St. Louis Fed’s James Bullard: 9/20 Full Show

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Sept. 20 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: James Bullard, St. Louis Federal Reserve Bank President, Bloomberg West Editor-At-Large Cory Johnson, Chris Whalen, executive vice president at Carrington Holding Co., Ron Cohen, CEO at Acorda Therapeutics and Kurt Kuehn, CFO at United Parcel Service.

This is "bloomberg surveillance." the future of american banking, billions of dollars of fines and billions of pages of dodd-frank regulation.

Apple launches the iphone, blindingly fast.

Should samsung quake?

Microsoft -- ballmer is in the search for a device of choice.

I'm tom keene live from our world headquarters in new york.

It is friday, september 20. joining me, as always, sara eisen.

And anna edwards has brought her british accent, the host of "countdown" in for scarlet fu.

Good to have an eye here at head of the german elections and everything.

Do you have the new iphone?

I don't yet but i will be getting one.

But first let's kick it off as i always do with a morning briefing.

Digg news overnight.

I's central-bank governor surprised the world -- india's central bank governors apprise the world by raising interest rates.

He is trying to rein in inflation and get cracking -- growth has been pretty slow.

Higher rate protects the currency from devaluation.

He has two problems he wants to deal with it the weakening rupee and higher inflation.

The interest rate increase does threaten the economic growth.

Was not expected by anybody.

Not any of the economists -- they need family fisher as head of the central bank.

May be.

Also on the calendar in the u.s., nothing really on the way of economic releases.

We do get one earnings report.

Starwood restaurants, the owner of tom's favorite, i love garden -- twice a week that it at the olive garden.

I can see that.

The apple iphone 5c and the 5s go on sale today.

8:00 a.m. worldwide.

Your is a live picture in new york city.

The flagship apple store.

Cory johnson will be here.

It is a lot of hype, seriously, but there is a lot at stake for apple.

I drove by an hour or an hour and a half ago but -- and it was not as large an audience as the iphone 5. as you can see, they are already gathering.

Thank you.

What is also interesting today is the iphone goes on sale in china, which is said to be a key market for apple as well.

The question is, is it cheap enough to get an audience?

I generally wonder what does it mean for samsung and the others.

Let's do a data check.

Aipac "bloomberg surveillance." -- a apckpacked "bloomberg surveillance." spaces in the market.

Right on the second board.

In honor of anna edwards -- will you make fun of my accent all morning?

A stronger british pound.

We will go shopping.

The footsie, 6624. burberry, i was in their store.

Beautiful fashion.

Anna edwards always decked out.

1631 pence -- how do you cloak of equity stock?

1600 -- -- and 31 pence.

So much more elegant.

I am going to get pulled over at customs now with my largest suitcase.

It is time for the front page where we scour the papers in the web for the most important stories.

On our front page of this morning is apple.

Absolutely.

We touched on it already but let's get more.

The iphone 5 as an 5c are hitting the stores.

They go on sale at 8:00 this morning in the united states.

A are poised for a record debut, according to some analysts.

Around the world, lines have already been forming.

In munich, 2000 people lining up, tokyo, 800 people waited and in london, one guy in the front of the line was there three days to get his hands on these things.

He bought two gold phones.

To me, it does not happen in any other entity.

Why some of thebulls on apple's sake, you can't underestimate the customer loyalty.

The question is, can it continue?

What i put on twitter -- heels, you put at the o right through the iphone 5, i will have to buy a new one.

I am not wearing heels.

I dropped my phone and she put the heel right through the iphone.

Are second from page story, jpmorgan fined $920 million over the london whale trading.

The securities and exchange commission landed its biggest -- biggest victory with jpmorgan admitting wrong doing.

This also was in the united kingdom, right?

Fca as well?

The u.k. regulators have a piece of this as well.

But it does not put to bed the whole issue.

From where you sit in the city, in greater london, is the attitude about jpmorgan -- has the attitude about jpmorgan james dimon?

I don't know.

I do not know if i will be qualified -- if you don't know the answer, just make it appeared that is what we do.

You can't deny the fact jpmorgan has been on the front pages it seems every single day.

While you can quantify some of the fines and tunnel -- and penalties like this one, the reputational damage -- there is a lot of competition in terms of bad headlines in the banking sector in london.

True.

Let's go to the third one, "the wall street journal." there could be problems with the launch of the insurance marketplace created by the federal health overall, related to obamacare.

The government software is experiencing a pricing glitch, according to the insurance executives.

The government and insurance -- insurers are working to correct last-minute issues.

October 1 is the rollout of the exchanges and no one denies the fact this will be bumpy but i am wondering if this can add fuel to the politics, republicans trying to defund obamacare.

Would you suggest this is a political debate in the sense that most of these articles are on the cover of "the wall street journal" as opposed to other newspapers and bloomberg question republicans and democrats agree this will be a bumpy rollout.

It will be a major endeavor.

James bullard with us at the 7:00 hour.

But right now, gene munster, honored to bring you senior research analyst at piper jaffray.

He will head over later on to the iphone store for his.

Christopher whalen joins us am executive vice president of carrington holding company.

Chris whalen with a terrific perspective on banking.

Gene, want to get right to your call.

The stock was at around 700 and something per share.

You said higher and higher.

Let's go back a year ago, what did you get wrong?

The impact of the prize was won.

I know apple is sticking to the higher price but i think we underestimated them keeping the high price and how it would impact in emerging markets.

It was really about the iphone 5 adoption.

Interestingly, we had feedback in hindsight either six days into it.

They give us the opening week number of 5 million iphone 5's and we expect 8 million.

Ultimately if we can gain a lot of information over the next two days -- kind of like a movie with opening weekend.

