tv Bloomberg GO Bloomberg October 8, 2015 7:00am-10:01am EDT
center of a financial crisis. and volkswagen under even more fight. chief is on capitol hill, and it looks like he is going to have a rough day. >> welcome to bloomberg go. we are in new york city at bloomberg headquarters. i am stephanie ruhle. >> i am david weston. let's kick it off with steve case. welcome to bloomberg. also with us, bloomberg executive at her christine harper. we love to have christine with us. stephanie: guess who's joining us in 30 minutes? bloomberg "surveillance" is still here. it is on the radio now, but tom will be joining us on set. david: he is a very tall man. keene is: tom
everywhere. but you will see him 30 minutes from now. david: we have a big hour. we will be joined by ben bernanke he and former morgan stanley ceo now bk capital partners john mack. stephanie: let's get you started with bloomberg first word news. vonnie: thank you so much, stephanie. hillary clinton is taking another shot at what she calls risky behavior on wall street. the democratic front roger will propose a tax that would penalize high stakes trading strategies. fiat chrysler has a birdie what would've been an expensive strike. the automaker and united auto workers agreed on a new contract. no details, but the union says it secured significant gains. fiat chrysler workers will baltimore. -- will vote tomorrow. bodyr's global sectioning has ended the 17 year reign of
president sepp blatter. fifa suspended blatter for 90 da ys. blatter had already announced he would give up his position in february. as we check in the markets, here is matt miller. news.breaking the bank of england is holding its benchmark interest rate at 0.5%. the vote was 8-1 in favor of holding. they are also going to hold their bond buying repurposing plan -- repurchasing plan. a couple of headlines before we look into futures, which are down. the s&p has not had a bad run. up 6 of 7 days. if you look at our bloomberg a technicalam not analyst, but we are bumping up against what is a resistance level at 2000. the s&p, since august 25, up 7% from its 10 month low. interesting. more if you look at crude oil, it is
up 22% in the last seven trading days. so, check it out at $47.91 a barrel. because of that, the energy sector has been up. no, i'm sorry. seven of the last seven days. the energy sector has been really kicking butt. but of course, it had gotten its butt kicks. stephanie: you got that from the terminal. technically kicking butt. david: now we want to turn to bloomberg politics. the mattingly to talk about story that body was talking about. news out of hillary clinton's camp. details on how she would tax and regulate wall street. she has not actually made the announcement. looking at it, it looks like something of a laundry list. phil: there is a lot there. and a lot from the headline perspective about targeting individuals, executives in the wake of the financial crisis but there are three all point i think are most important. the first is she is targeting high for currency trading.
she was to craft a tax that would target excessive cancellation orders. i have talked to a lot of people since i heard this, a lot of confusion as to how this might actually work. but she's really going after hft on that. the other issue is on the volcker rule. they allowed a loophole that allows banks to invest 3% of capital in hedge funds and private equity's. she would eliminate that completely. also, reimpose what is known in washington as section 716, technical jargon. but there is a lot of big fights over where banks could keep their portfolio in their subsidiaries. this would remove it from their areas where they have insured deposits. those are the three key omens. not as big as breaking up banks are re-imposing glass-steagall keyhose are the three elements. the will start to address idea she is too close to wall street or can be outflanked on the left when it comes to finance issues. stephanie: welcome.
christine, this is what blows my mind. to dig back into the vocal world -- the volcker rule. it took them a year and a have to to agree on what the term market making meant. now we want to get deep into hft? ruletine: the volcker component of this -- this is premature -- but it seems to be targeting the percentage they are allowed to own and funds -- in funds. goldman sachs or jpmorgan used to be able to own 100% of the hedge fund. now they only can all 3%. it is how to know how much risk there is in 3% of the fund. but maybe it looks good to say. stephanie: is it just for show? christine: it is politics. david: just for show in politics? shocking. stephanie: we are going to this big plan? or not of a hedge
fund. e relevant question how much of the banks reserves and capital is involved? christine: in the volcker rule, they cannot have more than 3% of their capital and hedge fund. the interesting thing is really the part that has not been mentioned is where they put the swaps within the financial companies. right now they are allowed of have it and the deposit taking part of the bank. there has been a lot of brouhaha led by elizabeth warren on this side of the aisle. hillary's proposal seems to be saying they want to go back to that. stephanie: this would completely cramped and a derivatives type businesses. what is your take, steve? steve: i do not focus on derivatives and hedge funds. i am more on the startups and the venture capital sides of things. more focused on that and how we use that as a lever to create jobs and drive economic growth.
so, you must be investing in some financial technology companies that are looking to disrupt the way these wall street banks -- that is another threat. more so than the politicians is what companies like yours can do in terms of creating new competitors. steve: it is a threat. four-on-two can or -- for ent it is ans opportunity. you can see these conglomerates breakdown as they attacked different slices of what had bee n an integrated strategy. that is going to take hold o ver the next decade. they are challenging the status quo. the large companies are the incumbents trying to protect the status quo. we've seen that play out in media and communications. health, education, energy, transportation, financial services, food are up for grabs. christine: is your fund doing any of that? i know john mack has.
steve: we are trying to invest in people and ideas trying to change the world. isnancial services, fintech, one area we are talking -- working on. david: this is politics. it is an election. i understand all that. what is the audience hillary clinton is trying to address? every person, you start talking about high-frequency trading and what percentage of the hedge fund. i'm going to vote for that person because of this 3% of a hedge fund. christine: i think she has a debate coming up next week. and she is going to be debated people who may be taking on wall street. stephanie: haven't we taken them on already? i think that is almost the point. of all the things a candidate can go after, i feel like wall street, we got them. david: it does resonate. a lot of people are still
frustrated. a lot of people feel left behind. there has been a lot of growth and wealth. the opportunity gap has wid ened. is tapping into -- the whole bernie sanders movement. a lot of people as people saying they are fed up with washington, fed up with the status quo. they want to take on wall street. some of the big banks. it does resonate. to take on wall street for that translates into -- and she is talking about holding individual executives personally responsible. he put get that. i just do not get this technical stuff. -- people get that. christine: people understand there is something in their life that -- they start up. the new technology, apple, google. for wall street and make a case why you need this microsecond trading and why it makes your life better. sometimes they read that it causes things like the flash crash.
stephanie: banks don't make something in your home. christine: politically it is harder to defend. about movingmore money around. it is important part of the economy. most people in the country want to figure out what are the people that are creating the products and services can improve their lives? companieselate to that are creating jobs and opportunities in their communities, not just in a few places. we are notmaybe appreciating the fact that it is those banks that find people who want to start businesses, to help people. i mean, you the financial industry does help make all these things happen. steve: a lot of banks do not fund startups. there is a sector of the economy, the venture capital side, that obviously does. ffmanis where the kau foundation says in the last few decades 40 million jobs a been created. morefocus on that,
incentives are important. i think there is a recognition that the financial services big and focus is sometimes on these things that people do not understand. how do we focus on things that create the companies that create the products that improve people's lives and create the jobs they can uplift communities all over the country. that is what we are hearing more and more about. stephanie: the financial industry has had a branding problem. guess who else does? volkswagen. then in the news for the last week and a half. ownt to bring in our detroit bureau chief jeff green to join us with exclusive reporting. give us an update. jeff: we were kind of curious and general what was going on with death and injury reporting. we were not looking for volkswagen specifically, but lo and behold when we had the numbers crunched, they were amon g the lowest reporting. it is not necessarily saying they did anything wrong, but honda and chrysler looked better than they do in this. so, we pointed out that this may
be another area -- a focus of the department of transportation right now -- trying to get these automakers to report death and injuries so they can detect trends a sooner. this is another thing that may come up at the hearing today. another issue for volkswagen. david: i understand your reporting, there is some statistical indication -- we do not know what happened -- it is possible that volkswagen underreported debts but they are not alone. there are others. they have been fined. jeff: honda has been fined. a year ago we called chrysler out. they said, no, everything is good. here they are now saying everything was not good. we went looking and said, if chrysler is admitting this is a problem, maybe the other automakers are come have some issues. maybe volkswagen just is not have very many people complaining about their products. it does look statistically suspicious. david: we have the volkswagen u.s. head on. from reporting overnight, it
looks like he was told in 20 that there was a problem with emissions. is that correct? also, looks like there will have to stop selling diesels and the united states altogether. jeff: he was told there were something going on. just like in general motors, we do not have that smoking gun that somebody at the top was part of the issue. more that they heard things are going on. they got first glimmering and then somebody said, here is the issue. they knew well before we do that there was something going on. stephanie: thank you for joining us, giving us -- this is an ongoing saga. matt, i know you want to jump in but we have got to move on. you live with us. but steve cases in the house and we have to talk about another headline this morning. michael dell sniffing around emc for how he can leverage something. what you make of this? steve: it is news to me. i was with michael. he loves being private, not public. he did not take me off.
i think it is a sign of consolidation in the market. and looking at m&a as part of that answer. david: we don't know much about it yet, but if this deal went for it, could michael remain private? does he have to go public? christine: he likes being private. like ant was looking all cash deal. i assume banks are going -- he is able to stay private. my guess is he will go public again because you have got a lot of backers. tosome point they will want monetize their investment, but for now, he seems to be enjoying life as a private company ceo. stephanie: when you look at what it is like for companies now, saying michael likes being out of the public eye. you are in a position where you get to work on things you love. it is great to be a vc. to pick and choose where you want to be. where for you is there the most value, is it th emost exciting?
