Transcript: Wednesday, April 9, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib.

pop as the Federal Reserve calms concerns over when the Central Bank might
start to raise rates.

government releases a massive amount of data on Medicare pricing and the
doctors who billed the very most. What it says about the system and what
every patient and taxpayer should know.

GHARIB: And making your spending secure. Steps companies are taking
to protect your credit card data and the huge costs involved.

We have all that and more on NIGHTLY BUSINESS REPORT for this
Wednesday, April 9th.

MATHISEN: Good evening, everyone, and welcome.

Go to any business meeting anywhere, and the reading of the minutes
from the last session is likely to be the biggest snooze on the agenda.
But not today, and not when it comes from the Federal Reserve meeting.
Stocks catapulted at precisely 2:00 p.m. Eastern today when the Fed
published the minutes from its March meeting. Short term bond prices rose,

Why? Fairly simple. The minutes reaffirm the idea that the fed is in
no hurry to raise interest rates. What`s more? It was revealed today that
new chair Janet Yellen was so concerned about fine-tuning interest rate
guidance that she called an unusual pre-meeting video conference on March
4th to discuss the matter.

The Dow soured 181 points on the day, the NASDAQ jumped nearly 71, and
an almost 2 percent spike for the day, and the S&P 500 added 20.

Here`s a look at the bond numbers on a bit of mixed day. There`s the
5-year note. You see the yield coming down there.

The dollar index weakened a bit and the gold prices briefly turned
higher after the Fed`s minutes were released. But they ended the day
slightly lower.

Steve Liesman has more on the Fed`s minutes and where the bank stands
and when interest rates may start to climb higher.


the Federal Reserve`s March meeting suggested maybe the Fed was not as
hawkish as some in the market believed at the time. The Fed saying it was
concerned that the market would take the wrong signal from the individual
funds rates forecast of its members. Those forecasts showed the Fed
believes rates would be higher in 2015 and 2016 than the market had
previously thought.

It`s a big problem for the Fed where it says one thing in the
statement about the funds rate but also provides the individual forecast of
its members. In this case those were at odd and it spooked the market into
thinking the rates would be higher. They minutes say the participants were
concerned that that could be misconstrued by the market into thinking the
Fed would be tighter than it otherwise would have been. The minutes say
specifically that the public should follow statements not the individual

All but one Fed member sees rates rising not into 2015 or later. A
large majority of the Feds see a gradual rise to the fund rates when it
does begin going up. There was further tapering expected throughout the
rest of this year assuming the economy continued to improve. And the Feds
saw fewer headwinds to the economy this year and better growth, and they
thought that the weakness in the winter was largely the result of the



GHARIB: Let`s turn now to Lindsay (NYSE:LNN) Piegza for more analysis
on the Fed, the economy, and the markets. She`s chief economist at Sterne

So, Lindsey, it seems like the Fed`s message really didn`t change.
They just confirmed what they said before that interest rates are going to
go up gradually. Is that your take on it?

The minutes reminded the market that it is the statement and not the famed
dot plot that conveys monetary policy intention. And the statement was
very clear, very dovish, reaffirming the Fed`s commitment to this very
accommodative stance. And so the meeting minutes simply reaffirms that
dovish stance, and reaffirms to the market the Fed`s intentions in terms of
monetary policy.

MATHISEN: So how do I take this statement today, these minutes and
apply them in my investing life?

PIEGZA: Well, you know, I think the market`s reaction tells all. The
market liked the idea that the Fed`s affirmation, or excuse me, the Fed`s
commitment to accommodation was reaffirmed. And again, what this says is
that when we look at the monetary policy stance of the Fed against the back
drop of very weak labor conditions, very minimal income growth, despite the
fact that the market seem ready and almost wanting rates to rise, it`s more
likely that the Fed remains at this accommodative stance longer than
expected, meaning that the Fed could be on hold well into 2016, possibly
even 17, if we continue to see this very tepid pace of growth.

GHARIB: You know, Lindsey, investors are always looking at some of
kind of headlines to let them know that they`re on track with their
investments. I mean, what`s the key thing that they should look out for?
Is it something about the job market? Is it just overall economy, housing?
I mean, what are you monitoring?

