bair, has come up with a solution. she wants banks to prepay $45 billion in insurance premiums. >> sus: another key measure of the housing market is showing improvement with prices marking monthly gains. what does it mean for the housing recovery? we'll get some answers from a noted economist. >> the demand will go wild in two to three years. so hold on to your horses, everybody, real estate is coming up, there's no doubt about it. >> paul: this south florida homebuilder thinks happy days will soon be here again. he'll tell you why. >> susie: then, it's all about revenue when it comes to earnings. while cost cuts helped companies make their numbers during the recession, wall street's now looking for revenue growth. >> paul: i'm paul kangas. >> susie: and i'm susie gharib. this is "nightly business report" for tuesday, september 29. "nightly business report" is made possible by:

this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. prepay us $45 billion. that was the message today from the government agency that insures the nation's bank deposits, the federal deposit insurance corporation. the fdic wants member banks to pay their deposit insurance premiums for the next three years ahead of schedule. as stephanie dhue explains, the agency's deposit insurance fund is scrambling to come up with cash to cope with a string of bank failures.

>> reporter: as of tomorrow, the fdic's deposit insurance fund will be officially in the red. the agency' has shelled out %25 billion to pay for 95 bank failures just since january. so today, its board took an unusual step, asking banks to pay $45 billion in fees up front. it's money that would have paid over three years. fdic chairman sheila bair says the industry should support the fund. >> i do think that the american people would prefer to see an end to policies that look to the federal balance sheet as a remedy to every problem. that is especially true of this industry that has the resources to deal with these problems. >> reporter: the banking industry likes the prepayment idea over other options, like a special fee. the american bankers association's john chessen says today's move is a wash on bank balance sheets. >> it's going to have less impact on the banks and less impact on their communities. >> reporter: and banking consultant bert ely says the prepayments should make it easier for banks to raise capital. >> it takes a lot of uncertainty out of what bank earnings are

going to be going forward with regard to deposit insurance assessments. >> reporter: but there is a lot of uncertainty in the industry-- more than 400 banks are now on the fdic's troubled list, and the agency expects to spend $100 billion on bank failures in the next few years. analyst andy laperriere thinks that's a lowball number. >> i think the fdic is going to increase their estimated losses, and this short-term measure of having the banks pay their fees up front probably is not going to hold us over through this cycle of bank failures. and i think, ultimately, the fdic is going to have to go to treasury and ask for a loan. >> reporter: while the agency does have a half trillion dollar line of credit at the treasury, bair says she doesn't think she'll need it. and in any case, she says, america's bank deposits are 100% safe, no matter what. stephanie dhue, "nightly business report," washington. >> paul: a mixed picture on the economy today, with consumer confidence tumbling despite a continuing rebound in home prices. the s&p case shiller home price

index rose just over 1.5% from june to july, its third straight month-to-month rise. still, year over year, prices are down 13%. but as home prices rose, consumer confidence fell. the conference board says its september reading dipped to 53.1 this month on continued worries about unemployment. that's down from august, and lower than expected. >> susie: joining us with more analysis about the economy, bruce kasman, chief economist at j.p. morgan. hi, bruce. >> hi susie. >> susie: we continue to get conflicting data about the economy, and people want to know, is the economy now doing better or is it still in trouble? >> i think it's pretty clear that the economy has begun to grow. it looks us to like we'll have increased at a 3 to 4% pace this quarter. that's a pretty strong pace. coming off a deep recession. but i think we have to realize that we're getting growth off a very narrow base, we're getting some help from manufacturers having cut back too far, similar to builders

and we have some incentives in the auto and housing industry. and we're not yet on a fully sustainable growth pace. in addition we're coming off of such big lows in terms of the recession, in terms of how high unemployment is, how serious credit problems are going to be that we're going to continue to have bad news here on a number of fronts, eve than as we see the economy growing. >> susie: let me pick up on some of those points. the housing data, are home prices doing better because of fundamental improvements or because of those tax credits from the government for first-time home buyers? >> there's probably a little of both. and there's probably also an issue here that there were less foreclosed homes sold in the spring, which is showing up in the number. but we do think we're getting close to a bottom in home prices and we do think there is plenty of reason to think it's fundamentals are supporting stabilization in housing here. >> susie: how are american businesses doing, you've been reporting about increased merger activity, we see that the dow is getting closer to the 10,000 level.

