Transcripts For BLOOMBERG In The Loop With Betty Liu 20140611

Counter general electrics did for the alston business. One of the biggest upset ever in a congressional race the number two in public and in the house, eric cantor, lost in the primary to the key Party Candidate, david rat in david brat in virginia. Campaign that a portrayed eric cantor as being soft on immigration. Moving and shaking this hour, the incoming ceo of aig Peter Hancock. He will take over again september 4 Bob Benmosche. For bobptember benmosche. He established a Derivatives Group at j. P. Morgan. Internationalgs assets, return the company to profitability and repaid the government 182 Million Dollars bob motion. He stayed on longer than planned bob and moshe it. He stayed on longer than that plan after announcing in 2010 he was battling cancer. I spoke with bob for a few moments yesterday. I want to read one part of what he said. It is simple. I said i would set a date to make the trip, but in order to make the organizational changes at aig it would be important to have a new ceo to run the company. The transition was taking too long. He pressed the board and said we need to make a decision. The actual person taken over is not a surprise. That is a great way to sum it up. Peter hancock has been seen as the presumptive next ceo. The surprise was the timing. People thought that Ben Moshe Bob and moshe it would be sticking around until next year. This brings up questions. J winthrop was seen as another successor. He was the other internal candidate. You runs the Life Insurance operation at aig. Steve miller, the chairman of aig, told me that he plans to stay on, but we will see how that plays out. There are questions about Peter Hancocks mandate and how he will take aig to the next phase. And here is what bob said. Peter will be continuing the momentum at aig. If the board wanted a genetic change, they would have look for someone outside. I put pressure on the board to name a new ceo. There was too much pressure about it. This is a process that has been going on for a long time. Bob and moshe had cancer. They looked at some external candidates, but frankly they landed on they had these strong internal ones, and as rob said, they like the direction they were headed, so they meant about peter. What are people telling you about what peter is going to do with aig . Is it big issue with aig is a vastly Different Company today than what Bob Benmosche inherited. Is a Smaller Company had clicked it is much smooth company. It is much smaller. They used to have these past International Life organizations. What Peter Hancock needs to do is not stabilize the business, but figure out ways to grow it, and that is what he has been doing is the head of the Property Casualty unit for the next stretch, trying to figure out ways aig can deploy capital at attractive riskadjusted returns. Very some criticism. Some have said Peter Hancock does not know the Insurance Business that while. He is still relatively new to it. He was a banker at j. P. Morgan. In derivatives. And he is relatively new to the insurance industry. Aig for a couple of years, traveling the world to figure out operations, and we will see how he does. On the question on aig and why this transition taking place now, some have said there is an employee morale problem and some executives are leaving. I talked to Bob Benmosche about that, and he said it is the opposite, there are people knocking on the door, they want to comment they believe aig has its groove back. That is when he was saying. What are you hearing on that front . Hasorale is something that hung around aig since the financial crisis. And a lot of executive departures. We will have to see. It will come down to how peter grows the business. Are there attractive opportunities for people to stay on and grow their careers . Noah, thank you for joining me on this. In washington, that is the seat of the number two republican in the house, eric cantor, exposing the continued divide in the party. Peter cook is tracking the fallout. What exactly happened here in virginia . Saw it coming including, will of poorly, eric cantor. One minute, he is the conservative heir apparent to House Speaker john boehner, the favor lawmaker of a lot of his groups here in washington, and the next minute he is out of a job, losing in his primary to a tea partybacked candidate nobody had ever heard of outside of the seventh district of virginia until last night. Eric cantor was here yesterday, casting votes, seemingly unconcerned. He had run some campaign ads, but he did not have to mount a serious fight. Brat,d he loses at david a professor at a College North of richmond. Made the case that eric cantor was not conservative enough, especially on immigration. Eric cantor spoke to his supporters. It is disappointing, sure. I believe in this country. I believe there is opportunity around the next corner or all of us. Nobody believes that eric cantor would be out of a job, the number two House Republican, the man tapped to replace john boehner. The Ripple Effect will ripple across the country, certainly already on capitol hill. Some of these established republicans like john boehner, should they be worried . Absolutely. This is a message to the leadership. John boehner should be worried about his speakers gavel and the tea party folks, the conservatives, they will demand a seat at the leadership table. Tompeople to watch, and price of georgia, they will argue to get some see at the table. Peter, thank you. Peter cook, our chief washington correspondent. Lets turn to business. If you live in london, paris, youed, milan, madrid might want to stay at home as traffic will be a nightmare as therell be a protest of uber. The largest will be in london where the traditional black cabs will block major areas. , what is the plan for the protest today, and are using traffic jams right now . Good morning. The plan is for in about one hours time thousands of taxi anders will descend here start circling this area going down to whitehall, harlem and square. Up,housands of cabs show these are key arteries of traffic in central london. It could cause extraordinary gridlock. These cabdrivers are angry, saying uber is operating illegally. They have to jump through all sorts of hoops and uber has come in and they get to do what they please. Today is about voicing their discontent. I spoke to the head of the taxi drivers association. In london this afternoon i have been threatened with arrest. Cabdrivers are being threatened for driving on the road streets. Is that the sort of power that uber has . Is this the money it has . Ise the police force quest it by a police force . . Hat is going on in the city this is a start up. It has not been worth 17 billion for too long. He said really what this is about is a manifestation against a successful, Disruptive Technology breaking into a heavily regulated industry. Cks Olivia Sterns Olivia Sterns, thank you. Aignt to get back to the them naming Peter Hancock to replace Bob Benmosche. My next guest served as the treasury Second Special compensation. It can find break ken feinberg joining me. Thank you for joining me this morning. Here. D to be first off, your reaction to Bob Benmosche and this succession plan. Do you think it is orderly . Orderly, tough shoes to fill. Bob benmosche, during the 16 months that i was the treasury on executive pay was the most effective negotiator on behalf of any of those top corporate recipients of taxpayer funds. I wish peter well. Those are tough shoes to fill. He was affect them against you, ken. He wasnt really. Negotiator. Cellent humor, he knew the facts, he understood the tension between a populist resentment to the tarp bailout of aig, and the need to keep his employees in place and not bolt to other competitors. He was very effective. He knew everything about the company. He came prepared to treasury. We personally negotiated each and every compensation package. A really set the Gold Standard for this. He said to you and those running tarp at the time that he needed to pay his executives