Transcripts For FBC MONEY With Melissa Francis 20130916 : vi

FBC MONEY With Melissa Francis September 16, 2013

Melissa straight off the top tonight, an exclusive interview with my personal choice for who should be the next fed chair, reknowned economist john taylor. News that Larry Summers has withdrawn his name for consideration of the job led to a nice rally in the markets. Everyone is looking ahead to try to predict whether the next fed chief will be vicechair janet yellen or not. Hear to weigh in what went down and what were in store for. Mere is stanford professor, john taylor himself, author of the five keys to prosperity. Great to have you back on the show. Good to be here. Melissa what did you think when you heard the news when, you heard Larry Summers was withdrawing his name . I was surprised but it looked like it was moving that way in the last few days. A number of Democratic Senators indicated resistance to him. That was going to make it hard. I think he read the tea leaves and the white house read the tea leaves and decided best not to push it. Melissa what do you think really went down . Whenever somebody submit as letter that theyre withdrawing their name from consideration, it is like, saying i want to spend more time with my kids. Im sure they love their kids but its a little suspect. What do you think happened . He just saw it would be unlikely or tough at least, would be quite disruptive to the hearings. The votes were moving against him in the senate. Several democrats, as many as four on the Banking Committee indicated reservations. And that would mean they would have to get quite a few republicans which would be tough. And so i think they just calculated this was, had a low probability and didnt need that at this point. Went ahead and he withdrew. Of course the white house must have known that as he did. It yeah, absolutely. I want to play for you janet yellen, comes out as the frontrunner again it seems although it seems we can never sort of commit to her being a real choice. I want to say to you what Elizabeth Warren had to say about that and ask you what you think about her as the choice on the other side. Lets listen. Janet has terrific experience and i think he shoes good judgment. Shes done, she is a consensus builder and thats a very good thing for someone at the fed. Melissa do you agree with that, john . I agree with that. Shes someone you can get alongwith. One of the things ive been quite critical of the fed and some of the actions that janet yellen has taken of the you can talk to her and discuss it. I think that, ultimately she wants to get back to i think a more sensible policy she is going to do that. She knows where she wants to know. I quarrel with how fast she should do it but i agree with that basically. Say she wants to get back to a more sensible policy. What does that mean mean . I feel like knowing your school of economic thought i would think you and janet disagree a lot what should be done right now . We do disagree, no question bit. The watch quantity quantitative easing i dont think has been very effective. I think a lot of extraordinary interventions since the crisis, 2009, 10, 11, 12, have not been helpful. I think some of the actions taken before the crisis werent helpful. A lot of disagreement there. On the other hand she always indicated she would like to get back to rulesbased policy i think thats correct. She didnt think it is time yet. I disagree with that. But at least there is a sense where you want to go. I think that is important. Melissa do you think people read her as looser with Monetary Policy than ben bernanke . Do you think she is more dovish than he is . She may be. The word dovish is very confusing. Think she basically has been supportive of bernanke and im not positive about a lost policies. That is one of the reasons we disagree. I wouldnt say it is more dovish. I would say ultimately, and i say this again, she thought there is good reasons to deviate from it rulesbased policy i disagree with those reasons. I wouldnt say it is dovish. Basically a deviation from better policy and i think she wants to get back there at some point. Melissa what do you think about the idea, before Larry Summers said that he was withdrawing his name from consideration there has sort of been this little rumbling about you know, ben bernanke didnt really want to leave. President obama basically fired him on television in an interview with charlie rose. That there is some sort after riff between the two, but that market would be happy if ben bernanke stuck around and he might be willing to do it . Do you think there is any truth to that narrative . What would that mean for the market and the economy . Yeah. I think he did consider it early but i think the president indicated pretty clearly he wanted to go in a different direction. He has been there eight years. There is a sense the president would like to have his own person. I dont know that for sure. But i think at this point there is such an indication he wants to move in a different direction. I think what the market appreciated the removal of a lot of uncertainty about Larry Summers. He would have been quite different, hard to read. Youre seeing positive reaction to removal of uncertainty. People like janet yellen on the list will not be that much different. Market ultimately likes that. I hope they make changes they need to do. Melissa other names out there floated. Don kohn, that comes to the fore for whatever reason because everyone likes to speculate or they dont think really janet yellen will get it. As soon as Larry Summers name went away don kohns came in stronger and you heard Timothy Geithner floated in as well. Do you think those are real possibilities those two . Theyre