Transcript: Nightly Business Report – February 6, 2017

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Washington and Wall Street. From immigration to health care to tax reform, the role business can play to shape the Trump administration’s agenda.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Rollback roadblocks. Why making changes to the wide-ranging law that governs Wall Street won’t be easy, but it can be a windfall for investors.

MATHISEN: Tough road ahead? Is Toyota’s biggest challenge sitting in the White House?

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday, February 6.

HERERA: Good evening, everyone, and welcome.

Curb your enthusiasm. That’s what Wall Street appears to have done, at least for today. The muted trading follows concerns that the White House’s economic policy agenda may not get pushed through as quickly as hoped. The markets moved higher since early November has been pegged to the idea that pro-growth policies like tax cuts and infrastructure spending would be high on the to-do list.

But that is now in question. The Dow Jones Industrial Average fell 19 points to 20,052. The NASDAQ was off 3, and S&P 500 was down 4. According to the “Wall Street Journal,” that index has not experienced a daily move of 1 percent or more for 35 consecutive sessions, the longest streak since 1974.

MATHISEN: House Speaker Paul Ryan recently said that tax reform won’t be looked at until spring after the budget passes and then an interview yesterday, President Trump signaled the time line to repeal and replace the Affordable Care Act is now likely to stretch into next year. But that extended timetable could complicate things for the health insurers which have to commit soon to selling plans through the Affordable Care Act market places and they don’t want to wait until they know — want to do that until they know what the future holds. Today, shares of Cigna, Aetna, Anthem, Humana, UnitedHealthcare, all lower in part because of that increased uncertainty.

HERERA: And Republicans are also taking aim at one of the more controversial parts of the health care system — Medicaid. The woman nominated to head the Centers for Medicare and Medicaid helped shape Indiana’s Medicaid program. She was able to cross the aisle and work with both Republicans and Democrats.

And as Bertha Coombs reports, many see her work as a potential blue print for the GOP’s reform plan.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: When crippling back pain forced Robin Henderson to leave her job last year, Medicaid was a godsend.

ROBIN HENDERSON, HEALTHY INDIANA ENROLEE: If I didn’t have the coverage, I would be in trouble.

COOMBS: She was covered through the Healthy Indiana Plan or HIP, the state’s version of the ACA’s Medicaid expansion. The architect behind HIP is Indiana consultant Seema Verma, brought in by then-Governor Mike Pence. She has then helped designed Medicaid expansion plans in several states headed by Republican governors like Iowa and Ohio, governors who did not support most other provisions of the Affordable Care Act.

Now, she is President Trump’s pick to head the Centers for Medicare and Medicaid. So, she’ll be deeply involved in the administration’s plans to repeal and replace the Affordable Care Act.

Back home, Verma gets high marks for working across the aisle.

JONATHAN NALLI, ASCENSION INDIANA CEO: Every time you encounter her, it is for what is our ability to solve the problem and how do we obtain that solution? And she drives for that on a regular basis.

DR. SARAH STELZNER, ESKANAZI HEALTH CLINIC: She was a very good listener and was able to put a lot of different perspectives kind of into the mix.

COOMBS: But Verma has also come under fire by some policy experts who are requiring low income HIP enrollees to contribute 2 percent of their income toward premiums and advising a plan that pushes them out if they fall behind.

JOAN ALKER, GEORGETOWN UNIVERSITY: If you don’t pay your premium on time or you don’t get your paperwork on time, even if you go back and say, I’m going to pay my premium, you’re actually locked out of the program for six to 12 months.

COOMBS: Republicans in Congress are looking to rein in federal funding for Medicaid. But in the states, even some Republican governors like Indiana’s Eric Holcomb have questioned that those cuts will have a big impact on their budgets.

ALKER: What happens to the Medicaid program writ large for example if spending is capped potentially could layer on top of an ACA repeal. That will simply be a huge cost shifts to the states.

COOMBS: Hospital and nursing home reimbursement could be hardest hit under Medicaid cuts. In Seema Verma’s home town, executives are hoping she can help build compromise in Washington to limit the pain.

NALLI: There’s been a lot of discussion about how bipartisan this needs to be. We are optimistic about what that means.

COOMBS: HIP enrollees like Robin Henderson are hoping they won’t lose their life line.

