captioning sponsored by wpbt >> paul: your bank deposits are safe. that's the word from sheila bair. but the head of the fdic says the fund protecting those deposits has dropped sharply, hit with almost $4 billion in losses. >> susie: up and down wall street, folks are wondering why so many banks are failing when the economy is improving. coming up, a look at the disconnect between bank health and the recovery. >> paul: call it the benmosche effect. a.i.g. shares surge 27% on hopes new ceo robert benmosche can turn around the troubled

insurer. >> susie: then, we talk with robert toll, c.e.o. of toll brothers. the luxury home builder's loss widens in its latest quarter. but he says orders are starting to pick up. >> paul: i'm paul kangas. >> susie: and i'm susie gharib. this is "nightly business report" for thursday, august 27. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. 7//& >> susie: good evening everyone. there are now more than 400 american banks on the government's so-called "problem list". that's the biggest number in 15 years. but don't worry, your money is still safe. the federal deposit insurance corporation said today the fund that insures your money can still cover any losses. that fund is shrinking: down 20%. as darren gersh reports many analysts are concerned taxpayers could eventually be called on for yet another bailout. >> reporter: even though its deposit insurance fund is dwindling, chairman sheila bair

says the f.d.i.c. can manage its way through the financial crisis. >> a decline in the fund balance does not diminish our ability to protect insured depositors. the f.d.i.c. was created specifically for times such as these. our resources are strong, your insured deposits are safe. >> reporter: of the $42 billion in the deposit insurance fund, the f.d.i.c. expects $32 billion will be used for losses regulators already see coming. that leaves a little more than $10 billion to cover the unexpected. and with 416 banks on the f.d.i.c.'s problem list holding assets of $300 billion, there is plenty of room for unexpected. >> they're going to need more money. >> reporter: doug elliott studies the financial crisis for the brookings institution. if needed, the fdic can borrow from the treasury to shore up it's deposit insurance fund, but elliott thinks taxpayers won't have to any losses. >> my best guess is that taxpayers won't have to put up anything. that the premiums they can

charge to the banks over the next, say ten years, can cover this crisis. but we don't know. >> reporter: james chessen, chief economist, for the american bankers association says banks are doing their part to help the fdic. they are already paying higher premiums for deposit insurance and the industry set aside $67 billion in the second quarter to cover their growing loan losses. >> it's a matter of trying to be prudent having income a little less because they want to have the resources set aside to handle the loan losses they expect in such a deep recession. >> reporter: but that may not be enough. the f.d.i.c. says it is likely to hike deposit insurance premiums on banks yet again. while bank profits are rising, georgetown business professor phillip swagel says charging banks to shore up the f.d.i.c. comes with a price. >> every time you do that, of course, you're draining the lifeblood out of the banking system. you're taking the capital the

banks need to make loans and you are using it to replenish the fdic fund. now that's appropriate. this fund is there to backstop the banks and banks should be paying for it, but there's a balance. >> reporter: chairman sheila bair says she has no plans at this time to tap the f.d.i.c.'s half a trillion dollar credit line at the u.s. treasury. but bair also added she never says never. darren gersh, "nightly business report", washington. >> many of the economic reports we're seeing show signs of improvement. so if the economy is doing better, why are the banks still in trouble? as scott gurvey explains, it's a matter of timing. >> reporter: it will take months before the green shoots appearing in the economy show up at your neighborhood bank. that's because the job loss comes first, then the missed mortgage payments, then the foreclosures. and with home foreclosures comes trouble for retailers and others

dependent on consumer spending. morningstar bank analyst jamie peters, says that's why banks are just beginning to feel the pain from commercial mortgage failures. >> you have almost half a year between the time when the first mortgage payment was missed to the bank's probably charging off the loan. and so what you have is half a year and sometimes on commercial credit it's almost as long as two years of lagging charge-offs the banks are having. so the combination of that the fact that these problems have just been accumulating throughout the recession is that some banks have just reached that breaking point right now. they just can't take any more loses. >> reporter: on top of that, some banks may have trouble paying special assessments charged by the fdic to make whole insured depositors of failed banks. analysts say for some banks, the new fees may be the difference between making and losing money. to date, investors have been buying big bank stocks since the housing market showed signs of stabilizing earlier this summer. experts say there are bargains to be found among the stocks of small banks.