PIEGZA: It all comes down to jobs. And I think the Fed`s adjustment
to forward guidance really highlights how important the recovery in the
labor market is, in terms of not only investment but in terms of the Fed`s
guidance for monetary policy. And moving away from just looking at the
unemployment rates the Feds said look we have to keep an eye on average
hourly earnings which are flat at 9.1 percent, the participation rate,
which remains at a three-decade low. All the factors contribute to the
broader health of the labor market which gives us a much broader, dire
picture than the unemployment rate that`s come down from a peak of 10

MATHISEN: So, Lindsey, for those who love to get in touch with our
inner Fed wonk, what if anything should we draw from the — from the
unusual video conference meeting that Chair Yellen called in advance of the
main meeting? Does it signal anything about her tenure or leadership, how
she is going to do things? What she is concerned about?

PIEGZA: You know, I don`t know if we can really draw a conclusion
from that. Remember there was a lot of confusion after the March meeting
and I don`t think Yellen or any individual member can be blamed for that.

I think, instead, this points to the idea that the economy is really
at a precipice. We`ve had very accommodative policy for an incredibly long
time and yet the economy continues to just bounce along. And so, I think
what the chairman`s intention was, is to say, look, we`re sending a very
unclear signal. The market needs now more than ever guidance from the
Feds. And I think in the back drop of the confusion that came after the
March meeting, she simply wanted everyone on the same page to make sure
that a unified message was conveyed to the market, that message being a
very dovish message.

GHARIB: All right. Lindsey, thanks for translating it all for us.
We really appreciate it.

Lindsey Piegza from Sterne Agee.

PIEGZA: Thank you.

MATHISEN: Well, despite today`s gains, a weaker than expected report
out today on wholesale inventories prompted JPMorgan (NYSE:JPM) chase to
lower its forecast for first quarter overall economic growth from 1 1/2
percent to 1 percent. But the bank did raise its outlook for the second
quarter, which we`re in right now by the way from 2 1/2 percent to 3
percent growth.

GHARIB: Well, Treasury Secretary Jack Lew says the U.S. is leaning
the global economic recovery, but he also says there`s still a lot of work
to do to get the American economy where it needs to be.


JACK LEW, TREASURY SECRETARY: We took tough decisions, you know six
years ago. And we stuck with them. We have our economy growing. We
reformed our financial system. We have our fiscal house in a much better
place, and we have, you know, growth that is by world standards, doing
better. As you know, by our standards, we`re still have a lot of work to
do, as long as there are millions of Americans who want to work full-time
or who want to find jobs who can`t, we`re not done with our work.


GHARIB: Lew says kick-starting economic growth is his top priority
when he meets on Friday with other financial leaders at the International
Monetary Fund annual meeting in Washington.

MATHISEN: And a real setback in President Obama`s push for equal pay
rules for men and women. The Senate voted against debating what was called
the Paycheck Fairness Act, which would require federal contractors to
disclose how they compensate workers and bar any retribution against
employees who discuss their salaries with others. Some lawmakers argue the
bill would lead to frivolous lawsuits and deny women flexibility in the

GHARIB: Some good news for Detroit today. The bankrupt city reached
a settlement that will give some bondholders nearly 3/4 of the almost $400
million that`s owed to them. Kevyn Orr, the state appointed emergency
manager, says the deal and the plans to exit bankruptcy protection in
October could influence other creditors to reach more settlements as the
Motor City heads in the right direction.


KEVYN ORR, EMERGENCY MANAGER: The city itself, especially the central
core downtown, is thriving. The other 130 miles of city were huge, we`re
the size of Boston, New York and San Francisco, and New York city
altogether. The city itself is going to take a period of time but we`re
getting at it right now.


GHARIB: When the deal gets the final OK from a federal bankruptcy
judge, Detroit will pay 74 cents for each dollar owed.

MATHISEN: An important Senate hearing today as Comcast (NASDAQ:CMCSA)
(NYSE:CCS), the nation`s biggest cable television provider, explained to
lawmakers why it should be allowed to acquire Time Warner (NYSE:TWX) Cable,
the nation`s number two cable company, and how consumers will benefit from
the combined companies. But there was a lot of skepticism on Capitol Hill.

Hampton Pearson has the story.


At the first public hearing on the proposed $45 billion merger between
Comcast (NASDAQ:CMCSA) (NYSE:CCS) and Time Warner (NYSE:TWX) Cable,
lawmakers on the Senate Judiciary Committee voiced concern about higher
prices for consumers and too much power over what Americans watch on TV,
and online.

