Alone. President obama will sit down with Texas Governor rick perry to discuss the emergency. He will not be at the border or the influx contact where the influx continues, but he will be in dallas. He will not visit the border at all. White house correspondent Phil Mattingly has been covering the story. The white house made the request for emergency funding yesterday. Will that be enough and how are the democrats and the republicans reacting to it . Administration officials willingly acknowledge it is a shortterm solution to what has become a major problem. The 3. 7 million breaks down into four tracks. The first is the capacity track. They need money to fund places to put these kids. Assistanceso foreign , where you see the state department trying to work with guatemala, el salvador, honduras, trying to work on deterrence on that front. You also see money going to the Justice Department. Youll also see money going to customs and Border Patrol. There is an enforcement aspect to this. I do not think any party inks tossing 3. 7 billion salsa problem. The major issue is no one is solves the problem. Onemajor issue in and no is coalescing around one idea about what the solution should be. There is a growing chorus of whoers from both parties want the president to visit the border. Is that something he may consider at all . You mentioned it up top. It is not on a schedule. He is in dallas. He will meet with faith leaders and elected officials and governor perry about the issue, but from the democrats side they say why not go to the border, you are so close check close . We are not worried about the optics. The president is very aware of the situation that exists on the southwest border. The key thing with the administration is this is often the way everyone they act. They do not believe that is because everyone says he should go do something, the president should do it. Now, the president has no plans to head to the border. He is down there, and it is not a long trip, who knows. Forhat about this ask emergency funding how does it fit into what the president can do unilaterally on immigration . This is an unanswered question that we will see a lot of in the weeks ahead. Everyone remembers the president saying efforts for comprehensive Immigration Reform have fallen apart and it was time for him to act alone and advocates were thrilled for there would be a hold in deportation or other action taken. It is a major policy problem politically and policywise. How it restricts those actions will be a big thing to watch. Click Phil Mattingly, thank you. Phil mattingly, thank you. Me, jeff denham, a republican congressman who recently visited the border. Congressman, thank you for joining me. You recently went to the border. What did you come away with . Well, i think it is important for every member of the congress as well as the president to go to the border and see exactly what is happening. It is not for optics. It is for a president to understand what is happening. It is a president that said and 2011 that the board is border is secure. What we saw on the border was amazing because san diego has the most secure area of double fencing, cameras, motion detectors, the Border Patrol there is doing everything right, but the department of Homeland Security is still catching thousands of immigrants coming across the border to seek asylum or following the same 2008 law for human trafficking. Visited, theou part of the border youve visited, is not even aware most , right . Ontroversy is we are talking about the border around texas or we have seen most of the Migrant Children come through to the u. S. Absolutely. That is why we believe the president should go look at it. The president has said the border is secure. That area in texas has several acres that is department of the interior, parkland, areas where the Border Patrol are forbidden not only from going in, but from putting roads in so that they can actually drive along and detect people. The border is unsecured in that part of the area and throwing money at the area for a shortterm fix does not solve the Border Security issue. Commerce meant, i know you have been one of the republicans we need to who say get Immigration Reform done, work with the democrats to get sweeping overhaul, how do you see that the border is not secure that it will only rally members of your party, that there needs to be much more done before any kind of sweeping reform can be put in place . I think we can do both at the same time. We have to secure the border. We have to do that first. You can test legislation contingent on the board being secure and verified. It is some of to what the senate did. Senate the seven the bill needs improvement, but this has forced us to actually take a borderecurity, security, which i think will lead to addressing the other areas as well. Nancy pelosi, for instance, she herself visited the border, and she came away and said i do not think we will get Immigration Reform done because the visuals of how leaky the border is will only cause republicans who have been fighting for Border Control to dig their heels in even more. I disagree. I think you have to address all of the issued. We can secure the border, throw money at the problem, and fix interior problems, but we still have to address unaccompanied , and thenylum visas we have the 11. 5 million here today that had to be part of the discussion. We have not discussed this as congress. It is time to do that. Congressman, i know you are in an area where there are a lot of tech companies. Many tech ceos have said they want Immigration Reform, that they are hurting because there has not been reform done so far. Are you confident we could get some deal done before the august break . I mean, is that even possible, congressman . I think we have to get these bills not only out of committee, but the ones that are out of committee to the floor. That is something we can do before the august rake we have a lot of work to do before anything is finalized to send to the president. Commerce and jeff denham, republican, california. Abbve wants as, new home with a lower tax rate and it is making an offer to shire and it might need to raise it offer yet again. I want to head to london where Matt Campbell has been following that deal. You have been busy. Vie, will they get this deal done . A keeps on coming. This is offer number four. Will they need to go to five . The mood music seems to be pretty positive, so it seems like they are getting toward a shire may come to the table. I have not yet and we do not know where this will end. There are about two weeks to the deadline and we will see what happens. Atack tax savings much would they save and tax savings . The actual tax savings are vie, likell because abb a lot of u. S. Companies that not anything like the headline rate of 35 in the u. S. Are u. S. The advantages are megan hughes the advantages are they could use cash in a way that would not be domiciled. Future earnings would not have to be repatriated as well. There are Tax Advantages but they are not overwhelming. This is a deal that has a lot of strategic and industrial logic. Tell us what this all means for the mergers and that positions front overall, which we have seen quite a bit of lately. s are coming fast. Things are coming fast. Gridlock in washington is helping these deals because texan version is only possible until congress put a stop to them, and as