WEBVTT - Levitt: regulators should be nervous with credibility at risk

0:00:00.440 --> 0:00:05.519
<v Speaker 1>Global business news twenty four hours a day at Bloomberg

0:00:05.559 --> 0:00:08.600
<v Speaker 1>dot com, the Radio plus mobile last and on your radio.

0:00:08.920 --> 0:00:12.920
<v Speaker 1>This is a Bloomberg Business Flash and I'm Karin Moscow.

0:00:12.960 --> 0:00:15.960
<v Speaker 1>This updates brought to you by Interactive Brokers and CME Group.

0:00:16.000 --> 0:00:18.960
<v Speaker 1>If you're looking for global futures contracts at low trading costs,

0:00:19.000 --> 0:00:22.280
<v Speaker 1>look no further. Interactive Brokers is the industry leader. Learn

0:00:22.320 --> 0:00:25.800
<v Speaker 1>more at Interactive brokers dot com slash c m E Group.

0:00:26.239 --> 0:00:29.880
<v Speaker 1>Oil is rising along with global equities amid speculation that

0:00:29.920 --> 0:00:33.080
<v Speaker 1>a production freeze by some OPEC members in Russia could

0:00:33.120 --> 0:00:35.960
<v Speaker 1>eventually help to evate the surplus. We checked the markets

0:00:36.000 --> 0:00:39.159
<v Speaker 1>every fifteen minutes throughout the trading day on Bloomberg nimex

0:00:39.240 --> 0:00:41.280
<v Speaker 1>Heurd oil is up five point eight percent of a

0:00:41.280 --> 0:00:43.760
<v Speaker 1>dollar seventy two is a thirty one dollars thirty six

0:00:43.840 --> 0:00:46.760
<v Speaker 1>cents of barrel. Brent is up four point nine percent

0:00:46.840 --> 0:00:50.000
<v Speaker 1>at thirty four dollars sixty two cents. Futures are higher,

0:00:50.080 --> 0:00:53.360
<v Speaker 1>with SNP eveny futures of nineteen points. Dow Emuni futures

0:00:53.360 --> 0:00:56.720
<v Speaker 1>have a hundred seventy one NASTACUMUNY futures up forty one

0:00:56.800 --> 0:00:59.520
<v Speaker 1>decks in Germany's up one point seven per cent. Ten

0:00:59.560 --> 0:01:01.760
<v Speaker 1>your treasure read down to thirty seconds. The YELD one

0:01:02.120 --> 0:01:05.880
<v Speaker 1>seven coms goal down one point seven or twenty one

0:01:05.920 --> 0:01:09.200
<v Speaker 1>dollars to t announced and the British pound is at

0:01:09.240 --> 0:01:12.160
<v Speaker 1>a dollar one, the Euro a dollar ten oh nine.

0:01:12.280 --> 0:01:15.479
<v Speaker 1>That's a Bloomberg business flash. Tom and Mike Karen, thank

0:01:15.560 --> 0:01:19.160
<v Speaker 1>you so much. Long ago in far away where I

0:01:19.200 --> 0:01:21.720
<v Speaker 1>would remember, and I'm sure that Arthur Levitt, the former

0:01:21.800 --> 0:01:26.400
<v Speaker 1>chairman of the SEC remember, was a field goal. No,

0:01:26.640 --> 0:01:30.199
<v Speaker 1>not Pete or Charlie Gogelac kicking field goals, three point

0:01:30.319 --> 0:01:34.240
<v Speaker 1>field goals a long time ago. But if you really

0:01:34.319 --> 0:01:38.520
<v Speaker 1>wanted to get paid and damage your client, you could

0:01:38.560 --> 0:01:41.440
<v Speaker 1>make three big figures or a field goal. I'm moving

0:01:41.560 --> 0:01:44.480
<v Speaker 1>a piece of paper over to one of your clients.

0:01:45.400 --> 0:01:49.960
<v Speaker 1>Arthur Levitt considers the final death of this where maybe Arthur,

0:01:50.720 --> 0:01:54.520
<v Speaker 1>we would actually know the mark up at least some

0:01:54.640 --> 0:01:57.120
<v Speaker 1>of the markup on some of our bonds. Are we

0:01:57.320 --> 0:02:02.320
<v Speaker 1>really actually too a visible market on bonds. I think

0:02:02.360 --> 0:02:06.080
<v Speaker 1>we're getting closer, whether we'll get there. We've thought this

0:02:06.240 --> 0:02:10.800
<v Speaker 1>for the past twenty years, the game of taking bonds

0:02:10.880 --> 0:02:15.720
<v Speaker 1>into inventory, and that afternoon, marking them up by one

0:02:15.840 --> 0:02:19.520
<v Speaker 1>or two points as much as that and handing them

0:02:19.600 --> 0:02:25.960
<v Speaker 1>to innocent retail investors as a game that was known

