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tv   Bloomberg Markets European Close  Bloomberg  September 13, 2018 11:00am-12:00pm EDT

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♪ vonnie: top stories from the bloomberg around the world. turkey's central-bank stuns markets by raising the benchmark rate. 24%, the lira is rallying on the news. big central-bank news from the european central bank, mario draghi says he is confident inflation will return to target levels. special coverage of life after lehman continues. we speak to former senator chris dodd. julie: 90 minutes into the trading day. let's take a look at stocks. hanging onto gains but off the highs of the session, considerably. consumer staples weak, led by
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kroger. energy shares also a drag on the major averages with oil prices trading lower. stocks rebounding. philadelphia semiconductor index had seen a slide over the past sessions, down 67%. losses in six days. very weak as a late. rebounding stocks. outlier tooing, amd, the upside within semis. setting prices are good at highest on the street. qualcomm reinstating overweight at barclays, company starts $16 billion accelerated by back and we have an apple ripple effect in wake of the product announcements. firstapple suppliers, gain in 12 days. apple, representing
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30% of revenue. when it comes to amd, outlier. it had four down weeks going back to april. extraordinary, the gains they have had and especially since it has been a sharp contrast with the industry. a quick check on builders. decline in the homebuilders after a major companies said a survey conducted pointed to third quarter order downside. 30 yeareantime, mortgage rates up to 4.6%, third straight weekly rise, concern about rising rates and the effect that will have on housing sales. taking a look at u.s. dollar, down once again. euro and pound climbing in the wake of central-bank meetings. the dollar is bouncing off the low. vonnie: thank you. 10 years ago, lehman brothers
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fell, marking the beginning of the financial crisis. we are talking about the recovery. we welcome chris dodd, former democratic senator from connecticut and former chairman of the senate banking committee and a co-author of the dodd frank act. thank you for joining us. i'm curious as to whether you think another crisis is in the offing anytime soon? senator dodd: there are always dangers of that. the next crisis is more likely to be about student loan, debt. national level, state and local levels as well. e obligations that are growing. that is the danger. i don't see immediate danger. for aial services sector, lot of the reasons, the actions we took in 2008 and 2010, first with legislation that stabilized financial institutions and
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provided a vehicle, through providing equity to large financial banks rather than buying toxic assets, allowing for stability took her. a year and a half later -- stability to occur. a year and a half later we passed dodd-frank. that is an issue that will loom large -- debt is an issue that will loom large. vonnie: do you see any threat with deregulation? senator dodd: the dodd frank bill is basically intact. -- the banking senate committee today passed legislation -- i did not like every piece -- but overall it was a moderate effort to make some changes to the bill. i have always said, we did not write the 10 commandments in 2010. we wrote a bill. i agreed to amendments. i was not overly enthusiastic. they clearly changes.
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with the benefit of 10 years, we can see where we will moderate that and where will it work better? with the benefit of 10we have ps necessary to minimize the danger of major financial collapse, such as 2008. julie: at the same time, although many of the same people are in place in government, as you know, things have become more acrimonious when it comes to the president or within congress itself. if we were faced with another crisis of financial or otherwise, what do you think is the capability of the president and congress to tackle it, considering the gulf in washington now? senator dodd: i have thought about it so often. to paint the picture -- in september, september 18 when ben bernanke, the head of the federal reserve announced to a group of us that evening in nancy pelosi's office that
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unless we acted, that in a matter of days, there was a good chance the entire financial system of this country and a good part of the world would collapse. that is almost an exact quote. we came together, democrats and republicans with 40 days to go until a national election, we passed legislation to provide foreclosure assistance, warrants to allow taxpayers to get their money back. the administration was republican. we came together to try and do what we thought was right for the country. i would like to believe that could happen today but i am doubtful. julie: when you look at the status of banks today, the broad view is that they are well capitalized, in part because of the reaction to the crisis. they are bigger than ever in some cases. we are seeing consolidation. the idea of not having banks too big to fail, we seem to have
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forgotten about that. how much of a risk is that? senator dodd: less than people make of it. canadian banks are larger than u.s. banks. to put in perspective -- it is not the size of an institution. it is the systemic risk. because we required more capital here, the banks are better shaped. we required stress tests, i know it is painful for banks to go through, but it gives us a good idea of how banks are performing. should they be confronted with another crisis, we provide clarity in the derivatives market. we did a lot of things in that legislation, that are designed to minimize the kind of problems we have seen in the past. i do not think size should be the only criteria. it is whether or not they are opposing systemic risk, examinations to prudential risk, will all help us to minimize the problem.
