JPMorgan’s $750Mil Fine: Surveillance (09/17)

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Sept. 17 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Gary Shilling, Jack Markell, John Taft, Paul Miller, Bill Martin, and Sandy Cockrell. (Source: Bloomberg)


Running billions of losses.

The fed begins critical meetings, tapering amid weak growth, low inflation.

Gary shilling is still on the deflation watch.

917,092 people in delaware.

We speak to the governor of the state.

Good morning, this is "bloomberg surveillance." we are live from our world headquarters in new york, tuesday, september 17. joining me, sara eisen and scarlet fu.

Important meeting.

The fed starts the meeting, tomorrow out with the decision.

Is ben bernanke a lame duck?

I don't think so.

Everybody is expecting a big move and it comes to tapering.

The question is, how much and will it go through with some of the economic data?

Shameless plug, 2:00 p.m. tomorrow, said meeting, be there.

Overnight, we got a read on german investor confidence.

Rising to the highest level in more than three years.

The closely watched survey.

British inflation slowed down to 2.7%. transport and clothing prices did increase.

In the u.s., tom mentioned the fed meeting, will be hosting a special announcement tomorrow at 2:00 p.m. eastern time on bloomberg television.

Economic data, this morning, cpi or consumer prices.

Good read on inflation.

The federal reserve watches that one.

10:00 a.m., housing market index, pretty good measure of sentiment.

It is a light day in terms of our put events.

Some big interviews.

Looking forward to these with dan dilbert summit the founder of quicken.

Rick snyder and twitter founder jack dorsey.

That should be interesting and timely etc.

The ipo announcement.

Quite market, but i want to focus on the australian dollar.

Euro-dollar continued strength.

West texas under 107. on to the next screen.

The vix, couldn't get to a 13 handle yesterday.

Gold near 1200 handle.

Futures, 1689. that is an important metric.

The aussie dollar is right at the point of really signaling a china recovery.

We're at the highest level for the aussie dollar since the middle of june.

It is better economic data out of china.

A weaker u.s. dollar and a celebration larry summers would not be fed chairman, week dollar.

In the midst of all of distractions, jpmorgan and the fed and things we will talk about frontpage, the idea once again doom and gloom over china being unfounded.

What does the united states economy look like?

I will be interstate.

We will get the economic forecast tomorrow at 2:00 em it is time for the frontpage for all of the most important stories in our top story is jpmorgan.

This came out late yesterday.

The bank is set to pay at least $750 million to resolve regulatory probes into its biggest ever trading loss, the london whale treading laws that came in a more than $6 billion.

A big win for the sec, jpmorgan expected to admit wrongdoing.

In the past, these banks admitted and denied nothing.

That is significant.

And the significant part is what?

It does open the door for civil charges.

Not the action -- actual london well.

We will see what comes out.

Our second front-page story is our brand-new story.

On the front page of

Tom is excited.

Grand theft auto 5 hits store shelves today.

This game makes more money than most blockbuster movies.

I have no clue what this is about.

I don't either.

It is forecasted one oh yen dollars in sales -- $1 billion in sales in one month.

My husband plays it, but the boys are not allowed to play it.

Come on.

Maybe in time.

This is violent.

This is a big, big deal.

What else do we have on the front page?

Janet yellen, the fed vice chairman, set to be president obama's topic to replace ben bernanke as fed chairman.

Larry summers took himself out of the running by withdrawing his name from contention.

She is at the fed meeting today.

And they begin their two-day meeting.

The opponents of larry summers said he was too loud for regular leading role street.

If nominated and confirmed, should become the first woman to serve as fed chairman.

Photograph, peter diamond in the background, and orbital laureate, was turned down as governor.

You wonder the politics here if we bring in vice chair -- but with all of the economist letters and the policymakers pushing for her, it looks like a much smoother confirmation process.

Investors are taking it as the easier money.

A continuation of ben bernanke's legacy.

. shelley will join us later in the hour to discuss the fed.

-- gary shilling will join us later in the hour to discuss the fed.

Right now we have two guest hosts.

Welcome, governor.

How is the economy?

It is getting better, but not at the pace we would like.

We have some great companies.

Dupont, a key employer, j.p. morgan chase, discover, capital one, citi --all growing.

We have a strong ultra business.

-- puoultry.

Is washington your friend or enemy right now?

We can't wait for anything to happen in washington.

I think in the governor would tell you the same thing.

We have to be focused every day on the things that employers care about.

We are in a world where 3 billion people looking for work and are 1.2 million jobs available.

In this global war for jobs.

Which means we're in a global war for talent.

The jobs will go where the talent is.

Every state has to understand that, and we have to act accordingly.

Leadership is critical.

You're a democrat, in support of president obama.

Look at the fed decision.

This was his decision to make all stock he lost from sight of his suppose it front-runner candidate when it comes to syria, questions about his communication as well.

Is the president losing influence?

I don't think so.

Overall, washington is unbelievably dysfunctional and has been.

I don't define any governor who says they're waiting for washington to do one thing or another.

It would be great if folks there could get on the same page, on the deficit, on the debt, on everything else.

You blame congress and not the president?

I blame -- i blame the washington nationals.

Yuri shilling, than ask you, is gridlock good?

Is gridlock that the governor has to ignore, is it a beneficial thing for economic growth?

There is a school of thought.

The gridlock is great because and they don't do anything and anything they do in washington is determined tall, more regulation and so on.

I think the reality is, we have so much government involvement in the economy now that gridlock means there are some things that don't get done that really do need to be done.

In other words, if the government were wretch smaller, you would say, hey, leave them aside.

That is not reality, anymore.

Despite all these overhangs, your bullish on the overhangs?

We did a series for bloomberg view on this.

I have to ask this, you own price change.

