captioning sponsored by wpbt >> paul: more bullish news on housing. new home sales surge on steep price cuts and the first time buyer tax credit, but economists say it will take years before we see a full real estate recovery. >> jeff: sheila bair and the f.d.i.c. are making it easier for private equity firms to buy up failed banks. we get analysis on the late day decision and what it means for the banking industry. >> paul: the bargain hunter returns. street critique guest patrick o'hare of briefing.com tells us

why kraft foods has landed on his bargain basement radar. >> jeff: then, remembering the liberal lion. we look at how the late senator ted kennedy shaped health care reform and what happens to those efforts now. >> paul: i'm paul kangas. >> jeff: and i'm jeff yastine. susie gharib is on assignment. this is "nightly business report" for wednesday, august 26. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. >> jeff: good evening, everyone.

a much bigger increase than forecast. sales of new homes jumped 9.6% in july. could it be the housing market is turning? scott gurvey reports. >> reporter: it was the fourth straight month of increased new home sales and although this is a number with a wide margin of error, it did encourage those who see a bottom in housing. beth ann bovino of standard and poor's notes there has also been increased buying of distressed properties and existing homes. >> those homeowners were actually free to move and actually buy something elsewhere. so you're starting to see it trickle through. will it continue through next year? well, we do expect that is something that is going to see some... basically get some stability and continue through next year, although we're not expecting any kind of blockbuster sales through this year or the next. it's just something that we'll slowly climb out of that hole. >> reporter: stocks in the home

construction sector began rallying in early july. but maury harris of u.b.s. warns there will be a shakeout among the companies in the group. >> you're going to have a lot more concentration among the top five of six sellers in the market. it is partly because of credit conditions and the small builders not being able to get the financing. so when you talk about what's going to happen to the homebuilders and their fortunes, they should outperform overall home sales because they're going to get a bigger market share. >> reporter: but how big a market will they share? some of the current buying is a result of government's first time buyers tax credit, which expires december 1. before the housing bubble burst, 25% of home mortgages were in the non-prime credit category. assuming that kind of lending is history, the new normal for housing will be much lower than the two million starts seen in the year before the sector collapsed. >> while it does look like housing starts, the numbers that were out a little while ago, were also starting to show signs

of stabilizing, and that would be a good sign for home builders. it doesn't look like we're going to really see anything near what would be considered an average rate of say about 1.6 million for housing starts, until probably 2011. >> reporter: home prices are expected to continue to decline into next year, but recent data indicates the rate of decline is decreasing. scott gurvey, "nightly business report," new york. >> jeff: tomorrow we'll see quarterly results from luxury home builder toll brothers and talk with chairman and c.e.o. robert toll. >> paul: wall street started on a narrowly mixed note but buyers soon took control on that solid rise in new home sales and a 4.9% jump in july durable goods orders. so by 11:00 a.m. the dow posted a 21 point gain with the nasdaq up 4 points. stock fell into modestly lower ground during mid-session as investors showed caution after a string of six straight winning sessions for the dow. optimism that tomorrow's second quarter g.d.p. revision would

show strength helped stocks close with miniscule gains. the dow jones ended up 4.23 at 9543.52. the nasdaq added .20 to 2024.43. the s&p 500 edged up .12 to 1028.12. in the bond market, the 10 year note edged up 1/32 to 101-19/32 putting the yield at 3.43%. >> jeff: it just got a lot easier for private-equity firms to buy failed banks. the f.d.i.c. voted this afternoon to lower the proposed minimum capital requirement for those private investors to 10% of the failed bank's assets. the f.d.i.c. proposed higher

capital ratios last month, drawing howls of protest from the private-equity community. joining us now for more about the decision is alex pollock, a resident fellow at the american enterprise institute. >> the fdic has already brokered two sales banks deals this year, two positive equity firms. will today's decisions open those flood gates. >> i don't know about flood gates but it seems to me it's a sensible decision that they made to back off from their 15% requirement to 10 so you could get more interest on private equity. the bank failures of course as we know are mounting and look like there could be quite a few going forward. so you want to have as many pools of capital as are interested be able come in and take a serious look at investing in the new recapitalized bank that will go forward. >> jeff: i counted more than 70 failed banks just this year alone on the fdic website.

