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tv   The Kudlow Report  CNBC  May 14, 2012 7:00pm-8:00pm EDT

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campaign bunninglers a capital guide. and book your tickets, folks. singapore only charges 20% income tax to successful citizens. thousands of americans have said enough taxes. adios, america. i don't like it, but it's true. "the kudlow report" just moments away. you know what i'm doing after the show tonight? i'm watching the incredible story of makers mark on how i made my millions. it's on tonight at 9:00 p.m. and midnight on cnbc. horrible market. not denying it. easily taken down by europe. europe is not done going down. that market is awful. it takes us down, but not as much as them. i like to say there is always a bull market somewhere. i promise to try to find it just for you. i'm jim cramer on "mad money." i'll see you tomorrow. just too big to fail. just too big a taxpayer risk, and should be broken up. good evening, everyone. i'm larry kudlow. this is "the kudlow report."
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team obama unleashes an attack ad, calling mitt romney's former private equity company bain capital a, quote, vampire for shutting down an unprofitable steel mill. but it turns out as president obama comes to new york on a taxpayer-funded ride, one of obama's millionaire campaign bunninglers an executive at bain capital. bain capital, right when that mill was shut down. romney himself had already been gone for a couple years to run the winter olympics. in just a moment, our weekly debate. i'm going to ask the dnc's communication director brad woodhouse and his colleague at the rnc sean spicer whether this latest volley in the war is credible. chief economist austan goolsb goolsbee. not create many new jobs. that, folks, is the real issue
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in the campaign. our political panel is going to weigh in. also, questions about the scandal surrounding jpmorgan. heads have already rolled. is jpmorgan a perfect example of the bank that is too big to fail, too big to manage, and therefore so big that once again it puts taxpayers on the hook for another massive potential bailout nation? jpmorgan's stock slid another 3% today. bringing the whole market down 1% overall. we begin tonight with yet another volley of attack ads from team obama and team romney, this time questioning mitt romney's role at bain capital, a topic beaten to death in the republican primaries. but john harwood in washington joins us with all the details. good evening, john. >> reporter: good evening, larry. team obama wants to beat this subject a little bit more. you know, last week was distracted by the gay marriage debate. now team obama squarely back on economic concerns with this blistering ad going after bain
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capital, accusing the former governor of massachusetts of being part of a company that shut down a steel mill and sucked money out at the expense of the workers. here is the ad. >> bain capital walked way with a lot of money that they made off of this plant. we view mitt romney as a job destroyer. >> to get up on national tv and brag about making jobs when he has destroyed thousands of people's careers, lifetimes, just destroying people. >> he is running for president. and if he is going to run the country the way he ran our business, i wouldn't want him there. >> now bain capital put out a statement this afternoon saying the ad had oversimplified a very cosm plex business transaction. romney was gone from bain capital when the company was shut down and gone into bankruptcy. the romney campaign came out with an ad showing the other side of creative destruction, that is a company that mitt romney and his company helped to
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start. >> sdi almost never got started when others shied away, mitt romney's private sector leadership team stepped in. >> building a dream with other 6,000 employees today. >> if it wasn't for a company like steel dynamic, this county wouldn't have a lot. >> if that's not the american dream, i don't know what is. >> now, team obama has good reason to go after mitt romney on economics, because polls have shown that americans give romney more credit than obama for having good ideas on the economy. one interesting side note, larry, in addition to tbundler you mentioned. >> many thanks to john harwood for the update. let's talk about this vampire bain capital ad. as usual on mondays, we have brad woodhouse, communications director for the democratic national committee, and sean spicer, republican national committee communications man. and as always, i begin with brad
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woodhouse. >> thanks, larry. >> i will give sean the last word. so you got this vampire ad about this steel company, gs steel that went out of business. the only thing that ad neglected to say is mitt romney was already out of the company when the steel company went down, running the olympics. so how do you figure this? >> well, larry, that's just not true. mitt romney was still ceo of the company. he was still an owner in the company. he was still benefitting financially from the company. in fact, he is still benefitting financially from the company today. but let's be clear. mitt romney started bain capital. and he began what we call romney economics, which was taking companies, breaking them down, leveraging them with debt, laying off employees, and taking away big profits and fees. that's what happened at gs steel. and that's just the facts. it's not an indictment on the private sector. it's not an indictment on private equity. but if mitt romney is going to use on his resume for public office what he did in the