we just heard from the congressman, it is hard to get a deal on anything in congress, let alone comprehend and tax reform. Inasmuch as this loophole, if you want to call it that, stays open, we will see more of these transatlantic conversion deals in more sectors until it is closed. Matt campbell, thank you so much. Matt campbell in london. Moving and shaking this morning, yet team germany. The germans shocked brazil with a recordbreaking 71 victory. Ever. Brazils worst loss humiliation for a team hoping to win the world cup on their home soil. Fanse were crying and the stands. It also set a record on twitter. During atweets sporting event. Final, germany will play the winner between argentina and the netherlands. What a big difference between those sides in the stands. Coming up, the future of the big banks one branch one big chance big banks bread branches will disappear and money will become in and take. Uber versus list who will come on top come out on top . First. Bloomberg. In an oped piece in yesterdays wall street journal , Morgan Stanleys Ceo James Gorman made bold predictions branchesitional bank will disappear and cold, hard cash, you will not need it anymore. He writes morning for perspective is connect one bank ceo frank sorrentino. It is one of the largest banks in new jersey. By the way, i live in new jersey. We have a branch right near you. I know you do. Keep it open. And you will keep it open. About jameseel gorman same branches like yours will turn into coffee shops, people will sit around discussing things . There is a difference between a worldwide enterprise and a Community Bank. Our Business Owners want to speak to a decisionmaker, talk to us about this plant. It is more than just about making a deposit, which i think will change over time. Technology is changing the playing field. James gorman said everyone mobile phones and inc. And banks will be in the pocket. Yous a business owner, if are making a big decision, youll want to sit across the table from a banker. Big banks would say they could serve that hurt this. Purpose. They did not have a connection in a Community Like a Community Bank has. While the number of Community Banks are shrinking, and the Smaller Banks are somewhat disappearing through mergers and acquisitions, all that is really happening is the small banks are just adding to your. Getting bigger. They are not going away. The newne Services Jersey and much of new york area. Inn your future your future you see more acquisitions, more mergers . I think there will be a move toward less tanks, but i do nothing but wait banks, but i do not think we are going to four. Regulatory the environment here in United States has put a cap on what the largest institutions could do. You do not see m a at the larger end, the top 20 institutions. You see a lot of m a in smaller places. Completed this merger with union center and we are now the Third Largest banking new jersey. I think there will definitely be m a activity, but there is still a place for Community Banks to Service Clients on main street. You would say that, because that is your business, or what is it that big banks cannot do . They can communicate, they could have people on the ground. In one context we call the largest banks the gift that keeps on giving because because of their size and scale, they have to put things in boxes, have checklists, do things in a programmatic way using an algorithm to figure out who is a good credit score. It will never replace the personal, oneonone contact that a Community Bank could have across the desk, in a community, on main street, where those bankers grew up and know the borrowers. It is a different business model. Ok, a different is this model, but could the big banks undercut you on fees . So, they do. Whether it is fees, Interest Rates, interest paid for those clients that are ratedriven, cdriven, there might be a good cdriven, there might be a competitive environment where we would look like we are at a disadvantage, but who might that be . But with all things, people are willing to pay more for a better service. I get that with older clients that have always been your customers, but what about new consumers, as we always hear millenials are not that random loyal. Brand loyal. Has the same Technology Every large visitation has. Your millenial, they can pick up do businessone, just like they can at any of the larger institutions. Frank, great to see you. Thank you. Frank sorrentino, ceo of new jerseybased connectone bank. Coming up, while your child should major in a socalled stem field it is a matter of dollars and cents. You cannot win them all. Prosecutor federal loses the case and the brother j. Rock treasure on them ra we will be back in two minutes. First. Bloomberg. You are watching in the loop , live on Bloomberg Television and streaming on your phone, tablet, and on bloomberg. Com. Good morning. I am betty liu. Here is a look at the top headlines the government was dealt a blow in and sevenyour crackdown on Insider Trading. Federal traders found Hedge Fund Trader Rengan Rajaratnam not guilty. He is the brother of Raj Rajaratnam, who was found guilty three years ago and is now serving 11 years. Billionaire carlos slim will divest aspects of his own company to his newly formed company. Allow them to escape copper regulations and penalties. Abbvie is not giving up lands to buy shire. They want to move their legal home to the u. K. And when a tax break. They made a fourth offer yesterday that valued shire at over 50 million. It is 26 minutes past the hour. Bloomberg tv is on the markets. Equity futures are rebounding after two days of losses. A big selloff in technology shares. Were getting breaking news on American Apparel as you know that saga with its founder and ceo. The company says they have reached a 25 Million Dollars deal with standard general, one of its biggest investors, and they also said the board would be revamped. They will be adding five new members to the board and they will be discussing on the future of dov charney. He said he would fight his ouster from American Apparel, the company he founded. Well have much more on this story. We are on the markets again in 30 minutes. Number isoomberg 65,000 how much the College Class of 2008 earned on average in 2012 if they had a degree in field, science, technology, energy, matt they graduate just in time to see the financial crisis. Spurompany hoping to Science Innovation in the u. S. Is bare more stem grads yer, Holding Events here in manhattan hoping to ignite the next generation. Up with theamed first africanamerican woman to go into space and that event is happening a Grand Central station. I enjoyed by both. Both. M joined by thank you for joining me. Thank you. Bill, you have seen it is higher harder to hire stem graduates . We have seen growth but we are looking for engineers of many types, and also down around the golf we have some of our chemicald hightech plants, a similar shortage. What is the shortage describe it to me for the next last five years . It has dramatically increased over the last 18 months. Any have made announcements the biotech industry is in god mode and there is general growth mode, and there is general growth. It is key to our business to have these welleducated science graduate who understand science, and that is so important for others. Science is key to us. May, why is that . I know you are working with students. You