aren't convinced the strategy will work. >> suzanne: a health care compromise of sorts in congress could get health reform to the president's desk this fall. the key to moving forward: a public option. >> paul: tonight's "street critique" guest still thinks cash is king, even with the recent run-up in stocks. she's hilary kramer, chief market strategist at greentech research. >> suzanne: cash for clunkers hopes to jump start sales at the nation's auto dealers and improve the nation's fuel efficiency. but as those dealers are finding out, the program has some problems. >> paul: i'm paul kangas. >> suzanne: and i'm suzanne pratt. susie gharib is off tonight. this is "nightly business report" for wednesday, july 29. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. >> suzanne: good evening everyone. investors are calling it "micro- hoo," a search and advertising deal between microsoft and yahoo. but they're also calling it a disappointment, and that sent yahoo's stock plunging 12% today. the problem is the limited scope of the agreement and the lack of cash going from microsoft's pockets to yahoo's. as scott gurvey explains, the deal teams up microsoft's "bing" search engine with yahoo's ad expertise to better fight the 800-pound gorilla of the internet. >> reporter: make no mistake, this deal is driven by google, which burst onto the scene ten years ago to knock yahoo! for a loop and become a thorn in microsoft's side. according to internet research firm comshare, yahoo! had nearly 20% of the primary search market

last month, microsoft just over 8%. the two combined total less than half of google's 65% share. while microsoft and yahoo companies argue their partnership will be good for consumers and advertisers, in separate video statements handed out to reporters, the c.e.o.'s made their motives clear. >> right now, there's one company that really dominates the world wide market for search and online advertising. the partnership we are announcing today will help to create a stronger number two and increase competition in the search area. >> yahoo! and microsoft the scale necessary to compete against google, which dominates more than 70% of all search. >> reporter: yahoo and microsoft have been dancing around the idea of combining forces for nearly three years. that dance included a hostile takeover bid for yahoo! by microsoft. under the terms of today's ten year deal, microsoft will supply the search technology used on yahoo! while yahoo! will handle sales to advertisers. the companies will share ad revenue. yahoo! says the partnership will save operating expenses and

increase sales. but investors punished its stock, they're disappointed microsoft isn't paying money up front or buying any yahoo! shares. standard and poor's scott kessler says it looks as if yahoo! simply decided to give up on search. >> over time it might end up being a very, very good deal for yahoo! but if you look at the terms and what they did and did not include, it really suggest to us that yahoo! probably could have, and perhaps should have done better than they did. >> reporter: microsoft and yahoo! expect regulators to look closely at the agreement but they don't expect any anti- trust problems. commenting on its rivals' deal, google says competition is good. scott gurvey, "nightly business report," new york. >> suzanne: after a near-death experience, health care reform is moving forward again in congress. a deal was brokered by the white house, congressional leaders and conservative house democrats. it protects small businesses. requiring only firms with a payroll over half a million dollars to provide health insurance. as darren gersh reports, the

deal also clearly defines the role of a government run health plan. >> reporter: the health care logjam broke after the idea of a public option-- essentially a government health plan offered to all americans-- won critical backing from four conservative house democrats. one of them, arkansas's mike ross, was quick to add the support comes with conditions. >> the public option is just that, it's optional. it gives consumers more choices. it is not mandated on any of them. the public option will be required to negotiate with providers just like private insurance industry does so we have a level playing field. >> reporter: the public option is so politically sensitive, president obama is telling town hall meetings across the country he has no plans for the government to take over health care. >> if you like your health plan, you keep your health plan. these people need to stop scaring people. >> reporter: the compromise reached today would let states set up health care co-ops to compete with private plans. it also keeps any government

health insurance plan from using its clout to set prices. of course, setting prices is also a way to hold down costs points out health care analyst joe antos. >> it's possible, i think, to have a public plan that doesn't do that, but it isn't very likely that we'll have a successful public plan that doesn't use its pricing authority in ways that will undercut competition. >> reporter: there are also limits to how low even a government plan can go. in the short run, a public plan might be able to push costs down. but in the long run, government plans like medicare often see costs rise as health care providers pressure congress to raise reimbursement rates. and, managed care analyst dave shove says even the government is subject to economic reality. >> the huge problem with the public plan idea is that if there is a public plan and it's cheaper than private insurance, everybody is going to buy it.

people are economic decision makers and if everyone buys it, it costs the government too much money. >> reporter: right now, the cost of the health care bill itself is going down. a compromise effort in the senate is expected soon and should come out below the politically sensitive trillion dollar mark. darren gersh, "nightly business report," washington. >> paul: wall street headed moderately lower this morning as investors took profits for a third straight day. early selling was also prompted by a much bigger than expected 2.5% decline in june durable goods orders. by midday, the dow was off 64 points and the nasdaq down 16. then, a poorly received five- year treasury-note auction drove stocks lower. but a late buying spree trimmed the closing losses. the dow ended the day down just 26 points at 9,070.72. the nasdaq fell 7.75 to 1,967.76. the s&p 500 lost 4.47 to 975.15. in the bond market, the 10 year

