Transcript: Nightly Business Report – September 22, 2016

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

existing homes sold last month dropped unexpectedly, and there`s important reason why.

Labor violations?  A group of senators is taking the investigation into
Wells Fargo (NYSE:WFC) one step further.  Now, they`re asking the Labor
Department to get involved.

Hands free.  Tesla rolls out its new version of its auto pilot.  But how
much control should drivers hand over to computers?

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
September 22nd.

Good evening, everyone.  I`m Sue Herera.  Tyler Mathisen is on assignment

We begin with the markets, where investors were in a risk-taking mood.  The
NASDAQ closed at an all-time high after stocks around the world rallied
following the Federal Reserve`s decision yesterday to stand pat on interest
rates.  Gold and crude also rose.  Bond yields fell as did the dollar.

Investors were also trying to make sense of the positive report on the
labor market and also the disappointing housing numbers.  So, the Dow Jones
Industrial Average gained 98 points to 18,392.  The NASDAQ added 44 to an
all-time high of 5,339.  And the S&P 500 was up 14.

More now on that report on housing which may be showing some new signs of
weakness.  Sales of existing homes in August declined unexpectedly, down
0.9 percent to the lowest level since February.  Realtors say there`s a
simple reason.  There just aren`t enough homes to buy.

Diana Olick has our story.


hunting in L.A.

DOUG STIRLING, HOUSE HUNTER:  I`m a glutton for punishment.

OLICK:  But he has no illusions of an easy search.

STIRLING:  It`s fierce, because inventory is low, and then you get up
against more investors who have cash behind them as opposed to someone who
is borrowing and doesn`t have a stronger foothold and getting in the door.

OLICK:  There actually 10 percent fewer homes for sale today nationally
than there were a year ago according to the realtors.  And that, they
claim, is why sales are dropping.

buyers are exhausted.  They are not excited about the low inventory
choices.  And furthermore, home prices consistently are rising above
people`s wages.  People are getting just knocked out.

OLICK:  Home prices jumped over 5 percent annually in August and that hit
first time buyers especially hard.  Their share of field fell compared to
July and has been historically low throughout this recovery.

JASON ANDERSON, REALTY ONE GROUP:  I do find them a little disappointed
that the starting point is a little higher than they would like.

It`s currently up $789,000.

OLICK:  And buyers are getting more savvy.

STIRLING:  There`s a lot of overpriced things out there.  One thing I like
to do is judge like the neighborhood, has it already kind become too hip
and popular, versus what`s going to be a trending spot that might improve
in cost?

OLICK:  With prices rising so strongly, mere record low mortgage rates
aren`t helping as much as they normally would.  The good news is, interest
rates are not expected to rise anytime soon as some had expected.

Stirling knows he has to compete but he also recognizes there is a limit.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.


HERERA:  The homebuilder Lennar (NYSE:LEN) is buying luxury home builder
WCI Communities.  The price tag, about $640 million.  That deal combines
two of the largest home builders in Florida.  Lennar (NYSE:LEN) is the
country`s number two homebuilder.  WCI Communities builds luxury homes.
Shares of WCI soared nearly 38 percent.  Lennar (NYSE:LEN) was up slightly.

The number of people filing for unemployment benefits fell to the lowest
level since July.  Initial jobless claims dropped by 8,000 to 252,000 last
week.  That level is just modestly above the four-decade low hit back in

Wells Fargo`s CEO John Stumpf late tonight stepped down from the Federal
Reserve Advisory Council.  Separately, several Democratic senators,
including Elizabeth Warren, are asking the Labor Department to investigate
the bank.  In a letter addressed to Secretary Tom Perez, the senators want
the agency to examine whether Wells Fargo (NYSE:WFC) violated labor laws.

