tv Nightly Business Report PBS February 17, 2016 7:00pm-7:31pm PST
>> announcer: this is "nightly business report" with tyler mathisen and sue herera. personal security versus national security. a court orders apple to help the fbi unlock an iphone used by a domestic terrorist. apple says no, and the battle is highlighting one of the most important and contentious privacy issues of our time. off the rails. why cheap oil is causing a business that had once been booming to go bust. and closing the gap. how one program is helping urban youth gain the skills they need to get the jobs they want. the second part of our "bridging the divide" series tonight on "nightly business report" for wednesday, february 17th. good evening, everyone. i'm sharon epperson in tonight for sue herera. >> and welcome from me, as well.
i'm tyler mathisen. on wall street, it was the first three-day win streak for stocks this year. but we begin tonight with the battle between silicon valley and the federal government. apple will fight a court order to help the fbi unlock an iphone used by one of the san bernardino shooters. the decision sets up a legal showdown between the world's largest publicly traded company and federal law enforcement. one side citing privacy, the other national security. eamon javers has more on this escalating confrontation. >> reporter: a dramatic standoff today between the fbi and apple. the fbi wants access to the cell phone of one of the shooters in the san bernardino terrorist attack back in december. they say they simply can't get into that phone. they want apple computers' help and they've gotten a court order from a judge that would order apple to do that. here's what the order says. the judge saying that the apple computer engineers have to come up with some kind of system or
software that would bypass or disable the iphone's auto erase function so the phone won't delete itself when the fbi tries to get in there. it would enable the fbi to have access to that phone, either through a device port, through bluetooth, through wi-fi or some other way to get into the phone, and also that the apple software engineers would have to ensure that that particular phone's software won't delay the fbi as they try to use what's called brut force to crack into that phone, that is, dialing up random numbers on the passcode in order to just guess by pure chance what the password is to that phone. the fbi thinking if they can do that at computer speed, they can simply enter in millions of passwords until they get the right one and get access to the information on that phone, which they say is crucial to their investigation. meanwhile, tim cook at apple saying that that company is going to resist this court order. here's what he had to say yesterday, saying, "opposing this order is not something we take lightly. we feel we must speak up in the face of what we see as an
overreach by the u.s. government. we are challenging the fbi's demand with the deepest respect for american democracy and a love for our country." and guys, not at all clear here where this goes from here, but apple has a number of days now to respond to this court order. failing that, we could see this go up to the court of appeals, and ultimately, this is the kind of case that could be heard before the supreme court. back to you. >> we have two guests now with opposing views on this battle between apple and the federal government. susan land yao is professor of cyber security policy and supports apple, and ron hosco is former assistant director at the fbi and now president of the law enforcement legal defense fund. he says the government's request is narrow and reasonable. susan, let me start with you. there is a big issue here. a lot of people may not even realize how secure their phones are at this particular time, but now they realize that. and the issue with apple has to do with one phone.
