Speaker 1: Broadcasting live to New York, Bloomberg eleventh Rio to Washington,
Speaker 1: d C. Bloomberg to Boston, Bloomberg twelve hundred to San Francisco,
Speaker 1: Bloomberg nine to the country, US Exam General one nineteen
Speaker 1: and around the globe the Bloomberg Radio Plus Appen Bloomberg
Speaker 1: dot Com. This is taking Stock. I'm Kathleen Hayes. My
Speaker 1: co host Pim Fox is on assignment this Friday afternoon.
Speaker 1: Could it be as easy as five easy faces to
Speaker 1: give us common sense solutions to America's greatest economic challenges.
Speaker 1: We're gonna be speaking now with James Stone, new York
Speaker 1: Times best selling author about his new book, where I
Speaker 1: especially talked to him about financial reform, What's wrong with
Speaker 1: the banks? This from a man who has been there
Speaker 1: and done that. He's worked in the financial services industry.
Speaker 1: His critiques and ideas are going to be oh so interesting.
Speaker 1: He's always also interesting. He's in the newsroom. His name
Speaker 1: is Charlie Pellett, and he's got a Bloomberg Business flash
Speaker 1: and I thank you very much, Athlene Hayes. We're looking
Speaker 1: at a down day here with the Dow, the SMP
Speaker 1: nestak all declining, We are brought to you by van
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Speaker 1: are retreating SMP heading for the steepest drop in two months,
Speaker 1: amid caution over tepid global growth and a series of
Speaker 1: looming events with the potential to spur renewed market turbulence.
Speaker 1: Right now, we've got the SMP five hundred index down
Speaker 1: one a down twenty four points, a drop there of
Speaker 1: one one percent, to two thousand ninety one down. Industrials
Speaker 1: down one eight a drop of nine tenths of one percent.
Speaker 1: Nastac is down seventy two, a drop there of one
Speaker 1: and a half percent. Murray Gunn is head of technical
Speaker 1: analysis at h S b C Securities in London. He's
Speaker 1: looking for what he calls a market melt. Once the
Speaker 1: market starts moving up, you're going to see a bit
Speaker 1: of a scramble, I think for people to get in
Speaker 1: to the market. The one issue we have at the moment,
Speaker 1: the one potential problem is the fact that on balanced
Speaker 1: volume has not passed its previous peak, SOEL really would
Speaker 1: like to see on balanced volume move up above that.
Speaker 1: But if we move about twenty one thirty four on
Speaker 1: the SMP five hundred, there's a potential target for twenty
Speaker 1: sixty three in terms of an Elliott waves what we
Speaker 1: call wave equality target. And right now the SMP of
Speaker 1: gold up five eighty, the ounce twelve seventy eight, a
Speaker 1: gain of point four percent to thirty two on Wall Street.
Speaker 1: Now let's look at other news from around the world
Speaker 1: on Bloomberg Radio. Thank you, Charlie from the Bloomberg Newsroom.
Speaker 1: I'm Scarlet Food. Although how Speaker Paul Ryan called Donald
Speaker 1: Trump's attack of a federal judge a textbook definition of racism,
Speaker 1: he is still supporting the Republican presumptive nominee. I believe
Speaker 1: that he's certainly better than Hillary Clinton. These are the
Speaker 1: choices that we have. And here's the question I asked,
Speaker 1: do I believe that these principles and these policies that
Speaker 1: flow from those principles have a better chance of making
Speaker 1: the law with Donald Trump and Hillardy Glinn. Absolutely. I
Speaker 1: do believe that Senate Majority Leader Mitch McConnell tells Bloomberg
Speaker 1: Politics Trump's attacks on ethnic groups and other Republicans need
Speaker 1: to end. He says Trump needs to pick an experienced
Speaker 1: running mate because quote, he doesn't know a lot about
Speaker 1: the issues. Fans line the streets of Louisville to say
Speaker 1: a final goodbye to hometown hero Muhammad Ali. Cleon Robertson
Speaker 1: was a high school classmate him, also running through the
Speaker 1: hall uh Patton on the going down the hallways. Ali
Speaker 1: was seventy four when he died. Last week. A memorial
Speaker 1: service is being held to honor the three time heavyweight champ.