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size is an issue but not the deciding one. vonnie: we will be speaking to icelande minister of during the financial collapse. many people in iceland went to jail. should people in the united states have gone to jail? senator dodd: absolutely. that is one of the great disappointments. we did far more than stabilize banks. if you ask people about the tarp legislation, they will call it a bailout. that is unfortunate because we included taxpayers and homeowners. in canada, you have to break the law in order to be convicted. people wanted to see convictions or at least trials. i would suggest, why the temptation is strong to suggest that, i do not think the justice department had any reluctance in
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the obama administration to pursue criminal prosecutions. i think they came to the conclusion that it was difficult to specifically identify laws broken. julie: one of the other disappointments in the wake of the crisis has been the widening gulf between different americans, politically and economically. we have a chart looking at that income differential and how it accelerated since the crisis. is there anything, is there a role for government in trying to heighten that gulf? senator dodd: great question. there are a lot of people giving serious thought. it has gone on for some time, for a good part of the 20th century, economic growth, wealth creation was the ambition of all political parties and so forth, for the most part. what has happened lately, because we are still growing, successfully and creating, at
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the expense of jobs in the country -- automation, technology. when we start talking about decision-making and how we increase wealth and opportunity, we need to simultaneously talk about how you care for and provide assistance to those who lose their jobs or have inability to have incomes grow in order to keep pace with what you have described, a growing amount of wealth in the country. we have not done a good job of that in the last three years. we need to do a better job. democratic administrations as well as republican. you are correct. if we are going to continue to grow economically, we have to deal with this gap between wealth on one hand and those who lack resources to provide for themselves and their families. vonnie: quick prognostication on the midterms. how does the house split and does the senate flip? senator dodd: i am a democrat. i am hoping the democrats do well.
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i would not tell you that merely on a hope. i think because what is happening in the country, the deep concern, as we have heard, the democrats are going to do better in the house races. a month ago i would not have given you much chance, for the democrats to gain seats in the senate but lately given the data, all the major races are tightening. there is a good chance democrats will gain seats in the senate and could end up controlling the senate. on this day here in september, i am more optimistic than i was a month ago. you and i both know, 24 hours is a lifetime in politics and much can change between now and november. vonnie: thank you for joining us. 24 hours. former senator chris dodd from washington dc. special coverage of life after lehman continues. we speak with the former prime minister of iceland, who led his
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country through the crisis in 2008. florence hasricane shifted. the storm as we can to category 2 -- weakend to category 2. it will still bring rain and storm surge to the carolina coast. florence could make landfall near wilmington, north carolina early tomorrow. it is bringing wind of up to 105 miles per hour, enough to tear off a roof. president trump rejecting the puerto rican death toll due to hurricane maria last year. he blamed democrats were artificially inflating the number of casualties to make him look bad. a study by top u.s. universities concluded the storm killed almost 3000 people. the president said, 18 people died. president trump firing back dimon, who ceo jamie
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claimed he could beat the president in an election. the president tweeted that jamie dimon is not smart enough to run for the job. he has made a lot of bankers look smarter than they are with economic policies. suspects in the poisoning of a former russian spy in the u.k. says there is an innocent reason they were in town. they told russian tv they were visiting salisbury as tourists and left because of the snow. the u.k. has identified the men as spies. moscow denies it. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm courtney donohoe, this is bloomberg. vonnie: thank you. update on brexit. pound strengthening, giving up gains. u.k. government spokesman james ramp upys they will preparations for a no deal brexit. he says it is unlikely but possible. poundgain, british
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trading at 1.3105. this is bloomberg. ♪
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♪ vonnie: live from new york, i'm vonnie quinn. julie: this is the "bloomberg markets: european close,". , erdoganira falling surprised most economists by hiking rates. joining from vista gold -- istanbul, give us the short version of the story and why rates are at 24%? reporter: short version? tricky. that was a roller coaster ride in the last few hours.
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the expectation was for a rate hike of 21%, in the survey of analysts and investors that bloomberg conducted and what came through was 24%. it was a surprise slightly to the upside. going into the decision, two hours before we heard from the turkish president, underscoring his unorthodox view that higher rates caused inflation and that interest rates were a tool of explication. you can see the market getting anxious, thinking pressure was on the central bank not to hike. the fact that they came out and pushed against rhetoric from the president and make it clear they have to react to the realities on the ground, double-digit inflation, the highest level in 15 years, economic growth beginning to moderate, forecast for inflation even next year from some investors, a quick line from the central bank, concerns about domestic matters,
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keeping the door open for ongoing tightening policy or further tightening as when it is needed. julie: have we heard reaction from the president following the rate announcement? i am curious. in the u.s.,, it appears this is a sign of independence. how is it being perceived there? reporter: initial signs are incurre -- encouraging. initial signs from investors and asset prices, they are not surging. turkish lira and turkish stock market, same thing goes for bonds. there is still the reality. this is something, it is not just the issue of raising rates. you have unresolved political disputes with the united states over the american pastor being held here. then you have fiscal tightening as well. the work is still ahead for the country, it is still a lot.
