10 months lar, looks like the toxic acids are still hanging around. we talked with elizabh warren, thwoman appointed by cgress to keep an eye on the787 billion an. >> very impressed. very impressed. i -- u know, i'd aost trade in my w for this thing here. >> susie: thas what general motor's co fritz henderson was hoping for as g.m. gathered wit consumers for a test drivef the new cars in stock. >> paul:stocks stumble.

dickbovay says there trading on fumes, not reality. >> susie: it may be 100 degrees the shade in some parts of the country t the naon's retailers are thinng saters d coats for christmas they're busy thinking of new wayso ring up sales ts holiday ason. paul: i'm pau kangas. susie: i'm susie arib. this is nitly business report for use it, august 11th. th program was made possible by contributns to your pbs station from viewers likyou. thank you. 7//& captioning sponsored bwpbt

>> susie: hazardous to the econy's health. thatas the warning today from the congressional watchdog monitori the government's bailout of the tion's banks. according to report from the congressional oversht panel, banks still have plenty problem loans on thbooks and thatould threaten the economi recovery. how bais this situati? stephanie dew talked today with the panel' chairwoman, elizabeth rren. >> how vnerable is the financial stem to the toxic asse? >> what's vulnerable -- it's vulnerable in two waysfirst, mostf the toxic acids -- assets th were there in oober are still thereith all th implications terms of as they n't pay off, they run the risk ofringing the bank down the seconds so long as these assets remain onhe bank's books, every time they get capil in, they use it as sort of a hedge agnst those assets rather than turni around and lending that capital. so it gets in the way of small

buness lending andther things we ne to get the economy restarted. >> how lg will the treasury's private investnt program go towards cleaning up thisess? bottom line is we really don't know. it's got two problems with it again. the first is whether or not sort of the ientives the trsury isffering to get to get people buy the assets will b enough toridge the gap betweenthe amount the banks are carrying these assetsn their books and what mos buyers think i the true value. e second big problem with th treasury's progras it oks only t securitytizedortgages. those are mostl the way mortgages are heldn large financial institutio but in th mid-sized a smaller fincial institutions, they're held as whole loans, that is t institutio the bank,olds the ole mortgage andhe treasury'srogram doesn'tdo

anything for those. so treasury once again is focused on the very big guyut not on t rest ofheanking stem. >> theeports suggest th banks wi need a lot more mono. >> we're really tryingto see. we have to tak a loo througut the banking system, nojust at the two dozen big, big banks. andhe reason for that is we have to look at the smaller banks, notnly do they hold mogage that has won't be tohed by the treasy's prram, in addition, theyarry a diroportionate share of coercial mortgage that has will sta maturing next year or thyear after orhe yearafter that and are predictedo have terrible default rates. also keein mind, the mall banks have n had the sess test tt the bigger banks had and smaller financial stitutions from more trouble raisg capital so all of thes mean that the just dow from big

medium-sized and smaller financial institutions, the are a lot of risks there and we're really suesting treasury needs to taka very close look. rememb, these are the financiainstitutions that do most othe small business lending in arica. >> most of the folks on the oversight panel you cha agreed but congressman jeb id that rhaps the toxic aet problem isaking care of itself and thaturther gernment inrvention might be counterproductive. does the government need to be pumping more money in the banking syst? >> i want to start by sayg i think th maybe he shod reread this rert carefully. the report doesn't call for ending more money in thiarea area. at the report says is that the wa treasury plan topend its money mayot accomplish the ins we identifieas needed. wh we're really trying to get a focus on in the rort is to point t t danr areas an say once again, we srted

this problem witoxic assets. we spent $700 billion and we stabilized the banks but we didn't yet de with the toxic asset problem and we've got to do that to save our banks and to get our economy bac on track. >> there's a lot of coern about the tarp progra it's become a $700 billion slush fund for thereasury. when the banks repay the mey, it's not getti drawn down. is that the way this program should be handled? >> i tnk this is a sious problem and the best i can s is that congres gets what congress wte in this statute. the state saks of a ceili of $700 billion of whic treasury cannot go. treasury takes t position that means when moy comes back to pay down that that gives easury as they describe morehead room to be able to use that money in otherplaces where

it's needed. quite frankly, if that's not what congreswants, then congre has to be more specific inhe legislation. my guest today, elizabet warren thank you so muc >> thank you. >> susie: citigroup is one of e biggest beneficiariesf the gornment tarp funds. the ba said today the program helped toncrease lending during the second quaer $ billion worth. most of the loans went to state anlocal governments as wl as mortgage lenders making more money ailable to new home buyers and homwners looking to refince their mortgages. >> paul: wall street >> paul: wall street heade broadly lower at the outset th the bank stocks leading e seoff after analyst dick bove' made cautious commts about the sector profit ting also helped to send the dow off 101 pois an ur into trading with the nasdaq down 24 points. thlosses persisted as buyers re scarce ahead of tomorrow' fed desion and statement, but a well-bid threeear t-note auctiohelped stocks show a slight late improvement.