properly, that top executives could not be subject to some of the caps on being put in place. In the end, those were the right decisions . I think so. I think we balanced the political outrage at the bonuses that had been paid to aig employees with bobs foresight, his vision in understanding what the future held for the company, each individual employee we worked that out through a negotiation process. Asked what was most effective about what was most effective about Bob Benmosche . He knew the fact. He came prepared. It was not simply from 30 thousand feet. He came in and with each employee he had a dossier. He had the information. He knew what he needed. He came up with creative alternatives to simply more money, less money. He left treasury impressing everyone. What is your big question around aig . The big question now is can the momentum be sustained. That he was dreaming if he thought the company would be able to repay its tarp taxpayer obligations. He was right. He managed to do it. Big challenge for peter will be further stabilization, moving forward, maintaining the momentum bob brought to the company. The think of the company, now that it is out of government oversight, ken, that it has learned its lesson . It is a Smaller Company, still systemically important, but you think they have learned their lessons and are you confident they can go on without direct government oversight . That remains to be seen. The crystal ball is murky. I would not predict one way or the other. I would say all of the indications from the past and thepresent is that bob left company in a position where it should be able to maintain that momentum. Peter is in charge. He knows the company. He knows it has to be done. Fingers crossed, but obviously, in america, companies advanced on their own in the marketplace without the kind of government intrusion that was necessary after tarp. Hancock . Know peter i have met peter. I would not know him the way i know Bob Benmosche through experience. I have not peter, i have met peter, that is about it, but he certainly has the resume and knowledge of the company. The outlook is promising. It seems like you have no ill will or harbor any hard feelings at all against Bob Benmosche, and the fights that came out in public later that were welldocumented between you and over compensation . You have no ill will. Ill will i have no ill will at all. I salute bob. We had disagreements, sure. I had a treasury mandate from congress. Is borna mandate from in his company. We worked it out. From his board and his company. We worked it out. That is what negotiation is about. People look to you as the go compensation,t Victims Compensation, from the 9 11 fund, to bp, and now i know you are working with General Motors. Compensation do you think it has gotten out of hand on wall street since the days you negotiated the pay of aig . I think executive compensation is still higher than it should be, but that is the free market. That is the adam smith in the laissezfaire system. I think they get between wall street compensation and main street competition is conspicuous, obvious, and i think it is too high, but only the free market can correct that system. And you do not see that reversing at any point . Well, if the market reverses. Right now, the argument is you get what you pay for. The market is soaring. Wall street is thriving. Main street is still very iffy, but this is the way the system works. You cannot expect government to interfere the way we did that tarpess demand after the bailout. You cannot expect government to monitor how wall street executives get paid on a daily basis. That is the function of private markets. It is a problem, but it is a problem that we have had for the last over 200 years in this country and it will continue, i think. Can, the extent that you can you tell me how it is going so far with assessing the Victims Compensation with General Motors . It is going very well. As i have said publicly, by the end of this month, we will establish a Compensation Program that will define who is eligible to file a claim with this fund that i am creating, what the dollars will look like for those who do file, the obligations they will have, the claimants, to prove their claim. We will, as expeditiously as we can, start to pay eligible claims. G. M. , i must say, as delegated has delegated to me without any ambiguity here full discretion to evaluate each individual claim, make a determination, and a those claims that are eligible pay those claims that are eligible, and the program should kick in, as gm has demanded, around august 1. Or you could be paying claims as soon as an or will it take a little while after . It will take a little while after. I would hope by august 1 week could invite claimants to file a claim. It will be a claims form. There will be rules governing claims. I am collecting input and advice lawyers,fficials, claimants themselves what should a Compensation Program, the structure, look like . By the end of this month, we should have a program in place and we will prepare the documentation, the claim forms, the rules, and i hope that we will begin to welcome the submission of claims by august 1 per gms timetable. I know it is very early, but is the price tag going to be astronomical will the shareholders gasp at what will be paid out . I like your comment. It is rather early. The price tag is at the end of the process. First, who is eligible to file a claim . Who is eligible . Claim is filed, what will be the methodology how will we calculate with individual claimant should receive . Third, how many claimants . If you had a number of claimants to the methodology we are going to use to calculate damages, that will give you some rough, but thatestimate program cannot go on forever. If we start by august 1, we want to have a relatively modest timetable to invite claimants to file their claim or that families and loved ones. Get them evaluating. It is premature to talk ken we are back with ken feinberg for this exclusive interview. Ken feinberg, as you know, is running the victims Competition Fund for General Motors. I can do many things on this program, i apologize, but one thing i cannot do is change our commercial breaks. You are finishing your comments about the price tag of what these claims could be and you were describing the process. At the end of all of this, do you have any idea, can you estimate at all how much we are talking about, or will this be a Game Changing number for General Motors . The answer is no, i cannot estimate it. First of all, we do not have the rules in place yet. We are gathering permission about what the program should look like. Secondly, it after you have the program in place, who is applying, who will submit the claims . Third, even if they submit a claim, is it corroborated, is it approvable . It is very premature to be talking about aggregate numbers. Yeah. Until there is more detail about what the Program Looks Like and who is filing the claim. Who is working with you . How many people do you have working with you on this . This is a small group. I have my colleagues working closely with me. Il has worked closely with me on these various programs like 9 11 and the bp oil spill. Touse outside economists help model what the program should look like. I reach out to the plaintiff lawyers across the country who have the claims, to gm officials to get their input as to which automobiles might be eligible, and we are trying to have a net toet, cast a wide get as much information as we came to make the program credible. If it is not credible, it is not successful. Clarks absolutely. Howd is this absolutely. How is this different from your experience on the 9 11 fund, bp, or tarp, for that matter . The 9 11 fund stands on its own. That was a national, historical tragedy, unrivaled, maybe pearl harbor, the civil war that is about it. There will be nothing like the emotion associated so soon after the 9 11 attacks with the establishment of the 9 11 fund. With bp, the problem was volume. We received over one million claims from 50 