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Hired they love him foxbusiness.com.
Live we have a whole lot and that really exciting story to get tee today and having no better really kick off -- -- -- -- stay with in the Fox Business family.
12 punch of Peter Barnes and Adam Shapiro talking about the G-8 and I'm very interesting story that AIG -- go get some money back from AIG.
Gets out about not in the moment -- beginning with Peter and it oh yeah.
And it's sad because remember we talked about this.
Oh we've been talking about this -- a bad idea that the press corps -- gets.
As -- had to go into the GA extended an added this morning yet either had not.
Received it's my bag and I believe that might -- Holes breaking news now Peter.
Breaking news absolutely who cares about global warming Brooke -- that global economy and and unstable financial markets.
Thanks to generally.
Who has her finger on the pulse of popular culture.
-- I do know that there were in fact.
-- there were freebies here for the media and I have in fact retrieved my.
Let's open up shop yeah let's take it.
I think the market.
Now we actually have some boring stuff in your first like you know IG -- Prescott who cares about that and then you know a guidebook to the region he get that -- -- a grocery store.
And then this study who wants a look at that.
Aren't we start out here with this exquisite Lenin.
Had made in Italy does have a G-8 I think how -- felt like your hair -- make sure hope you know it has up yesterday as we are now.
I think it does have the Italian flag on -- I mean that here and then then we've got pulled this.
This looked like a hockey puck when we open it up but you know what it is -- that is in fact.
T shirt an extra large and not miss.
Like a hockey park and there we go a long sleeved tee shirt at that -- of their on this through the logic though there's the logo right there.
I got a G-8 marker.
Pen and pencil.
And -- goes over it and guess what else I have -- what I'm gonna send it to you yeah.
-- -- -- So full -- -- realized -- kind of their brand of humor to -- if there's any names on that it is day.
It is a swatch I believe I'm saying it is a branded G-8 item now appear I -- you -- remember the last time that we we talked at least a couple days ago in context and the slime bag weighs in reference to that big G-8 meeting in Japan a few years ago that cost -- 715.
Million dollars to put on.
Yeah nice -- the group who's paying for your swatch watch Barnes.
I have a feeling that the grand total value of all this is probably about five bucks aren't good.
Most of the made in.
Probably most of it made in China China -- part of the global economy speaking of which hey maybe get a word to -- about period.
-- -- -- -- -- Well I in order for Janet to get the watch right -- to her by name.
She must tell me what the acronym just -- it stands for.
Oh forget it great line.
It goes in the first person on our online -- -- get that answer right you guys have the right in right now what is flag stand for the first person that is if so why AG.
-- asked him immediately into Eisenhower awaiting -- fans I actually don't I'm -- returning residents are waiting for and to be able we're we're gonna wait for it forget evidently.
Agassi appear until they get -- -- everything error.
-- do you have dental student.
Did wasteful asinine government.
There are certainly starting to come in here sealed with a gift and this is wishing want to -- three G.
Stuff we all get out it's a significant point I'll bet that's exactly right.
-- -- -- -- -- -- -- gets lots and they get like -- -- something we're.
You have violently but before we let you go maybe you we could touch -- don't know I didn't hear anybody any news coming out of this besides your watch.
Yes we are going to be hearing from the president in the hour on the issue of climate change -- -- a big meeting right now on that the G-8 plus about a dozen of the other countries here and as you know the big.
Roadblock to getting some kind of global plan to address greenhouse gases has been -- developing countries China India Brazil Mexico.
They are all kind of still negotiating here with the industrial countries and the president is scheduled to make some comments say.
After the at the end of this meeting that's going on right now and I believe.
Will be carrying that live on the Fox Business Network aren't good enough so you already here tomorrow.
We're back here tomorrow.
And the president will be having a press conference so obviously we'll be covering that and then.
President heads to Rome for a meeting with the Pope.
And strength that's right trailing.
That -- and on to Africa and after that right at the end of -- and they end of the trip and -- okay.
Poppy thanks a lot GA Tennessee -- here and -- okay that was so much my thing.
Well again the stuff we don't know yet.
Apparently don't get it what I've just had a good answer that that was cancer although.
Chris -- well he's known for its outside.
So you're here to talk about AIG and us getting our money back from AIG promising -- focus flagging him.
Stuff stuff we all don't get it.
Here's an issue that we're trying to resolve actually and they didn't just bring -- speed.
Financial Times reports that AIG negotiating once again we've met life they had done -- great deal fell apart.
To sell one of AIG's -- insurance companies which is American life.
So the question is if it sells for fifteen billion as the FT is reporting all the we had the same time.
Now we don't bump but that's exactly what -- -- -- tell us adult ADV anybody ahead.
I -- sells for fifteen billion question becomes who gets paid back the Federal Reserve for the sex -- in and here's a lesson in economics or what we like to call the mafia -- the Fed.
The Federal Reserve often makes deals or you know it's an offer you can't refuses to do you can't refuse.
They the Federal Reserve a private organization they're not you and I the US taxpayer it's a private -- -- public what everyone to call it.
They loaned AIG eighty billion and that loan was collateralized with companies like.
American life international so -- the fifteen million dollar deal goes through does that fifteen billion goes to the Federal Reserve.
And to Don Ben Bernanke -- war.
There's seventy million dollars that you.
And die in Jan and coddle him and Connell and -- everybody else through the romper room magic Fairfield -- remember that 300 million taxpayers.
Game AIG seventy billion through the US treasury.
So we have let's say to give us the F fifteen million dollars up for grabs as -- go to the Federal Reserve because it go to the US trade both.
Well -- you know -- like split it and yeah.
Do you think uncle band or you know -- -- Ben Bernanke's gonna split physically get it.
The problem I don't know what's -- are trying to get a clarification on this there has nothing to do that when it comes to the Federal Reserve they take their -- -- there's no fair when you borrow from the Fed.
But what the -- guidelines talk about repayment of loans.
And this company that is allegedly up for sale and I should point out that -- met life.
No comment on whether this is actually happening in AIG we're waiting to see if they'll say no comment -- actually talk about it.