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private sector, we're going to take a look at it. >> let's look at what the president has done. he took over gm and chrysler. he shed 2,000 dealerships from gm alone, cost them hundreds of thousands of jobs to get them back. and now he is attacking the same type of system that he used at gm, and he is proud of gm. he is proud of what he did there. you guys want to campaign on that. >> wait a minute, sean. gm and chrysler are in business. gst steel is out of business. >> how about steel dynamics? can i just as i this point? hold on. >> sean, hang on, sean. >> in the automobile industry. >> what about -- >> profiting at the expense. >> okay, your own car czar said this is a bad analogy. >> right. >> it's interesting that you bring that up. steve rattner said that the attack was unfair. and right after that, he said mitt romney, though, should have never claimed that what he was doing in the private sector was creating jobs. that's where he put this issue
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on the table. >> can i ask this question? okay. just let me get this in. >> please. >> gs steel went down. it cost 50 jobs. mitt romney was already several years out of bain capital. we can debate that. he was running the winter olympics. here is the one. why don't you include the success of steel dynamics? >> or staples. >> was bain company underwritten firm. it was turnaround firm, and it created 6,000 jobs. now i got another. you know how brutal it was in the steel industry. so they tried to prop up this little gsk, couldn't make it. but they succeeded in steel dynamics, 6,000 jobs. come on, brad. you got to -- >> sure, i'll be glad to talk about. >> he is a job creator. >> i'll be glad to talk about. look, larry, come on. you know in private equity, and you know in wall street, the issue is not about job creation. the issue is about investment. it's about making wealth for your investors. his former colleagues at bain capital have said that they're -- that their job was to create wealth. it wasn't to create jobs.
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we're not saying that none of his investments ever, ever panned out. but job creation was not what the investments themselves were about. and for him to say otherwise is just not -- >> to raise money from the same people that you a saying are so evil. >> no. that's exactly -- [ overlapping dialog ] >> no, no, let sean. >> i think it's interesting that the president is on his way up to new york right now to raise money from the same type of people that they're criticizing. that the car czar said this is unfair. as you pointed out correctly, mitt romney was turning around the olympics as a source of u.s. pride at the same time they're claiming this occurred. you don't want to highlight the other steel companies. they don't want to highlight staples. all the jobs that were created, all the companies that have been successful. you know, the fact of the matter is -- >> sean, you're making the argument for us. >> okay -- >> we're not indicting private equity. mitt romney said that he was creating jobs. that's not what he was doing.
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he was creating wealth. if jobs happened to be created, great. >> can i ask another one? can i ask another one. >> let me just finish this. gst steel's case that. >> not only -- they not only shut down the company, they had to have the federal government come in and bail the pensions out. but they walked out with millions. >> hang on. let me make this point. in steel dynamics they created 6,000 jobs. they also create ed tens and te and thousands of jobs with people like staples and sports authority. brad, i want to ask you this. >> sure. >> one of your biggest bundlers, jonathan levine, he was a bain capital guy who was still around when this little gsk steel company went down. he is an obama bundler, 100 grand. he will probably be at one of the obama fundraisers tonight. doesn't that indict your indictment and show how silly this whole line of reasoning is? he is your guy. he is from bain capital, and he is raising a fortune for obama. >> well heck no. >> he is paying for the ad.
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>> heck no. that just proves our point that we're not indicting private equity. what we're talking about is what mitt romney's claims are to be qualified to be president. he says my private sector experience qualifies me to be president. well, if you think people think that -- >> there is a broader point here that we need to look at, larry. >> then let's take a look at it. and by the way, by the way -- >> all right, i got to let sean have the right word. sean's got to have the last word. >> here is the bigger picture. when you look at mitt romney as a leader, there is no question that overall he has turned around the companies that he has worked for. >> ask the people in kansas city if they turned that around. >> brad, let him finish. >> you have got solyndra. you've got gsa. you've got noaa hiring magicians. when you talk about leadership and the ability to get things going on the right track, there is a clear contrast in this race. >> leave there it, gentlemen. you are terrific. i'm sorry. we could go on for an hour. maybe one night we will.
