>> i want to be clear, i was the c.e.o. of the company, and i accept responsibility for everything that happened on my watch. >> tom: the former head of fannie mae caps off a week of very public apologies, saying the collapse of the mortgage giant was on him. >> susie: but the panel investigating the financial crisis still wants to know why fannie and freddie mac dove headfirst into high-risk mortgages. you're watching "nightly business report" for friday, april 9. this is "nightly business report" with susie gharib and tom hudson. "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 >> tom: good evening. the financial crisis inquiry commission today heard yet another refrain of the c.e.o, song-- "i'm sorry." this time it was former fannie mae c.e.o. daniel mudd doing the crooning, as the commission turned its attention to government-backed mortgage giants fannie mae and freddie mac. >> susie: tom, american taxpayers paid dearly for their poor decisions. fannie and freddie were taken over by the government in 2008 and so far they've cost taxpayers more than $125 billion. >> tom: the companies had the twin tasks of encouraging homeownership while growing

shareholder profits. stephanie dhue reports. >> reporter: former fannie mae c.e.o. daniel mudd says meeting his firms competing goals of increasing affordable housing and maximizing profits was an impossible task. >> the government-sponsored enterprises were able to balance business and mission when home prices were rising. they could perform when home prices were flat. they could survive a 30-year flood, but not 2008. >> reporter: in 2005, when the housing market was still booming, the companies were embroiled in accounting scandals and losing market share to wall street firms. in response, fannie and freddie dove aggressively into riskier mortgages, backing more alternative loans and buying subprime mortgage backed securities. >> if you're not making money, you're not driving profits, you're not increasing revenues, you're also unable to grow your capital, and therefore, you're unable to participate in the... in the marketplace. >> reporter: regulators have a different view. armando falcon oversaw the firms from '99 until 2005, he calls

their collapse a leadership issue. >> ultimately, the companies were not the unwitting victims of an economic down cycle or flawed products and services of theirs. their failure was deeply rooted in a culture of arrogance and greed. >> reporter: regulators say they didn't have the tools to reign in the mortgage giants. fannie and freddie lobbied heavily against any regulation that would shrink their portfolio or require higher capital. james lockhart oversaw the firms from 2006 to 2008. he says they resisted raising capital when the financial crisis hit. >> the boards were much more focused on profitability, they felt that was their fiduciary responsibility to the shareholders and the mission was a distant not even second. >> reporter: while there is disagreement about just what went wrong, there is agreement that once the financial crisis is over, fannie and freddie need a new business model. one that doesn't have a built in conflict of interest. stephanie dhue, "nightly business report," washington.

>> susie: mortgage rates ticked up this week to their highest level in eight months. rates for a 30-year fixed rate loan now average about 5.25% it's still quite low by historic standards, but even a modest increase ups borrowing costs for homebuyers and could threaten the housing market's recovery. suzanne pratt reports. >> reporter: at weichert realty in morris plains, new jersey the recent uptick in mortgage rates has not scared away homebuyers. weichert's v.p. dominick prevete says business has steadily improved in the last six months, thanks to falling home prices. customers are sensitive to mortgage rates, but he says if anything this month's increase is actually stimulating sales. >> the fear of a high rate is what motivates people to purchase. so, in some ways probably

there's an incentive for purchasers to buy before they feel rates go up significantly higher. >> reporter: many experts had expected rates to rise once the federal reserve stopped buying mortgage debt at the end of march. and while rates did climb, it turns out we can't blame the fed, at least not yet. instead experts credit the return of job growth, and improvement in the manufacturing sector. that upbeat economic news pushed bond yields higher. mortgage rates move with bond yields, specifically the 10-year note. experts say homebuyers should keep close tabs on the bond market for clues about mortgage rates. credit suisse mortgage strategist mahesh swaminathan says mortgage rates will move higher this year, but not by much. >> our thinking is something around five and a quarter average rate for most of this year is most realistic. at the high end, if we do see treasury rates continue to sell off then we might see a five and a half or a five and three- quarter mortgage rate.