The letter cites threats of termination, harassment and other forms of
retaliation at the bank.  It also said Wells Fargo (NYSE:WFC) failed to pay
overtime to tellers and sales representatives who worked late to meet sales
quotas.  The letter suggests widespread exploitation of the Wells Fargo
(NYSE:WFC) workforce and it deepens the bank`s fake account scandal.

So, what could a federal version into Wells Fargo`s wage and labor
practices mean for the troubled bank?

Michael Deutsche is co-founder and partner at the New York law firm Singer
Deutsche and he joins us now to discuss.

Welcome.  It`s nice to have you here, Michael.

Thanks for having me.

HERERA:  What are the implications for Wells Fargo (NYSE:WFC) here?

DEUTSCH:  Well, certainly, this is an expanding problem for Wells Fargo
(NYSE:WFC), because they`re subject to not only the investigation that just
concluded with a $185 million fine, but now, there are indications that the
Justice Department is looking into them as well as this recommendation from
the Democratic senators that the Department of Labor look into them.

And certainly, if Wells Fargo (NYSE:WFC) has committed the acts that the
Democratic senators have indicated that they may have done over some period
of time, then they will have trouble because they will have violated the
Fair Labor Standards Act, as well as various state laws that are applicable
in the same situations with regard to retaliation and with regard to
overtime in particular.

HERERA:  And, obviously, it`s a national bank, so do you anticipate that
other states attorneys general might join in some sort of action?

DEUTSCHE:  I think there`s high likelihood of that, except if the federal
government asks them to refrain from doing it while they`re conducting an
investigation.  But, certainly, with Wells Fargo`s footprint around the
entire country as well as the world, I think there`s a high probability
that attorneys general are going to be looking at this in the near future.

HERERA:  How do they manage this?  Or can they manage this?

DEUTSCHE:  Well, I`m not on the business end of things, but certainly
they`re going to have to create a very large litigation reserve for this
particular issue, as well as other issues that crop up based on these
activities.  I think you`ll see that reserve set aside in the near future.

But it`s going to be a long slog for them because this activity was taking
place over a long period of time, certainly with the understanding by
senior people at the company that it was happening and they did nothing to
fix the problem over a period of time.

HERERA:  Now, we`ve been talking about investigations and things like that,
but there could be also individual lawsuits, could there not?

DEUTSCHE:  Certainly, there will be individual lawsuits.  And my
understanding is that there are already individual lawsuits filed in
California.  But I think we`re only seeing the beginning of that.

And based on the number of employees that Wells Fargo (NYSE:WFC) has, the
number of people who were working in their branches, the number of people
subject to these sales guidance from Wells Fargo (NYSE:WFC), we`re going to
see an awful lot of lawsuits, particularly if there was retaliation against
people who were in a position to know that something wrong was going on and
complained about it and were either discriminated against or were
discharged, which is a violation of the Fair Labor Standards Act.

HERERA:  You know, a lot of businesses try and get out in front of
controversy and put it, you know, behind them as soon as possible.  But
with this many pending or possibly pending actions, it does not sound as
though this is going to have a quick resolution.

DEUTSCH:  I wouldn`t expect the resolution to be too quick, particularly
with the number of regulators and entities that are investigating them or
about to begin investigations, including the Senate Banking Committee and
the House Finance Committee which, of course, is a very public stage and
it`s going to lead to a lot of chest-beating by politicians related to
this, and then get administrators involved on a much expedited basis than
they would have otherwise.

HERERA:  Does it, as — speaking as a lawyer who litigates cases like this
and advises companies on cases like this, does it help if the company puts
in a dramatic change of management?  Does it lessen the penalties that they
might get hit with?  Or does it not matter at all?

DEUTSCH:  It could have an effect on settlements they`re making with
regulators, certainly.  But it will have no effect on the damages that
individuals are entitled to under these various federal and state laws.  If
there are violations that have occurred, their statutory penalties and
statutory rights that people can avail themselves of including back pay,
including liquidated damages.

HERERA:  On that note, Michael, thank you very much for your insights.  We
appreciate it.