see this juxtaposition of in stem for more skills versus the decreasing the number of students that go into it. We see the need to enhance education in the classroom, taking advantage of that and eight curiosity and actually teach them better. When you notice the types of jobs bill talked about it was not just the four year college degrees. It is also the technicians that work on the floor, and it is important that we understand what we are looking at the technical jobs, it applies across the board. Why iss that that . I read reports were there are institutions high schools trying to get kids more interested, but it is an uphill battle. In some places there is not a lot of interest, even if students are told this is really important for their careers. You cannot tell kids have you ever tried to tell kids this is good for you and watch the necessarily do it . You have to look at the innate curiosity. Bugs, snails,s up and they are experimenting, but we lose that in school. We have to have them do the handson things, grow the potato plant. The things that we are doing a Grand Central station here in new york city and the experiment that let the students become involved and see that science is not the memorization in the book. It is the experimentation that is just as engaging as anything we do. Somebody said to me that when the nasa Program Ended it would interest in kids science. Having been in nasa, do you agree with that . I think space is one of the things that excites. Works every kid wants to go to space. Every kid wants to go to space. Space expiration has not ended. There is a wide range. Stem, you need it for hairdressing. Ill is holding a soccer ball. Materials andyer that is part of a larger strategy that we are not just a part of aspirin, but a lot more than that. Come to Grand Central station. This ball is coded with a bayer polyurethane, which gives it flight. To,of the kids that i talk people that are now in employment they had one key moment where they got interested in science. Relevant,orld cup in people will go down there. We have some players showing them tricks. This could be an entry point to have a few kids interested. It is not memory. It is sexy, exciting stuff, science is. The world cup is probably the best advertising for your materials. Have you seen any kind of increased buzz around your product because of the soccer ball . It is a little early to see, but we are certainly proud to be involved and proud to be involved in the success of the world cup. This is a great example, one of many, where materials make it a different. Is part of all of this also to let consumers know here in the u. S. That bayer, as i mentioned, is more than just a drug company . It is more than just about drugs, but you are much more than just a drug company . Asked surveys surveys show trusted brand, and we are proud of aspirin, but our experience shows many other items that we have. We have new technology in health care, and we are proud of the product we are bringing forward. Does that help with hiring . I want to go back to Something Else that is going on today. What we are doing is saying that learning happens all of the time. We are here in the summer, new york city, Grand Central station, which is a metaphor, being in the center of everything, and you have adults with the opportunity to see what science is because they are not afraid of it, so they influence children. Yes, the Greater Peace is about the Science Education work that has been going on for years. Bayer has been working on this for over 20 years. We first met and started working together when i was putting together a science camp and i came out of nasa. It is how we engage in doubts we are not able to turn on this spigot to the science workers because we need them. You have to start at the very beginning. Kindergarten. Even every day folks need science literacy, and that is what is happening with the types of rogue rams and where the incredible effort needs to be programs, and that is where this incredible effort needs to be done. What could be one of the biggest frances that you make differences that you make . How we teach science in Allegheny County in pittsburgh, they started doing this handson education, it was a strong curriculum and it has spread across pennsylvania. It is a model program. It was a Public Private partnership that actually pushes things. We do education differently so that kids actually watch butterflies grow, watch the flashlight for electricity. One of the other ones is the Biotech Partners in berkeley where you take at risk high school students, who were not going to graduate, and then they go through a program with internships and cooperation, and end up actually graduating as biotech missions. Quickly, phil blake, before we go, how will you sell the hiring gap . Road,will be out on the and scientists are people that are naturally curious. Once they have the bug, they want to move onto other things. We show the career path. We have to do the groundwork, making a difference at the ground level and the schools for longterm programs to get the joy of science. Of bayer, and mae jemison, thank you. Petition is gearing up lift getting ready to take on uber. Detroit trying to avoid a showdown with pensioners. Stay in the loop. The Ridesharing Service with, known for those fuzzy, pink mustaches is trying to take on uber, after announcement that uber would cut prices by 20 temporarily, making the service cheaper than a new york city taxi. For more on the ride rivalry, bloombergs matt miller joins me now. Details on lift here. With is in lift is in fierce competition with uber, but they are serving different niche is of the market. In that you uber can handle a car using a Smartphone App and it will take you where you want to go and everything is paid for by the credit card data you have entered in your phone. Unlike a taxi where you have to hail it by hand. On the other hand, lift is like a gypsy cab it is some guy that has a honda civic in queens. It is different than getting in a black town car that you think think ofthink of an uber service. Though there is a lower price category. Then you will get the dude in the honda. What you would still seek sit in the backseat and have you will have a drivers license. Moreis bigger, and has name recognition, first mover advantage. Uber has gone 1. 