0:02:26.080 --> 0:02:30.520
<v Speaker 1>throughout the street. But I think that the Municipal Securities

0:02:30.600 --> 0:02:36.320
<v Speaker 1>Rulemaking Board and FINRA are now going to require brokers

0:02:36.360 --> 0:02:40.160
<v Speaker 1>to disclose exactly how much they pocket when they buy

0:02:41.000 --> 0:02:44.840
<v Speaker 1>corporate or municipal bonds and then sell those same securities

0:02:45.480 --> 0:02:48.040
<v Speaker 1>later in the same day. And I would point out, folks,

0:02:48.080 --> 0:02:50.239
<v Speaker 1>as you know, the field goal was a joke on

0:02:50.320 --> 0:02:53.120
<v Speaker 1>the street, but I want to point out, as Mr

0:02:53.280 --> 0:02:57.080
<v Speaker 1>Lovitt mentions one or two points, many many people would

0:02:57.160 --> 0:03:02.400
<v Speaker 1>mark up bonds constructively and ethically to their customers for

0:03:02.520 --> 0:03:05.799
<v Speaker 1>a quarter, three aids, half a point whatever. So you know,

0:03:05.880 --> 0:03:10.959
<v Speaker 1>it wasn't Mike. It wasn't so reprehensible that everybody did it.

0:03:11.600 --> 0:03:13.480
<v Speaker 1>It's just you didn't even know who was doing it.

0:03:14.560 --> 0:03:17.760
<v Speaker 1>It didn't because those markets have not had the liquidity

0:03:18.320 --> 0:03:22.440
<v Speaker 1>of our equity markets, and when you get mom and

0:03:22.639 --> 0:03:26.320
<v Speaker 1>pop buyers of odd lots, they're gonna pay a lot

0:03:26.400 --> 0:03:28.600
<v Speaker 1>of money for it. I don't know that that's going

0:03:28.680 --> 0:03:34.160
<v Speaker 1>to change totally. I think it probably won't, but we're

0:03:34.200 --> 0:03:37.680
<v Speaker 1>still in a better place than we were ten years ago.

0:03:38.840 --> 0:03:41.440
<v Speaker 1>We were talking earlier today with Brad Hints about the

0:03:41.520 --> 0:03:47.440
<v Speaker 1>outlook for banks and how regulator has increased their costs significantly. Uh.

0:03:47.880 --> 0:03:53.960
<v Speaker 1>One of the items of regulatory requirement banks having to

0:03:53.960 --> 0:03:55.880
<v Speaker 1>put up with these days, and the living wills, which

0:03:55.960 --> 0:03:59.280
<v Speaker 1>Jenny ellens Hays haven't worked out so well so far

0:03:59.720 --> 0:04:02.400
<v Speaker 1>as they've send them back to the banks to do

0:04:02.520 --> 0:04:06.120
<v Speaker 1>them again. Who should be the most worried the banks

0:04:06.520 --> 0:04:08.760
<v Speaker 1>that they have to keep doing this or regulators because

0:04:08.800 --> 0:04:11.960
<v Speaker 1>we can't get right. Well, I think regulators should be

0:04:12.040 --> 0:04:18.360
<v Speaker 1>nervous because their credibility is online, and I think the

0:04:18.440 --> 0:04:23.040
<v Speaker 1>American public should be most nervous. It's their money on

0:04:23.160 --> 0:04:25.760
<v Speaker 1>the line if they end up bailing out the banks again.

0:04:27.080 --> 0:04:30.719
<v Speaker 1>The regulators should have required more of the living wills

0:04:30.800 --> 0:04:34.040
<v Speaker 1>to be made public so that outside experts could have

0:04:34.120 --> 0:04:38.960
<v Speaker 1>evaluated them. They should have also publicly disclosed how much

0:04:39.040 --> 0:04:42.600
<v Speaker 1>funding they think it would take for those institutions to

0:04:42.680 --> 0:04:46.520
<v Speaker 1>be resolved in bankruptcy and exactly where is the money

0:04:46.640 --> 0:04:51.440
<v Speaker 1>coming from. Well, so I think there's a lot of

0:04:51.560 --> 0:04:56.599
<v Speaker 1>worry to go around. One of the points cash carry

0:04:56.720 --> 0:05:01.240
<v Speaker 1>makes is that the money doesn't have to come from anywhere.

0:05:01.320 --> 0:05:04.200
<v Speaker 1>If one bank is failing in isolation, they can let

0:05:04.240 --> 0:05:06.760
<v Speaker 1>it go. But the bank is unlikely to fail. A

0:05:06.839 --> 0:05:09.520
<v Speaker 1>big bank like that is unlikely to fail unless there's

0:05:09.600 --> 0:05:13.120
<v Speaker 1>some sort of overall crisis that means that the federal

0:05:13.160 --> 0:05:16.840
<v Speaker 1>government has to bail about. So his view is it's

0:05:17.080 --> 0:05:20.960
<v Speaker 1>by default a bailout. Yes, I think that's absolutely right.