Speaker 1: Former President Bill Clinton is among those expected to speak.
Speaker 1: Police are investigating the fire bombings of two Staten Island
Speaker 1: churches in the same week as possible hate crimes. Police
Speaker 1: say a man toss a malta of cocktail Thursday at
Speaker 1: the First Central Baptist Church on Staten Island, setting the
Speaker 1: exterior wall of the church and its awning on fire.
Speaker 1: On Sunday, a Molotov cocktail was thrown through a window
Speaker 1: of St. Paul's Memorial Episcopal Church, causing a small fire.
Speaker 1: Both churches are in the Stapleton neighborhood. No arrests have
Speaker 1: been made global news twenty four hours a day, powered
Speaker 1: by twenty journalists and more than one fifty news bureaus
Speaker 1: around the world. From the Bloomberg Newsroom, I'm Scarlet Foo Charlie,
Speaker 1: and we thank you and again recapping s some P
Speaker 1: five hundred index down twenty four points to two thousand
Speaker 1: ninety one. Drop there of one. I'm Charlie Pellett and
Speaker 1: that's a Bloomberg Business Flash. This is taking Stock with
Speaker 1: Kathleen Hayes and Grim Fox on Bloomberg Radio. The biggest
Speaker 1: economic challenges facing America could be solved with five easy
Speaker 1: feces some common sense solutions, so writes James Own, founder,
Speaker 1: chairman and CEO of the Plymouth Plymouth Rock Group in Boston.
Speaker 1: He joins us today from there, I just have to
Speaker 1: quickly know. First of all, I want to say welcome Jim.
Speaker 1: It's great taddy on the show. Thanks glad to be
Speaker 1: with you. I also want to let our our our
Speaker 1: listeners know a little bit about your background. You you
Speaker 1: taught economics, You got your PhD in economics at Harvard.
Speaker 1: You were the Massachusetts Insurance Commissioner from seventy to seventy nine.
Speaker 1: You were Chairman and Commissioner of the CFTC, the Commodity
Speaker 1: Futures Trading Commission, you found the Plymouth Rock. I could
Speaker 1: go on and on, but you are a guy who
Speaker 1: really knows business. You're not just you're you know, you're
Speaker 1: not You're not only an academic. And I think that's
Speaker 1: one of the things that makes this book so powerful.
Speaker 1: What drove you to write it? Well, I felt I
Speaker 1: had some unfinished business from my time in Washington. I
Speaker 1: didn't convince people when I was there of the dangers
Speaker 1: of derivatives and over financialization of the economy, and so
Speaker 1: this book was a chance to link my three careers
Speaker 1: and take another crack at convincing people. Well let's start
Speaker 1: there then, because you're an not the only person who
Speaker 1: tried to convince uh, the world that there were dangerous
Speaker 1: and derivatives. And you're up against the likes of Alan Greenspan,
Speaker 1: you know, the former Fed gereman. There's a lot of
Speaker 1: things right, but this is one thing he didn't recognize,
Speaker 1: nor did Larry Summers, who became Treasury Secondary Uh, you know,
Speaker 1: nor did many other regulators in Washington. What is your
Speaker 1: common sense solution and why do you say there's still
Speaker 1: so much risk in the financial system. Well, the financial
Speaker 1: system didn't really get improved after the last crash. You know,
Speaker 1: after the crash, the big lessons were learned, and the
Speaker 1: big lessons are simple, which is less leverage and more disclosure.
Speaker 1: I think Dodd Frank was a step forward, but it
Speaker 1: didn't solve either of those things. And today the largest
Speaker 1: banks have bigger derivative open positions than they had before
Speaker 1: the crash, and the ten largest banks have two hundred
Speaker 1: trillion in open derivative positions, three times the world's GMP.