5 million in funding from various Venture Capital and Investment Groups whereas lift only has about 250 million in funding. They are a much smaller player, and here in new york, they will be serving a much smaller segment of the market, not only the low cost end of the market, but also you can only use lift friday starting at 7 00 p. M. In brooklyn and queens. You cannot get a lift in manhattan whereas uber serves all five boroughs. , do we know if it is linked them coming into the market, based on uber cutting prices 20 . They knew they would be cutting their lowest price to. Yft levels it does not cover the town cars and the suvs. The expensive products will remain expensive, but they are taking the cut now to war with uber in brooklyn and queens. Matt miller, thank you. Amazon makes a plea directly to authors in its dispute with hachette, can they cut out the middleman . Brad hintz is making a major career move we will be asking what inspired his decision to go back to school. They in the loop stay in the loop. We just had some breaking news out on American Apparel agreeing with standard general on terms for the company. Julie hyman has this at the breaking news desk. It looks like American Apparel has breathing room in terms of default in on its loan from lion capital. After the ceo was ousted from ,he company, standard general one of the investors, loaned him ,he money to increase his take and standard general would then have authority over votes and now American Apparel will get 25 million from standard general to allow him to pay off that loan. Remain. Airman will dov is still at question is charneys future. The standard general board had been backing dov charney, so this could help them stay, at least in some capacity, with the company he founded. Correct thank you, julie thank you, julie hyman. A pivotal vote for detroits to get out of bankruptcy is set to take place this week. Andecently visited detroit here is what michigan governor Rick Schneider said about the revival of the city. It is simple. If you look over the last two years, over 10,000 jobs have been created, occupancy for housing is over 98 . If you look at the project on the pipeline, there is a a there is rail system, a new hockey arena, the riverfront is excited exciting. You could have a great quality of life at a low cost. He is pumping up the trade. We are joined by scott ha gerstrum. You and i have talked about what you have considered as a state bailout of detroit, that you have been opposed to what they are doing there. First off, what you make about what the governor is saying about the revival of detroit, that they are making the right moves . We want to commend the governor. He has been a great job in tackling this important issue, going from a consent agreement, and now we have a grand bargain. Not while we have not agree stillvery aspect, he is addressing the problems. The government has created a cost culture that is hostile to businesses, entrepreneurship. Greatpting america did a series on Small Businesses that face hurdle after hurdle things like an awning tax for a restaurant. We saw a nonprofit wanted to put goats in to control weeds and the city clamped down on them. It is outrageous. They have to create an environment for entrepreneurship. But that is exactly what the governor and the city are trying to do together, so help me understand how you can commend the governor for what they are doing, but at the same time detroit. D the state of point earlier. We have seen the population go from 1. 8 million 200 700,000 to understand hundred thousand. Cost of living is low. Crime is still very low. We do not see the culture in the leadership, city leadership changing. A Council Member was arrested earlier this year for drugs in his car, and another was arrested for drunk driving. Power a mayor that has no and has 30 employees making over six figures. Government. Xpanding million just gave a 285 dollar tax break to a billionaire family for a new hockey arena. Andculture has not changed we believe the call to need change within the leadership in detroit and the state can set up an environment to help, but until we see those changes in the city to create an environment that is no longer hostile scott, you are sounding a different tone than when you are on a few weeks ago where you had said, look, detroit should not taxpayermichigans dollars. This is all good money going after bad, you know, into detroit. So, help me understand, scott, has there been a change of heart here in terms of what the governor is doing with the trade . Detroit . No. We oppose the bailout. Vote. A close the taxpayers are sending 195 million to the city of detroit. The city has their hands out for number 2 billion in the future. They continue to receive subsidy after subsidy from the state and federal government and we believe that does not help create corrected culture detroit. He culture in on that issue we disagree with the governor but overall we commend the governor for tackling the problem, for having an emergency manager, for allowing the city to go into bankruptcy, then trying to address the problems. We still stand by the taxpayers of michigan should not be bailing out the city of detroit. The governor said that was a onetime deal and no other city in the state of michigan will get a deal like that. You said the city should sell money, and wesave asked the governor that question and here is what he said. The point about municipal bankruptcy is not to maximize return to creditors it is about having a city be successful, and one of the Cultural Assets of the city is the Detroit Institute of arts and it is a world thats worldclass resource that will be a will to continue on and get young people excited about living in detroit. What about that what about that . Quick second jobs will bring people to detroit, not the fact they have an art museum. The trade is not learned a lesson. Michigan, they sold off assets, cut the budget, and improve services to residents. They had to cut a deal with the unions here in the trade in order to get the bailout money through. Legislation required defined contributions for all city teacher and city pension years, and the legislature change that. We see the leadership in detroit is not changing their tune, not creating an environment that is friendly to Small Businesses. What is going to create the environment to create jobs in detroit . We need a change in leadership in detroit that really gets it, does not have their handout. Big government created this problem that we have in the trade. We needed culture and environment that is friendly to Small Business management ownership. That does not exist. We do not see that anything has changed among the leadership within the city of troy. Detroit. , well haveerstrom to leave it here. I am sure therell be another opportunity to talk about detroit in the near future. Brad hintz, the machine Scott Hagerstrom the michigan director for americans for prosperity. Break a fightto on it comes to ebook retailers. They have blocked the orders for the shed books hachette books. The standoff has gone on for weeks. Amazon has now made an offer it will pay some hachette authors all of the proceeds from the sales of the digital books while the two sides work out their dispute. So, that is hachette, whose likers do not appear to the deal. One of them called it an ethical and moral violation, one that hachette would not accept that all. They are urging amazon to end the dispute with the publisher. Is expected ebooks to be eight times higher this year than it was in 2010. And it is 56 minutes past the hour. Bloomberg tv is on the markets. Equity futures are rebounding after two days of losses. We have earnings that continue to come out. Alcoa was better than expected yesterday after the close. We are on the markets again in 30 minutes. Coming up, saying goodbye to wall street, one of the countries best known bank analyst goes back to school and citigroup gets ready to pay the price at my cost billions to resolve an investigation into mortgage bond sales. You are watching in the loop, live on Bloomberg Television and streaming on your phone, tablet, and on bloomberg. Com. We are about 30 minutes away from the opening bell. You are in the loop. I am betty liu. Here is what we are working on futures are indicating that equity markets will open higher. We are waiting for that minutes. American apparel will get 25 million from standard general and in return American Apparel will shake up its