states and foreign countries. They are all different. This is a unique situation. Gm we will get it, and we will get it right. What is the biggest challenge, here, with gm what is the biggest challenge for . U, ken the biggest challenge is what it always is coming up with a program that is viewed as fair, efficient, speedy, and the goal, always, get money out the door and as fast as we can. Ken feinberg, thank you for joining me this morning. Glad to be here. Thank you. President Barack Obamas popularity rating sinks to the lowest point in his presidency. Only 44 of americans say they have a positive feeling about the president. The president got low ratings on his handling of veteran affairs and the deal that freed sergeant obregon bowe bergdahl. Emirates Airlines Cancels in order for airbus planes. Increasing his bed on u. S. Treasury. Governmentrelated death makes up half of his debt makes up half of his total return fund, the Worlds Largest bond fund, which has trailed 62 of its peers in the last year. It has been a tough year or years for bill gross. Turning to the world cup if you are Cristiano Ronaldo or deckedmessi, you will be out in a colorful shoes. Nike and adidas and a colorful new pair of shoes. Nike and adidas spent millions. That is Cristiano Ronaldo, the best Soccer Player in the world. I am in madrid because nike wants me to see his new shoes. This is not just a step forward in good design. It is a giant leap. , carney is the ceo of footwear. A silo is an industry term. It is a line of shoes. Im curious about what nike calls the silo approach. It is a specific cleat for one type of player. Think of a player like Cristiano Ronaldo. His game is about explosive speed, so we created a product for players that have that style. Cristiano macarthur Cristiano Ronaldo will be wearing the material super fly. Any single layer. Blow out a knee or have player could blow out a knee or have a bad year. When he is old or injured, there is a new player waiting. Even nike admits therell probably never be air jordans for soccer. Is it possible for something to happen around a ronaldo at the way the air jordan became something greater than a shoe . Clemson football there are always moments. Productcan link innovation to keep moments, that is when the magic happens. What he means there is no. Just like nike, adidas has four cleat silos and they started with the predator. Then adidas got the predators on a kid named David Beckham. In 2004 they launch a limited run in david to come dollars. Patient David Beckham caught a David Beckham colors. Today, it is lionel messi. Logo, but does not have his own shoe. As little kid, you want to be the next lionel messi, and how do you do that, i want to buy. Hat shoe, he that player this is my best friends son at soccer practice in germany. [speaking german] i asked the kids whether lionel messi wears adidas or nike. Think that kids lionel messi wears adidas. Half of them think he wears nike. Thates not really matter the kids do not know which shoes lionel messi wears. At this age, their parents by their cleats. When ar15 and have their own money, silos will matter. Until then, it is enough then adidas makes sure they know who lionel messi is. That is some good german. It is my only party trick. That comment out the different marketing approaches between tell me adidas about the different marketing approaches between nike and adidas. Adidas has been closely aligned with either. They have this beautiful history with the world cup, all of these moments. Nike did not get into soccer until 1994 and did not get serious until around 2000. Nike does not have a history that adidas as. They are aware of it. They have chosen to focus much more on sponsoring individual players and teams and building up advertising as opposed to what adidas does, which is focused on owning the entire event. Will that write them with these allegations of corruption did for the world cup . I do not think anyone thought 10 years ago that there would be a repetition of reputational issue with being closely affixed with fisa. Adidas has called for a more thorough investigation. We have not even begun talking about russia in 2018. Oh nobody know nobody knows what kind of Reputational Risk that will be. Things going on does not have to do with the board. It is the way soccer is moving. It is so much money going to European Club teams that club championships, National Championships are becoming global units. The German League will be carried on fox next year in the u. S. National tournaments are becoming global tournaments. It used to be adidas had a lock on the oma global tournament, the world cup. It is not the only global tournament now. Thank you. Make sure to watch our special shootout a look at the battle between nike and adidas tonight at 9 00 p. M. Eastern time. Headed the excitement into brazil, there are concerns about safety. A new report estimates that 485 million on security alone, but will that be enough . You and me and joining me is manner thatat matter. James reese. First off, why the high price tag in brazil . What is going on . Liu. Od morning, betty right now, the brazilians are holding their breath as the world cup against. They have had some challenges down there with civil unrest, all the problems with fisa, the buildings, transportation, telecommunications. It has been a problem. For the 600,000 to one million travelers, it could be a challenge. Everyone is holding their breath to see what happens. This price tag, what would underscore that . Is it the fact that it is being held in one dozen cities . The games are being played and well different cities throughout brazil. If you fly from the north to the south, it is a fiveour flight. It is a huge country. They have to spend security sources around. There is a 22 increase in Security Forces from the south African World cup games. If you are running security there, what would you focus on . One of the things, and it is nice to see the brazilians have done this have established what i would call and Operations Center in brasilia. Sitesave the different linked into that. They also run a Liaison Officers from the Different Countries that are there to liaison with Security Forces, whether the military or law enforcement, to continue to Work Information in real time. The biggest things i would be looking for is watching social media, civil unrest. That is the Biggest Issue to travelers and safety and committees mobs, before any of the protests, that could put a big crimp on the games. Like for thefety world cup versus other major events like the olympics, for instance . They are similar. The olympics, the world cup, major events. They are very similar. The thing with the world cup is, especially here in brazil, i believe the biggest factor is the distance that they have to travel to different places. Talking hundreds of miles where london, at the last olympics in london, they are all concentrated there, so you can concentrate Security Forces. One of the issues is if you have an issue in manaus and another in sao paulo or brasilia, now youve spend your forces around. Where would you rank brazilian terms of danger versus other countries . . In terms of danger versus other countries . We would call in a medium to high threat country. We believe the biggest threat is between where they are staying in there and you and the flash crime that can happen there. Brazil,our clients in the technology you are using to protect them what is different this time . For us, it is about what type of information we can get out there to provide the clients realtime, quick information to move them away from a position. One of the software social media gathering. Media, watching indicators that will allow social media which is how many of the mobs and protests are being done they are gathered over social media. If we can monitor knows, we can move things around and bypass them so that clients can get around them. Do you not have a tracking device you have on your clients with . We do. We are taking spans from the military. We have a small beacon that