>> susie: tonight, we bring you our exclusive interview with one of the most powerful policy makers at the federal reserve. >> there are a lot of people that could actually be motivated to actually take positive steps that would help the economy if they had confidence that the political process was working better. >> susie: new york fed president bill dudley says the central bank has more tools to fix the economy, but it could use a little help from congress. >> tom: in another exclusive, we talk with the man running one of the world's biggest private equity and investment firms. >> commercial real estate is really very interesting. >> tom: in the united states? >> in the united states, for sure. >> tom: steve schwarzman, the chairman and c.e.o. of blackstone. it's "nightly business report" for thursday, november 17. this is "nightly business

report" with susie gharib and tom hudson. "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. the new york federal reserve bank president bill dudley tells "nightly business report" the central bank has already done a lot to help the economy, but it could do more. tom, dudley laid out his plan for revving up growth in an exclusive interview with me at his offices at the new york fed,

just blocks from here. >> tom: dudley was clear the fed still has plenty of ammunition to boost growth. that firepower includes more bond buying and more open communication about the economy. but he also says the fed can't fix the economy alone. it needs what he called "complementary" initiatives from others, including congress. >> susie: dudley plays a key role on the fed's committee on interest rates, and he is second only to chairman ben bernanke in wielding power over policy. he got the job nearly two years ago in the middle of the worst financial crisis in decades. his colleagues today are divided on what the fed should do next-- take action now or wait to see if the recovery stalls further. i began my interview with dudley by asking him how the economy is doing. >> things are getting a little bit better. second half of the year growth is definitely stronger than the first half. we've seen a little bit of pick up in employment growth but not

what we want. unemployment rate is still too high but the outlook is definitely better than it was. the other thing we can note the is inflation rate pickup offed up at the first of year is now turning down. it's not great but better than it was in the first half. >> susie: but the fed has been saying that there are still significant down side risks to the economy. is it the risk of a financial crises or risk of a recession? >> well i think obviously the two are connected. if you had a financial crises that would increase the risk of recession. there's big focus right now probably mostly in europe. the european situation is still very unsettled. we think it's definitely solvable. we think they have the fiscal capacity to do what they need to do. the politics are difficult. >> susie: what are the risks for recession. any way you can quantify. 20%, 40%. >> i think the risk of recession has actually fallen significantly over the last few months. we're now getting the virtue circle of employment, income growth leading to a stronger consumer spending. i think the biggest risk is

europe. what happens in washington in terms of fiscal policy. because fiscal policy is, if we do nothing, it's scheduled to become quite restrictive in 2012 in housing. it's a major financial asset for most households. so if you also stabilize housing prices, this has direct implications for household balance sheets. therefore makes people to feel more confident about increasing their spending. >> susie: housing is very important to the recovery. what is it going to take to fix the housing sector? >> the harp program to help people refinance their high loan to value mortgages, take advantage of lower interest rates, the administration initiative in this area i think is very helpful. i think there are other things we could do as well. trying to take steps to improve the access to mortgage crises more generally. making sure the appraisal process doesn't swing from two optimistic to too pessimistic is an issue. i think there's a number of issues we could take housing that would help stabilize the sector.

i think if you stabilize the sector, have huge consequences both directly for the sector itself, but also in terms of household confidence which would then affect household spending. >> susie: is there a role for the fed. we hear so much from people how hard it is to get a mortgage, to refinance. is there anything that the feds can do to encourage banks to loan more? >> well, we have to make sure that our examiners when they go into the banks don't, the needle doesn't swing from letting anything go to be very very restrictive. i think we are trying to make it clear to the banks we want them to engage with small businesses. and i think the most important thing i think we've done in terms of the bank is the banks, especially the larger banks, we force them to raise a lot of capital and build their liquidity buffers. so they're in much better shape now than they were then. >> susie: let's talk a little bit about monetary paul z you say that the federal reserve has not run out of ammunition to fix the economy. what's left. >> i think the important thing i

would emphasize on the monetary policy we could do our part but there are other things that would be helpful and complementary. housing, fiscal policy are two of the important ones. i think the first thing i would emphasize is the federal reserve has already done a lot. the second thing could we do more? yes, we could. i think on the communications side we could be a little, we could make further progress in terms of explaining exactly what it would take for us to actually start to want to rise short term interest rates. what level of unemployment, what level of inflation might be thresholds until we reach those thresholds we'll be pretty comfortable keeping short term rates where they are. the second thing we could do is more on the balance sheet side. if we were going down at that time path one obvious area to consider to be purchasing mortgage-backed securities. >> susie: there are those who say that the asset purchases have done little to repair the economy in terms of the past.