the doj says they just want that one phone. why is it such an issue when it's only that one device? >> because in order to do this, apple has to write a piece of software that while it is targeted at that one phone, can be reused, as long as one has apple's, what's called sign-in key, in order to use it on other phones, and then it becomes very dangerous, because apple's sign-in key now becomes the target, for example, for nation states to go after, because that would unlock other people's phones. and given the way we use our phones, that's exceedingly dangerous, including for national security. >> ron will take the other side of this. why do you think tim cook is wrong? >> well, i think this order that was issued in california is very narrow. we are talking about a phone that the fbi is in lawful possession of after this horrific terrorist incident, that the county has consented to a search of because it was the county's phone possessed by a
terrorist. and what the order requires and expects is that apple take reasonable steps to develop the tools to get in there. that doesn't necessarily equate with the fbi driving away with the tools. what the fbi wants is the data from the phone, which is potentially evidence of a crime, evidence of a broader conspiracy. >> so, ron, could all of this be done in apple's offices? they just unlock that phone, get the data that the fbi needs, provide the fbi with that data without giving them the whole back-door process to the way that they actually were able to get the data from the phone? >> that is my understanding of the order. the order does not contemplate the fbi being handed over the encryption or the decryption tools or software that could act upon other phones. this is much more narrow. what the fbi is looking for, reasonably and responsibly, is the data. but this does lead us into the broader conversation. >> mm-hmm. >> sadly here, the terrorist attack is over. and where the fbi wants to be is in front of a terrorist attack
the next time so it can defeat it. >> susan, play out for me this scenario that i sense you are -- you fear in response to what appears to be a reasonable court order to go after a device that was owned by a terrorist murderer. play it out. why should we, the users of cell phones, be worried that apple would have the ability to unlock a phone that is now not unlockable. >> right. so, ten years ago, before the iphone what we had was a situation where corporate data was accessed through blackberrys, which were quite secure. but as soon as the iphone was developed and then the android, apps became really important and people started carrying iphones and androids and then started using them at work. now we have byod, bring your own device. so, while somebody working in the department of defense or in the defense industrial base of
lockheed martha imartin or mart marietta or one of those companies, those people carry two phones, one for work, one for their own personal information. but almost everybody else carries just one phone, and that phone not only has their family photos and their mail with their spouse, but it also has access to work, and it sometimes has work information on it. and those phones then become very interesting to nation states, whether they're a lawyer, an employee at ford, an employee at some other u.s. company. the information there is really important. if apple makes -- creates software that enables it to unlock a single device, that software will enable it to unlock other devices, and then that software and apple's sign-in key become a real target for other nation states, and we make ourselves less secure. >> are you concerned, susan, that this also sets a precedent? again, what if it's just as narrow and reasonable, as ron suggests it may be, and we are only talking about one phone that could be unlocked, again,
at apple without the fbi really having access to the process of unlocking? is your concern that this then would open a precedent, though, for requests to come from another country, perhaps? >> i'm absolutely concerned that, you know, a businessperson, a u.s. businessperson is traveling in russia, is traveling in china, is traveling in many other countries in the world, and the governments there go to apple and they say we know you know how to unlock the phone, do it. it could be a u.s. businessperson, a german, a french person, a brit. the point is that we are only as secure as the device is secure, and that's where the risk is. we're also at risk because the software can be stolen. it would be nice to say apple has amazing security, but we know from the opm hack where the chinese went into the u.s. government office of personnel management and stole records, we know from many other hacks just how determined nation state actors are. >> well, we'll see -- >> and that's the concern. >> there is a concern, but we'll have to see whether apple is
able to prevail here or whether they will have to comply with that court order. and of course, it could go, as eamon said, to the supreme court. susan landow and ron hasko, thank you. wall street sees its first three-day win streak this year helped by a rebound in oil prices, decent economic data and upbeat reports. the dow gained to 16,453. nasdaq added 98. s&p 500 exited correction territory with a gain of 31 points. also had its first back-to-back-to-back gains of 1% or more since october 2011. tyler, as for that economic data, wholesale prisions ticked higher in january, offering hints of inflation in an economy looking for it. the producer price index rose 0.1% last month, and that was stronger than the decline that economists had been looking for. core prices, which exclude food and energy, rose 0.4%, the