You take a little information and extrapolate a long way.

I should have put more weight on what happened opening we can.

Ask an article on "business week." i can't say enough.

We'd -- read this article.

Forget about unit growth and forget about samsung and forget about nokia, people use their iphone.

Do you agree?

Absolutely.

In the states we measure it.

About 90% of the people who have a iphone's say they will buy another.

Outside the u.s. the numbers tend to be a little bit lower, 60%-70% range.

What apple is making a bet is when people get their iphones they follow love with them and they will stick with them and they don't need to give up on price.

That goes to our next story, which is why we are absolutely glued to the live images of the fifth avenue store, tokyo launch, china.

This is a company that has lost almost a third of its market value since reaching a high last year.

Since the iphone 5 was released.

What exactly is at stake here with the retail launch and investors questioning the strategy?

Iphone 5c 55% of sales of the need to get it right.

I think this is the first step of what will be six quarters of a sped up product cycle.

Yes, the iphone 5s is important, but it is the same form factor.

What we are going to see if this will be a healthy adoption by the iphone six will be -- next year.

Chris whalen, your expertise on banking.

Your boring world uses blackberrys.

I will look something or do you go to the fancy hotels you are in and there are are still the old guys on blackberrys.

I totally disagree.

I have two, i have enjoyed -- the guy we had yesterday -- do i need to carry three phones?

We need to take a bigger survey.

Honestly the iphone have big issues.

I was stunned apple pulled it out with all the problems -- last time around -- a lot of issues.

I would rather use a driodoid friendly.

The fingerprint technology do you expect it to constrain supply?

Tom, i know you pointed out you pointed out that the lines to not look as much -- it is kind of an optical illusion.

I counted, 875 -- there were 750 -- how long did it take?

There is an app for cap the people.

To put it in perspective, 750 at 8:00 a year ago.

That number will probably be over a thousand at 8:00. walking through this line, i would say 80% of the people are not from the u.s.. i would say 70% are from southeast asia.

I think there is still a very big market.

I will have a tough time -- i've got to polish up on my southeast asian language.

I have the team -- t mobile north american boss, he said in pre-orders, the pink one was flying.

Don't know who was buying it.

But that is where that's the one selected where is the 5th avenue store over there -- covent garden?

Gene munster with us from piper jaffray, cory johnson with terrific perspective later on "bloomberg surveillance." let's get to company news.

Exit so much.

The lending operations of major automakers are being investigated for possible bias.

The justice department as toyota and hard -- and honda on information on pricing of loans.

As many as five other auto lenders associated with car companies are being asked for similar information.

A legal setback for groupon.

The company loses its bid to dismiss a securities fraud lawsuit.

The class action suit alleges groupon misled investors about its financial performance before its ipo nearly two years ago.

A judge says the allegations represent "laudable violation of securities law." the dividend is back at the new york times -- the company will by stockholders four cents a share next month.

It had struggled with a drop in revenue from print advertising.

And that is today's company news.

Coming up on "bloomberg surveillance," we will talk a lot more about apple.

Tweet us.

What do you want to see on your next smartphone?

Fingerprint technology is in the new iphone.

We are just getting started.

? go to newsstands today and pick up a copy of the newest issue of "bloomberg businessweek." there is tim cook flanked by his deputies, in a rare exclusive interview with our senior tech correspondent sam grobart.

He went to cupertino.

He got access.

And he spoke to them.

And, boy, did they hammer home the strategy they will keep it high end.

The new iphone's going on sale globally.

Tom, you said you will get the champagne and white iphone.

I can't decide that's black -- you look great in black, and this is an outstanding cover article where sam grobart alludes to the dynamic emirates air.

Gene munster from piper jaffray minneapolis, has a champagne five that's -- 5s, he is an apple bull.

Chris whaler desk was whalen of carrington is a user of smartphones but a little more skeptical.

What will the cash to do at apple over the next two years as they cycle through the next product launch?

If you assume they grow their top line around five percent, which enable comfortably do that, they will generate about $30 to $40 per share per year in cash.

They will give some of it back through a dividend and some they will buy stock back.

But it gives you an idea.

10% cash flow yield.

Is this a blue-chip company or a growth company?

How much does a t-shirt cause?

300 bucks?

Egyptian company.

Cool growth company or is this my belt?

If you look at the growth rates, the 10% growth rate, in internet and tech world you have to grow 30% to 40% to be a growth stock.

The reality is this will be more of a value story but it will be a continued 10% growth the next several years.

And this "bloomberg businessweek" piece, the message was we are not in the business of making junk.

They will not go low end at some of the street was expecting.

Will they have to do that because of economic growth and the potential for consumers in an emerging market?

There is no reason for apple to come out and cut prices right out of the gate, because there are going to be a lot of people who will line up and buy them.

But over the next few years you will see a more dynamic pricing environment for the iphone throughout the world.

In general they will keep the higher end price but they will be more nimble country to country.

At the end of each report there are risk factors.

What is your number one risk factor right now?

What's the number one risk factor is android.

If they continue to drive the price down and the strategy of apple sticking to a premium price doesn't fly and the emerging markets.

Anna, you have been watching this.

Is it covent garden?

Where the big lines are.

The guy in front of the queue -- sorry, line -- he bought two gold ones but he will sell them online for charity apparently.

One of the things that look so different about me 5s is the fingerprint technology.

Who will make money from that?

Is it the or apple, retailers, app designers?

This is an exciting part of the next decade of what will happen in mobile, and that is the digital wallet.

Right now, security is the issue and the fingerprint reader helps address some of that.

As it stands when you buy an iphone 5s you will be able to buy things on itunes through your fingerprint.

