>> because of everyone pushing the envelope, pushing the envelope, the end product was garbage. >> susie: that's the former managing director at moody's investor service, talking about the wathe nation's credit rating agencies do business. >> tom: lawmakers say those agencies were supposed to protect us from risky investments, but instead helped fuel the financial crisis. you're watching "nightly business report" for friday, april 23. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. on capitol hill today the focus was on the role of credit rating agencies in the financial crisis. and, tom, lawmakers heard a lot of excuses from executives of some of the top agencies. >> tom: susie, those former executives told senate investigators about conflicts of interest and pressure from wall street investment bankers. they said those factors were part of the reason they issued high ratings on mortgages made up of sub-prime loans. >> susie: today's revelations could lead to ratings oversight in the financial reform bill under debate in congress.

darren gersh reports. >> reporter: senate investigators found the companies that crunched the numbers and awarded the a.a.a. credit ratings to sub-prime mortgage bonds were heavily influenced by wall street money. it's one reason investigators say the credit rating agencies delayed a massive sub-prime downgrade until july 2007. senator carl levin says that helped set off the financial crisis. >> those mass downgrades hit the markets like a hammer, making it clear the investment grade ratings had been a colossal mistake. >> reporter: industry insiders who warned credit agencies were trading their integrity for market share stopped short of declaring this was fraud. former moody's managing director eric kolchinsky says everyone along the chain, from the time a mortgage was originated to the time it was sold around the world, left something out. >> because of everyone pushing

the envelope, pushing the envelope, the end product was garbage. >> reporter: but when he was asked about the abacus deal at the heart of the s.e.c.'s fraud case against goldman sachs, kolchinsky said he didn't know hedge fund manager john paulson was betting against it. >> that's something i personally would have wanted to know. it changes the incentives in the structure. >> reporter: the ratings agencies' own incentives came under sharp criticism today. since wall street bankers pay for credit ratings, they often shop for a favorable opinion. former moody's executive richard michalek says analysts got the message quickly: being too tough would put year-end bonuses in doubt. >> clearly, if for any reason you were stopping a deal or delaying a deal or creating an issue with the relationship with the banker and moody's, that was a problem. moody's c.e.o. raymond mcdaniel says investment bankers never want a tough rating that hurts a deal. but while he pays attention to

market share, mcdaniel says he always puts ratings quality first. >> those are risks and they must be managed properly so the ratings system is not compromised in any way. >> reporter: the credit rating agencies are supposed to be the referee on the field and senator carl levin says their call should never determine whether someone gets a bonus. the financial regulatory reform bill doesn't address that conflict, but levin says it's got to find it's way into the bill when the senate takes it up next week. darren gersh, "nightly business report", washington. >> tom: more encouraging news on housing, new home sales surged 27% in march from february's weak pace. the gains snap four months of declines. it's the strongest sales pace since last july and the largest one month percentage gain in almost 50 years. lousy weather in february and the first time buyers tax credit that expires april 30 figured into the sales gains. economist richard dekaser is optimistic the housing market is stabilizing.

>> if you, for example, compare the first three months of this year with the first three months of last year-- which really does pretty much abstract away from these tax related issues-- you see a modest increase in the 5% to 10% range for home sales. that's what i think we're really looking at, not a gangbuster housing market, but one which is no longer sinking and showing some modest gains. >> tom: today's report also put the average new home price at just over $258,000, relatively flat from a year ago. >> susie: here are the stories in tonight's "n.b.r. newswheel". wall street finished the week on the plus side, the dow rose 70 points, the nasdaq added 11, and the s&p 500 was up eight. volume on the big board edged just a little lower than yesterday. on the nasdaq, trading activity also slowed a bit. calling his country a sinking ship, greece's prime minister today formally tapped a rescue fund from the european union and the international monetary fund.

the 45 billion euro aid package should start flowing early next week. it's the first time a euro-zone nation has needed outside help. so far, no oil leaking from that sunken drilling rig in the gulf of mexico. but there's still a ten mile by ten mile sheen of oil floating where the rig had been. two lawmakers are already calling for a congressional investigation into the rig explosion. >> tom: still ahead, elkhart, indiana. it's home to the nation's r.v. industry and 15% unemployment. that number has been dropping. an economic update from the heartland. >> susie: multiple choice: the economy is strong. the economy is weak. none of the above. reports released today on manufacturing and home sales as well as an eight-week stock market rally say one thing, but slow job growth and weak forecasts say another. so what shape is the economy really in? the answer, as scott gurvey explains, depends on the recovery alphabet.