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that means you could still see pressure on assets going forward. there are some were taking this as opportunity, dupont capital said they have been adding turkey. they see the market undervalued, 20%, almost back down to book value, arguably opportunity, if you have the courage to get back in given the conditions and uncertainty. vonnie: wonderful report. thank you. plunging iceland into crisis, the overleveraged banks could not access credit. massive default broke down the government. asr haarde, who now serves the ambassador to the united states. he joins us from washington. with the benefit of hindsight,
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is there anything iceland should have done differently? perhaps, staying in the whaling business for example? geir: there are a lot of things we can all learn from the financial crisis. our banks were overleveraged, super active in international markets, taking advantage of low interest rates and the abundance of cheap money. we were operating within european framework, regulatory framework, which we had to much confidence in, and it was not perfect, not as perfect as we had believed. there were a lot of actors that can look back and say, i didn't analyze the wrist properly. -- the risk properly. there was insufficient risk is tha -- risk assessment and management at many levels. vonnie: what do you make now of the environment, as you look across europe, do you see problems? geir: they have changed a lot of the framework within which they
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regulate the banks. i think they have learned quite a bit from the crisis of 10 years ago. they also learned one thing from us, because one of the things we did during the crisis was we protected depositors. we changed the order of priorities in terms of the claims against the banks to prioritize depositors. i believe the european union has also adopted that approach, which is consumer friendly. ambassador, of course you also came under legal scrutiny in your home country in the wake of the crisis. you were indicted, did not serve time. i am curious as you look at the potential for crises around the globe, how you think responsibility should play out? is it for the leader of a country? regulators? that actors within the system --
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bad actors within the system? geir: those who make the decisions that are wrong. i need to correct your colleague , who said that i was convicted in this trial. that is not true. i was found not guilty of substantive charges that had anything to do with the crisis. the only minor charge -- vonnie: cabinet meetings. i believe i said that. geir: i do not think you did but, what about the assessment of responsibility in our days? of course, bankers should be held responsible for mistakes, breaches of the law that they are responsible for, and so should everybody else. we went through a process in my country and a number of bankers were found guilty of breaking the law and have served time in jail. that is up to every country and its own rules and different
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systems to figure out what to do in specific instances. vonnie: i think iceland is being cited as an example to admire in that resolve. thecurrent micro crisis, at theepreciated 6% beginning of the month because of wow airlines. countryou run a small and not experience these micro crises? geir: i would not call it a crisis now. it is generally recognized our currency has been overvalued for some time, making things difficult for our exporting industries. we have diversified the economy substantially. we have fisheries, renewable energy, tourism, including andines, two big airlines,
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another other things in the i.t. business and so on. diversification is one thing. currency fluctuations are another. we have independent currency, in this resource-based economy. there is always the risk of fluctuations in such a small, open economy. vonnie: can i ask you about brexit? your party is eurosceptic. you must have interest. have you imagine it will play out? what does your party believes should be done? geir: i am not in politics anymore. colleagues are opposed to membership in the european union and so was i at the time i was active in politics. we could do just as well on the outside. we have done well within the framework but within terms of the european economic area, for our economy to join, let's say,
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the euro system, we would be at the mercy of positions taken at the european central bank. it would be like a straitjacket. decisions on trades and other things, at the european central bank would never be based on anything that has to do specifically with events and developments in the icelandic economy. vonnie: thanks very much for your time, ambassador geir haarde, iceland's ambassador to the united states. julie: time for the bloomberg business flash. the biggest stories in the news. the richest person in the world fund tog a $2 billion help the homeless. jeff bezos will create nonprofit preschools in low income communities. he is fund to help worth $164 billion. homelessness is a problem on the west coast.
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airbus replacing the sales chief after less than a year on the job. eric schultz joined from rolls-royce, he was hired to turn airbus into a challenger to boeing. that is your bloomberg business flash. vonnie: thank you very much. for thefour minutes european side of things. adding to losses, down 4/10 of 1% potentially on the comments of a no deal brexit. the dax up a quarter of 1%. cac holding onto a two-point gain. this is bloomberg. ♪
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♪ >> this is the european close on "bloomberg markets," let's see where we are finishing up. altering to the finish on the stoxx 600, majority in the green, down 1/10 of 1%.