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brad woodhouse, democratic national committee. sean spicer, republican national committee. gentlemen, thank you very much. all right. up next, does it matter to stocks here in america that greece exit the eurozone? and also ajpmorgan's $2 million bet gone bad prove that banks that are too big to fail are too big to manage, and they ought to be broken up. later in the show, taxed out. higher taxes driving more of the most successful out of america. the number has gone up sevenfold since 2008. that ain't good. and free market capitalism would solve the problem with low supply side tax rates if only somebody in washington would get wise. i'm kudlow. we'll be right back. it's very important to understand how math and science kind of makes the world work.
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in high school, i had a physics teacher by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies.
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all right. a new week, but the stock declines continue. stocks tumbled on worries that greece may exit the eurozone. there are a lot more losses coming from jpmorgan and other u.s. banks. those are worries. the dow posted a triple-digit plunge. s&p also ended down, edging below the key 1340 support level. gold lost 23 bucks today, has given up half of all its 2012 gains.
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king dollar rallied, up 2 1/2% since late april. this is the second 11th straight day run in its history. here now to talk is doug cote, chief market strategist with ing investment management. david goldman. he is currently president of macro strategy. a i do not want to go into the ins and outs of jpmorgan. we're going to do that to some extent in the next segment. i am interested in your view about financial service stocks, about bank stocks, and maybe jpmorgan itself. how does this story affect the broader theme of bank stocks? >> i think it affects it mostly, larry, by giving the people who are looking to give a little bit more legs. come on this, is being blown way out of proportion, right. $2 billion on a $200 billion
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capital bank. i think that the media is making way too much of this. >> i'm sure that's true. but do you worry that there are other trading losses from other banks? maybe the jpmorgan thing turns out a little worse, but you're right. they're highly capitalized. what about citi? not the greatest student in the classroom. what about some of these other banks? are there other shoes to fall, ron? >> you know, i don't think so, larry. i think there has been a lot of scrutiny put on this. there can be other shoes to drop. but if they're as small as this shoe, i wouldn't get overly concerned about it. >> dave goldman, do you have a different view? you're going to have every single subcommittee congressman, senator, s.e.c., federal reserve, fdic, i'm probably forgetting a whole bunch, they're all going to descend on the financial industry. what does that mean? >> it's very bad for two reasons. one is we've seen that banks are capable of making very bad decisions. they should be shrinking their business to correspond to the
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actual opportunities out there. and what jpmorgan did was try to artificially expand its balance sheet through synthetics, through derivatives. and they got blown up doing it. that doesn't mean that bank of america or citi may be doing it, and they may be good investments at this point. the problem is the public doesn't know. and they can't find out. >> the proverbial shoe hanging over is if there. >> exactly. >> you can't get rid of it. >> you have federally supported institutions that have enormous discretion to make dumb errors. when the federales come in and say we're going to straighten it out, it's more government intervention. >> doug cote, can i move on to something else? dollar rising. gold falling a lot. oil falling a lot. retail gasoline falling a lot. the retail gasoline is great. i don't know about the other stuff. what is there? is there deflation going on
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here? is that what is happening? >> there is a lot of risk going on. the best strategy has been to look through these risks and get into the market with a broad global diverse portfolio. gold going down, we've been forecasting that. i think gold is a bubble. it's going to continue falling like a rock. and look at the fomc statement. ben bernanke upgrading the economic outokay from modest to moderate that was a bullish statement. no more qe. that's why gold is falling. and you have on your shows about fracking, new energy supplies, that's why gas is going down. there is crude inventories that are very high. it's going to continue to come down. and it's going to benefit businesses and consumers, especially look at natural gas prices, down to $2 compared to $11 in japan. >> so you're saying, doug, i don't mean to cut in, but you're saying this pattern of a stronger king dollar, falling gold prices, falling energy prices is a good thing? >> it's all good. it's time to get back in the
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market, yes. >> you sound like ron. you sound very optimistic about that. >> i am optimistic. >> larry, i really disagree about this. two weeks ago, the market believed that -- oops, sorry. we got it. >> you talk, i'll put it in. >> two weeks ago, the market thought the european central bank, the european leaders had everything under control. now the new government in france, socialist. political chaos in greece, demonstrations in spain. the consensus has collapsed. and spain is a potential problem bigger than greece. we don't know how big the debt problem is. we don't know how the europeans are going to respond. keep your head down until we find out. >> let me just ask you a funny question. >> spain is not greece. >> i want to get back to ron. if the european story was imploding, would not gold be rallying? >> is so much gold owned by european banks, the fear is they'll have to liquidate positions in order to raise cash. >> that's a great point. ron, do you have a rebuttal? if spain goes down, if greece down, are we going to go down?