board and add five new members. It might cause citigroup up to 7 million 7 billion to about mortgage bond sales. A handful of major banks have been under government scrutiny. We saw a rare loss and the two prosecutors who had been cracking down on Insider Trading. Rengan rajaratnam, the younger brother of prison Insider Trading Raj Rajaratnam, walked out of court as a free man. We are joined by Kerry Geithner and sheila clock are. , one of theintz most widely Read Research analyst on the streets who Just Announced he will be leaving wall street for another career. We will get to that in a moment. Kerry geithner, let me start the citigroup news and the 7 billion fine put that in context for us. They are gearing up to pay after claims of selling bad mortgages into the market, one of the many roots of the financial crisis. They are following jpmorgan which paid 13 billion for this last year, and they are on the heels of bank of america, which is expected to pay more than 10 million for a similar claim in the coming months. What is important to remember about this compared to other settlements we have seen with Credit Suisse and bnp paribas, these are civil claims. There is no criminal liability involved in this case. Therefore, they are actually looking to settle this. Even if the Justice Department decides to sue citigroup, you do not have the same Collateral Damage is. That is what i was going to say doesnt make it better, less bad . It does. It was based on a statute that is about 20 plus years old, a derivatives the loan crisis. It is a way to reach back and pull out some wrongdoing. Limitationstatute of , 10 years, and that is why you see some of these cases popping up again. , what you make of these fines . I wouldve guessed that after five years we were through with them because liability typically lasts five years, so it was a surprise. You cannot really defend yourself because essentially the government can sue you for hurting yourself because it you think of citigroup, they certainly have suffered from the shareholders and yet they are being sued also for the mortgages they put out. Is there a sense, though, that this is, kind of, the last stand, the last of them . Definitely. Issues,mortgagerelated these cases, which jpmorgan settled, now citigroup, and probably next in line, bank of america, is probably the last of the suits on the mortgage front, but i cannot say on the other issues. Insider trading issues, right, sheelah kolhatkar. Here you have Rengan Rajaratnam who walked free yesterday. It was never a huge case in what the monetary they allege in the case, but it was important because Raj Rajaratnam was the big fish, and the judge made it clear they did not feel the government had presented enough evidence to make the case, and it was a shrink in case from the beginning. The one charge they were left with was a conspiracy charge, the weakest charge you can bring against someone, was rejected by jurors in only a few hours. Quite a stunning loss. And embarrassed an embarrassment for preet bharara, right . He has had this record the sheriff of wall street. Exactly, and they have tried to send this message and there have been people that have criticized him. Basically, the government never loses in court. Are they taking enough risks in the cases they bring . People who feel that way might feel heartened because it feels it is showing they were willing to try a case that was not a 100 slamdunk. Brad, where do you stand on this . Insider trading, i am against it. [laughter] the theu feel that with nearperfect record that the government was not hard enough on Insider Trading cases . They have to come down very hard on a case because in a war that is selfregulating, you have to do that. It is like the irs. Why do americans willingly write checks to the irs question that they fear the irs. That means when they bring irs . That means when they bring a case they have to be very tough to keep everyone else in line. That is how regulation works on wall street. Sheelah kolhatkar, this is the same chart case i was , ring with keri geiger prosecutors now going after the smaller fish because there are not any of the big fish left for them to try . This investigation started in 2006, 2007, reald and dozens of people, and snared people that perhaps should not have been caught up in their web. Cohen. Try to get steve quickly he could not get him. They charged his firm. They could not get him. They charged his firm. There is the sense that this series of cases is winding down. They are wrapping up the loose threads. Somebody compared it to the album. Of the thriller they will probably not make another thriller. The one hit wonders are done. Keri geiger, thank you for joining us. Sheelah kolhatkar, thank you. Brad hintz well be sticking around with me through the opening bell. Nash will be sticking around with the through the opening will be sticking around with me through the opening bell. Moving and shaking, the second richest person in the world, carlos no, who will give an carlos slim who will break up american movil operations in that sicko. He is you next ago. He is that mexico. He is divesting some of the company reducing market share to below 50 . He had held a monopoly in mexico. According to the bloomberg billionaires index slim is worth more than 71 alien dollars, just 71bill gates billion, just behind bill gates. Coming up, i will be asking brad hintz why he is giving up his three career to go back to school. Germanys stunning win over brazil is potentially a game changer for the world cup, and perhaps the markets. Well tell you why it could send stocks lower in brazil. Stay in the loop. You are watching in the loop , live on Bloomberg Television and streaming on your phone, tablet, and on bloomberg. Com. Analysttion, long time brad hintz is done, leaving wall street and will become a fulltime professor at nyu where he will be teaching secondyear. Bas workites it is exciting to for the bigger than life personalities of old wall street , and as inequity analyst interviewing the ceos and cfos of todays capital markets. Brad joins me again. , would beld say considered one of those old wall street names and legend people would refer to. People have read your note and follow to work for decades. This off, why did you make move . First, this fellow that had been teaching at nyu for years his partner was roy smith. At thes going to teach zicklin school. Someday i hope to have a Business School named after me. There was a spot open. Roy asked two of us myself and phil ryan. Ly, we have this absolute wonderful it is like three musketeers. Ran the london office, ryan was the ceo of Credit Suisse, and myself. Why now . Are you done with wall street . Thanks now. Asked no. I was just no. Differentt be in a location, watching the parade from 4th street. [laughter] a more fun location. Im actually finding a little more tedious these companies are tied up in regulation. They have surplus capital. Essentially, regulators are making many of the decisions. They do not want to admit this, telling youcc is what leverage ratios you can use when lending to a client micromanaging. For me, i have been watching and waiting for the fed to do something for three years. This is one where you say ok, now it is the time to write the book. That means you do not see any of that changing anytime soon. Not in the near term, certainly not in the next two years. I do not see