the dow closed dn 96.50 at 9241.45. the sdaq dropped 22.51 to 1969.73. e s&p 500 lost 12.75 to 994.35. in the bond market, the 10 yr te rose 26/32 to 95 18/32, putting the yield at.67%. 600 trillion mart was a key contbutor to the financial crisis. now,he white house is proposing that allerivatives anthe companies that trade them will be subjecto federal regulation a clearg houses will be created to provide transparency.

derivativesegulation would be shared by theecurities and exchange commission and the coodity futures trading commission. >> paul: it looks like customer extement over the cash for clunkers program istarting to sputr. edmunds.com ys interest in the program peaked jy 29th but has fallen 15% since then. the auto research firm says if current tren continue, sales will fl back to precash for clunker levels ithe next 10 days. over1 billion ha been spent on rebates for almost 2 50,000 new vehicles. th helped ph july vehicle sales to theirhighest levels in almost aear. >> susi general moat or he s says -- general motor he has sayshe chevy will give more drivers more driveor their money. the volt only usesas0% of the time. the other 90% isowered by baeries. the car hidealers' lotsate next year. one of 25 newehicles g.m. is

rolling out over the next two yes to get the vicles right, the compy is figuring out what consumers like and don't like about its products. diane joine 100 consumer at has could help g.m. design its product of the future. >>eporter: they came from bost, seattle, and parts in between.... >> this is sweet. everyone should ha one of these. >> reporter: . to get behind the wheel of general motors hottest products. >> how areou today, sir? >> reporter: ts week, at-m's expense, 100onsumers from around the u.s. came to e company's st track near detroit to bn a little rubber, eck out vehicle interiors i like that. >> reporte and give ceo fritz henderson an earfuabout what they wt and don't want in a car or truck. >> if i want a camero don't want a four door. >> we'll sell you a came. ere's one right there. >> it doesn'have 4 doors. >> reporter: henders says this firsof-its kind eve for the auto maker refles how the new

g-m is doing business. he thinks the company n sell mo vehicles by listening more carefully to amerin consumers and king them tough questions. >> how do we appeal tohe buyers beten 16 and 30? historical, this was an area that ptiac was focused on and we certainly belve that what we havcoming into the evrolet showroom, that we ha a lot of excitinproducts for thosconsumers. but iteminded me that we have a job to do. >> reporr: this confab comes just one month aft g-m emerged om bankruptcy. many of the consumers here emailehenderson with questions about gm procts or have an interest in design or marking. boston architect rayshide pped into his knowledge of design when he got bind the wheel of the redesigned buic lacrosse. >> it very nicelcombines some slick elements of design witut being too over theop. >> repter: mark darren walker was invid because he's never been a g.m. fan. i'm a bmw guy. so, wh i get ouhere i'm looking at perfornce the handling aspect of it.

>> reporter: aft test driving thcadillac cts-4, walker conceded he could beme a gm convert. >> the engine was very responsive. there was a little draon it but i guess that was becausef the per charger kicking in. i would have preferred little more active epping on the gas, but other th that it's a very pressive automobile. >> reporter: g will survey these consumers about the products they dre and keep in toh with them in the future. the company isn't suref it will hold mo events like this, but henderson promes the auto ker will do all it can to wi the heartsf american consums. has new day dawned at gm? >> yes. for sure, for sure. >> reporter: diane easbrook nightly busine report, milford,ichigan.

>> paul: bernard madoff's rht handan is coorating with prosecutors and fra says madoff wasn't ale in commting his crime. the former cfo at mado's firm pleaded guilty to 10 criminal counts today incding conspiracy, securities fraud and falsifying records. he was denied bail andrdered to jail. he says th others helped madoff carry outhe $ billion ponzi scheme. he didn't say whthe others ar he faces up to125 years in prison. madoff is sving 150-year sentence for masteining one of the rgestinvestment swindles ever. >> sie: c.i.t. group waved a red flag today, ying there's ubt about whether it can sta in business. the problems: credit-mket stressoperating losses, and credit-rating downgrades the century-olcommercial

lender dayed filing its quarterly report with the e.c. toy, saying it needs more time to worout a restructuring plan with bondholders. if that plan falls throu and it can't get other financi, c.i.t. cld be forced into bankptcy. pa. >> paul: susie, cishares were amonthe big board's big movers. we'll sethem in just a moment as we take a look at ourtocks in the news tonight.