You started merrill lynch economics.

I hate how longer report is.

I apologize.

Can i get a cliff notes kind of -- do you give up the deflation nor alan metzer is worried about inflation.

Others are worried about inflation.

Are you worried about inflation?

Not really.

As long as we stood the d going on and slow growth in the world of the kind of access resources, unemployed people, you just don't have the makings of inflation.

Is consensus from higher interest rates?

Are you on the bill gross team?


i think the highest -- higher interest rates are in overreaction to what the fed might do.

There are nine, they're talking about tapering.

Tapering is only getting rid of the additions to the excess reserves of two point one joy in dollars.

The fed has a really got into the main act.

A lot more to come.

Can we have four hours of "surveillance" this morning?

Tapering is the word of the day.

We need some company news.

The united kingdom is cutting a stake in lloyds.

The british government selling six percent of its holdings in the bank for $5 billion.

It netted u.k. taxpayers and 95 midol or profit, five years after the government bailed out lloyds.

-- 95 million dollar profit, five years after the government bailed out lloyds.

Demand for the iphone maybe we can china.

Pre-orders topped 100,000, the way below the 300,000 pre-orders for the previous iphone.

The new iphones go on sale this friday in china.

Allegations of bribery of a baby food brand in china.

Allegedly paid hospital workers thousands of dollars to use its milk out her with newborns.

The charges were disclosed in report airing on china's state run television.

The allegations are being investigated.

That is today's company news.

I want to show you some images.

Talking about how they were trying to remove the costa concordia ship.

It is a success.

We have this time delay video where crews used giant chance to pull it up right off the coast of italy.

It had been there for about 20 months since it capsized.

It will cost about 800 million dollars.

For the next few months, the ship will sit underwater on platforms and towed to a port, broken up for scrap metal.

Very cool.

Very cool.

What a scene.

Will and iphone 5 as do that?

I don't know, but it is for sale now.

The cheap one is.

I went in the apple store yesterday to look around.

It did not have the frenzy.

It was busy.

But not -- coming up, we have to talk about jpmorgan, set to pay the big fine for the handling of the london well trades.

The staggering legal fees, not to mention the occasional damage.

That is coming up on "bloomberg surveillance." ? good morning, "bloomberg surveillance." jack dorsey, look for this on bloomberg west.

6:00 p.m., jack dorsey, twitter, i think they will talk about an initial public offering.

I'm really looking forward to that.

That will be most interesting.

This is "bloomberg surveillance." it is time for jpmorgan to pay up for the london whale.

So much for tempest in a teapot.

It could be as much as $800 million in fines and penalties to u.s. and u.k. regulators that jpmorgan will have to pony up.

Jpmorgan will also make the rare admission of wrongdoing as well.

Up until now, usually, the banks able to say they admit or deny nothing.

Senior executives would avoid charges, so i guess that is a big win.

It feels like this has been going on forever as the actual trading loss until now.

Jamie dimon keeps china put it behind him.

A settlement is expected this week before the end of the third quarter.

Jpmorgan board is meeting to approve the fines, the penalties.

This number, it is still a moving target.

If more agencies join in, it could go north.

That is something to pay attention to.

No surprise jpmorgan yesterday put out the stress test results to the show the banquet survive an economic crisis, trying to move attention to some of the key issues.

When you look at the operating income for 12 months, you can see it is miniscule.

$700 million versus $ 35,000 million.

Gary shilling, do you have something?

I think there are two overarching factors that are important to me.

One, simply too big to manage.

Jamie dimon says he knows all the joints and bones of the place, but this london whale thing happens in he first said it was a tempest in a teapot.

He honestly didn't know.

The second thing is culture.

I think every institution has a culture and it starts at the top.

You say, was this this offbeat, these guys went wild or was that -- this is not in a vacuum.

There have been a number of other legal challenges for jpmorgan.

It is starting to add up.

Jimmy dimon has been washington negotiated with different agencies.

He faces inquiries from 7 different u.s. agencies and two european nations.

The amount of money he is paid up so far, 17.2 billion dollars is what jpmorgan is had to pay just to resolve a lot of these penalties and legal overhangs.

It has cost the banks.

I would attest also to attaching main street to wall street.

Governor markell is with us this morning from delaware.

You're known as the tax haven state.

I say that with respect.

Grand banks, 50 used bank vote, surveillance yacht we go out on.

It is called the bell of cincinnati.

It is a joke.

How do we get main street's trust back with wall street question mark for that matter, back with delaware, when we have tax havens and malfeasance by banks?

Let me say, the delaware has no sales tax and our other taxes are very attractive.

It is very different -- and you have every right to do that.

Absolutely we do.

That is why so many people come to shop and work and live in delaware.

As respected jpmorgan chase, certainly wrongdoing ought to be punished, but we have to understand, this is a company with hundreds of thousands of employees.

The overwhelming majority of the people who work at jpmorgan chase, including pretty much all the people who work in our state, or middle-class people.

All they want to do everyday is go to work, do the right thing, go home and raise a family.

Sometimes these companies get tainted with -- painted with a broad brush.

So you support these actions to put 2008 behind us.

I think we have to.

We have to move on.

It is really important financial industry, the financial sector be strong, both in terms of lending as well as employment.

We could go on forever.

We are to talk about delaware in a bit.

The bell of cincinnati.

That is a good game if we had a yacht.

A federal judge, he came up in another case, where he basically did not accept -- was from one of the other banks and did not accept it because he said, if they -- how can you say we don't admit, we don't deny, etc., but you're going to pay half $1 billion fine?

I think there is a change here.

It is a market change.

It is a change and it is a win for mary jo white, the new chairwoman.

Gary shilling and the governor of delaware with us.

Moody's analytics is warning it is the only state in the country that still faces a rising risk of recession.

