation oroo little growth the u.s. >> so look at ina as now being a significant stakeholr in how the u.s.conomy performs. >> reporter: the.s. too has a prrietary interest in china, ich is on its way to becomin

the largeseconomy in the world, a is already one of the largest markets for u.s. exports. st recent figures show the u.s. trade dicit with china wn 18%. with china shiftg from export- led growth to growtht home, treasury secreta timothy geithner wts to see the trend continue. china's success in shifting structure of econo will be huge contrution to bringing about more rapid glol recovery >> reporter: but china has fueled the shift wh large increases in bank lendg, a trend th worries some servers, says the u.s. cha business council's john frisbie. >> so thu.s. will have its own questions abt china's exit strate from that to avoid inflation down the road,ust as china is going to be talng about our own it strategy to avoid inflation here down e road. >> reporter: this meeting billed as a dialue and it is high level: byncluding secretary of stateillary

clinton,he obama team is gnaling the breadth of issue china and the u. face. but the very se of the meeting and the sizef the two nations underscores the difficul of making quick changes. >> this makes it very portant at this dialogue continues a that the united ates be in a positi to nudge china in the rit direction as it emerges as the leading ecomic power of th21st century. >>eporter: one issue where progress is slow, but e need increasing urgent is climate change. the two countries have dee economic difrences there that may be harder to resolve tn the usual digreements over cuencies and trade. darren gersh, "nhtly business rert", washington. >> suzan: today marks the thirstraight up day for the dow with a modest 15-pnt gain. but the bluehip average has been on a tear sging about 40% sie its march low, while the s&p 500 is up 45% inhe same time fra. as scott gurvey rerts, those gainare starting to make some investors quite nervs. >> rorter: is it the real thing or just a head fake.

what the doubters call a skers rally? that is the big money qution facing invesrs watching a maet which exploded on the upside in july. stephen wood of ruell investments ys he hasn't seen a major ecomic change. but he has seen a big ing in market psyology. >> about a year d a half ago, end two thousand and seven, you had a market pricefor absolute perction. coming into the rst quarter of two thousand nine you had market priced foarmageddon. what's you've seen is a reversion to somethi in between. and i think it's an expections game now in at its not nearly as bad as feared. estites have come down and expectations are so lothat companies arbeginning to beat. >> reporr: analysts say many professional money manager afraid of being left behin have fueled the reboun mike ryan ofbs wealth manageme says there's a lot of cashvailable to sustain the rally, at ast in the near rm. >> on e margin we're starting to see that the news h become incremenlly better. you'reeeing less concerns about system wide failure d more issues about w quickly

this recovery ll gain traction and where will it in its footing fit. so to me i think the conversation has srted to ift now away from the depth e recession and now towards how robust this recovery pross will be. >> reporter: maneconomistsre looking for thu.s. to exit recessn by the fourth quarter with europe following xt year. but for the market rally tbe sustained, the experts s there muste evidence the recovery can be sustained withoutife support fromhe government. and consumers must break o their wallets agn, so corporatprats,s r he r cthtsan sales, rather than cost ts. i think going into 2010 we' going to go fromxpectations, costutting situation, into those firmthat are stragically positioned, strong balance shts, great cash potion, they don't have a lot of debt and they c take market sharaway from their competitors and actual drive sales. so think going forward its probably goi to be a little toher because its been a relief rally since march >> reporr: the experts warn there are still major riskto the system. and would only take a few bad earnings reports tbring the marketally to a screeching halt.

scott rvey, "nightly business report", new york. >> paul: bigger than expected jump in new home sales dn't put wall strt in rally mode is morning. instead vestors focused on guarded outlooks from tna and honeywel by 11:00 a.m. the dowas off 45 points and theasdaq down 15. the modest selloff continu as the market consodated its recentains. but light volume and positiv breadth attractelate buying and e markets had a slightly higher close.