but you must do your homework to find out how strong their balance sheets are before you invest. >> the bigger players we're talking about, bank of america, citigroup, jp morgan, they've raised a lot of capital in the markets in order to shore up their balance sheets. your local community bank doesn't have that opportunity. as a result, they're still playing with the same amount of capital they had at the beginning and they're taking the same type of loses as the big banks but they don't have the capital, new capital, to absorb the loses. >> reporter: the small banks now showing up on the f.d.i.c.'s trouble list are also often new banks. they were founded during the housing bubble, taking on risky investments in a bid to get established quickly. scott gurvey, "nightly business report", new york. >> susie: richmond federal reserve bank president jeffrey lacker says the u.s. economy appears to be stabilizing. and he sees inflation more likely to rise than fall. lacker's comments came after news this morning that second quarter g.d.p. fell 1% a smaller than expected slide. speaking to a business group in virginia, lacker said while many

industries and towns remain distressed he sees the economy headed for better times. lacker also weighed in on a judge's ruling monday, ordering the fed to disclose the borrowers using its emergency lending program. he said he's not sure what good it would do. the fed has argued the release of names would hurt the individual firms. >> paul: after seven consecutive sessions of gains, wall street's blue chips were targeted by profit takers in the early going today. better than expected readings on new weekly jobless claims and second quarter gdp were overridden by investor concerns that stocks have become overpriced. at 11:00 a.m. the dow was off 75 points and the nasdaq down 29 points. a very successful 7-year-t-note auction helped the market bounce back this afternoon to end with modest gains.

>> susie: one of the nation's biggest homebuilders said today it's seeing signs of stabilization in the housing market. toll brothers is optimistic even though it reported a quarterly loss bigger than a year ago. excluding charges toll lost $2.93 in its fiscal third quarter the luxury home builder also said orders in the current quarter are up 26% from year ago levels. a short while ago i talked with c.e.o. robert toll and asked him when he expects the company to return to profitability.

>> it could be in a couple of quarters. or less. or it could take longer depending upon the market demand. right now demand has been increasing pretty strongly. and that would indicate that we should be in pretty good shape? the not too distant future. but if i say more than that, my cfo and general counsel will kill me. so i'll have to let it go at that. >> mr. toll, you said today that you're seeing signs that the housing market is stabilizing. can you elaborate on the trends that you're seeing. >> about six months ago we would see the average buyer about 8 to 10 times. and probably the only question that was being asked was can you give me a few more dollars in incentives. can you knock five or $10,000 more off the price of this home. otherwise, i don't think i'll be able to buy. whereas now we see the client buying after five or

six visits and being concerned after the first couple to establish the price with can i get the garden room. can i get -- can i put an add-on for a musk room. can i have a mother-in-law suite developed in connection with the home. so we're now back to primary interest of the home itself as opposed to being concerned only with the price. >> now you also mentioned today that you're seeing people are realizing that this is a buyer's market is that translating into a new orders and actual contracts? i mean what is, can you expect for toll brothers this fall? >> where i see it in the fall is only to extrapolate as would you san say if things continue than the demand will continue to increase. but it seems to me as though we're more likely to be going up in terms of demand and up in terms of price than we are to be going down. and i think the public is starting to sense that. >> so are contract

cancellations less of a problem now for toll brothers? >> oh, very much so. our cancellation rate now is down to about 8.5%. a normalized rate is about 7%. so we're almost back to the normalized rate that we've enjoyed since 1986 as opposed to the last four years when the cancellation rate went up as high as -- i'm not exactly certain but it was something like 25%. >> now you mentioned on the analyst conference call today that you're seeing a pickup in demand for high-end luxury homes. what about prices on the high-end. are they also holding up? >> we've increased prices, i believe on about 40% of our communities in the last month, month and a half. so they're not only holding up, they're going up which is a very welcome sign because that was a rarity

over the past four years until about the last four or five months. >> now we've heard from some economists that there are chances for a double dip recession. how are you adjusting your business plans for that possibility? >> well, we're not adjusting our business plans for that possibility. we're not adjusting our business plans for the v recovery or for the you recovery. we're anxious to buy land but we are anxious to buy it on a criteria, on a basis that uses the criteria of what exists today, not what will exist with inflation and home price. and inflation and demand. so if we continue to use the threshold of our current experience, we feel comfortable in acquiring land but we're not yet willing to make an assumption that things are going to get better when it comes to actually putting out the money for land acquisition.

>> all right. well we'll check in with you again in the next couple of months. thank you so much for coming on the program tonight. >> you're welcome. it's my pleasure. thanks. >> paul: while home sales appear to be picking up mortgage rates are too. rates on conventional home loans headed higher last month with borrowers paying on average 5.31% on a 30-year loan. the data from the federal housing financing agency covers loans up to $417,000. 15-year fixed rate loans averaged 4.89% last month. >> paul: an upbeat outlook from dell computer late today,

