It is 9 00 in washington. Many other cities. We will look at chinas banks. They have cash in on a big quarter in the third quarter. We will have the numbers plus indepth analysis on the health of that sector. Plus anyone who equates the rejection of keystone xl with some kind of body blow to the oilsands is just plain wrong. Canada remains committed to developing its natural oils fans even as the debate rages in the u. S. Over the extension of the Keystone Pipeline. In our latest special series, oilsands at a crossroads. That will be coming up in just a short bit. The top story is the u. S. Federal reserve has decided to continue pumping liquidity into Capital Markets at a tune of 285 billion dollars a month. Our correspondent here in washington is daniel wrenches and has been following the story. It wasnt big news, but there was big news out of it. It is very interesting that they decided to avoid this process they are calling tapering. At the end of this twoday meeting, they decided to leave it alone and wait and see. This summer, fed chairman ben bernanke said if the u. S. Economy continued picking up speed, then the fed would start reducing bond purchases. Today, members of the federal open Market Committee arent sure if the American Economic engine is Strong Enough to produce reduce unemployment and increase growth. The two parties need to sit down together and take this seriously. There is a Huge Movement in the business world. They are writing letters to the leaders, saying, this is no joke. If you come continue this way, the real economy will be affected. Economic data has been distorted by the ever mentioned him the brinksmanship over raising the debt ceiling. The postmeeting statement notes that fiscal policy is restraining growth and that the housing sector has slowed somewhat. But the Committee Members to see underlying strength in the economy and will await more evidence before deciding to slow the stimulus effort known as tapering. They have to say, tapering is a possibility at the end of the year, even though i dont think they will. The data that is going to be coming out in the next couple of months is going to be weaker than expected. Ultralow Interest Rate policy incentivizes investors to buy cheap stocks, raising valuations even though the broader economy remains subdued, raising the risk of a jarring market correction. Fed vice chair janet yellen is expected to take over the chair from ben bernanke sometime in the new year. She will be facing a very complex task to gradually reduce the nations reliance on all of the stimulus, and at the same time, try not to upset the apple cart and upset the u. S. Economic recovery, which after all is being challenged by all of this dysfunction in washington. We can talk an hour about dysfunction, but there are a group of folks that are really being penalized because of the stimulus. You go to the data and put in your deposits, you make zero percent. That affects savers and senior citizens. Is there a sense that perhaps at some point that this has got to end because you are penalizing people for being careful with their money . No, not really. [laughter] the problem at the moment is they are kind of addicted to it. We saw, when even ben bernanke raise the idea of slightly steeper in slightly tapering the stimulus program, not even raising Interest Rates, slightly tapering the amount they will inject into the economy each month, 85 billion, in the markets reacted interesting instantly. Everyone kind of short back. Even the fed sharks back. At the moment, they are beholden a little bit to the people who are taking the risks and getting the easy money. If they pull back on that too soon, thats going to upset the apple cart for everyone. It affects your stocks. It affects your pension. All of those savers, and different ways. Yes, think the people who really lose out are people who have been financially prudent, put money in their bank account just to be safe, for a rainy day, or just come in this case, for pensions. Or in my case, the shoebox on the decks. Always good to have you on this segment. Michelle mccoury is in new york city. Keith fitzgerald is outside here in washington, d. C. Lets start with michelle for reaction from wall street. The feds decision to continue its 85 billion a month bondbuying program did not spark a rally. In fact come it was a volatile trading day. The dow and the s p both hit intraday highs, but closed in the red. Initially, markets traded flat on the fed status quo message. Then reports from the wall street journal that the fed could begin tapering a as december caused some discerned caused some concern. The nasdaq declined 0. 5 . Other analysts say todays decline was due to that meeting wall street saying, buy on the room up, sell on the we have had a strong run with confirmation there is no immediate tapering scheduled. On the earnings front, linkedin tanked overnight over 9 . Earnings did top expectations, but the network site should Current Quarter revenue guidance below forecasts. Western union tumbled over 12 after the Money TransferCompany Reported a 20 decline in earnings. However, General Motors revved up over 3 after reporting strongerthanexpected quarterly profits, thanks to strengthen its core north American Market and a smaller than anticipated loss in europe. Another fact that was laying on the markets today, a report that hiring is on the decline. From Small Businesses to medium sized firms, a new report shows u. S. Employers are not hiring as much as much as they were earlier this