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>> larry, they're not going to go down. i think that you're going to have the political process is going to work. look at the underlying numbers. i mean, the numbers, the markets are undervalued. you've got gas prices coming down. they say china is a hard landing. but that's going to relieve the pressure on commodity prices. financial stocks are undervalued in this environment. the political process is the problem, all right. and we're going to go through it. but this market will hit -- the s&p will hit 1500 before it hits 1100. i'll go on that limb. >> you have been bullish. >> i have been, since august of last year. >> except for a few corrections here and there. >> well, you're going to have corrections. >> yeah, it was real bad last year, but you stayed bullish during the correction. you're basically right. do you think in a 2% economy, which is what austan goolsbee, in a 2% economy, ron, you have enough profits to get you to 1500, knowing that you were is soft and knowing that china is,
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okay, i'm going to call china a soft landing. it there? >> larry, there are companies out there that are making great profits. balance sheets are improving. the economy, the companies are a lot healthier than they were even a few years ago. it's absolutely there. you got to get the uncertainty of the political process out of the way, including our own political process in november, where we had this fiscal clip. the only thing that is going to derail this market are the politicians. so when in doubt, blame the politicians, larry. >> romney is going to win. he is going to make a deal. he is going to fix the thing and we're all going to live happily ever half. jeremy siegle is right. we're going to 17,000 on the dow. that's my long-term view. between now and then, we'll have much more fun covering it. doug cote, thank you. david goldman, thank you. up next, the soap opera at yahoo comes to an end. this time, anyway. and then there is groupon surprises. all the latest headlines coming up. and later, jpmorgan's $2 billion blunder puts the economy and obama's reelection in deeper trouble. you're going to hear from the
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president who just spoke about it. main street has flashbacks to 2008. that may not be justified, but that's what people are worried about. and my question is aren't banks still too big to fail? and shouldn't we take some action? i'm larry kudlow. we'll be right back. [ donovan ] i hit a wall.
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and i thought "i can't do this, it's just too hard."
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groupon, yahoo, and jpmorgan making news after hours. cnbc's own courtney reagan joins us with more on those stories and all the latest breaking headlines coming into the cnbc knew. good evening, courtney. >> good evening to you, larry. groupon surged after the bell, beating estimates and issuing a revenue forecast that topped wall street targets. the stock is up handily after hours. dan loeb joins the board which will be three seats smaller. ross levenson taking over as interim ceo. ex-ceo scott thompson will get no severance for his four months at the top. jpmorgan will be in the news again tomorrow. the annual meet willing be the first time jamie dimon faces rank and file shareholders since he disclosed the $2 billion trading loss last thursday. and larry, the european banking weakness spreads to italy as moody's downgrades 26 banks because of reduced level of support they might receive from the italian government.
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that's all for now. back to you. >> many thanks, cnbc's courtney reagan. up next on kudlow, did they use taxpayer-insured money? i'm talking fdic-backed deposits to make their risky bets? did we not learn anything from 2008? and later on, successful americans renouncing their u.s. citizenship up sevenfold since 2008. mr. president, we've got a high tax problem. we're not competitive. america can't afford a brain drain. stay with us. much more to come. it's very important to understand
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how math and science kind of makes the world work. in high school, i had a physics teacher by the name of mr. davies.
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he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. u, mr. davies.