we can monetary realtime. If they happen to go inside and they lose the feed we can track and inside on a gsm system it gets down to one meter resolution. It gives us great observation of where our people are at all times. On a final note, what country or countries are harder to secure clients than others . It brazil fairly easy and open . Are there other countries that are a lot more difficult . That is a difficult question. We could spend all day on that. Brazil is an interesting country. It is open, but i will give you an example. There are days where we are picking up clients at the airport and it is a 45 minute drive from the airport to downtown sao paulo in the next day could be four hours. The middle east is still a difficult place for our clients. We have watched that because of the uncertainty, but right now i think brazil is a big focus for us and a lot of other safety and security apparatuses. Jim reese, thank you for joining me on security in brazil. Have a great day. Will be back in two minutes on in the loop. Stay with us. The Political Landscape in washington has shifted overnight with republican majority lossrs eric cantors to a tea party backed candidate in virginia. Peter cook is joined by republican congressman in new york, peter king. Thank you. I am joined by congressman king, and veteran of Party Politics on the capital, what did you make of eric cantors defeat . First of all, nobody saw it yesterday. The only question was how big eric cantor would win by. This took everyone by surprise. 7 45rd about it at about last night. There are real consequences. There is a lot of monday morning quarterback in, but i am more concerned about consequences for the future. What does it mean for House Republican leadership does it expose the risk between the more conservative faction and the establishment . We should not kid ourselves. There is a real division. I like eric cantor. I support eric cantor, but i do or tedt the rand paul cruz wing to take us more out of the mainstream. Eric cantor was able to get things done. He was very conservative and able to get things done. The ted cruz wing of the government wants to bring the government down and im afraid we could be going in that direction. Have you gotten messages for more conservative members of the congress who want to assume eric cantors leadership position . I havent contacted by several people, i have been contacted by several people, one who i think is rational. Is john boehner in doubt . I would hope not. I hope he wants to run against parity you will have these positions opening up. The ted would consider cruz wing versus the Ronald Reagan wing. Isnt it fair for Tea Party Conservatives to say we deserve a seat at the table, look what happened to eric cantor . I would say look at mike simpson in idaho who fight off who fought off strongly 8k party challenge. I would say there is a division in the party. Was a big oneloss but there are many other races around the country where our people won. You think eric cantor needs to step down as House Majority leader right away . He has been a good job. If he steps down, were going to miss them because he was able to make things work. About theask legislative impact many folks that if there was hope for immigration, that is gone by the wing side wayside. Anything remotely controversial will be put to the side. Thank god there are no issues about it does to the Government Shutdown because those would be hard to navigate also. Fortunately, we can keep the government running, but i did not expect to see anything dramatic worth shattering over the next several months. Is assailed over big business and the support that is this a vote over big business and the support that eric cantor and others have enjoyed . What people are angry and they are taking it out on people in positions of authority. We are a party of business because business creates jobs. We also have to show that we are bluecollar. Maybe it shows that we have gone too much away from the reagan democrats. Congressman king, thank you, assessing the fallout from eric cantors defeat in his primary in virginia. Peter cook, thank you. Our chief washington correspondent. To day today turning summit. Goldman sachs here is Lloyd Blankfein on charlie rose last night staging about the importance of this summit. A lot is going to change when you think about the u. S. Being as close as it is to energy sufficiency, and not having to be a net importer of energy. When you think of the history of the last 40 years, since the arab oil embargo, when it was driven home how dependent we are on foreign oil, and the way history unfolded over the last 40 years could you imagine how Different Things would have the last 40 years and project forward and imagine how different it will be over the next generations if we could get this right and make north American Energy sufficient, both in terms of the economy, and in terms of the geopolitics and americas position in the world. It is quite a blessing. Bloombergs alix steel is on location and she is joined by jeffrey currie, mobile global head of commodities that Goldman Sachs. A lie. Thank you. The theme is unlocking the potential of shale. What does that mean . I thought we already knew that. We have seen massive investment. North america spent nearly 200 billion producing oil and gas. In contrast, on the demand side nothe equation, we did outspend the rest of the world. Asia and the middle east outspend north america 15 to one. Are we talking about me using natural gas for my car or the infrastructure to get me a natural gas . Building up the natural Gas Infrastructure to the transportation sector and the manufacturing sector. These are the three eras were north america can benefit. Economicswise, what is the potential if we were able to get money into that . Absolutely massive. On the gdp side we think you can add one percent to gdp growth rate over the next decade. 2 million jobs usually highvalue jobs in energy and tech sectors, and we can reduce emissions by at least 5 over that period. Almost 1 on jobs in in gdp staggering numbers. What are the biggest holdouts . People say the shell evolution happen without Energy Policy, so why do we need Energy Policy . The answer is shale investments are quick turnaround investments. Making an investment in a 10 million selling cracker for the manufacturing site will take you decades to recoup that. That is really the purpose of this summit discuss how to create a more confident vision of the future. What makes you so sure shale will be around in five years . Five years ago we are talking about importing more oil, and now were talking about exporting. What makes you confident . X of whats the core cru the summit is about. To be confidentiality around we need to have questions about best fracking policies answered, methane emissions, pipeline regulation all of these things need to be dealt with to have the confidence that it will be around one decade, 20 years from now. It is the perfect world, marion business interests, relative regulatory interests, it sounds like a cinderella fairytale. How do we wind up getting there . Would you hear from people at the conference . There is a strong consensus and agreement that we need to deal with these issues that are and a lotnvestment, of it is relatively clear and creative policy. We do not think it is so much debating whether or not fracking is good or bad, but trying to create a welldefined, stable policy around can this be done safely. As in fracking is going to be here, so this is the way were going to do it . Not so much. We take the assumption that there are benefits. Can we do this safely and in a costeffective manner to generate this outcome . Is there a lack of confidence in prices or the president natural gas that is preventing companies from wanting to invest . Absolutely purely go back to a few automated investment in the 1990s when gas was 1. 