Transcript: Nightly Business Report – September 22, 2015

NBR-ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Sue Herera.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: The pope and the
president. The pontiff and the head of the People`s Republic of China
arrive in the United States for the start of two very important state
visits.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Scandal widens. Millions
more Volkswagen vehicles evaded emission regulations as the investigations
multiply and costs to the company mount.

MATHISEN: And right prescription. How one presidential hopeful plans
to take on a very powerful industry.

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
September 22nd.

HERERA: Good evening, everyone.

A rough day on Wall Street. We`ll have more on that coming up in just
a moment. But we begin tonight with the two momentous state visits, both
of which began today.

Pope Francis arrived in our nation`s capital for his first ever trip
to the United States. He then heads to New York and Philadelphia, and at
some point, could discuss a topic he`s touched on before, namely,
capitalism`s flaws.

In Washington state, the president of China began a nearly week long
trip, his first state visit to America as the leader of that country. In
addition to meeting with President Obama, he will be talking with a who`s
who of American CEOs at a time when tensions between China and some
industries are running high.

And that`s where we begin our coverage with Michelle Caruso-Cabrera in
Seattle.

(BEGIN VIDEOTAPE)

MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT: The
president of China, Xi Jinping, arrives in the United States at a critical
time in U.S./China relations. The Chinese economy has been faltering and
Beijing has been increasing its level of economic intervention. President
Xi will be meeting with CEOs of some of America`s biggest companies, Apple
(NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Berkshire Hathaway (NYSE:BRK.A),
Disney (NYSE:DIS), IBM, General Motors (NYSE:GM), who have an a lot at
stake in China and are deeply concerned about the situation there.

One of those meetings being orchestrated by former U.S. Treasury
Secretary Hank Paulson.

HANK PAULSON, FORMER U.S. TREASURY SECRETARY: China is very important
to these multinational companies. And their voices haven`t been quite as
loud in support of U.S./China relations because the business climate is
becoming more difficult. They have concerns not just about the economy but
concerns about the pace of reform in opening up and concerns about whether
some of these new laws and regulations are, you know, which are limiting
access, they have concerns about the intent behind that.

CARUSO-CABRERA: Just today, the current U.S. Treasury Secretary Jack
Lew published an op-ed in “The Wall Street Journal” questioning President
Xi`s commitment to market reforms. China`s huge market is of great
importance to many parts of the American economy. President Xi will also
meet with five U.S. governors including Iowa Governor Terry Branstad, who
has known Xi since he was a low level bureaucrat who visited Iowa 30 years
ago. They still have a personal relationship but also an economic one.

GOV. TERRY BRANSTAD, IOWA: China has become a major trading partner.
We`re the leading soybean producing state in America. Thirty percent of
our soybeans go to China. They also recently a Chinese company purchased
Smithfield Foods (NYSE:SFD) because they want a safe, reliable supply of
pork.

CARUSO-CABRERA: The other key issue: cyberattacks that the U.S.
government believes were orchestrated by the Chinese government. President
Obama and business leaders are expected to press the Chinese leader on
cybersecurity. The U.S. has been considering whether or not to unleash
economic sanctions on Chinese companies accused of hackers. President Xi`s
response could determine whether or not sanctions are imposed.

Tonight, President Xi will make a policy speech in a large dinner in
front of hundreds of political and economic leaders from the United States.
What he says will set the tone for the entire trip.

For NIGHTLY BUSINESS REPORT, Michelle Caruso-Cabrera, Seattle.

(END VIDEOTAPE)

MATHISEN: Joining us now to talk more about China and U.S. relations
is Samm Sacks. She`s a Chinese analyst at the Eurasia Group, a political
research firm.

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

There are a variety of topics that are friction points, let us say,
between the United States and China. Of all of them, whether it`s
cybersecurity or trade or of military relations in the South China sea,
what is the one that is the trickiest? And is there any possibility of
progress on that issue during this visit?

