captioning sponsored by wpbt >> paul: the s.e.c. admits it failed to protect investors from bernie madoff and the biggest ponzi scheme in history. the comments come as a taped madoff phone call surfaces. with the swindler bragging about how easy it is to fool regulators. >> susie: president obama ignites fresh debate over health care reform. tonight we talk with health care expert steven ullman about the realities of getting reform passed this year. >> paul: after four years at the helm of morgan stanley c.e.o. john mack announced today he's stepping down. but he isn't going very far. >> susie: reviving the family business with whacky commercials. tonight our signature series

"all in the family" introduces us to the smithe brothers of walter e smithe furniture. >> paul: i'm paul kangas. >> susie: and i'm susie gharib. this is "nightly business report" for thursday, september 10th. "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. "we're sorry and we're fixing the problem." that was the response today from the securities and exchange commission over how it bungled five separate investigations into bernie madoff's massive ponzi scheme. contrite regulators were called on the carpet by congress today, after a scathing report said the agency was incompetent. adding fuel to the fire: massachusetts state regulators released a tape of a phone call madoff made, bragging about how easy it was to scam the s.e.c. stephanie dhue reports. >> reporter: madoff knew how to work the securities and exchange commission. in a phone call from december 2005, madoff coached the chief

risk officer of the fairfield greenwich fund about how to handle the s.e.c. before an interview with agency examiners. >> we run through this all the time, these guys come in to do a books and records examination and they ask a zillion different questions, and we look at them sometimes and we laugh and say what are you guys writing a book. these guys, they work for five years at the commission, then they become a compliance manager at a hedge fund now, or they go work at proprietary trading desk, nobody wants to stay there forever. >> reporter: the s.e.c. fielded six complaints and completed three exams and two investigations over 16 years. but in all that time, inspectors never verified any of madoff's trades through a third party, instead trusting his word. inspector general david kotz says the agency also never investigated whether madoff was running a ponzi scheme. >> he used his knowledge, generally in the industry to impress the examiners, so in many ways he knew which buttons to push, he knew how to impress

the examiners and he knew how to keep them off the track that would expose the ponzi scheme. >> reporter: the s.e.c. has cleaned house. the new head of the enforcement division, robert khuzami, promises to do better. >> simply stated, we failed in our fundamental mission to protect investors, we must continue vigorously to reform the way we operate. >> reporter: the agency says has beefed up staff training, now requires 3rd party verification of trades and has revamped the way it handles tips. former s.e.c. attorney jacob frenkel worries the agency is already going too far to clean up its image. >> i have seen that and my colleages have seen that the agency is acting in a heavy handed, bordering on improper manner in how its moving some of these cases very quickly. >> reporter: the s.e.c. says the madoff mistakes shouldn't mar the 75 year history of the agency.

but clearly it already has. some lawmakers are considering beefing up the agencies budget, but some say fundamental changes, not more money are what's needed. stephanie dhue, "nightly business report", washington. >> paul: we're no longer on the brink of economic disaster. but treasury secretary timothy geithner today told a congressional oversight panel the recovery still has a long way to go. geithner was testifying about the government's efforts to fix the financial crisis including the tarp or troubled asset relief program. he says the administration has not decided if it will extend the $700 billion financial rescue plan. he says even with the economy's progress, now is the time to repair and rebuild the foundation of financial regulation for future growth. >> susie: late today, one of those tarp recipients morgan stanley announced big changes to its top leadership. john mack is stepping down as c.e.o. but staying on as chairman of the investment banking firm on january 1, mack will hand over the reins to the

current co-president james gorman. since 2005, under mack's leadership, shares of morgan stanley have fallen about 34%. but shares at rival goldman sachs, have surged about 70%. >> paul: stocks got off to a slow start on wall street today, but ended with another positive close, it's 5th straight session to the upside. an upbeat forecast from texas instruments combined with procter & gamble's prediction for improved sales to boost stocks. adding to the bullishness, a better than expected drop in new weekly jobless benefit claims. the upward trend continued through the afternoon and strong demand for an auction of 30 year t-bonds helped the market end at the day's highs.

>> susie: president obama was talking up the need for healthcare reform today a day after his blunt address to congress. speaking to an audience of nurses the president said the number of uninsured americans rose by 6 million in the past year because of the recession bringing the total to 46.3 million. did the president's speech to the nation make a difference in the health care debate? i talked with university of miami healthcare expert steven ullman a short while ago and asked him if president obama made a convincing case last night.