biggest one-month jump in 15 months. a reading on industrial production, that's a broad measure of everything made by manufacturers, mines, utilities, up in january after three straight months of declines. some economists say the 0.9% rise should alay fears that the economy's headed for recession and suggests the manufacturing sector may be weathering weak demand globally all right. the rebound last month being attributed to strong car sales. but the latest housing data wasn't as strong. the commerce department reports that new home construction fell nearly 4% in january, and that's the second straight monthly decline, which some say is due to snow in the northeast. we've certainly had a lot of it. despite the drop, though, many economists feel the fundamentals of the housing market remain strong. at the last federal reserve meeting, many policymakers weren't sure whether the u.s. economy could withstand the turmoil in global financial markets. according to the minutes of the january meeting, members of the fed saw more pronounced downside risks, and as hampton pearson
reports, their outlook for the economy was growing increasingly cloudy. >> reporter: when monetary policymakers met at the end of january, concerns about commodity and financial market volatility and the economic slowdown in china raised concerns about the impact on the u.s. economy. according to the minutes from the fed meeting, it was enough for fed members to decide they would move slowly and cautiously along the path of raising interest rates. fed chair janet yellen echoed those concerns during two days of congressional testimony last week, and longtime fed-watchers see little likelihood of an interest rate hike in march. >> they didn't act in late january, and i think they won't act in march. there's a lot of emphasis there on global developments and instability. so, i think they're on hold for a while. >> reporter: stocks held on to gains after the release of the fed minutes. monetary policymakers say market
volatility so far this year has been a factor in figuring out a timetable for raising interest rates. those policymakers also want to see proof of inflation moving closer to the fed's 2% target. but market-watchers say the fed needs to send a clearer signal. >> if they hold to the increases that they're implying, you know, the market is not going to be able to move forward. we really do need the fed to take their foot off the accelerator, ratchet back those rate increases maybe just to 1%, 2%. >> reporter: those fed minutes also shed light on why chair janet yellen says rate hike policy is on no preset course. on the one hand, there is a u.s. economy with strong fundamentals offset by global uncertainty. for "nightly business report," i'm hampton pearson in washington. still ahead, the high cost of cheap crude to one part of the transportation sector.
oil prices moved back above $30 a barrel on hopes of a deal among some oil producers to freeze production. domestic crude rose about 5.5%. iran says it welcomes the saudi/russian deal to freeze production that we told you about yesterday but stopped short of committing to hold back output. and despite today's price rise, many who follow the energy markets remain skeptical such an agreement will ever materialize. for years, oil shippers preferred to move crude by train, rather than by pipeline to save on cost, but the economics have changed. and as morgan brennan reports from linden, new jersey, that's pushing the crude-by-rail business off the tracks. >> reporter: from 2008 to 2014,
as fracking boomed, so did the business of hauling oil by train. during that time period, crude-by-rail surged 5,000%, peaking at just over a million barrels per day in the third quarter of 2014. but as crude prices have collapsed, volumes for the biggest railroads have tumbled by nearly a quarter. according to the association of american railroads. >> when oil production starts to drop, so does moving oil drop. and one of the areas that's been the most affected has been the light sweet crude that comes out of the balkan and the larger percentage which went on rail. >> reporter: the larger trains that haul crude rail come from the bakken formation. jenscape estimates 1.2 million barrels of day of frail capacity, but only 350,000 barrels are being loaded currently, down almost half from a year ago. the process of hauling to the refineries is less economical because it's expensive and imported crude is more attra attractive once again to those refineries.
now, oil's still a small piece, only 2% of overall business for the railroads, but it was a fast-growing, high-margin one. it's also throwing a number of infrastructure projects into question, including how much oil this philips 66 refinery, bayway, will continue to accept via rail. the slump is beginning to affect rail car manufacturers and leasing companies like greenbrier companies, trinity industries, american rail car industries and gatx. after a record number of deliveries in 2015, analysts say rail car demand has begun to weaken. >> all of those items have combined to form a headwind in this market, and we've seen rail car backlog fall by roughly 20% from peak levels a year ago. >> reporter: but there have been some winners as well, particularly grain shippers. over the last two winters, when oil trains still took precedence in the dakotas, many agricultural customers suffered steep delivery delays. that dynamic has reversed. and while the grain market is