not having to sit and report earnings and answer to shareholders. inve: we took aol public 1992. we went from a low valuation to a big company with a big valuation. it worked out fine. but now my focus with revolution is investing in the next generation of entrepreneurs. but also in rise of the - cities. we think there is too much focus on new york city and silicon valley. last year, 74% of venture capital went to three states. the other 47 states have great entrepreneurs building great. companies. focusing on opportunities to disrupt, but sometimes the folks in silicon valley are not paying attention. stephanie: are you not worried about a bubble? 1999. everybody said it was going to create xyz.com. there was not an infinite amount of great ideas. steve: i'm worried about that in
places where there is a lot of capital focus like silicon valley. you do not hear about a bubble when you go to des moines. last year i did a bus tour in philadelphia, buffalo, manchester, and portland. you do not hear about a bubble there. most investors are focusing -- in the backyard. the best hope for a stronger economy is to back these on to epreneurs- these entr all across the country. stephanie: from baltimore to buffalo. steve case, for joining us. david: now it is time for global go. today we go to berlin to germany and to hans nichols. we have to talk about deutsche bank. this is big news overnight. hans: it is big news on two fronts. one, there is a balance sheet, the economic aspect, and two, there is the psychological and which is more important. let's do the first part first, and that is what they
announce, 6.2 third quarter los s. they will have to write down the values with new capital ratios. they will have $1.2 billion in litigation costs. those are the numbers. no bonuses, no dividends. since 1957, the deutsche bank dividend has been reliable. it is almost a holy grail in germany. this idea of no banker bonuses, wow. here is my assignment -- stephanie, i'm going to send you to frank for. i'm going to send you to an audi lot and see if anyone is buying volkswagen made diesels after they do not get the bonus they were expecting from deutsche bank. it's a bad day for all german companies. more billionaires and frankford then london. city.urt is a rich stephanie: i may come out to visit.
i spent eight years of my life at deutsche bank. it is a place you work to take big risks and make a lot of money. there are people who work there for the culture. who is going to be left in the building? christine: you know as well as anybody who is left in the building. this is not news that torture bank is having problem. the new ceo harshly recognize a lot of the problems. -- this is not news that deutsche bank is having problems. the shareholders are fed up of being asked to provide more capital. so, in october 29, he is going to come up with a strategy to revive revenue growth. meanwhile, you have got a lot of employees who are, i if they are any good, they are saying, why wouldn't i? why wouldn't you go to morgan stanley? stephanie: our own christine harper. guess what? you're not happy. call steve case. bernankeome back, ben
welcome back. you are watching bloomberg we want to welcome a very special guest. former fed chair ben bernanke. now a fellow at brookings. his just-released a book. about thege to act" financial crisis. welcome to ben: nice to be here. stephanie: take us inside this book. for you, during the crisis, what was the scariest moment where you said, this is that you crisis? this is a turning point? ben: the scares moment would not be a big shot which is lehman weekend. i think of lehman week. after lehman failed, merrill
lynch was taken over. we had to bailout aig at great political risk in some sense. morgan stanley, goldman sachs, wachovia, a lot of firms came under pressure. the financial panic accelerated that week. the spread went to the roof. it was a turning point because on the one hand, the crisis got so much worse. on the other hand, that that was beginning of the political response. stephanie: hindsight being 2020, if there was something that we you could do over, what would you do? ben: we did all we could. we could not save lehman. we did not have the tools to save it. we knew it was going to be a problem. we made the right call in saving aig. it was a scary decision. by that point, i think we were really at full thrust. one of the things that strikes me is the extent to which the president and congress delegated to you and hank paulson the decisions. you describe going to the roosevelt room with president bush about aig, saying we need
$85 billion to bail them out. political suicide. then up to capitol hill and said, it is on you. did you think better of them for being willing to delegate to? or did you secretly wish someone would take the responsibility? ben: president bush was very stand up. he said, to paulson and me, you are my guys. do what you think is right. i will stand behind you and i will defend you. television, what happened. and was going against his own party. stephanie: many of the books we have read about the financial crisis don't mention janet yellen. you talk about your -- tim geithner. where was janet yellen? ben: janet was not really much engaged in the crisis in washington. at the time, she was head of the federal reserve taken san francisco. she was involved there. after don: retired, she -- don c
ohen retired, she was a big part of the monetary policy planning we did. david: i have never been to anything approaching the crisis. we covered 9/11. one of the things i discovered is you learn more in five minutes about people's character than you can in five years. some people step up. some people disappoint. so, which people really stepped up in a way you would not expect? and which people disappointed you? stephanie: how about legal disappoint? ben: the them of the book is it's not enough to get the right analysis you have to be going to do it if it is unpopular. president bush. president obama was going to support us and stand behind the fed, even when we were doing unpopular things. that was really important for us. the team we had was hank paulson, me and tim geithner. stephanie: you all had to work with the banks, and those bank
leaders at a time and even after when mainstream hated the banking industry so very much. when you talk about bad actors or who weren't standup partners, what was it like working with the banks? ben: they were in a lot of stress at that point. there were a few who were stronger. obvious we and jpmc helped rescue bear stearns, for example. but a number of them were under a lot of stress. we're trying to find solutions. stephanie: i hate when we have to go to commercial! david: the good news we are coming back to ben bernanke he. we will also have tom keene. he will share his morning must read on bloomberg . ♪ the only way to get better is to challenge yourself,
and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. vonnie: welcome back. an agreement has averted a
strike at chrysler. they reached a tentative deal covering 40,000 workers in no details have been released but the union says it made significant gains. they rejected a deal that did not do enough to close the gap or lower paid employees. carolina,a, south flooding is threatening the water supplies and crews have given up the attempt to bypass a canal. the state warns the threat of flooding and coastal areas could last through the weekend. challenged onwere the south china seas. sail insideps will a 12 mile zone that china claims around artificial islands. the move is likely to increase tensions between the u.s. and china. dell is in talks to combine with all or part of a data storage
company. it does may not result in a deal and emc has been looking at strategic options to boost its share price and dell faces a slumping market for personal computers. those are your first word headlines. now it's time for morning must read. we have former fed chair ben bernanke he and are joined by tom keene. please, leave the way. bring up the morning must read. the united states with is relatively flexible labor markets will prove more successful to many other countries in accommodating older people want to continue to work in ar
chairman, net felts gave an important speech seven years ago at the bank of international settlements and focused on one word, a dynamic society. where is the new new? >> our society is structured to allow that to happen. is example i given the book the energy revolution happening in the united states. not because the geologic survey of than anywhere else but because our government and our private sectors able to put together that kind of innovation. of how, inexample the united states, we can develop a new industry quickly. it revolution
is a little slow. which isgrowth personified by massachusetts institute of technology, is amic growth, the search smooth curve and we get there someday. too many americans, that's not the case. they don't feel they are part of that growth curve. how do we get them on that? >> it's not enough for the economy overall to be growing. you want a broad part of the population to share the benefits. it's not happening. it's not a recent thing. it goes back at least to the 70's. we have had spreading income distribution and it's the products from long-run forces like globalization, high-tech, social changes, a variety of things. it's not going to be solved on a bumper sticker. you cannot solve it in a few days. skills and training, tax and transfer policies, there is a bright of things that can be
done to make the economy stronger and open to more people. tom: this does not speak to the two americas. talked about american exceptionalism when it comes of the economy and we have had that in many respects. but going back to the 30's and 40's, organized labor allow the middle class to be brought along with the owners of capital. i wonder whether we can have that dynamic economy if we don't figure out a way to bring people along so that everybody has a real investment. >> there are many things you can do but the most important thing is to get all americans equipped to participate in the modern economy. that means skills, training, ability to relate to high-tech. david: we have not done a very good job of that. our education has not gone up the way other countries have done. >> it's very inconsistent. we have made various efforts and have not persisted and making it happen.
so, education. tom: no one taught you macro economics in your childhood area o. how did math play a part? >> i taught myself calculus because it was not in high school. i like that kind of stuff but i like history and fiction. i wanted to be a writer for a while. in college, it was a combination of history and math. economics combine those things. tom: someone say is that combination of things area you look well rested, what happened? >> things have gotten quieter for me lately. tom: you're on stephen colbert last night. david: thank you so much, tom keene. it's fascinating to see the amount of brainpower at that desk.