DEUTSCH:  My pleasure.

HERERA:  Michael Deutsche with Singer Deutsche.

Microsoft (NASDAQ:MSFT) and Target (NYSE:TGT) both announced big buybacks
this week as we`ve reported.  And that`s one of the ways that companies
return money to shareholders.  But it`s also a way for companies to improve
their earnings per share.

Dominic Chu explains.


explains they`re going to spend $40 billion on anything, they`ll grab
headlines.  That`s exactly what happened earlier this week when Microsoft
(NASDAQ:MSFT) said they`re going to start a new program to buy back up to
$40 billion of their own stock, in addition to boosting their dividend

because it`s one of the ways that companies can return money to their
shareholders.  One way obviously would be dividends, by which they send a
check to the shareholders.  But they can also buyback in shares which
lowers the number of shares outstanding and lifts earnings per share.

CHU:  According to S&P/Dow Jones analysts Howard Silverblatt, the three
biggest corporate purchasers of their own stock in the entire S&P 500 are
Apple (NASDAQ:AAPL), General Electric (NYSE:GE), and Microsoft
(NASDAQ:MSFT).  In the 12 months ended in June, both Microsoft
(NASDAQ:MSFT) and GE had spent around $16 billion each on buying back
shares.  Apple (NASDAQ:AAPL) was by far the biggest purchaser, buying back
around $37 billion during that time span.

But when it comes to which companies saw the biggest reduction in their
share counts through stock buybacks, it`s American Airlines, H&R Block
(NYSE:HRB), and Quanta Services (NYSE:PWR).  Each bought back enough stock
to lower share count by at least 20 percent, thus helping companies improve
earnings per share.

The concept of stock buybacks has been somewhat controversial.  Should
companies be buying back their own stock or taking that cash and
reinvesting it in the business to grow and hire more people?

A big reason why companies can do these larger scale buybacks is because of
how low interest rates are.

TRENNERT:  Companies can issue debt with extraordinarily low rates and then
buy back shares.  And that increases earnings per share.  It increases the
return shareholders get and there`s very little cost again with rates this
low for companies to do that.

CHU:  Now that the Fed has signaled that interest rates could stay lower
for even longer, stock buy backs could continue to be a big part of the
corporate profit story and help keep stocks higher.  But the question is,
how long that run can last?



HERERA:  Still ahead, massive breach.  Yahoo (NASDAQ:YHOO)! confirms a
breach that affects 500 million accounts and dates back to 2014.


HERERA:  And now to Charlotte, where a state of emergency has been declared
after two nights of violence and continued protests over the police killing
of a black man.  And even as some officials urge city firms to return to
business as usual, a number of them told their employees to work from home
today.  Those businesses including Bank of America (NYSE:BAC), Wells Fargo
(NYSE:WFC), Fifth Third Bank, Duke Energy (NYSE:DUK), and United Way.

And a statement late today from the NFL said the league is planning to play
Sunday`s game between the Carolina Panthers and the Minnesota Vikings in

To the campaign trail: Democratic presidential candidate Hillary Clinton
has proposed a 65 percent top rate for the estate tax.  This is according
to an updated version of her tax plan that was released today.  The 65
percent estate tax rate would be the highest since 1981.  According to the
nonpartisan Committee for a Responsible Federal Budget which advocates
fiscal restraint, Clinton`s updated estate tax and other new proposals
would generate $260 billion over the next decade.

And that same think tank analyzed both Clinton`s and Donald Trump`s tax and
spending proposals and found that Trump`s would increase the debt 26 times
more than Clinton`s.

John Harwood joins us from Washington.