struggling with its own headwinds, railroad gridlock is no longer one of them. for "nightly business report," i'm morgan brennan in linden, new jersey. priceline reports higher-than-expected quarterly profit, and that's where we begin tonight's "market focus." a rise in hotel and rental car bookings lifted results and helped offset the effect of a strong dollar. ceo darren hustin is also attributing the results to a decline in the price of gas. >> one of the things people underestimated was travel specifically really benefits from lower oil prices, and we're seeing in particular that macro effect having a positive impact on our business. >> shares gained more than 11% to $1,232.56. shopify's revenue doubled in its fourth quarter, thanks in part to a strong holiday shopping season. the e-commerce companies make software that helps retailers manage online stores. shopify also issued an upbeat outlook for 2016 and said it
expects to see a jump in revenue as high as 61%. that's as a record number of new merchants recently signed up for the service. shares of shopify rose 9% to $22.37. and garmin, maker of gps devices and wearable fitness products, reported a 37% drop in profit for its last quarter, but that was still good enough to beat the street's estimates. revenue also came in above targets, and the company forecasted full-year revenue to come in above expectations, but it does expect profit to lag. garmin shares still rose more than 16% to $41.06. bloomin brands, operator of outback steakhouse, saw a decline in both profit and revenue for its most recent quarter, as same-store sales fell across all four of its brands. as part of a restructuring effort, the company said it would close 14 of its bonefish grill locations. the company also announced a new $250 million share buyback program. shares of bloomin lost more than
10% today to $15.10. similar story at the newspaper publisher gannett. it saw its sales and profit fall for the fourth quarter as a result of lower advertising demand and declining circulation. the company said it expects the declines to continue through the year. shares down more than 7% to $14.24. and sherwin williams announced a quarterly dividend increase of 25%. shareholders will be paid 84 cents a share on friday, march 11th. the paint company has increased its dividend -- get this -- for 37 consecutive years. shares up fractionally to $259.15. now here's a good story. a dairy farmer, a convenience store owner and the irs. well, it is a bizarre business tale of small businessmen who got caught up in laws that were designed to target terrorists. kate rogers has the story. >> reporter: maryland dairy farmer randy sowers had no idea
large cash deposits could be a problem until he found out the hard way, when the irs seized $63,000 from him in 2012. >> we didn't do anything wrong. we were just depositing cash into the bank, like you know, we thought was very legitimate. i mean, if i wanted to hide it, i would have put it in a can. i wouldn't have deposited it in a bank. and you know, the government comes in, takes your money. >> reporter: sowers and his wife, karen, were bringing in cash they earned at weekend farmers' markets when a bank teller suggested making smaller deposits to avoid filling out tedious paperwork. transactions higher than $10,000 have to be reported to the federal government. the pattern of the cash deposits caught the attention of the irs and the agency invoked structuring laws. those laws are meant to target money launderers, terrorists and drug dealers who often break up deposits into less than $10,000 sums. randy sowers maintains the family had no idea. they settled, but the irs kept nearly half their cash, almost $30,000. convenient store owner ken kuran
was less lucky and unknowingly agreed to forfeit his entire bank account to agents who came to his store in 2014, accusing the palestinian immigrant of skirting laws. he drew a red flag for a different reason, withdrawals of less than $10,000. the irs took more than $150,000 from him and he denies the charges. >> he said you need to sign a paper. i said, listen, i can't, you know, my english is, you know, it's not right. you need to sign it or we go to your wife and have her sign it. >> reporter: both businesses are fighting to get their cash back. they've turned to the non-profit institute for justice, which has petitioned the government to return the seized assets. this week it sent letters to the department of justice on behalf of the sowers and the irs on behalf of kuran, seeking answers. the irs and doj declined to comment on specific cases. >> the government's able to take property based on mere suspicion that they've done something wrong, and then to force them to
prove their innocence in order to get that property back, and that takes the fundamental american principle of innocent until proven guilty and it turns it on its head. >> reporter: the irs changed their policies in 2014, saying that asset forfeiture would be restricted to cases in which property owners were suspected of criminal activity. a new directive followed suit from the doj in march of 2015. the policies are meant to apply towards new cases, but that hasn't stopped the dairy farmer and the convenience store owner from taking on the u.s. government. for "nightly business report," i'm kate r >> and to read more about small business owners fighting the irs, head to our website, nbr.com. coming up, an organization that's helping to bridge the wage and employment divide and has already helped thousands of low-income inner cities join the ranks of corporate america. the second part of our week-long series is next.