HENDERSON: It is important to have health insurance. It’s hard not to have it.

COOMBS: Bertha Coombs, NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

MATHISEN: Well, the biggest technology companies in the world are fighting the president’s immigration order, a major issue for business. Nearly 100 companies including Apple, Facebook, Google, Microsoft, Netflix, Twitter, filed a motion with the court last night that says the executive order represents, quote, a significant departure from the principles of fairness and predictability that have governed the immigration system in the U.S. for more than 50 years.

The order also, they say, makes it more difficult for U.S. companies to hire talent. IBM, Qualcomm, Oracle, among the big companies in technology that were not part of that legal brief.

HERERA: Despite some tensions between President Trump and the business world, there is one school of thought that contends corporate executives have the best chance of helping the White House shape policy, and that theory comes from Tom Friedman of the “New York Times.”

(BEGIN VIDEO CLIP)

THOMAS FRIEDMAN, THE NEW YORK TIMES: Right now, the Republican Party is obviously not going to be much of a check on him. The Democrats really have no ability to do so. Mainstream media doesn’t have a vote. So, it’s really the business community that has the access to the president and the standing with him, I think, to engage him.

(END VIDEO CLIP)

MATHISEN: Let’s turn now to Michael Farr to talk more about how business executives could help shape policy in Washington. He is president of the money management firm Farr, Miller and Washington. He would be the Farr in that equation of Farr, Miller and Washington.

Michael, good to see you.

Let’s talk first about the pace of the Trump agenda. You pointed out, it’s something I happen to have also been talking about. That the idea that things will move fast and without hiccups and hair balls in Washington is a little naive.

MICHAEL FARR, FARR, MILLER & WASHINGTON PRESIDENT: I think so, Tyler. And thank you again for having me. And great job on nailing the Dow 20,000. I mean, within a couple weeks, how many other people get to do that? You nailed it.

MATHISEN: Yes.

FARR: You know, I think that people get too optimistic about Washington. And the way Sue started the program tonight about sort of Wall Street saying, curb your enthusiasm. Oh, Washington is still Washington seems to be the realization.

So, it is. And I think given Trump’s very full agenda, and I mean, it has been at a blazing speed. It has been difficult on keep up. And now, we’re still watching, OK, we’re watching the Affordable Care Act kind of bog down. We hear that the tax cuts might be sometime probably towards the end of the year. Take effect next year.

And infrastructure spending isn’t garnering a lot of enthusiasm anywhere in Washington because a lot of the right wing Republicans certainly want to be very fiscally constrained. So, a lot is getting bogged down.

MATHISEN: Right.

FARR: It’s not all bad. It’s just Washington.

HERERA: What about the thought, the school of thought right now, Michael, that perhaps industry leaders, CEOs, which Mr. Trump repeatedly has called to the White House, may be better suited to shape policy in a more apolitical way than those who are on Capitol Hill? Do you believe that that is the case? And what is the appetite for many CEOs to take on a president?

FARR: I think this is the most fascinating new administration to watch, Sue, and it’s a terrific question because we’re watching different CEOs take different approaches. We have the tech guys who are sort of protesting, particularly on the immigration issues now, and their ability to hire. We’re watching others sort of seem to try to get along well the president.

So, do you do it by sucking up and getting along and going along? Or do you oppose and fight this new president? And what’s going to be more effective for your company?

I think if I were a Fortune 100 company, I would be having my research folks study exactly the relationship with Putin. I don’t know exactly the dynamics of that relationship but it seems very successful for Mr. Putin, and it seems like that might be at least a model for those who are trying to figure out how to advance their company’s cause the farthest with the new administration.

MATHISEN: Do you think companies are worried that they’ll be the object of a Twitter tantrum on the president’s part?

FARR: I think everybody is a little bit worried about that, Tyler. I mean, in particular, I think that Janet Yellen should probably be worried about that, because the president’s agenda is for fiscal stimulus, tax cuts and things that are going to propel the economy.

Well, those things can be inflationary. What happens if the Federal Reserve starts raising rates, trying to countermand some of that inflation? What’s the president going to tweet in the middle of Mrs. Yellen’s next press conference? I mean, the unpredictability that we’re getting used to. But Wall Street doesn’t like it.

MATHISEN: Michael, thank you as always.

Michael Farr with Farr, Miller and Washington of Washington, D.C.