note gained 6/32 to 95-19/32 putting the yield at 3.66%. >> suzanne: a multi-state crackdown on medicare fraud today netted 32 arrests in houston, boston and miami. it's the third major sweep in two months. and the busts are working. the feds have arrested 145 people, and recovered more than $370 million. medicare celebrates its 44th anniversary tomorrow, and as jeff yastine reports cutting medicare fraud could help pay for health care reform. >> reporter: medicare fraud. it's been a problem almost since

the beginning of the program. today, fraud steals $70 billion a year from federal healthcare funds. consider just a few of the typical scams. there's the "rent-a-patient" scheme. set up a storefront business for pain treatments, diabetes injections, or medical equipment. recruit people off the street as patients. pay them a little something for their time and trouble. then bill medicare for big bucks; millions upon millions of dollars. another common fraud: "upcoding." every medical procedure has a numbered medicare billing code, but as former federal prosecutor marcella auerbach explains, it's easy to substitute a different code, one that conveniently has a higher reimbursement rate. >> for example, if a medicare patient goes to a doctor and complains of a cough or a cold, the doctor looks at the patient for 10 minutes and says, "you've got a cough and a cold" and the patient goes home.

the doctor turns around, or a hospital turns around and bills medicare, for example, for severe bronchitis, an hour long doctor visit which of course never took place, and a nebulizer. >> reporter: auerbach, now in private practice, says healthcare fraud extends to otherwise legitimate companies. merck and tenet healthcare are recent examples, both paid hundreds of millions to settle fraud allegations. >> the reason that happens and the reason it's so devastating to the system is the cost to the system are so much higher. they've decided to take the gamble. they think they're not going to get caught. and unfortunately, in most cases they don't get caught. >> reporter: which brings up a final question. can cracking down on medicare fraud really pay off? south florida is often considered a capital for medicare fraud. over the past four years, federal teams recovered $350 million dollars.

the most recent data shows the medicare trust fund recoups nearly $800 million a year from fraud investigations. as the nation debates health care reform, and how it's paid for, former prosecutors like auerbach say recovering more money from medicare fraud could make a big difference. >> for example, right now with the efforts the federal government has undertaken in fighting medicare fraud, there's a return of $15 for every dollar spent on investigators and prosecutors, and that's a much better return than i've heard about on anything lately. >> reporter: returns the federal government will need as it tries to make every healthcare dollar count. jeff yastine, "nightly business report," miami.

>> suzanne: visa charged ahead late today with better than expected earnings thanks to consumers increasing their use of debit cards. excluding charges, visa earned 67 cents a share, three cents more than analysts were expecting. revenue increased 2% to $1.65 billion. that's because there are more visa cards in use. a total of $1.7 billion credit cards worldwide now have a visa logo. visa and rival mastercard are insulated from rising credit card delinquencies, because they process transactions without taking on the risk associated with making loans. paul? >> paul: suzanne we'll see how mastercard is doing tomorrow when it reports quarterly results. now let's take a look at some stocks in the news tonight.

>> paul: tonight's "street critique" guest says being careful and conservative is still the way to go. she's hilary kramer, chief market analyst at greentech research and author of "ahead of the curve." hilary, welcome back to n.b.r. >> thank you, paul. pleasure to be here. >> paul: you've been saying that cash is king for months now. with stocks up some 40% from their march lows, do you still like the sidelines, and if so,

why? >> paul, i think it's important, more than ever, to be very, very careful when it comes to your money. the reason is that we have negative influences that will eventually bring down the market eye mean, we will have a recovery five to 10 years down the road, but you have unemployment which is very serious. it's much higher than 9.4%. it's in the 15% range because we're not even including those who have-- are no longer eligible for unemployment benefits. and then the bigger problem, even besides consumers not being able to spend because they don't have jobs, is that there's no available credit out there-- not for consumers and not for small business and even big companies are finding very egregious terms on wall street when they want to go for a loan. >> paul: so you feel the market is far too high considering what the economy is doing. >> that's absolutely right because we have a jobless recovery-- if, indeed, we do have a recovery. >> paul: what are earnings telling you? we have seen pretty decent earnings, have we not?

>> no, we haven't. to me those earnings were a farce. they're an absolute joke, and the reason is they're all about cutting costs. in many ways, it was really earnings that had to do with unemployment-- people were laid off, companies cut the fat out, and in some ways that was good. it was effective and many corporation needed to do that, but at the end of the day, only 22% of all companies that had reported really had sales that were the same or up. the top line wasn't there. >> paul: interesting observation. the fed's latest beige book out tawd shotz the recession is becoming less severe in most regions of the country. are you seeing any signs of recovery? >> well, the only recovery i'm seeing has to do with the fact that there's no longer fear in the streets. the banks have stabilized. the banks aren't going under. we're not fearing global implosion anymore and, quite frankly, the financial institutions are doing quite well. but the fear is gone. >> paul: now what sectors do you like for the upcoming recovery? >> well, we've been talking