take a look at the futures. we are trading back up again and markets are recovering from a midmorning drop. they are doing pretty well over the last week in general. let's show you some history starting with biotech. sinceave gotten killed the hillary clinton tweet about pricing issues. the nasdaq biotech index from her tweet on september 21 were down one week later almost 20%. we have had a bit of recovery over the last seven sessions, about 5.5% and the same is true the s&p 500. up six out of the past seven sessions in a gain of about 6% to 1995. 2000 seems to be not a technical number but a round resistance. x has come back down to the markets have calmed down. about 33%. gone down
ben bernanke he is still with us and we are joined by john mack. >> thanks for having me. the most impressive thing is he he not only played football for do but was on a scholarship or football. that is impressive. >> i wasn't very good at either. love to come back to you for a moment. this is out of the book -- monetary versus regulatory functions for the fed. you talk about the fact that monetary was not really the approach taken when it came to the bubble in mortgages. you say financial regulation supervision should be the first weapon against financial
bubbles. has that been corrected now? wasn't very regulatory fail? has it been corrected or overcorrected? >> that's an awful lot to absorb. the critique of the fed prior to the crisis -- a lot of it was focus on monetary policy that people who look at it closely generally agree that monetary policy was not the main reason for the housing bubble. one way the fed was responsible with other regulators is it did not do enough to prevent bad mortgage lending. there are many reasons for that. one reason was that there was a strong political support for subprime lending because it was creating homeownership broadly. stephanie: barney frank, for example, who has been critical of bad bank behavior during the financial crisis specifically around mortgages, would you say it is he who was promoting this as part of the american dream? to own a home? >> it was not barney frank
alone. regulators wanted to get rid of predatory lending but subprime lending was positive because it improve homeownership. it was a goal many were pursuing. , some bado practices were involved. david: this was good for lower income people. >> right, those specific things have been addressed significantly. i have had a lot of complains about mortgages being too hard to get now. the other thing the country has done is make the system stronger so capital in the banks are way higher and the system is more resilient than it was. john, you said there was not have regulation going into the crisis. >> no question about it. it was political. it got out of control and got to easy. securitization became almost a machine. there was not enough oversight
and there was a lot of fraud. everyone is happy in the market is going up. andink it gets worse getting sloppy and how things are done and it's totally changed now and as what we need. politics have a lot to do with it. it's great to have people own homes but it has to be a situation or they can afford the home. there is no lying or cheating and you cannot have four or five homes with some people did. david: and they were flipping them. but politics don't go away. politics plays some role i suspect in the regulation now. >> but much more so let's make sure this does not happen again. you're not getting the big push 10 years ago that we were getting. it has gotten a lot better, in my view. stephanie: is there any risk that the intervention in 2008, we are not in that much better of a situation today but maybe
we just kick the can down the road and was not an absolute rescue. >> i disagree. in theunt of liquidity banks, lower leverage ratios in the banks, i don't see how this could happen again unless that changes. speculation on the street is dramatically lower than what it was back in 2006. i don't see that. stephanie: is the economy doing that much better today? >> it takes a long time to get out of the hole we were in. look at our economy compared to the rest of the world. i think we are doing pretty well. matt: bloomberg has a great screen, financial conditions, a dashboard that allows you to see the state of the economy as it is now and historically. if you take a look at the financial conditions and look up a proprietary index that puts marketr a number of prices and different inputs to
show you the cost and availability of credit, you can see we had a huge recovery since the financial crisis. we have been staying above the zero line. in 2011 with the correction on the market but we have been good since then until the last few days. financialck on conditions, you can get a bigger picture of the index and see over the last few weeks, we have come debt -- back down below zero. i wonder if it will take us this long to recover from that. look at that picture, the stress in 2008 was unbelievable and our economy was at great risk. as john was saying, the u.s. is done better than any other industrial country. we were 10% above the highest peak of our gdp before the crisis. europe is not yet back to the precrisis level. regular working americans
think we are not doing as well as we should be. is that wrong? >> there are a couple of issues -- one is the distribution or issue in the fed cannot do much about that. societyr issue for our and the growth test and the reason growth is so slow is not because the recession is persisting. it's a productivity gains that are slow. that requires a broader set of responses. stephanie: when you say distribution, you mean the rich are getting richer? one could make the argument that qe was extreme nariman rates of been so low for so long that it has been great for the financial industry. no, you can't point to the fed. there's a difference between the u.s. recovery and other con -- in other countries. it took europe six years longer to do qe. in terms of income distribution, this is a long-term trend going
on for 30 years or more and it's related to things like globalization and technology, things will that -- that will not reverse a few days. david: we have been bernanke a, former chair of the fed, john mack, former ceo of morgan stanley, who are on opposite ends of some phone calls on a sunday in the fall of 2008. you are facing a dire situation that affected all the financial markets. you had bank after bank and institutions like aig and others were about to belt -- were about to go belly up and you are fighting to keep morgan stanley afloat. you actually talk with each other at a time when ben was saying we have to do something and perhaps you should think about selling your company, john. take me back to what you were thinking. you thought the chinese were going to bill them out? brothers, then
pressure was turned on the remaining investment banks, on morgan stanley and goldman sachs. one thing that the fed did was to make the two companies, the bank holding companies which was mostly symbolic. it was essentially assuring the markets the fed would not oversee those companies. morgan stanley and goldman sachs went out and got private investors. that was the key to strengthening. >> it did not happen right away. >>it was in the works. the conversation that hank paulson and i had was very forceful. it was about what would morgan stanley do. i was not going to do that. david: what did they want you to do? >> they wanted us to sell the firm for two dollars per share to jpmorgan. in all fairness, it was tim who wanted that. >> was jamie dimon interested?
would he have bought it? >> he was not interested in he said that's all i would pay. we had three or four conversations and ti said called jamiem and he did not want to do it and i did not want to do it. when the head of the new york fed is pushing you to make those calls, you make the calls. stephanie: when we look at the last few years and the problems that banks have faced since these acquisitions, is it fair? we say it was the fed of push the bank into these trades. >> that's not fair. no,et us in this position, when you just make money and the market is going your way and you can borrow low and sell high and securitize and people are making e's with stock, someone has to blow the whistle. leverage was wild. when you think about the leverage these firms had including morgan stanley, it was
absurd. everything is going up and everyone wants to play. i've member calling tim on leveraged loan deal we were trying to make. we were uncomfortable with it. we kept passing and finally our guy said you have to be involved. we passed him a last three deals. we get involved at six times leverage which is ridiculous and once the sponsor has the leverage, they turned it again to seven times leverage. we dropped out and i called ahead of the new york fed and said we are out of control. i can say no to maybe three deals. on the fourth deal, i have to play. david: you knew morgan stanley was overleveraged. did you know? >> only a full would not know. >> it became increasingly obvious. people were dumping securities as quickly as possible over fear and panic and i was driving the
prices down and making situations worse. stephanie: when you look at what corporate america is doing, we see corporations borrow trillions of dollars to buy back stock. at recording m&a levels. is that helping the economy? >> it can help. buybacks book money in the economy and gives shareholders money. , if it's good, will improve efficiency and rationalize markets. stephanie: you think that's what we have right now? >> in some cases. >> where is leverage today compared to where was? >> it's nowhere close to where it was. the regulators are much more proactive now. it's not just the cfo or ceo with boards. regulators come into the board meetings and talk about risk and leverage. that did not happen eight years ago or seven years ago. david: this is fascinating.
we actually have representatives of the fed sitting in board meetings in banks now. >> you actually have representatives of the fed sitting in the building. morgan stanley has 200 people there. stephanie: and you are not concerned about the leverage loan market coming back into the universe? you look at high yield and distress, unsophisticated investors being pushed into those markets, what happens when rates normalize question mark >> you need to look at their balance sheet. the balance sheet today are conservative and they can handle that kind of stress right now. stephanie: can investors? you have insurance companies being pushed of where rates are into riskier assets for it what happens when we have the rate hike? it will not be banks holding the bag, it could be investors. >> the fed is not in charge of making sure investors make money.
the fed is in charge of manger financial stability is preserved. the fed is looking at these financial conditions to think about what could happen and what other risks. the concern the fed has is not that someone loses money, the concern is that because of leverage or other reasons, the loss of money leads to instability in the system and that's the concern. stephanie: but the investors are insurance companies. >> they have regulators, too. stephanie: given where rates are, they have pushed into riskier assets and while banks cannot take on risk, the high-yield market has frozen. it makes a very concerned for those investors. we are moving where the risk is sitting. >> i think you're overly concerned. i don't know what the time frame on this discussion is but let me say this clearly -- two heroes is this gentle man and hank paulson. and inot agree with them
was upset when them when they were trying to break my arm to sell the firm and that's all right. we got through it and they did their job and we did our job. it was their leadership that saved us. one of the points in this book that comes across is that the president, congress and everyone else said to ben bernanke in hank paulson that it's up to you. we trust you but it's on your head and they stepped up. question is leading in crisis. you are leading in a crisis and you are vermont's leading in a crisis from your end. how do you put together a structure or team? how do you do that and what did you learn from this experience? people around you are often -- ando make look to you they look to you. day, almostus exactly seven years ago, the
treasury said to the big firms takinge to demonstrate capital because we have to make sure it's not signet sized and john said we will take it and we understand the need and we money to d lever. there was some pushback in a meeting. many did not want to take it. especially on the west coast. hank paulson said if you don't take his money and you get in trouble, i will punish you. when he said that, i signed it. i don't want to be punished. david: how did you lead through this crisis? what can other people learn from this. ? >> you have to communicate with employees. i walked the floor and talks to people. i would have lunch with the traders and sit in the financing room and try to keep it light
and make sure they know that i feel pretty good about it so they should. i did everything. when i got in the business, the vietnam war had just finished. i'll never forget sitting across from a captain of the marine corps and he was stressed about his family and financials and how he will make it with a new baby. i said to him, how do you live with this stress? he says this is not stress. he said stress is when someone is trying to kill you. known was trying to kill me. people were trying to help us. ca ild to keep people gave the employeesm all. . they are the most honorable group of people i ever worked with at it has paid off in space. david: they stepped up with a $.4 billion? >> let's call it $9 billion. david: they did all right on that investment. >> they trusted us.