>> reporter: still, every a half point increase in mortgage rates means $31 more a month on every $100,000 you borrow. that's an extra $372 a year. while it sounds like a nominal sum, it all adds up and affects housing affordability. that's why some experts worry higher rates will crack the still fragile housing recovery. but, others say it really depends on how high they go. >> there's talk of rates going to 6% and just looking at the history of interest rates you have to chuckle when you talk about 6% being a high interest rate. the fact is rates are very, very low and historically they're in a very low range. >> reporter: housing experts say it's not just low mortgages that inspire people to buy homes. jobs and consumer confidence are also huge factors and both are improving. suzanne pratt, "nightly business report," new york. >> tom: here are the stories in tonight's n.b.r. newswheel: the dow couldn't quite hold 11,000 at the closing bell. the blue chips crossed the 11,000 mark in late trading, but

pulled back at the close. still, the dow closed up 70 points, the nasdaq added 17 and the s&p 500 gained nearly eight. all three hit new post-recession highs. big board volume was under one billion shares again. the gains came on a surprise jump in wholesale inventories up 6-tenths of a percent in february, twice what economists expected. companies are moving to re-stock shelves as demand picks up. another problem for greece. fitch ratings slashed its debt rating by two notches. the move comes on what fitch calls an intensification of fiscal challenges. while greek i.o.u.s are still investment grade, one more notch lower and greece's debt would cross into junk status. and u.s. supreme court justice john paul stevens will retire from the high court this summer. he's 89 years old. the retirement gives president obama his second nominee to the high court. last year, he appointed justice sonia sotomayor. >> tom: still ahead on the program: forget about dow 11,000.

tonight's market monitor thinks we'll hit dow 12,500 this year. he's eugene peroni of advisors asset management. >> susie: if the recent pickup in mergers and acquisitions is any indicator, the economy may finally be finding its footing. the people who advise on that m&a activity say their clients are catching the buying bug. it was only last year that few even wanted to talk about deals. jeff yastine sat down with the head of an m&a advisory firm. while you've probably never heard of imap, you'll want to listen to what the company has to say. >> reporter: let's face it. when it comes to the blue-suited world of mergers and acquistiions, talk of big mergers, like the one rumored this week between u.a.l. and u.s. airway is big news. when two mid-sized firms, like frutarom industries and the u.k.'s oxford chemicals do a deal, only a few people are likely to hear about it. which is fine with that merger's advisor, imap. the global m&a advisory firm

specializes in bringing together private mid-sized companies. imap currently ranks sixth worldwide in deals worth $100- million or less. imap's president mark esbeck says there's a reason for the uptick in deals. >> what it means is that there's more confidence about the future. m&a is a business driven by confidence and attitude of certainty about the future, because the buyer is going to make a significant investment, in hopes of generating a good return on that investment. when the environment is fuzzy and cloudy, they will hold off. and sellers are the same way. so should we feel better about the direction of the economy, given what imap is seeing about mid-sized mergers and acquisitions? >> it's a good sign for the economic recovery when middle market companies are selling actively like they were. it means people have faith in the future.

and i think it's a great barometer for the fact that the recovery is happening when you see middle-market m&a start to pick up again >> a big deal in the auto industry today... >> reporter: remember the euphoric days of merger mania? esbeck believes that era is gone. >> we exited very abruptly at the end of 2008 from a period of abundance of liquidity-- lots of buyers, deals were getting done at ever higher prices. and the future was generally held to be that things would keep going forward-- a very robust time. that stopped in 2008. and realism has now taken over. the new realism is that transactions have to be put together so they can operate in this environment. buyers that bought businesses in

2007, many of them were liquidating those businesses in 2009. so they're looking at acquisitions in a much more intense and sophisticated way. >> reporter: and if you want an idea of that new reality in m&a, think "due diligence." >> i was talking to a colleague in argentina, who is working with a german buyer. it's a $40 million transaction. the buyer sent 38 people to buenos aires last week to do "due diligence." that would not have happened two or three years ago. it might have been a team of three or five people at that point in time. so people are looking at all aspects and everything to make sure it is a good deal before they are investing money. >> reporter: our guest, mark esbeck, president of imap. >> thank you, jeff.