But -- it says that if you -- it looks like the Fed gets paid back because he is taxpayers are getting equity in AIG.
It is already getting a little payback.
Right well -- I get paid back and it's going to be kind of like well I can't say this even on a web show tonight there's there's an analyst report out -- -- city which says -- -- -- -- -- that distribute equity and AIG that there might not be -- half yeah 120 stuck to his sinker over -- city is saying that look as AIG sells off its profitable divisions profitable companies.
There's no equity left -- that it's essentially worth zero and the question for me eat that I'm asking different people in the government is.
If -- seventy billion that AIG owes us.
Through the the loans we've made them through the treasury and we've gotten equity of the.
Got stuck in that stock is worthless we ever get paid back.
-- GM and do we I wonder.
Probably not right.
Can we sell the watch to see here -- -- -- swatch -- -- like so many people are sitting by the way AIG's common stock price today is trading at ten bucks and change the study what is -- percent and right they -- -- one for twenty stock split.
Which you know.
Do that essentially makes you pumps to stock up because it's putting more out there so you're 22 bucks after they did that I think -- -- -- that's -- down already.
From that to about ten it's an -- say -- down more than 20% today right so it and it's going in that direction back kitten that they'll be back where they started before the one for Tony's -- And I know they're getting hit that the problem for AG Brian Tobin asked this question -- it's great question -- think you have huge market share you know this is -- there are companies and -- -- which are hugely profitable yes so why would this be why wouldn't there be equity for the stockholders will according to -- a -- every city.
There there's so much exposure to things like credit default swaps -- their liabilities are so great that it's just.
-- look you know who have visited the AIG in about that one unit.
And in particular that brought it down it really is amazing how interconnected that one unit moss the company was just this one.
Put AIG -- financial products -- that was that was so interconnect to the rest of the global economy that it just completely overshadows the rest of those other units that are profiting.
Take video car analogy got what they are playing -- you -- right.
The jet with a 1997 through 2000 jaguar X -- the beautiful convertible has the AJV eight engine for design this -- Jack what is on the engine.
Beautiful great engine when -- -- -- -- they say this is a great engine the problem with the original version.
If they had plastic pensioners on the engines -- this 101000 dollar piece of machinery.
Can be destroyed by a little piece of plastic which fails and it does fail -- if you own a jaguar a lot of people say about this yet to replace those tension is because if they fail.
It wipes out the entire engine.
And that's -- 101000 dollar replacement.
I don't know much about that yes you're good analogy I don't know exactly.
Have a car and I tell us yes fantastic start -- -- they actually thank you chaps nice type C it I think about a twelve point seven institute -- if it tastes good when it has good taste she.
This is such an inside baseball circles wardrobe -- in my back in about 27 are we talking Bernie -- -- -- 47 or you want to get -- we we like we have.
-- -- -- -- -- I think but you know Ruth allegedly was shopping for an apartment on east -- -- what happened.
The New York Post reporting that Ruth looking to buy one bedroom.
At east ninetieth street right and totally absolutely and I love the post but totally absolutely no way inaccurate.
It's not happening.
The article in the post is totally absolutely no way it's inaccurate.
OK so that's them -- -- where she -- they're not saying where she has moved.
Interest and who got look for tell -- I'm not gonna happen when your company email from Dan -- she wanted like Republicans.
They didn't very consistent with the -- -- -- admit that he edited and instead they need to get it can't really control only do you have a lot of control.
While we have -- way back more about -- drinking and racing handicap -- we will win and one of those strains.
Now I'm there.
-- -- Went back to the market yet did.
-- -- we've worked -- -- they -- -- -- everybody AMR I think it is not much going on at least right now on the headline is he -- dad's -- -- let's just what is it possible the next big gains for stocks today that the -- What down one down now down one point that.
But we wanna talk a longer term about -- affecting.
Not only stocks the financial markets in general and -- video catalog posts here president global investment strategist to blue -- -- blue marble.
Researched any good to see you thanks for coming on thank you -- this is dot com life.
We appreciate it so you don't remove all -- this a couple of issues I think today that are in the news -- -- some of which we haven't talked about.
Problem yet because through retirement AIG and other things in the G -- event.
-- -- -- -- -- -- -- Now is being put out there there's nine they've signed up these nine firms writes it to go forward it -- it's a shadow of what we thought it was going to be it's much much smaller.
Let me think of it I think it's the proof is in -- putting and we'll see whether or.
President's plan actually does see the light of day.
Beyond that you just mentioned the very very small aspects on into the -- test to see how it works and Manuel I think he would have preferred to have secrets -- actually.
Word from the get go.
-- not been something that really helps to kind of you know will evolve and develop its way into it he had an idea.
He wants to get the financial institutions Kentucky -- keep the financial services industry intact he wants to -- financial innovation.
Continue to develop.
Continue to be they're going forward he thinks it's essential for.
The entire US economy so -- and they're more support for I think largely it's because of the fact that the plan itself.
It's problematic because -- -- banks don't wanna sell.
At the prices that are there but I know that buyers don't seem to be -- you know you've heard the argument -- before against it and those arguments seem to be coming to fruition.
So do you think the market still needed though in that the plan is doing foe Armenia that regardless -- If -- -- the idea is the more important the market in the actual implementation and the plan.
-- into the market already ran its course is far and getting what they needed from me this announcement -- -- -- actually need to see this process happened over the next.
Clear -- -- our -- sell on the news sort of thing.
There you can go only so far less than expectations of something you're really -- you start to happen and I think that that's.
-- market reaction if we start getting announcements that can be -- should be being kept taking on the toxic I think that would you know I.
I would -- that that would be very very positive the financial services industry -- banking industry.
Really needs to get his act together he needs to be recapitalize properly it's been used to start lending.
It's sort of hoarding the money.
And it's understandable why they are fearful -- -- are hoarding the money because of the capital requirements issue and stuff like that so that's part of the equation that's there.
I think the most immediate thing that's on most investors' minds right now.
Is second quarter earnings results yet -- got all of these above consensus macroeconomic.