are these signs of real good news for companies, or is it just superficial? >> i think the real good news we've been seeing is in corporate. they've done an extremely good job maintaining costs through the downturn. they're seeing improvement in their export picture, foreign demand is picking up. and companies are now making profit even before the recession is over. what's important now is to see will that trends leads not to expansion but a pullback from retrenchments. that's what we're looking for on the labor market data and it's a profile we hope three, six months down the road will start to turn the tide towards job creation. >> susie: bruce, i want to get your take on the fdic's call today for banks to prepay their premiums. do you think that could put a squeeze on the banks so that it will be more difficult for them to lend to businesses and to consumers and to keep the credit markets flowing? >> i think the fdic charges a modest impact. but i think we should put it in broader context.

there's going to be a price that will have to be paid for continued credit losses for the damage that's been done to the economy on the fiscal side. banks are going to pay part of it, not only in this but also in higher capital requirement. and i think we are going to have a credit market that is going to be affected by this for a long time to come. >> susie: how are you seeing -- everybody has been worried over this past year about money flowing through the credit markets. what kind of shape are the credit markets in right now? >> well, the credit markets are still fragile, they're improved. and i think the drug on growth is substantially less. there's also good news and bad in that with the levels of housing and activity consumer durable demand so low the system didn't need to generate that much credit to get us to grow again. but the healing is slow, it's in the right direction, but i would not expect or characterize credit markets as having come close to normalizing at this stage. >> susie: where do you stand on all this talk of a possibility of a double dip in the recession in the economy, do you believe in that? >> no, i don't think so.

i think we're going to gather momentum here, because i think with the initial lift to growth we're going to get some very powerful and positive feedback loops working. we're seeing some of it already in the improvement taking place in the financial markets. the one which i think is critical to see in the next few months is what we just mentioned, businesses pull away from retrenchment, not only does that add to growth but it helps labor income. and graduated well, it's not going to be a straight line, confidence picks up and that lifts consumer spending as well as business spending. >> susie: confidence has a lot to do with what's going on in the job market. we get the employment report on friday. is anything going to come out of that employment report that will boost confidence? >> well, i think we should be seeing less cutbacks on the part of businesses. if we're right it's not on less job cuts, but it's also a continued stabilization in the work week, which is helpful for income. unfortunately we do think unemployment is continuing to rise. we're looking for a 9.8% unemployment rate on friday. >> susie: okay, that's not good. but thank you for coming on

the program and giving us your views on the economy. >> thank you. >> susie: my guest, bruce kasman, chief economist at j. p. morgan. >> paul: on wall street, that rise in july home prices prompted small opening gains, but stocks didn't close that way. the market slumped after that unexpected drop in september consumer confidence was reported. by 11:00 a.m., the dow was off 42 points with the nasdaq down 11 points. stocks remained locked in lower ground to the close as investors worried the decline in consumer confidence might be signaling trouble in the economic recovery. the major averages all ended lower. the dow industrial average closed down 47.16 at 9,742.20. the nasdaq dropped 6.70 to 2,124.04. the s&p 500 lost 2.37 to 1,060.61. in the bond market, the ten-year note fell 4/32 to 102 25/32, putting the yield at 3.29%.