the mojo coming back to the street immediately. Will, inill nothing the end, change the culture of wall street, which is the fun part. You do not think so . You mentioned in your letter the old wall street characters that you used to work with, the bigger than life characters we are talking about. Do you think wall street can create characters like that given what you said about the tediousness of the business . We might be in a transition period. Will we see another dick fuld . Hopefully not for some people. [laughter] will we see more wall street legends or not . We will see the street go back to its venial sense, right . They always seem to do that. It just be a different set of venial sent that they will be doing. That is the joy. You can write mystery novels about it. Bestsellers, movies. You could have people without High School Degrees competing with people that went to harvard Business School. You are teaching mbas are you worried that young people today are not enamored with wall street, that they are buying into the wall street is evil and should not be a place where im going to make my career . Are you worried about that . You are hitting so close to home. 24, would not use any of my contacts when he came out of emory for a job on wall street. He had a brilliant, threewall street resume, and he is going off to law school. Back. Turned his what you have is a portion of the best and the brightest who are looking at Venture Capital or social service of some kind, but remember, wash it is 3, 400 wall street is a small place. It is 300,000, 400,000 people. Is there a shortage of 300,000, who want to make 1 million a year . No. That is probably true. More with brad hintz coming up. Valley conference gets underway today. We will have more on immediate deal that could be done there. Well be back in two minutes on in the loop. Well, the allen and Company Sun Valley conference kicks off today and that means two things billionaires, and possibly corporate deals. We are joined by our west coast correspondent who lives in sunny california, gathered in idaho, jon erlichman. Who are you watching . A lot of names. Obviously you have spent a good amount of time here at sun valley. It is always an impressive list of invited guests by allen and company, who puts on this conference. Everyone from Warren Buffett to media executives like les ryanes, people like roberts, and of course, in technology, the growing number of leaders from reid hoffman of linkedin, two Mark Zuckerberg of facebook, to googles larry page. What they do a bunch of stuff. There is a planned part of the day. They are getting the day started with their first session. Actually, the New York Knicks boss phil jackson will be talking about leadership. They will sit through sessions where they are asking questions on subjects like communications, leadership, philanthropy, politics, but the other part of the day there is more ground to do whatever you want. On the way over to the camera we saw the Reed Hastings strolling along, having a conversation, and that is why everyone is curious about what could happen at sun valley when you put powerful people together and they have a casual chat, and deals have started at this conference. Ideas exchanged, people go bike riding, golf, whatever, and who knows what happens. You talk to barry diller about the aerial loss. What did he say . Reohe just said that ae fought the good fight. Heis interesting in that said they are going to try to drum up support for their cause. The other thing that he briefly addressed was consolidation, and this will be a big theme. The fact that since last years conference you now have these major cable deals happening, whether it is comcast or at t, and what that means for some of the broadcasters and what they might be doing. So, i would imagine we would be seeing more discussion on that front is weak. Ok, i imagine so. , thank you so much. Jon erlichman, our west coast correspondent at sun valley in idaho. Stocks you dop 10 not want to miss right after this break. Keep it here on in the loop. First. Bloomberg. Welcome back. You are in the loop. I am betty liu. It is 26 minutes past the hour. Bloomberg tv is on the markets. Matt miller joining me on futures right before the open. Yeah, we have futures slightly positive s p, nasdaq, Dow Jones Futures all up. 10 after the retreat we have few yesterday and the last days after the record high thursday, a little bit of a retreat monday and tuesday, and now futures are up just a little. Very little change. We will watch to see how the markets move right after the open. Thank you. We are on the markets again in 30 minutes. Lets count down to the open with the top 10 the only stocks you need to know about. That stays with me and julie hyman. We start with number 10, boeing. Theyre getting a boost after an order for 150 of the companys jets. The dubaibased airline will pay 56 billion dollars for the planes. Number nine is Reynolds American shares of the tobacco maker are getting a boost on rumors of a deal. British isican is said to be part of a deal to buy what they do not own already. Cody,ber eight is announcing a new structure that will help under four different categories rather than the two standalone business models. Number seven is american movil. Carlos slim is planning a breakup, allowing them to escape tougher regulations and penalties. Bob evans shares are losing steam after the Company Reported fourthquarter sales below estimates and cut its fourthquarter and cut earnings estimates for the year. They separated the Food Products unit and buy back shares. Number five, American Apparel, the retailer getting 25 million from standard general, part of an agreement that will shake up the board and let them pay off a 10 million loan. Number four is allergan, the botox maker stepping up efforts to fend off a hostile takeover. They will unveil a broad Restructuring Plan that will involve tax cost cuts. Number four is number three is alcoa, unofficially kicking off earnings season with a bang. Results were helped i costcutting efforts and the strength of traditional aluminum smelting business. Number two, Container Store shares are lunging after a wider than expected loss and the ceo said they are experiencing a retail funk along with its competitors. Well, number one, citigroup the bank is close to sealing a deal with federal prosecutors to settle a probe into mortgage bond sales. The agreement could be announced as early as next week and will about 7 billion in fines according to a person familiar with the investigation. It is just the latest of several fines being paid by banks. Now to the call on the markets, still with us is brad hintz, who has spent more than a decade covering banks at stanford bernstein, and is now leaving to teach at nyu. His call first as he ponders the possibility that Interest Rates may never rise in the u. S. , that we may be stuck in this period of slow recovery. Clark certainly we have this zero interestrate policy,who g . There are the interest sensitive stocks that we see a lot of investors go into. Market schwab has money fee rebates. You cannot charge 50 basis points to clients for running money markets if Interest Rates are zero, so they are writing checks to their clients on that one, and you can look at the trust banks, who have large amounts of low cost to pop lowcost deposits. All of those get badly hurt in terms of a deferral of rates