They will extend it to pass and also retailers.

I think apple will probably not make a ton of money facilitating this, but what they are trying to do is make the iphone essentially the best digital wall.

So you want to go out and buy the hardware to get the digital what experience.

Plastic will be dead in a decade and cash is already dead.

When are you going to the fifth avenue store?

15 minutes.

13 minutes?

646714 -- i'm getting.

Will you get a phone today question that will they give you one?

I have them mailed to me so i can focus on research today.

At is critical -- can you get a phone mailed to you or do you need to go to the store to switch your old phone?

If you go online at that i have an hour ago you can have within three business days.

G muster, thank you so much.

Piper jaffray.

And we will look for your research note.

Coming up next, why it matters a german chancellor angela merkel remains the leader of germany?

The morning must-read is next.

"bloomberg surveillance lowe's quote streaming on your tablet, on your phone, and bloomberg.com . ? this is "bloomberg surveillance." i'm sara eisen, here as always with tom keene and anna edwards is here for scarlet fu.

Voters in germany will decide sunday whether to give angela merkel a third term as chancellor.

Recent polls suggest the election is hers to lose.

Voters say they trust the leadership and credit her for the recent economic gains.

A surprise rate increase by india's new central bank governor, raising the benchmark interest rate in an effort to keep inflation in check.

The first major move by him both -- since taking office two weeks ago.

In sports, the los angeles dodgers became the first major league baseball team to clinch a playoff spot.

The dodgers beat the arizona diamondbacks 7-6 to win the national league west title.

A few hours later, the boston red sox clinched a spot -- calm down, tom.

Last place to first place.

Very cool.

Comeback story.

They sucked last year and they are really quite good.

Over the weekend, morning must- read, we need to get some water on this.

Not the boston red sox or dortmund german soccer.

And edwards is on the german elections.

Taking a leak from a column -- buying german equities on the back of the election.

They say by germany and not the eurozone.

This is the typical climber you hear right now about buy europe.

The clamor is growing, time to buy europe.

European equity markets are at a five-year high and there is an uncanny -- uncanny sense of tranquility in the bond market -- buy.

Typical cry on why we should buy the eurozone.

Lex actually says to by germany.

There are a couple of things that could change as a result of the election.

One thing is the amount of investment german companies do domestically, and labor market rules.

Anna, the big question for investors -- is this german election about germany or about europe?

In other words, if she does win, is there a new vision for the eurozone?

Opinion is really divided.

Some say this is big.

If she is in for a third term, there could be a change in emphasis.

She has been the one banging the drum in europe saying that anybody who gets a bailout on the periphery needs to put in place reforms to get that.

Others say actually it will be exactly the same as it was.

I read cover to cover a primer in "the economist" i say to her three months ago, and where you sit in london, what is the motive of the german people question mark the idea is, they are really well off, but they get angry because they look at the wealth of the haves and the periphery as even more wealthy than the germans.

Which way is it?

There is a complicated dynamic.

Our correspondent in germany talked about how this has become an election around the personality of angela merkel.

She is selling herself as a personality.

Going for this iconic third term.

What kind of legacy we'll see what to leave?

And it is not actually an election about some of these issues, even though -- she is speaking to german voters.

She has been careful to stay away from austerity.

Although the opposition has not and they have been talking a lot about it.

Coming up, microsoft holding its annual day of meetings.

Did steve ballmer went over any skeptics?

We all wanted to go the same direction, up.

? this is "bloomberg surveillance." i'm sara eisen, here as always with tom keene and and edwards host of "countdown" here from london.

She is here for scarlet fu.

This week shaping up to be the third in a row of games for u.s. stocks.

Somebody wins with a punch bowl is that big.

Let's look at equity, bonds, currencies, commodities.

Futures flat after a bang up we ek.

The euro is stronger in the nymex is often little bit.

When you look at the bond market, how should it react to what we witnessed from the fed?

Should you just assume consensus, higher yields, or with potential gdp where it is, yields has the drive lower?

This is where we thought.

Rates bottomed a year ago.

And the market has since been going it on way -- it's own way despite the fed.

But i am sure you will see an enormous rally.

For example, in the mortgage market, i don't think we will see the bench marks we used the price loans -- the john templeton 101, he will talk by a shortage of shares, shortage of bonds.

Will we see a shortage of bonds?

This is your wheelhouse.

Will we see a shortage of bonds because the fed is taken them all in?

The fed is taking it all in and the mortgage market production is falling.

Details of loans in the securitization market, fannie and freddie, are falling, because of lack of demand.

It is not interest rates.

You got to think structural issues when you look at mortgages.

In treasuries, the deficit is coming down.

You may have an overall shortage of paper.

I want to bring in some company winners and losers.

We did see a standout gainer in yesterday's session.

You don't usually see this one on the gainers list it groupon up nine percent.

It got a very positive up great from stifel nicholas on the potential for mobile games.

Pandora also had a nice game.

It is doing an expanded stock offering, trying to find it plans to ramp up competition.

Yesterday, rich greenfield put out an aggressive sell on pandora.

He says itunes radio will compete.

Good morning -- [laughter] who is this?

Cory johnson.

He could not stay quiet.

I did not name my dog ballmer or steve.

It is a black lab.

Cori johnson joins us -- cory johnson joins us from "bloomberg west." i named my dog bear --what else?

The newios, when you long gone, any music, the first thing you get is the radio app.

I think that matters.

It is not that different than a browser in a microsoft computer.

They are using that phone to gain share in that business.

We are going to talk about your dog now.

Cory johnson is here, and we will talk about microsoft.

It actually was a gainer yesterday.

The critics have been saying microsoft has been wasting vast amounts of time and money on failed consumer electronics.