>> paul: last night fedel reserve chrman ben bernanke went where no fed chiehas gone before. stight to the people. it came in a towhall meeting in kansas city hosted byhe pbs program "the newour with jim lehr". beanke took questions on everytng from the fed's handng of the financial crisis to exactlyhat his agency does. ansome of the questions were blunt. a small busiss owner asked why the fed rescued bibanks while shorchanging small companies? bernke responded saying he too was disgusted by theailouts. >> let me just ehasize that nothg made me more frustrated, more angry, than havg to intervene, parcularly in a couple of cases where king wild bets forced theseompanies close toankruptcy. the's nothing that made me angrier than having too that.

why d we do it? because if that company ha collapsed in the middle of crisis it could ve brought everytng down. >> paul:ou can see more of bernanke's comments on the newshourn pbs tonight, tomorrowight, and wednesday night. also, thfed is taking a closer look at how the financiacrisis is affecti americans. it's doing a new surveof consumer finans. the la one was done two years ago just as the mortga crisis was bubbng to the surface. >> suzanne: the fed is n the only one loong into the finaial crisis. congress has also t up a finaial crisis inquiry commission to investige the root cause rmer senator and florida governor bob graham isne of its ten members and heoins me now. senator, welme to the program. >> tnk you very much, suzan. i appreciaoining you in my home town wh my friend paul >> suzanne: ne to have you here. le me start with jus an plainer. the commissn has been set u examine many dierent are of the fincial crises. no do you view ts as a fact

finding missio or wl there actually be remmendations that come out of it. >> both. we are directed byhe congress to do a thoroughxamination of the causes of e current fincial crises much likehe ficora mmission d in the 1930'snd then to make recommendations as ficora which leo the securities d exchan question. >>uzanne: that's my next question a lot of peoe are drawing parallels betweethis commission and the ficora commsion and out o that came some very sigficant financial form. now do youhink it's fair to draw those kd of parallels, i that the right thing to do. >> it's certainly challenging standard for ourcommission because the pikora commission which w actually a committ of the unite states senate did such an outstanding job of analysis and then pscription.

are gng into thi ten membs, republicans and democrats with the goal of havi a report,hich will do a though analysis of wha has happened because the ameran people have en severy damad by the exrience of the la year. and what can we contribute to avoiding a repition. >> suzanne now, by the time your commission makes its rulings or giveits report, it will be the end of next year, if i'm not mistaken, crect, the end of 2010. >> december of 2010 is our final date to port. >> suzanne correct. do youelieve it's going to by then already be business as usual on wall street? i mean, isn't going to rt of a bit late to be ming these recommendations? >> no. weon'tant to be a commission th delays the proces of dealing with current problems. we look forward to assisting the congre and the treasury and

the whitehouses they collectivelyake decisions. wh we wan to do is bui a record of what has happened to the american economy and then make recmendations in addition to those that may he already been put into place to avoid repetition. >> suzanne: it may nfusing i think t some of our viewers to be examing the system that failed wle athe same te we're currently trng to rewrite theules. how doyouee those two processes working sort of side by side. >> i think it' a little bit like a position. the first thing the position tries to do is listen to your comments, test -- take laboratory samples and tn diagnose what your problem is. once that's determined, thenyou moveo the questioof recommdation. so our j is gng to be to look at whatas happen, to build a historical record, try to understand what that record says in terms of the

future and make recommendations as the pikora commsion did that has served the nation very ry well. >> suzan: i would be remiss if i didt ask you what types of reforms that you would like to see see come out of the finaial crises we've all been living through in the last f years. >> i will swer your qstion t i will say i hop all th members going into this process withs much of an on mind as possible becau it's going to beery importantthat wereach a consensus if e recommendatis of the commissi are going to be helpful. i woul say one thing. i'm interested ilooking at is there were someountries which avoided this crises, countri like australia a new zealand and to large extent canada. what did they do tt we d muof western europe didn't do, which contrited tour problem and theiravingotten throug this situation

relatively unscaed. >> suzanne: enator we have to leavet there. gooduck with your endeavor >> thank you vermuch. >> suzne: my guest this evening former senator bob graham. >> suzan: cash for clunkers ared to life today with lots of america hoping uncle sam will put them in the driver seat. thgovernment program gives buyers up to $4,500 to trade their old models forore fuel efficiencars and trucks. buyers are alrdy flooding showrooms and alst 16,000 dealers nt to take part. the program's weite cars.gov has also been by with a million and a half hits so far.