Even with all those tax benefits.

That is coming up on "bloomberg surveillance." ? it is a peaceful morning.

The flag at half mast at the white house after the tragedy yesterday at the navy yard.

More than a dozen dead.

Good morning, "bloomberg surveillance." on the tragedy, turns out a former navy reservist is suspected of killing 12 people in that mass shooting at washington, d.c.'s navy yard.

Investigators say aaron alexis acted alone and called off the search for other suspects.

He was shot and killed by police at the scene.

It was the deadliest mass killing in the u.s. since the massacre of 20 students and six adults and newtown, connecticut last december.

John kerry says the us is not wavering on its goal of ending the role of president syria assad.

Chemical weapons expert sent to work with the assad regime.

He stressed the u.s. remains committed to a side's opposition.

-- two al-assad's opposition.

Tickets for super bowl will double in price.

Go bengals.

Mezzanine seats could cost $2600 from $1250 last year.

Those are your top headlines.

The bengals won last night.

They did.

Freezing in the cold in new jersey in january.

Why would you pay that much?

I can see the super bowl at the university of delaware.

It would be cold there.

Let's get to a delaware wedding must read.

I'm going to focus on washington because the remainder of the legislative time and attention that is not spent on syria will not be consumed by budget and debt ceiling debate.

A columnist at the washington post writes -- the gridlock we have talked about so many times.

Governor, you have been a treasure for a decade before governor.

This is a challenge to deals politicians that are completely fixed.

It is for sure a challenge, which is why what we try to do in delaware is focus on the business community, make sure we understand in detail what it is they're looking for so they can put people to work.

We will continue this discussion.

Gary shilling with today's fed meeting today.

It turns out the half of u.s. publicly traded companies are incorporated in the state of delaware.

That is an amazing statistic.

? this is "bloomberg surveillance." we need a data check as the fed begins its two-day meeting.

A good run for the equity markets, if not some of the economic data.

10-year yield, i will call that ms.


Euro persistently stronger.

Nymex crude is soft off of the commerce a statement on syria.

It means companies have more of a currency to buy other companies.

Packaging corporation of america, a big gainer yesterday, up 11% in trading after agreed to byuy.

Allegheny technologies, up more than 8%. under armour, a decliner, falling about 4% after it was downgraded to neutral.

Keeping the price target at about $77 a share.

And facebook also getting hit by about 4%. we are going to talk about delaware.

It was singled out in a recent report is the only state in the country still at risk of falling into recession.

This according to moody analytics.

Doom and gloom.

Governor of delaware, jack markell, was treasurer for a full decade and he knows where every bean counting is on every statement within the state.

He disagrees with moody's assessment of the delaware economy.

Corporate center where they do all this corporate business.

Take us away from that to the real delaware.

We have the stereotype, this myth, from new york to washington and back on amtrak.

What is the real delaware look like?

In contrast to the mood is report, job gains have actually outpaced the nation with 2.3% growth over the last 12 months compared to 1.7% growth for the rest of the country.

The federal reserve says we are well-positioned for growth, cnbc says we are -- who?

About that.

-- sorry about that.

Is he begging for road trip to delaware?

On the unemployment, 7.4% is your own implement rate, which matches the country but it hasn't really moved.

A year ago, it was better.

Why is a moving in the wrong direction?

At the same time, we've had a job gains.

If you look at how many jobs get created over the last year, we have outperform the country.

This is one of the frustrations when they release these figures.

At the national level, people can drop out of the looking in the an employee rate comes down.

That part is participation.

At least we are creating jobs.

Not as fast as we would like, for sure, but we have wonderful companies.

Governor, you have the stability, the corporate headquarters and so on, i would have thought that would've made you less cyclical than a lot of other states.

First of all, we are grateful for all the companies and -- that incorporate there.

What happens, we absolutely got crushed in 2008. we lost both our car plants, all the banks -- we have a huge number of banks.

They were downsizing big-time back then.

Fortunately, they are growing.

The poultry got hit.

People ate less chicken?

They did.

How did you downgrade from chicken, tofu?

Governor, are you the template for the little switzerland?

You're the autoplay disaster him a question about that.

Are you the little switzerland america yearns for with a high in jobs like the banks?

It is what we're striving for.

In the same way, we are recognized so much how we are so connected to the global economy.

Even in our small state.

We have a steel plant that is now owned by russian company.

With a plant but does pharmaceutical packaging owned by folks from india.

We have a couple of copies owned by the taiwanese.

More than ever, we are connected globally.

Where do you fly in there?


We have frontier that flies in and out to a number of cities.

Mainly in the philadelphia.


The thing with delaware, in 1792, we talk about half the u.s. publicly traded company's are incorporated in delaware, you have mcdonald's, dell, which is why carl icahn decided to sue the board of directors of dell.

A lot of lawyers in the state, a lot of accountants in the state, but what about companies that make angst being based in the state, not just incorporated or calling delaware the home?

We have everybody from dupont, a company that makes gore-tex, to north america's headquarters for astrazeneca, poultry firms in the southern part of our state, which is an $8 billion industry.

Agriculture is hugely important.

How many employees of astrazeneca?

About 2000. so it is a real business, not like three people?

What percentage of the incomes are generated through the chancellery courts and headquarters?

Is that a big chunk question are about 21% of the state budget.

It is a meaningful number.

We love that part of the business, but we're really trying to get more and more people to recognize the value of doing business in delaware.

The banks have tens of thousands of employees in the state.

With all this friendly tax rolls and corporate taxes on in particular, how do you stay on top of drug trafficking or embezzlement, money laundering, some of the illegal activity that can come with that?

I'm not really sure where to take the question.

First of all, it is not about the taxes for most people.