>> susie: a major setback for supporters of a public option for health care reform. today, the senate finance committee shot down two proposals for government- sponsored plans. the committee is in its second week of considering amendments to a health care reform bill, and the public option was arguably the most controversial idea to hit the cutting room floor. committee chairman max baucus was one of the democrats to vote no. he says a public option could not get the 60 votes needed to pass the senate. >> my first job is to get this bill across the finish line. there's a lot in this bill that will reform the insurance market, there is a lot in this bill that will control costs,

and there is a lot in this bill that will expand coverage to millions of americans. those things have to be my priority. >> susie: but some democrats are vowing to keep the fight for a public option alive. senator charles schumer, whose amendment was rejected, told the finance committee he won't give up until the proposal passes the senate. >> paul: a watchdog for the securities and exchange commission hopes the agency can learn a lesson from the mess it made of the bernard madoff ponzi scheme. so a new report out today has some advice for investigators. among the ideas: new ways to collect complaints and tips, and follow up on them. that's something that didn't happen in the madoff case. the agency's enforcement division is already adopting some of those ideas, putting teams into place to help identify fraud.

>> susie: it's getting to be that time of year again-- earnings season. usually, when we report on corporate earnings, we look at how much money firms are expected to make. but this time around, we have a different take due to the recession. as suzanne pratt explains, the earnings story now is straight out of hollywood. >> show me the money! show me the money! >> reporter: for corporate america, this earnings season is all about showing investors the money. after cost-cutting their way through the last few quarters, experts say companies need to come through with at least some revenue growth. thomson reuters' ashwani kaul says, even though the economy is improving, it may be too early for any real revenue recovery. >> i think earnings will

outperform. you know, whether or not we're going to see that top line growth that the street is looking for is still up in the air. but, definitely, there's going to be bottom line improvements. i think earnings will outperform analysts' expectations, but i think everyone is waiting for that top line number. >> reporter: in the last few quarters, companies have done everything from trimming headcount to slashing r&d to control costs. so, some firms have been able to chop-chop their way to profitability. according to thomson reuters, it's typical for about 6% of s&p 500 names to show profits growing while revenue is shrinking. this year, however, 16% of the s&p 500 have managed to trim so much fat that earnings grow without the help of sales. despite that nifty accomplishment, experts say corporate america is running out of things to cut. investors are anxious to see some action on the revenue side this reporting season. miller tabak strategist peter boockvar predicts only some

companies can do it. >> if you are an exporter selling goods overseas, you probably got a lift because other overseas markets definitely improved. but the u.s.-centric businesses, those businesses that are dependent on the u.s. consumer, revenue growth is much more difficult to come by. s0, i think it's going to be a very bifurcated market. >> reporter: earnings will drive stock prices in the coming weeks, but experts say only those companies that really show investors the money will be rewarded in the stock market. suzanne pratt, "nightly business report," new york. $"$"

>> susie: today's report on improving home prices that we told you about is welcome news to the nation's home builders, particularly those in foreclosure ravaged areas like florida. jeff yastine recently visited one of the nation's largest private homebuilders, g.l. homes. g.l.'s founder gave us an insider's look at how the firm survived the housing bust, and what he's going through now. >> jeff: this is a rare sight these days-- a subdivision being turned from paper plans into reality: new roads... new sidewalks... new homes. and it's where you're likely to run into itchko ezratti, founder and c.e.o. of privately held g.l. homes. >> we have obviously survived this obviously disastrous recession for our building industry. >> jeff: ezratti watched revenues at the homebuilder drop by 55% last year, and the number of homes that went to closing fell by 40%.

but don't feel sorry for him-- g.l. has continued to build and grow through the worst real- estate downturn in a generation. >> we have three segments that we build: affordable for family, luxury for family, and active adult. the active adult people buy cash. they did not get hurt so much by the economy, and prices are down, so people are buying. >> jeff: we all know the reasons to say "come on!" after all, hundreds of billions have been lost in the real estate market, the stock market. 401(k)s were turned into 201(k)s. who's buying? ezratti says many middle-class workers were priced out of his family-oriented subdivisions. now, those with secure jobs, like government positions, are taking advantage of the lower prices. and this subdivision, aimed at active retirees, sold out when the first phase was offered for sale earlier this year. >> many people who retired did not invest with madoff, thank god, did not invest in exotic instruments.