>> reporter: back when we feared the great recession would never end, we speculated on the shape of the recovery that economists assured us would eventually arrive. now that by many measures the recovery is here, it is obvious the letter the recovery most resembles depends on what indicator you are using. the equity markets have bounced like a "v", suggesting a strong recovery. a "v" is also good for consumers, who are spending again. but jobs have not returned strongly. that measure puts us in a "u" shape or maybe the dreaded "l". economist julia coronado thinks the recovery's true shape is still in doubt. >> we have tended in the past to see the deeper the recession, the stronger the recovery. we're not seeing that. if we were there, we'd be seeing number like 300,000 jobs created each month. instead, we're seeing numbers that are much more subdued. and you know the kind of deleveraging, the decline in debt, the decline in borrowing that we're seeing is something we've never seen before.

>> reporter: we are also seeing consumers pay down existing debt at record rates while at the same time, banks are not lending as they work to repair the damage done by the financial crisis. economist david wyss says he is worried about the private sector's ability to create jobs to replace those which have been generated by government. >> a lot of the growth this year is boosted by those big government stimulus programs. is that growth going to continue as that stimulus is taken away? particularly, are there going to be big cutbacks in state and local government spending as the federal government reduces its support for them? >> reporter: so what shape does the recovery most resemble, perhaps it's not a letter at all. >> i think it would be definitely not an "l" or a "u", it's sort of a like a square root sign, if i can say that. it's sort of a modified "v", so

you know, we went down hard and we're coming up more gradually. it's definitely not a traditional v-shape recovery. >> reporter: it was also not a traditional recession. on that, most people agree. for now, i suggest this shape: in a few years, with the benefit of hindsight, we'll revise this story. that's how the economists do it. scott gurvey, "nightly business report", new york.

>> notching up to new post-recession highs for the major indices on friday night. another busy earnings week comes with all three of the major indices finishing higher than where they began the week. the dow saw buying interest all five days this week. it was up 1.7% on the week. the nasdaq went four for five, but saw enough buying to end up 2% for the week. both the dow and nasdaq are up eight straight weeks. and the s&p 500 resumed its weekly winning ways. it was up 2.1% for the week. today, it was broad based buying, led by energy stocks, including services giant schlumberger. earnings were better than expected, even if they dropped from a year ago. the company is raising its spending outlook in anticipation

of more offshore business and drilling in russia. the stock responded very nicely to the results, jumping more than 6% on heavy volume. it's now at a new 52-week high. the results also sparked buying across the industry. smith international, which schlumberger is buying, weatherford, and baker hughes all rallied. it also helped that oil prices rallied to $85 a barrel. many companies have been detailing their costs to conform with the new health care law. drug maker merck says the law will cost it more than a half billion dollars through the end of next year. but that comes as a relief that it's not a larger number. the law cuts into drug sales by

requiring drug makers to give bigger discounts for medicare and medicaid patients. merck led the way higher for the dow. microsoft was the biggest percentage loser after its earnings call last night. the stock saw very heavy volume. another dow stock turned in its financial report card today. results were very disappointing for traveler's insurance, missing estimates by 15 cents. the earthquake in chile and east coast winter storms took their toll. the stock dropped a little less than 1% but on heavier volume. an old stock name is seeing some new life. xerox has long been known for its copier business, but it's been trying to remake itself into a more complete business services firm. first quarter results saw a huge jump from a year ago and easily beat forecasts. the acquisition of affiliated computer services helped. xerox bought that firm to spearhead its corporate makeover.

shareholders loved the quarter, bidding the stock to a new year and a half high. the firm also boosted its 2010 guidance which helped the buying interest today. >> susie: elkhart county, indiana has been a poster child for the ravages of recession. but now the home of the recreational vehicle industry is making a comeback. r.v. sales are moving out of neutral into first gear and r.v. manufacturers are hiring again.