so why bother again? >> we think that they have actually been effective in reducing long term interest rates by taking duration out of the market. by basically helping support the stock market and housing values. and yes, we wish the economy was stronger than it's been but we're pretty convinced that the economy would have been significantly worse if we hadn't been involved in these programs. >> susie: you talk about giving more guidance on economic conditions so that people know when the fed will be raising interest rates. what do you think of the suggestion by some of your colleagues that the fed promises to keep interest rates low until the unemployment rate gets down to 7%. >> well, i think the general framework i think is something that we definitely want to explore. of course the devil's in the details to get all the members in the committee to agree what's the right, what those right numbers are, what's the right unemployment rate, what's the right inflation right. this is something that you know i definitely want to continue to work on and see if we can bring

the committee to a consensus. >> susie: how is setting these public targets being more help really help the economy grow or help people get jobs. >> i think the important thing, the allows people investors to have more certainty about how the federal reserve is going to behave in the future. if people have more confidence in how the fed is likely to react to future incoming economic information, that reduces the riskiness of them going out and buying financial assets. it reduces risk which supports the economy. right now we have this mid 2013 date. that's what we've said. but what's that date based on? and so i think it would be helpful if we could provide a little more detail about what was the underlying thinking that caused us to arrive at that particular date. >> susie: so how did the fed come up with that mid 2013 that would keep interest rates low until that date? >> probably because i think it was the sense of the committee that we were unlikely to reach

an unemployment rate and inflation rate that would cause us to want to exit sooner than that. so implicit behind the number, the notion that the economy was unlikely to be strong enough to generate an unemployment rate low enough or inflation high enough that would cause us to want to leave sooner. >> susie: in a few moments, more from my conversation with bill dudley on fiscal policy, jobs, and the european financial crisis. >> in taxes, everyone tends to look into everyone else's pockets. >> tom: also ahead on the program, steve schwarzman, the influential c.e.o. of one of the largest alternative and private equity investment groups on taxes and investing in american real estate. occupy wall street marked two months in new york city today with massive protests. today's target-- the new york stock exchange. police and protestors clashed outside the big board. as many as 200 people were arrested. meanwhile, fresh worries about europe continuing to dominate trading on wall street. the risk premium on spanish and

french bonds soared today, as investors wanted more for lending to what they see as riskier economies. u.s. stocks tumbled in reaction. the dow fell 134 points, the nasdaq lost 51, and the s&p 500 was down 20. trading volume was heavier with one billion shares moving on the big board and over two billion on the nasdaq. on capitol hill, energy secretary steven chu defended the white house on its handling of a half-billion dollar loan to the now-bankrupt solyndra. testifying before the house energy and commerce committee, chu denied that the administration had rushed funding to the solar panel maker without properly vetting its financial health. >> susie: more now from my exclusive interview with new york fed president bill dudley. we continue now with his thoughts on fiscal stimulus. i asked him if the payroll tax cuts that expire in a few weeks should be extended.

>> i'm not going to talk about particular programs. i would say though that if we do nothing, fiscal policy in 2012 is going to be very restrictive to the tune of more than 1% of gdp. that seems like an awful lot of fiscal restrain at a time that the economy is only growing at a moderate pace. it seems to me a better fiscal policy path would be to have less restraint over the near term accompanied by a credible long term program of fiscal consolidation. >> susie: you talk about everyone working together. if everyone isn't working together what does that mean for the economy. >> i think it's going to hurt confidence. it's going to hurt household confidence. a lot of people we talked to we asked about their business and saying we're actually okay. i say you're going out and hiring and investing. no, i'm sitting and waiting. so i think there are a lot of people that could be motivated to take positive steps to help the economy if it was better.