Data that's come out of the last couple of months twelve by my count.
OK so now we need to see it actually show itself.
In earnings that are above expectations.
That you start to get -- -- platform upon a star from Mars you'll get a that we might get that believe the problem is did the revenue on the revenue side of things in the top line we're just not seeing the -- festival coming through cost cutting -- write reviews and all of -- are very quickly yesterday because.
Because corporate America needs to be as efficient as a problem.
Possibly can be and that's an excellent point you -- -- slow GDP growth you can slow top line growth to an extent for a while.
But if you have good bottom line growth.
Then you have the justification for stocks to be higher.
That's supports valuations -- -- -- we're headed high of one of our viewer says yes what about the market indexes for the next six months up or down you think yes I do think it's up.
It's all contingent upon certain.
Important numbers that are you know -- really -- They have a crystal ball Holland do not like to see that these numbers -- got to bear itself out we need to -- except meaning what specifically.
That you need to see numbers in the second quarter -- Above.
Consensus expecting my.
Like Alcoa for example like a little big drop in profits so anyways if it was better than expectations correct.
You see them the markets are based upon consensus expectations.
Valuation is based upon consensus expectations.
So therefore anything that's above.
Consensus expectations which for the S&P 500.
For the second quarter of this year is around fourteen dollars in total.
OK so if it's above fourteen dollars -- -- -- -- fifteen or sixteen books in the aggregate that would be concede they're gonna contribute to be very positive.
Sony needs to be above expectation.
Let's try to talk a tactical here a little -- the US will be on your blog about a head and shoulders.
Pattern in the market actually are on.
Robert -- was on the show yesterday talking about this some -- is a real.
Debate brewing between the bulls and the bears -- know what side you stand on that -- bullish you've already kind of stated your case for -- -- talk about the head and shoulders pattern and what we can read into the technical -- -- Well -- mention in my blog posting yesterday that it's a low shot past.
Did -- see what you want to see -- -- -- chart patterns so where the head and shoulders formation that is a top which is what the bears would say you have.
One shoulder ahead and then another shoulder and that forms a neckline -- when you break -- neckline then you're headed on down the measure of wit which is the -- to the top of the head.
Right now in the case of the short term top.
For this market the argument would be that you know OK well your first that didn't O'Donnell away hundreds -- -- S&P 500.
However -- well yes and then demand the ball you don't spot that is -- -- -- -- the -- we got a larger longer six months.
Head and shoulders reversal sort of bottom in other words if you got one shoulder this way to your -- goes this way many of -- shoulder goes this right now.
It's -- on down again you need to break -- headline the next -- excuse me if you break that -- -- -- up to eleven under better all the problem at all as technical stuff -- we don't know until you know -- which one that's what is right you know we were you might be right about -- longer term look at the charts but the short -- guys might be right to put out directly -- happens at all not quite what uses it.
The uses that if you blended together like I believe that you should.
With fundamental analysis to it did you're -- purest.
Technicians that say I don't care if they make widgets -- -- chips I don't care what they make the bottom line is that.
The chart pattern is everything that matters the price action yet everything that matters and even look at the fundamentals that's correct I don't believe in I believe that you have to blend the two together.
And by blending the two together then you can find a fundamental justification.
What's playing out on the technical side and that's where earnings earnings expectations.
Price earnings ratio valuation and those kind of things they matter a lot.
-- -- from Georgia brings up a point about consumer is that I'm curious about your perspective on he says that in general doesn't really matter.
The market technicalities consumers are still bearish they're gonna save their gonna -- last night and that it.
In of itself is significant what do you thank you.
Yeah I think that that's an excellent point than we are shifting in the US economy.
I'm way from being so heavily dependent and it's grown to be so heavily dependent on consumer spending consumer spending right now constitutes around 70% or at least last year.
Of a US GDP.
That is expected to decline back to the earlier period where we had -- the 1960s.
Which is in the low sixties not only winless on the go all the way -- down.
But what we will do we see consumers save as good as -- Person has stated yes they're gonna save -- are gonna spend less does that affect on the US economy that's why.
If you have companies that are globally based -- benefit from emerging markets and particularly the middle class and emerging middle class emerging middle markets.
-- -- emerging markets then you're going to see them benefit economically revenues will then improve bottom line mold and improves to use -- You've made the point for example did you you like investing in places like Brazil capsule and that's the logic for that you still like that even is a problem of the a lot of these seven emerging countries is that there stock markets have really run up here that's the last few months big -- -- -- 50% -- big moves while how much does that keep going.
Well because you have a dynamic that works we're emerging markets won't -- -- -- specific point that I'm jumping under different points.
Your specific point the reason that they've run as much as they -- is because of global rules -- story.
-- seeming to take some home yeah -- getting some traction so therefore export markets we've gone back to the way we war.
And that's kind of the army and also his decoupling 2.0.
There's a view that decoupling was starting to take place to some extent so Buffalo's items helped to drive those markets and then when -- commodity markets doing as well as they did.
The expectation was that since so many of these countries are export oriented and -- included.
Then you have the combination of all of that.
There's the growth they are good markets are improving we'll -- them back to the way it was.
Therefore money started to flow into those markets -- a little bit ahead of itself.
Correcting to some degree but that is the secular story that is where you want to be.
And -- where the growth that is the growth is not going to be and developed economies like euros US Europe and Japan college kids got some time to really export element that's there.
It's going to be an emerging markets and -- great story.
When big things and I presume that we were actually talking yesterday on the show with baton could put currency analyst.
Why is episode can get hurt Joseph Biden the stronger dollar and as we know it said the president was meeting with the president of Brazil on earlier this morning they did not according T the Press Secretary discussed.
And and a new global reserve currency -- or anything related to the dollar at all.
It bears seems to still be fear in the market which is causing at times -- dollar strengthening can -- and these emerging markets -- concerned about that.
I say -- I'm glad that there's a concern because you need to have not concerned because part of the conditions for any bull market is climbing a wall of worry.
And so you have the expectations.