Speaker 1: So one of the things that you describe, that you
Speaker 1: suggest has to do with a meaning fair reserve requirement
Speaker 1: for derivatives. How would that work? Every time a derivatives
Speaker 1: position is opened. Uh, you've got some counterparty risks, some
Speaker 1: basis risks, some liquidity risks, some human error risk. You've
Speaker 1: always got some risk. And so today that a bank
Speaker 1: or other holder these derivatives doesn't have to record these
Speaker 1: derivatives in any way that causes a reserve because they
Speaker 1: met them against one another. But the netting doesn't get
Speaker 1: rid of any of those risks that I just listed.
Speaker 1: It does get rid of some risk of market movement,
Speaker 1: So netting, you know, is a partial thing and not
Speaker 1: a complete thing. They should have to put up reserves,
Speaker 1: and if you had to put up even a fairly
Speaker 1: small reserve, even a very small reserve, against these huge numbers,
Speaker 1: you wouldn't have the positions and we'd be better off
Speaker 1: if the banks didn't have them by a lot. A
Speaker 1: couple other let's a couple hit on a couple of other.
Speaker 1: Five thesis besides, what needs to be done to make
Speaker 1: banks are really safe? And institutions that really a grease
Speaker 1: the wheels of commerce instead of pulling the wheels off
Speaker 1: of it. So security, what would you do with so security? Well,
Speaker 1: social security, unfortunately, is going to need to be changed
Speaker 1: in a way that nobody really likes. But it is
Speaker 1: inevitability because the current eligibility age was set when people
Speaker 1: live to be in their sixties, and now people lived
Speaker 1: to be roughly eighty. Um. If we make great progress
Speaker 1: in cancer, which I think we will, people will live
Speaker 1: routinely into their nineties, We're going to have to raise
Speaker 1: the eligibility age. And the sooner we do it, the
Speaker 1: less painful it is because we can do it gradually,
Speaker 1: and too many politicians want to wait until there's a crisis,
Speaker 1: you know, speed up the brick wall, and then say,
Speaker 1: crisis crisis, we've got to fix it. But then you've
Speaker 1: got to fix it quickly and disruptively. We should fix
Speaker 1: it now. So you want everybody wants fiscal balance, But
Speaker 1: the way you look at fiscal balance is different from austerity.
Speaker 1: So that's been a very contentious issue in Europe the
Speaker 1: past several years. May people say those those solutions to
Speaker 1: their crisis helped make even worse problems for countries like
Speaker 1: Greece and others. What do you mean by fiscal balance
Speaker 1: in the United States? Yeah, if you want to have
Speaker 1: a lower deficit, if you want to come close to
Speaker 1: balance in the budget, or even balance it the whole
Speaker 1: way you can do that. Fiscal policy ought to be
Speaker 1: used stimulus when you need it, and um to have
Speaker 1: no deficit when you don't need it. But the best
Speaker 1: way to fix it is to get rid of tax expenditures.
Speaker 1: Appropriations get a lot of attention every year, they get
Speaker 1: argued about, but our budget is full of tax expendatures
Speaker 1: at his deductions that really don't do any good. And
Speaker 1: although it's going to sound controversial, I would get rid
Speaker 1: of the home interest deduction. I think that's a terrible
Speaker 1: piece of public policy, and I'd get rid of the
Speaker 1: corporate interest deduction. If you got of those two deductions,
Speaker 1: you don't have to change appropriations, you don't change stimulus.
Speaker 1: You would immediately balance the budget because those equal about
Speaker 1: the deficit. The trouble with the home interest deduction is
Speaker 1: that the bottom third of the population, the people you
Speaker 1: want to help most are rankers. They get no benefit
Speaker 1: from it. The next third don't itemize, they get no
Speaker 1: benefit from it. It's only the top third and its
Speaker 1: subsidizes the biggest home. All right, well, James Stone, thank
Speaker 1: you so much for joining us today and giving us
Speaker 1: I tasted your very erudite, very interesting new about five
Speaker 1: easy pieces, common sense solutions to America's greatest economic challenges.
Speaker 1: I'm Kathleen Hayes. This is taking Stock on whom the radio.
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