the dow just missed 11,000. i'm looking here at 10,997.30. just about two more points. it will probably happen next we'll be right back, and i guess it does show there is more confidence coming into the market. >> clearly, you know. we've seen buyers continue to kind of begin to encourage themselves as we're a year into this bull market. let's take a look at tonight's market focus. >> tom: we've now seen higher

weekly closes for the major indices six weeks in a row, sending them to fresh highs for this bull market. the dow saw the slimmest of the percentage gains among the big three, but was up six tenths of a percent on the week. tech stocks were the out performers with the nasdaq gaining 2.1% for the week. and check those s&p 500 focused mutual funds. the benchmark index was up 1.4%. as we head into the last weekend before earnings season, the company that traditionally marks the beginning of reporting season saw some heavy selling. alcoa is the first dow component to report its quarterly financials, which are due after the closing bell monday. the stock was the biggest percentage loser of the dow after j.p. morgan cut its rating to neutral, lowering its earnings prediction thanks to lower aluminum prices. oil continued to back down slightly from its recent highs, but big oil found buyers thanks to chevron's outlook.

shares of chevron are at their highest price since mid-january. it says higher oil prices compared to late last year, and a return to profits in its gasoline refinery business will add up to stronger earnings. c.v.x. was the biggest percentage gainer of the dow industrials. conoco shares hit a new 52-week high and exxon also rallied. natural gas saw a little buying interest but it remains near some lows. still, there's buying interest in production. atlas energy jumped 20% thanks to a deal to sell a stake in one of its nat gas fields to an indian company, bringing in $1.7 billion. others involved in this same nat gas field that stretches from west virginia to new york saw buying. rex energy, exco resources and range resources, each up 4% or more on heavy volume. as jeff reported earlier, hopes are high merger activity is beginning to pick up.

certainly merger rumors are picking up. not a week goes by recently without some kind of merger rumor fueling big volume in shares of palm. the latest speculation came today from a chinese language version of a technology news website, reporting smart phone maker h.t.c. is talking to palm. the stock was among the most active. jacobs engineering group also is in the rumor mill as a possible private equity buyout target. and casey's general store stock shot up after it rejected a hostile buyout from a canadian convenience store operator. insurance giant aetna will have to stop enrolling new customers in its medicare advantage or medicare prescription drug plans beginning april 21. the federal government ordered the halt because aetna has not followed certain requirements for the drug prescription plans for seniors. shares of aetna dropped below $33 a share at mid day when the news came out. the stock recovered some but still fell on the day. the company says the suspension does not affect current customers and it is working to

resolve the issue. and just two new stocks coming to market this week, a steel service company and an organ replacement firm. metals u.s.a. is a partial spin out from its private equity owner. it started at $21 a share today, higher than predicted. the firm doesn't actually make steel but acts as a middleman. tengion also hit the tape today at $5. this company is developing replacement tissue. in it's regulatory filing, tengion says recurring losses quote, "raise substantial doubt," end quote about its ability to stay in business. earnings begin next week, that's tonight's market focus.

>> susie: toyota's legal battles will be waged in a federal courtroom in los angeles. a judicial panel decided that today. it affects more than 200 lawsuits against the automaker filed around the country. it also means one judge will make the pre-trial decisions for all the cases. some suits are by toyota owners claiming their vehicles have lost value. others are asking for money for injuries from sudden acceleration problems. toyota has recalled more than eight million vehicles worldwide for issues with their gas pedals and brakes. >> tom: here's what we're watching for next week. our friday market monitor guest is dr. hans black, chairman of inter-invest. on monday, alcoa kicks off the first quarter's earnings season. later in the week, we'll see results from bank of america, general electric, google and j.p. morgan.

monday, u-s/china relations. we'll look at the currency and trade issues, as the leaders of both countries meet. >> susie: netflix customers who want to see popular movies like "avatar" will have to wait even longer. today, the online movie rental company and twentieth century fox signed a new distribution deal: it includes a 28-day delay on new releases. in exchange, fox will provide some of its television shows to netflix for internet streaming for the first time. fox's blockbuster "avatar" will be among the first films to be released under this agreement. >> tom: restaurant chain california pizza kitchen has an order in for a new owner! the "wall street journal" reports the company is on the auction block, soliciting interest from buyers including private equity firms. that news sent shares up 14% today or $2.56 to close at $20.74. california pizza kitchen is not commenting on a potential sale, but its sales slowed

considerably last year as consumers stayed away from casual dining chains during the recession. caption test caption test caption test caption test caption come united's pilot union is also against the merger.