i have the utmost respect for what they have done. ben, you have written this book and you are on a book tour and then you you take a new look at things. what did you learn from writing the book? what do you think differently about with this experience? general, i went back and had my e-mails and was trying to go through day by day to see what was happening. what we all have to appreciate about an episode like this is in retrospect it seems straightforward. is so muche, there happening and you are trying to balance the risk and understand what's going on. david: you don't know how it's going to come out. >> you don't know the end of the story so there was the sense that real-time decision-making is more difficult than after the fact. that was something i felt as i went through this. it was helpful for me to do this
and think about a lot of the decisions we made. at least we stabilize the system and set the economy on the path toward economic recovery. stephanie: where did you get the name of the book? >> my wife suggested it. around the world, i think policymakers and central bankers got together and said we have to do these things. they may not be popular and there may be blowback but it needs to be done. was the united states, the fed, and the treasury and i thought that was important part of what we were doing was taking unpopular decisions and acting. let's play a game of up or down where we ask which way keep benchmarks are headed in the next year. up or down? the u.s. dollar. >> i don't think i'm going to play this game. stephanie: not playing, come on now. >> all these things are
incorporated with what people know. if there is no information that will affect the dollar but it is already reflecting what people think about the economy. stephanie: ok, john. up or down? >> up. stephanie: s&p? >> flat. stephanie: 10 year treasury? >> up slightly. stephanie: unemployment. >> down. stephanie: how that a yearbook before we go? take a look at this shot. i guess we don't have that. there it is. how about this high school yearbook picture? that mop is hot.
volkswagen under the gun. angry lawmakers question top u.s. executives in just a few hours. -- glencore taking next. ♪ david: welcome to the second hour of "bloomberg ." former morgan stanley and brendan, welcome back. david: let's go first for first word news. for that, we have vonnie quinn. michael might be in for a tough day on capitol hill. he has testified before a house
to sayee and is expected vw will stop delivery of 2016 models. thousands will remain quarantined. the democratic front-runner hillary clinton will propose a penalizewill investors, financial managers, and traders for misconduct. cutting costs for oil prices. any newnot start projects. saudi arabia gets 90% of revenue from oil. little turnaround this morning and we're back down now. futures are bouncing back and forth between gains and losses. after the last seven days, we are up 6% on the s&p.
take a look into volkswagen, if we could first, we know michael horn, the ceo of volkswagen of america is peaking in front of congress today. they are down to 100 1820. you can see what the stock looks like compared to other carmakers since september 18, the day on which the revelation was aired. than 20en was down more 5% since then. they lost more than a quarter of their value. they have all done relatively well relative to volkswagen. the interesting thing today for me is michael will talk today in front of congress and will say he has known there has been an issue since the spring of 2014, that there was a compliance issue with the epa but that he did not know the details.
i was thinking about this when you are running abc news, david, if you knew the fcc had a real problem with something that happened on your network, and your editor said, do not worry, we will fix it, would you not ask what the details were? great point. my experience was the first reports you get are always wrong . they typically understate the problem. they have no incentive to say, you know what, the problem is worse than you think. >> in his testimony he will give today, spring of 2014, he was made aware of a possible admissions noncompliance that could be remedied. we are not there and we do not know it, but this is a company clearly in crisis. they have got legal problems around the world, criminal
liability, lawsuits against aem, a brand problem and sales problem. how do you get your arms around that? john: you have to be straightforward and honest. in accord, you need to tell constituency that is interested. then you have to clean house and set a standard. that standard is we will hold people accountable. if you are not fulfilling obligations, this is well we will handle it -- how we will handle it. i do not know the people of vw now. i used to years ago. companies get big, sloppy, greedy, and they make mistakes. fix the culture. it is hard and it takes senior
leadership involved with employees at a lot of different levels, talking about what is important and what is right, how we will not tolerate cutting corners, and we have to enforce it. you cannot have a list of things you should not do and when someone does them, you do not punish them. you have to show you really care. >> there was a colleague i had shoot the puppy pyramid can example of him. is it a problem that the sentiment is the puppy? we look at wall street, who has really been punished. goldman sachs, 27 years old. how about the senior people who exam, peopleous 24 who actually ran businesses? >> one thing that is interesting about the company is the company
itself started a criminal complaint against whoever it is responsible for it in germany. imagine a company is suing itself to get to the bottom of this. this is fascinating. the company is announcing broad cost-cutting measures already. there is a steady drip of consumer complaints all around the world. this has got to hit their top line. john: i take issue with you on that. i think in an organization, mid-level or senior-level, where people above them do not know if they are cheating or cutting corners. a complicated business with a lot of moving parts. if you agree to take the visor he and get paid big bucks because the traders below your report up into you, you have got to be responsible for that. john: that is different than
ignoring it. you take responsibility but i do not think people should be fined or put in jail. the firm should be and the firm takes a hit. the employee needs to be fired or dealt with. but everyone takes these exams and they take it seriously. say immediately the responsibility goes right up the line, at morgan stanley, when we were having a hard time, it is responsibility as i would take that. doing trays that are illegal, clearly the firm will be punished for it, but you have to do with the person who actually pulls the trigger. people can game you. tests youare how many take about understanding the business, it is a comp located business and there is a lot of compliance weight on since the crisis. i think firms are really paying attention. if you want to cheat and steal, you can in any business in the world. stephanie: do you think this
supports the argument to get rid complicatedd and businesses? they are so complicated that if you go up the line, managers can be gained easier? john: no, i think you have a robust committee that understands this and just because it is complicated, in many ways, it gives a fuel to grow a business and it is important to us. it is all about oversight, audit, and mismanagement. hillary clinton is set to announce a brand-new plan today. some of the details we know, a taxon high-frequency trading, a loophole in the vocal role, and forcing to pay fines for misconduct. does it mean for wall street?
you know how difficult and complicated it is to regulate. are we getting in the weeds here? seasonhis is a political and they are trying to ask -- answer questions on the voters minds. since and before the crisis, there has been a lot of pushback the banks have been making. she is appealing to that. the real point, and you said it earlier, she wants to prosecute crooks. if they cut corners, they should be prosecuted. i do not have an issue with that. the justice department has gone after shareholders. do shareholders have any meaningful oversight to correct this in the future? they have a annual vote, they can throw out management. you see a lot of man u --
management change. dealan argue it is a big and it is still a lot of money. i think a lot of that is part of the issue. look, i are struggling, grew up in north carolina. kidou made when i was a 10,000 dollars, as a parent, that was a fair amount of money. when you look at the , james gorman, and he say, we cannot make that kind of money, how are we doing that? to me it is up to shareholders to hold them accountable. i think the board is clearly more involved and i think the regulators are going to board meetings and talking to audit committees and directors. the whole nature of oversight has changed. onis much more focused control, less leverage, and making sure things are done properly.
you pick the number. $100 billion trading. at the end of the day, you want to pay them. we want to make sure we're right down to the middle of the road. stephanie: if there is continued pressure to pay the executive's less and less money, which makes sense, will wall street be able to get the top talent required to take these complicated jobs? or what they say, why on earth would i ever want to run a bank? john: running a bank, i would agree with you. [laughter] everything else, i think is debatable. there are a lot of talented people. technology up it what is going on in tech? financial tech. it is changing the way the business is being done and huge wealth in many instances. i think that is a competitor to the banks.
outung man or woman getting of college, making broad exposure to global markets to understand how the economy works, people by and large are .eam players up theie: as you move ranks, how will banks keep those? hedge funds and private equity are waiting on the sidelines. big numbers is not very specific. people who run these .rganizations who execute in the scheme of how people are paid, they will be paid well. go back to hillary clinton.
there is something between holding people criminally responsible and just finding the company. one thing she reportedly will propose is when there are big fines, some percentage of it has to come out of the incentive compensation of the executive team at what do you think of that idea? it is not saying they're criminals but it is saying, it is coming out of your pocket. trade on thea huge mortgage market and we lost a tremendous amount of money. board, ialk to the take a bonus. i think management today, if you stumble, if you go down the you do notslightly, produce. compensation has to come down. are much more into with that today than they were 10 years ago. i believe it is working and i believe the focus of regulators
has helped that an shareholders, they will hold them accountable. no question about it. grexit not everyone has a strong moral backbone. john: you do need a strong board. understand those parts of the business. stephanie: stay with us. john and brendan will begin when we return. ask?are you excited to some investors are running scared from volatility in the commodities market. mr. mack is seeing opportunities ahead. you are watching "bloomberg ." ♪
suisse is set to be preparing substantial capital increase according to financial times. you can see the shares trading in switzerland right now are taking a hit. this is why deutsche bank can come out and say we will lose seven dollars and canceled dividends because investors are happy they do not have to raise capital. credit suisse does and you can see investors have punished the stock in trading today in switzerland. now vonnie quinn. vonnie: big action this morning in real estate. it is the landlord catering to biotech companies. in talks to combine with all or
company, data storage bloomberg news is reporting negotiations may not result in a deal. toking asked her tj cautions boost its share price. a slumping market for personal computers. it could bolster revenue for storage. deutsche bank is bracing for its biggest quarterly loss in at least a decade. lossexpect a third quarter for $7 billion. dividends paying out since germany's reconstruction. bonuses are also likely to be slashed. david: thanks. we are joined by brendan and john mack. john, you were talking earlier. you are on the board of lending club. you have a robust view. a lot of things have
traditionally been done in a traditional way with lending and borrowing. if you look at lending club and how quickly it has grown, on deck is doing the same thing. at the end of the day, when a consumer needs to borrow money and he goes into the community bank and for whatever reason, he is turned down, you walk out a little down. "i have been rejected or co- --rejected." it is a way to reduce costs genetically in how you borrow and lend money. believer. what has happened has been outstanding. credit suisse, huge capital raise. -- to blame for any of this? john: not at all and you know
that. absolutely not at all. to run credit suisse. it had one of the best financial brands in the world. , andeason they locked up explain that to me, one of the things i used to say on the board, they clearly did not like me. i understand that appeared i was a matches. there is no reason -- stephanie: just because you changed the conference rooms to the north carolina room -- has happened has nothing to do with it. at some point, it will. if you were these banks and things were going in the wrong direction and innovation is not happening in your house, it is happening and you have got to be worried about this. yes but take action. i know morgan stanley, which is very popular now, it has got real traction and i know people are working on it. larry just bought a small
company called future adviser to get into the market. the banks will change. let me flip stephanie's's question around and say, is this growth happening because banks are still sitting on credit? john: i do not think so. no. the banks have not fought in terms -- i am 70 years old. james is 58 or 56. i do not know about lloyd. probably the same age. i did not grow up thinking about technology and i do not think they did either. all of the leaders are paying attention to it and either building groups within their firms to focus on it and talk about, how can we service a client and take out cost? efficient?be more making loans, i think they will all adapt some peace. they have to. stephanie: should we have our ion and the day and have a look
at some of these smaller companies? i think larry gives a great example. he brought it. i think some of the companies who need capital and want to grow, who have a product and want to enhance either asset management or credit or how you make loans and a four loans, i think yes, they will be brought. we havee: one company been talking about may need a little capital or credit. that is glencore. isatility and commodities shaking the company to its core. using it on the board of glencore, this organization has been the one to watch. the smartest, the sharpest, the best. did they get too close to the sun? no.: they are the sharks and i know all of them. maybe they were too sharp. assets.they have real they have a balance sheet with
too much debt on it. we brought in a half billion dollars. we have begun to cut back on some of our minds. .ou have seen what has happened and you have fund managers who short the stock, and that is exactly what happened during the crisis. that creates a lot of volatility. it is not real investment in let me offer a counterpoint. i am looking at bank of america merrill lynch. gross exposure to glencore at over $100 billion per we believe the significant majority is unsecured. the exposure is now coming into investor focus. they are now paying attention. is that true? the point is are they paying attention and the answer is yes. what they have done cutting back and closing them.