FARR: Thank you.

MATHISEN: You bet.

HERERA: Still ahead, how a rollback in banking regulations could put more money in investors’ pockets.

(MUSIC)

HERERA: The president of the European Central Bank struck back at the Trump White House. Mario Draghi rejected accusations that Germany manipulates the euro and used a congressional report to back up the statement.

(BEGIN VIDEO CLIP)

MARIA DRAGHI, ECB PRESIDENT: Its latest report to Congress released on October 14, 2016, the U.S. Treasury itself stressed that Germany does not manipulate its currency. The reason is that Germany does not satisfy all three criteria used by the U.S. Treasury to identify unfair currency practices.

(END VIDEO CLI)

HERERA: Last week, Peter Navarro, the president’s top trade adviser, said Germany was using a grocery undervalued currency to take advantage of the U.S.

MATHISEN: Mr. Draghi also warned that deregulating the banking industry was potentially dangerous and could start the next financial crisis. As we reported Friday, President Trump signed a directive asking federal agencies to review the sweeping group of Wall Street reforms embedded in the law known as Dodd-Frank.

But as Steve Liesman reports, big rollbacks could meet some big roadblocks.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: In signing the order last week, the president said he planned to, quote, “cut a lot” out of the regulatory reform law known as Dodd-Frank. The reality is that changing the law will require a lot more than just his signature on an executive order.

First, there’s Congress. Jeb Hensarling heads the Financial Services Committee and is a strong supporter of overhauling Dodd-Frank. But he’ll have to find common ground with the more moderate Senator Mike Crapo, head of Senate Banking.

Overall, the Senate could prove the biggest hurdle.

FMR. REP. BARNEY FRANK (D), DODD-FRANK CO-AUTHOR: During the period when the Republicans were in power in Congress before this, they never moved for the total appeal of it the way they did with health care. And you’re going to need 60 votes to change any of the major legislative pieces.

LIESMAN: And there are multiple agencies involved. They include the Federal Reserve and office of the controller of the currency, both of which regulate banks.

But there are many more. The issues are complex. Should big banks keep more capital on hand than smaller banks? What’s the best way to wind down a bank if it gets into trouble and make sure it doesn’t require a taxpayer pair bailout?

Not every change requires changing the law. The president, for example, can appoint people can enforce it less stringently. But for at least the next year, President Trump will have to visit with Janet Yellen who is not opposed to all forms of Dodd-Frank but has generally supported it.

And then there’s the question of what exact problem President Trump is trying to fix?

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We have so many people, friends of mine that have nice businesses. They can’t borrow money. They just can’t get any money because the banks just won’t let them borrow because of the rules and regulations.

LIESMAN: But the data show banks are lending pretty strongly right now, and a key small business survey shows that few business owners have trouble getting credit.

While many disagree over the need to fixing Dodd-Frank or how to do it, this fairly good agreement that it’s one of the most complex laws of the land and fixing it won’t be easy.

For NIGHTLY BUSINESS REPORT, I’m Steve Liesman.

(END VIDEOTAPE)

HERERA: If President Trump is successful in repealing Dodd-Frank, investors, according to the “Wall Street Journal,” could potentially see a return of more than $100 billion in capital in the form of share buybacks and dividends from some of the biggest banks in the country.

Marty Mosby, director of bank and equity strategies at Vining Sparks, joins us now to talk more about that.

Welcome, Marty. It’s nice to have you here.

MARTY MOSBY, VINING SPARKS DIR. BANK & EQUITY STRATEGIES: Well, thanks for having me this afternoon.

HERERA: Let’s start with why the banks would want to do this because we’ve kind of outlined the way they might do it. What would compel them to do this?

MOSBY: Well, what the banks are looking to be able to do is to get back to being able to manage their companies like all other industries for the most part. Where you can look at your capital, you can look at your balance sheet and not be looking over your shoulder at the regulators to make sure that you’re not having to flinch. As we’re being able to come and move forward, we’ve built a lot of capital. We’ve sustained historical amount of liquidity. And the banks are looking to now kind of move forward and begin to take some of the reins back for the regulators at this point.

MATHISEN: You know, Marty, are the banks really in a firm enough position to start paying out some of that extra capital that they’ve to store? Are there leverage positions now healthy enough that they can do it? Because it was really leverage that’s so often is the case killed them.