That -- we've got the fear of a strong dollar and see how you get a strong dollar with a massive amount of -- that we're gonna have to do just for the US economy along.
At best I think that you're going to get a mediocre golf and if you get a mediocre dollar and currency the point is -- Completion.
Absolutely come back -- -- my pleasure thank you this is very then join Netanyahu and that he -- -- is with blue -- research and and it's got the blog I think we posted earlier we will now you can read it looks if you block 200 -- for a little while yesterday thank -- -- -- Popular this California story that's your home state -- the way.
It is my own state that I take no responsibility for these fiscal crisis all right now wonder if anybody does we're gonna talk about those IOUs and what they mean how you can actually capitalize -- on them to some extent.
And what it -- most importantly for all the banks in California.
That's next on foxbusiness.com life.
Everybody welcome back markets -- about thirteen points right now on Thursday.
And we've been -- this story a little bit but it's one and many of you have that respondent about because -- concern not just for California but other states as well as we continue here about.
And staging crisis municipalities in crisis and what we are going to.
Do about it absolutely our Rob Brown is joining us from.
The State Capitol Sacramento in California this president CEO the California.
Bankers associations -- -- an important group to talk to at a time like this the IOUs -- warrants.
Being issued -- how the banks in the state holding up.
Well they're holding up well thank you very much and -- and Janet thank you for inviting -- to be part of your program this morning appreciate it.
Who is when you say holding up well and you're welcome is that good to have you on the -- what what do you mean by that and it's obviously -- -- as Genesis in a rough fiscal situation.
Com and download and at the IOUs come out how does that affect.
-- member banks.
Well clearly California -- in a deep economic slump and it is affecting the banks but the banks are working through that as -- relates to the registered warrants.
This adds another dimension of -- operational risk and credit risk.
Basically the registered warrants which are nothing more than a physical check with registered warrants stamped on it.
Received by the banks through tomorrow July -- someone into the balance of the month.
Those are received as a uniform of credit extended to the state of California held in the banks.
Securities portfolio until the -- warrants are redeemed on October the second 2009.
So they're approaching this with very yet careful deliberation they made their decisions earlier this month.
To accept these -- customers.
And did that is good corporate citizens but -- they also don't want to facilitate or enable the lack of resolution of the budget cuts.
Tough balance isn't it I mean how did they that he -- -- talk to again members the organization how are they.
Striking that balance between wanting to be the good corporate citizens you talk about the -- Enabling what's going on out there -- what what are some of the conversations you've been having about it.
Well first of all the California bankers -- been working for months with our member banks to be operationally ready so that we can physically process.
The registered warrants for the banks that accepted them.
We talk individually with the banks about what they're considering and I would emphasize that they make their decisions in individually these are not collective decisions.
And today are continuing to.
Experienced very rigorous regulatory over -- oversight the regulators have said.
That the state of California is not a good credit risk earlier this week our bond ratings were reduced.
So the banks are saying we have to be mindful of how many of these we can absolutely yes except.
And have the capital to support.
And by contrast we would much rather use that capital to make loans to consumers and businesses to reinvigorate this California economy.
So it's a very -- -- complex consideration.
Well that's the thing we we want to see the banks lending again obviously if this holds them back from that they're not that puts them in a bad position puts consumers in a rough position.
What about the at the prospect of more bank failures California's -- a state that's been hit.
Harder than many other spot that already this year there's been a number bank failures and some of what should happen in California and you go back to.
To last year you think of -- Mac and others.
-- are we gonna see a lot more bank failures.
Why don't have any unique insight into what may be in store firm banks that is I listened in the financial press is I listened to our -- military authorities.
Clearly there will be more banks challenged -- around the kind -- United States six of the seven that were close in.
I guess last Friday.
Were we're out of obviously the state of California.
Rather this this this -- didn't the government with their stabilization plans.
There's been trying now for some time to throw a safety net under this US economy.
I would suggest that we haven't effectively done that yet.
-- eight inch Indian in light of all of the very significant effort -- and told that safety net is completely fabricated.
And we bring this economy to a bottom in California and around the rest the United States.
We're gonna continue to see some very significant pressure on all businesses consumers banks would be a part of that -- because banks are really a reflection of what's going on with their customers.
And we have some questions rob Rob Brown is with us a CO the California bankers association from Sacramento we have some questions coming in our common border number viewers all for a few of the match you.
Chad senate comedy and while we were talking about foreclosures.
Obviously banks would have to deal with that mental -- gone up a lot this -- expectation foreclosures are gonna.
Are gonna keep rising for the foreseeable future.
You know as I listen to that matter clearly we had a absorption of foreclosed homes around the country and in California these past 34 months that means that.
There were sales of homes -- been foreclosed upon.
And the flow of new foreclosures out of the pipeline slow down I think in some measure that was a function of the moratorium that was imposed here in California.
So as I listen to.
Those that are close to the real estate markets we'll probably see some elevated foreclosure activity.
As those homes that have been held in abeyance now come on to the market.
Here's another question coming in you can take this one anyway you want arrived at ten -- rights and how did California get into this mess and he started the conversation and our -- -- with others.
-- viewers coming back and saying well they're suffering from quote on quote excessive government.
You know too much taxation and rules and regulation of have damaged the statement and -- making comments about the Governor Arnold Schwarzenegger what have you but how did California find itself.
In the situation that it that it's now and a fiscal complete.
-- it well.
Ted offers a very good question I'm not stop structure on uniquely.
Qualified to answer -- -- clearly we have known for the last couple of years that we have been on a path.
To us spend more money than the state was taking in in revenues and no one foresaw this very very severe economic downturn.
Which is -- -- the and decline in revenues.
So California has reached a point you reach it on July the second.
Where the money that we spend exceeded the revenues it receive that gap for now is trying to be closed with a registered warrants by the state.
Until they can address the budget issues.
Maria I'm always seems we have a habit of having some exceptionally good times in this state.
Enjoying elevated revenues.
Deciding this Mendoza rather than no pun intended put those in the bank.
For a rainy day and then we find ourselves in a downturn with some set expenditures we can't fund it.
