captioning sponsored by wpbt >> susie: when it comes to when the fed will hike interest rates, richard fisher of the federal reserve bank of dallas is not a gambling man. >> i'm unwilling to wager on that, because it depends on, again, whether or not this economy keeps moving forward. i don't think we're going to go into reverse gear, but i do think we have an anemic recovery. it will take a while. >> tom: stay tuned for our exclusive interview with fisher. we get his take on rates, the fed's exit strategy, and job creation. you're watching "nightly business report" for tuesday, march 2. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. >> susie: good evening, everyone. a top federal reserve official tells "nightly business report" that interest rates will "not" be going up for "some time." tom, just a short while ago richard fisher, the president of the dallas federal reserve, told me the economic recovery is "anemic"-- his words-- and so it's unlikely the fed will raise rates for a while. >> tom: susie, fisher also says there's a lot of slack in the economy, and so he's not worried about inflation right now. >> susie: i began my exclusive interview by asking fisher to describe the health of the u.s.

economy. >> it is not robust, burr it is improving. we have come off, as you know, a horrible crisis. we had a very stout number for the last quarter. a lot of that was inventory- driven. if you strip that away, it indicates a slight pickup in activity-- not sufficient to reduce the unemployment rate, and so this is going to be a long haul. it's a slow climb. >> susie: the jobs report comes out this friday. everybody is going to be looking for job growth. when will we see substantial job growth? >> when businesses regain confidence. they've gone through what i call post-traumatic slack syndrome. there's so much slack in the global system. there's excess capacity. and we went through a period up into the middle of 2008, everyone was worried about inflation-- what was coming in the door was so expensive, sending it out the door, could you raise price or not. the gears stopped and went into

reverse during the financial crisis. but businesses have continued to try to cut costs to make profits, but they haven't been able to lift their top line, their sales volumes lines. and until they do that and they feel they can continue to do it, i don't think they're going to rehire again, so this will attack for a while. >> susie: what about the unemployment rate? has it peaked? does it go down from where we are now? >> it may bounce around at current levels, because there are a lot of people who aren't on the unemployment-seeking roles. they've given up-- quite a few, actually-- and when they come back into the system, looking for jobs, they'll be counted in that count. so your viewers need to understand, there are a lot of people who have removed themselves because they've given up. what we want to do is get the people back in. i think it's going to take a while. the fed has been saying it going to keep interest rates low for an extended period of time. and i have been polling your colleagues at the fed to define exactly what that

means. fed vice chairman bill dudley told me at least until june, maybe a little bit longer. how long is "extended period," in your view? >> i don't think you can be very precise about that. it depends on the circumstances. by the way, just for the record, i wasn't in favor of that language in the beginning. it's our actions, rather than our words. but we do operate in a committee, and a majority of the committee felt-- a significant majority, by the way-- that those should be the words used, and it signaled to the market we were going to keep rates low, because we were worried about the economy. and until the economy picks back up, it's unlikely the rates will increase. we have to look way down the road. but right now, i don't think that's going to lag for some time. >> susie: when do you think... when is "some time"? >> i'm unwilling to wage on that, because it depends on, again, whether or not this economy keeps moving forward. i don't think we're going to go in reverse gear, but i do think we have an anemic recovery. it will take a while. >> susie: but how long can the fed keep rates at 0% and not

stir up inflation? >> well, it depends on what the demand pull forces are, cost- push forces that come. i guess the real issue is whether or not we keep rates this low, do we encourage speculative bubbles elsewhere? some of my colleagues are worried about that. >> susie: are you worried about that? do you see them cropping up anywhere? >> i don't see them right now, but i think we always have to be vigilant on that front. >> susie: what do you think is the appropriate rate for inflation in the u.s. economy? some economists are saying up to 3%, it's not a problem. >> i disagree with that. as you know, i'm one of the most hawkish members of the committee-- not because i come from texas and we're hawkish people, but i think 1%, 1% to 2% max, because if you're not careful, things can get away from you. and there's been a recent academic paper which has said maybe we ought to target 4% or more. i firmly disagree with that. >> susie: do you see any inflation now? are you worried about inflation now? >> no, in fact we're seeing pressures that are in the opposite direction. part of it has to be with the entrails of the number, by the way.

oddly, the last number that was reported, it was luggage that was one of the most interesting, of all the variables, that drove this number to a very negative territory-- not very negative, a slightly negative territory. there's too much slack in the system right now, and, again, until we employ the biggest factor, labor, until some of this excess capacity worldwide-- which is gradually working off-- gets back into better demand configuration, then i think, even as a hawk on the committee, i am less worried about inflation in the short term. if we do our business well, then i won't worry about the intermediate term or the long- term either. >> susie: let's talk a little bit about the fed's exit strategy. recently when the fed raised the interest rates it charges banks, it said this was the first step in normalizing banking conditions. what's the next step? >> first of all, we normalized a lot. we create emergency facilities. we did what we said we were going to do, and we undid it. the commercial paper facilities, other special facilities, it got so much attention, they're now being wrapped up.