year. Private sector employers added just 130,000 jobs to their payrolls this month, and that is about 20,000 shy of what economists were expecting. Adps National Employment report covers the twoweek Government Shutdown and the bitter debt ceiling battle. The labor departments snapshot for october will be released next week. It has actually been delayed by a week because of that Government Shutdown. Im going to be back later on in the show with the latest on facebooks phenomenal earnings, but right now, more on the fed with you. Another while the story. Michelle, thank you. Lets start with keith fitzgerald, chief Investment Officer at map money map press. Good to see you, sir. Welcome to biz asia america. Let me start with the federal reserve, this tapering. Explain to us why do we even care whether or not the fed tapers or doesnt taper. You care because of this the fed has maintained a program where it is artificially keeping Interest Rates low by injecting 85 billion a month of liquidity into the markets. What that means in plain english is they are using a tremendous amount of money to buy bonds and presumptively keep Interest Rates that want to go up actually down. The theory is that this will trickle into the rest of the economy in the form of spending, low Interest Rates, low mortgage rates, low credit card debt, and the consumer will feel emboldened, they will borrow more, and they will spend more. In the United States, Consumer Spending makes up 70 of the economy. The fed is out of bullets and they are out of magic tricks. This isnt working as well as it used to, which is why you saw a lot of hesitation when the fed acknowledged it is just went to continue, but not really do anything about it. One and one argue that it has worked . The Housing Market has bounced back. The markets for all intents and purposes are at alltime highs. What hasnt worked about it . That is a very interesting point. It is a very valid one. Here is the issue. The stock market has gone up Something Like 83 95 off its 2009 lows. Consumer spending has risen only 9 . You have a huge divergence. What that points to is that the stock market has enjoyed the liquidity boom, but the consumers have not. The worry whenever you see a divergence is theres got to be one of two things happening either earnings have got to come down, market prices have to come down, or earnings have to come up. Either way, there is a looming correction. His is a classic sign for technical traders that there is maybe a danger sign. The other thing i want to get to is this money printing, this quantitative easing, the tapering. Why do i care whether they print more money or not . It doesnt seem to affect the rest of the economy terms of when i go to a store and buy something. Is it all that bad . Thats the real issue. They have bailed out main street , and they have left that middle america. Wall street has left them out pretty yes, you do care. If they take that liquidity away , then instantly credit grinds to a halt. All of the lending that you presumptively expect to be there isnt. The consumer who is addicted to debt, the stock market which is addicted to debt immediately says, where is all my money . Prices correct artificially. I think we should just bring one of our credit cards right now. Yes, we like our debt and credit cards, but i want to ask you about the economy a bit more. When you talk about Interest Rates, this tapering doesnt even affect Interest Rates quite yet, but rates are at zero. When will they actually increase rates, and is america or the world ready for higher Interest Rates, whether it comes out in 2014 or 2015 or 2016 . That is an interesting question. If you are a keynesian economist, you say, no. I want the Interest Rates as low as possible. That is going to allow the government and the fed to make up the gap, the spending gap, until you can acquire enough growth that you begin taking bad assets off the sheet. if you are an austrian economist, you say no, you got to let rates rise naturally, and companies have to die to make that happen in order to provide success. I personally of the Letter School trip think we have to the latter school. There is no quantitative, and. Which approve that. This is like taking cough medicine in small doses. You still got to swallow the stuff. It is still going to taste bad. The question is, on whose watch is this going to occur . Bernanke doesnt want it on his watch for the congress doesnt want it on his watch. The president doesnt want it on his watch. Its not a silly question, but it is something that has been bugging me for a while United States government sets Interest Rates. Those Interest Rates, we pay treasuries. If we raise the rates, arent we basically saying that we will have to pay other people more money in terms of the debt that we owe . Why would the u. S. Want to raise Interest Rates basically on ourselves . It doesnt seem to make any sense. Wouldnt we want rates of zero because that is the cheapest way to go . Yes. If youve got too much money, theres got to be a certain amount of deleveraging that takes place. Consumers, for example, in the middleclass dont want to debt. We saw in japan in the 1990s the bank of japan took Interest Rates to zero, and consumer still do not want it. You see that in portions of europe were Interest Rates are negative. Here in the United States, without the same phenomenon. The fed is keeping Interest Rates so low that savers come as you pointed out earlier, are being penalized. They are being involuntarily stripped of that asset and