Right and that's the system and that's it therein lies the problem essentially so -- just to go back to your members and when you talk to do you have any kind of a cross section bankers you're getting.
Again these these -- conversations what's the biggest fear right now it seems like things are as bad as they can ever be but could it get worse and itself.
How or why and what we do to prevent it.
Well our member banks approach this downturn with a greater capitalization.
Then the last downturn in the early 1990s.
So they had balance sheets that were fortified -- able to withstand the the pressures.
Loan losses and decline earnings.
They are rigorously and trying to continue to grow their businesses manage their problem loans serve their customers well.
And many many banks in this state are doing well or very well and some are.
Challenged in varying measures.
It's more than just a sub prime matter obviously we've long since migrated past that.
Two commercial and industrial loans and I had now.
Commercial real estate loans.
And then the broader issue of job losses since he enticed are those really going to be a -- by the way those commercial loans and then you know commercial -- -- we had a conversation about the other day Michelle and some people say look out.
There's still a lot more to go through there.
-- of the banks is -- relates to their respective portfolios.
And the regulators as it relates to their oversight.
Are paying very careful attention to that and watching to see what is happening with vacancies and how that affects cash flows.
And whether that will put any pressure on those loans -- is still some.
Investment partnership that we've been talking about today and and you know they have nine -- signed up I know it's a lot smaller than it was supposed to be but who knows maybe it'll grow.
Does that help the California banks.
Well it has the potential and you recall this is the second effort to to deal with so what -- first -- referred to -- toxic assets.
And then it was given the label -- legacy assets.
The TARP plan was pulled away in terms of buying toxic assets along came the capital purchase plan.
Now the FP -- program has emerged and frankly it doesn't seem to be gaining a lot of traction I believe there is a kind of a beta test by the FDIC plan for the summer.
But some of the assets -- acquired through foreclosure thanks we'll see have to see how that goes there really just back to the issue of valuation of the assets right banks don't wanna sell Lawrence thanks don't then there was so thanks levels.
The banks don't want to sell at a -- level that really doesn't have an established market value -- Well we'll see how that works its way through is another one may -- nobody thought -- -- rod thank you very much and good luck with everything down -- tough situation in California thanks for coming up.
Nice to get your program thank you Ron Brown as the head of the California bankers association now I'm still to come here we're gonna.
Talk a little bit later on with Howard -- of stock twit -- I'm on -- community where people talk about the markets to Twitter Howard's been on before he'll be on.
Little bit later but and just a moment we're gonna keep this conversation about California going.
And look at a way that some people are cashing in.
On all the trouble out there this is foxbusiness.com.
Are we continue here on fox this is dot com live on -- Thursday -- will be back from the Fox News Channel where she's doing a report in just a moment but we've been talking about.
-- her home state of California all the fiscal troubles out there and we're going to go now to Jeremy Smith who has yet to coming colts' second market.
And Jeremy joins us from Cleveland now the talk about how some people are actually believe it or not making some money on all these California IOUs that we were just talking about.
From the bank's perspective how does that work chairman.
Well the way it would work.
And I should say right now second markets as a marketplace for liquid assets were monitoring the situation to the extent that.
The majority of the banks and large banks continue to accept IOUs then there may not -- it to be a need for robust secondary market however as conditions change.
Maybe as early as Monday.
What would happen is sellers could come to the second market website.
Post is there IOU they're they're registered warrant for sale.
My second market would then confirm -- we've been in in discussions with the state of California.
And second market would verify and have the state of California verify that that is in fact they.
-- -- The war would be listed bidders would bid on the war position and the seller would accept the highest price.
And then second market and this is an important thing to to be aware.
As a registered broker dealer who is regulated by Finneran SEC we take extra precautions to make sure that everybody has confidence in the system.
And so what we will do is actually take possession of those warrants.
As well as the cash from the -- so that buyer and seller can be comfortable that they will receive what they signed up to -- OK so couple questions here number one how's that how's this going to or how might this something like this help the situation.
Out -- are well.
Yes that the biggest way that it can help the situation is there are people out there whether it's individuals.
Or local governments or businesses.
That need liquidity and in order to pay their mortgage or to pay their employees and they can't wait until October to get cash.
And so by by posting on second -- for sale you have the opportunity to actually get cash for your IOU and helped -- your own personal or corporate situation.
All right and you said a moment ago that you had some concerns you would be monitoring it is set over the weekend and then you made the other point about.
You know that second -- being -- registered organization net and whatnot.
What are you most worried about when when you put some -- together what what what can your wrong.
Well it really it's just about something go wrong is communications and miscommunication.
Which is the importance of why would second market -- set up the way we are.
We have the people the market specialists who can.
Manage the process manually but we also have the electronic systems in place that provides for transparency and documentation.
So that that potential miscommunication.
Is really mitigated if not completely eliminated from looking at second Marcum is looking at the website down -- -- haven't gotten a computer in front of me right now I mean you're you're in the business usually -- handling what.
Things like bankruptcies but I see you know even that the different categories that you have listed auction rate securities and studios and all this type stuff -- your.
And you mentioned to register organization that what what job do you guys handle the most in -- you know day to day business what's what's your biggest market.
I think that the three biggest markets auction rate securities mortgage backed securities and our private company's stock market I would say those are the three most.
Active ones you know I'd talk about that as you do you know your -- advertised as the marketplace for illiquid securities.
We just got done with the conversation on the on the -- have been trying to get these securities that are supposedly -- a liquid off the balance sheets is some of the banks.
What's your what's your take been -- all that.
Well it's a great question because actually do.
We go down to Washington about every week every other week and meet with people on Capitol Hill as well as the government agencies.
To talk to them about how -- market might be able to be a part of need to keep -- process or really complimentary marketplace for so that banks with assets mortgage backed CD -- whole loans.
Can list their assets for sale on second market.
And then the government can bid on those assets independent private investors can bid on those assets.
So can help potentially provide a much more standardize.
And efficient system for selling the legacy assets again either.
