captioning sponsored by wpbt >> the recession is very likely over at this point. >> paul: the fed chairman's declaration sends stocks higher. but ben bernanke says we shouldn't expect a robust recovery. >> susie: today marks one year since the lehman brother's bankruptcy. so how's wall street doing now? we get some answers in tonight's "lessons from lehman." >> paul: investors put best buy shares on sale today. the stock dropped 5% as the electronics retailer posted a bigger than expected drop in profits. >> susie: more people are staying unemployed longer and that's leaving many americans with hard choices: pay the mortgage or pay for health care coverage. >> paul: i'm paul kangas. >> susie: and i'm susie gharib. this is "nightly business report" for tuesday, september 15. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. >> susie: good evening, everyone. ben bernanke declared today that the recession is "very likely over." but the fed chief cautioned that the u.s. economy still is very weak and many americans will continue to struggle to find jobs. speaking at a conference in washington, bernanke explained that technical indicators show the recession has ended, but growth will return slowly. darren gersh reports. >> reporter: the recovery ben bernanke is looking for will be a moderate one. the fed chairman is expecting

growth of around 2% to 3% next year and he says that math is not good for the unemployed. >> the arithmetic is that unless the economy grows significantly faster than its longer term growth rate, it will be relatively slow in creating jobs over and above those needed to employ people coming into the labor force and therefore the unemployment rate would tend to come down quite slowly. >> reporter: one year after the near collapse of the financial system, bernanke pointed to signs of stability today. but the debate over the failure of lehman brothers and the root cause of the crisis continues. bernanke stressed that financial failures were a global phenomenon. as for lehman, he says the fed did not have the authority to save the firm. >> the company's available collateral fell well short of the amount needed to secure a federal reserve loan of sufficient size to meet its funding needs. >> reporter: that argument does not make sense to some analysts including economist martin bailey who wondered why lehman's failure was followed by a

dramatic rescue of insurance giant a.i.g. >> so i think that was just a mistake. it wouldn't have been easy to save lehman but i think it probably could and should have been done. >> reporter: the fed argues a.i.g. had better collateral than lehman. but former fed staffer vince reinhart says the crucial decision was actually made when the fed bailed out bear stearns, a move that sent a strong signal to the market. >> knowing the government's playbook, speculators only had to pick out the next weakest antelope in the herd. they sold the equities short and bought the debt, precipitating the next installment of the crisis. >> reporter: while economists generally credit the federal reserve with rescuing the united states and much of the world from a second great depression, many lawmakers on capitol hill are not so generous. the record of the last few years has convinced them giving the federal reserve more power to police the financial system, as the obama administration is recommending, is not a good idea. darren gersh, "nightly business report", washington. >> susie: it's been exactly a year since the lehman brothers

filed for bankruptcy setting off financial panic around the globe. but how much has changed? is wall street still broken? as we continue our special series "lessons from lehman" erika miller looks at what still needs to be done to make sure a similar crisis doesn't happen again. >> reporter: it has been a year of fear. lehman brother's collapse triggered a global market meltdown and ushered in unprecedented government intervention in the economy. yet a year later, not a single law has been passed to help prevent another crisis. noted economist henry kaufman believes wall street is still broken. >> yes, in a broader sense it is broken. because, generally speaking, financial institutions are not really lending or investing at risk. >> reporter: the big concern is that systemic risk still exists. there's still no watchdog making sure a single firm can't topple the system. the obama administration wants the federal reserve to take on that role.

some in congress think that responsibility should be given to a council of regulators. but kaufman says what we really need is an international supervisory body. >> the members of various key governments should be on another supervisory board that looks at risk taking in the global sense among major financial institutions. and then, agree to uniformed supervision, regulation, and constraints. >> reporter: and there's still the problem of how to prevent another large scale bank failure like lehman. president obama has proposed creating a new resolution authority to wind down failing firms in an orderly manner. mike oxley, a former congressman and co-author of the sarbanes/oxley act, likes the idea. >> if in fact entities are too big to fail and i think we have to recognize at least under the current situation there are some that are, how do we resolve those issues when they get in trouble? and so, i think some of those-- all of those-- i think will ultimately be in legislation

passed by congress and i'm all for it. >> reporter: excessive risk taking by banks exacerbated the financial crisis. that's why many people, including investment strategist nick sargen, think the government should put stricter limits on leverage. >> the banks and investment banks will not like it. but, we can't allow the system to take us to the brink where we were. so, i do believe that, in general, the rules will have to have less leverage than in the past. >> reporter: "less money than in the past" is something many on wall street expect to see in their paychecks. investors and taxpayers are calling for new restrictions on compensation. but some would like to see financial firms be given a chance to make changes on their own. >> if the companies don't address the compensation issue soon to the satisfaction of the shareholders, not the press, not the congress- but to the shareholders. then they're going to get more government intervention.