>> susie: is the fed going to drain now millions from the financial system and then raise interest rates, or are both of these going to happen simultaneously? howes this going to play out? >> it depends on the circumstances. we have several tools we can use. we can deal with the interest rate we've had in the reserves, that's a new tool that we have. we have issue time depos to it the banks that have excess money on our balance sheets. we can sell out rights on the mortgage backed securities we have, we can also raise the base rate at which banks lend to each other. it really depends on what's happening with the economy. >> susie: richard, another issue that's worrying investor is this is whole debt crisis in greece and europe and the concern is that could it create a second round of the financial crisis. what do you think? >> i don't think so. and it is something of course that everybody is concerned about, the markets are watching very carefully, it's something that occupies the

european central bank. the one thing that is a positive that comes out of this, and i like to remind people of that, is it shows the virtue of an independent central bank n. the old days what the greek was do in this circumstance is turn to their central bank to float that dealt, inflate their way out of it, debase their currency, and they wouldn't get the fiscal discipline to pull their act together. they don't have that choice now, because the european central bank is independent. there is a euro, they're not going to debase the currency for any one member country. so those that are responsible for fiscal imprudence will have to pull up their socks and get their job down. that's true in greece, ireland or even here in the united states. >> susie: fisher also told me he's not worried about mortgage rates going up as the fed backs out of the mortgage market. you can watch the video of my entire interview with fisher or read a transcript of it on our website, nbronpps.org.

>> tom: here are the stories in tonight's n.b.r. newswheel. while the closing wall street numbers are higher, the major indices barely held on to their early gains by the time the closing bell rang. the dow ended up just two points. the nasdaq was up seven. and the s&p 500 gained two. kentucky senator jim bunning is standing firm, again blocking the extension of unemployment benefits and health care subsidies for 400,000 americans. bunning says the bill would add $10 billion to the budget deficit. saturday mail delivery could soon be a thing of the past, as the post office struggles with $7 billion in red ink. the postmaster general told congress today he wants to cut back to just five days of delivery and hike postal rates to combat the agency's growing red ink. >> susie: on friday, lawmakers are expected to roll out a bill to reform the nation's financial system. a key element is a new agency to protect consumers against things like credit card and mortgage fraud. senator chris dodd is proposing to put the federal reserve in charge of that consumer protection unit. other democrats are opposed; they want it to be an independent agency or based at the treasury.

i asked dallas fed bank president richard fisher about that: can the fed really be a watchdog for consumer interests? >> i think we can always do a better job at anything we dochl we're working hard to do a better job on this front we i think we're doing a better job, we're trying to do well. it will be up to the congress to decide where they vest that particular aspect of bank regulation. >> susie: meanwhile, barney frank, head of the house financial services committee, calls the proposal to put the consumer watchdog at the fed a "joke," saying the house will not accept it. >> tom: toyota's loss was its rivals' gain when it comes to last month's auto sales. general motors reported a 12% sales increase. but with a 43% surge, ford outsold g.m. for the first time in decades. there was some good news for chrysler, too. sales inched up by 0.5%-- not much, but that's the automaker's first increase since december, 2007.

at toyota, sales fell 9% amid its massive recall and sales suspension of some popular vehicles. honda posted a 13% increase, boosted by sales of its accord mid-size car, which competes directly with toyota's camry. >> susie: some automakers may be required to change the way they equip vehicles so the brake overrides the gas pedal. the national highway traffic safety administration, or nhtsa, is considering the move. it's in response to consumer complaints about unintended sudden acceleration in toyotas. nhtsa administrator david strickland today is still investigating problems with toyotas. he says a toyota document that brags of saving $100 million by rolling back a nhtsa safety investigation has no foundation. >> the claims that toyota made about their negotiations or influences is false. the things they claim in that document are like me claiming i was responsible for the sun

rising this morning-- absolutely false. size toyota says it will have a brake override system by the end of this year and will also retrofit some current models to have the safety feature. >> tom: still ahead, get your portfolio passport ready. tonight's of mutual interest looks at international mutual funds and whether they provide you with the devirs fi indication they promise.