SAMM SACKS, EURASIA GROUP: The most difficult issue is cyber-enabled
economic espionage. And, unfortunately, I see this as one we`re not going
to see a lot of progress during this visit.

HERERA: Why not? I mean, is it not beneficial that they just
discuss what has been such a thorny issue? Would you deem that progressive
if indeed they do sit down and actually bring the topic up?

SACKS: The topic will be discussed, and that`s a sign of progress,
the fact that they`re willing to address the elephant in the room. But
we`re going to see a more confrontational stance from Washington. At the
same time, I just don`t think Beijing is willing to give on this. They`re
not going to let up with cyber hacks no matter what is really discussed
during this visit.

MATHISEN: Let`s talk a little more broadly what`s been going on in
China lately. The economy is certainly slowing. We don`t know how
reliable some of the numbers are. They have responded to drops in the
market in ways that are sort of inimical to free marketism. How free
market do you really believe this Chinese leadership is?

SACKS: This leadership is actually committed to giving a greater role
to market forces in the economy. I don`t see what happened this summer as
derailing reform efforts so much as a political distraction. But it`s
going to be incredibly difficult to implement. There`s a lot of vested
interest in the economy that don`t have a motive to see these changes move
forward. And Xi faces a lot of opposition in doing so.

HERERA: What about the territorial disputes going on as Tyler
mentioned in the Southern (NYSE:SO) China Seas? Any progress there, do you
think? How aggressive do you think the U.S. will be in pressing China on
that issue?

SACKS: I think the U.S. is going to be more aggressive in pressing
China than we`ve seen in the past. I also think this is going to be met
with a more hard line stance in Beijing. This government is increasingly
confident in its ability to back up its territorial claims. But I don`t
see armed conflict as being a real risk.

MATHISEN: Let`s go back to the question is of cybersecurity which is,
I happen to agree with you. I think that is probably the trickiest one to
get a handle on. The Chinese are a proud country and they don`t like being
lectured about their practices, and we don`t like being lectured and I`m
sure the Chinese believe we`re involved in probably some cybersecurity
issues that would not be helpful to them, right?

SACKS: Absolutely. That`s why I don`t think we`re going to see a lot
of traction. I think that Washington has recognized they have to focus on
points of leverage over Beijing. Right now, that point of leverage is
access to U.S. markets for Chinese companies. That`s why we`ve seen
sanctions put on the table as a policy option. And in fact, I don`t see
that threat of sanctions being off the table anytime soon, unless Beijing
comes to some significant agreement with Washington which is actually not
very likely.

MATHISEN: Ms. Sacks, thank you very much for being with us. We
appreciate your insights tonight.

SACKS: Thank you.

SACKS: Samm Sacks is with the Eurasia Group.

Later in the program, we`ll hear from a hacker in China.

HERERA: Pope Francis began his five-day visit to the U.S. which
involves travel to three cities. This afternoon, he landed in Washington,
D.C. where he was greeted by cheering fans and by President Obama and the
First Family.

Mary Thompson is in our nation`s capital, reporting on the pontiff`s
visit for us.

A pretty historic day today, Mary.

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: It certainly
was, Sue. The 266th pope becoming the fourth leader of the Catholic Church
to visit the United States where 70 million identified themselves as
Catholic. At Joint Base Andrews, he waved to the crowds but didn`t make
any public comments, presumably saving his breaths for the many events he
has during this whirlwind tour.

It kicks off tomorrow with a meeting at the White House with the
president and a canonization mass later in the day. On Thursday, he
addresses Congress, that`s a first for a pope, and then on Friday, the U.N.
General Assembly. With the main event coming Sunday, an outdoor masses in
Philadelphia to celebrate the conclusion of the Festival of Families.