they bought t-bills, muni bonds, fixed income. and those people are still here and they're coming. in this area, we're selling 20, 30 per month, and in the winter, we'll sell even more. >> jeff: of course the big question everyone wants answered now is "has the real estate market bottomed?" ezratti says he can't be sure, but he says his company has sold 750 homes already this year, a good figure for the company. and instead of cutting prices, the company has now started raising prices on homes in some developments. this house was priced at $265,000 at the start of the year; now, it's priced at $275,000. >> we used to price once every couple of months. today, we price daily. >> jeff: ezratti is an optimist. but he puts his faith in numbers. few new homes are being built these days. but he says that lays the groundwork for a bigger surge, when the u.s. economy returns to a full recovery. >> basically, it will reverse itself.

the supply/demand issue will be even harder, meaning the demand will go wild in two to three years. so hold on to your horses everybody, real estate is coming back, there's no doubt about it. >> jeff: a sentiment many americans may not yet believe, but desperately hope will happen. jeff yastine, "nightly business report," boynton beach, florida. >> paul: tomorrow marks the end of the third quarter on wall street. s&p's sam stovall joins us for a review and a preview of what's next. >> susie: at&t is working on a big infrastructure investment as it tries to keep up with consumer demand. the telecom giant will invest up to $18 billion this year on its wireless and broadband networks. that investment includes adding as many as 3,000 high-tech workers over the next three months. it's all part of at&t's plan to bring whatever content you like on television or the desktop to your cell phone. >> paul: the first vaccines for the h1n1 virus were sent to the

u.s. government today. sanofi aventis says the shipment was sent out this morning, ahead of schedule. the firm's under contract to provide about 75 million doses of swine flu vaccine in the united states. another 175 million doses will come from astra zeneca, glaxo smithkline, and novartis. @ñ@ñ@ñ@ñ@ñ@ñ@ñ@ñ@ñ@ñ@ñ@ñ@ñ@ñ@ñ@? .

>> susie: here's a look at what's happening tomorrow: on capitol hill, the house committee on oversight and government reform looks at ways to reform credit ratings agencies. also, the final reading on second quarter g.d.p. in tonight's "of mutual interest," why newer isn't always better. here's john waggoner, mutual fund columnist at "u.s.a. today." >> the leaves are turning, the geese are flying south, and visions of new mutual funds are dancing in fund companies' heads. mmm, you can almost smell investors' money going up in smoke. the mutual fund industry offers nearly 8,000 funds, which invest in stocks, bonds, futures and money market securities. you can choose from about 5,000 stock funds alone. nevertheless, the industry has been merrily creating new funds. just last friday, for example, ishares launched three new small-company exchange-traded funds. monday, an exchange-traded fund that bets against the price of oil made its debut. what's so bad about new funds?

well, for one thing, they have no record. with so many funds to choose from, why pick one that has no track record? for another thing, they tend to be faddish, and that's a bad thing. fund companies make their money by charging a fee equal to a percentage of the fund's assets. the bigger the fund, the more money they make. not surprisingly, fund companies roll out new funds that specialize in hot market sectors-- oil, for example-- or small-company stocks. hot sectors get the most money from the investing public. but it takes a while to create a new fund and get permission from the government to sell it to the public. by the time the fund makes its appearance, the hot market trend is starting to cool off. in the worst case, new funds just suck in investors at the worst possible time. one exception to the rule-- new funds with seasoned managers. every once in a while, a great manager strikes out on his own and starts a new fund company. but most times, the best use for a new fund prospectus is to light the evening fire. >> paul: recapping today's market action: stocks slip after a disappointing report on consumer

confidence. the dow dropped 47 points and the nasdaq fell six 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. >> susie: that's "nightly business report" for tuesday, september 29. i'm susie gharib good night, everyone, and good night to you, paul. >> paul: good night, 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 >> announcer: outdoors maryland

is made by mpt, to serve all of our diverse and is made possible by the generous support of our members. >> narrator: coming up... by chesapeake wa