SEN. CHARLES GRASSLEY (R), IOWA: Consumers want to know whether
combining Comcast (NASDAQ:CMCSA) (NYSE:CCS)/Time Warner (NYSE:TWX) will be
in a position to provide high speed Internet access, will consumes have
higher cable bills, will they have more or less content choices?

SEN. AMY KLOBUCHAR (D), MINNESOTA: This issue literally touches
people`s lives every day and it touches their wallets every month.

PEARSON: A post-merger Comcast (NASDAQ:CMCSA) (NYSE:CCS) will have
about 30 million cable subscribers, just under 30 percent of the pay TV
market, and serve anywhere between 20 percent to 40 percent of the high
speed internet market. But not at the expense of consumer choice.

A top executive from Comcast (NASDAQ:CMCSA) (NYSE:CCS) says that is
because the competitive landscape is changing.

will make us bigger that is a good thing, not a problem. Most of our real
competitors are national and global and larger than us, like the Bells,
satellite companies, Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Sony
(NYSE:SNE) and Netflix (NASDAQ:NFLX).

PEARSON: However, critics said today`s hearing repeatedly pointed to
Comcast (NASDAQ:CMCSA) (NYSE:CCS) ownership of NBC Universal (NYSE:UVV),
and the ability to leverage that content as another potential obstacle.

could fundamentally undermine these new, wonderful innovative options
consumers are seeing. Comcast (NASDAQ:CMCSA) (NYSE:CCS), with its control
of video and high speed broadband, adding Time Warner (NYSE:TWX) systems
could lock in increased high prices for NBC, programming, and sports and
regional sports and cable programming.

PEARSON (on camera): The real audience for today`s hearing, top
regulators and lawyers at the FCC and Justice Department. They will have
the final word on one of the biggest proposed media mergers in history.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.


MATHISEN: And we should point out that Comcast (NASDAQ:CMCSA)
(NYSE:CCS) is the parent company of CNBC, which produces this program.

GHARIB: And coming up on NIGHTLY BUSINESS REPORT, why a small
fraction of doctors get a big share of Medicare payment, and why it matters
to you.


GHARIB: Some car trouble to tell you about. Toyota (NYSE:TM) is
recalling more than 6.5 million cars worldwide, this involves 30 different
models in all for a variety of problems, ranging from faulty air bags to
defective steering columns, to bad starter switches.

Meanwhile, Volkswagen ordered its U.S. dealers to stop selling 20,000
newly manufactured Jettas and Beetles and Passats. These are the ones with
1.8 liter engines and automatic transmission. The reason, the transmission
oil may leak and cause a fire.

MATHISEN: Ally Financials pricing its initial public offering this
evening. The company offering 95 million shares at $25 each. That is at
the low end of the estimated pricing range. The IPL will raise more than
$2 billion. You may recall that Ally is the former General Motors
(NYSE:GM) financing arm that was forced to take a government bailout after
beating big — and I do mean big — on sub-prime mortgages. The government
needed to raise $1.9 billion to break-even.

GHARIB: It`s expected to be the busiest week for initial public
offerings in more than seven years, and we begin tonight`s “Market Focus”
with two companies that has successful trading debuts today.

First, we look at La Quinta. Shares of this Blackstone-backed hotel
operator got off to a bumpy start. They fell 4 percent in early trading,
after pricing below the expected range. But then, shares rebounded and the
company raised $650 million from the offering. The stock rose a fraction
to $7.12.

Meanwhile, the IPO of Chinese firm Ikang Healthcare rose sharply. It
priced at 11 million shares at $14 apiece. Now Ikang is China`s largest
private operators of medical exams and disease screening centers. The
stock surged 8 1/2 percent to $15.20.

Constellations Brands quarterly profits came in better than expected,
thanks to strong sales of Corona and Modelo beer in the U.S. But the
company says it will spend over $1 billion, almost double what it expected
to increase capacity at a Mexican brewery. Well, that worried investors.
Shares fell 1 percent to $80.64.

MATHISEN: No kisses for Hershey`s today. Investors went south on
Hershey after a downgrade out of Goldman Sachs (NYSE:GS). The firm lowered
its rating on the chocolate maker to sell from neutral, saying its strong
run is about to end. The stock off nearly 3 percent, 98-91, the close.

Another candy maker, Mars, is buying the bulk of three of Procter and
Gamble`s pet food brands. Mars already own some pet care companies, but
the new additions of with IAMS and other names will beef up that unit. The
$3 billion sale is part of an effort by Procter & Gamble (NYSE:PG) to
concentrate on its most profitable core businesses.