>> susie: are people fearful about the long term prospect of the united states and what's going to happen to the living standard. >> that can change. if you start to see that's a credible policies put in place, people then become more confident about the future, stwhrfer they're more willing to spend. then that generates employment growth which then feeds into confidence which then generates more income and all of a sudden you have a virtual circle. >> susie: does it matter what come out of the super committee. >> i think it's important that we get something tangible from this super committee rather than just going to frustration that it triggers. i think that the failure of the democrats and republicans to reach an agreement would say quite a bit about the political dysfunction that people perceive in washington. so i think getting to an agreement is very very important symbolically. >> susie: i want to talk a little about jobs.

there are 1 million people who do not have jobs. are these permanent job losses. >> i don't think so. the longer people are unemployed the tougher it is on them to find jobs in the future because they lose some of their job skills and become hard employment in the future. that's why it's so important to generate a strong economy as we can over the near term to generate more employment. >> susie: what do you say to the out of work construction worker. what do you say to that recent college graduate still can't find a job. >> look i feel very badly for them and i think they should be writing their congressman and senators in washington telling them to come forward with a credible program on fiscal policy. do things to make the housing sector more functional. you know, if monetary policy works hand in hand with issues on the other areas, the economy could actually be quite good in 2012. >> susie: the occupy wall

street movement has made a lot of news and the demonstrators are just around the corner from your offices here at the federal reserve. they're angry at the fed. what do you say to the demonstrators? >> i completely understand the anger of people at occupy wall street. what i don't think, i would argue, i don't think they understand enough is why we intervene in the way that we did. it wasn't that we wanted to rescue the banks, we wanted to rescue the financial system because without a functional financial system, credit can't keep flowing to household and businesses which is the life blood of the economy. >> susie: i want to ask you a few questions about you said that you're worried that the stresses in europe are escalating. to what extent could europe hurt the u.s. economy? >> of course it could hurt the economy because if europe goes badly and falls into recession then there will be less demand for u.s. goods and services. also, u.s. banks have some exposure to europe and so to the extent that you're doing badly,

there will be some consequences for u.s. banks. although i would say the direct u.s. exposure of u.s. banks to the countries in europe that we're talking about is actually very very modest. we think the european situation is definitely solvable. their fiscal position is certainly no worse than the u.s. the problem is a political one. there's a lot of concern about u.s. banks. do you think u.s. banks can weather a full-blown european crises. >> define full-blown european crises. what i can say is the u.s. banks their direct exposure is quite modest and they're better equipped to manage any type of crises than they were in 2008. they bolstered their capital significantly. they built their loan loss reserves. they have very large liquidity buffers. so i think that our banks are in very very good shape. >> >> susie: you can read a transcript of my entire interview with new york fed

president bill dudley. you'll find it on our web site, nbronpbs.org. just couldn't escape the selling. >> you hit the celibaten. palms are out that means selling of course and we saw a lot of it today spurred on by concerns over europe. let's take a look at the actions with tonight's market focus. market worries returned to europe, but shifted to spain, sending stocks into a bit of a tailspin. looking at the day's trading activity for the s&p 500 highlights the steep drop we saw during the noon hour, eastern time. leading the market lower were the materials, information technology, and the energy sectors. each of these sectors fell more than 2%. the biggest dow loser was in the material sector, alcoa falling 3.5%, holding just above its

october low. on the tech side, storage firm netapp shed 12% after warning revenue growth is slowing due to choppy spending by customers and flooding in thailand. semiconductor equipment manufacturer applied materials dropped 7.5%. it also warned of a rough economy hurting its outlook. computer maker hewlett-packard was among those pushing down tech stocks. h-p-q fell more than 2%. it will be one to watch next week. it is due to report earnings monday, its first under new c.e.o. meg whitman. retailer sears had a tough go last quarter. the stores lost more money than anticipated. the quarter was hurt by weakness in clothing and pharmacy sales at k-marts in the u.s. shares of sears slid 4.5%, down to a four-week low. profit margins also fell at both sears and k-mart brands. speaking of shrinking profit margins in retail, perry ellis