>> i think he lose dated to a much greater extent what he wanted to get across in terms of health-care reform, something that has not really come forth to date. a lot of it had been left up to congress. this was the first time that he actually laid out a lot of the plan. >> steve, when you examined the president's proposal, what do you think that the president is promising that is right and what is the president promising that is wrong in your view? >> in terms of what is right, 47 million people currently uninsured is what he is trying to get at. and to try to get them access to health care is one of the right aspects of it. also his crackdown on medicare fraud, and abuse and also issues associated with efficiency, bring being greater efficiency are the strong points in terms of the plan. in terms it of concerns or weaknesses that i perceive in the plan, one of them is the issue associated with a primary care network. if you are bringing all these new people into the plan r there going to be

providers, physicians, nurse practitioners who are providing primary care to serve this increased population or will they end up instead right back in the emergency room, or highest form of health care, that is of concern. >> the president said last night that the plan would not add to federal deficits and the cost would come from savings. when you do the math, do the numbers add up, do the costs get balanced out by savings? >> there is a question mark there. the concept is that if are you going to increase a provision of care to people who are currently uninsured, costs will indeed go up. what the obama administration is currently indicating is by dealing with fraud and abuse and trying to bring about greater efficiencies a lot of that will be offset by those new innovations. what aring one of the question marks, if you listen carefully to the speech there is an out that president obama has. and that is the indication

that if, indeed, all the cost savings are not realized that there could be adjustments in terms of how health care by the government is provided in terms it of some of their other programs. >> steve, as you know there is still a lot of debate about the so-called public option. a government insurance plan as an alternative to private insurance companies. do you think that the government can do a better job? >> i think the government can provide a competitive edge in terms of programming, in terms of health care insurance provision. but i don't think it's mission critical. i think that there are other means willing also that are available to bring about a more competitive marketplace that is just one option. >> and what about small businesses. a lot of them right now are struggling with the high cost of providing health benefits to their employees. is there anything this this plan or should be in this plan to help out small businesses? >> the concept is that they are going to have basically a consortium of small businesses that will reduce

the risk pool and allow access to private insurance through this risk pool. and if that should help alleviate some of the problems in terms of some of your smaller companies not being able to a vord right now, health care insurance, not only the small employers but also the self-employed as well. >> some of the feedback coming out from washington today reveals that the democrats and republicans are still digging in their heels on this whole debate about health-care reform. do you think a compromise is possible? >> i think a compromise will come about. i think that you will see that there will be give-and-take on this, that certain aspects of the plan will probably fall by the wayside in terms of excess ability, in terms of perhaps the government provision of care, in terms of perhaps the mandatory aspects of the plan, in terms of mandatory participation by employers and also by private citizens. some of those are going to be some of the areas that will be probably hotly debated over the next few months but i do think that something will be coming out

of congress at this point in time. >> if something doesn't come out of congress what is the threat to the economy? >> significant. significant threat. you are looking at from estimates i've seen, upwards of 68 million uninsured by the year 2015. you are looking at per capita expenditures for health care going up to about 12,000 for every man, woman and child. and in certain metropolitan areas as high ace 25,000 for every man, woman and child that is an untenable situation. it reduces our competitiveness internationally. >> we'll see what happens. steve, thank you so much for coming on the program tonight. >> i appreciate it. thank you.

>> paul: now, let's take a look at some stocks in the news tonight.

and those are the stocks in the news tonight, susie. >> susie: paul, during tough times one of the last things people think about is buying new clothes. so the retail and fashion worlds have been hit hard by the recession. now those industries are fighting back. they're offering the first ever "fashion's night out": it's a worldwide initiative tonight, to bring customers into the stores. as erika miller explains, retailers are pulling out all the stops to make a sale. >> reporter: gone are the days when retailers can just put clothing on racks and expect it to sell. nowadays, many stores find they must also create a connection with their brands. that's where fashion's night out comes in-- it's a global retail extravaganza designed to lure

men and women into the stores with after hours events. many well known chain stores are participating, including macys, and gap. in addition to high end boutiques like calvin klein, that company's c.e.o. tom murry says the goal is to get customers to buy fall fashions while they're still at full price. >> the whole idea is to create excitement about fashion. let's feel positive! and i think we have some really beautiful product in the stores right now. >> reporter: style may be important, but many shoppers also want a deal. putting it another way: frugal is the new black. >> reporter: analyst richard jaffe says many apparel retailers are focusing on lowering the average price points in their stores. >> rather than the $10,000 purse, maybe it's make ten $900 purses and attract a broader audience. try and work down a little bit on the food chain. >> reporter: that's expected to result in fewer luxury goods in stores and more moderately priced bridge line merchandise. you're also likely to see more accessories, because it can be