50. Those memories are recent. In certainty is driving that. Why does he does she need to have a clearer output going why doesutlook the industry have to have a clearer outlook Going Forward . Probably less concerned about and at themand future will be elsewhere . Website think it underscores that the interest in domestic markets in consume i think it underscores that interest in domestic markets consuming that. Atre will be domestic demand home to create economic benefits. Do we need both, exporting as well as domestic demand . We think about the export market as a residual. If you end up with a warm winter and have too much gas, you can export. Does that hurt gas prices . If it is viewed as a residual, and domestic demand is the first one trying to consume the gas, we would then think about it as primarily being when we have too much gas we start exporting more of it because it is more price competitive against the global market. When you look at the Energy Market in five to 10 years, what is the best energy mix factoring in nuclear, coal, renewable, oils, natural gas . Answer the question is on the transportation side and the generation side. First, transportation, the two we find the most positive are natural gasbased ethanol because you do not have to change the cars, and the second is electric vehicles. On the generation side we see renewables as an important part of the general next, however there are scalability issues. Window we need to have Battery Technologies that take them to the next level. We advocate natural gas as an important part of the baseload. Not only does natural gas do that, but it deals with intermittency problems of renewables, when the wind is not blowing, when the sun is not shining. Gases are important part of that mix. We advocated diversified portfolio. Do you have a favorite . Natural gas is the favorite because it is scalable and relatively lowcost. Jeff currie, such a pleasure. Thank you. Alix steel, thank you, with jeff currie, head of Commodities Research at Goldman Sachs. It is 56 minutes past the hour. Bloomberg tv is on the markets. Futures are lower, as you can see. Remember, the world bank overnight cut their forecast for Global Growth and there is also turmoil on the political front raising investor concerns. S p futures are down already about. 5 before the bell. We are on the markets again in 30 minutes. Coming up, former pimco executive Neel Kashkari has tried his hands and many things and he just won a primary to face incumbent democrat jerry brown for california governor. I will talk to neel about his new challenges. Stay in the loop, as we had towards the open as we head towards the open. We are 30 minutes away from the open. You are in the loop. I am betty liu. Futures indicate stocks will open lower. The dow beginning today at a record high. There will be a new ceo at aig, the Insurance Company rescued by the government. Aig promoting Peter Hancock to replace Bob Benmosche. Hancock takes over september 1. Two Companies Might join forward forces to challenge gm tom with siemens talks. Ks in when hiring is picking up, there is one career you do not want, mortgage banker. They are being laid off by the thousands. Mike mckee has a real dialogue has the real deal on what job. Be the worst thousands of Mortgage Bankers are losing their jobs because when nobody wants a mortgage, nobody needs Mortgage Bankers. Here is what you need to know. Look at Mortgage Applications as compiled by the Mortgage Bankers association. Since peaking in 2012, demand for mortgage has fallen off a cliff. We are at levels below where we were during the Great Recession where no one could get a mortgage, let alone wanted one. There are a host of reasons. The big one, nobody wants to refinance anymore. The rise in rates over last years taper tantrum put them at an average. Wanted tot have refinance already have. We saw a big declines in purchases over the winter. The question is are they going to snap back now that the weather has gotten better. I know i have refinanced. I am in the clear there. And you do not need a mortgage banker. Now. No. Mortgage bankers were complaining about falling profits from lending. A report was put out yesterday on just how bad it was. Ofks reported a net loss 194 on every loan they made during the First Quarter. Loanmade 150 on every during the fourth quarter. The cost of making the loan adding up the commission, compensation, office space, 8,000nt, it rises over alone, and what happens when you start to lose money, you start cutting heads, and that has been what is happened what has happened. Mortgage l, 7000 mortgage banking jobs lost at these are just the people that make the loans. See is a time when we 200,000 jobs created. It might be the worst job right now other than majority leader. [laughter] bad news for them. Thank you, mike. Economics editor, michael mckee. Moving and shaking this hour, Goldman Sachs ceo Lloyd Blankfein. Goldman is hosting Energy Conference today and Lloyd Blankfein told charlie rose the geopolitics are going to change once america no longer has a ba in that fashion be a net importer of foreign oil and he talked about his personality quirks. I am sure i am paranoid. Paranoid about what . Everything. When the phone rings too late at night or too early in the morning, i am going all, my god, what happened . If it stops ringing, i call everyone i know to find out what i missed. I can identify with that. You can watch all of charlie roses interview with Lloyd Blankfein at 8 00 p. M. And 10 00 p. M. I hear on Bloomberg Television. Found ahkari has not tough job he did not want. He might have his toughest job yet, running for governor in california against a favored opponent in a wellentrenched democratic party. Neel kashkari won his own primary last week against a tea Party Candidate. L, great to have you join us from california. First off, what you make of eric . Antors loss great to see you, betty. Every race is unique. It is sad to see eric cantor loses seat. He has been a strong leader for a long time, but the house representatives will move on. There is a deep bench into step up. Broadot think there is a take away. Every race is different. In my own, we saw leaders from around the state and we were very effective. Now i am totally focused on defeating jerry brown and making him answer for the destruction of the middle class in california. We have our work cut out for us, but the issues are on our side and i believe we can make him answer. I want to get to california in a moment, because i know that is what you want to talk about, but indulge me for a moment on the Republican Party. Sure. Ok. How does the Republican Party move on from the defeats they are seen against a tea party . Just before yesterday everyone was writing that it was the establishment defeating the Tea Party Left and right. I think the Republican Party is big enough for everyone, the socalled establishment, the tea party. There is room and a role for everyone to make a contribution. I do not want to take too much away from one loss and one congressional seat. The bigger message is if republicans are united and focused on changing washington, changing president obamas agenda to a more growthoriented agenda, all republicans will be successful and the country better off. How will anything get done in washington on issues like immigration . Immigration is a key issue and we need to be forceful in pushing washington to deal with that. Im coming back to california, but california is affected by it, as are other states. In my time in washington we got republicans and democrats to Work Together across party lines, take career risks, put their country first. If we could do that in 2008, i am optimistic with the right leadership and frankly, it starts in the white house with the right leadership, ring in both parties together, we could get big things done. On california, the economy has been improving. Credit ratings have gone up, the jobless rate has gone down, then you are back up to a pretty recession employment level. This is where jerry browns camp is saying, so why would any voter want to come out and vote for you . Governor brown thinks being ranked 47 in america for jobs is good enough, hes your man. Outhead and