>> reporter: wk into any clothingtore, and it's clear the crial holidaseason is fast aroaching. despite sweltering temratures outside, you'll findlenty of winter ite inside. but shoppers may nice some subtle changes in the merchandise mix. off-price retailer daf's, for example, is offering more practical clothing and less gh fashion. the compans president, marcia wilson, says that's at customers want >> i think that ere's a

definite cnge in the mindset of the consumer. and i think that trey items that are going to lastne season are not gng to be quite asalatable to them as something clasc that they can ar season after season. >> reporter:acy's, on the otr hand, is tailoring merchandisto specific stores. cashiers keep track of t sellers d customer requests to stock the sales floo accordingly. many mchants, even luxury chains le saks and coach, are offering more lower-priced gds to entice custers. thesaren't the only changes mercnts are making as they try to cope th the weak economy. many stores e reducing inventy. they'd rher run out of hot items than rk heavy markdowns athe end of the season. retailers have everyeason to be nervo. last year, many chains rorted a dramaticecline in sales, leading to a sw of bankruptcies retail expert howa davidowitz sees morcarnage ahead. >> it will be en worse than la year. re bankruptcies, more store closings.

were going to close hundreds of thousands of stor. we are going to close thsands of shoppincenters. it's going to be even worsthan last year, which was t worst. >> reporter: it's no wder many stores are playing it safeith merchandise cks. however, retail analt brian tunick wns, in some cases, the strategy could backfire. >> you have to finnewness. something she don't have in the oset. ifou are trying to compete on basisweaters or basic denim or bac knit tops, it's just a bad thing foyour top line. >> reporter: t emphasis on lue is expected to last beyo this year. analystsredict it could be other decade before consumer spendingeturns to its 2007 high. erika mier, "nightly business report," new york. >> pau tomorrow, the fed policymakers wrap up a two-day meetg. we'll dissect their statement on the economy with panel of expes. >> susie: micro blogging web

sitewitter was down again day. e outage was brief and twitter's 44 million users cou tweet again. no the question is what happen? st week, twitter was attacked by hackers leaving the site off-line for seval hours. rivals like facebook re affeed in thatttackut not efcted today. >>aul: a sign today that there's still weakness ithe economy. atticus capital, one othe most respectehedge funds, is closing two of its 3 fun. its foder, timothy barakett, is stepping down. he says the decision wasurely personal. sharolders will get back their $3 bilon by october. atcus will continue to run its billion dollar european nd. euub

>> susie: the feral reserve wrapup its two-day policy meeting. alsoomorrow, international trade numbers for jane je and quarterly tdss results from retail giant macy's. >> susie: when icomes to banker's pay, tonighs commentator says the financi crisis has dramacally changed exctations. 's francesco guerrera, u.s. finance d business editor at "the financial times." >> how much a bank is worth? the question is s to exercise

poticians, regulators and wall street ecutives for months to come. bere the devastating fincial cris we've just witnessed, few americansbegrudge the fabulous paid packagesommanded by finance. some experts pnted to the miions of dollars earned dealmakers and traders as example ofhe aspects of the american dam. those who work har and he superior skis will receive superior rewards. that argument is no longer heard very often, not afterhe u.s. government h to use billion dollars of taxpayers' money to rescue banks from a crisis largelof their own making. not the middle of the worst recessn since the grt depression where nearly one in 10 americansre unemployed. a lot poor and arier than before the crisis. neverthele, u.s. nks will have to pay theitop pple somethg if they want to prevent the brain drain to foren competitorshedge funds. especially many wall street firms report robust ofits this year. how ch of that should go to

the people that oduced it? not much asefore and not as much as t banks expect. theinancial industry wants to win back publ support or at least publicolerance. they'll have to dispy two qualities, contrition and restraint. even if th banks may reap a profit, even if the economy imoves, the banks and their leads will have to show a skeptical public thewill not take advtage of taxpayers' generosity. greed no longer good in america. >> paul: recappingoday's market actn, stocks fall on cautioahead of the fed's policy announcement. the dow dropped 96.5 pointand the nasdaq fell 22.5 points. learn more about the storie in tonight's brocast, to watch our streaming video d to take part iour daily blog, go to "nightly business reporton pbs.org. you can also email us at nbr@pbs.org. >> susie: a luxuryesort in san

diegis doing its best to appealto cash-straed coumers. the rancht rancho bernardo n is offerin much ler prices in change for fewer amenities. for just $19 a night, gues can buy the rvivor package and they'll get whathey pay for a room with noed, no air-conditioning and nlights. for that price, y're provided with a tentut you have to bring your o sheets and towels tols. so, paul,bout two dozen cuomers took advantage of this promotion whent was first offered in june. believe it or not. >> paul: who'saking advantage of whom here is the estion? fo$19, i think the resort ought to pay the customers f that. >> susie: gives wheew aning to survivor. >> susie: at's "nightly business report" foruesday, august 1 i'm susie ghib. go night, everyone, and good night to you, paul. >> paul: good night, sie. i'm paul kans, wishing all of you the best of good buys.

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