it is being foisted upon people who have been responsible with their money. Have been your responsible with their money. Thank you very much for joining us from portland, oregon. We take a short break right now. Still to come, our big and latest on our series of oil sands at the crossroads. Thus, we will talk about chinas banks. Profits are starting to cool off, as welker and we will get the details from shanghai. Cool off as well. We will get the details from shanghai. Welcome back to biz asia america. Chinas big banks reported slowing profits and bad loans also improved. For more details, we go to shanghai. Hello. Hi, phil. Its actually not too bad. If we look at the numbers, the banks earnings rose between 7 and 14 in the third quarter. That means those banks are still among the most profitable in the world. The thing is, as china slows, so do the big banks. Especially after china moves to free Interest Rates, that is really affecting those big banks and their lending margins, which is their main source of revenue. There is simply more competition from private banks. That means those big banks will have to diversify to expand overseas and also to sell more financial products. In terms of bad loans, the consensus view is high, but the number improved comics up for the bank of china. It is the Smaller Banks with the bigger problem of debt. All of the banks are waiting for more Interest Rate reforms from next months policy meeting. This policy meeting, the markets seem to like it for the most part. What has the reaction been so far . Thats right. Investors obviously like the reforms come as you mentioned. Stocks rose on wednesday in sectors such as utilities, power, and energy. It is believed that these sectors will be benefiting from the policies at the meeting. On the other hand, investors were also taking profits in sectors such as the free trade zonerelated sectors. Analysts are telling us the markets are sadly preparing for the what if scenario in case the policy meeting disappoints. Investors are also waiting for the official china pmi for october, which is expected to hit a 1. 5 year high tom according to a reuters poll. We will continue to wait with you. The feeling, thank you for joining us live from shanghai to discuss the health of the chinese banking industry. The partner of Greater China elite, a leader at ernst young in beijing, weighed in with me and whether beijing is more worried about this credit or bad loans. I wouldnt think the government is very much worried about bad loans, too much money in the system. They just try to control the pace of the growth into a more healthy pace. That means they want their business to grow, but they want the business to grow at a more healthy pace, and also, to be more controlled. This bad loan at the banking sector, a lot of people have talked about it for years the people who say it is going to be a big problem side effect affected there are always loans that are made. The bad loans are going to rise. That is bad for the banks. On the other hand, a lot of folks say, look, thanks in china have a lot of money. They are very big. Even if there is a lot of bad loans, they should be able to absorb those bad loans, which is true. I would say since we are in the process of Interest Rate operation, liberation, a lot of the spread between of the spread is between traffic and lending. The profits are quite good in the past years. However, we also need to see that the liberation of the Interest Rates, it is driving banks to lend to highrisk customers. They are also calling for the increase of the npl at the provision level of the credit business. I would say it is controllable. In my view, the provision and npl position in the China Banking sector is still very well controlled. I wouldnt say it is a major concern, but we need to be closely monitoring it. As somebody who has looked at chinas Banking System for so many years, you are an expert on this. When you look at the Housing Market, the banking industry, the Foreign Exchange industry, what is the number one thing you worry about . I would say that actually the banking, their motivation is driving for the profits, and they always put Risk Management off their minds. That will make their business grow in a very risky position. It is also a phenomenon where the npl ratio will go up. A good strategy in china, the capital strategy we are promoting the concept that you have limited capital, and you need to control your business to a healthier growth rate, and you need to Investor Capital invest your capital into better businesses which will give you help your revenue returns. That is a concept called the capital strategy to aim for a more sound Business Plan and business strategy. That was a partner at ernst young. Coming up on biz asia america, we go to our weeklong series and our latest installment. We will look at the canadian perspective of Environmental Protection to the government pressing for more development of the oil sands. That is coming up next. Our weeklong series oil sands at a crossroads continues. This is the Controversial Development of canadas oil sands. As with many of canadas Natural Resources, the oil sands were discovered by the Aboriginal People who first inhabited the land. They used the tar substance to waterproof clothing and canoes. Commercial developer and began in the 1960s. In 1967, Suncor Energy constructed a rig. The second mine began almost 20 years later is in 1978. That was a private public mentor venture which included the canadian and alberta governments. Th