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a good showing from the carmakers. you see that in the dax. up 2/10 of 1%, all gaining. good session. rallying a quarter of a percent led by the banks following the ecb decision and mario draghi reaffirming asset purchases will end i don't know the facts. the facts need to come out. that is the point i am trying to make. quacks i am curious of what you think about the increasingly .asty ads >> first, i legally cannot
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pac, and heper super pac, about anything they do or don't do. we are legally prohibited from discussing ads with super pac's. even the inner cc. secondly, i think you know me pretty well. i abhor identity politics. i do not think it is good for the country. i don't think is good for society. campaigns are most successfully run by talking about ideas can we had a good -- ideas. look at how far left the democrats are going. they want to abolish ice. they want to socialize medicine. economicepeal all the policies that made this country great. we have a great con trust to run on. i don't think identity politics should be played by anybody at any time.
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i will just leave it at that. that follow up on that, if super pac is exploiting identity politics, will you stop raising money for it? >> you cannot legally coordinate with a super pac. i want to save our majority. i want to do the things i can to save our majority. it surprise00, does you that the president made that claim? >> i will just say what i just said. there is no reason to dispute these numbers. it's a function of this is a devastating storm that hit an isolated island. that is no one's fault. that is just what happened. about the talking pres. trump: the one that is on the -- [indiscernible] the one that is on the floor today.
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conservatives of like to see their policy priorities reflected. concerned about conservative riders in this bill? >> i think we got a great amount of victories for our members. first of all, where funding -- the v.a. mission is a perfect example, done the way the house wanted to get it done. when you are negotiating with two parties in four corners, you will not get everything you want. negotiations and compromise works. this 94-5, the vote speaks for itself. talked about the storm. last year, you moved dolls for irma and harvey.
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based on lindsay's questions on conservatives,by you will have to do some supplemental if the storm sideline as it is and the sandy bell a few years ago? >> if memory serves, there were things in the sandy bell that members did not believe deserved to be in the supplemental bill. those bills have been cleaned up since then. the harvey and maria bills were much cleaner bills. also, we have plussed the fema account.
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i am not sure we should feel as comfortable as the outlook was presented today. vonnie: the spread you points, we2.5 basis are away from crisis levels. how much are you concerned about it becoming a real problem and how much it is a specific problem for italy and that the european union needs to look at these deficit targets? >> my concern is that we have because ofitioned the exceptionally high spreads in 2011 and 2012 to consider spreads of 200 to 300 basis points are not crisis levels. as a matter of fact, the euro
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area is unsustainable if other things are equal. gives does theat european union have to be more lenient with countries that are finding it hard to adjust? that,ind it interesting in the way you pose your question, you left the ecb out of it. isa matter of fact, the ecb
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a major, biggest player determining how fragile government bond markets are. the ecb on its own, with a discretionary decisions that would be better suited for the euro area, could provide more security and calmness and markets. let me -- calmness in markets. people at the ecb always say that markets determine interest rates, we don't. that's not true. ratesmarkets and interest and best there is always this threat, just a couple of downgrades by a couple of rating agencies can out ofthe government collateral.
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that is the ecb policy that could have been changed to something more reasonable that is not as punishing. julie: i do want to ask you about another topic that has been relevant in cyprus. money laundering. we are seeing some executive departures in ing about allegations of money laundering. how relevant do you think that is in europe at this point and are regulators doing enough to fight back against it? i have to agree with some of the statements that have been ecb officials and others
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that it would be very useful, actually essential to harmonize the enforcement of money laundering at the eu level. in the euro area, we can at least do this. the regulatory framework is fragmented. regulators do not have as much power as they should have to make sure we have better practices in europe. -- if this would be centralized with greater enforcement authority to the ssm, practice could improve drastically. julie: thank you so much for your time. carney: hurricane florence has
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slowed down, but it is still category 2, power left to tear off a roof. florence's path has shifted again and it could make landfall near wilmington, north carolina as early as tomorrow. a million people have been ordered to evacuate. clothing prices fell the most in seven decades to medical care costs also declined. in turkey, the central bank raised its central bank interest rates by the most by erdogan 15 years ago. the benchmark raise -- rate was .aised six points he said turkey should cut rates. inlation rose to most 18%
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august -- to almost 18% in august. julie: coming up, fitbit white be losing to apple, but can it pull out a win? we will find out next. this is bloomberg. ♪
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julie: for our battle of the charts, you can see all the charts on gtv .