>> it's 81 this year-to-date. >> jeff: 81, okay. >> if we look back to the late 1980's, i'm not talking about savings and loans, i'm talking about commercial banks. there were eight years in a row at which more than a hundred commercial banks failed. >> jeff: with that in mind does the fdic really have a choice on this. they have to bring in these deeper pockets from somebody who has the cash and at this point it seems like it's only the private equity funds that have those deep reserves. >> well they certainly have to look for sources of capital and this is one of them. so that's why i think this is a reasonable step for them to take. >> jeff: you know, for a bank to buy a failed bank, it only takes 5% as a minimum capital requirement. why doesn't the fdic just bring in all the way down to parody so private equity funds and the banks are competing on an equal level. >> as i understand it, it's 8 for a bank to buy one. i think it's a strong argument that it would be better to have

one set of rules that's consistently applied to everybody. there was one vote against the proposal today by the acting director of the office of thrift supervision, and as i understand it from the press, his reason was he thought there should be one set of rules and everybody should have the same set of rules applied to them. that's a pretty strong argument, i'd say. >> jeff: do you think the fdic will eventually go all the way to that level? >> i don't know these things are all about negotiations subject to a lot of uncertainty when we're in these pressured financial situations. so that's anybody's guess, i'd say. >> jeff: how does the fdic make sure it is not brokering these deals on too cheap of a basis. we saw indy mac at the start of the year. they were the first of this year to get bought by a private equity or a series of private equity firms, a group of them. and i've seen some criticism

after that of some who say perhaps indy mac was brokered or sold too cheap by the fdic. >> that's a problem and worry you have if you're a receiver whose taken over the bank and now selling it, that later so somebody's going to say you sold too cheap and somebody made a pile of money because you gave them too good a deal. that certainly happened in the early 1990's when you had the rtc, if you remember that, liquidating thrifts and selling them pretty cheap. and some people made enormous amounts of money buying things cheap. so you got to worry about that financially but also politically. on the other hand, if there are few buyers, the prices are going to be cheap. if there are lots of buyers dying to buy, the prices wouldn't be so cheap. that's the nature of a market, and this is a sort of specialized market in taking

over the ongoing assets of failed financial institutions. >> jeff: we'll have to see how the reaction of the private equity community to this latest change in decision by the fdic. alex, appreciate you coming on the program. >> thanks, great to be with you. >> jeff: our guest alex paul awk of the enterprise >> paul: the nation is mourning the passing of one of the most influential senators in our history. representing massachusetts for close to half a century, ted kennedy helped re-write the nation's laws on bankruptcy, immigration, and education. but as darren gersh reports, kennedy's passion and most likely legacy will be health care reform. >> reporter: for millions of families senator ted kennedy is one of the reasons their children have health insurance. health policy expert chris jennings worked with kennedy, as the senator pursued his life- long dream of extending care to every american. this was senator kennedy's, one of his big legacies, right? >> yes, this is the signing of the children's health insurance legislation.

>> reporter: senator kennedy's passion for health care reform and his legislative prowess have been sorely missed this year. now, as has often been the case with the kennedys, jennings thinks the senator's death will inspire many of his colleagues in congress to act. >> unfortunately, it sometimes takes this moment of them leaving us, departing us, if you will, to really focus on the fact that they had a point, that there really was an issue worth addressing and it's long overdue that we addressed it. >> reporter: to be sure, kennedy was controversial. republicans delighted in campaigning against the liberal lion of the senate. but that reputation also gave kennedy the clout to cut bipartisan deals on health care that sometimes disappointed core democratic constituents. mark mcclellan, a health care policy adviser to presidents clinton and bush, says that kind of pragmatism is badly needed now. >> if there is a model from what senator kennedy has done, i think it's that we can find a

bipartisan way to solve these problems and address them. >> reporter: kennedy's legacy extends far beyond health care. nick allard, a close kennedy adviser, says some 300 major pieces of legislation carry the senator's name. >> i recall, for example, providing relief from the bankruptcy laws for small family farmers. always keeping his eye out for the little guy. >> reporter: kennedy's friends are still hoping for one more victory. a bipartisan health care reform covering all americans and signed into law by the man kennedy endorsed for president. >> i think the current health care debate is in the president's hands right now, but i wouldn't be surprised if there was some divine intervention from the senator. he's probably starting to lobby already from up there.

>> jeff: the final ka-ching is in for cash for clunkers. the transportation department released the final numbers today, showing the popular program rang up almost 700,000 vehicle sales. the total value of rebates was $2.8 billion dollars, just under the program's $3 billion dollar budget. transportation secretary ray lahood says the program's winners were u.s. consumers and workers. but they weren't the only ones. toyota raked in more than 19% of all clunker sales, followed by general motors, ford and honda. now that the program is over, car dealers are waiting to get paid. their deadline for submitting paperwork was last night. paul? >> paul: 2,000 workers are processing those applications,

but the government hasn't said yet when checks will be mailed. now let's take a look at our stocks in the news tonight.