about the banks. now, again the banks are printing money. they get to borrow at 0% and lend out at whatever terms and to whom they want at 7%. so i think the financial institution, especially the big investment houses that may see a recurrence in mergers and acquisition, initial public offerings and have no more competition from lehmann brothers and bear sterns and wachovia. they will do very, very well. i think the other sector that might benefit as we eventually come out of this recession will be technology because technology can be very nimble. it's about efficiencies. it's not expensive the way for a company is it might be to buy new plants and equipments to try to have financing and the technology companies themselves don't have to go to a bank and borrow in the same way, let's say, a utility has to. >> paul: so the tech stocks not cash intensive, in other words. >> absolutely. so that's a nice area to go for. and i really think it's important to be careful of the

energy sector, energy services, and even health care, where a lot of my expert friends are saying-- , "oh, that is where you need to be." >> paul: very good. hilary thanks for joining us again. >> paul, thank you so much. >> paul: my guest hilary kramer of greentech research. >> suzanne: tomorrow, the doctor is out on a house call. we profile a medicare program saving money through home care. >> suzanne: bernard madoff's wife may soon find herself in court. ruth madoff is being sued for $45 million by the trustee seeking to recover her husband's assets. mrs. madoff isn't accused of knowing about her husband's fraud, but the lawsuit says she lived a life of splendor using money that belonged to her husband's customers. ruth madoff's attorney says today's action is quote, "wrong as a matter of law and fairness." >> paul: it looks like more investors are gaining confidence in the market. $11 billion flowed into mutual funds last week, that's the biggest weekly investment since early june.

the investment company institute tracks the numbers. it says much of that money went into stock funds as investors responded to a string of strong earnings reports. >> suzanne: here's a look at

what's happening tomorrow. we'll see weekly jobless claims and a host of quarterly results. exxon mobil, kellogg, motorola and walt disney are among the companies scheduled to report. >> suzanne: many u.s. car dealers are crushed with customers, thanks to the government's new cash for clunkers program. it kicked off friday, offering consumers rebates to trade old gas hogs for more fuel efficient vehicles. the idea is to jumpstart car and truck sales. but as diane eastabrook reports the program already faces some bumps in the road. >> reporter: bernard rossbach is saying goodbye to his rusty old station wagon and hello to a shiny new sedan. >> it has the features that i need. it has the easy entrance and exit for my wife who is handicapped. >> reporter: rossbach is among thousands of americans taking advantage of the government's car allowance rebate system-- better known as cars or cash for clunkers. the program offers up to $4,500 for consumers who scrap old gas guzzlers for more fuel efficient

cars and trucks. rossbach got 3,500 dollars to trade in his 1986 oldsmobile custom cruiser for a new chevy impala. >> it made it more convenient to get rid of the car at this time since it brought in more money on a trade-in. >> reporter: since cash for clunkers started friday, consumers have been flocking to 22,000 dealers in the program. at this kia dealership, owner mark scarpelli sold two vehicles in the hour we were on his lot. >> our traffic and volume has increased about 50% since the program got started. >> reporter: but, the program which ends november 1 has hit some speed bumps. >> the help desk cannot address program questions. >> reporter: at bill stasek chevrolet, employees couldn't get help from a call center when they had trouble electronically submitting reimbursement claims. how long have you been working on this one transaction? >> two hours. >> reporter: and you're frustrated? >> only a little.

>> reporter: owner bill stasek thinks part of problem is 41 pages of rules that dealers must follow in order to submit a cars claim. >> they want a lot of documentation and all that has to be provided. when you provide it and you don't get everything right, it gets rejected and then you have to go to the back of the line. >> reporter: many industry watchers think the program itself is flawed. j.d. power and associaties president finbar o'neill thinks there should be fewer restrictions on the cars eligible for the scrap yard. >> the biggest problem is the trade-in has to be worth less than $4,500 which is the maximum voucher and that is a big limiting factor. only about 38% of vehicles actually qualify. >> reporter: experts think in the weeks ahead the government could tweak or even extend cash for clunkers, but dealers hope any changes won't make an already confusing program, even more confusing. diane eastabrook "nightly business report," antioch, illinois. >> paul: recapping today's market action: a late buying

spree cuts wall street's closing losses. the dow dropped 26 points and the nasdaq lost seven points. to learn more about the stories in tonight's broadcast, to watch our streaming video and to take part in our daily blog, go to "nightly business report" on pbs.org. you can also email us at nbr@pbs.org. >> suzanne: and finally tonight, desperate times call for desperate measures. so the state of arizona is coming up with some pretty original ways to raise cash. lawmakers there are considering selling the state house and senate buildings in phoenix, along with dozens of other state-owned properties. but, the plan isn't to liquidate the properties. instead, officials hope to sell them and lease them back over several years. ultimately, assuming ownership again. that could give the state a cash infusion of more than $700 million. paul? >> paul: that would qualify, i assume, as a capital gain. >> very, very cute. it's pretty amazing when you consider the state of the real

estate market in phoenix is pretty desperate. >> paul: a little convoluted but i hope it works. >> me, too. >> suzanne: that's "nightly business report" for wednesday, july 29. i'm suzanne pratt goodnight everyone, and good night to you too, paul! >> paul: and you as well suzanne. i'm paul kangas wishing all of you the best of good buys. "nightly business report" is made possible by:

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