stock lost more than a third of its value. weak sales and profit margins. the company also lowered its outlook. among the issues the occupy wall street movement has brought attention to are student loans. the newly created consumer financial protection bureau announced an effort today to hear from the public on the private student loan market. s-l-m shares dove 4%, but was down much more during the session. the student lender is working with the consumer financial agency, and a spokesperson said it encourages students to at least make interest payments while in school instead of deferring payments. after the close, sales software firm salesforce.com reported earnings three cents better than estimates before taking out compensation and other charges. it saw double-digit revenue increases in some of its key business segments. while sales lost 4% during the regular session, they were down another 6% after the close, thanks to its outlook coming in

just below expectations. in the commodity market, the worries about europe did not help precious metals. gold fell 3%, silver dropped almost 7%. after hitting over $100 a barrel yesterday, oil fell more than 3.5%, and gasoline futures shed more than 4.5%. and that's tonight's "market focus."

>> tom: our other big, exclusive interview tonight is with steve schwarzman. in investment circles, he's as big as they come. while he may not be a household name, companies he has money in certainly are. schwarzman is the co-founder, chairman and c.e.o. of blackstone, one of the world's largest alternative investment and private equity investors. blackstone has money behind brands such as hilton hotels and universal orlando theme park. we spoke at his headquarters in new york, beginning with his assessment of the u.s. economy. >> u.s. economy seems to have a little bit of life. remember we've had extremely low interest rates and a lot of stimulus. i think there's still head winds that we're really facing a lot of lack of confidence that's happening from ternal issues and -- temperamental issues and lack of extension credit and the type of things we're dealing

with. the super committee is the latest but it's a problem with society that is questioning its base principles. >> tom: what's the structural issues that you've been able to identify in terms of the economy when you talk about a society questioning its base principles. >> part of it is that economy isn't producing jobs, which is one reason why you have a lot of unemployment and a movement like the occupy wall street movement. 14 million people in the united states either unemployed or under employed. these people are frustrated and they have a right to be. economically, we're facing a situation where historically the u.s. government has spent around 20% of gdp ask took in 18%

revenues. we've now got revenues down around 16% but our spending has mushroomed up to 25%. >> tom: some appointed to raising revenues as part of the solution and the super committee is talking about not only spending cuts but the ability to raise revenues. occupy wall street has talked about they're the 99% and the 1% need to offer up more. you're certainly in that class with your success. are you prepared to pay more in taxes? >> in taxes, everyone tends to look into everyone else's pocket. in my own case, i'm paying 53% tax. 36% federal. 35 maximum rate and then another 1% because i'm self employed and then 17% new york city and new york state tax. that rate is about the second highest in the world. i think there has to be some

recognition that we're going to be moving people into the highest tax paying class in the world very quickly. >> tom: mr. schwarzman, let me ask you about opportunities that you have identified and your team has identified as investors. you operate already across many different industries across many differenteographies. hilton hotels, sea world, commercial real state, construction materials. where are you finding the greatest opportunities? >> well, right now real estate, commercial real estate is really very interesting. in the united states. >> in the united states for sure. it probably has more pressure on it in europe but there are going to be a lot of european institutions selling loans. and the opportunity in real estate is not necessarily buying the equity in real estate because it may be overvalued. but these huge amounts of loans

that were made near the top of the cycle where they need to be refinanced when they come due. we tend to buy some of that debt, the right part in the capital structure and convert that down into equity. so we're buying at a new value. >> tom: where are the weaknesses that you see? >> europe is the area of greatest concern. european base businesses, european financial system, the european financial crises is really unprecedented in our time. the reason is that you need 17 countries to agree on doing anything. look at the united states. we barely can get anything done. >> tom: our conversation with steve schwarzman continues tomorrow. we talk creating jobs through entrepreneurism, and how blackstone hopes to inspire new companies. until then, you can follow nbr anytime. we're online at nbronpbs.org.

you can also follow us on twitter @bzrpt, or my personal feed @hudsonnbr. if tweeting isn't your thing, friend us on facebook at bizrpt. >> susie: before we say good night, here's what we're watching for tomorrow. we'll see the conference board's index of leading economic indicators for october, and quarterly earnings from h.j. heinz. also tomorrow, our "market monitor" says once the e.u. debt situation is resolved, the market will be driven by fundamentals. he's erik ristuben, chief investment officer of client strategies at russell investments. that's "nightly business report" for thursday, november 17. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "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 >> be more.

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