Steve ballmer tried to explain the strategy yesterday in their 2013 analyst meeting.

Yet, bloomberg west editor at large cory johnson is here.

Let's have a listen first on what the bomber had to say about the all-important mobile strategy.

Mobile devices, we have almost no share.

I don't know whether to say that with enthusiasm or kind of uncomfortable tension.

But i am an optimistic guy.

Low market share sounds like upside opportunity to meet.

Help me.

He looked like max headroom -- can you explain max headroom to sara question mark of was the body language but -- and that was the body language but he was brutally honest.

Do they have a plan?

What's steve ballmer would tell us as there is a whole world of people who have yet to use computing, period, and the first computing device will be a smart phone.

Think of that, emerging economies in africa, asia, he really thinks there will be people using bees cheap nokia smartphones with windows software -- cheap being $100 -- and that is their strategy and they will make the hardware and software.

But the hardware business is a crummy business for everyone but apple.

Because there isn't a lot of money to be made there.

Heart of his job yesterday was to try to convince the analysts -- part of his job yesterday was to try to convince the analysts that there is a strategy there to create phones, make phones, sell phones and use michael -- and use microsoft hardware and software.

But also not forgetting about the rest of the business.

He wants to keep microsoft working to keep the pc the device of choice.

Is there a big battle going on to replace in every office across much of the western world -- you still see pc's on desks.

That's got to be a big -- the nonsense that the pc is dead.

Everybody who wrote that headline wrote it on a pc.

What has changed is the refresh cycle.

The companies replacing pc's every three years will replace then -- them every six.

A big change.

Really bad news for intel.

Here is a chart real quickly.

Apple, apple, up, up.

Harsh.

Here is microsoft flatlining like a bad patient.

Cory, you know better than anybody i know a bloomberg about the psychology of microsoft.

How is sick -- how thick are the walls and silos?

There is a joke -- not that funny.

You have one big outside circle and the person in the middle tiered and microsoft is lots of different things all with guns pointing at each other.

I don't think it has changed at all.

I think the company is still that way.

And microsoft -- different parts of the company will develop pieces of software that the other parts of the company already have so they don't have to work together.

The question that is looming over everything is who will be the next ceo, now that weballmer will retire in less than a year.

That hangs over everything.

Here is how he addressed the question yesterday.

We made this decision to announce before we had a replacement so we can run the absolute best succession process on the planet.

I got to say, it's kind of a little weird to me to come to work and have that kind of known.

But yet when we talked it all through, we said this is absolutely the best way to ensure that the company get the leader it deserves.

A window into at least his own personality.

It is weird for him to come to work.

I don't know about the actual search.

On this powerpoint, it was to get, but it does in a body want to work at microsoft?

I thought they all want to work for google?

Microsoft is a great place to work.

I was in seattle -- you just wanted to see the seahawks.

What i don't ever want to see the seahawks again after what happened last sunday.

There are two domenic companies in the seattle area.

One is microsoft and one is amazon.

Amazon is full of younger people who are starting new things and creating new businesses and running their own business units.

And microsoft, there are people who have worked there 15 years because they spent their life improving the save button.

Chris whalen looks inflated -- does this discrete destruction at work, all the mumbo-jumbo we are talking about?

I used to work as a tech banker and microsoft is just further along in its lifecycle.

Apple is obviously in ascendancy, new ideas and people.

I love what you are saying at amazon -- about amazon.

A great company.

But microsoft should break themselves up.

I don't think they will ever work together.

The problems i have using their products are ridiculous.

You would think there would be a real database inside of outlook right now.

They just don't do the most obvious thing.

Are you the last guy on the planet using bing?

I don't use it.

You are a pc guy.

Bing has 19% share.

I would have thought lower.

It is not nothing but i think part of it is what it is coming from with the operating system.

What is the cory johnson angle about apple?

I don't know yet.

I have to see what happens at the store.

But i don't want to make my cover today about what color phone to get -- although i am curious about what people decide -- but i think it is what this new operating system means for the whole universe of products.

Here is "the new york times." sara, you have "bloomberg businessweek." samsung, apple -- who will win?

I will be there in the hour.

Should we go?

In the water is warm.

I don't like waiting in line.

You are not going in the next hour because in the next hour we will talk about packaging and delivery.

The ups cfo will be our guest on "bloomberg surveillance" on bloomberg television, streaming on your tablet, your phone, and.com.

? this is "bloomberg surveillance." i'm sara eisen with tom keene and anna edwards is here from london in today for scarlet fu.

The obama administration is said to count down on greenhouse gas emissions.

Epa unveiling new roles requiring coal plants to capture and store some of the carbon dioxide they produce.

The coal industry says the regulations are far too expensive and would prevent new plants from being built.

Spending cuts narrow britain's budget deficit.

Borrowing help slightly while tax income rose.

Bending by government department fell by five percent over the year and revenue growth was led by gains from corporations, taxes, and value added tax.

A real estate investment trust that owns the empire state building wants to raise $1 billion in an ipo.

It plans to offer 71 million shares and one of the largest ipo's ever for a week.

Vote -- for a reit.

They might have it into the top?

I recommend going at night.

They are open at midnight.

Incredible view.

It is actually very romantic to do.

Sounds like an hr violation.

With customs, i have to pay import taxes on all the things i buy in new york.

[laughter] when you bring your dog?

I'll bring their.

Let's go to single best chart, anna edwards.

Robert crosley at citi, comparing u.k. -- it's british.

Comparing the u.k. qe program to the u.s. of what happens when you withdraw quantitative easing.

The u.k. did not do any tapering , they just stopped.

The experience is different in that sense.