stick with 47 of 50 states. I think we could do better. We could bring the Unemployment Rate down, put people back to work, and rebuild the middle class. We have an Education System that is ranked 46 out of 50 states. We are number one in america, first out of 50 states for poverty, and this is where jerry brown defined as the california comeback. Im running for governor because i want to rebuild the middle class, that starts with a good education and good jobs available. That is my vision. Voters will have a clear choice defend the status quo with jerry brown or a bold, new future where we all Work Together. A day status quo, because as i pointed out, it seems the trend is his friend. The Unemployment Rate is still high, but it has gone down. Housing prices continue to go up. California, i believe, has a budget surplus. They can use the money to pay down debts, put the money toward infrastructure budgets whatever it is they want. As an example, Governor Browns 70 billion highspeed train i have come out and said that is the first thing i would do, cancel that train. We are suffering one of the worst droughts in modern californian history and Governor Brown wants to spend 70 billion on the train from l. A. To san francisco. I want to cancel the train and more more money building water storage and infrastructure so we have enough water to feed our state. It is an issue of priorities. While the whole u. S. Economy is rebounding slowly to 2008 in large part to the responses we took to stabilize the crisis, california could be doing much better. A state where we are 47th out of 50 states for jobs is not nearly good enough. , i see you in a similar, but opposite situation of texas. Texas is a republican stronghold, and democrats are down there, battleground texas, trying to get democrats to vote, in your are facing the opposite issue. Some republicans might say it is such a Democratic State why do i even bother to vote. How do you get those people out there . You are absolutely what im saying to republicans is you cannot give up. We have to fight all the issues. Thee are a big tent, if Republican Party is an Inclusive Party where we invite everyone independents, the moderate democrats, and we focus win,onomic issues, we can rebuild the party and turn california around. I am an optimist. I want to lead the charge, and im getting a lot of support from republicans around the state and around the country who care about california, but we have our work cut out for us. What changes after the primary, on fundraising, for instance . Ottica group said once you a lot of people said once you get through the primary we will be with you. So we will work with those folks. I have challenged Governor Brown to 10 debates. Four years ago, the day after the primary he told meg whitman we need to have 10 debates. I said Governor Brown, you were right four years ago, and that is still right today. Have you heard anything from him . We have asked him to give a response by this friday, so i will let you know next week. I will make him answer for the destruction of the middle class and when i do that, everyone will see he has no answers, and that is how we can beat him. When you say the structure metaclass, break it down what is the single biggest destroyer . What in 1980, we were 11th for educated workforce. Are 48. Day, we we were 26th in jobs. Today, we are 47. We were 25th in poverty. Today we are number one. California is becoming a twotier state with high earners that are highly educated and very low earners at the bottom. You want to change that by cutting taxes . I want to rebuild the middle class by bringing jobs back here. Toyota announced they were leaving and Governor Brown shrugged his shoulders and said it is not my fault. The next logical question why isnt toyota dont think ours here . Of course they should be building cars here. More jobs means rebuilding the middle class and Governor Brown does not understand that eric understand that. With a kashkari, stay pair will stick more about california and also about, about Bob Benmosche, who is stepping down. Tradingt makes its u. S. Debut, alibaba is threatening amazon with a new u. S. Retail website. Details straight ahead. We are back with california candidate for governor Neel Kashkari. Tarp, thelly wrote rescue plan that say the number of banks and aig. I spoke with ken feinberg, who you worked closely with, and heres what he had to say about Bob Benmosche, the outgoing ceo. He was very effective. He knew everything about the company. He came prepared to treasury. He personally negotiated each and every compensation package. He really set the Gold Standard for this. , are you surprised how laudatory ken feinberg was . . No, im not. I think now that the history has been written, he did a great job paying back the taxpayers. I am pleased to see the outcome and it seems to have an orderly transition to the new ceos of the Company Seems to be well on its way, which is good for everyone. Do you share ken feinbergs essential description of the Bob Benmosche of how prepared he was when he came to you guys . In all honestly, ken was much closer to that. I cannot speak to how prepared he was when he walked in the door. I can only observe compared to other companies, once the new ceo was put in place, the management was put in place, and once they had the worst put behind him. I agree with him on the big picture. Everyone who has worked on that has moved on. Most of them have worked on to other things. You are running for governor. Ken feinberg is working on the General Motors fund and i can name dozens of others. The fact that aig has paid its bailout, and ken said it was a surprise how quickly they did pay it, and they are how now onto a new successor, a new ceo, what does that tell you . It tells us that hopefully that American Time that time in american history, we are able to close the chapter, but too Many Americans are still struggling with a slow recovery out of that terrible economic crisis, but it shows us the acute actions that we can to stabilize the American Economy in 2008 were, on the whole, effective. Nobody wanted to do that. We hated the idea of intervening, but if we had to intervene, we wanted to stabilize the economy and protect the taxpayers. I am proud those actions were successful. Even at that time, people thought california was going down the toilet. That is true. Havein california, we almost 500 billion dollars of unfunded liabilities that we are on the hook for. Those are there. Governor brown is excepting the rosie projections that calpers producing. We have to use honest accounting and then have an honest conversation with the people of california. I wish i could say were completely out of the woods, but we are not eric yeah. We are not. Yeah. We can Work Together. If you get a response from Governor Brown for a debate, i would love to host that. I think you would be terrific. Great to see you. Neel kashkari, former head of equities at pimco are running for governor of california. Conference is e3 one of the biggest gaming meet ups in the country. We will show you the highlights. Well be right back. He claims he is the first billionaire to make his fortune in hiphop, and dr. Dre might be turning to real estate. He put his Hollywood Hills mansion on the block for 35 million. He bought a four years ago for half of that. Spent 40is month he million formerly owned on a mansion formerly owned by tom brady and gisele bunge and. He is the ceo of beats electronics, which apple agreed to by four over 3 billion. You we have the top 10 trade you not want to miss after this break. First. Bloomberg. Welcome back. You are in the loop. I am betty liu. It is 26 minutes past the hour. Bloomberg tv is on the markets. Senior markets correspondent julie hyman has the latest on futures right before the open. We halted a fourday winning streak for the sdi s p 500, and it looks like the declines will continue. The world bank is cutting its Global Growth forecast from january two now. Getting less optimistic obviously. The world bank is talking about Slower