cash for cnkers ends november 1st or wnever the billion dollars set aside to cov the program runs out. paul? >> paul: suzannecongress hasn't ruled out givg the green lighto another auto rebate down the road. let's take a look at ourtocks in the newtonight.

and those are the stocksn the news tonig, suzanne. >> suzanne: paul, thursd marks medica's 44th birthday. as the nation tales health care reform, manhave suggested usg medicare as a cost-saving model.

so this week, 're looking at the program, the progress 's ma, and the challenges it still faces. first, here's a quick cour on the basics omedicare. medicare is thfederal health inrance program for people 65 and older. the program cors about 45 miion americans including peop younger than 65 with permanent disabilities. medicareas originally set up to provide hospital and dical insurance. but no prescription drug coverage. today, the pgram h four parts. parts "a" and "b" e medicare's hospal and medical insurance. part "c" is the medire advantage progm. an option lettinpeople sign up foprivate health insurance plans that provideedicare benefits part "d" is thvoluntary prescrtion drug benefit signed into law in 2003.r th year, medicare costs are expected to totaalmost half a trillion dollars oabout 13% of the deral budget.

even if you're not on medica there'a good chance you're paying for it. 41% its funding comes from payroll taxes. th money is put into a trust fund that pays for befits. but medicare snding now exceedrevenues. and e trust fund is projected to dry up in eight yrs. the medicare math won't ge easier. the number of peop on medicare is eected to balloon to 79 million by 203 as baby boomers e. tomorrow, we'll talk healtcare reform with dicare's former administrator,octor mark mccleln. >> paul: also tomoow, fighting foreosures. thnation's big mortgage firms head to the white use for a pow-woon loan modifications. >> suzanne: say goodbye naked short sellg forever. the sec today made permanent temporary le banning the prtice. short lling is where investors bet against a stock, browing shares to ll, then buying them when the price falls.

naked shorsellers never borrow the shares in the first ple. the temporary n was put in place last fall the height of thstock market's turmoil. >> pl: say hello to a new head of british bank lloys. he's winischoff former chrman of citigroup. bischoff has a challenge aad of him. lld's banking group lost billions of pounds orisky loans that forced the itish government to ep in with a hugeescue package. bischoff tak over on september 15.

>> suzne: here's a look at what's happening tomorrow. tonight's commentator sa when it comes to healthcareeform has to be done right. he's mark zandi chf onomist at mdy's economy.com. >> health care reform done right wille a boon to our onomy. if done wrong, reform wille an economic albross. the right ki of health care form must do two things. first, it must be cribly paid for. insuring the uninsur is very importt, but this will be expensivand it can not be covered byimply wringing out cost savings elsewhe in the health ce system.

there st aren't enough savings to be had year in and ar out. second, heal care reform must lower the growthn future health ce costs. this is critical to reininin long-term defits. far and away the most significant reasonhy the government's debt lo threatens to balloon out of corol is thatealth care costs are growintwice as fast as overall inflation. e best way to accomplish bot things is to sca back the tax exclusion on employer prided heal care insurance for those with very expensive alth care plans. this will ise lots of money to pay for the uninsured and willlso force higher income households to more cefully shop for tir care. with circumsct shoppers, heth care providers will be forced to be more jucious in their pring. unfortunaty this isn't the rection policymakers seem headed. other potentl solutions being debated either rely on accounting gmickry to pay for e uninsured and/or do nothin out slowing the growth in long-term health carcosts. unless t debate soon changes, this is a rerm not worth doin

this is mark zandi. >> paul: rapping today's market aion stocks turn sitive late in the day. the dow gains 15 points. and the nasdaq addalmost two points to learnore about the stories in tonight's broadcast, watch our streaming video d to take part in our day blog, go to "nigly business report" on pbs.org. you can also emails at nbr at pbs.g. suzanne: that's "nightly business report" for monda july 27. i'm suzanne pratt goodnight, everyone. and good night to u too, paul. >> pl: and you as well, suzanne. i'm pa kangas wishing l of you the best of good buys. "nightly businesreport" is ma possible by:

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