the real reason this has got so much focus is this is the commodity market sold off for radically. china is not the big buyer of copper. the other thing is, and this is changing for the industry and not just for glencore, it looks to me when you own a mind, the one thing you need to do is produce. you sometimes have got to cut that back, whether it is oil or copper or whatever it may be. a traitor can go long and short. if you own a mine, you're stuck long. a -- ant unlike industrial company or one of the operating banks, you close the mine. you do not have to put electricity in it or say many people guard the door. it is easy to do that. issue is a lot of these are in developing companies. they need those jobs and we have
to be sensitive to that. you look at what they're doing in indonesia and africa and other countries, they need to be supportive and take a social responsibility for it. i credit ivan for that. last week you bought a big hunk of shares of glencore. you doubled down. why? every senior person in glencore did that also. they like the company. please stay with us. we will have the morning must-read next. stephanie: they could use a couple girls. ♪
hour and a half. your morningcking off with a little john mack and ben bernanke. david: and also brendan greeley. stephanie: we also have geraldo rodriguez. we will get started in just a breaking news., claims,itial jobless 263,000 was the number we got for the last week. come in a little bit better than expected and you have continuing claims at 2,204,000 coming and basically bang in line with the number we expected. if you look behind me, we're still down one third of 1%. good news now? and thenr six hours good news became dan is again. when you: i am excited
think we are back to fundamentals. vonnie: thank you so much. the headlines have diverted what would have been an expensive -- expensive strike. new agreements on a new contract. workers will vote tomorrow. republicans though today on their choice to be the next speaker of the house. kevin mccarthy is expected to and but a conservative house freedom caucus has of -- endorsed -- they could to that -- try to ignore the minority. a seven-yearnding reign. while he is being investigated for corruption. he had already announced he would give up his position, in
february. he did not engage in misconduct. turn, brendan's is a big soccer fan. me -- to get you to the morning meeting. he joins us. what is the most important thing you are focused on right now? >> we're focused on the absence of growth, emerging economies. both are a reflection of a global environment in which the slow growth we saw, we thought it was a temporary consequence after the crisis, it looks like it is something that will stay with us for a while. it creates challenges for the developer and emerging economies. economies emerging has been challenged. the markets have reacted to that. appreciation of
em currencies, it is part of a global adjustment that needs to take place so emerging economies will grow on a more sustainable pattern going forward. brendan: we were just talking about developing economies and what that does hair the global report, they just spent a lot of time looking at these economies and saying, when there were growth and commodities prices, there was not economic growth outside of these commodities happening. did they miss the whole chance of having a boom? >> the massive boom in commodities we saw did not create the right incentives for reform.ural in a previous cycle, the strength of the em economies came from a macro stability base that was created after significant crisis in the 1980
passes in the 1990's. it took a lot to do the structural reform, from autonomy as a way toanks, establish the basis for a growth. that on thet been structural reform agenda. cases like india and mexico, they are doing things to foster the domestic sources of aggregate demand have become very attractive. you do not see many of those out there. would you say mesko has done the best job of diversifying commodities? geraldo: absolutely. you do not see many emerging economies that have a government makethe conviction to structural changes. what we're seeing in mexico on is a mixy space, it that would change for the next 10 years.
byrt-term, you're influenced the headwinds of the global economy. the is a reminder that structural reform agenda needs to be front and center of the emerging economy. stephanie: make us money and tell us exactly where to invest. gerardo: equity markets in mexico are not representative of all the new things that will be driving economy growth. it is a challenge there. but the fiscal market is very attractive and mexico. like cases on equity space in india. structural reform momentum. of equityperformance markets is creating interest and investment opportunities where there is value. are looking at places like turkey. opportunities are on the equity space. peso has really been
hammered against the dollar. is that a reason you're getting a focus into mexico? i would love to hear your view of the peso. actually not. what has happened with the peso, it has moved around the medium of all emerging currencies. -- most has surprised of the movement with currency has been driven by the strength the dollar up until, so if you look at emerging currencies against the euro and the yen, they have been somewhat stable until the chinese authorities depreciated the currency. it introduced an element of that created another leg of depreciation for all emerging currency to buy would say the peso has been moving with the pack over emerging current seas, again with the absence of export growth
momentum. manufacturing and commodities, you need a weaker exchange rate. >> i understand that. when you think about it, it will be restructured, you think about mexico and the united states, what it does with automotive and the u.s. has grown in a big way, setting records, i am still perplexed. i think mexico's currency is separate from the traditional markets we're talking about. as an investor, that is what i have been looking at and i have been wrong. i have been investing in the thinknd bonds and i still there is something missing. the country has so many resources and i think a population that wants to work and grow, maybe your answer is 100% right. gerardo: you are right that the movement has been across the board and currencies. not all emerging markets are the
same. that, if anything, mexico has much better conductivity with the rest of the world. positiveve some momentum there when economic activity comes back. you have the structural momentum that would generate them. or dollar,.5, peso all assets look very cheap in mexico so you cannot be wrong. david: let's stick with you, john, and turned to china. a weeklong holiday has been going in china. you spent a lot of time in china. i think you are an advisor. the mind at the top of these days, are we seeing china right? it is the second largest economy in the world.
any time you had the growth that they have had, you get a hiccup. would i invest in china? yes. the focus on corruption and cleaning up the way deals are done and who is taking money out of the public pocket, it is very intense. a chip all over the world, it will hurt them. in the long run, it is the economy you want to invest in. matt: you have got mainland shares that have gone insane. right here, you have u.s. shares. listed here in the u.s. and trading here, you can see it is lester maddock.
what do think as a u.s. retail investor? >> i think you want to be a long china. as china does better, you will do well. .'m indifferent talking about the party itself, i want to ask. when you make that currency move, it unsettled everybody. one thing you have heard a lot was economist around the world , that it has the skill to pull this off. how does it get fixed? saying -- is it just china?
[laughter] >> tell me a central bank that goes down the world -- goes down the road and does everything right? there is not one. was theoncern we heard signaling, the bank of england, the ecb, the fed, letting people know what they're thinking about and what they're doing. what came out of china was a surprise and that was the concern. there is evolution going on. it takes time. to thewant to compare it western world and the united states, we have been doing it for a long time and the chinese have not there they are very smart and very focused. any bank at some point can make the wrong news -- wrong noise or
a weak signal. i have spent years -- i am really confident in their leadership. they make mistakes and they fix them. if we had jim chanos sitting here or carson, it -- they would say it is about posturing. there saying, it is just story telling and it was -- you are saying their new to the process. is weo: the only thing were all working under the assumption that the case of china was different, and then we got surprised by the fact it is not that easy and it is a process and you have got to inrn how to communicate and an environment where you can explain what is going on, communicate, and that takes time to get right.