>> reporter: but even supporters of financial reforms warn: there will never be a surefire way to avert another major banking meltdown. >> i don't think you can preclude crises, i think that what we cannot allow is have a crisis of the order and magnitude of the last one. this one was beyond anything we ever expected. >> reporter: with the one year anniversary of lehman's bankruptcy, fixing wall street is getting a lot of attention. but most experts think financial reform will take a backseat to healthcare reform. as the markets continue to stabilize, experts say there's less urgency for change. erika miller, "nightly business report", new york. >> paul: retail sales got a boost in august thanks to back to school shoppers and the government's cash for clunkers program. the commerce department says retail sales jumped more than 2.5% in august. department stores and clothing retailers both saw 2% gains. even if you factor out auto sales, it was still a good month with the rest of the retail sector up 1%.

that's more than double what economists expected. wall street opened narrowly mixed as those strong retail numbers were offset by a bigger than expected jump in inflation at the wholesale level. august producer prices rose 1.7%. then numerous stock upgrades by analysts gave the market a firm undertone with the dow up 40 points at mid-day. the rally gathered momentum as those positive bernanke comments made the rounds. and stocks ended near the day's highs.

>> susie: more analysis now on the anniversary of the lehman collapse and how that event changed wall street. joining us now robert albertson, chief strategist at sandler o'neill. hi, robert. >> hi,. >> susie:y. >> susie: i don't know if you saw the cover of the economist this week, but i says, wall street one year on, what's changed. how would you answer that question? >> well, it's changed quite a lot. a lot of the logical reforms are already falling in place, such as compensation headed more towards long-term in shares. leverage is down a lot. i don't care what anyone says. there are adjuncts to wall street that are in the been addressed by are still problematic, that would include the rating agencies and the mortgage originators, both of which need to be brought under the regulatory tent. but in the end, wall street

isn't broken, it sure is dangerously diminished. and we have to remember wall street is a critical component of credit creation, much bigger be the banking system, in fact. >> susie: as you know, president obama, congress, the public, they don't want to go through another one of these financial crises and they want to do something to prevent that. so they're calling for new rules, new regulations. can wall street and by that i mean the big financial firms, banks and investment banks, come up with a new structure, a new safe guard before congress does? >> well, i don't know. i don't want to go through it again either, no one does. but the truth is you have to step back and understand what caused it in the first place, where did the disease begin. and i don't want to diminish the role of wall street at the end, but this was something that took 20 years of declining saving and ten years of an influx of unprecedented foreign liquidity.

we had a tsunami, no one seemed to see it. i think the street now recognizes it. i think the rules will change. i don't understand really why we want to completely revamp the regulatory system and the rules. we need to add some rules, but the rules weren't the problem. we didn't center strong rulers, people who executed properly. and the poster child for that, in a different way but very on russ to all, was madoff. that was highly transparent for a long time, that came under the auspices of finnra, which most peep may not know, and the s. e. c., and those are internal regulatory structure line of reporting execution issues, there's no law that can be passed that is going to help us here. it's got to be better regulation. >> susie: what is the solution here? because american taxpayers don't want to be put in a position again that they're backed up against the wall saying look you've got to bail

out, you fill in the blank, whether it's financial firms, auto companies or whatever. you're going to have to bail them out because the whole financial system is at risk. what's the solution? >> well, solution number one is to get trust restored in the system so it functions between as opposed to contactly berating it as the primary cause of everything bad. solution number two would require recognition that the support for this system is not taxpayers n. the case of the banks, all the money given to the banks is basically being returned out of profit. there are a lot more banks that are maller banks that will have problems. those failures are ultimately going to be paid for by the banking industry so, the taxpayer is not on the hook in the financial system in the way a lot of people think. and the third thing is we need to start addressing the broader problems instead of being obsessed with the financial system as the primary issue. but right now everyone

believes that president obama, you know, refers to it as quick kills and bloated bonuses. i don't want to turn into quick fixes and bloated government. and i think there are all the obvious things that need to be done are on the table, including the compensation issue, leverage, all of that is being accomplished. and that should do it. the real issue is we need to be able in the future to be able to he these tsunamis better and to have the con rix and the authority to act on them and to slow them down and stop them. >> susie: that's a hard thing to do. but i want to go back to something else president obama said yesterday. he said that he doesn't want the old ways that led to this crisis cannot stand, he said, the old ways. do you think that wall street, once again the big financial firms, are still back to their old ways, are they still going out there doing risky ventures? or have they scaled back? >> there's a balance. you have to take risk in order to generate any kind of

growth. wall street is not back to its old ways, there's no evidence of that whatsoever. what some people are confused about is that some of the firms remaining today are highly profitable again. they don't recognize that their leverage has been cut in half and part of the reason they're profitable is a huge amount of capacity has been taken out of wall street. that's not an indication of going back to the old ways at all. most of the senior wall street c.e.o.s have already addressed the compensation issue, squarely, honestly. and i disagree with the president's statement. >> susie: all right, unfortunately we can't continue the discussion, we'll have to leave it there. you're going to have to come back. >> i would enjoy that. >> susie: thank you so much. >> susie: my guest tonight: robert albertson, chief strategist at sandler o'neill.