But the popular assertion, of course, is a reduction in qe means yields go higher.

That is not the experience.

We have lessons from the first round of qe and the second round and then the third round.

If you look six months out in all cases the 10 year gilt yield is lower six months after the end of qe then when it ended.

Steel dynamics going on.

Chris whalen, you are perfect for this.

Is this a predictable?

Does anybody have a plan forward or predict ability of where we will be given an outcome?

I think the british are doing it right.

The fed has a pause -- they are not willing to stop quantitative easing because what they see particularly in housing.

The whole point of this exercise was to get consumer demand and housing moving.

It really has not worked very well, particularly if you look at the purchases of treasuries.

I think we would be better off if the fed were to taper quickly, because it was signal to the market things were getting better.

What bernanke did the other day was say basically things are not getting better.

James bullard is on the next hour.

What do you want to hear from him?

I would like to hear constructive comments about how we can get policymakers to realize that perhaps we need to change things.

I don't think businesses are speaking nearly loud enough to policymakers about the impact of what the fed is doing in a negative sense.

I suspect some business leaders, particularly on wall street, i speak -- speaking loudly to congress saying they want the juice.

It must have had something to do.

You are so cynical.

How can somebody from the pacific time zone be so cynical?

My dog is named bear.

We will talk to jim bullard about what would prompt a change in policy.

We put so many obstacles in the wake of credit creation in this country.

You are not going to grow jobs until credit expands.

Very simple.

And we don't have that.

Chris whalen, hang on because we will talk about your warehouse.

Dodd-frank has been the law of the land for three years but only a third of its roles are in place.

Are we any better off?

That is next on "bloomberg surveillance.

? this is "bloomberg surveillance." i'm sara eisen here with tom keene and anna edwards from london the in for scarlet fu.

Nokia ceo is in line for a windfall if his company replete -- completed the sale of the handset is handset business to microsoft.

He will get $25 million if the deal goes through based on the share price.

Shares of pandora have almost tripled this year.

The stock continued its run yesterday, gaining almost seven percent.

It came after the internet radio service announced a larger than planned stock offering.

The proceeds will finance its efforts to compete with radio stations for advertisers.

Priceline closed above $1000 a share yesterday, topping its dot com global high, and the previous high was $990 a share on a split-adjusted basis back in april of 1999. that is today's company news from the files of "bloomberg west your.

-- "bloomberg west." now you are an even money.

They are killing it because of the hotel business.

The hotel business in the u.s. are the chains, but in europe it is much more diverse.

So, priceline is doing a great job.

Bringing order to it.

Cool.

What have we got?

We are going to talk about banking because more than a year after jpmorgan caused a multibillion-dollar loss the government imposed a $920 million fine and one regulator ready to flex its powers granted by the dodd-frank law to allow the commission to charge firms for recklessly manipulating markets.

That is just one of jpmorgan's headaches and it brings us to a broader question of the issue of financial reform, still a work in progress.

We need an update on the future of too big to fail.

Particular whalen is a veteran, grizzled analyst, now executive vice president at carrington holding -- christopher whalen.

He wrote an important book.

How money and debt build the american dream, as we count the billions and billions of pages of don freight -- don frank.

What is different now?

Bounds of regulations.

The late 1930's and others that you capture brilliantly in your book and what is different this time about dodd-frank?

Dodd-frank was a reaction by congress, and the american public, a calvinist approach of limiting credit and punishing people.

We are angry at the big banks.

But the reality is the government and congress are the most culpable in the subprime crisis.

They are the ones who created the circumstances.

And of course the bank is obliged and it's silly and reckless things.

We have to understand, the embrace of the u.s. government with the housing sector was the catalyst of the subprime crisis.

A lot of my friends, berry results and others say it was agreed and stability -- barry rithiltz say he was agreed -- everybody has to own a home.

With the pooling of risk.

-- without the pooling of risk, you would not have had this.

Jamie dimon right now, onward and forward, build revenues and cash and move on or is there a more nuanced approach?

I think that is what they are doing.

We do a lot of business with jpmorgan.

They are a very important part.

I do not think there has been particular damage as far as the institutional community.

Certainly a lot of public relations heat.

What i look at at morgan is they are guiding down on the mortgage business and they say they will lose money on mortgages this year because volumes are falling.

Those people you talk about jpmorgan, do they like james dimon?

Of course.

He is a great operator.

He made a mistake.

Dawn kopecki engaged him and he responded and i don't think he would do it in the future.

As a prudent risk management -- manager?

It produced a large banks are difficult to manage.

Why do we know about the london whale question mark the volcker rule and dodd-frank.

In england they take a radically different approach.

Anna edwards, what is the difference between the approach at lloyds bank or this horrific story at rbs versus what we hear from christopher whalen?

The differences.

Instead of splitting banks -- the selling of proprietary trading desks -- they decided to do ring fencing, putting walls between parts of big international businesses.

Bob diamond writing in this over the weekend warned about this, you have regulators in different parts of the world in a global industry doing different things and it undermines the credibility of the regulations.

Do you go along?

Of course.

We have the image, this neurotic global regulation but we -- we don't have it.

We have international treatment.

I would say to my friends in the u.k., get on with it -- you need to sell those banks and get them into private sector.

The longer they stay under state ownership the worse it will be.

You talk about the banks in the mortgage companies and everybody being blamed, what about the credit rating agencies?

We have not heard anything about that and there has not been regulation addressing their role and structure.

At carrington are -- at carrington, we are traditionally non-agency shop.

I don't think they understand our business at all.

We had the fiasco earlier this year with fitch and the forbearance balances on mortgages.

Way too much jargon.

The point is, they don't help.