John, those are some big numbers.  Exactly what did the committee for a
responsible federal budget find when it comes to the impact of Clinton`s
and Trump`s policies on debt and deficits?

that the committee is only evaluating the bottom line, not whether it`s
good to have bigger government or smaller government that`s paid for.  For
example, for Hillary Clinton, they estimate that she would add a lot of
spending but pay for it by raising revenue.  And so on net, she would only
average, according to the center, $20 billion added to the deficit every

Donald Trump, on the other hand, has proposed a massive tax cut, and
because of that tax cut, they estimate that Trump would add $530 billion a
year to the federal deficit.

HERERA:  You know, I assume also that there are some other surprises or
details in there that the public`s going to have to sift through.

HARWOOD:  Well, exactly, Sue.  And it was, e surprise was the estate tax
proposal you talked about.  It was not announced by the Clinton campaign.
They`ve said they`re going to pay for those with this estate tax proposal.
It would raise the top rate from the estate tax from 45 percent, which is
what she previously proposed, to 50 percent for estates of $10 million or
more, 55 percent for estates at $50 million or more, and 65 percent for
estates at $500 million or more, $1 billion for a couple.  Obviously, that
would affect only a tiny number of taxpayers.

HERERA:  Is it risky for her to do that so close to the election?

HARWOOD:  I think it is, and I think that`s why she didn`t announce it with
a lot of fanfare.  On the other hand, she can come back and say, Donald
Trump, this is the kind of proposal that would only affect people like you,
and that`s a fairly simple argument to make on the debate stage.

HERERA:  And how does her tax proposal compare to — the estate tax
specifically, to the Trump proposal?

HARWOOD:  Well, you couldn`t have a sharper contrast.  Highest rates since
1981, as you mentioned earlier, on those very largest estates.  Donald
Trump would eliminate the estate tax entirely.

HERERA:  And, John, finally, before we let you go, another hack, this one
of a White House staffer.  What do you know?

HARWOOD:  Well, that hack of a White House staffer resulted in Michelle
Obama`s passport information being displayed on a website, DC Leaks, which
has been linked to Russian intelligence services.  You had two members of
Congress today come out, Democrats, call for the Russian government to stop
interfering in U.S. elections.

This is something that President Obama has also discussed, and cast a wary
eye on, and we`ll see whether or not that has any effect.  No signs it`s
having any affect, those warning so far.

HERERA:  To be continued.

John, thank you very much.  John Harwood in Washington for us tonight.

Yahoo (NASDAQ:YHOO) confirms possibly the largest data breach ever,
affecting a half billion users.  That`s where we begin tonight`s “Market

The company confirmed a hack in late 2014 compromised the private
information of at least 500 million users.  Yahoo (NASDAQ:YHOO) thinks it
was a state sponsored act.  The data includes names, e-mail addresses,
telephone numbers and dates of birth.  Shares of Yahoo (NASDAQ:YHOO) rose a
penny to $44.15.

AutoZone (NYSE:AZO) topped its earnings forecasts thanks to new store
openings, but revenue missed.  With a 12 percent rise in earnings, the auto
parts retailer has posted double digit growth for 40 straight quarters.
Still, AutoZone (NYSE:AZO) shares were off a fraction to $748.23.

Rite Aid (NYSE:RAD) also posted better than expected earnings with sales
falling a little short.  The drugstore chain said pharmacy sales were hurt
by less expensive generic drugs.  Shares of Rite Aid (NYSE:RAD) rose two
cents to $8.12.

Scholastic`s revenue jumped 48 percent while its loss narrowed from a year
ago.  The publisher said it was helped by the sales of the latest book in
the “Harry Potter” franchise.  Scholastic (NASDAQ:SCHL) shares rose 2 1/2
percent to $39.32.

And E.L.F. Beauty had a strong debut on Wall Street.  The discount price
cosmetics company opened at $17, which was above the range for the initial
public offering.  Shares of E.L.F. finished up 56 percent, at $26.50.

And Airbnb is now being valued now at $30 billion.  According to Dow Jones,
the valuation follows an $850 million fundraising round for the home rental
company.  The deal is reportedly designed to relieve some of the pressure
to go public, giving it more funds to spend on overseas expansion.