possibilities. I think janet is the frontrunner, but i think those are possibilities. Were in normal scuttlebutt about new fed chairman. With leiry removed, there is discussion who is in first place. Don kohn has been vice chairman in the past. Been at the fed for a long time. A natural person. Tim geithner was president of new york fed for a while and treasury secretary. So it is quite natural they would be being discussed. I think most of that is just press speculation. The president did mention don kohn. So that is, someone to bring up obviously for that reason but the rest is pretty much speculation. Melissa before i let you go who do you think would be the best and who do you think is going to get it . I think the best person who makes it clear that they want to get back to behindkind of policy that worked so well in work the in 80s and 90s and do it in credible way. Well see who is able to do that ive been positive what i said a few minutes ago about janet yellen but don kohn, don kohns there too but the main thing get back to a policy that works. Im critical of whats happened. I was a positive supporter of the fed in the 80s and 90s. Im very concerned what they have been doing recently. The person who gets us back there in the most sensible way is the person i hope president obama appoints. Melissa do you think theyre doing damage . That we left the policies too long and it is detrimental or diminishing returns . It has moved to the detrimental side. You think about quantitative easing, number three was put in the end of last year. The Interest Rate 1. 7 and now it is 2. 9. How can you claim that as a positive. There is a lot of thing to question about the policy. Everything considered, i think it has been a negative and thats why i think it is so important to get back to policies that we saw worked in the past and they will work when we get back to them in the future. Melissa john taylor, thank you so much. My vote for the fed if i had one, but unfortunately this is my only pulpit here. There you can see. Would i make you fed chair but no one listens to me. There you go, for now, thank you for coming on. I hope you come back soon. Thank you, melissa. Melissa next on money, another day, another big hit to jpmorgan. This one at least, 750 million in fines over the london whale former fdic chair sheila bair whether it is enough to set an example. Plus what really happened behind the scenes that caused Larry Summers to bow out as the next fed chief . Hmmm. We have all the news on wall street and the scoop. More money straight ahead. [ tires screech ] [ male announcer ] 1. 21 gigawatts. Today, thats easy. Ge is revolutioning power. Supercharging turbines with advanced hardware and innovative software. Using data predictively to help power entire cities. So the turbines of today. Will power us all. Into the future. [ engine revs, tires squeal ] [ male announcer ] since we began, mercedesbenz has pioneered many breakthroughs. Breakthroughs in design. Breakthroughs in safety. In engineering. And technology. And now our latest creation breaks one more barrier. Introducing the cla. Starting at 29,900. Melissa big news about jpmorgan developing and a highprofile victory for the sec. Not only is the bank going to be hit for at least 750 million in fines for the london whale debacle, it will report admitting culpability. Forcing companies to admit wrongdoing as part after settlement is part after major push by sec chairman Mary Jo White and not something that regularly occurs. Here to weigh in with her Expert Opinion former fdic share, sheila bair. Happy to have you back. Happy to be here. Melissa lets get right to it. What is your reaction to the jpmorgan news and is it important that firms admit some sort of culpability or wrongdoing rather than just paying a fine . Speaking in policy terms, yes, i think this is a positive development. I can commend Mary Jo White to have enforcement policy that enforces accountability. I think that is a good thing, a, slightly. Melissa it is why us a same, and i can sell from their statements in the past. They should have had oversight. Theyre not admitting fraud or serious wrongdoing. We were negligent and we should have had closer eye on the guys and here is the fine were paying. Why is that different from paying the fine . Because its a public expression of accountability. It can lead to perhaps other legal accountability. Im not familiar with the particular facts and circumstances there in terms of whether there could be further shareholder actions brought but i do think this is, you know, something that speaks to a broader problem with enforcement policy is that, theres so much, you know i think, one of the things london whale is something that gift that keeps on giving for jpmorgan and jamie dimon. They cant get themselves out of it. It is endemic after larger policy issue even with banks with good management, theyre too big to manage. Theyre too complex to manage. That is an overall policy discussion we havent had enough of in washington. I dont think weve dealt with it meaningfully. Not just jpmorgan chase. I question if theyre manageable by anyone. Melissa it seems weve seen a shift lately, especially in the case of jpmorgan. Theyre getting out of the physical commodity business. Right, right. Melissa they set aside 2 billion for litigation for things like this. They know it is coming down the road. They say theyre getting rid of their noncar assets. The student loan business was latest thing they said theyre getting out of. Right. Melissa it does feel like they have been taken to task over and over again lately and as a result they are getting smaller. Would you agree . Well, they have taken some positive steps definitely and i think the good news