an inexpensive way to spice up your wardrobe. when it comes to clothing, many stores are pushing practical pieces, a strategy that could backfire. >> the wrong move-- and we will see it-- is to shift to basics. so instead of a fancy hand knit sweater, you see a navy, grey and white cardigan. very boring. >> reporter: fashion's night out is a one time event, so analysts don't think it will help the quarterly earnings of most major chain stores. but retailers say it can't hurt to create buzz ahead of the all important holiday season. some stores are cautiously optimistic this year will be better than last. >> we are starting to see the early signs of a recovery in our retail sales. we are seeing it more in asia and europe than we are in the united states, but we're seeing opportunities here where we're starting to slowly grow the business again. >> reporter: but even if the outlook is improving, that doesn't mean happy days are here again. most industry experts agree it

will be years, perhaps even a decade, before consumer spending returns to its 2007 high. erika miller, "nightly business report", new york. >> paul: tomorrow, our friday "market monitor" guest is erik ristuben chief investment officer at russell investments. >> susie: sprint nextel is calling on new customers with a new pricing plan. it's called "any mobile anytime." the nation's third largest wireless provider is offering users unlimited calling to any cellphone in the country no matter which network it uses. the new plan starts at about $70 a month. sprint's offer comes as it struggles with heavy subscriber losses as customers defect to rivals verizon and at&t. >> paul: general motors is selling a major portion of its european opel division to canadian auto supplier magna. today's announcement ends months of uncertainty over the fate of gm's best-selling european brand. under the plan, magna, along

with russia's zbeer-bank will own 55% of opel. opel employees would hold 10% leaving gm with a 35% stake. gm sees the deal closing in november or december. >> susie: here's a look at what's happening tomorrow:

>> paul: recapping today's market action, stocks are higher for the 5th straight day. the dow gained 80 points. and the nasdaq gained 23. 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 tonight, family businesses account for roughly four of every five american companies. so tonight, we bring you the latest installment of our signature series "all in the family, looking at the challenges of integrating work and family. diane eastabrook introduces us to walter e smithe, a chicago area furniture chain building its family business for nearly five decades. ♪ ♪

>> walter e. smithe. you dream it, we build it. >> reporter: in chicago, the smithe brothers and their wacky tv ads are as famous as the furniture stores that bear their grandfather's name. >> tim, mark get back to work. >> reporter: walter e. smithe furniture has been a chicago staple for more than a half century. but sales skyrocketed after mark, tim, and walt took to the airwaves nine years ago. >> we decided in 2000 that we wanted to come up with something that would be difficult for competitors to steal and we wanted to kind of give a face to the company and so we thought making the brothers the brand personality would accomplish that. >> the smithe brand got started after world war ii when walter e. smithe senior opened a chicago appliance and furniture store. in the 1960's son walter junior took over focusing on furniture. at that same time walter junior's three inseparable sons

who loved clowning around, often before home movie cameras-- began honing their own entrepreneurial skills. >> we had a beer can collection and we would go to flea markets and sell beer cans. so, we really got into business 30 yeas ago. i had a paper route and tim used to sleep on the floor-- you know he's four years younger than i am-- he'd sleep on the floor so he could help me do my paper route in the morning. >> reporter: the brothers joined the family business in the early 1980s, expanding the company from one store to 13. but despite that growth, the smithes think the commercials have helped the chain keep its small business appeal. >> people will pick up the phone and call you if there's an issue or a problem. that's one of the great things about family business. often times there is that contact. >> we are rolling action. >> reporter: most of the commercials are shot in the stores. tim is the head script writer. >> the early scripts were very heady. and we'd write a paragraph and everyone would say it. and we found the more serious we

were the funnier we were because we're just not very good actors. >> reporter: mark says the public instantly connected with their raw acting skills. >> i was in starbucks one time and this was years ago when we just started the commercials and the guy puts the latte up and says that's a latte with an e, ha ha. that was really cute and that's the first time i remember someone recognizing us. >> reporter: as savvy businessmen the smithes know creative tv ads may draw customers into their stores, but they may not necessarily move merchandise. walter e. smithe senior's favorite motto was, forever better. walt says his grandfather's words motivate every business decision he and his brothers make. >> we're looking to improve towards what you already have-- whether it's our staffing, our advertising, whether it's the appearance of our stores. in a fashion business you are constantly working on maintaining the fashionability of what you're trying to sell. >> reporter: the smithes truly love promoting what they sell and never miss an opportunity to do it, even with us. >> okay, one, two, three.

walter e, smithe you dream it we build it. i love that song. do you want the second verse? ( laughs ) ( applause ) >> reporter: diane eastabrook "nightly busness report" glendale heights, illinois. sure looks like they are having a lot of fun. >> it works. >> sure does. >> susie: that's nightly business report for thursday, september 10. 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.

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