MOSBY: Well, when we look at leverage, you’ve got to make sure you look at the two different pieces of leverage. One is capital, and to build capital. In the $100 billion that you talk about is over the worst-case scenario that the Fed can come up with in stress testing the capital positions.

But, let’s put that aside for a second. What really matters is liquidity. And you’ve seen $2.5 trillion of increased liquidity come into the system as we have other deposit growth over the last eight to nine years. So, the bank are in a position to start looking to move forward and get past the, you know, anxiety that, you know, framed financial crisis we just went through.

HERERA: All right. Now, if indeed there is the appetite to roll back some or part of the Dodd-Frank resolution, there’s still the Federal Reserve. There’s still the stress test and things like that. How would that fit into the overall equation?

MOSBY: Well, this could be very simple. We don’t have to repeal the whole thing. We need to change two numbers. And that will address the majority of where the problem is.

The unintended consequences of Dodd-Frank has overly burdened community and regional banks. They wrote the law so that the thresholds were at $10 billion and $50 billion, which are banks that all the things that you mentioned. You know, what do you do when they fail? It’s not a problem.

What we need to do is to take $10 billion and move to it $50 billion. Take the $50 billion threshold and move it up to $250 billion. Changing those two things I think can get bipartisan support and could really be pushed through fairly easily.

HERERA: On that note, Marty, thank you very much. Marty Mosby with Vining Sparks.

MOSBY: Thank you.

MATHISEN: Well, Hasbro Toys with Wall Street targets, and that’s where we begin tonight’s “Market Focus”.

The company said strong demand for dolls based off Disney’s movie “Frozen”, as well as its easy bake oven products helped it easily topped estimates. Hasbro also hiked its quarterly dividend 12 percent to 57 cents a share and look what shares did today, up 14 percent to $94.31.

The luxury jeweler Tiffany said its chief executive has stepped down from his role following the board’s disappointment with recent financial performance. Tiffany said that while it searchers for a replacement, the company’s chairman will take over as the interim CEO. Tiffany off 2 percent at $78.49.

The consumer products company Newell Brands said strength in several of its businesses caused sales to more than double, but the results still missed Wall Street expectations. The owner of Yankee Candle and Elmer’s glue brands posted earnings that were in line with estimates and said it would raise its guidance for the year. Shares though down more than 5 percent at $44.23.

And the meat producer Tyson Foods says stronger demand for beef and pork led to record earnings, which topped expectations. The company also posted better than expected sales, gave upbeat guidance for the year. Tyson also said it recently received a subpoena from U.S. officials. It believes is related to allegations the company engaged in price fixing. And that sent shares down 3 percent to $63.13.

HERERA: Food distributor Sysco said higher margins coupled with steady volume growth led to better than expected profits in its latest quarter. The company sales rose but the results were not quite good enough to beat estimates. Shares finished down more than 2 percent to $51.20.

Aratana Therapeutics, which develops pet medications, said in a regulatory filing that the Center for Veterinary Medicine has requested additional information regarding that company’s appetite stimulation drug. Aratana says it now expects that treatment to be delayed until the end of this year. The shares plunged 18 percent to $6.59.

Pharmacy benefits manager Express Scripts said prescription drug spending for its patients fell in 2016 to just under 4 percent. That’s a more than 25 percent decrease from the year before. Express Scripts negotiates drug prices for the health insurers and employers. Shares rose just a fraction to $67.40.

And Walt Disney’s CEO Bob Iger reportedly may be considering staying on longer at the entertainment giant as there is still no successor in place. Iger is currently slated to retire in June of 2018. Disney shares fell fractionally to $109.57. The Dow component reports its earnings tomorrow.

MATHISEN: Toyota says its profits could grow almost 10 percent this year. The company raised its full year earnings outlooks after reporting disappointing quarterly results.

Phil LeBeau has more on the automaker’s outlook and why it could get more attention of President Trump.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Toyota is in a tough spot. Earnings for the last quarter of 2016 fell 23 percent as the company sold fewer vehicles. But this year, profits are expected to grow almost 10 percent, due largely to the weak Japanese yen which helps the profitability of vehicles built in Japan and exported to markets like the U.S.