while elkhart county is spreading hope to the rest of country, it's also spreading a message of caution. diane eastabrook reports. >> reporter: if you're looking for signs the economy's recovering, you'll find them in elkhart county, indiana where 70% of the nation's recreational vehicles are built. jayco, the nation's third largest r.v. maker, is building twice as many trailers and motor homes as it did a year ago. it's also hiring back many of the workers it furloughed during the recession. marketing director sid johnson calls his business a good economic indicator. >> our customers, while conservative, are also the type of people who can afford to do things that they want to do for their family. and so when there's an upturn, even in anticipation of a general economic upturn, they begin buying again.

>> reporter: this corner of indiana has traditionally been a barometer of sorts for the overall economy because it tends to lead the rest of the nation into and out of recession. the most recent downturn started here in the spring of 2008 when gas prices took off and the housing market tanked. those two factors caused the r.v. industry to collapse. as a result, r.v. makers like jayco, damon, and coachmen industries pink-slipped thousands of workers. by the spring of last year, the unemployment rate in elkhart county reached 19%. then early last fall, the r.v. industry made a u-turn. dealers started restocking their lots again. so, r.v. manufacturers started rehiring. today elkart county's unemployment rate is just over 15%. the president of the county's economic development corporation is encouraged by the improvement in the r.v. industry, but she's cautious about a full-blown recovery. >> one never knows what the future is, but we see that this is going to take some time to

get out of. >> reporter: that's the sentiment at elkhart bedding company. the family-owned firm makes mattresses for the r.v. industry and cut its staff in half when orders collapsed in 2008. while orders have picked up in recent months, owner chris darr says the recession has him reevaluating how he runs his business. >> the industry has been very good to our business and our family and i think we've been a good supplier to the industry and we will continue to be. it's just probably percentage- wise it can't be an 80% part of our business anymore. >> reporter: analysts say tight credit and a still stagnant housing market could make for a long road to recovery for the r.v. industry. and that could make elkhart county an example for the rest of the u.s. diane eastabrook, "nightly business report", elkhart county, indiana. >> tom: here's what we're watching for next week. our friday "market monitor" guest is james paulsen of wells capital management.

tuesday, goldman sachs c.e.o. lloyd blankfein and executive fabrice tourre testify before a senate committee. federal reserve policymakers meet to decide what's next for interest rates. and monday, quarterly results from the big cat. we'll find out how heavy machinery maker caterpillar's doing. >> susie: ford is recalling about 33,000 of its 2010 cars and s.u.v.s. the automaker needs to replace potentially faulty front seats. the models are the 2010 explorer, explorer sport trac, mercury mountaineer, as well as the 2010 ford fusion and mercury milan. ford said it had no reports of accidents or injuries related to the defect. customers and ford dealerships will receive letters on how to deal with the problem next week. >> tom: competition among e-readers is heating up. today, barnes and noble's nook added a software update allowing users to surf the web and play games like chess and sudoku. amazon's kindle already has a basic web browser.

this weekend, a test of sorts will start with the kindle going on sale in dozens of target stores in minneapolis and florida. more stores will sell it later this year. both the kindle and the nook face competition from apple's ipad that debuted earlier this month. hd2pp( >> the bull market continues to run with the three major indices

hitting post-recession highs. in tonight's market montermark skousen editor of "forecasts and strategies" joins us tonight. welcome back to nbr, mark. >> good to be with you. >> congratulations in august you predictedly the dow 10,000 by the end of last year. you were right. you want to particular a topic this year? >> i'm actually not as-- not as surprising this year. 1200 on the dow this year. i'm a cautious bull, but i'm not as enthusiastic about this market like i was last year. >> dow 1200 would only be, well, about 800 points, seven 7.5%, 8% from where we are. why the tempered expectations? >> there's a lot of positive news out there with corporate profits rising, the manufacturing index going up, even housing starts coming back. clearly, we're in better shape than we were last year. however, the easy money has been made. we had a tremendous economic