but pilots at u.s. airways said it "might" support a deal if it's good for them. overwhelming union opposition blocked a merger between united and u.s. airways a decade ago. neither airline has confirmed current talks and it's not clear if a deal will happen. >> tom: while the dow industrials have been flirting with 11,000 for the past two week's, tonight's market monitor thinks the blue chips have more upside from here. he's eugene peroni, portfolio manager for advisors asset management and he joins us from philadelphia. >> tom: welcome back to "nightly business report". >> nice to be here, tom. thank you very much. it is nice to see you. >> tom: so what makes you so bullish, that we're below 11,000 and you think we have room to run. >> i like the technical behavior of this market, it reminiscent of the behavior we saw from the 2002 bowment. i think with extremely attractive factors, along

with low interest rates, this market is positioned nicely to move higher. the fact that volume has been light, to me indicates a glass half full scenario and we have pentup buying potential that could come in when we surpass some of the key levels. >> tom: what are some of the levels you're watching on the dow charts? >> the next one might be just a few points away. the 11,000 era is a psychological level. i think as investors see that this market appears to be for real that the bottom last march has legs, it is sustaining itself, that this is going to probably attract more investors into the market. at first gradually, but i would argue towards the end of the quarter -- towards the end of the cycle, like other cycles, we could very well see a more urgent buying move. >> tom: some have noted, gene, the lack of really any selling pressure of a move down of a pause of 5% or more.

do you anticipate that to happen at all? >> well, it certainly could happen along the way. i don't think it will happen from these levels just yet. but as we punch into the 11,000 area, and move to the mid-upper 11,000s, perhaps a correction of 5% to 8% is possible. maybe now it would be 3% to 4% pullback. >> tom: the last time you were here at "nightly business report," it was around halloween time. nice returns for apple and allergens. 28% for apple, and 12.5% for allergen. do you still like these picks? >> i do-yes. >> let's go to the next two. and ever core partners down by less than 1%. any new money to work in these? >> i still like cora labs have much. i like the energy outlook. with respect to everett core, i look the financial group, but there may be better opportunities in

that category. >> tom: and you brought along some of those stocks you think are better opportunities. including the on-line retailers, amazon.com. and the stock price around $140 per share. which it has not really be able to pierce lately. >> no, it hasn't. it has been consolidating some of its recent big gains. but we think that is just what it is doing, consolidating the gains and we look for another move up. >> flow serve, f.l.s., is another one you brought with you. it operates in the flow control systems. nice strong rally of 77%, but volume has been lighter as we've been at some new highs here. >> it has been a little lighter. it could pull back here a little bit. like other leadership stocks, they're a little extended here near term. but not greatly so, when you look at the intermediate term foundation of this bottom. i think that the risk to reward, even at these levels, is very attractive. taking a 12 to 18 month

perspective forward. >> the next one is crm, the kind of software that sales force sells. and it has a large rally. it is at a new 52-week high. do you like to by at net highs? >> in this case, yes. other stocks in this particular category remain strong. i think the outlook for business opportunity improving is quite good. >> how about stanley black and decker, a new 52-week high has we end the week. >> a lot of the traditional industrial stocks have been doing very well here of late. i think that positive trend will continue. i think with stanley works and the acquisition of black and decker, it has created niacin energ nice synergy for this stocks. >> tom: any disclosures. >> i may own a and n

indirectly. >> tom: eugene peroni. >> first we have to get to 11,000, and 12,000, and maybe get to 13,000, 14,000. >> tom: and it is a big week. as well as earnings reports beginning. >> that's the "nightly business report" for friday, april 9th, i'm susie gharib. have a great weekend, and you, too, tom. >> you, too, susie. i'm tom hudson, and we'll see you back "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 >> more information about investing is available in "nightly business report's" video "how wall street works". to order this dvd, call 1-800- play-pbs or visit online at shoppbs.org.