0:05:22.760 --> 0:05:25.160
<v Speaker 1>I look, Arthur, at the state of banking, I mean,

0:05:25.240 --> 0:05:28.400
<v Speaker 1>and to go away from the reading of the weekend,

0:05:29.560 --> 0:05:31.720
<v Speaker 1>are we at a point we were where we are

0:05:31.960 --> 0:05:37.320
<v Speaker 1>utility banking? Are we in the cycle? No? I don't

0:05:37.360 --> 0:05:41.800
<v Speaker 1>think so, not quite. I don't think banking has changed

0:05:42.000 --> 0:05:47.640
<v Speaker 1>all that much. I think our regulation has changed in

0:05:47.839 --> 0:05:53.000
<v Speaker 1>some ways. It's become more punitive. I think the public's

0:05:53.120 --> 0:05:57.960
<v Speaker 1>awareness of the consequences of too big to fail is

0:05:58.080 --> 0:06:02.480
<v Speaker 1>much keener than it's ever been for so I think

0:06:02.560 --> 0:06:07.720
<v Speaker 1>the lessons of the market haven't gone unheeded. And I

0:06:07.839 --> 0:06:11.800
<v Speaker 1>think the political pressure on the banks is greater today

0:06:11.920 --> 0:06:17.160
<v Speaker 1>than ever before in recent history. So the banks are

0:06:17.240 --> 0:06:21.000
<v Speaker 1>not getting a free ride, but the regulators aren't doing

0:06:21.160 --> 0:06:26.320
<v Speaker 1>all they can, and the public obviously is bearing down

0:06:26.480 --> 0:06:32.720
<v Speaker 1>on the banks as the villain of this economic environment.

0:06:33.560 --> 0:06:35.800
<v Speaker 1>Arthur thank you so much. Arthur Lovely quickly this morning.

0:06:35.839 --> 0:06:38.520
<v Speaker 1>He's a former chairman of the STEC board member with

0:06:38.560 --> 0:06:42.640
<v Speaker 1>Bloomberg LP. Mike. The bond markup idea would be revolutionary

0:06:43.520 --> 0:06:45.960
<v Speaker 1>if it happened. I think so much of the reason

0:06:46.040 --> 0:06:52.599
<v Speaker 1>individual bond performance went away, in individual bond interest went away,

0:06:52.640 --> 0:06:54.880
<v Speaker 1>I should say, is because people have no clue what

0:06:54.920 --> 0:06:57.880
<v Speaker 1>they're buying. If I mean not that mistakes aren't made

0:06:57.880 --> 0:06:59.800
<v Speaker 1>every every day in the equity market, but there's even

0:07:00.080 --> 0:07:03.360
<v Speaker 1>there's a semblance of actually doing where you are. People

0:07:03.440 --> 0:07:06.120
<v Speaker 1>have no clue what they're getting in the bottom market none.

0:07:06.920 --> 0:07:10.560
<v Speaker 1>That's why they're they gravitate towards things like ETFs. Yeah,

0:07:10.800 --> 0:07:13.800
<v Speaker 1>and well that that and and also the unit trust

0:07:13.880 --> 0:07:15.920
<v Speaker 1>and the mutual funds as well. But individual bonds, I

0:07:16.000 --> 0:07:19.640
<v Speaker 1>remember a million years ago it was a huge part

0:07:19.680 --> 0:07:23.600
<v Speaker 1>of the business. And that is just evaporated. Futures very

0:07:23.640 --> 0:07:26.440
<v Speaker 1>stable up twenty as we get the markets open here

0:07:26.480 --> 0:07:29.559
<v Speaker 1>in five minutes, death futures up one seventy five. Yields

0:07:29.600 --> 0:07:32.000
<v Speaker 1>are higher by two and one basis points or so.

0:07:32.560 --> 0:07:36.760
<v Speaker 1>But early my headline today is curved flattening really significant.

0:07:36.840 --> 0:07:39.280
<v Speaker 1>Bears close watching as he goes through the week with

0:07:39.400 --> 0:07:47.040
<v Speaker 1>important economic data Bloomberg Surveillance. We're kind of down to

0:07:47.080 --> 0:07:48.920
<v Speaker 1>the opening bell, brought to you by the refined Jeep

0:07:48.920 --> 0:07:51.200
<v Speaker 1>Grand Cherokee Overland. It continues to raise the bar with

0:07:51.280 --> 0:07:54.600
<v Speaker 1>its luxurious interior and legendary four by four capability. Drive

0:07:54.640 --> 0:07:56.640
<v Speaker 1>one at your local Jeep dealer today get the official

0:07:56.760 --> 0:07:58.280
<v Speaker 1>vehicle KILLINGTOLN Resort