We do have no sales tax and attractive taxes, but if you look at the companies incorporating in delaware, it has less to do with taxes and more with the quality of the chancellery court.

Our laws, our corporate laws of the best understood in the country.

People know what they're getting.

So it is not a threat for you.

I don't think so.

The critics will say, it is incredibly easy to incorporate in delaware, some say it than getting her drivers license.

But you understand the capital formation importance.

It is one of the greatest advantages this company -- countries had.

If we what entrepreneurship, companies need to be able to raise capital.

Let's go to the heart of the matter.


I love them.

Here is delaware eggs from whitmore farms.

It is like a democratic chicken with a republican chicken.

This is a booming business.

I going to whole foods and everyone is standing around the counter going mental.

Everyone is poking them.

I'm as guilty as anyone else.

This is a big business, isn't it?

If you going to whole foods, a lot of the chicken you get comes out of sussex county, delaware.

He is just one big shameless plug.

He is the governor, that is his job.

It is great.

We want to bring up another story.

As we talk about companies and looking for adventitious ways in, elon musk these to watch out because general motors goes head-to-head with tesla.

Chef revolt uses a gasoline engine to charge it's better, but they're saying it they're developing an electric car that will go 200 miles on a single charge and will sell for about $30,000. pretty affordable.

Gm not saying when the car will be available.

Tesla model s is all electric, but big difference in price.

How can you get jobs back from bmw?

How do you refill the auto factories?

It is challenging.

Part of the issue is when they closed the plant a delaware, both gm and chrysler closed in 2008, 2009. those were the last plant in the middle and.

The problem is, the cost of transportation from the midwest with black trucks on the road.

And terms of supplies and every thing else, has made it difficult.

We reached out to every car company imaginable.

This goes to the heart of your research.

There's a lot of individual competitions around economic growth.


Sure, there is.

And transportation is part of it and labor costs are a huge part of it.

That is why all the auto companies and other manufacturing moved to the south.

What is the recession risk right now?

What is the risk of recession?

I think it is probably low at the moment, but the economy is growing so slowly at it doesn't take an awful lot -- you don't believe in ben bernanke stripper city every -- ben bernanke's 3% recovery, do you?

They keep cranking them down.

He even admits this in his press conference, he said, well, if we once again are wrong in our numbers -- i wouldn't go with the fed as the forecaster.

That sets us up beautifully for gary coming up on america's economy.

A two-day meeting.

Do think vice chairman yellen speaks more this time around?

I doubt it.

We will be watching her.

And the next hour, bill martin, literally, retailers bracing for the holiday season and it is only september.

? this is "bloomberg surveillance." top headlines this morning, car sales in europe continue to slide, falling to a 23-year low.

Registration for new car slid almost 5% last month of the lowest level since records began back in 1990. that drop coming is record unemployment continues to hurt sales.

Crowds lining up in new york for the release of the latest grand theft auto video game.

There is tom.

It is estimated to take in $1 billion in just the first month of the release, four times the amount interactive software spends to make the game.

An early forecast predicts the weakest holiday shopping season in 4 years.

Shoppertrak founder to meeting sales will rise by 2.4% less than the three percent increase last year, weaker than the 4% gains in 2011 and 2010, and we will have the founder of shoppertrak founder discuss the reasons why in the next hour.

Those are your top news headlines.

As it is never too early to start tracking holiday shopping.

It is sick.

It just got refreshingly chilly in new york.

You're worried about ginger -- gingerbread men.

Kmart putting out a controversial holiday ad a little early.

Sara eisen, always the first in line for santa.

Single best chart.

When and how much will be fed tapir bite?

How investors are anticipating the move.

They have already sold off bonds.

It looks like the annualized total return for 2013. here's what we see so far.

If you invested in the long bond, 20% drop.

You're the biggest loser there so far.

Some of the biggest losses on record , noticeable bonds.

Junk bonds, sitting up five percent.

Having said that, raising her china gdp forecast, so long as 4% acts as a false ceiling, the bear market rally continues.

I would suggest this is totally affected by ethan harris's persistent call on economic growth.

I think it -- gary shilling is in that camp as well.

Your big call of the last few decades has been go long for long bond, 30-year treasuries.

Is that still the best place to be?

I don't know about right now, but i don't think what i call the bond really a verb by time in 1980 when the yield was 15.21%, i doubt that it is over because we are in this age of deleveraging.

Slow economic growth and -- but you're going to milk it another 20 years?

It isn't going to last forever.

It is probably over at about five years.

We're halfway through it.

What does the optimism that wrong?

On the economy?

On the economy or the interest rates.

I don't think they understand the power of deleveraging.

Would you look at all the monetary and fiscal stimuli that have been thrown at the economy, here and worldwide, and then you see economic growth below 2%, it tells you something.

Governor, have you seen deleveraging and it -- end in delaware?

Rocks the banks have been doing well.

They are hiring.

Compared to what question mark five years ago the credit card banks were absolutely hammered.

The securitization markets were absolutely frozen.

We have come a long way in that regard.

I just had the image of 3000 jpmorgan people fighting off legal bills.

Big legal bills.

The amount of money that is gone into bond funds, $1 trillion since 2000. and that is making gary shilling a happy man.

Time for photos making news today.

We have to start in colorado.

Raging waters continuing to decimate state roads and bridges and residential homes.

Right now 8 people are confirmed dead, but over 600 still remain unaccounted for.

Thousands are stranded, awaiting evacuation.

Helicopters on the move to reach survivors.

Mexico, soldiers and police are searching for victims of the latest landslide, and natural issue to hit the countries northern gulf coast.

Two massive storms converged -- global warming.

Historic flooding their.

Roads became ridges -- rivers.

The east coast, the hurricanes haven't happened.

Were moving off to the coast of italy.

This is the shot of the moment.