Expect the pope to touch on hot button issues here in the U.S.,
including immigration, income inequality and climate change. All through
the prism, the pope has used to shape his message since first stepping out
on the balcony of St. Peter`s last year. That message being he is a leader
of a church whose mission is to serve the poor — Tyler.

MATHISEN: He is not one to duck issues, Mary, at all. He has been
critical broadly of capitalism. He has been cautioning about how we humans
treat the environment. Phrases that might not go over terribly well in a
Congress controlled by the GOP.

THOMPSON: Well, Tyler, you know, a number of people say that the
phrases that are fiery are the only ones that make headlines. They say
it`s hard to put Francis in a box. While he has been critical of
capitalism, he has also commented has helped to raise a number of people
out of poverty. He talks of business as being a noble profession.

At the same time, he says people in those positions in business
positions and power have to keep in mind that they need to use that power
in order to raise up the poorest among us.

As far as climate change goes, he sees the environment as one of God`s
gifts. It`s a gift that the people should protect. That`s his message and
we`re expected to hear it, especially when he addresses the U.N. General
Assembly. That is probably when he`ll speak most on climate change.

And as you said, it`s not a position that`s very welcomed by a number
in the GOP. You saw his approval among U.S. Catholics go down
significantly when he released his papal encyclical on the environment, in
large part because conservative Catholics didn`t like what they heard.

Back to you.

HERERA: Mary, thank you so much. Mary Thompson in Washington.

MATHISEN: Worries over global growth and the timing of interest rate
hike here in the United States crept back into the market today. Stocks
started the day lower and they stayed there. The Dow Jones Industrial
Average down 179 points to 16,330, NASDAQ dropped 72, the S&P 500 was off
24.

Bob Pisani has more on today`s sharp decline from the New York Stock
Exchange.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was another one
of those why are we down days. It wasn`t just one headline. It was a
series of smaller headlines that added up to more uncertainty in the global
market.

Now, China`s president, Xi Jinping, touched down in the U.S., and even
though the China markets were up overnight, China was in focus as Asia
Development Bank lowered its GDP estimate for China this year to 6.8
percent down from 7.2 percent.

Then, Credit Suisse came out with a` report on the commodities market
entitled “Race to the Bottom,” citing the long-term problems of falling
demand and rising supply, cutting the ratings on a number of commodity
stocks like Anglo-American.

While, predictably, other commodity names like BHP Billiton
(NYSE:BHP), Vale, and Rio Tinto all were down 3 percent to 5 percent.

Elsewhere, the Volkswagen scandal is another can of worms. The French
finance minister called for a probe into the entire auto sector. Now,
that`s a big problem. Auto companies like Volkswagen, Porsche, Daimler and
BMW are at the heart of the German economy and the German stock market,
which is the largest market in continental Europe. Little wonder the
German stock market down 8 percent in the past two days at its lows for the
year.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock
Exchange.

(END VIDEOTAPE)

HERERA: And as Bob just reported, investors here and in Europe are
keeping watch over what happens with Volkswagen. The scandal has widened
to include more than 11 million vehicles.

And as Phil LeBeau reports, there are now questions about the future
of the automaker`s CEO.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: As the scandal
involving Volkswagen`s emissions and diesel deception continues to grow, so
do apologies coming from executives with the German automaker, the latest
coming today from CEO Martin Winterkorn.

Winterkorn himself is the subject of a lot of debate right now about
whether or not he will retain his job. His current contract is up on
Thursday and many are questioning whether or not he will keep it. One
German newspaper says his contract will be terminated. Volkswagen
responded to that report, calling it ridiculous.

But we know that the VW board is meeting this week, discussing
Winterkorn`s future and no doubt discussing what`s happening with the
emission scandal as it continues to grow around the world. Earlier today,
Martin Winterkorn issued a video statement in which he once again
apologized for what Volkswagen has done when comes to deceiving customers
about the level of emissions in their diesel vehicles.