>> paul: tonight's street critique guest says oreos aren't the only reason he likes kraft. it's got a tasty dividend, too. he's patrick o'hare, chief market strategist at briefing.com and author of the site's bargain hunting column.

patrick, welcome back to n.b.r. >> hi paul, thank you, nice to be back with you. >> paul: why has kraft stock landed in your bargain hunting radar? >> well, what we've dean in the broader market rally of course is not the most exciting stock pick but we think it's the right stock pick at this juncture but our belief is the easy money from that march rally has been made so we're urging the condivorces to start looking to a name like kraft which offers a nice dividend yield and in this case crash yield is 4.1% leads all the peers in its group. >> paul: do you have a target price and time frame for kraft stock? >> we think kraft could move into the mid 30's over the 12-18 months. the company just completed a five-year restructuring program that has taken out a lot of costs and we think there's good room here for margin expansion potential. as those margins improve over time here it's going to increase

profitability and raise the dividends and buy back shares. for the patient minded investor we think there's potential here. >> paul: now you saw similar themes at jm smucker when you recommended it in may. let's look at that chart. it's up 43% since then. i have to congratulate you on that and some of your other recent calls. for instance in mid july you liked discount retailer dollar three and to this very day with very strong earnings, the stock is up almost 14% from the time of your recommendation. on march 25th you said the spieders were the best to play the recovery and you're right on. you still like these securities as long-term investments. >> sure, i think they are all still attractive as long term investments. i should put the caveat they had tremendous runs at a pace that's not sustained. we would urge investors to take them off the table. they're not going to continue

like we've seen in the past several months. >> paul: all right. but do you feel that we are in bull market or is it still one of these rallies in a bear market that a lot of people still think. >> we're in the camp and it's cyclical bull market with a secular bear market. the easy money's been made here on this rally. we're not optimistic on the economic recovery as the stock market would like for us to believe we should be. we don't see that recovery taking shape given the travails of the consumer and the weight. -- good to hear your ideas. thanks for being with us. >> thank you, paul. >> paul: my guest patrick

o'hare of briefing.com. >> jeff: tomorrow, the wireless industry goes under the microsocope as regulators look into competition, innovation and billing practices. >> jeff: massachusetts' top securities regulator is taking a closer look at the trading tips that goldman sachs gives its top clients. those tips come from weekly meetings of the firm's research analysts and are then passed along to traders and top clients. regulators are concerned the practice favors some clients over others. massachusetts today confirmed it has subpoenaed goldman for details. the firm has until september 7 to respond. >> paul: carl icahn is betting on atlantic city's tropicana casino. today, new jersey gaming regulators cleared the way for him and a group of lenders, to take over the tropicana. icahn will own about 41% of the casino when it emerges from chapter 11. the billionaire is no stranger to this type of deal. in 2000, he bought the sands hotel in atlantic city and later sold it for a huge profit.

>> jeff: here's a look at what's happening tomorrow. we'll see weekly jobless claims and a first look at second quarter g.d.p. also, quarterly results from dell, h&r block, and toll brothers. in the money file, some smart things to do with your money now. here's jonathan pond, author of

"safe money in tough times." >> the great recession has taken its toll on our money and our psyches. here are five smart and feel good things to do with your money this year. pay extra principal first. pay extra principal on your mortgage, credit cards, and other loans. paying off principal gives you a guaranteed return equivalent to the loans interest rate. second, home improvement contractors are eager to work for you during this dour economy. but make sure you can afford the improvements and make sure they enhance the value of your home more than they enhance your ego. a third smart thing to do with your money: buy big ticket items money is to purchase big-ticket items that you need. manufacturers and retailers are hurting, so prices are declining. in short, this is a good time to buy expensive stuff, but only if you really need the stuff.

idea number four is to continue your education. one of the best investments you can make is to obtain more education and training in your chosen line of work. maintaining top-notch skills is doubly important amidst what is likely to be a weak employment climate for several years to come. help kids and grandkids start finally, helping younger generation family members fund retirement plans, like i.r.a.s, is one of the best ways to show them the importance of saving for retirement. even minors can contribute to i.r.a.s if they have job income. i'm jonathan pond. >> paul: recapping today's market action: good news from >> jeff: and finally tonight, in california's latest attempt to raise money, the state is holding a two-day garage sale this weekend. a warehouse in sacramento is housing thousands of surplus or confiscated items, ranging from jewelry and computers, to coat racks and cars.

some of the vehicles have been autographed by governor arnold schwarzenegger. other items are being sold on craigslist and ebay. those listings are aimed at attracting shoppers outside california. all together, the state hopes to make a million and a half dollars to help ease its budget crunch. >> jeff: that's "nightly business report" for wednesday, agust 26. i'm jeff yastine. goodnight everyone, and good night to you, paul. >> paul: goodnight, jeff. i'm paul kangas wishing all of you the best of good buys. "nightly business report" is made possible by:

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