recovery. and, remember, moody's just downgrade or threatened to downgrade treasury securities, so that suggests to me an ongoing crisis. perhaps interest rates will be starting to go up. taxes are going to be going up next year. i think the obama administration is making a number of mistakes, overregulating wall street, raising taxes. these could be problematic as we enter into next year. >> we are seeing corporate earnings for the first quarter are really hitting it out of the park, in somenice bottom-line growth across broad industries. that's not do make you feel better about the end of the year doesn't it? >> it does, but we have to look into the future not the-- looking back. so in the future, you do have some of these problems that we're facing. >> fair enough. we do have to look past a look in the back, to august, you brought a trio of picks to 1919. the first one, up by almost 10%. the hong kong change-trade fund up. do you still like either of

these two? >> i think we'll take profits on anali capital. it profits from the yield curve and interest rates will probably be rising. i do like hong kong because chinese are increasing their demand for hong kong products, including real estate. so that's very positive, in my mind,. >> let me ask you about globally investing here, it's back on the front pages this week with more worries continueing to build around greece. sdha temper your expectations about global investing? >> i think that's primarily a european problem. i don't think it's gog affect our asian markets that much. >> all right, let's see you you had one more pick back in august. we'll get the viewers updated on it. it was interplus resources fund, and almost 27% move to the upside, including stock price and dividends. are you taking any of this money off the table? >> yeah, i'm going to take profits on that one, 26% is pretty good for a large oil and

gas firm. and i don't know if oil prices are really going to keep heading up. so i'm going to pass on that one. >> okay, wool, we have two more picks, two new ones. enterprise product pipeline lp, and energy master limited partnership with a nice 6% dividend kbreeld and stock at a 52-week high. what makes it grow from here? >> the late dan duncan, who just recently passed away, the founder of the company, right before he died, he bought $15 million worth of the company, so i think that's very positive. it's a rising dividend policy. i think the outlook for pipelines and industrial production really looks good. >> you also like private equity. there's a publicly traded essentially private equity firm called american capital. take a look at its chart here. a nice move higher year to date, clearly, since january. what makes this one grow. >> well, what's really exciting about this is john paulson, who has been in the news lately, the hedge fund billionaire, bought

13% of the company. it's in restructuring, so it's clearly a speculation on my parent but it could double from here. i'm very positive on this speculation. >> mark, do you own the stocks mention tonight? >> only anali capital right now. >> tonight's guest mark skousen, editor of "forecasts and strategies." >> susie: with over ten million americans unemployed, there's a big focus on job creation. entrepreneurs play a big role in that, but according to tonight's commentator, they're not the only one. he's harry lin, president of photometria. >> wouldn't it be wonderful if wealth creation always equaled job creation? think about it: last year, hedge funds managed more than $300 billion in assets and created nosebleed returns for their management and certain investors. but how many good jobs were created as a result of all that? i dunno, short-term trading bets algorithmed by computer programs; a wealth machine, maybe; a jobs machine, questionable. recently, the kauffman foundation issued a report that

said that most new jobs in the u.s. are created by companies that are five years old or younger. new york times columnist thomas friedman argues that means that entrepreneurs create most new jobs, more so than big established corporations. but let's not oversimplify. most new-new companies go out of business, and those that do prosper are often acquired by the aforementioned big established corporations. this means that were really talking about churn: new jobs created, new jobs lost, new jobs become old jobs, old jobs become outdated. the best way to both spark and sustain entrepreneurial job creation is to foster what business author peter cohan calls an entrepreneurial ecosystem. where smart risk-takers get the capital they need and the intellectual property protections they want to launch new ventures, quickly and aggressively. i'd also add that our education system needs serious attention-- to train talent capable of doing

21st century jobs. so, a recipe for job creation: smart risk-takers with an appetite for independence and a bias toward ingenuity. hmm. sounds like america. i'm harry lin. >> tom: that's nightly business report" for friday, april 23. i'm tom hudson. goodnight everyone. you too susie. >> susie: good night, tom. i'm susie gharib. have a great weekend everyone, we hope to see all of you again on monday. "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 >> more information about investing is available in "nightly business report's" video "how wall street works". to order this dvd, call 1-800- play-pbs or visionline at shoppbs.org. >> be more. what did you do that for? i've been wondering whether i'd like it. what's the decision?

i don't know yet. you can have another c you know what they are?