What we look for in our firm are investors who want to do the work, who understand risk, and deploy capital on that basis.

The rating agencies, i think, have gone into irrelevancy, frankly.

I have about eight more questions.

We have to continue.

Chris whalen.

Mr.

johnson, going to fifth avenue?

I will run over and see what is going on at the apple store at 58th street.

What is the bigger deal, the s or the c, the cheap one?

The cheap one could expand the market for apple or not.

We shall see.

The s continues to be the top- of-the-line model.

Ch we should send you to china.

A long walk.

And eight our show one day.

I could go with whalen for three hours and cory -- the san francisco giants are playing in new york.

I sat on -- in the airplane next to -- and the red sox clinched.

All right.

I was interested in the yankees playing san francisco.

Chris, thank you.

Coming up in the next hour of bloomberg television, we will talk to jim bullard, the st.

Louis fed president.

? this is "bloomberg surveillance." james bullard of the st.

Louis fed on taper-free central banking and the future of the american job.

Health insurers in washington scramble to catch up with the affordable care act and we speak with the chief executive officer of a drug company worried about innovation in washington.

Next date mail has been like three days.

Ups has a headache.

Good morning everyone, this is "bloomberg surveillance." it is friday, september 20. joining me, as always, sara eisen and ann edwards is in for scarlet fu.

Our guest host for the entire hour is james toler, president of the federal reserve bank of st.

Louis and will join us unto many things to mention and michael michael mckee is joining us as well.

Terrific hour and ahead.

This became more important after the fed meeting.

They decided to leave the stimulus flowing and that starts her morning reading.

Another central bank moved overnight, the indian central bank surprised analysts by raising their main interest rates.

This is the first policy review and he is trying to rein in stimulus and fight the weaker currency.

No significant economic data in the u.s. we will getdarden before the bell and add 8 a.m., the new apple iphone goes on sale.

" bloomberg west" this afternoon with perspective on the financial and technology aspects of this apple launch.

A high-stakes retail launch for apple, two phones.

Anna edwards has company news.

Less than one hour to go until the apple new iphones go on sale in the united states.

The 5s and 5c are already on sale around the world.

Today marks the first time apple is rolling out the phones in china on the same day as everywhere else.

In the past, there had been a three month delay in china.

Jp morgan admits guilt in the londonwhale trading scandal and find $950 million.

For violating securities law.

The sec landed a victory by requiring the bank to say it was guilty.

The commission has forced companies to admit guilt as part of some settlements.

There could be a problem with the launch of insurance exchanges part of the federal health overall.

There is a pricing glitch at health exchanges.

Insurers and the government have seen -- have been working to correct the last minute issues.

Our top story of the week, after the suppression the federal reserve this week, we have one of the decision-makers in the federal open market committee himself with us for the entire hour, james bullard.

Great to be here.

Markets this week were set up for the start of tapering or raining and the quantitative easing.

Does the federal reserve have a messaging problem?

I think it was a good decision.

The -- we said this was data dependent and it is.

I think that is one message that comes out of this.

I think many people in markets had some kind of idea that this was some kind of straight line down to zero and that is not the case.

The chairman has emphasized that over and over so i am a little dismayed at those markets that are saying that they are surprised by this.

When we came into this june decision, we said -- we told a story and the story was that the economy would improve in the second half of the year and if we saw that improvement, we would taper.

What actually happened is we got weaker eta and that that put the committee in a position where we could deal a. if you are data dependent, what sort of picture has the data been painting for this economy?

I don't think the economy is that fragile but if you track forecasts for gdp, they are below two percent right now.

For myself, i was expecting the second half to be around three percent.

It gives you a little bit of pause and the inflection numbers have been low.

Let's set up the hour, an exclusive hour with james bullard.

We'll talk about the fed and st.

Louis and michael mckee with with an extended interview later today.

Let's talk about indiana university.

You got your phd there are a million years ago and have been at the st.

Louis fed 23 years.

The fed communicated with incense and myrrh and semaphore flags.

Is there too much transparency now?

I think the transparency cap is out of the bag and we will not go back to a situation where we have the kind of smoke signals we sent in the 1980s or 1990s. that was probably not a good way to do business even though it -- even though that was the way it was done at that time.

You talk about the fed chairman speaking and he did not speak after july and the vice chairman did not speak at all since the tapering talk began.

Can you say that markets got this wrong?

Do you have a communications problem or do they have a listening problem?

The committee gets out and tries to communicate as best we can.

One of the things that happened between the july meeting and this meeting was weaker data came in and markets did ratchet back their expectations for tapering.

We talked about a smaller taper.

The other challenge is how much difference is there between zero and $10 billion?

Why didn't they do a little bit instead of zero?

That was a borderline decision.

The committee came down on the side of let's wait.

For me, inflation is low, we can afford to be patient.

Is this one of the most uncertain fed meetings?

Yes, because the data did not come in the way we were hoping to validate what we said in june.

If you look at the week points of the economy, jobs, demand, is this something qe is effective in addressing?

If you look at what happened after the june meeting and look at what happened after this meeting, it should lay to rest the notions that qe is ineffective or does not have an impact.

Points that is just going out the window and those that say that will have to recalibrate.

This is critical -- you have a meeting and the minutes come out how many weeks on, three weeks -- you have spoken about this meeting a few days ago, you stated there was a real discussion involved.

Without jeopardizing the release of the minutes, what was the distinctive tension in the room at the eccles building?

It's not a secret.

It was discussed in financial markets where the data had come in weaker, the employment report -- you had this decrease in unemployment but also a decrease in labor force participation -- what should we make of that?

-- you had this general story of mixed a thick coming into the meeting.