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welcome back to "the kudlow report." i'm larry kudlow. in this half hour, neither president obama nor mitt romney have a clear position on what happened with jpmorgan. neither candidate sticking up for the taxpayer who backs these trades with government insurance, fdic insurance. and they're opposed to risky trading for any reason. well, the president draw first blood? you're going to hear what he said just moments ago. also this evening, just
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hours before facebook goes public, one of its founders says adios to america. he is not alone. thousands have left the country. forget to spin. taxes are the real reason. we're going to show you why. we begin tonight with the $2 billion blunder that is still causing shockwaves. heads have rolled, but the problem has not been solved. the banks are using fdic-backed depositor money to fund their exotic risky transaction. that's a key question. i have not heard an answer all day, all yesterday or what. it's not only against the law, it worries main street and smacks of a new unaffordable bailout for the nation. until we abolish too big to fail, i fear all this is going to continue. so let's talk. former fdic chairman bill isaac is with us. he is the chairman of fifth third bank core. we bring back our old friend peter wallison. he wrote the blog piece jpmorgan's losses prove that the
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volcker rule is unworkable. and dick bove. apart from the additional issues of the volcker rule, and apart from peeling back the hedges that were hedged and rehedged that didn't work, i want to know, who is funding the purchases of these risky assets? is it in fact taxpayer-backed fdic retail deposits, which is not supposed to happen way back under the law that repealed? in other words, where is the taxpayer protection here? i don't see it. >> the taxpayer's got nothing to do with this situation. jpmorgan has $2.3 trillion worth of assets. it has $1.1 trillion worth of deposits. that means there is $1.2 trillion of wholesale-funded assets which are used to do this trading. there are no taxpayer dollars involved. the taxpayer is not at risk in any way, shape, or form in terms of this particular transaction.
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>> i don't see how you can say that, dick, with all due respect. first of all, my understanding is this. when you undertake these risky transaction, whether they're for hedging purposes, whether they're for proprietary trading purposes or what, you are not supposed to use retail deposits inside the bank. that goes all the way back to the law that ended glass. you're supposed to have separate channels, and i fear they are not using it. >> they're not. if you have $1.2 trillion in borrowed funds, $1 trillion in borrowed funds and 0.2 trillion in capital, there is no reason in the world you would have to dip into retail deposits to fund what you're doing in trading. it makes sense. and it's against the way a bank is constructed. they don't use retail deposits to fund the security portfolio. that's done with borrowed money, and it's done with capital or equity. they did not use taxpayer money
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or deposits or retail deposits or whatever you want to call it to fund these transactions. >> i sincerely hope you're right. peter, i want to get your take on that. on whether the volcker rule can ever succeed. how do we know the difference between investments for the bank's portfolio, between hedging operations for the bank's portfolio. this after all was a hedge against the bank's portfolio. and then they hedged the hedge, or whether it's a hedge against customer portfolios? it boggles the mind, peter. and fortunately, as dick bove said, yeah, this is a highly capitalized bank. not all of them are. that's what worries me. >> larry, you were wrong. the law does specifically permit banks to hedge. in fact, that's a very important thing. they should be allowed to hedge. hedges reduce their risks. it doesn't matter what funds they're using. i do agree with dick bove.
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they didn't use taxpayer funds. they didn't use insured funds. but they were allowed to do these trades for hedging purposes under the dodd/frank act, and under the volcker rule. the problem, however, is this. and that is that it is very difficult to tell whether a trade is a hedge or a trade is a proprietary trade. and for that reason, the volcker rule is worthless. it's unworkable. it should be -- it should be handled solely by the bank examiners doing supervision, but not through any kind of regulation. >> so where the hell were they? where the hell were these brill want bank zexaminers? where were they in 2007? in 2008? >> this is a $2 billion loss. it sounds like a lot.
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but it's 1/11/1000th of this ba >> i have my mom calling up. >> you're a good son. >> and she is worried about the bank. he is wants to know. and she is not alone. >> of course. because the media has blown this thing completely out of proportion. of course everyone is worried about it. but this, as i say, it's 1/1000th of the value of this bank is $2 billion. it doesn't mean a thing. they're going to earn something like 15 to $20 billion this year. this was only $2 billion. >> all right. what about these other banks that don't have that kind of cushion cushion? >> that's a different story. >> no, it's part of the same story. this is much more bigger than jpmorgan, for heaven's sakes. >> it could be. we only know about jpmorgan. >> i understand. god knows what is going to come out. i don't want to be an alarmist. i'm just saying i'm looking at it from the standpoint of the taxpayers who don't want another round of bailout nation. you guys are looking at it from the standpoint of investors.