With the government or as a complementary market just for for private market transaction so what's happened yet and admit you haven't been able to make any any progress on that.
Actually we we've made some great progress where we do we launched the markets for mortgage backed CDOs and whole loans.
Approximately two or three months ago and since then we have gone from.
Zero assets in those three classes.
Two over ten billion dollars of the legacy assets and -- with -- every liquid asset class we enter.
The bid ask spread what the seller wants and what the buyer wants to pay.
Start out very wide.
They begin to narrow and eventually transactions start to consummate.
And we're getting to the point now where the spreads narrowing and buyers and sellers and those three asset classes are ready to start doing business okay so on this particular.
Firms that are taking part -- his -- you have any direct involvement or that or you're just talking about business other than that on the certain non non signed another business other than directly with the government's involvement.
I know it's it's that businesses while Syria has him talk.
Yes we've been talking of the government and we're going to be reaching out to the asset managers talking about how second market could be the marketplace.
Through which the people that.
Program -- entities can buy and or sell because ultimately however they buy the assets right at some point they're going to have to sell any competitive marketplace is a great place to sell your asset.
Let me ask you here let me ask you are real quick -- about your outlook for that program but first to wanna just remind people -- you're watching the Fox Business Network -- -- President Obama.
Making an appearance he's about to speak right now.
In Italy and there's that and the podium that's so build Berlusconi -- -- the Italian prime minister -- to speaking right now.
President Obama's about to speak and we will carry it live on the Fox Business Network on television just one of the point that out.
For people who might be watching there and also saw there's President Obama and opted to -- -- a joint appearance with the Italian prime minister self.
There you have -- that's being carried on Fox Business we continue on foxbusiness.com.
Jeremy Smith this was out of Cleveland second market is the company but -- up -- -- a moment Jeremy -- to -- retirement California ID IOUs and I think it's interesting to talk about this paper program finally.
You're outlook for this because a lot has been made that it's not as big as we thought and it's.
You know people are writing it off already it's just starting but you know you have to give -- to grant the fact that it did not live up to at least the outset.
What the government had that kind of promoted -- asked why not what's going on.
Well you know I I'm not exactly certain as to the details -- -- the reason we've set up our business as a marketplace is we let the market.
Figure things out whether it's the price of something for the viability if something I think in the end.
The marketplace is going to determine whether or not they'd like to use the and then so overtime so this might be the start of it in other words and mobile industry best -- How it builds up right.
That that that's correct thanks Jeremy thanks for coming on a network until those issues second market again the check it out -- -- and market dot com which is where I am right now Jeremy Smith -- -- Cleveland.
Okay again we do have a lot more still to come we'll talk about the markets and Howard Woodson and talk.
Stock twits and what people are are kept buzzing about on the Internet today with regard to to that but did the GA talked about President Obama speaking out in Italy.
Really get into more of what has actually happened there and what we can.
Expect to come out of that meeting whether it's direct right now or indirect down the line that's next fox this is dot com life.
Like right -- the Fox Business Network up president Obama's making some comments at the G-8 meeting in here at foxbusiness.com we are going to talk about.
That meeting now is Tony -- joins us global policy network organizers of the economic.
A policy institute and Tony is with us to see the president there from our bureau in DC.
Seems like every conversation Tony thanks for coming on had not every conversation -- most of them are related in one way shape performed a global warming has been so much on climate change.
That is either been talked about -- might come out of this not so much and things like currencies the economy in general.
What have you -- of of what this G-8 as either accomplished or not accomplished at this point.
Well actually I'm I'm a bit disappointed because I think the issue that should have been dealt with.
The latest that projections from the international labor organization.
Is that that this crisis this economic crisis we're in now is going to result in the loss of 51 million jobs worldwide.
And that needs to be addressed and I'm I would hope that that G-8.
Leaders would look at what is working or not working in various countries.
And did do something about stopping this -- because this is really.
Very very severe Craig.
This was so you know you're in this country ought to present an overseas we've talked about things like a second stimulus right and -- and debated whether we we need dad.
Is that what the conversation he should be sent or not not only here but in other countries more government spending.
Well I think second stimulus is going to be needed them and the best way to.
I know a lot of people concerned about that and increasing deficit in the best way to address a deficit is to have a thriving economy and bad -- The what -- dealt with -- we have to do but I think there's some things like for instance what Germany is doing.
Should be emulated in other countries.
Germany has lost as much are ready.
Cover its economy and -- -- in terms of the climate GDP GDP as any other country in the world right but.
They -- -- have a program.
To maintain jobs and their unemployment has not risen at all when this matter of fact they haven't lost a single.
I'm -- production jobs and the way they do it.
Is that they have a program.
To encourage businesses.
To keep their payrolls in -- and they actually.
Be equivalent amount of what they would pay a worker for unemployment.
They pay that to the business -- the business.
Owner keeps the payroll in -- and keep those people employed not to much.
-- let me go through that the numbers just backed by the with the Fox News Channel so you jump in here in a second but -- -- -- -- Tony retirement Germany seven point four to seven point 7% to up a little bit and unemployment.
At the same time the US has gone from five and a -- to eight point 9%.
So obviously we're coming off a lower base.
We had very low unemployment figures coming into this -- and the Germans were higher in years back they were even nine did was not -- go right to Germany was an even higher than this today.
Maybe it made some improvements it's a different.
Kind of I don't know if it's apples to apples or not to make the comparison but you're saying hey listen they did a better job are -- the best example of what's going on in Europe it sounds funny to.
Many of our viewers we've had these discussions before to be to say the United States should be following the economic policies of the Europeans that you seem to think so.
Well it's true Germany has traditionally had a higher or unemployment rate -- the United States is tied.
But they ought to have a much much better as social safety net should be unemployed -- Germany is not severe a thing for a personal thing for workers.
As to be unemployed in the United States.
But certainly had Germany's Germany's policy of retaining jobs keeping people off of the unemployment rolls.
Is definitely are an excellent example -- should be emulated.
-- -- -- a good question on that Germany's population is 82 million people in the United States have well over 300 million isn't really fair comparison.