Based on what we said in june, you would have hoped that we would have had strong data coming into the meeting that would rationalize the pullback.

The statement cites financial conditions.

Was it your fault?

Did the fed do it by talk of tapering?

Rates went up a lot over the summer which is true.

For many on the committee, that was a surprise but not a surprise for me because i've said that the flow rate of qe matters a lot.

When we threatened to pull that back, marketsthat is just going out the naturally bid up the yield on the 10-year.

The chairman is right, that was a concern for the committee.

This sets up the perfect polarity between the fed and the bank of england, the idea of the flow rate versus an analysis of the stock.

How do you observe this through the prism of the bank of england.

We did the analysis of the 10-year gilt in the uk.

There would be differences because at the time the qe was ended in the uk, the economy was not strong so there are timing differences in the experience.

A big factor for this program here is that this is open ended qe and that's something i advocated for a long time and that's one of the reasons this has a big impact on the economy is because even though you are talking about a small amount, markets will trace out a future path of possible purchases.

As we look at the surprise of the market, there are critics saying the that has a credibility issue.

What do you say to that in communicating its message on policy?

I think we do as good a job as we can do on communication.

There is a lot of uncertainty when we are tracking the economy, as you know.

Data comes in in different ways and we have to that data and make decisions.

Two days after a giant and shocking fed meeting, we bring you james bullard from -- for the entire hour.

We will talk about the auto recovery, manufacturing renaissance -- is it for real and the clock is ticking on passing a federal budget.

We know the fed is worried about congress and all of that is coming up with jim bullard of the st.

Louis fed.

"bloomberg surveillance" on bloomberg television and streaming on your phone, your tablet, and bloomberg.com.

? good morning, everyone.

This matters now to our guest, james bullard, the president of the st.

Louis fed.

This is the fed district of the st.

Louis cardinals.

He suggests there is a lack of inclusion and should have the attention of all global central bank for it he questions the fed first focus on jobs.

Is it a dual mandate fed right now?

Are they looking at jobs?

Do you also care about inflation?

Absolutely, it is a dual mandate and i have been concerned in the last couple of years that we have shifted so much attention to jobs.

We are concerned about high unemployment.

But i don't want to lose the focus on inclusion place in which has been running low in the u.s. i think that is something that should concern the committee.

Our current forecast is that it will come back to target but i would like to see that happen.

R others talk about a need toeflate.

Do we need to create an animal spirit that will create investment?

If we set them in place and target of two percent, we should hit that target and have credibility that we will hit that target.

We are moving accommodation when inflation is below target and maybe threatening to go lower.

That's a concern to me.

People like olivier blanchard -- i don't think we would get anything out of that that i think we should defend our inflation target from the low side.

There are words that mortal speak of and economists speak of but one of them is credibility.

Define for our audience what credibility means to central bankers.

Credibility means, ideally, committing to a rule that tells financial markets how we react to developments in the economy and how we will adjust policy in reaction to developments in the economy.

The taylor rule is a great example where you could have a credible commitment to the rule but that does not mean people know exactly where interest rates would go in the future but they do know how the central bank will react to developments in the economy.

We don't really have that as good right now with our qe program.

It does not have as much experience.

James bullard is with us and we will continue to days after hannah store fed meeting.

Today is an historic day for apple, the excitement of their phones released worldwide.

A shot coming up here of fifth avenue, the lines are forming from the surveillance helicopter.

? this is " bloomberg surveillance." our guest host is james woolard, the president of the st.

Louis federal reserve bank.

Voters in germany will decide on sunday whether to give angela merkel a third term as the countries chancellor tummy tuck.

-- chancellor.

A surprise rate increase by the new indian central bank governor raising the benchmark interest rates in an effort to keep inflation in check there if it was the first major move by him since taking office to weeks ago.

In sports, the los angeles dodgers became the first major league baseball team to clinch a playoff spot for the dodgers beat the arizona diamondbacks 7- 6 to win the national league west title.

A few hours later, the boston red sox clinched a spot with a win against the baltimore orioles.

The reds are clenching nothing because their art to teams in the national league central that can.

Those pirates have been pesky but it's fun.

The cards are looking good right now.

Do you go to the game?

I have been to a couple of games.

Is very federal reserve box?

We don't do that.

You have to pay for your own seat?

I pay for my own seat.

But they give you free budweiser.

We will move from baseball to health care with two deadlines fast approaching.

On october 1, funding of the federal government runs out but on that very day, key provision of obamacare goes into effect and republicans in the house or tying these days together and their plan is if you want to pass a budget, d fund obamacare.

Ron, you are in the pharma industry which has been a backer of the president's health care legislation but has become polarized.

Are you still in support of this legislation?

Yes, certainly conceptually them a we are in favor of having americans have access to healthcare.

Any civilized country needs to aspire to that, having all of its citizens have that basic right, access to healthcare and innovative medicines.

It is a to see the polarization because the die is cast and we have crossed that bridge and it is time for everyone to buckle down and figure out how to make it work as best as possible and, over time, if things are not working, how do we fix those things.

It has been a little bumpy in the lead up to it and corporations and individuals are making moves.

In your region, how do you see business responding to the implementation of obamacare?

The citizens and the district are concerned about implementation of the health care bill and confused.

They want more clarity about what will happen.

They want some visibility to the costs going forward.

They say it is inhibiting their business planning and i would be remiss if i did not make that point emphatically.

That is hugely common across all kinds of businesses.

People think you just sit in a skyscraper and give media interviews.

You go out and speak to people with real companies that are employing real people.

How concerned are you that this will be messed up in some form?

My concern has risen some on that issue.

At oeste, i thought it was political posturing.