revenue, but who does not . He ones who do not are the m a boutiques because zero is a very good price for financing and acquisition, and you just got off the stage talking about acquisitions. Of course, acquisitions are good for the companies acquiring them if they get the price right. They are always good for the boutiques. Not to mention there is a lot of cash around, right . That companies are holding to make some of these deals not just financing them at a cheap price but that they have a lot of money they need to spend. Six guys sitting in a make ance room can pretty nice fee. You have calls on specific banks. Goldman sachs is one of them. You downgraded Goldman Sachs. Julie, you have been looking into that case. And in particular the next person to lead up Goldman Sachs. There has been talk that goldman has stepped up its bench to groom of people. The ceo has been having dinner with different people. These are people already on the bench gary cohen, harvey schwartz, as well as david solomon, various executives. Blank fine says he is not going anywhere, but this comes back to the idea of how do you groom that bench of talent at a time when there are a lot of attractive alternatives . I know brad mentioned a few of them, and we talked yesterday about a story where if you are potentially a teenaged intern in Silicon Valley or at a tech firm, you are getting six grand a month. It seems wall street has taken has taken over as the hot place to go rather than the traditional place. This is why brad is going to nyu, to groom the next generation of bankers, right . Well, there is always the demand for bankers. Wall street turns over about 12 to 15 a year, so it there are always openings. Everyone is always looking for a new opportunity. The idea of the bench at Goldman Sachs, that is not in your scenario right now about Goldman Sachs and why you downgraded it. Goldman faces a real challenge, and the challenges because they have been so successful. They are the best trading firm, position globally, and they are in every market. If you were doing an ipo, you would undoubtedly call goldman in for the beauty contest at the very end. You would bring them in and a couple of other names. So these are highmargin premargin 35 , 40 businesses. That is the good part about goldman. Theyre trading businesses on the other hand have not been able to beat their cost of capital. We have run numbers that show that goldman businesses are generating about a 7 are oe roe. The risk data, settlement takes, that is in him acceptable performance. They have automated right, they have held their Balance Sheet stable for a period of time, so they have done all the optimization. Thats great. They still have not solved the problem. If goldman is only getting 7 there is the problem. So if you are Lloyd Blankfein and you see that kind of roe, what is your instincts . Cut more jobs . At some point you have cut the right amount and you want to maintain those capabilities. So, yes, you keep looking at that. They have moved people to salt lake, to dallas. So you are seeing them make all of those changes. What would you do . You can give capital back to shareholders, but you have to ask the Federal Reserve for that, and are they going to allow it . Probably no trade you can do acquisitions, but it is difficult to do acquisitions when you are a Partnership Culture for fear that you damage the partnership. A problem that is a bad problem. Goldman,iod of time, the stock, could be dead money. They will drag around the trading business that will not generate return. Someday in the far future, we will see the rest of the pieces drop out, shrink. It is almost the same question you are asking about Interest Rates. Are we stuck in this period for quite some time . It sounds that way for Goldman Sachs and some of these other big banks. Brad, hang on, because i know you have calls for other companies as well, and brad, youre watching the area case on ameritrade. Brad is positive on this, right . He has an over and outperform on that stock. 10 bucks from where it is today. Yesterday the senate held hearings on highfrequency trading and certain things that te deum air to does, like back ameritrade does. The concern is that the company to where theyers are paid to send them. They had revenue of 236 million from payments from order flow last year, up substantially from what they had in 2012. So it is growing, on an upward trajectory. Saysnk Sanford Bernstein 12 of their 2015 earnings are going to come from this. If they get in trouble or if they are not allowed to do this able to will they be still make money from this . Will it not hurt their growth . That is an interesting one. Why is retail flow so valuable . It is very simple. Retail flow is statistically predictable. You can look and you know statistically how frequently an ibm trade will come in. Ofas a result, it is a form editable liquidity. In a world where there is a shortage of liquidity, that is very valuable. What we see is internalization, and internalization is taking retail flow and taking institutional flow, and you run the institutional big orders matics that slice it up and put it against retail. Youre helping the institutional player, not hurting the retail player because they are getting the best execution. If you are not doing best execution, that is a violation, and there is the issue. You will have a review of all of these to make sure they are meeting the best execution rules. Her member e trade at one point had an institutional debt and they were netting them against the retail trade. Is torades alternative say i wont sell it, rather i will open up an institutional trading operation myself and take advantage of retail flow. Has great value. Brad, thank you so much. Great to see you this morning. Brad hintze, the outgoing equity back in two minutes on in the loop. Oh, yes. It was the game heard around the world, a stunning win. 71any trounced brazil in a victory in the world cup semifinals yesterday, the worst effete in brazilian history. What we can expect in todays upcoming match the between argentina and the netherlands. I am still stunned from that game yesterday. People were crying and it was considered did anybody predict that at all . Technically, a couple of people did. In online betting platforms, people got the halftime score right. They did not get the final score right. Are they getting paid . They are getting paid. If you get the chances of that happening, they did not get paid enough. This was 10,000 to one type of odds. Yes, somebody got it right. But think of it like option trading, like the s p high volatility situations. Somebody always gets it right. So tell me how statistically speaking yes, there were people who predicted this right, but tell me the odds going in and what this means for the game. The odds going in were 50 53 51 that germany was going to win, 49 brazil was going to win. They tied against ghana. Ande had talked yesterday said this was going to be a 71 score, you would have thought i was crazy. It is like one of those black swan situations who soon on me, hurricane katrina, huge stock market downfalls. You do not know how to expect these things. You know there is a percentage,. 