>> susie: the dow seems to be taking baby steps to breaking its record. >> tom: ever so slight gains today to pull into positive territory. let's take a look at that market focus. >> tom: we saw basic material stock buying and corporate buying in that sector help lead the market, even as stock prices slipped from their earlier gains late in the day. metal and mining stocks helped push the metals and mining exchange traded fund to a five- week high. this fund is made up of plenty of steel and coal stocks, the broader basic materials e.t.f. that includes chemical, paper and coal stocks, in addition to metal makers and miners. coal stocks were hot today, with a couple of them among the best percentage performers for the s&p 500. with today's 4% rally, massey energy stock is less than a dollar away from a new 52-week high.

there's market speculation that massey may be on the cusp of a buyout offer for patriot coal. patriot saw a huge volume increase today, up more than three times average. the companies are not commenting. separately, oil prices jumped as the dollar dropped, and gasoline refinery stocks ignited with some buyers. tesoro was the second best percentage gainer of the s&p 500 index, up 5%. that's a new five-week high for sunoco. and valero seeing heavy than usual volume. these stocks have been hit thanks to a drop in profit margins and too much gasoline. we have a new chapter today in the two-way buyout fight for fertilizer maker terra industries. shares of t.r.a. continue climbing to new highs on big volume. today's buyout offer from c.f. industries values the stock at $47.29 based on tonight's closing price. here's the two-way fight for

terra. for a year, c.f. has been trying to buy terra and today upped its offer to cash and stock totaling $4.7 billion. terra already has agreed to a lower but all-cash $4.1 billion buyout from norway's yara international. the yara deal values terra at $41.10 a share. some pre-earning news fueled big volume in qualcomm, making it the biggest s&p 500 gainer on the day. qualcomm stock saw a nice pop today after hitting almost its lowest price in a year yesterday. the wireless technology company says its quarterly profit would meet or beat its best estimate. this came a day after the company announced a new stock buyback plan and raised its quarterly dividend. it wasn't good earnings news at staples, and that hit its competitors as well. the office supply retailer saw earnings come in a penny lighter

than expected. more worrisome was its 2010 forecast that was disappointing. staples stock quickly dropped to match its year-to-date low. its disappointing guidance also hit competitors office depot and office max, falling 3% and 2% respectively. nutrisystems stock went on a diet after its weak 2010 outlook. with a tenfold increase in volume, the stock is at a four- month low. from food issues to food and drug questions, the f.d.a. countered a stock analyst report today regarding drug development firm dendreon. the company is developing a prostate cancer treatment and the f.d.a. says it will not be reviewed by an outside panel. the stock hit a new 52-week high on the drama. and finally one small cap, one medium cap, and one large cap. continental airlines saw demand increase in february, but the two east coast snowstorms cost it $25 million in lost revenue. mid-cap arena resources owns oil and natural gas reserves.

the stock plummeted on disappointing earnings. and the small cap genetic testing firm sequenom scored a couple of analyst upgrades. tomorrow, retailer costco is due out with earnings. and that's tonight's market focus. if you have sent your investment money overseas this year, you've seen less of it come back. international mutual funds are down more than 4% this year, according to lipper. in tonight's "of mutual interest," giving your fund portfolio a passport.

guest john waggoner is the mutual funds columnist at "u.s.a. today," and joins us from our washington bureau. john, welcome back. >> thanks so much. >> tom: are international funds truly an effective tool to deverse file one's investments as they're sold? >> you know of, if you ask financial planners they tend to say put a lot of money in when international funds are high and they tend to recommend less when international funds are low. i have my doubts about their helpfulness in a portfolio. i think that you could probably get along with a small amount, you'd be fine. >> tom: what type of amount? anywhere from 10%, or a larger percentage in overseas investments? >> i'd say 10 to 15. to be honest, try to imagine one time, try to think of one time when the market has fallen by a great deal, say 200 points on the dow, and the rest of the world hasn't. they almost always do, the world falls when wall street falls. the world does not necessarily rise when wall street rises however. so you have a high correlation on the down side and not such

a great one on the up side. >> tom: but it has a low cost way to diversify their investments outside the united states which is supposed to hold on on volatility? >> it does give you bigger pools to fish in. but if you think about large company stocks, most really big international companies are in fact sold on u.s. exchanges in the form of american depos taer reseats. so your average large cap u.s. domestic fund probably has a big slug of those in its portfolio as well. >> tom: let's take a look at some of the names you brought along with you for folks to consider. one is not even a mutual fund, it an exchange traded fund, spider world x u.s., this is basically buying the world except for america. what makes this one stand out? >> well, it's kind of neat, you get a very broad diversification, you get all the world except the u.s., which we assume you already have, for about one-third of a percentage point, which is not much. so you can really get the whole world for very little and that's a nice deverse filer for you. >> tom: you did bring along