After 20 months of staying underwater, the coast record he was pulled up right early tuesday -- coast to concordia was pulled upright tuesday.

It took 19 hours.

It looks like they're finally getting it up right where they will be able to basically turn it into scrap metal.

They sell the compressed edge of the starboard side of the boat.


That phone you heard was gary shilling's, janet yellen: for advice.

We will talk about what kind of fair chad men -- said chairwoman she would make.

Or who the next said chairman should be.

Can they scale back the stimulus without harming the economy?

Stay with us here on "bloomberg surveillance." ? this is "bloomberg surveillance." scarlet fu has some company news.

It is the battle of the exchanges for twitter.

The company still deciding on where it will list.

A listing on the nasdaq would give the exchange of chance to make upward spiraling bungling of the facebook ipo.

York stock exchange listing would boost the image of that exchange as friendly or young tech companies.

Pandora has filed to raise about 231 million dollars by issuing new shares.

The web radio service made the move after shares more than double this year.

Pandora will sell an additional 10 million shares according to regulatory filing.

The owner of the red box kiosks cutting its outlook.

Sales will be below wall street estimates they say as discounts and shorter rentals its revenue.

The promotional strategy did bring in more customers, but it led to an increase in single night rentals at the kiosks.

That is today's companies news.

I know you go to red box.

I had a dvd of my hand the other day from the closet.

It felt so old.

It was vintage.

Are your netflix?

I do, but i am more and more disappointed.

The movies i want i can't get.

Which is frustrating.

We are going to talk about the federal reserve, the debate of the moment with larry summers out of the running.

The list of candidates to reduce them bernanke is getting smaller and less predictable.

Who should be the next chairman or chairwoman and how should they handle a job it is only getting harder?

Our guest host, terry schilling, has some thoughts about that.

We do know it is not going to be larry summers.

Is that a good thing?

It probably is because right now you don't need a lot of controversy.

We don't need a lot of acrimony.

The fed is at a delicate stage right now.

They're dealing with this tapering.

Cutting back on these $85 billion purchases per month.

And to have the uncertainty of a big fight over not only who the president picks, but in the confirmation hearings.

You write brilliantly in your note with your historical ability about the invisible hand.

I was the just with this odd policy, this original policy, it is a new invisible hand.

What is it?

The invisible hand -- what is the invisible hand the fed has her the economy has been all the distortions we are living in?

I think they have an invisible hand in the sense there is the hope they can come out of here was stability.

I think the invisible hand is perhaps more perception than reality, the hope that somehow the fed can keep things right.

What they've been trying to do by popping out all this money is convince people the economy is in good shape.

They have concluded it is not doing much good and just piling up the excess reserves that they have to get rid of sooner or later.

Here and lie some of the concerns, about janet yellen, currently the fun runner -- front-runner, the easy money candidate.

That is she will focus more on the unemployment and the stubbornly high unemployment that potentially worrying about inflation are bubbles coming down the road.

Do you share that concern?

That may well be, but again, i think the next said chairman , whomever it is, has got to deal with these excess reserves.

Now they're adding to them, $85 billion a month, and the economy is not going to stay subdued in growth forever.

When it does revive, these reserves will turn into loans and money.

Are you optimistic about that, that they can -- i think they will do it one way or the other, but can they do it in an orderly way?

There's so much dependence on the fed.

I call it their grand disconnect between complete faith in the said an economy's on the ground, which aren't doing all that well, so at the first tent the fed is going to change that policy.

What happens?

Markets take a nosedive.

March 1964, reeling from the assassination of a president, only gary shilling could have the 1963 income tax rate with a 91% marginal bracket.

A took $.91 of every dollar.

But there are were very few people who pay that.

We did this article , and what it really says is, there is this invisible hand that the corporate tax, the individual tax rate in this country, the actual rate is averaged 12.3% and every time it gets below that, they ease up on taxes.

When it is below -- thank you so much, gary shilling with a prep your, day one of the fed.

Thank you so much, governor.

I'm going to have three eggs for breakfast.

You some chicken for dinner, too.

The fed kicks off a two-day meeting, we see the dollar weakened against the euro, strengthened against the japanese yen.

The aussie dollar is the highest since june.

That or china.

John taft is our guest host, in the next hour of "bloomberg surveillance." ? ? this is "bloomberg surveillance." hiding billions of losses.

Jamie dimon pays another sub million dollar fine.

The elephant in the room is a lack of confidence by american business to invest.

You will spend more time shopping on the internet this holiday season.

Books, bricks and mortars, hoisted by its own pit tired.

Good morning, i am tom keene.

With us is the shakespearean actress sara eisen and scarlet fu.

I got that, that was very good.

It's not just online, it is more mobile shopping online.

Our guest for the hour is john taft.

235 billion dollars in assets around the world.

Where the retail investor is and what the concerns are for what could be a historic fed meeting.

German investor confidence rose to the highest level in more than three years in that closely watched z ew survey.

Here in the united states, the federal reserve kicks off a two- day meeting tomorrow.

We will get a 2 p.m. announcement.

We will get a forecast on the economy.

Tom and i will be anchoring a special on all things said and all of the excitement on bloomberg television's starting at 2 p.m.. our nation's inflation, 10 a.m. and housing market index.

It is a pretty light day for corporate events.

"bloomberg west" is holding court today.

Dan gilbert, founder of quicken.

Twitter founder jack dorsey.

The fed is front and center today.

Also jpmorgan is a big story which we will get to anymore and -- which we will get to in a moment.

Fed vice chairman janet yellen moved to the top of the list after larry summers took himself out of the running.

If selected and confirmed, she would become the first woman to serve as the fed's chairman.

Crowds lined up in new york for the release of its latest "grand theft auto" video game.

It is expected to take in $1 billion in sales after just one month of release.