The weak yen is also a long time complaint of the CEOs of the Big Three. They believe the yen allows Toyota to be more aggressive with rebates and incentives and they say it ultimately cuts into sales and profitability for GM, Ford and Chrysler. It’s a complaint Toyota calls false.

But the bigger issue for the Japanese automaker could be President Trump. He has blasted Toyota on Twitter for building a plant in Mexico that will export cars to the U.S.

So far, Toyota has said it is not those plans. About half of the vehicles it sells in the U.S. are built in the U.S. In addition, the company is expanding capacity at a plant in Indiana.

The level of U.S. production by Japanese automakers and the weakness of the Japanese yen could be two topics discussed later this week by Japan’s Prime Minister Shinzo Abe and President Donald Trump. They are scheduled to meet on Friday at the White House.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: Coming up, Elon Musk isn’t the only big thinker in his family. What brother Kimbal is doing to change the way the world eats.

(MUSIC)

HERERA: Call it a food resolution. When you think of farming, you probably imagine farms stretching in the Midwest. But what about in a parking lot in Brooklyn?

Well, a new start-up is working to write fresh produce to city residents.

Andrea Day got the first look at these first urban farms.

(BEGIN VIDEOTAPE)

TOBIAS PEGGS, SQUARE ROOTS GROW CEO: We are literally on a parking lot in the middle of Brooklyn.

ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: In the shadow of the New York housing project is the brainchild of Tobias Peggs and his partner Kimbal Musk.

PEGGS: This is a farm.

DAY: Urban farming. But instead of roof tops, the food is grown inside shipping containers.

PEGGS: Inside each shipping container is the equivalent of a two-acre outdoor field.

DAY: His business is Square Roots Grow. According to Peggs, designed to help entrepreneurs capitalize on what he predicts will be a real food revolution.

PEGGS: People have lost trust in the industrial food system and those people will want real food. And Kimbal and I think that that opportunity that presents itself today is bigger than the Internet was when we both started our careers 20 years ago.

DAY: The food is grown vertically on these white towers that contain the crops without soil.

UNIDENTIFIED MALE: He is probably growing 18 head of lettuce on every single tower and there were 256 towers in his farm.

DAY: The environment inside is totally controlled. From the length of day flight to nutrients, which are mixed in with the water that feeds the roofs.

PEGGS: We don’t use pesticides. We don’t spray.

DAY: And the entire system he says is engineered to use the fewest resources possible, like this pink LEDs with just the right spectrum of light for growth.

ERIK GROSZYK, SQUARE ROOTS GROW FARMER: Right now, we’re in water pits. I have Brussels salad mix of kale.

DAY: He is a former banker turned urban farmer.

GROSZYK: Ii think the highlight for my weak is to do my harvest, package it up and to bring it to people.

DAY: And Square Roots works direct when I farmers to help make that happen. Coaching them how to grow and sell, and will takes percentage of the revenue.

MASON GRASSFIELD, SQUARE ROOTS GROW FARMER: The kale I’ll be selling is three hours since it’s been cut. I have no idea how old the kale that I usually buy is.

PEGGS: This is a global mega trend.

DAY: And just how big does he think this mega trend will ultimately be? He is planning to build urban farms in at least 20 cities by 2020.

For NIGHTLY BUSINESS REPORT, I’m Andrea Day.

(END VIDEOTAPE)

MATHISEN: One hundred eleven million people watched the New England Patriots make Super Bowl history last night. But the team’s come from behind win may not bode well for investors. That’s according to the Super Bowl indicator. Maybe you’ve heard of it.

This unscientific forecasting tool says stocks will fall if a team from the original American Football League wins the game. And this year, that team was the Patriots. The indicator has been correct 40 out of 50 years. That is an 80 percent success rate. But you knew that.

HERERA: Oh, dear.

All right. Hang on to your jerseys, because finally tonight, the jersey that Patriots quarterback Tom Brady was wearing in last night’s game is reportedly still missing and that jersey could be worth a lot. According to Bloomberg, one sports collectible said the Super Bowl’s MVP jersey could be worth upwards $500,000. Wow!

That does it for us tonight on NIGHTLY BUSINESS REPORT. I’m Sue Herera. Thanks for joining us.

MATHISEN: And thanks from me as well. I’m Tyler Mathisen. Have a great evening. We’ll see you tomorrow.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2017 CNBC, Inc.

 

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