Shares of P&G rose slightly to $81.49. Mars is private.

Bed, Bath and Beyond, I love the Beyond department there, posted
disappointing earnings after the bell. The home furnishing retailer saw
sales decrease in the fourth quarter, earnings in line with estimates, but
the company`s revenue missed and its outlook came in weaker than expected.

Shares fell initially. In the after hours session, the stock ended
the regular trading day up a fraction at $67.91.

GHARIB: A head-turning report about how much some individual doctors
have been reimbursed for treating Medicare patients, including one Florida
ophthalmologist who was repaid $21 million in just one year.

Scott Cohn has more.


is no question Solomon Melgen of West Palm Beach is successful, a board
certified ophthalmologist with four eye clinics in South Florida, treating
presidents, governors, politicians, celebrities, according to his Web site.
Solomon Melgen is also the top billing individual Medicare provider in the
country, collecting nearly $21 million taxpayer dollars in 2012 alone.

Newly released data on more than 800,000 providers, information the
government kept under wraps for decades, is shedding new light on a $900
billion system, and some say showing just how flawed it is.

where every doctor is reimbursed for every single treatment, every single
drug they provide, there is this incentive as you say to provide more care.

COHN: While some of the biggest payments went to labs and ambulance
services, a handful of individual doctors like Dr. Melgen raked in
millions, more than 18 million for a Florida cardiologist, $12 million for
a New Jersey pathologist.

New York radiologist Eric Schnipper was nowhere close, collecting
about $520,000. But he says releasing the data in raw form isn`t fair.

DR. ERIC SCHNIPPER, RADIOLOGIST: It`s based on gross income. In
other words, it`s not net. So, for example, there is no accounting for how
much money it costs the physician to provide that service.

COHN (on camera): The numbers can be deceiving. Doctors billed
Medicare based on set reimbursement raise that are repeatedly been cut,
take away the doctor`s costs for a drug or procedure, and Medicare can be a
money loser.

(voice-over): Nonetheless, fraud is rampant. Federal authorities
recovered a record $4.3 billions last year, and that just scratches the
surface. Solomon Melgen has been under a federal investigation over his
Medicare billing, though his attorney says the doctor always billed in
conformity with Medicare rules. The head of the American Medical
Association worries about painting all doctors with the same brush.

ARDIS HOVEN: We have to be very careful. The data has got to be
correct. It has to be used properly.

COHN: But the Obama administration which released data on hospital
billing last year defends this latest release, saying it will help
policymakers and the public to follow the money.



MATHISEN: Joining us now to help put the data from this Medicare
report in the context is Cristina Boccuti. She`s senior associate with the
Kaiser Family Foundation.

Ms. Boccuti, welcome. Good to have you with us.


MATHISEN: This is an irresistible data base. I spent part of the
afternoon looking at my doctors and my family`s doctor to see how much
revenue they pulled in for Medicare. But I guess the simple question for
you is, what am I to make of these numbers and is there a size necessarily
telling in anyway?

BOCCUTI: Well, what you make of the data and what other researchers
make of the data can have different purposes. So I think what can come
from this data is some analysis of variation in how many patients each
doctor and other kinds of providers like physical therapists see — and by
patients, these are all Medicare patients — and how many services they
provide to each patient. And you`ll see that it varies not just within a
community but — each provider within a community. But it also varies
across the country in a variety of ways.

GHARIB: You know, Cristina, let me just follow up on what Tyler was
asking, because I did the same thing. I was also inputting my doctors.
And I`m just wondering — how are consumers supposed to use this data. You
know, until now, none of us really knew why one drug company charged one
price, and another one charges something else with the same drug, or why a
doctor charges for, you know, this hip replacement, one price, and another
one charges a lot more.

You know, there`s no way to compare. But how do consumers use this
data? Now, it seems like it is a consumer reports type indexing like that.

BOCCUTI: Well, the data right now that CMS has put out is not
extraordinarily user-friendly. But I imagine that several other
organizations are going to quickly help consumers use it in an easier way.

But the consumers could look at the data and be able to see the
average prices that Medicare pays for the various services that they might
be interested in or how much Medicare has paid their doctor. And also how
much combined the doctor is paid with the co-insurance and Medicare

But those fees are generally set by Medicare. They vary for a few
different reasons. But their variation is based on where they`re provided
and in what setting.