Growth in the u. S. As well as china, russia, india, and brazil, the socalled rick company brick countries. Saw the concern seems to be weighing on stocks. Well have more on the markets in 30 minutes. Thank you. Lets count down to the open with the top 10. Cbs, start with number 10, who says they fully will divest the stake in the billboard Advertising Company cbs outdoor america, the final step in the spinoff of cbs outdoors which began trading as a Standalone Company in march. Number nine is toyota, recalling vehicles in japan because of possible airbag issues. Toyota has recalled more than 2 million vehicles for the same reason last year. They were all manufactured by japans toccata. Google,r eight is paying for a startup that provides realtime satellite imagery. The cash deal comes as google looks to bolster mapping services. Number seven, Family Dollar theyares surged 12 after attract the attention of another activist investor, carl icahn. Fund is one of the biggest donors. , thember six, h r block biggest u. S. Tax preparer, says fiscal profit rose 36 . H r block agreed to sell its to exitunit in april Federal Reserve oversight and focus on tax preparation. Number five is bowing, who could benefit from news that airbus had a deal scrapped with emirates. Shares are falling after getting downgraded by rbc capital. The provider of Touchscreen Technology buying exclusive supplier of display chips for the iphone. They will pay 475 million to the japanese chipmaker. Chips, ibm at number three is nearing a deal for its chip manufacturing business. Ibm, which has been unloading less profitable businesses has been searching for a buyer for the unit since last year. Number two, altra salon reporting First Quarter results that topped estimates. They said earnings rose nine percent from one year ago. And number one, aig. The insurer named Peter Hancock as its new ceo, succeeding Bob Benmosche, who stabilize the Insurance Company and pay back eight 2008 government bailout. Oncock will take over september 1. Now to the call on the markets. I want to bring in the head of equities at usaa investment. His call is that now is the time to get aggressive with banks and Life Insurance companies, including, john, like aig . Yes, we would agree. Two of oure, favorite names. We did a transformation continues under Peter Hancock canthey have to show they execute. We like metlife. They announced a buyback. They will be able to return more capital once the rules come into effect but they will also benefit from the fact that we think the 10 year treasury yield has probably bottomed and will go up. I have also be risked the balance sheet, and if you look at them, they are cheap. You like metlife better than aig. Why . We would say right now, metlife is more levered to a rise in the 10year treasury yield. On the financial side, the bank side, julie hyman has been looking at the case against banks. Both for and against. There are pros and cons if we have seen treasury rates bottom. On the plus side, if the yield curve will widen, which tends to happen when the economy is improving, that would be good for banks and their Net Interest Margin because it tends to mirror this measure. Thus far we have not seen a lot of widening, but presumably we will see it as rates go up. That could be a benefit. One thing that could be a negative has to do with the Housing Market and mortgage rates. For the banks that are more leveraged to the Housing Market, obviously we are at a low rate. It depends on the velocity in which we see rates go up. If we see a sudden move upward, that could cause a shortterm hiccup at the very least if not a more substantial one. That could be a negative. How do you play this tale of two cities . We would agree that mortgage lending is decelerating, but on the other hand look at the commercial and industrial lending statistics. Very strong credit growth in that area. We think that will be a positive offset. If you look at banks, yeah, they will face more regulations, but utilities are a largely regulated industry advocate the gap between financials and utilities. Banks are so cheap right now. We are not saying they are going back to the valuation multiples they had before the crisis, but we are saying theyre getting used to dealing with the regulation, a lot of the costs, payment and litigation costs. There might be some out there, but a lot of that is in the rearview window. Some say they are treated at a discount because of the regulation, they are priced accordingly for that. We would say too big a discount. We would not argue that they should not trait a discount to the s p, but it is too big paradox a couple of stocks you like two big. Like,ouple of socks you walgreens. Scarlet fu has been looking into walgreens. There was the bombs started with a disappointing there have been problems, starting with a disappointing outlook for alliance foods. Walgreens shares are near the record high and investors are concerned about costs on drugs. Aboutare concerns walgreens moving its headquarters to capture a lower tax rate before a potential rule change. A potential hiccup. What about those headwinds . We would disagree. We do not know if the text version transaction would happen to lower the tax rate. That would be great if it did. Walgreens can cut the margin cap it has to cbs, its big competitor in drug retail. We also see tailwinds from the fact that more people are insured, there is an aging population, and Alliance Brings an advantage to walgreens. That is sellodel more front end, particularly with beauty. It is not a model walgreens has followed. They have done very well on their pharmacy sales. Front end sales have not been so good. Putting Beauty Products upfront, we think that is an attractive change. John toohey before we go, what is the one area that you would say is leading in the is a worry in the equity markets echo we are very concerned about some who are not growing dividends. Some of the utilities, high prey payout ratios, rates go up, we see those getting impacted negatively. But thank you very much. Coming up, eric cantors stunning loss. How big of a victory is this for the tea party . We will ask a former advisor of mitt romney. The wii console struggling to keep up with the competition . Theill sell you about latest from the Biggest Gaming Companies there. Just a few moments into the session. Stay in the loop. X here is a look at our top tech stories. Google is planning on making a deeper investment in the 360 billion power server market. They are working on software and helpare cools tools to efficiency in the market. A big market for them. Has a new site meant for Specialty Shops offering products that are not available in massmarket retailers like clothing and jewelry. It does not have an opening date, but potential customers should expect an invitation. Gaming and in gaming, do not count the we you out just yet. U out just yet. And speaking of nintendo, japanese Gaming Company is in atlanta is in l a for the e3 gathering. E3 alwaysrylines at depend on where we are in the game console cycle. It is boring to say, but it was important a couple of years ago was everybody at e3 was saying, when our microsoft and sony going to come out with their new gaming devices . And until they do, we will have to deal with the existing games. It was more about microsoft opening xbox one and sony in the playstation 4. Now that those devices have been on the market for some time, it gets back to the games fueling sales of the consuls heading into the holiday season. You have seen the mix. You have seen some shoot them up, action type games. Youve seen Companies Going back to establish franchises as well microsoft with halo is a good example. And you have these collectibles that are interactive. They become part of the game and you buy them and make them part of the gaming experience. That is from the playbook of Companies Like disney. What about this Virtual Reality headset . This is the most fun thing to discuss, without a doubt. It was a couple of years ago where a small oculus team first gave the world