despite a 23% drop in second quarter earnings. dell earned 24-cents a share in the quarter, beating analysts estimates by a penny. revenues were down from last year, but also beat the street. coming in at $12.8 billion. c.e.o. michael dell says the p.c. maker has slashed operating costs and is ready for a turnaround in i.t. spending. he sees sales in the second half of the year coming in far stronger than the first half. >> susie: boeing doesn't expect any more flight delays when it comes to getting the 787 dreamliner off the ground. the plane is now expected to make its first flight by the end of this year with the first delivery slated for the fourth quarter of next year. production problems have forced boeing to revise its schedule 5 times. the dreamliner's initial flight was originally set for the fall of 2007. boeing has high hopes for the plane. it's expected to save about 20% on fuel and carbon emissions. boeing has sold about 800

dreamliners and expects to build ten a month by late 2013. >> paul: susie, boeing shares jumped four dollars even or 8% to close at $51.82. now let's take a look at some stocks in the news tonight. h5z-z4h5z-54zz--z4h5j5j5u65-[4-

and those are the stocks in the news tonight, susie. >> susie: accused ponzi schemer allen stanford was taken to a

texas hospital. he's being treated for an irregular heart beat and a high pulse. but the chief financial officer of stanford financial group of stanford financial group did appear in court today. james davis pleaded guilty in connection with that alleged ponzi scheme. he now faces up to 30 years in prison for conspiracy and fraud. before being arrested, stanford implied that davis was responsible for the fraud. both men and other executives of the now-defunct stanford financial group are accused of advising clients to buy $7 billion in bogus certificates of deposit, then creating false records to inflate the firm's assets. >> paul: toyota is pulling the plug on a plant it once shared with general motors. the automaker announced today that it in march it will shut down production at the new united motor manufacturing facility. the fremont california plant employees 4700 workers. it's toyota's only plant where workers are employees of the united auto workers union. in june, general motors cut its operational ties there as part of its restructuring.

>> susie: meanwhile, ford seems to be firing on all cylinders. the automaker said today it's adding shifts at two plants to beef up production for the rest of the year. ford is also on track to post its first monthly, year-over- year sales increase for f-series trucks in august. it would be the first time in almost three years that has happened helped along by the government's cash for clunkers program. >> paul: tomorrow our friday market monitor guest is john dorfman, chairman of thunderstorm capital. >> susie: are americans getting a fair deal from their cell phone providers? that's a question the federal communications commission hopes to answer as it launches formal inquiries into the wireless industry. the investigation will focus on whether carriers are competitive and innovative enough to keep prices low for consumers. the commission also is looking into whether exclusivity agreements between carriers and handset makers should be allowed like at&t and apple's i-phone.

>> paul: if you've ever answered the phone and a pre-recorded robo-call was on the other end, you know how frustrating they can be. now, those automated calls are coming to an end. the federal trade commission says telemarketers are banned from making those calls as of september 1. the exception? when telemarketers get written permission from consumers.

>> susie: here's a look at what's happening tomorrow: >> susie: goldman sachs is taking heat for giving trading tips to its biggest customers. tonight's two ways to play looks at whether this is the proverbial mole hill of which mountains are made. here's kevin depew of minyanville and minyanville's kevin depew. >> once again people are furious at goldman sachs, this time about the firm's practice of holding weekly meetings where trading tips are shared with some of its biggest clients. these tips usually involve expectations for short-term moves in stocks. and, you'd better sit down for this, sometimes, these stock tips are different from the official ratings on the stocks. naturally, goldmans smaller clients are upset by this; the appearance is that the firm is saving the top shelf research for its big clients and giving

everyone else the cheap stuff. >> okay, outrage at goldman sachs, what else is new. but these short-term-trading ideas are not contrary to longer-term stock opinions issued by the firm, and so they're not doing anything wrong. think about it like this. if you go to vegas and spend ten thousand bucks gambling, you're gonna get a free room. spend a hundred bucks, well, good luck with that. don't get me wrong, there are plenty of reasons to be outraged at goldman sachs. start with the ten billion they got from the government right before reporting their richest quarterly profit in history. just don't blame them for doing what all businesses do, providing extra services to their best clients. >> the blue chip index rose 37 points while the nasdaq added three points. to learn 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.

>> susie: and finally there were 10 million victims of identity theft last year. the nation's chief banker was one of them. ben bernanke and his wife were victims of an elaborate identity-fraud ring that stole more than $2 million from people around the country. the crime ring was made up of pickpockets, mail thieves and purse snatchers. one of them, allegedly stole mrs. bernanke's purse. a few days later, someone cashed checks on the bernanke family bank account. because the bank had been alerted about the theft, no money was withdrawn. so paul, if there's a lesson here, it's that even the powerful can fall victim to sophisticated thieves. >> good thought, very good thought. >> susie: that's "nightly business report" for thursday, august 27. i'm susie gharib goodnight everyone. and good night to you paul. >> paul: goodnight susie. i'm paul kangas wishing all of you the best of good buys.

"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