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all right, bill isaac, i want to ask this question. what about richard fisher's argument from the dollar's fed. he says it's too big to fail, too big to manage there is no better risk manager than jamie dimon. no better risk manager. and look what happened. should the marketplace be allowed to shrink that bank down? should the regulatory people shrink that bank down? i know it's not free market capitalism. but the american banking system is not free market capitalism. it's basically a government semi socialist utility. what about richard fisher's argument that too big to fail is too big and it should be shrunk down? >> i think, larry, that the issue is not the size of the bank. it really is the complexity of the bank that matters. and you could have a -- you could have a very large bank that basically takes retail deposits and makes loans, and has some investment securities and doesn't do much else. i don't care how big that bank is. it's easy to run.
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it's easy to oversee if you're a regulator. and i'm not worried about size per se. so i really think that we've got to look at these institutions. we have to have a much better regulatory system in place than we have today. i agree with you on that. >> i'm coming back to this. i got a bury under my saddle. do you think retail deposits should be used -- these are fdic-backed, and therefore taxpayer-backed deposits -- should be used to create synthetic derivative hedging devices for the bank's only portfolio? do you think that was where our system was intended to go? >> well, we certainly didn't have derivatives until 10 or 15 or 20 years ago. so they're a relatively new thing. and i don't think we understand them very well. and that concerns me. i would say that i would agree with -- i would actually disagree with dick and on the point of whether these banks are using retail deposits. i think money is fungible.
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i don't think you can say they got from wholesale sources and didn't use retail source. the issue is did they have enough capital to cover this risk they take and all the other risks they take and not jeopardize the taxpayers. i think jpmorgan passed that test there is 200 billion in capital against $2 billion in losses. >> dick bove on the way out, you still like the sector? >> yeah. and i don't think there is any reason to break up the big banks, particularly if a bank earned $18 billion a year and $22 billion the next year, why in heaven's name would you say it can't be run? >> all right. i'm going to leave there it. not all banks meet that criteria. but gentlemen, i appreciate your time and your disagreement with my taxpayer worries. somebody's got to do it. bill isaac, peter wallison and dick bove. up next on "kudlow," speaking of taxes, high taxes are driving u.s. citizens to high-tail it out of the country to a number of successful numbers renouncing their citizenship and going to lower tax countries.
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the number is up sevenfold since '08. a national disgrace. a terrible story. this jpmorgan $2 billion fiasco, drawing blood. both candidates. so what is wall street going to do for you? it always, it always has a pinprick. huge embarrassment for president obama. let's see what mitt romney can do with this. can romney handle this one or not? how is it going to hurt the president's reelection campaign? we're going to do the politics of this jpmorgan business. [ male announcer ] citi turns 200 this year. in that time there've been some good days. and some difficult ones. but, through it all, we've persevered, supporting some of the biggest ideas in modern history. so why should our anniversary matter to you? because for 200 years,
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for getting a check-up. it's our wellness for life program, with online access to mayo clinic. see the difference at avivausa.com. all right. some news breaking on the facebook ipo. cnbc's kate kelly joins us with the details. evening, kate. >> larry, how are you? >> good. what you got? >> okay. i got some breaking news on facebook. they have revised the price range upward to 34 to $38. that values the company at that range comfortably above $100 billion. it puts it at a range with 2.6 billion sharesout outstanding between $192 billion and $103 billion if they price it at the $38. we can expect to see a new s.e.c. filing reflecting this early in the morning, i'm told. but right now the underwriters
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for the company are in the process of speaking to investors about the new prices and where the book might fall out at this new level. this gives them about 48 hours to get the final book together, of course, because the final price will be selected on thursday night. but they have narrowed the range. they have done it on an upward basis. and this tells you that surprise, surprise, enthusiasm for facebook is pretty darn high. they started out at a range of 28 to $35. so this is pretty well above where they began, larry. >> all right. kate kelly, thank you very much. appreciate it. programing note. this thursday at 1:00, cnbc's going to go inside facebook, literally. see how the company makes money. hear if you should invest in it. don't miss facebook, the social offering at 1:00 on cnbc. as eduardo saverin gives up his u.s. citizenship to avoid paying taxes. are high taxes driving the most
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successful people out of the united states? courtney reagan joins us with some of those details. >> that's right. brazilian born facebook founder eduardo saverin is renouncing his u.s. citizenship just before the social network is expected to go public, as kate kelly said. while no longer actively involved in facebook, his 4% ownership stake still stands to make him a billionaire nearly four times over. and announcing citizenship cuts off the u.s.'s tax claim on the proceeds. but his spokesperson doesn't cite the reason as taxes. the u.s. is just one of a few countries that taxes the passport holders no matter where they live in the world and work. nearly as many as eight times of americans renounced citizenship last year than in 2008. just a small estimated of the 8 million americans living and working abroad. it is likely to draw the attention of lawmakers. living abroad, you have to really separate your emotional and patriotic attachment.