So, patients should be able to look at it and see more how many
services the provider is providing during the year. And also, it could
help predict what kinds of costs the patient might expect going to that

MATHISEN: There are lots of anomalies in the data. For example, I
believe in the case of the ophthalmologist in Cohen`s report there, he was
prescribing a quite expensive ophthalmic drug when another drug was
comparable, according to many physicians, would have worked just as well.
But the peculiarity in the data, in the numbers is, that Medicare pays more
for a more expensive drug, are there instances here as well where a doctor
might have been billed or received payment from Medicare for procedures
performed by other people in his practice? Like at the Mayo Clinic, for

BOCCUTI: Well, that`s possible. The physicians can — can have a
large practice where they have other providers that are working under
supervision for them, for example some nurse practitioners can provide
services under supervision. They can also provide services and bill
separately independently. But if they`re providing services under the
supervision of the physician, then the billing can be under the physician`s
name and so, it can be that they see more patients under that way.

MATHISEN: Cristina, thank you for helping with this tonight. We
appreciate it. Cristina Boccuti, Kaiser Family Foundation.

GHARIB: And coming up next, the links and costs companies are going
in order to make sure your transactions are secure. That`s next.


MATHISEN: It is being called one of the most serious Internet
security flaws ever. A computer bug known as Heartbleed has been found in
encryption codes at over two thirds of active Web site servers. The bug
may have exposed the personal information of the millions of users,
including passwords, credit card data and even email addresses to hackers.
Internet users are now being advised to change their passwords and keep a
close eye on any activity in their bank accounts.

GHARIB: Well, it`s official now. Bank of America (NYSE:BAC) has been
fined nearly $800 million by federal regulators after being accused of
pressuring customers to sign up for costly credit card services that they
didn`t need. B of A`s the fifth major U.S. bank to settle credit card
abuse allegations with the comptroller of the currency.

MATHISEN: After the massive data breach at Target (NYSE:TGT) stores
and its chains like Neiman Marcus (NYSE:MCS) and Michael`s, retailers are
rushing to make their cash registers and mobile payment systems more

Courtney Reagan went to the Transact Conference in Las Vegas, where
the biggest names in retail and cybersecurity are looking to restore
consumer confidence.


The Electronic Transaction Associations` Transact Conference brings every
part of a payment together — credit cards, banks, payment processors,
regulators and retailers, all talking about securing spending while
pointing fingers at each other for bearing the cost and liability.

Many retailers have had payment and data security teams in place for
years and have been migrating, albeit slowly, the payment system is capable
of using EMV technology. This allows systems to read chips and PIN cards
similar to networks currently used outside the U.S.

(on camera): Visa (NYSE:V) and MasterCard (NYSE:MA) are giving
retailers until October of 2015 to put the EMV system in place. Otherwise,
the liability for fraudulent purchases shifts to the retailers.

BOB CARR, HEARTLAND PAYMENTS CEO: There will be enormous activities
getting it done by October 15th of 2015. It is not going to happen.

REAGAN: Although the world`s largest retailer says it is already in
the process of converting its system. As of two weeks ago, Walmart turned
on software at 1,000 U.S. locations enabling point of sale systems to
accept chip and PIN cards. The retailer says its whole network of stores
will be ready to accept EMV cards before the end of year. Because Wal-
Mart`s current point of sale card hardware is already compatible with EMV,
the cost of turning on the software isn`t material.

Target (NYSE:TGT), however, has that exhilarating chip and PIN
technology, is part of $100 million effort to ready all 1,800 locations to
accept EMV cards by the first quarter of next year.

Now, migrating payment systems to chip and PIN technology isn`t cheap.

have to go to a chip card system, however, we`re probably talking $5
billion for the banks, and another $25 billion to $30 billion for the

UNIDENTIFIED MALE: Is that cost prohibitive in relationship to the
damage that can happen to your company if you`re breached? If they get
hacked and their customers` card numbers become counterfeited, now, they
have major damage to their brand.

So, that`s what`s driving people to focus now on EMV.

REAGAN: EMV isn`t necessarily a cure-all to prevent data breaches and
hackers, but it does a layer of encryption not currently in place in the
U.S., and maybe some peace of mind for customers.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan, in Las Vegas,


MATHISEN: And that will do it for NIGHTLY BUSINESS REPORT tonight.
I`m Tyler Mathisen. Thanks for watching.

GHARIB: And I`m Susie Gharib. Have a great evening, everyone. We`ll
be right back here. See you tomorrow.


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