I thought some of the business leaders will be more republican but i have become more concerned about the implementation of this bill and what it means for the nation and the macro economy.

I would like to see more clarity going forward.

What can you say about the implementation, the idea that americans will have more of a choice in health care exchanges even they might not know how to choose?

I agree with jim.

The concerns i have our own implementation.

-- are on implementation.

The bill as it is has been subject to so much posturing.

That in itself has been inhibiting americans understanding of how it will work.

Here is the money question -- would you advocate delaying these programs?

No, well, there was an article today that appeared about computer systems not being quite ready for the exchanges.

I think you take them on a case- by-case basis.

If they are not ready, you don't implement them at that time.

You try to get them ready as soon as you can.

Dr.

bullard, do you advocate a delay?

I would be for a delay if you thought it would help the implementation and you could get more clarity.

That would be a fine thing to do.

If it will delay and we will be back at the same mode next year at this time, that would not be helpful.

That is a year of uncertainty.

Is obamacare costing american jobs, high quality, full time, good paying american jobs?

It might be through the channel that business leaders are reluctant to go forward with big investments because they are not sure where their healthcare costs will be and what their labor arrangements will be.

This is is an out of body conversation.

You are not having this conversation in the united kingdom.

You talked about how complicated a lyrically this is to mystically within the united states.

It is way too complicated already with the politics around it and comparing it with other parts of the world, it gets even more politicized.

Do they do this better in the united kingdom?

I- i- let me make it simple -- with all of the risks that entails, what they do in the united kingdom is they have universal health coverage.

They have achieved, to an extent, what we are aspiring to with obamacare.

What they don't have is very efficient or advanced delivery of care in many cases.

There are very long waits for basic procedures, people don't get certain new medicines because the does not want to pay for it.

Roncohen, coming up, we will talk to the ceo of ups.

? it is a big day for technology.

The apple 5c and 5s - cory johnson this afternoon on "bloomberg west," he is planted on 5th avenue with the apple store in the background.

What is different this time for apple?

I don't know what is different here.

There is a big crowd of people that have shown up in the last hour or two.

I started counting people as i walked around the block and around the block and around the block.

The line goes literally completely around this block.

Probably about 1000 people.

People from all over the place -- i rented to a friend of mine from california who got here at 5:00 and he is still 300 people back.

This crowd helped create this.

Apple helped meet the production demand.

They limit the amount of people to fulfill the demand but some people want the phone early.

I asked a guy online what he was doing.

Why would you get up this early to get a phone?

He said my wife wants the phone.

Happy wife, happy life.

That's an exclusive for cory johnson.

Look, this is the gold.

The gray is a little different.

For a business sampling, this will be the game changer.

This is the cheaper phone, the 5c, that could open up new markets for apple.

Per apple, it is not just about the phone.

Yes, it is their biggest as ms.

And yes, they will do 150 million units in the next year but it is opening up markets for the ipod and ipad and the mac and everything else.

This is what -- why the smaller and cheaper phone will be a big deal.

Cory johnson on 5th avenue.

Happy wife, happy life applies to me as well.

A lesson there.

New technology, old technology and manufacturing because he talked about the production of iphones and present obama will head to the midwest.

He will go to kansas city to speak at a ford plant and it raises the question about jobs and production in our nation's factories.

Jim bullard is with us and the idea there is a manufacturing renaissance and we can count on manufacturing for growth and this is a changing story, do you buy it?

There are instances ofre- shoring of manufacturing in my district.

I pay some attention to it and i give some credence to this.

You can cite a couple of economic factors, oil prices have tripled over the past decade and wages are rising in asia.

Those kind of factors together are making some business calculations -- calculators bring the manufacturing back.

How much more competitive are we in our nation's factories compared to china?

I don't know if i can put a number on it but we were -- we are more competitive than we were a decade ago.

The first note in the news conference you had on structural and cyclical unemployment rate which side you stand on?

Is the job pain in america, is the anxiety a permanent structural change or with a better economy, can we feel better about american jobs?

One of the biggest issues here is labor force participation.

For those that look at this, you have to realize that labor force participation has been dropping in the united states since 2000. it has been dropping for more than a decade.

A lot of that is accounted for by demographic factors.

I think that is something to keep in mind.

People keep pointing to lower labor force participation but a huge chunk of that is really structural.

Another fed worry is congress.

Clearly, ben bernanke signaled there is a concern about congress here.

Brinksmanship in washington was very damaging to the u.s. economy in 2011 on this issue.

We had a downgrade of u.s. debt that was needless.

It was all self inflicted by our own political process print i don't want to see that happen again.

That conversation affect the shocking announcement two days ago?

It's in our statement.

I want to know the back story.

Forget about the statement, i cannot report exactly on what was said in the meeting but the committee came to the decision to cite fiscal factors.

How hard could it hit our economy?

It was a big factor in 2011. there were several things going on at that juncture but it was a big factor.

A quick data check -- equities and bonds, equities are flat for the day and a 10-year yield, 2.74% and the nymex is under $105 per barrel.

This is "bloomberg surveillance," on bloomberg television and streaming on your phone, your tablet, and bloomberg.com.

Anna edwards is in for scarlet fu today.

Our guest host for the errors james alert, the president of the federal reserve tank of st.

Louis.

Let's talk to someone who has a gig employment base to work off of, the chief financial officer week at "bloomberg surveillance," we searched for a frontline cfo that worked his way up from the autumn.

Curt came out of yell and put on a brown uniform and delivered packages and collected parking tickets and is the chief financial officer of united parcel service.

They have 399,000 employees.

I think that is fabulous that you started out at the bottom.

When you look at cfo's today, are there too many t

This text has been automatically generated. It may not be 100% accurate.

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