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if you no longer need the benefits of u.s. citizenship, you have to file taxes every year for the rest of your life, even day to day banking has become difficult. larry, the foreign account tax compliance act requires foreign banks to disclose american account details. and many of them simply find it easier to drop those american clients all together as opposed to complying with the rules. >> all right. there you have it. cnbc's courtney reagan. great rundown. here is the question. are high taxes forcing successful earners out of the usa? now let's talk to cnbc contributor jim pethokoukis, american enterprise institute. i've been reading 60, 70, 80% tax rates don't matter in the u.s. you mean that's not true? >> it's amazing when these people leave, they don't leave to go to france or something, which is 75% tax rate on the way. it's always low tax rates like singapore where it's half those of the united states. i think we know now.
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we're having anecdotes and real life experience both in the flight of people out of california, which has become a high tax state, as well as when great britain tried raising taxes. you know, they lost money on the deal. the problem is not the west, the u.s., the eu is undertaxed. we're overtaxed. >> there is going to be a brain drain from france. the france have going to go to sweden, which you have written about, the supply side experiment and low tax rates. or they may go to asia. you're saying singapore has half the rates we have. and if i'm not mistaken, in china they have about half the tax rates we have, at least on capital investment. >> listen, our good friend jimmy rogers had an interview, the famed investor saying maybe it's not because of taxes. he still has to pay some taxes when he leafs the country. it's a big hassle. but listen. jimmy rogers is an older guy. this eduardo saverin, he is 28 years old. he looks forward and sees a
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lifetime of radically higher taxes in the united states which were going the wrong direction. i think he wants to avoid those. >> we're going to leave there it. it burns me up, jimmy. i know you're dead right. i just hate this. we need to be competitive. we need to be the most hospitable company bring the best brain and the best investing and capital. jimmy p., pethokoukis. up next tonight, president obama has a wall street problem. jpmorgan's failed risky bets not supposed to happen anymore after the president signed dodd/frank into law. remember? so mr. president, sir, what went wrong? mine was earned off vietnam in 1968. over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection, and because usaa's commitment to serve the military, veterans and their families
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all right. the jpmorgan $2 billion failed risky bet which could go a lot higher is still causing shockwaves not just on wall street, but in main street and washington and on the campaign trail. this wasn't supposed to happen anymore after the president signed dodd/frank into law. but listen to the president just moments ago taping with abc's "the view." >> jpmorgan is one of the best managed banks there is. jamie dimon, the head of it is one of the smartest bankers we've got. and they still lost $2 billion and counting. precisely because they were making bets in these derivative markets. we don't know all the details yet. it's going to be investigated.
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but this is why we passed wall street reform. >> yeah. but mr. president, if you passed it, dodd/frank, which you fought for and got into law with the democratic majority, why did this happen? that's the issue. another pin in the obama election balloon. the question is what is mitt romney's response going to be? let's talk a little bit. ari melber, michael steele, and former managing director at bain capital, author of the book unintended consequences. ed conard, i want to start with you. dodd/frank did not prevent this big goldman sachs mistake. lord knows what is out there. what is mitt romney's response going to be? what should his response be? you're a bain capital financier. what is up with this? if dodd/frank didn't stop it, where should we go? >> i think we have to recognize that the losses at jpmorgan is incurring did not cause the
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financial crisis. a 30% drop in real estate prices caused the financial crisis. and that led institutional depositors to withdraw their money from the banks. if we don't solve that problem, we're going to have ten years of slow growth and high unemployment. as the obama administration done anything to solve that problem? they have done very well. dodd/frank does very little to solve that problem. >> all right. dodd/frank does very little to solve that problem. it doesn't solve too big to fail, that's for sure. on this network, austan goolsb e goolsbee, he says the economy regrettably he says is only growing at 2%, and that's not going to create jobs. i ask you, isn't that the real issue? not whether bain capital closed down a little steel mill after trying to keep it oath open for ten years, not really the jpmorgan issue. isn't it about jobs and the economy? isn't that still the issue? >> it's very much the issue. and will be straight through the summer and fall.