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>> there haven't been any huge up dates on the apple watch your but that changed yesterday. the tumble quite yesterday, one of their biggest competitors, especially in the u.s.. this is a market in which it is only 30% penetrated, depending on which demographic you're looking at. that consumerab and lock into your product. that is why analysts are concerned because apple took a big step forward in that health and fitness space. julie: i was trying to look at your wrist. >> i have apple watch. as you can see, i am not quite into fitness as julia's.
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i will talk about that -- julie is. i will talk about that another time. i thought i would talk about car stocks. talk was tariff implemented back in may, european stocks for cars have gone down 16%, so a real the client for european automakers. it remains to be seen what happened then's desk what happens with nafta. it remains to be seen what happens with nafta. if can see that chart on the bloomberg at gtv . julie: i think i have to give it to vonnie today. together,ulies stick vonnie. nie: i am honored and
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humbled. all sorts of emoji's. julie: this is bloomberg. ♪
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vonnie: live from new york, i am vonnie quinn. julie: and i am julie hyman. the climax of months of trouble in the banking system in 2008 was a surprise. norman king spoke with guy johnson in london. july 2008, eight was clear that confidence in the banking system was waxing and waning and only a recapitalization of the banking system both in u.k. and the united states would solve the house him -- the problem. we spent a lot of time trying to persuade the government to do
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this. britain was the first to do it. 2008, after that, one month things seem to be improving a bit, the next month things are getting worse. something deeper would have to be done. brothers was the , thef most people's list institution that would get into trouble. bernanke made it quite clear that, in his judgment, if the fed had not then dramatic action, every major financial institution in the united states could have failed. that is a pretty strong statement. that became clear as we moved towards the autumn. sundaya that somehow on 14 september, we were happy with
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what was going on and, on the 15, it was bad news. that's not right. we knew the banking system was in deep trouble in the week before lehman brothers failed. there was a concern about lehman brothers building up. the conversations that took place over the weekend were trying to find a solution to the lehman problem,. suddenly discovering that limits was in trouble. guy: lehman brothers was not a watershed moment, but was that he lehman brothers go a mistake? >> i don't think people consciously>> really let it go. i think people in the united states worked very hard to find a solution to it. they took the view that they would not put public money into lehman brothers. they look further options. that they could not lend to lehman brothers because there was not enough collateral. they concluded that a deal would be lovely.
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they couldn't find an american back to buy lehman brothers. they were hoping that barclays might buy it. barclays is a lucky bank because they bought it for half the price a few days later. but the hang up on the barclays deal was that people in the u.s. wanted the british government to underwrite any potential losses from lehman brothers. since we knew at the time that we were basically -- julie: we have breaking news from goldman sachs and its succession. david solomon is set to take the ceo. other management changes, steven beshear is expected -- stephen take theexpected to head of the company. david solomon is to take over
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for lloyd blankfein. these gentlemen were being seen as candidates already. the shares are not much changed. these are guys that were already there, part of the management. this is a succession that has been well telegraphed, or leaked, one would say come on the street. vonnie: we know these characters. reno john waldron as cohead of investment banking. then he became the chief of the investment banking division. these are all guys who
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know each other and have worked together for a long time. shares little changed on this news. julie: the headline is saying that they will be sold president and cfo. we are not seeing a copresident situation as we did at the bank in the past. they copresident structure was to tee up a successor to lloyd blankfein. that is no longer necessary at this time. goldman sachs, by the way, the stock has been performing really poorly recently. as we talk about this, the shares have followed this year by about 9.6%. they are down for 1, 2, 3, 4, 5, eight, 9, 10, 11, 12 record losing streak.
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that 12-session slide we have seen. that is the longest streak ever. it does not look like this news have arrested it in any way. to reiterate, waldron will be president and shcerr will be cfo. named cooon has been and president. it will be interesting to see how these gentlemen change up the back, if at all. there are changes underway in a five-year plan and that will continue at pace.
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but for now, we should imagine things will keep running as they have been running. julie: indeed. in the statement, lloyd blankfein highlighted on john waldron's expertise in global m&a and underwriting. it is not a pivot, a real emphasis perhaps on the part of the business being signaled. life underk about lehman, it is a changing of the guard was again. julie: good point. we will keep watching the goldman sachs stock and analyzing these changes at home and. our full complement of staff here at bloomberg. this is bloomberg. ♪
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westin. welcome to bloomberg balance of power. we have breaking news about goldman sachs. the future leadership of goldman sachs is coming to focus. david solomon is new ceo. >> buddy john has been working with david solomon. we reported he would be rising. he goes back to the bear days with david solomon. it has been a long time coming. when you are ceo, you want new people at the helm. the current cfo will be taking charge of the trading desk. stephen scherr


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