>> you have got to get governor joe. if you could get him on the show. stephanie: we are getting you a homework assignment. we will be back next week. he did not know he would get a take away. we are making you stay with us. gerardo, thank you for joining us. send us a tweet. john is still here. next, bloomberg politics talks to voters about their candidates and they did not hold back. you are watching "bloomberg ." ♪
fix welcome back to congress is likely to have tough questions for volkswagen in the u.s. mike will testify today on the test scandal. a delivery of 2016 diesel models. thousands that have been sent to the u.s. will remain quarantined. bedit suisse is set to preparing a financial planner the capital raising plan will be unveiled in two weeks. the credits we've ceo is expected to shift this away from operations 30king want to focus more on asian markets. moving toward a sale, according to bloomberg news. publishing has a rice to the note -- a number of these sauce pair they reportedly have a value of $2 billion. that is the news you need to know at this hour. stephanie: mark halperin is "aking his "bloomberg
debut. you and your team moderated simultaneous focus groups in iowa and new hampshire. on monday, i want to share a clip. new ande want something they do not want a politician. quite he is a typical politician and he is way out of touch. >> i do not think he has asserted himself enough. >> i feel like people think he does not have it in his belly. i cannot believe people will get behind another bush. always wantedave to be in a focus group and have a nielsen box. let's talk for a moment about jeb bush. when he was making the rounds in new york city, bringing the cans and all these wall street guys, he is the guy to watch, he is the leader, what do you think? normally, jeb bush should be
leading the race. much different story matches up with the polls. fierce resistance. they do not know much about him but they know he is a bush and while they like the bush family in some ways, they say it is not plausible to think the country wants another bush. he knew from the beginning it was a huge obstacle. the donors like cam and he is still raising the most money overall but he has got a big problem. >> he just can't beat the fundamentals of the campaign? is a lot of second-guessing. what he is dealing with now is donors. they want a turn on investment. they gave him money because they said, this guy will be president . he has made mistakes and people are questioning whether he is making too many mistakes. they are questioning how he has dealt with donald trump and his message. he has shifted to, i am an outsider.
it will be a hard sell with voters because they think of him as a bush. >> you have got donald trump, ultimate outsider, ben carson. it is hard for him to say, i'm an outsider, too. vote or more, trump, carson, or fiorina. it will be hard to do, but they realize the message of, i have been a governor, accomplished a lot. it is not where the electorate is. mistake beinghis too cautious? if you think about why people like donald trump so much, it is the, leading into it and punching back. they just have not heard from jeb. >> they like donald trump for that but they also like ben carson, who has -- is not outspoken in style but is an outsider. jeb bush will have to look
outside himself. we have seen front runners in both parties who look down and out. john mccain in 2008 5 back. >> if he had five, would it be a different story? >> it is difficult to get a message across with candidates. that is the point. it is all the same. it is crazy. beginning iom the think it is the most overrated field in a generation. scott walker was considered one of the top trust us and was in the race for 70 days and he was out. the good news is there is no establishment candidate who has caught on. plenty of time and plenty of room, but it is a daunting task. is the message i may better outsider than donald trump or is
it, i am a bush and i know what i'm doing? ask jeb bush looks a lot like george w. bush. not just physically. on thew. bush locked up money, the wall street and things like that, he was the front runner. he had been a governor. he came across as a true outsider. is it because of one too many bushes? what is the difference? >> there are two differences. foras a big difference barbara bush, who at one time told nbc news, aren't there any families that could become president? as much as he defends his brother on some issues, people do not have the warmest memories. heatinmg up for donald trump. >> they can talk about what they do not like about trump. too politically
incorrect did they say washington has to change and we are sick of what is going on. we cannot have business as usual and they will take a guy who is outspoken. >> what do you think of him as a presidential candidate? and i do notald want to comment on what i think. [laughter] stephanie: are you surprised in any way that he has done so well in such a short time? barry the earlier this week was aggressively going after donald trump, simply saying he is a bully. not surprised. i think he is responding to what people want to hear. he is clearly an outsider who says what he thinks. and thatisk taker appeals to people. >> if the primary settles down to an outsider or an insider,
which one handles to marco troop -- handles donald trump best? john: marco rubio. a lot of democrats are impressed with him. republicans have not been yet. trump has said nothing negative about john kasich and yesterday in iowa, he praised him extensively. >> he handled him well in the first debate. ask yourself why trump has attacked everyone in the race but him. we had steve schwarzman in earlier in the week. he had very complimentary things to say. that is almost a certainty bush, k-6, or rubio will be in a contest with trump come early next year. and then there will be a moment of truth for the republican party to do you go with trump, carson, fiorina, or one of those other three? >> let's turn to the democrats did i know you said you are supporting hillary and she should be the president.
hard time.s having a she said if i could do it over again, the e-mail would not be an issue. you judge people on what they have done to her when she was a senator for new york, i think she was one of the best we have ever had. she was involved and focus on health care and jobs and really helped the state. she is executing the direction of the president. and the leadership of the government. hers and sofan of is christie. it is politics. christie is your life. -- wife. [laughter] i'm a huge supporter of hers. based on what she did and my interaction with her. that's what was her single biggest, schmidt at secretary of state? john: she reached out and spend more time with foreign governments.
versus what other people have done -- i have gone to china i do not know how minute times. it is about getting to know people in understanding how to do things and i believe she can do that. power and as a senator, she did. i thought she was fantastic. she is the most likely next president of the united states and that is not nothing in a big field. is in danger against bernie sanders in iowa and new hampshire and supporters are underestimating what would happen. stephanie: thank you so much for joining us. we will be back. you are watching "bloomberg ." ♪
and erik schatzker is in the house. let's start again. david: there we go. erik: good morning, david. david: vice chairman at the blackstone, welcome. erik: where do we begin? lets the with the bank of england signaling that everybody can state lower for longer. they held rates at .5 of a percentage point and noted inflation in england may not top 1% until next spring. john, briefly, this is a marked change in tone for mark carney, the governor of the bank of england, because as recently as three weeks ago, there was a growing divide between mr. carney and miss yellen about the outlook for inflation. carney felt inflationary pressures were alive in britain and now they hold rates at a
till one and i say expected, but it is this language that seems to be the important distinction between now and three weeks ago. john: language? that inflation -- it is the color, the context. in britain, a rate hike is about inflation and they thought it was alive and well and now they are in the camp as yellen and fomc and mr. draghi, inflationary pressures are weak. 2% asnot if they focus on the target, otherwise, janet yellen is very sensitive about the risks of deflation. the terrible word. stephanie: she is sensitive? john: very sensitive about it. i think it is something she has nightmares about. carney is confident in his own skin and he is probably one of the most confident governors of the bank of england we have seen, and he has taken a view
that there is no need to increase rates so he will -- he has a right to be clear in his intellectual thinking. erik: stephanie, imagine that, a confident canadian. did the only language had an impact and that miller will show us that. matt: can you explain to us why the canadian is on the bank of england board of governors? stephanie: it is because they are so great. erik: he has distinguished himself as governor of the bank of canada and for reasons i will leave to the u.k. government, they decided to canadian would be better off running the boe than a brick. matt: plus, the queen is still in charge of canada. look, very interesting what happened to the pound after they stayed at 50 basis points
and said they will hold pact on the asset program of the hundred 70 5 billion pounds. a little bit of weakness against the dollar at 15280 and weakness is case across the board and currencies today. the ftse, interesting to note, we have a little bit of the game, .2 of 1%, that is live, currently about 2:00 in england? the ftse trading -- erik: that is right. matt: take a look at u.s. futures because we have been down and took a sharp leg down and recovered about 10 minutes ago and now off about .4 1% but the s&p 500 has done well. may beakness in futures is not that important. what is there he imported today is the 10 year yield, not necessarily the 10 year yield 2.05, but if you look back at the 10 year yield
over the last 50 years, you will rarely see one point where it gets a load to and right now, -- where it dips below two and hsbc's major cannot today with a note that said he thinks the 10 year yield will think down not only below to the to 1.5, that is like gary shilling territory by the end of 2016. i think this is one of the big stories of the day, hsbc shifting the view down. yesterday, you spoke with larry summers and i thought it was fascinating that his one-year call on the 10 year yield was flat, but now you have steve major saying he thinks it will go down to 1.5 and we have not been down that low since world war ii. not to vonnie quinn with bloomberg's first word. vonnie: thank you. the decision to stop searching for the crew of a cargo ship is a great loved ones. the hunt for survivors ended last night but the coast guard will look for the ship and the
data recorder. it sunk with 33 of board during hurricane joaquin and nearly three miles down. running waters in south carolina and cruz and columbia gave up trying to reach a canal as part of the system. the threat of flooding in coastal areas of last or the weekend. vladimir putin celebrates his 63rd birthday, trying to raise his image. [indiscernible] have asked in the password repeatedly and his team on 15, 10. -- won 15-10. david: thank you. time for the five stories -- dow jones in talks to combine with all or part of emc. erik: we do not know how such a deal could be structured but a full bio of it would top $50 billion and emc is under
pressure from the activist's anger and -- activist paul singler. whichbination with doubt, makes pcs and servers, as one option and the mc trades higher in the premarket. and, let's conceptualize emc buyout for a moment. the fed is limiting banks to financing transactions that they are times to six times leverage, so if you buy out emc, you have to come up with something in the order of $60 billion plus and this perhaps is the most important part, $10 billion of equity. who has 10 billion dollars of equity to throw at the problem? john: not clear, but to a certain extent, michael dell is a very credible character and an involved with the project so far and we will see. erik: that is true. david: blackstone took a hard look at dell a couple of years ago and i know you were involved in that. erik: and michael managed with
the help of silver lake and they put together a $27 billion deal for his own firm. john: there is a lot of capital out there looking for transactions and there is a scarcity of transactions, a it hasdating deal, logic, experienced players. erik: they could go to a pension fund and race some of that money may be? john: it would have to be a direct invest in sovereign fund, someone much more comfortable with the base. stephanie: michael dell, a lot of credibility and rehab a d losing said -- and we have a d losing some of the biggest quarterly loss is what deutsche bank braces for. the new ceo is taking breaks orn and making a scrap dividends that torture has paid to germany post-world war ii reconstruction. here is the news that matters most to wall street, bonuses are likely to be fast, cut, vanished.