05 of Something Like this happening, but you dont think it will happen tomorrow. It happens but we dont expect it tomorrow. You think doesnt even matter anymore . As c, do we need you on argentina is a slight favorite, depending on the numbers we look at. We have about 60 , so look for what look for them to get the win against the netherlands. But it could be 71, too. You never know. Eric chemi of bloomberg news. Thank you. It seems the yesterday it seems that yesterdays loss was so crushing that the series no longer holds. Jeffrey janus joins us from boston. Explain this theory that a loss from brazil would have actually been good for the markets. Well, the story is if results had lost the match, which of course they did do, the assumption would be that it the current president winning very early reelection in october. That would be good for the markets because the markets d like to see a new you are saying that this loss was just so stunning, so terrible, that this theory is totally out the window . I am not saying it is totally out the window. There are does kill people there are two key points we are making, the kneejerk assumption that she will be elected and the market will rally. Number one, this was such a massive humiliating loss by brazil that this will have an impact on the psyche of the country, probably on business sentiment, which could hurt the growth story even more. Our economists actually believe and i think it is a likely scenario myself that if she wins the election anyway, notwithstanding this loss we doubt very much when we come to three months down the road that the loss will make that much difference. I dont think there will be a kneejerk reaction to the market because of this humiliating defeat, we are not sure we just dont believe this represents a longterm buying opportunity because the politics are still very unclear. Where in the markets do we see the most Immediate Reaction . Where would you see the most ffrey . Ate reaction, geo to get a were going positive reaction in terms of foreign flows coming into result, you see the strengthening of the real. It is not down. The most likely Immediate Reaction would be Hedge Fund Activity locally pushing up the stock market in brazil when it reopens tomorrow. Obviously we will get a much better read on what local sentiment is toward the brazilian market when the market reopens tomorrow. I would expect some Hedge Fund Activity, but what we are saying is that brazil is underway within our emergingmarket portfolio. The market is not particularly attractive because politics are so uncertain. And with a massive defeat for brazil in the world cup, it is difficult to see that overall scenario. A very interesting note. Geoffrey dennis, head of emerging Market Strategy at ubs. We will be back in two minutes on in the loop. Time for our global outlook. Head ofncis names the and bloombergnk, andrew fry joins us now from rome with more on the story. Andy, tell us more about the invesco manager that is now taking over the bank. He is a 51yearold frenchman. He was the former ceo of invesco europe, and he has about 20 years of experience with the company before leaving it in 2011. He has also got deep contacts within the industry because he was for two years the president of one of the big trade groups here. So really the role that pope francis wants him to fill is one that he can transform the bank by continuing the compliance drive and really kind of get the bank on an Asset Management tra ck and perform up to the standards of its more traditional peers. Does that mean the bank will be opening up more . Will we see more outsiders having opportunities to do business with the bank . That is a distinct possibility. If you ever wanted to do business with the vatican bank, now is the time to pitch it. There is the former chairman of Deutsche Bank joining, and a whole new management team. The head finance guy at the vatican, Cardinal George pell, was asked that question at the press conference. He said they are going to work with advisors and consultants on a continuing basis. They will consider it going forward. But they do expect discounts. They are not going to pay market rates. Andy, thank you so much for joining us on that story. Andy fry in rome on the vatican bank. Tomorrow,op ,elivery. Com ceo jed kleckner delivering picnic food in central park. And larry silverstein, who is rebuilding the World Trade Center site, joining us to talk about all the challenges in attracting tenants. It has been a yearslong saga. That is all tomorrow starting at 8 00 a. M. Eastern time. It is 56 past the hour, which means we are on the markets. 30 minutes into the trading day, where we are seeing stocks trade. Actually green arrows across the board, so it is very slight. Dow on the s p 500. The pullback we saw over the last couple of days had many investors asking if this is the beginning of the correction that everyone has been waiting for. Bloomberg new is stock editor mike reagan. Obviously we take this with a grain of salt because we have 17,000 inme highs, change on the dow on thursday. The word pullback i almost cannot bring it out of my mouth from what we saw. Yesterday feels a lot worse than it was. We have gone 56 days now without a drop or a gain of more than one percent on the close for the s p 500. That is a very unusual stretch 1995. M going back to 1995 is the last time we saw this lack of volatility . As far as price swings. Still less than 1 yesterday, but it feels worse than it is. It is reminiscent of what we saw in march and april where it is the highflying momentum, internet, biotech names. Really high multiple stocks that people for whatever reason wake up and say these are overvalued and i will dump them. That said, everyone is waiting for a pullback. Even the most bullish of bulls out there is saying let me help , we took a breather here. It is true. At the piece that caught a lot was just forrday was jeffrey lasalle. A pretty bullish guy. He is calling for a 10 to 12 drop in the coming weeks. He thinks the market looks a lot like he did in 2011, and that is the closest we have come to a bear market in this current rally. That was when the u. S. Credit rating was downgraded by the s p. But he is saying there are other similarities, the valuation of the s p is where it was right than before the pullback. Earnings,eported i17, right around 18. He is putting out that basically multiples have expanded. In his thinking, the time is right for a pullback. In the long term he is still very bullish. , frankly, isnberg bullish. We get the fed minutes out today. More and more you hear calls for. Nterest rate hikes sooner does that have an effect . Is that part of what is driving this . Buzz rallyy we saw and the maneuver go down. Honestly by the fed buying . It is for now. Everyone is obviously protesting higher rates all year, thinking that as the fed weans us off the stimulus it will go higher. It just has not happened yet. So that is a huge question mark hanging over the fed. Thank you so much for joining us. We are on the markets again in 30 minutes. Market makers is up next. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Raking up is easy to do. Harlow slim will take apart his telecom at carlos slim will industry. His telecom casee prosecutor loses his against the brother of roger on or on him. Pope francis makes changes in the churchs bank after a scandal in profitability. Ou are watching Market Makers wednesday morning in new york city. Im Erik Schatzker. Im stephanie ruhle. We have a lot in store this morning. Big news in american retail
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