After weeks of controversy and questions about the safety of its auto pilot
driver assistance technology, Tesla is rolling out a new version it says
will make driving hands-free even safer.  But will it end the question of
how much control drivers should really hand over to the computers in their

Phil LeBeau has more from Tesla headquarters in Palo Alto, California.


loves driving his Tesla Model S in auto pilot mode where he takes his hands
off the wheel.

KRISHNA KALIDINDI, TESLA DRIVER:  The driver has to understand the
limitations of it.  And it`s like learning to drive.  You kind of have to
know what limits of these auto pilots are, right?  Because it`s still not
100 percent auto pilot.  You still need some kind of steering.

LEBEAU:  The doesn`t change in the new version of Tesla`s auto pilot
system.  In fact, it`s increased driver warnings, with the instrument
cluster lighting up and the vehicle sounding a warning when the driver
needs to take control of the car.

In addition, the system uses the car`s radar to provide a better view of
the road, so it can brake quicker and avoid collisions.  The system also
can steer the car on highway interchanges.

Tesla`s CEO, Elon Musk, says the changes will make Tesla`s Model S and
Model X the safest vehicles on the road.

But not everyone is buying that claim.  Auto pilot is still requiring
drivers to be ready to take control if they`re heading towards a collision.
And that worries analysts who track auto safety.

they`re allowing the car to drive but the human is there to back up the
car.  And that`s really kind of a dangerous situation, because — well,
quite honestly, humans aren`t designed that way.

LEBEAU:  Still, the federal government is pushing the development of self-
driving cars.  Earlier this week, it set new rules for what`s expected of
automakers building autonomous drive vehicles.  And Tesla`s auto pilot
system remains the focus of a federal investigation following the death of
a man driving his Tesla in auto pilot mode when it crashed in Florida
earlier this year.

Krishna Kalidindi knows the system isn`t perfect, but he has no plans to
stop using it.  In fact, he believes the new auto pilot will make his daily
commute in the Bay Area even more enjoyable.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Palo Alto, California.


HERERA:  They are a growing wave of bounty hunters.  Instead of chasing
down the bad guys, though, they`re chasing high tech bugs that could put
your personal information at risk.

Andrea Day has that report.


UNIDENTIFIED MALE:  We`re approaching a place where this is actually a
sustainable way to make a living.

not on the streets looking for criminals, but hacking into systems
searching for bugs before the bad guys can find them.

UNIDENTIFIED MALE:  They think like bad guys but they`re good guys.

DAY:  And they`re in hot demand by companies like Apple (NASDAQ:AAPL), AT&T
(NYSE:T), and Twitter, who are willing to pay people to expose their flaws.

DAVID BAKER, OKTA CHIEF SECURITY OFFICER:  If we`re not doing this, then
you should be questioning whether or not there should be this software.

DAY:  At his software company Okta, David Baker has a security team in
place, but still hires on hackers on the side.

BAKER:  They use it very tactically to test my test.

DAY:  The hackers he relies on are from Bugcrowd, started by Casey Ellis,
the company uses researchers from around the world to explosive flaws.

CASEY ELLIS, BUGCROWD CEO:  When one of them sees benefit from working with
us, they talk about it, and the others join in.

DAY:  Clients can decide to use a select few or the entire crowd, made up
of thousands of hackers.

ELLIS:  They literally never failed to get in.  There`s always something
that people have missed.  And that`s because vulnerabilities are hard to

DAY:  The flaws he says range from trivial to major, it could expose secret
data or remotely take over a self-driving car.

ELLIS:  The more impactful or severe it is, the more they get paid.

DAY:  Bugcrowd isn`t the only bounty startup.  And dozens of firms have
launched their own programs.