MARTIN WINTERKORN, VW CEO (through translator): I am deeply sorry
that we have broken this trust. I would like to make a formal apology to
our customers, to the authorities, and to the general public for this
misconduct.

LEBEAU: Also today, VW said 11 million diesel engines around the
world are impacted with some type of deviation in the software. Unclear
whether or not that deviation is the same type of situation as what we`re
seeing here in the United States with a half million vehicles that had a
defeat device on them in order to get around clean air standards.
Volkswagen says it will take a $7.27 billion charge in the third quarter to
deal with the emissions issue.

Again, Volkswagen`s board meeting twice this week as the stock is
under pressure discussing the future of not only CEO Martin Winterkorn but
its next step as it tries to contain the damage from this emissions
scandal.

That`s the latest regarding Volkswagen. Back to you.

(END VIDEOTAPE)

MATHISEN: Phil LeBeau reporting.

One of the worst performing stocks today in the Dow Jones Industrial
Average was Goldman Sachs (NYSE:GS). Earlier today, the CEO Lloyd
Blankfein announced he has lymphoma, an illness his doctors say is a highly
curable form of the disease. Blankfein underwent a series of tests after
not feeling well this summer, and had a biopsy last week, which revealed
the cancer.

HERERA: Still ahead, with all those health insurance mergers, will it
hurt consumers? What industry executives said today under oath.

(MUSIC)

HERERA: Health care deductibles are rising as wages barely budge.
That`s the conclusion of a new study by the Kaiser Family Foundation, a
health policy research group. Since 2010, deductibles have risen more than
six times faster than workers` earnings and almost three times as fast as
premiums during that same time.

MATHISEN: For that report on health care deductibles comes as the
chief executives of Aetna (NYSE:AET) and Anthem defend their proposed
mergers in front of a Senate panel. Some lawmakers are concerned that
consolidation among some of the nation`s biggest health carriers will
result in higher coverage costs.

Bertha Coombs reports from the Capitol Hill.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The big
question for senators: will health insurance consolidation help or hurt
consumers?

Mark Bertolini says Aetna (NYSE:AET) and Humana`s combination won`t
reduce competition.

MARK BERTOLINI, AETNA CEO: Today, the market competes on price and
choice of doctor, and this will not change. But to win in the market, we
believe consumers should be able to pick products that are focused on
improving the health of the member.

COOMBS: Anthem`s CEO Joseph Swedish argues his firm`s combination
with Cigna is necessary to meet changing needs in health care after the
Affordable Care Act.

JOSEPH SWEDISH, ANTHEM CEO: The turbulence, the speed of change in
the marketplace necessitates a combination that brings new value to the
marketplace. In that regard, we believe this economic combination makes a
lot of sense for us because we can come to market faster, better, and then
in turn create more value for the consumers.

COOMBS: Yet, Northwestern University`s Leemore Dafny says past
insurance mergers haven`t helped consumers, citing her study of Aetna`s
1999 acquisition of Prudential`s health business and its impact on large
employers.

PROF. LEEMORE DAFNY, NORTHWESTERN UNIVERSITY: Where Aetna (NYSE:AET)
and Prudential had the greatest overlap, we found the largest reductions in
health care employment and wages. We would have expected premiums to go
down in these areas but the opposite was true.

COOMBS: Senator Al Franken pressed the insurers to make sure it`s
different this time.

SEN. AL FRANKEN (D), MINNESOTA: Will you commit to passing along the
savings to your policyholders?

BERTOLINI: Our savings will be passed along in the price of our
product.

FRANKEN: Do you commit to pass those savings on to the consumers?

SWEDISH: We`ll certainly do so to the extent that we`re providing a
very balanced portfolio of offerings to the marketplace that is driven by
great value.

FRANKEN: I`m out of time. I do think that we could have gone quicker
if those answers were yes.