General motors developing an electric heart to challenge tesla.

The vehicle would be able to go 200 miles on a single charge and cost around $30,000 according to "the wall street journal.

Co the technology is available today, but the cost of the battery is far too high.

That is company news.

Another company that is all over the front pages, a familiar place, is jpmorgan.

They are said to pay at least $750 million to solve u.s. and uk probes of regulatory trading losses.

They are expected to admit wrongdoing.

Market makers anchors stephanie ruhle is here.

She and her colleague at bloomberg were the first to break the trading story.

Here we are almost a year later.

Extraordinary, a $750 million fine.

Put that in context or did they have just reserved $1.5 billion for litigation costs.

Think about it, goldman saved $550 million for advocates.

Sdc -- on top of the $6.2 billion they already lost your it is -- i know you also spoke with ken langone who is a jpmorgan shareholder.

What did he say?

I spoke with him exclusively last night.

I asked if this is fair.

Jpmorgan had their best year in earnings the same year they lost $6 billion with the whale.

Now they are being fined $750 million for having had the whale loss.

Help me out.

Capitalism worked.

They made a bet, they lost, that is the punishment.

You have to love can langone.

Jpmorgan made a bet and lost, but if there is wrongdoing, then it is more than just capitalism winning.

Look at enron.

Enron had wrongdoing.

If the government had not stepped in where would we be?

If this is a case of securities fraud, if one or two men end up in jail for 20 years, it is a lot more than that.

Tom, this raises a lot of questions about the legality and potentially further losses.

Paul miller is with sbr capital markets.

He joins us now from virginia.

Paul, 700 some million dollars.

How much does this find her to jamie dimon and jpmorgan?

It doesn't hurt them at all.

They generate a lot of pretax income and 30 and $40 billion range.

$750 million does not really impact them at all.

It is a rounding error, per se.

Even though it sounds like a lot of money.

But for someone like jpmorgan it does not impact them at all.

How is her business right now?

Are they distracted by this?

In your meetings with management and senior management, are they moving front and center forward to 2014? is probably a distraction at the very top, i think most of these managers are moving through it.

I don't think it has been a distraction to the operations of the business at all.

I am sure it is a giant headache for jamie and a bunch of lawyers at the very top, but i don't see it impacting their business at all.

Except for the future of credit derivatives is wiped out, the rest of the street really got out of this business.

One of the two men indicted was merely a trading assistant.

The fact that he could face 20 years as a guy who put in the tickets, that is an extraordinary thing to think about the people in the business.

I think the distinctions are interesting.

There is this idea, it is a lot like martha stewart, the actions during a transaction versus the hiding of the process, to me it is interesting.

The talks about the functioning of the credit derivatives market.

It has had an impact heard there is no one making a big bet on the future of credit derivatives.

You can't talk to single bank ceo that says they are really going for it in a structured credit space.

No one wants to get in a mess like this.

I can't stop thinking about this kid, possibly could go to jail for 20 years.

He is not martha stewart, he is not the london whale making up to 50 million bucks a year.

He is a kid.

He was indicted yesterday.

Paul miller of sbr capital.

When we look at how much jpmorgan has put aside to deal with these legal problems, $1.5 billion, you talk about a headline risk for litigation.

How much more money does jpmorgan need to put aside?

That is an unknown.

It just seems like every time you do open a paper there is a new investigation and a new department.

A new lawsuit coming out after that.

I think jpmorgan and a lot of these other banks will continue to add to their reserves.

It is just a cost of doing business.

The crisis is going on for five years now, i guess the anniversary for lehman.

They are still paying for things they did five or six years ago.

And that is a polar extreme.

Paul thank you very much.

I love this look -- i love this book.

The movie will be out memorial day of 2016. actually it will not , because it is boring, boring.

"stewardship." how do we move on from the drama of 2008? there is this constant from the.

-- with respect to enough, we had a veritable windstorm of backward looking analysis over the last couple of weeks over the five-year anniversary of the bankruptcy.

I am here today to attend a meeting that the cfa institute is sponsoring on the future of finance.

In other words, let's stop talking about what we did wrong, what do we need to do differently going forward so that the financial system is a source for good.

We just need more transparency in derivatives transactions whether they are on the banking book or the shadow banking book.

There are many issues.

First of all is character.

I do get ethics and integrity back into our industry.

The second one would be how you get innovation , credit derivatives was a source for destabilizing the economy.

How to get innovation to be a source for solving social problems?

Robert schiller at el has written very articulately about this.

You have a retirement savings crisis, any number of issues you have to address going forward.

Stephanie ruhle, thank you, market makers, stephanie reporting on market makers.

10 a.m. eastern on bloomberg television.

Coming up on "bloomberg surveillance." retailers are strategizing pretty early and we will discuss some of the new numbers.

Good morning everyone, "bloomberg surveillance." i am tom keene.

John taft's important "stewardship." it is much more.

He is looking forward to the autumn of 2015. ethics and responsibility on wall street.

John, wonderful to have you here with our capital market.

What is the message to revenue producers and rbc capital markets as they try to restore faith in their customers about wall street?

Focus on the client.

That is what financial services industries are supposed to do.

They are supposed to solve the needs that our customers have, whether it is investment portfolios for the long-term or raising capital.

What it is executing trades in the marketplace, we are supposed to facilitate and help them reach their goals.

When we focus on our customers, we tend to the direct things -- we tend to do the right things.

We spoke to a small to midsize new jersey banker.

Today we speak to the royal banker of canada.

-- to the royal bank of canada.

Is it that separate where it is six or seven banks here and everybody else over here trying to move forward?

It is a dozen mega-globally significant financial institutions that are in the news all the time.