Facebook (NASDAQ:FB) tells us, quote, “In the fast five years, we paid more
than $5 million to more than 900 researchers.”  Its largest pay out to
date, just over $33,000 to a Brazilian engineer who was later hired by the

Yahoo (NASDAQ:YHOO) said it`s paid out more than $1.7 million in bounties
and has a relationship with thousands of hackers.  Google (NASDAQ:GOOG) has
a bug hunter university.  MTI pays student hackers in special campus
currency.  Some firms offer their staff incentives to track down bugs.

But according to Ellis, those same workers could also be a threat.

ELLIS:  So, I think the risk of inside hacking is real for anyone.  They
really need to be thinking about, you know, what is an insider capable of,
and what kind of controls do we need to put in place to reduce the risk of
what they`re likely to do.

DAY:  By now, he says he`s not shocked by what hackers uncover but he warns
his new clients —

ELLIS:  You`re about to go down the rabbit hole.  There is almost a
terrifying element to learning how vulnerable everything is.

DAY:  And one of the reasons why he believes it`s better to look outside
the business for hackers is that the people who are building the software
don`t always think like someone who is trying to break it, like the bad guy
trying to get in.



HERERA:  Coming up, the mobile gaming market may be booming, but having a
few top selling games does not guarantee long term success.


HERERA:  The mobile gaming market is growing fast.  Take Pokemon Go, it`s
the latest game to take over mobile phones around the world.  But just
having a hit game isn`t enough.  You have to keep `em coming.

Julia Boorstin shows us how one company is trying to carefully navigate its
way to success.


market is booming, projected to generate nearly $40 billion in revenue and
overtake console and PC games for the first time this year.  Los Angeles-
based Jam City, the maker of games like Cookie Jam and Panda Pop is part of
that boom.  The company formerly called SGN Games announcing a name change
today, and saying it`s on track to surpass $400 million in annual revenue
this year, signs the company could be preparing to go public.

CHRIS DEWOLFE, JAM CITY CEO:  We`re always setting ourselves up for an IPO.
But as we know the markets are volatile up there. So, setting ourselves up
means having lots of games in the top grossing charts.

BOORSTIN:  Having a few games atop the charts isn`t enough to guarantee
long term success, which is why Jam City is licensing a range of
properties, including most recently the cartoon franchise Peanuts to help
diversify its portfolio.

CEO Chris DeWolfe, who also co-founded MySpace, wants to make sure that Jam
City doesn`t become like Zynga (NASDAQ:ZNGA), which soared with the success
of its Farmville games but couldn`t consistently replicate that success.
Zynga (NASDAQ:ZNGA) shares have dropped 80 percent from their peak in 2012.

DEWOLFE:  You have to make sure that your franchises last for not one year
or two years but 10, 20, 30 years.  So, our top games have been in the top
grossing charts and making a lot of money and continuing to grow for three
plus years.

BOORSTIN:  Rival King Digital with Candy Crush and other games continues to
grow since it`s been acquired by video game giant Activision.  Now, we`ll
see if Jam City draws acquisition interest or continues to go it alone as
it works to grow its 50 million monthly active gamers.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.


HERERA:  The Department of Education is no longer recognizing the nation`s
largest accreditor of for-profit colleges, and that could forced some
schools to close and jeopardize financial aid for hundreds of thousands of
students.  The Accrediting Council for Independent Colleges and Schools has
come under fire for its oversight of the now defunct Corinthian Colleges
(NASDAQ:COCO) and ITT Tech.  The agency has ten days to appeal.

And, finally tonight, Americans will spend a record amount on Halloween
this year.  According to National Retail Federation, $8.5 billion will be
spent on candy, costumes, decorations, even greeting cards.  That`s up
nearly 22 percent from last year.

Before we go, here is another look at the day on Wall Street.  The Dow
gained 98 points.  the NASDAQ added 44 to an all-time high, and S&P 500 was
up 14.

And that will do it for NIGHTLY BUSINESS REPORT for tonight.  I`m Sue
Herera.  Thanks for joining us.  Have a great evening, and we`ll see you


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