COOMBS: Ultimately, it`s up to the Department of Justice and state
regulators to sign off on the deals. The anti-trust division of the DOJ
has already asked Aetna (NYSE:AET) and Humana (NYSE:HUM) for more
information on their proposed merger, they`ll likely ask Anthem and Cigna
for more information, as well.

Bertha Coombs, NIGHTLY BUSINESS REPORT, Washington.

(END VIDEOTAPE)

HERERA: Today, Democratic presidential hopeful Hillary Clinton
outlined her plan to reign in the rising cost of prescription drugs, and
change the way the pharmaceutical industry does business.

(BEGIN VIDEO CLIP)

HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: Under my plan, drug
companies who want to keep getting federal support will have to redirect
more of their profits into meaningful investments in research and
development. That will mean more breakthroughs, more good drugs, not
fewer.

(END VIDEO CLIP)

HERERA: This comes one day after she took to Twitter to condemn the
price hike of a 62-year-old specialty medicine as we reported yesterday.

Meg Terrell joins us now, she`s been following that proposal.

Meg, is Mrs. Clinton`s plan as worrisome for the biotech industry as
investors yesterday feared?

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hey, Sue, well,
there are parts of it that are worrisome to the biotech community. What
some folks are saying is that the reaction we`ve been seeing in the stocks
are more just a reflection of the jitteriness of a market that`s been
rising for five years and the signs that really anything could come to
potentially stop it.

What Clinton really focused on today and what we heard from her was
trying to get companies to direct their focus from marketing over into
research. But the main thing that the drug industry and that investors are
afraid of is that she`s going to give Medicare the ability to negotiate
drug prices and did lay that out in her plan today.

MATHISEN: What would it change and how would it affect specific
companies and their stocks, Meg?

TIRRELL: So, if Medicare were enabled to negotiate drug prices,
analysts say this could really change everything, decades of the way the
drug industry is built. Because right now, private insurers who we`re just
hearing about are the only ones doing the negotiating, and that could
really weigh on drug prices.

Another thing that Clinton laid out was to only to cap the out of
pocket costs for prescription drugs at $250 a month. What folks say that
could actually affect the insurance stocks more than the drug company
stocks because it wouldn`t necessarily cap prices but it would cap what the
insurers get to have the consumers pay out of pocket.

HERERA: She`s consistently referenced price gouging. Does the plan
address that?

TIRRELL: That`s an interesting question, as well. Though she has
addressed price gouging so many times, folks say that she didn`t introduce
anything specific to address that. That proposal to limit out of pocket
costs for consumers should address that from their perspective, but it
doesn`t actually affect what the costs of the drugs are.

However, we have still seen stocks like Valeant, which is known for
this practice of rising the price of drugs they acquire quite a lot.

HERERA: All right. Meg, thank you so much — Meg Tirrell.

MATHISEN: Shareholders will allow Bank of America`s chairman and CEO
to keep both titles, and that is where we begin tonight`s “Market Focus”.

More than 60 percent of the company`s investors voted not to separate
Brian Moynihan`s two titles. Last year, the bank`s board elevated him to
chairman without consulting shareholders, and that led to criticism.
Shares fell a fraction today to $15.57.

Groupon (NASDAQ:GRPN) cutting about 10 percent of its workforce or
about 1,100 jobs. The move comes as the daily deals site restructures
outside North America and shuts down some of its oversees operations.
Shares were off today by 2 percent to $4.08.

Shares of Office Depot (NYSE:ODP) and Staples (NASDAQ:SPLS) slipping
today on reports that its merger may get blocked. “The New York Post”
reported that the head of the Federal Trade Commission may oppose the $11
billion combination. Commissioners are expected to rule on it by October.
Office Depot (NYSE:ODP) off 4 percent to $7.06. Staples (NASDAQ:SPLS)
slipped almost 6 percent to $12.75.

And mixed results from General Mills (NYSE:GIS). The food maker`s
adjusted earnings beat estimates, but its revenue was slightly below
forecasts. Restructuring and cost controls are helping the company`s
bottom line. Shares up slightly, $57.13 was the close.