>> 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, an alarming new projection on social security tonight. the congressional budget office now estimates the program's cash flow will be $11-billion in the red next year and stay in the red the year after that. that $10-billion number does not include interest paid on government bonds in the trust fund. still, it now looks like social security is running into financial challenges far sooner

than previously predicted. from sooner than predicted to longer than expected: it's taking a lot longer for jobless americans to get back to work these days. last month the average length of unemployment was six months. the labor department says that's double what it was a year ago. and a growing number of americans are facing even longer furloughs. as diane eastabrook reports those workers are facing a double dilemma: finding jobs. and possibly losing their health care benefits. >> reporter: there are 102 plans, so this takes a lot of due diligence. barbara tomczak is navigating through a myriad of health care plans on the internet. >> so, for example at $201, i'm going to have a deductible of $5,000, a co-insurance of 30%. >> reporter: the jobless human resources manager needs to buy health insurance because the benefits she's been getting through cobra end in a few weeks. while some options are affordable, tomczak says they aren't as comprehensive as the

$400 a month plan she's been getting through her previous employer. >> it appears that for single coverage if i continue under the same plan options i'm going to be playing between $425 and $600 a month. >> reporter: is that cost prohibitive for somebody like you? >> yes, at this time it is. >> reporter: as u.s. businesses continue to shed jobs, many displaced workers are finding their furloughs stretching beyond a year, putting their health care coverage at risk. cobra lets furloughed workers continue company-sponsored plans at the worker's expense, but only for 18 months. going without coverage for a couple of months really shouldn't hurt someone's chances of getting health insurance through a new employer, but being uninsured beyond two months can cause problems. karen frost heads up the health care outsourcing practice for benefits consultant hewitt associates. she says employers can deny coverage for up to a year if a new employee has a pre-existing medical condition. >> if you had cancer they are

undoubtedly going to exclude that cancer coverage for that one year period. once you pass that period then you could get treatment for under the plan for that coverage. >> reporter: anthony lo sasso is a health policy professor at the university of illinois chicago. he fears if unemployment keeps rising, more workers will choose other necessities over health insurance. >> you skip enough mortgage payments you lose the roof over your head. you can get cheaper food, but ultimately something has to give and health insurance could be one of those things. >> reporter: lo sasso says uninsured consumers ultimately drive up health care costs for everyone. barbara tomczak knows that and says she'll get coverage regardless of the cost. >> you never know what is going to happen to you and if you're without insurance you could lose everything that you've worked for. >> reporter: diane eastabrook "nightly business report" palatine illinois. >> paul: tomorrow, our street critique guest is paul larson, equities strategist and editor of morningstar's stock investor

newsletter. >> susie: mcgraw-hill says it's keeping its options open when it comes to the possible sale of "businessweek" magazine. the company has been meeting with would-be buyers since july. but nothing has been decided yet. interested buyers reportedly include bloomberg, fast company and private equity firms warburg pincus, platinum equity, open gate capital and zelnick media. bids for the magazine were due today. >> paul: blockbuster plans to close nearly 1,000 video stores or 20% of its current locations as it tries to reverse losses. the cuts were outlined today in a filing with the securities and exchange commission. blockbuster now plans to add more dvd-rental kiosks going from 500 to 10,000. the video-rental chain is struggling with competition from mail order rivals like netflix.

>> susie: here's a look at what's happening tomorrow. the consumer price index for august is released with august industrial production. also tomorrow the weekly report on crude oil and gasoline inventories. tonight's commentator says the panic's gone but little has changed. he's allan sloan senior editor- at-large at fortune. >> reporter: we news media

members love anniversaries. that's why you've heard so much about lehman brothers lately because today marks a year since lehman filed for bankruptcy. but let's do something different. instead of visiting the past and talking about what happened, let's visit the future and talk about what will happen as the result of the lehman collapse that almost destroyed the financial world. i'd like to be able to tell you that by next september 15th, well have new rules to avoid a lehman re-run. unfortunately, that wouldn't be true. the financial panic of a year ago is almost gone. so is the pressure to change the rules that let lehman get so big with so little capital, get into such trouble, and fail so disastrously. the treasury wants rules to force giant firms to add enough capital to make big failures less likely and to get powers to let it close down troubled giants in an orderly way. but washington is consumed with health care these days. unless we have another enormous

failure, heaven forbid, i can't see congress adopting serious changes to avoid lehman two. meanwhile, of course, people keep losing their jobs and their houses. but wall street keeps doing what it does best, looking out for its own interests. after every disaster from third world loans to junk bonds to subprime mortgages to commercial real estate, the street says, we've learned our lesson, things will be different next time. but they never are. i'm allan sloan. that's "nightly business report" for tuesday, september 15. i'm susie gharib goodnight everyone. and good night to you paul. goodnight susie. >> paul: 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

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