I think it's it's a fair comparisons are talking about what happens in businesses.
I mean -- me right now.
If -- here in Germany or the United States if a worker becomes unemployed.
Unemployment benefits in the United States it's.
-- a lot lower than it is in Germany we get about a 50% or replacement -- or less depending on what state you're -- Germany has a 68%.
Replacement rate on unemployment so.
That program is to try to keep people off from the unemployment -- so what Germany does -- pay the business owner.
For each worker -- that is threatened with with unemployment.
They -- the business -- to keep that person employed not much rhetoric doesn't course in the long run of course -- the government much less.
Here's the issue people are gonna happen with this it's what people see this kind of a slippery -- going back -- going down the road here to longer term whether or not we can still be a dynamic.
Economy in the United States if we're following policies like that the social safety net you mentioned.
He's very well known in Germany -- it's been jokes you know you via community of colleagues who work in Germany sell you guys are pickups are always on.
On vacation -- whatever the case may be and I remember reporting on German unemployment figures and they were always seem to be double digits which is as you mentioned used to be the case so.
Are you going down a road that makes an economy like this this one.
Much less dynamic and yeah all right so maybe they have a little bit lower unemployment rate than us right now but it's still seven plus percent almost 8%.
We don't wanna be in a long term position we're on our unemployment in this country is -- 67 or 8% we we need to get back to what it's just -- -- -- -- employment don't weighed down run for 5%.
Yes I would.
Definitely but we just did at the Economic Policy Institute we just them as an exercise.
Did a projection -- -- looking at past recessions and how long it took.
To -- get the employment error rate back up to what was it pre depression.
And we determined that if -- file is that this oppression pose the same pattern.
That do employment will not to get back to -- pre recession levels until 2015.
And that should be unacceptable we should we have to take an active labor market policy to try to really create more jobs and get people and keep people in the jobs they have now.
And that's the best way to get out of the recession.
You mentioned it was a great point about -- -- Germany's government relationship but businesses and the people there as well.
Is the only solution in your eyes to cut off these job losses -- bigger government here in United States.
Why don't think -- days.
-- to where you characterize this is bigger government as a matter of fact.
I'm letting people fall into unemployment rolls -- -- -- he as a way of as -- road to bigger government that's a good point even people employed keeping people employed doesn't doesn't increase the size of the government actually cuts down on government spending so it's.
Under way to get -- spending a lot -- in that scenario what you created from Germany for example but it's a fair point out.
If people unemployed there on -- -- on continuing benefits extended benefits and then.
You know that there are very dependent upon the state that way but if you're subsidizing jobs -- companies then there's also a different relationship with the government show.
It is still the government's involved either way you in our system.
You know it -- -- -- the government has taken a step back but is that is that the solution here it seems like you're saying it's not.
-- the government does have to be involved either way I'm in their government is is the fact that he did say this involved but if you want to try new.
I keep business going keep business thriving and that be on a path to our real recovery.
-- the best thing to do is keep people employed when you're employed they pay taxes that he are a contributing member of society.
And it doesn't go into this kind of bad depression that some of your guests were talking about previously.
People halfway up positive attitude towards economic recovery.
And that's extremely important when people become unemployed it's kind of like a cancer people become very discouraged.
They see houses and their -- yelling and our foreclosure and all of those things combined to.
-- stop people from spending.
What so what do you say to people who are and we've heard from a lot of them in the last few months certainly concerned that the government is just too involved in the day today.
Operations in American life now understand -- what about these deficits and you know as the question of growth that I brought up earlier and the -- you know how dynamic economy can be.
-- say people to say that just said this isn't the way this country was set up to work with this much government involvement what's the answer to that.
Why don't think that day anything that we've been talking about is a -- sort of dampening entrepreneurial spirit -- Putting government heavy government on top of anything it's really go our way to.
For government to act positively to help companies to help economic growth and -- that is clearly the best way to get out of the of a deficit that people have to be working.
They -- tax revenues have to increase and that's thriving economy is the best way to get out of the deficit.
I will be interesting to last time we appreciate your perspective and it brings some new -- to thank you very much for joining us today and -- will -- -- and I think.
-- sending -- -- We've talked about stock twist on the show before you know pretended to literally on its way now.
-- -- -- -- -- And we're gonna talk about it again at a moment just what people are buzzing about in terms of the markets on Twitter that's what -- -- dot com is all about it is you know nobody's check -- out Howard -- is the co-founder.
We'll join us as we continue here.
Talk about a number of different things on foxbusiness.com.
-- -- -- -- Yup he's tweeting about it are you tired -- is the co-founder he's joining us from saying hey.
Is a beautiful place out there and hit.
And we are and it looks nice out there -- are things going.
We'll behind me -- but it there's beautiful.
In his country it's it's interesting isn't it different backgrounds that -- up yeah.
They never quite a dance to right but it's asked for a different one minute and they've been pretty good that -- -- well next time -- -- a special request obviously.
That's right so what's the what's the buzz today I mean that's one of the ways kind of attack it how would your website for people aren't familiar against stocks which dot com is where.
You people used Twitter to basically talk about all things market -- individual stocks which are met wider macro issues what are people.
Really concerned about today I wanna talk about the whereabouts and BC FTC rules let's forget that day traders and traders should be -- up about that what what they've been talking about.
They are talking about I mean generally.
You know it's an idea engines and nobody's you know everybody is about talking about what their positions are but it really.
I think a lot of us were caught up in natural gas and oil and wondering.
You know about you and you which is a natural gas trust gonna have to print more stock I think.
I think the buzz is what the hell's going on I mean you know the SEC is obviously.
Time and time again.
Not doing its job and you know I'm I'm not for big government.
But you know of the SEC.
Is is an important.
Governing body I mean kinda keep the animals in place band.
The marketing has gotten ahead of the finance meaning the prospects.
It's like -- casino they're they're putting out products I don't know that really how they're gonna behave in the marketplace so.
You know the marketers on Wall Street have definitely surpassed.
The supply demand issue -- really managing the derivatives and what these products really can and cannot do they're all seem to be heading toward zero whether it's a long.