one international mutual fund, sextant international, ssifx, and remarkably this chart looks an awful lot like the exchange traded charted we just looked at >> it a nice little fund, it's small, it's been run by the same person for about 14 years, it's outperformed its peers consistently. and i just think it's an interesting kind of undiscovered gem among international funds. >> tom: does it have a favorite part of the world at this point or is it spread across the world outside the u.s.? >> it's spread across the world. and what i like about it is it's basically a large cap fund, so you're not going to see a lot of vietnamese stocks or very small emerging market stocks. but generally solid large cap companies and it's a nice diversified portfolio. >> tom: so many investors like to look to international to look at different currencys and there is a exchange traded fund that you can get directly

against the dollar, ticker symbol udn, this is a direct currency play? >> absolutely, and you can argue that most of the diversification you get is because of the currency. to get an international fund to movie really you have to have foreign stocks go up and the dollar go down, which benefits u.s. investors. that's not unheard of, but it's also not the most common occurrence. >> tom: the three funds we mentioned, any disclosures tonight? >> no, i'm good with all of them, i don't own one of them. >> tom: all right. our guest this evening, john waggoner, mutual fund columnist, you can read him at u.s.a. today. >> susie: here's what we're watching for tomorrow. >> susie: here's what we're watching for tomorrow. president obama will lay out a revised health care proposal that he hopes democrats in congress can pass. plus, the federal reserve releases its "beige book" survey of regional economies. also tomorrow, we'll take you behind the scenes at retail giant lands' end and show you how it's using quality and customer service to set itself a part from the competition. three million cablevision

customers in new york city could miss out on one of the year's biggest tv events: the oscars. it's part of the latest showdown involving cable companies, networks, and fees. this time it's abc parent disney versus cablevision. the dispute centers on whether cablevision should start paying additional fees to carry a local abc station as part of its basic package. cablevision doesn't want to. abc says it will pull the plug sunday without an additional $40 million a year. >> tom: apple is suing rival smartphone maker h.t.c., accusing the taiwanese company of violating patents on its i- phone touchscreen. today's suit can be construed as an indirect attack on google, whose android operating system powers h.t.c.'s nexus one phone. apple wants a block on u.s. sales of the company's android phones. h.t.c. says it's reviewing the suit. this is the latest patent fight in the smartphone business. others involve nokia, research in motion, and kodak.

>> susie: the treasury hopes to earn over a billion dollars tomorrow as it auctions off its bank of america warrants. that money will go to pay down losses on the tarp bailout fund. right now it stands at $117 billion. the president has proposed a tax on big banks to help cut those losses, but tonight's commentator thinks it's a losing proposition. he's douglas holtz-eakin, president of d.h.e. consulting and former director of the

congressional budget office under president george w. bush. >> the administration should scrap its proposed $90 billion bailout tax on the biggest banks. now, you guys with the pitchforks: stop right there. the taxpayers should get their money back. and i'm not defending banks, but let us aim higher than the moral equivalent of getting lit and punching a bank. the law is that by 2013, the president has to propose a way to get back the taxpayers' money. waiting makes sense. the last thing the economy needs now is more credit problems and the bank tax will make things worse, not better. economics is ruthless: we might want the tax to come out of bonuses, but more likely it will diminish loans or raise borrowing costs-- and waiting means we might have a clue exactly what the taxpayer is owed. over time, the estimated losses have literally ranged from zero to $700 billion. why not let the dust settle and get the right amount? and if the goal is to get the cash back from those who lost it, the obama tax doesn't make any sense. the big money losers weren't

even banks; they were a.i.g., car companies g.m. and chrysler, and car loans like g.m.a.c. when confronted with this, proponents switch to arguing the tax is an incentive to change risky bank practices. if it is, then it belongs as part of comprehensive financial regulation reform, not an isolated tax. banks and their bailout are really unpopular. fine. this bank tax is premature, ill- designed, and unwise. drop it. i'm doug holtz-eakin. >> tom: that's "nightly business report" for tuesday, march 2. i'm tom hudson. good night, everyone, and good night to you, too, susie. >> susie: good night, tom. i'm susie gharib. thanks, everyone, for watching. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org