And there are literally tens of thousands of financial institutions other than those 15 in the spotlight, who are looking at this saying this is reputation really disasters.

We need to move beyond this are we are going to end up being like the tobacco industry.

You were with the cfa institute today.

How do you move to autumn of 2015. where is the ethics, where is the timeline out two years.

That is a really good question.

There is a band that played at woodstock all caps 10 years after.

We are five years after.

I think it is going to take 10 years.

This is a bloomberg explosive -- a bloomberg exclusive.

A guy in a suit knows who 10 years after his.

We are making up to the single largest rewriting of rules for financial institutions and a lot of good things have artie happened.

You can have all the legislation and rulemaking you want, you are not going to solve the underlying problem if you don't address the issue of ethics and integrity and responsible behavior in our industry.

That is what we have to get at.

John taft is with us from rbc financial investments.

Good morning, it is "bloomberg surveillance." this is "bloomberg surveillance." our guest host for the hour is john taft.

A former navy reservist is suspected of killing 12 people in a mass shooting at washington dc's navy yard.

Investigators are saying that the suspect acted alone and called off the search for other suspects.

It was the deadliest mass killing in the united states since the massacre of 20 students and six adults in newtown connecticut last december.

The united states has not wavered on its determination to end assad's rule.

Kerry stressed that your u.s. is committed to assad's opposition.

A price hike for the super bowl.

The tickets will double in price for the game.

Tickets could cost on a $600 and that is up from 1250 no -- those are your top news headlines.

-- tickets could cost 2600 dollars and that is up from $1250 last year.

It has only been september.

It is way too early to talk about holiday sales, write?

Is sick.

One early forecast calls for a drop in foot traffic at stores.

Online shopping is making up the difference.

If you consider companies like best i -- like best buy.

Best buy's online sales increased 10.5% from a year ago.

The ceo is not the only manager emphasizing the online sales channel as a top writer artie this holiday season.

Will you mark in -- william martin says amazon and internet are cleaning the clock of bricks and mortars.


Is it just amazon or are there other sites as well?

Clearly, the retail sales are closing -- retail sales are shrinking in brick-and-mortar stores.

To me it is too simplistic to say it is just about internet.

I go nuts now.

I am spoiled third i go into a brick-and-mortar store and they don't have my size and they don't have what i want, is that a big heart of it?

The retailers have to act and execute.

They have to deliver on their brand promise.

When they see declining number of people's coming into the stores, they have to react accordingly.

Once you get there and you have decided to spend money on their store , they have to convert your injury buyer.

Given some of these transit you're predicting and also the shortened holiday season, what are retailers doing now to prepare the strategy for the season?

Not only are they looking at the behavior of shoppers around the community and the malls and near them, they are beginning to want to understand how to react and behave once again in the store.

We see them using video analytics or using some of the mobile analytics combined with a perimeter counting and give them the sense of what they should be doing at the store level.

Can you tell i am a tall dork when i walk into a store?

If i was in the store perhaps i could.

It is really just anonymous data.

We are looking at volumes of people coming into the door.

If we want to get more specific, that information is available on the sampling type basis.

Online sales is a straight line up as we mentioned earlier over the next couple of years.

Mobile sales is going to make up an increasingly bigger part of that.

Your research must show that people are unwilling to buy certain things over their phone, right tackle it probably does.

When we say two point four percent increase, there are can it be some winners and losers.

That is up to the individual retailers to figure out how to solve problems.

Apparel, is that something people will buy over the phone?

What we are seeing is retailers wanting to use all mechanism of technology to reach the consumer.

They are trying to organize their process to include mobile, to include online.

Many retailers are trying to sell online to get them to the store to come pick up the product.

It gives them a reason to come to the store and gives him another chance to sell the product while they're there.

It is probably early to start changing your format based on the technology that is available.

It is more important to change your behavior in the stores to make sure you are delivering a quarterly -- a quality experience.

I noticed that kmart aired a commercial already with a gingerbread man.

I suppose there is such a thing as early as created an uproar.

In the classic movie the christmas story, which i've seen a dozen times, they shouted in cleveland at a downtown mall.

The family goes in, those days are gone.

You guys know more about malls and anyone.

Are those days dead?

Where are the kids going?

If you live in new york, they are a novelty.

We love malls, but what you see happening are the retailers promoting earlier and earlier.

We don't see it is doing them any justice.

We see them draw more of the holiday sales in november and robin from december.

Is this model replicable?

Each individual retailer has to develop their own strategy.

Best buy had to react to what was happening to them and it was struggling with the show rooming affect.

By virtue of the fact that they're trying to elevate their brand, use the technology available, they were able to see some growth rate il martin of shoppertrak founder.

What would be the most market moving event of the year?

On "bloomberg surveillance."? first, bloomberg.

This is "bloomberg surveillance." i am sara eisen here of course with tom keene and scarlet fu.

Traders were indicted for securities fraud and their role of the banks $1.5 billion trading loss.

Separately, jpmorgan agreed to pay at least $750 million to set tle u.s. and uk suits.

The british government selling six percent of its holdings in the bank for $5 billion.

It comes five- minute -- with the sale the british government now owns 32.7% of the bank.

China unicom says free orders for the devices have topped 100,000, but that is way below the 300,000 pre-orders for the previous iphone.

The new devices go on sale this friday in china.

That is today's company news.


You're watching some companies changing hands in latin america.

He has been selling more assets as his company shrinks to a fraction of its former size.

He is facing a crisis of investor confidence because of a missed forecast and ballooning debt.

A lot of this is driven by the debt and its effort to his dart scaling back on the stimulus.

The knock on effect of countries like brazil is inflation.

We have seen it in brazil and india and indonesia.

Rbc is trimming its business in latin america, but that doesn't mean it is pulling back and all emerging markets.