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and the reality of it is the administration still has yet to put together a comprehensive effort that would allow the market to respond in the way that would create jobs. this is not you have beat this horse so many times, it's turned a different shade of blue. the reality is you've got to trust the go-getters, the entrepreneurs, the risk takers to go out there. the bain capitals of the world are the safety net. they're the ones who come in and try to manage and fix those that have fallen down or are trying to get back up on their feet. and sometimes the lights go out for some of those companies. you're never too big to fail, as jpmorgan has clearly proven. all the overregulation, all the heavy-handed oh we got to investigate more is good sound bite, is great on "the view." but the reality of it is small business owners, the men and women who are the backbone of this economic engine still don't trust this government, and certainly this administration's policies with respect to their ability to risk their capital to great those jobs. >> see, ari melber, i think
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michael steele is right. it's the simply small businessman on main street. obama has a wall street problem. you know that. they've been walking away because their wives are so angry at obama calling their husbands fat cats. that includes the great jamie dimon who has been kind of on the ropes, attacking. we don't know whether he'll go back to obama or switch to romney. ari, what is obama going to do here? if he is too tough, he is going to lose all his wall street money. and he needs the money, ari, because this is a darn close race that he could lose. >> you know, larry, a lot of americans are obese. so when you call people fat, you always risk offending the voters. >> that's why their wife are so pissed off. that was a huge mistake he made. >> i will come right at the very first question you asked at the top of the show, aged i think it is a core question. that is how does this kind of thing happen with dodd/frank in place. and one of the answers, and it rells to the bank's conduct is that the volcker rule in dodd/frank doesn't even begin until july 21st of this year.
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it is not officially on the book. that's because of extra time that the banks have asked to get in all of their exceptions and requests heard in the regulatory process. if that sounds like too long, if that sounds like too much regulatory action before real action, that is partly because of the financial community's desires here. now the big question from a regular framework, is this risk reduction hedging or is it something else? if you inject a lot of risk and claim it's risk reduction, the average person on the street says that soundston funny to me. >> what i want to know, i want to come back to edward conard. it's not enough for mitt romney to say that the bill was wrong, that frank/dodd, dodd/frank was wrong, because that sounds like all these rich guys on wall street are going to have their way, and they're going to do what goldman did, which was really a $100 billion investment and they lost $2 billion. edward, your pal mitt romney has
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to come up with a position that makes some sense that doesn't sound like he's catering to all his wall street buddies. how does he do that, edward? >> i think obama if he wants to get reelected, he is going to have to grow this economy more than he has. and vilifying the banks, vilifying successful risk takers, loading -- threatening successful risk takers with significantly higher taxes, there is no way that is going to produce the kind of growth that will be required to get him reelected. so he can go down this path, but jpmorgan is a red herring. it doesn't solve the problem. he won't get the growth and he won't get elected if he doesn't get the growth. >> i'm sorry, i'm down to 30, 40 seconds. romney's got to have a position, because then people are going to say he is catering to his fat cats. he's got to have a dodd/frank position. he can't let jpmorgan get away with this, can he? >> you know, that's a good question. i think we want to see a little bit more what is behind the jpmorgan veil. i think that romney has positioned himself in my estimation pretty well so far in
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this thing. he has sort of taken the aboveboard, looking to the future to build those jobs back into the economy. so i think there is still a little bit more to unfold here. we'll see to the earlier point about the volcker rule and whether that gets him. romney is okay on this issue i think so far. >> i think we got democratic fat cats versus republican fat cats. it's great fun. we're going to see who is going to win. ari melber, michael steele, edward conard. tomorrow night, edward klein describing obama. if you have copd like i do, you know how hard it can be to breathe and what that feels like. copd includes chronic bronchitis and emphysema. spiriva helps control my copd symptoms by keeping my airways open a full 24 hours. plus, it reduces copd flare-ups. spiriva is the only once-daily inhaled
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