Leveraged ETF for short -- ETF they're all trending -- zero and that's just not normal parts of our -- that you want more regulation that's it sounds like.
Now I mean more regulation I would like them too before they approve a product that's basically gambling vehicle.
I elected to look at the product and and look at the facts -- before a drug gets approved.
It goes through years and years of -- state.
But you know people on Wall Street can -- filed I NE TF product or I trust.
With derivatives not knowing how they're really gonna work and you know right now everybody wants to own natural gas for some reason natural gas keeps dropping.
Or even authorizes the president -- which was to track the president -- -- the due to -- price of natural gas is not working so you know.
You know we're trying to use it to traders aren't doctorates and the rest of the world are trying to use these tools.
Because supposedly they've been vetted and what world do areas like you know -- -- putting his hand on a grill you're not gonna keep doing it.
And so you know -- the test.
You know where the test monkey is I guess armed the traders an individual -- that I -- That doesn't mean a lot more regulation I would like the regulation that we're supposed to get to be done properly.
-- -- couple questions about your company for some of our viewers.
Maybe -- for example -- in North Carolina says if market -- are going out on Twitter is too late to move on them what do you think.
Today it's a great question I've had the simple answer is you have to you know we're an idea -- so it's like a human ticker where ideas never coming back through.
The great thing about Twitter and stock -- is within two clicks you can see the reputation of that person so you know unless your -- you know I don't believe everything every whether it's on.
Old media new media.
Eight or whether.
You know my daughter tells me so when I click on so what -- -- all my daughter told -- so when I click on something.
I cannot see that person I can see their profile consider history can look at you know how they've been in the past haven't promoting or they're really diligent about follow up at their ideas and now.
I mean if you're promoting you're not gonna have any followers and if you don't have any followers you're talking in the dark so.
We're really a farm system for people -- really want to contribute to a community have ideas to share in those that do well we'll get more -- a minute begets more followers.
I hired and -- you know that our show is basically based on talking and -- -- think it's out of people that's Hillary life.
It will continue to exceed our diverts from -- and Chris were not recommending stocks I think that's where -- through -- and not -- your -- many sacks is we're not a source depart for stocks suggestions and and it -- actually follow up on a question from one of our regulars bond guy who's asking about the quality of information so.
You're saying if you actually click on the person and saying hey check out this stock for example floor was moving today on the market so.
And you can go back -- actually see a bio is it more of a bio that -- get on a normal Twitter bio or is it just limited.
Yeah -- -- it's it's more focused these are his.
If we could lead we -- everything with a dollar -- so to actually commit to stock could you follow us.
And had to pull yourself into our street you have to put a dollar sign in front of a ticker symbol hi so we're separate so we're -- have to stop conversation we're not.
We're not pulling his stuff -- -- in the Apple Store and it's gorgeous you know a teenager and we're like people with intent to talk about shocks now.
Like I said.
Everybody reputation to me matters more than anything and so if you are just they're.
First of all we don't follow any penny stocks we've deleted them from our system -- OTC.
NASDAQ stock so we've limited the universe of stocks that you can talk about.
But secondly just with a couple clicks -- the -- you can either get to their Twitter page or their blog.
Or -- in order all the tweets that they've ever made the kind of make a judgment for yourself on a timeline you know are they good or they're not good.
Yeah that's the thing -- net net and that's one of the most challenging elements a Twitter real easy to get a lot of information from and it is extremely valuable for that most talked last couple days with the sun valley conference about you know how they're gonna monetize it you know that's their performance.
Longer term what -- Their problem right it is their problem but this -- gas station FaceBook -- while -- not a bad faith FaceBook.
-- is 280 million dollars but Zynga which is a gaming company on top of FaceBook started a year and a half ago.
Is doing you know a hundred times more.
What I mean -- because of -- those making three to five million supposedly a month.
As a company you've never heard of that -- using the FaceBook platform.
So all the old cards and and Sun Valley or whatever talk worry about Twitter and it's on the go it's all pandering there current obviously they all -- Twitter but.
If if if a company built on top of FaceBook can make three to five million a month and you haven't heard of them.
I'd like to be long social network and -- -- to be long social media.
Well I think we -- but -- -- -- -- -- thing I was gonna ask you Madison.
Although we move will -- we were worried about how they're gonna monetize it.
What about the information in terms of the value -- it on -- you're saying well you know you can still check people -- and -- your own homework but this kind of tough to.
Work through some that there's been a lot made of some of the false accounts and all the hacking and and what -- that's got to be a big concern at a place like -- it's your time -- money gates.
It's a big concerns -- if if I was a celebrity and I am -- -- some people -- -- I was a celebrity right now.
The stuff that's being sent to celebrities and and and fake -- signed up with the threats etc.
You know that that's -- problem.
Twitter does three things phenomenally well.
And although there are -- -- -- ten bit light years ahead of where we were before you can block a person meaning.
You say something mean to -- Jenna and you keep saying it to me I'm gonna block here I'm going to be saying it -- I'm black -- few months ago that what I'm saying -- isn't completely say something mean.
Are you say something -- productive I can block you so therefore you're talking but I can't hear you.
Okay and that's a powerful tool.
-- -- -- -- Question okay how -- we only have about twenty seconds -- really -- on satellite -- Estonia when you'll still be on Twitter hey here's the NASDAQ to its 200 years hey.
Yes I feature and it can't -- and -- feel I guess he.
Yeah Cabrera feel like he knew that I -- that the it's it's stuck to its Fox Business satellite without good looking people.
McConnell is really that's our motto about what.
Part -- take -- thanks for coming on again appreciate it -- -- And they -- -- -- foxwoods dot com take him check this out on check him out check us out to everybody comes footer.
A deal between today by the way and we don't like it or blocking efforts -- are treated today was today.
Mark Cuban -- earlier that he was turning on the Fox Business Network who could blame that -- but hey we'll see tomorrow here -- this is dot com logic is out on Hulu or iTunes in the meantime.
Back at noon tomorrow firing back.
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