HERERA: Keeping with the food theme, Darden Restaurants (NYSE:DRI
(NASDAQ:TBUS)) managing to top consensus on the top and bottom lines.
Same-restaurant sales also rose and the parent of the Olive Garden hiked
its earnings guidance for 2016. Despite that, shares were off slightly on
this down day to $69.69.

Conagra`s quarterly profit topped estimates and the firm said it
expects profit margins to continue to expand. But the food producer warned
that currency issues will impact profits. Shares fell 7 percent to $39.40.

Weatherford International (NYSE:WFT) announced that it is cancelling
its share and convertible debt offering only a few hours after announcing
the plan. This as the stock price dropped on the initial plans. Shares
popped on the reversal, up more than 10 percent to $9.31.

The specialty chemical maker Ashland (NYSE:ASH) says that it will
split into two companies. The firm will spinoff its engine lubricants unit
into a publicly-traded company to focus on its higher margin business.
Shares rose 2.5 percent to $108.50.

MATHISEN: Still ahead, rarely does a Chinese hacker talk openly about
his had he clandestine activities, until now.

(MUSIC)

HERERA: Here`s a look at what to watch for tomorrow. On the data
front, a report on mortgage applications. Also, the purchasing managers
manufacturing index is out. It`s a read on the private sector economy.
And we`ll be on the lookout for more news from the pope and President Xi`s
visit to the U.S. And that`s what to watch for on Wednesday.

MATHISEN: PricewaterhouseCoopers is hoping to attract talent with a
new perk. The consulting and accounting firm will give its employees
$1,200 a year up to six years to help them pay off student loan debt. It`s
not just new grads. The company will also offer the benefit to its
associate and senior associates employees.

HERERA: Cyberhacking, a major source of friction between the U.S. and
China. And it`s not often if ever that a Chinese hacker is willing to talk
about what he does and why he does it all on camera.

Eunice Yoon has our story tonight from Shenzhen, China.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: From his office
in southern China, this former military officer who would only tell us his
codename “Prince” says he heads a 5,000-person team known as the hunker
union or red hackers.

“I decided to learn hacking skills after my computer was hacked, he
said. After I retired from the army, I thought I could use my skills to
continue to serve and love my country. I chose to be a red hacker, to be
the personification of justice.”

China`s hackers are a source of friction between Washington and
Beijing. Alleged cyberattacks from China have angered the U.S. which has
blocked business deals for Chinese companies and is now considering
sanctions on those suspected of engaging in commercial cyber theft.

The hackers say that they work from all over the country but they tend
to cluster in hi-tech areas like Shenzhen. This city is home to the
country`s biggest electronics market and it`s China`s Silicon Valley.

Prince denies his group has targeted U.S. companies, though he says
they have attacked commercial organizations in regional rival Japan.
Prince showed me one way he hacks today into a local hospital. He finds an
e-mail. Based on security question, he guesses passwords like the hospital
address. By the third try, we`re in the system, in less than five minutes.

“We`re now able to gather more information, e-mail, phone numbers,
fax,” he says. Prince says for attacks, the hackers act on their own but
that occasionally they`re called on by the government to help track those
believed to be working against the state.

The Chinese government says it doesn`t support hacking activities and
we couldn`t verify his claims.

“I independently have some cooperation with the Chinese government.
But it`s all off the record,” he says. “The government normally asks me to
follow the electronic footprint of different hackers, gather information on
hackers and ultimately submit official reports”, for the country he vows to
protect.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon.

(END VIDEOTAPE)

HERERA: And that does it for NIGHTLY BUSINESS REPORT for tonight.
I`m Sue Herera. Thanks for joining us.

MATHISEN: And I`m Tyler Mathisen. Thanks from me as well. Have a
great evening, everybody. And we will see you back here tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
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