the gap between blacks and whites in the u.s. is particularly stark when it comes to employment and wages, especially among young adults. the unemployment rate for african-americans between 20 and 24 years old is more than double that of whites. tonight we continue our series on efforts to bridge the economic divide with a look at a program helping many young men and women who were jobless or in low-paying jobs find new career opportunities. >> there were times where i didn't know i was going to eat. there were times where i didn't know where i was going to sleep. >> reporter: at 18, brandon jordan was a high school dropout, homeless but not hopeless. >> i ended up realizing that i need to do what i need to do. >> reporter: he eventually got a ged and an apartment with friends in atlanta. he took some college courses but didn't have the money to finish. >> i wanted more for myself, but
i didn't quite have the opportunity. >> reporter: but that all changed. while working at a panera last summer, he saw an ad for year-up. jordan, now 24, applied to the non-profit, which offers low-income, young adults training and a corporate internship in i.t., finance and other areas. >> it just seems too good to be true when you first hear about it. >> reporter: more than 6.5 million 16 to 24-year-olds in the u.s. are not in school or working. almost one-third of them are black. year-up, which offers a stipend and college credit to each participant, is aimed at helping these so-called opportunity youth. students go through a six-month boot camp, learning technical and professional skills, including the importance of showing up on time. they'll get a stipend for every day they attend class, but they'll lose points and money if they're late. dress unprofessionally or fail to complete assignments. and if they lose too many points, they're out. >> they fundamentally believes
that you hire for skills but fire for behavior. >> reporter: gerald founded it in 2000. >> we know that talent is distributed evenly across this country, yet opportunity is not. >> reporter: more than 13,000 young people have gone through the program since it started in boston with 22 students. 3,200 will enroll this year in 13 metro areas. he hopes to eventually serve youth in 30 metro areas. 25% of those who start don't finish. those who make it through the first six months are awarded a six-month internship. about 250 companies have partnered with year-up and spend almost $28,000 to cover the cost of each intern. >> if you talk to many, many companies across the country today, they're not getting the professional skills and the customer service skills, and really, the teamwork, reliability, problem-solving, they're not getting those skills from many young adults coming out of even four-year college
settings. >> reporter: year-up alum brian goodson was working in a pizza shop four years ago and now is a consultant at salesforce.com, which has hired almost half of the 200 interns it's hosted since 2009. >> if someone told me three years ago that i'd be doing what i'm doing today, i wouldn't believe it. i might even have laughed. >> reporter: 85% of year-up alums have a full-time job or enrolled in college full time within four months of graduating. their average starting salary is about $36,000 a year. jordan hopes to follow goodson's path. he landed an internship in the i.t. department at the retailer aarons. >> i was like, yeah, you know, i did it, i earned it. this is -- i'm going to do this. this is fine. this is mine. >> the year-up experience doesn't end when a student finishes his or her internship. there is an extensive alumni network. brian goodson sits on the alumni board, and in addition to mentoring new interns at
salesforce, and most of the current students i talked to in atlanta are already talking about staying involved, just like brian, when they graduate. now, tomorrow we're going to continue our seer "bridging the divide" with a visit to a unique company in cleveland, where your paycheck can include home ownership. >> it's such a good thing that they teach them not only some of the work skills but also some of the behaviors -- showing up on time, dressing the part. >> how to write a succinct e-mail. >> yeah. >> all of those things are very important to know in the business world. and that is "nightly business report" for tonight. i'm sharon epperson. thanks so much for watching. >> and i'm tyler mathisen. thanks from me as well. have a great evening, everybody, and we will see you right back here tomorrow night.
sethi: coming up on "quest," a new kind of hybrid hits the streets... cotter: it is electric -- solar electric -- and it is incredibly fun. sethi: then, can bugs help to feed our growing population? man: insects are one of the most efficient converters of raw materials on the planet. sethi: and a fashion trend is cultivated in a corn field. man #2: if we use land to grow more fibers, we will have less land to grow food. announcer: major funding for "quest" is provided by the national science foundation. sethi: this invention lab