Just to be clear, we are closing an office in uruguay.

In terms of serving the needs of ultrahigh net worth clients in emerging markets around the world, we are actually growing into that business.

We are cosponsors of an report on where the wealth is coming from.

It is all from the emerging markets.

Did he want the same services as the high net worth in the united states?


They are very conservative.

They want to move it offshore and diversify into safe assets in non-correlated havens.

They want non-correlated havens, but they they want to buy real estate in new york or bonds with three-year maturity?


The world bank of canada today is light.

Canada is what switzerland was 20 years ago.

The banks of canada are what swiss banks were years ago, i.e. havens of safety.

They are very sophisticated but their risk tolerance when it comes to how they manage that safe money that they have earned in their businesses, they are ultraconservative.

I did an interview which was about don't invest culture night -- don't invest ultrahigh net worth people.

Why, they are the ones a connection to take the risk?

Yes, but the mindset is i take that risk in my operating business.

Once i have made the money i want to move it and invested in a way that is safe.

This is a critical point.

Is the nexus of my and be overrated?

The nexus of wealth is still switzerland, offshore, channel islands, miami, hong kong, vancouver four chinese nationals, those are the hotspots.

Absolutely, the fastest growing market for us in the united states is miami, serving our international clients.

Xtc the wealthy in the united states turning to behave more like a wealthy overseas or vice versa?

Very interesting you mention that, because there are more transnational clients in the united states, that is individuals who for whatever reason have an interest in our international services and capabilities.

A.b. because they are children who moved here and became citizens, maybe because they have businesses overseas.

There is a growing market for internationally interested americans and we are serving them.

How hard is this to get the wealthy asian consumer and investor, and who is your biggest competition?

It is very competitive.

Talk about a regulatory headwind.

Your key message as it canadian is the distinction.

They want to work with canadians.

All right, john taft.

With an eye on asia.

Scarlet, with an eye on the market.

Meetings begin today, it is a two-day meeting.

Announcement comes out tomorrow at 2 p.m.. futures are a little ahead of that.

Tom, back over to you.

Good morning, everyone.

"bloomberg surveillance." all of our interviews out of bloombergtv plus.

On itunes and android.

I am tom.

We you get two days of the fed meeting.

Sara eisen will bring you a 2 p.m. special tomorrow as that announcement comes.

Joining us as well, john taft . he is chief executive officer of rbc wealth management.

We take a hard look on bloomberg television at corporate finance.

Who better to speak to then deloitte sandy cockrell.

He has a new survey.

The less optimistic year ahead for corporations.

Sandy, we want to talk to about the outlook here.

I just want to know what cfos say about what it means for hiring.

Do they plan to hire?

Yes, but it is pretty dismal.

They are expecting about a 1.23% lift.

That is up from the survey average of the last 14 quarters of about 1.6 and 1.7%. but it is still not what people are looking for.

How accurate are your surveys echo.

-- how accurate are your surveys?

. in terms of optimism and pessimism this quarter, what we are expecting to see is 42% of the cf oh's -- of the cfos.

We have got about 18% of what we call optimism index.

This is a first time in the history of the survey that we have had three consecutive quarters where we have had a net optimism index.

That is actually good news.

And we feel pretty good about it.

Where is he caution coming from?

You come from chapel hill.

You actually speak to business people about what they do and what they wish to do, where is the wish to do right now?

Why the gloom?

There is no question about it.

The big issue is the slowdown in your three regional economies around the world.

Waiting for that to come back and then secondly what will governments do to try to correct that.

So it is not the generation of a constructive net present value, project by project.

It is not a microanalysis.

I think cfos today are much more strategists and think about the longer-term.

It is not as discreet as looking product type product am a company by company, issue by issue.

They are really looking at the longer-term's. one of the longer-term issues is the cost of healthcare, certainly in the united states.

What other certain -- one other survey says that most cfos count medical benefits as their primary concern.

Is unclear.

They really don't know.

Until we get some clarity about what it means, there's no question that even at deloitte, we are very conscious about what it will mean to our healthcare.

Only negative so far.

I think caution is the more proper word.

This is fascinating, just finished john hay one volume which goes up to 1895. in 2013. doom and gloom we can't grow anymore.

John taft with us with rbc capital markets.

You live this every day.

Are we just at a point where we can't figure.

Very interesting, because when we look at some of the metrics with all the sales, revenue growth, catholics and hiring, and we look at sales where they are hiring a five percent year-over-year sales growth, earnings growth is only eight percent.

That is a survey low.

The interesting thing we have been talking about is we have been anticipating that delta between sales growth and earning growth is beginning to tighten.

Our view is that many companies have taken as many costs as they can out of their infrastructure and.

Until we see economies improve it will be tough to grow the bottom and.

All right, from what is keeping cfos up at night to what is keeping you up at night.

What is the main market moving event for the rest of the year.

Baseball, fat, the german elections on sunday, that could be very moving.

This is bloomberg surveillance television and radio.

Good morning everyone.

Bloomberg surveillance.

Joining us now in the blue anchor, the lou -- scarlet fu.

Betty liu.

Are you kidding?

This is cool.

The third-generation of the buffets are coming out in public.

How a buffet, who is warren buffett son, he is actually now teaching a course at columbia university.

He started a few days ago.

It is basically in innovating in public policy.

How old is this guy and what has he done?

He is in his 20s and he is a farmer just like his dad.

He is very midwestern and obviously he -- people don't know this -- she has been running the howard g buffett foundation.

For the last few years.

Seriously, he came out of northwestern with some nice accomplishments.

He worked on the obama/biden some form of political team.

He and his father have just written a book called 40 chances." very cool.

I'm no that's the only reason why you're going to pay attention.

Is he marriageable?

These are not the questions i was expecting to answer.

Time for mo

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