how is deutsche bank going to maintain any top talent? a revolving door. people are bracing for the hills. if you are an organization like intsche bank, you cannot be structured products anymore. the lending you used to do is done by blackstone. however they stay afloat? john: deutsche bank has a strong position with good investment bankers. stephanie: why would they stay? john: i think hans nichols said they were going to pay no bonuses, and no when you pay no bonuses, you can go back to what we did in 2008 which is a deferred compensation based on some type of link to equity. stephanie: but deferred compensation at an organization like blackstone where there is more control and understanding, it is different from working inside a massive european bank where you are getting hit with regulation and litigation.
john: that is a bit alarmist that i think the reality is banks have done deferred compensation well since 2008 because they have had two, and i have not really talked to deutsche bank, but they are probably having a deferred compensation discussion because they have a lot of talented bankers who would be very much in demand at the likes of goldman, jpmorgan, morgan and stanley. banks are's see what doing for themselves and what washington might do to themselves. number three is hillary clinton street today.wall she plans to propose a tax on high-frequency trading and the rollback on recent regulatory wins on banks of derivative business and personal liability for a lot of executives. she has a long list, so, john, is this perceived by people at the banks as a serious effort? they said she is likely to be the next president of the united states or is this simple politics?
think this is sensationalism at the top-tier degree has the reality is most people i killer clinton do not understand derivatives and reality is we have this big banner right now of equality which is tier one, a top to issue in the pending presidential election, and having said that, this is probably not how you deal with the issue of inequality. it is a nice thing that sounds good but it is too much about nothing. david: she may not be a derivative expert, and her big win on futures couple of decades ago not withstanding -- erik: we are not going back to blackwater. david: but gary ginsberg, one of virtue are natural advisors, he is very much an expert, so one has to presume that he has taken a hard look at dodd-frank and sec regulations and pinpointed these things ask weaknesses. john: i think we have to
understand what the purpose of this is. is it to limit volatility? is it to reallocate wealth? is he tried to create more transference he? i'm not sure -- is it to create more transparency? she needs to be more clear on her goal rather than going after things that make good headlines at bloomberg. stephanie: i really like it when john is here. number four, your firm blackstone agreed this morning to acquire real estate investment island reality in a deal valued at a cool $8 billion. it would be the seventh largest private equity deal this year. this is not a deal that you were involved with gore did, but what is the appeal of a company that basically leases space to biotech companies? is it that biotech is so hot? john: that is the wrong question, stephanie. stephanie: damn. i'm wearing the wrong address, wrong questions. john: number one, i will not but this is auch
real estate transaction. look ataid that, if you global demographics, certain spaces favor global demographics in terms of aging. health care is a play on health care spending, investment, in and d,f primary care, r pharmaceuticals and biotech. there is an increased demand among that space for what i call the spoke -- be spoken real estate. stephanie: always a standout. john is the only one -- that is not a very good question, stephanie. erik: number five, volkswagen's usg will testify in the first public questioning of a vw executive since the case broke back in september. john, i want you to put your
strategic advisors hat back on because it fits pretty well. like the newguy of blackstone get control of the scandal so it does not keep spinning out of control? what do you do? john: first of all, i think you germanyremember that the car industry is the car jewel industry. it happens at the same time you have the other crown jewel deutsche bank having a car crash, not to use a bad pun. having said that, if you are the new ceo, you know all of this. seen to be be transparent, a good the center, communicating -- a good listener, communicated, and identify all the stakeholders and it is not just shareholders and employees you have to keep but regulators, the press,
people in this room and you have to identify your stakeholders and develop a proactive strategy and you have to be open of the fact that what you know today is probably 40% of what you will actually discover over the next six months. germany has had crises like this before. we had [indiscernible] stephanie had the acquisition of tick ontal tire with a debt and they had a lot of fragile capital structure but germans are disciplined, methodical, very good at managing problems. there is no question they will manage. erik: well the deal with it better than how gm or toyota dealt with the problem? john: i'm not an expert on how anyone dealt with their problems. erik: from a cultural standpoint. and: germany is disciplined it will be a balance between contestants management -- consensus management and they
erik: david: welcome back. we are joined by francine. usually in london that she is in peru. prancing is a bloomberg anchor and in lima covering the world bank imf meeting. weting, a basic question -- have these imf world bank meetings, what are they and what is the result? francine: hi, david. basically a massive data during. what comes out of it, maybe the communicate or several.
visit really focus on the things that matter? probably not. probably not about currency wars or china but the gathering of the most important people in the world with 200 central-bank governors, finance ministers and there are also the participants echo and meetings today and we try to figure out by following them and interviewing them what they really worry about the most and if they have any answers to our questions about china. david: do you have any sense what they are worried about? what are they talking about? francine: they are talking about all of that. the fed is on everyone's mind because there is a bleep when the fed starts hiking interest affect emerging markets. when you speak to participants, i spoke to south african central bank governor, he said at the fed delays the interest rate hike, it means that he has a bundle handle on the economy
because he has rapid inflation due to the local currency sliding by a lot. at the same time that the economy is going to advance, so he has a policy conundrum. if the fed delays, his job is easier but he says there is an overhanging uncertainty that he wants to get away from. he says the fed should do away with emerging markets to see how the market reacts and this is a very imf. there is no point in the fed putting a gamble because of domestic inflation not being there and the impact it would have on a lot of emerging markets that are dependent on commodities that have not been doing well. stephanie: john, you are responsible for a number of sovereign and international institutional relationships to blackstone. you will pay attention -- do you pay attention to this? john: no. stephanie: why question mark john: -- stephanie: why?
john: i do not have time. i look at key themes, i look at what christian lagarde says in terms of trend spotting and people like that, but having said that, i have not gone to the meetings many times. they are imported for people to put their faults together on detailed issues, and it is probably not of interest to the group or this panel, but there are a group of people who find it interesting. david: we will follow it francine follows, so thank you for joining us and you will be listening to francine's interview with christine lagarde at 11:00 a.m. eastern time on bloomberg tv. stephanie: you can get involved, send us a tweet. what would you like to ask john? stay with us, you are watching "bloomberg ." ♪
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what. you don't have a desk bed? don't be left in the dark. get proactive alerts 24/7. comcast business. built for business. vonnie: welcome back. the syrian general the curse of the major offensive against rebel forces. the general made the announcement in a televised speech saying attacks by russian forces make it possible for syrian troops to limit terrorists. that is what the syrian government calls those fighting to oust president assad. house republicans will vote by secret ballot to name their choice of speaker of the house. majority leader kevin mccarthy is expected to win but the conservative caucus backs the senator of florida.
south korea's international governing body is banning their longtime president for 90 days. they rolled against blatter. officials are facing charges in the united states. those are the latest headlines. erik: thank you. a few moments away from the opening bell. blackstone's john studzinski is with us. we want to talk about sovereign funds because stephanie would say that is your jam. you manage a lot of institutional relationships that blackstone has and these beeneign funds have attracting attention because we learned that norway will be with trying money from the $820 billion bank petroleum fund. also talking about selling state-owned assets and saudi drink spending cuts because of the impact of the drop of oil, how do you see it? john: sovereign wealth funds
exist for long-term wealth stability of economies. if you look at the major sovereign wealth funds in the world, there are probably a trillion dollars to $9 trillion tied up. about half of the wealth -- $8 trillion to 920 and dollars is tied up. about half of the wealth is from derived wealth. obviously, norway gets a lot of attentiobecause they are having the biggest. stephanie: they seemed, really. john: they had an expansion for several years and sovereign wealth funds are sophisticated organizations. they are global, diversied, they are run by major financial institutions, they have people not only in your way, but new york, london, hong kong, alternative assets and private equity, credit, hedge funds very sophisticted.
theyunderstand that the staycation and long-term planning. thi is about long-term planning. if you talk to sovereigwealth fund about insting, they re not intereed if their money wi get returned in fi ears or 10 years. they are looking for long-term investments. if you look atour friendre makin acquisitions or they can own them in definitely. this is about long-term financial security stability. if you have a period of time when the oil price drops, which is what norway is experiencing, you have your anger, your fund in order to deal with that -- your anchor and fund to deal with that. the reason ithink causes alarm is because when you look at a sovereign wealth fund, you think, they do not need to sell, they are long-term investors.