about the london whale it was, Shareholder Equity could absorb the losses and they were substantial and it was clearly a wakeup call to the management and board to tighten up Risk Management controls so i think that was a positive thing so yes there have been significant improvements but i still think the larger issue is whether these very large complex institutions with multiple business lines, commercial banking, Derivatives Market making, traditional Investment Banking, Securities Market making, are very different skillsets. Can they be effectively managed at the top of the house which is how they try to operate now . The regulators force them to simplify the legal structures, organize them along business lines and have intermediate management to have a better handle what is going on between the discrete business components. That would get a lot more shareholder information in terms of how each business line is actually performing. Now it is kind of a big blob. It is very difficult to tell. Again i think this is problematic, indicative of a larger problem with our approach to regulating these very large behemoths is that centrallymanaged theyre just too big and too comely kateed to do effectively. Melissa even still you think jpmorgan needs to be broken down further from where it is. I think legal structure, all of them. This isnt just jpmorgan chase. I would have interimmediate boards that specialize in understand commercial banking, understand the Derivatives Market, understand stand traditional Investment Banking. I think those are very different skillsets, very different Business Models and they would benefit greatly from managements focus with that, kind of background, expertise in those different areas. That is true for all of them, not just jpmorgan chase. I want to turn to you the idea were five years, fiveyear anniversary of the start of the financial crisis really. Are we better off than you thought we would be at this point . Or are we worse off than you thought we would be . Were worse off. I think certainly the system is safer than it was prior to the crisis. That is not, seting a high baseline. We had a pretty fragile system as we saw when lehman failed. So we had made progress but not nearly enough. Again these large financial conglomerates are too complicated to manage effectively. They operate with too much leverage. They into evidence higher capital. They rely too much on shortterm funding which dries up very quickly if you get into a downturn. More of the Derivatives Market needs to go into central clearing. Progress has been made. We have capital levels up a bit, thanks to the cftc and gary gensler. We have a good chunk of Derivatives Market in centralized clearing. So much more needs to be done. I worry about it, apropos with your conversation with john taylor, tapering there will be market volatility with this tapering. It will create some challenges i think for large Financial Institutions and we still have a fragile Financial System. I think that is very unfortunate. I agree with john. We need to get out of this. It needs to be gradual and controlled and but we need to get out of it. It will be hard. The system is still fragile and i worry about thible to cope with it. Melissa sheila bair, thanks for your insight. Come back soon. Thanks. Melissa time for the todays fuel gauge report. Oil prices tanked for Third Straight sessions. Crude settled down 1 1 2 at 106. 59 a barrel. Natural gas futures jumping today. Tropical storm activity in the gulf of mexico and hot temperatures in the midwest heatings the rally. Natgas settled at its highest level since july 23rd. Iran says it wants to resolve its Nuclear Dispute with the west. Its top Nuclear Negotiator says the company is ready to expand cooperation with the u. N. Nuclear watchdog. U. S. Energy secretary responded to irans apparent olive branch saying today, irans word has to be followed by concrete action. Next on money, five years since Lehman Brothers collapsed. Wall street wont touch dick fuld with a 10foot pole but plenty of ceos, you know, they have tanked companies only to get a great new job. What does making fuld so different . It is all the word on wall street. We have got all the details. Plus, does money buy happenness . A new study lifts all the old assumptions on their head. Weve got an allstar panel ready to sound off over todays big money talker. Stick around. Do you ever have too much money . Weekdays are for rising to the challenge. Theyre the days to take care of business. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. See who does good work and compare costs. It doesnt usually work that way with health care. But with unitedhealthcare, i get information on quality rated doctors, Treatment Options and estimates for how much ill pay. At helps me, and my guys, make better decisions. I dont like guesses with my business, and definitely not with our health. Innovations that work for you. Thats health in numbers. Unitedhealthcare. Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. Melissa so with this milestone after the financial crisis some are calling exLehman Brothers ceo dick fuld, a wall street pariah. He drove the giant Investment Bank into the ground and five years later, still cant find a job. Behind the scenes with about it all the word on wall street today. We have the wall street journals Spencer Jacobs here with the inside scoop. Spencer, thanks for coming back as always. What makes him different . You know, to be fair weve seen a lot of people trash companies and then they come out and they somehow get another great job. Youre like wait . Oh, it was that company, it was an impossible situation. Were all waiting to see what

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