they can sit pretty and when you see someone like that start to sell, what about those who do not have this kind of investments? should they rush to sell? john: stephanie, you are mixing up a couple of things -- stephanie: always. always of the down for john. mealways upbeat down for when john gets here. john: some have more liquid assets and now it's a norway probably gets the score of having the most transparent portfolio. that is because norway and what the government is structured, a large part of the sovereign wealth in terms of people's incomes, very transparent. have -- eign funds erik: you mentioned expansions. of course, it was going to be
inevitable and they said sovereign wealth funds would not be growing, but if we go from the buying cycle to a selling cycle for sovereign wealth assets, what does that mean for financial markets? what does that mean for acid demand. stephanie: and you will buy them? erik: and what does it mean for the clients or money managers, the likes of blackstone, carlisle, kkr? there are a number of hedge funds as well. they have to have some implications, do they not? john: all of them run as portfolios and i think the reality is you are talking about selling and it is the question of rearranging the portfolio. it is a question of transparency, liquidity, short-term, long-term and what type of assets they need. they all know what their demands will be over 10, 50, 25, 30 years. erik: like an insurance company? john: they have a clear view on
that and they run it conservatively. the thing that most impresses us is they are conservative, thoughtful and analytical. david: these are also attached to governments, mandates in limitations. if you take a china or singapore, to what extent may they be run in a way to influence economic policy beyond simply investing in long-term growth or investments? john: if you look at the best sovereign wealth funds, they are it isr this notion and the right notion that economic stability equals political stability, equals a very sound satisfied constituency. and that is the bottom line. david: it must be tempting for government. they must have some influence of the sovereign wealth funds to say they understand the
long-term but they need help. does that happen? john: i think there is a close relationship between the sovereign wealth funds and the government, but let's just say they manage in a grown-up way. erik: you are describing what happened in quebec, going back to the canadian example -- david: we love canadian examples. erik: it is a wealth fun run by the sovereign of quebec and it was subject cap kinds of political interference and it produced disastrous returns. more professionally managed now, more in line with what you were describing, john. whether theywonder are going to become political tools for economic policy tools as pressure grows on the economies to try and revive growth. john: these big sovereign wealth funds are run in a professional way and not all political
appointees. the majority are people who worked on wall street, london, hong kong, and they come from a rigorous financial asset manager background. if you take smaller sovereign wealth funds in other parts of the world, like latin america or parts of asia, then you have to question some of the themes you are talking about. stephanie: i want to turn our attention to a major issue facing europe and it is the migrant crisis. i am and there is this a many of us have really only been focused on this for the last six weeks since the mainstream media has cared. that this was a crisis facing europe that needed to be addressed. actually, we have a clip. john: right now, you have variables that deal with the gap between the rich and the poor, a lot of youth unemployed, a lot of unhappy people, immigration issues, you probably have five issues to seven issues that have
an x mental impact on each other to create an unstable europe. stephanie: it has gone from bad to worse, john. john: i brought my crystal ball again because i know i am not you are present with my crystal ball, but it is interesting. we were sitting at a lunch in 90%hamptons in august when of the lunch was spent discussing donald trump. sawlly, i looked over and i judge soros having a great consternation on his face when it became clear there were other --ngs he wanted to discuss can we leave the united states to shift to a big issue in europe? which is the migration issue and it is effectively going to have -- a short-term tax
on the european economy. david: it is more than europe. you have large camps in jordan, real pressure in lebanon, even in western iraq, turkey, this is a worldwide problem. it does not seem to be getting better and i am not sure what steps have been taken to make progress. john: you have had in the last five years, 15 geopolitical is and syria being the biggest one. if you report the majority of migrants in europe, they are coming principally from syria, afghanistan, and iraq. because the oil prices are down and the threat of isis and assad, you have all of these asylum-seekers who under 1951, can seek refuge. and libya, can seek refugee
status in europe. germany, us stocks as it is, does not have a petroleum fund like norway. it does not have the kind of economic ballast, if you will, that the sovereign wealth fund provides an audit does france, italy, greece, or britain. is the european union prepared for this tax that you described? we know it will be difficult, that is clear, but what is -- is your prepared for the ultimate cost? john: it is interesting. thes great to be alive at moment. we live in a fascinating time. the 20 countries of europe have been tested. they are being tested with the ukraine. the linkage is not the syria and vladimir putin and their tested with the greek crisis which has caused a number of countries is linked to the left and not just greece but spain.
the refugee crisis has caused a number of countries to swing to the right in terms of the emergence of nationalism. you saw that this morning in the discussion of bavaria and a couple of weeks ago with a big meeting in denmark with a group of pension funds talking about the immigration issue. what is interesting is they have a right-wing government now and they put in a right-wing prime minister, but the danish people, because of nato and because of their anglo-american affiliation, field in the heart of hearts that they have to do what stephanie's friend the pope said, this is not about a humanitarian crisis, you have to look at this person by person on the face of immigrant and that is what i think a lot of people in germany and in denmark are ,hinking, so it is causing going from a humanitarian crisis
to what ministers called the national security crisis on the governmental level and concerns about isis infiltrating europe through greece and other countries. it has become very confiscated. it is -- it has become complicated and it is expensive but the germans will try to manage. you have seen angela merkel coming out with her new team saying that she is going to try to manage the cost of this and have a balanced budget so we will see. david: sadly, this is not the last time we will have to talk about this but let's check to see what is going on with the markets. matt: they are opened up and take a look at the drop. not huge, but maybe a good thing. over at oppenheimer, a technical analyst says this may be a buying opportunity because today is october 9, and he did the average of the s&p 500 and found ont that average bottoms october 9 and investors who get
in here stand to gain about 5% on average. he is saying from the history and past performance, no guarantee of future results, at least from the history, the onrages dropped to a low october 9 and rally up about 5% into the end of the year. let's take a look at oil because we have gains again today. trading at 4844 a barrel and over the last week i think six in the last seven days. oil is at 9%. . i think one of the most interesting stories is the 10 year yield and the cop from stephen major at hsbc, the head of fixed-income research, and he said -- for winning his but last and he was the contrary in
there. he will be a contrarian again. this is a look over the last 50 years. his forecast at the end of 2016 this 1.5% on the 10 year yield, about half of consensus. the consensus is for 2.8%. [indiscernible] call. stephanie: what kind of investor pays attention to this, john? john: maybe a foreign-exchange trader, but that is it. matt: gary shilling pays a lot of attention and he has made a killing on his right call on long bonds for the last three years or four years. john: i hope everyone pays attention. david: the imax ceo will be here and we will talk to them about the big move to china next on "bloomberg ,go.." ♪
stephanie: vonnie: welcome back. it is time for the newsflash. blackstone is buying biomed realty trust for a billion dollars. they cater to biotech companies among cities in san francisco and seattle. all are part of the data touring emc, the talks are preliminary but emc has been looking for strategic options to boost chair price and the deal could offset the slumping market for computers. sony is close to selling their half of music. they own michael jackson's estate and they have the right to sell beatle songs and reportedly worth $2 billion. that is the latest business/. tradingmex china began
in china and shares closed up more than 10%. china has been the fastest growing market in the world, but how is the chinese economic effect in that? thank you forx, coming to bloomberg. i hear imax is quite big in china. >> it has a higher awareness than the united states and we do about 10% to 50% of the chinese box office the back to your initial question, the slowdown does not seem to have impact on our business and in a weird way, and even of it positive, so in terms of the attendance versus budget, that has been right on course since all the financial issues surfaced in terms of .nstalls which is putting up the third thing is new activity fact, for reasons i do
not understand, activity has picked up and this morning, we announced a 15 theater deal with all new joy, one of the bigger deals we have done in china. we announced another seven theaters but the only theory i consumeraybe discretionary and movies are fairly discussion proof and residents putting capital into export manufacturing and those kinds of things with people putting money into more dysplastic -- more domestic consumption and the movie industry has grown 30% compounded time asked for the last seven years or 10 years. stephanie: imax domestically, are you missing a beat or is china that much better? is a really good -- 2015 is a really good movie year and still "star wars" to come. china will pass the u.s. in terms of numbers of screens in
2017 and china's movie box office will pass the u.s. in 2017, so it is a runaway market. of the money raised in the ipo will be used for a bill. in china, but there was a bit of a secondary for you guys raising money for imax. what do you use it for? , what isalking earlier virtual reality and how does it fit in? richard: that is a good speculation because we are thinking of what to use is for in something like virtual right on pointis if we can find the right investment and something that could leverage off the brand. we have recently been buying into stocks and we are a company with the brand that is bigger than our product itself. we are looking for the right acquisition and if we cannot, we return it to shareholders. it is their money, not our money. stephanie: last question -- will viewingo go to an imax
stephanie: the hits keep on coming. guesthouseur fascinating things to say. let's take a >> look at what we heard. >>the scariest -- >> the scares moment was when lehman failed and we had to fill with a great political risk. stephanie: if there was something that we can could do over, what would you do? >> we could not save lehman, we
did the right call in saving aig, a scary decision. people who look at it carefully generally agree that monetary policy was not the main reason for the housing bubble. now we are joined by john mack. when you think about the leverage the firms had, including morgan stanley, it was absurd. david: where was leverage today compared to 2007? >> the amount of liquidity in the banks, i really do not see how this could happen again. they wanted to sell a firm for two dollars a share, their leadership i did not agree with. i was really upset with the way and unlessrying to you could prove malfeasance, i do not think people should be put in jail. stephanie: you sit on the board, did glencore get too close to the sun? >> no. stephanie: lastly, you brought -- you bought a hunk of glencore
shares. >> because i believe in the company. stephanie: john, what stands out to you? john: it is interesting when you see this clip and i already read ben bernanke's book, but you see what an extraordinarily high integrity, great and very earnest character he is. during the crisis, he was on the top and what did not know how human he was. stephanie: hence his title. david: that will be the final word. tune in tomorrow. we will have david rubenstein back on "bloomberg ." ♪ ♪
from bloomberg world headquarters in new york, i am pimm fox and here is what we are watching, the congressional hearings on the volkswagen hearings are underway in washington. the first person on the hot executiveswagen's michael horn will go live to capitol hill. deutsche bank battles a tide of red ink, drastic measures the german lender takes after posting a likely third-quarter loss of $7 billion. hillary clinton is taking aim at wall street. details behind her plan to tax high-frequency trading remake the rules. half hour into the trading day, so let's go to our markets where julie hyman has taken