an idea of what they were working on. Oculus is now owned by facebook. And you have sony with something called project morpheus that they are pushing as something that could really light up the playstation platform Going Forward. The big question, and we will talk to this with the oculus ceo later today, what is the best cultural Reality Experience . Facebook has more than a billion users. Oculus will be thinking about games, but just as much about the communication. Equivalent ore even better alternative to Something Like face time or skype . And as that focus for facebook ultimately create an opportunity for sony to push more Virtual Reality technology that will get the gamers excited . It is an interesting roadmap as the storyline is unfolding. And the continuing of franchises like a low . Halo . Yes, one of the things i found interesting is that it was not just good for the next halo game, but the fact that paying for the console for the fall, they will make the versions available for play. Microsoft is not always do that. It goes back to the best strategy for both gains and consoles. Games and consoles. Microsoft is saying, we want to focus on the fans. Last year, we were focused on the xbox as an entertainment unit. The gamers were a little bit upset. Now we are about the hardcore gamers at this years e3. Jon erlichman, thank you. Catch is exclusive interview with oculus ceo catch his exclusive interview with oculus ceo coming up audit 1 p. M. On bloomberg west. Scottish who want to separate from england. J. K. Ll tell you what rowling characters she compares them to. Eric cantor is now out of a job. We will ask a former advisor what the loss means for the gop. The primary loss by House Majority leader eric cantor was a nightmare for the gop. It is hard proof that it has to step up. Helped to fend and has workedty with mitt romney. Good to have you back on the program. What do you make of eric cantors lost . Were you just as as everyoneurprised else . Yes, it was a big surprise to everyone, especially with polling data that showed he was doing well as early as 10 days ago. But the argument that congressional reform is dead because he lost, i dont think that is the case. What do you think is the case . If you look at the composition of the gop leadership Going Forward, there is a lot of jostling that will be Going Forward. But it is entirely possible that what is left with john boehner and others, they are Immigration Reform advocates. I think it is probably too early to write the obituary for reform right now. But immigration is not going to get done this year. No, not before the Midterm Election. But then again, i dont think anything is going to get done before the midterm this year. That is not entirely surprising. This loss, though, what impact will it have on him on it stilltions . Raises the viability of the tea party. There was a lot of and aired of that the establishment had completely destroyed the tea party. I was thought that was premature. I think the tea party is a powerful force at the grassroots. Is that thereality tea party is still very much a factor. Well, yeah. You saw last week that on the program you said last week on the program that anyone who counted the tea party out would be wrong. And here we are a week later with this enormous defeat bike eric cantor. Defeat by eric cantor. Bird said basically that any kind of victory iat Party Candidate is only going to galvanize the democrats. I want you to listen to what he said. Lets say, youve been saying for year, look, we are moderating heart position. We recognize the demographic shifts in texas, the large growth of the hispanic population, and we will have a much more moderate stance on that. And they elect someone who has called immigration into texas and invasion. Who has said they are bringing third world diseases. This is a guy that is out of step with any policy. They have taken huge steps backward by nominating dan patrick. Dan patrick for lieutenant governor, of course. What is your reaction . That is the talking point from the left. I get that. They are trying to make this into some notion that because isc cantor lost, somehow it a huge tide against the Republican Party. I think the fundamentals of this Midterm Election still favor the republicans regardless of what happened with eric cantor. Sure, it is a wakeup call for established republicans, but the notion that somehow folks further to the right that have been nominated and somehow were publicans are dead in november is ridiculous. How does the Republican Party move forward on issues like immigration . You have a very hardline faction of the party that is so reformsly against the that Establishment Republicans have talked about, that will scare away some of those hispanic voters, for instance, that republicans want. Republicans need to regroup in 2015, no question. On the Immigration Reform specifically, i would say a couple of things. One, there is still a broad consensus in favor of fixing our system. The question is always what the specific fixes are. The republicans need to articulate those fixes with some of those reforms. And i think democrat have to be willing to come to the table if republicans do express a willingness to work on the issues. There are deftly summon the Publican Party better strongly definitely some in the Republican Party that are strongly opposed to Immigration Reform will stop Immigration Reform. Jobs play . Ut this who will stick out as a leading candidate in 2016 . Rate question. The fundamentals of that race remain the same. Theres a lot of volatility that a lot of folks are talking about. I dont know that this individual loss shed a ton of light on 22016. The basics and fundamentals of ont race have always focused the fact that there is no clear heir apparent to the nomination. That will make for a wide open race. Thank you for joining me. Advisor frommpaign stanford. Iraqsa has now seized secondlargest city. More example one of the iraqi Prime Minister losing his grip on the nation. And canceling their order for all 70 of the a350 jetliners at a price of 350 billion. Donated 1. 6has million to the staying together campaign. I will be talking to real estate to a realmobile estate mogul about why he held off on bidding for the clippers. It is nearly 56 past the hour, and that means Bloomberg Television is on the markets. Im julie hyman. Lets take a look at where stocks are trading intraday. We could not hold the record from yesterday. We continue to see a pullback after the world bank cut its Global Growth forecast. Lets take a look at oil prices. Opec tea keeping its production targets unchanged today. Littleh center media changed. Also, Inventory Data on oil today. And if you look at wii prices, we have had a big decline in wheat prices over the longerterm, however a bit of a rebound on speculation that it may be rekindled because of the low prices that we have seen. And sticking with the commodities, this years el nino could have big invitations in soft commodities. That could affect a number of emerging companies. Joining me is the director of Market Strategy at new edge. El nino is not something we are used to thinking a lot about. Weve talked about global warming, about the winter and how horrible that weather was and the effect it had. And now we have to contend with el nino. For those who dont know, el nino is a warming effect in the ocean. Yeah, warming. It is one of the most significant effects of the weather patterns. It happens every 57 years. What happens is, the trade winds that blow from south america to asia slowdown substantially. Slow down substantially. As a result, the precipitation, willet clouds if you will, basically not move over to Southeast Asia as a result and as a result, you will get this unfortunately you will get disproportionately drier conditions in Southeast Asia while south america will be had by much higher than average precipitation. This creates all kinds of dislocations in the commodity markets. For example, you could have floods on the west coast of south america, which could impact the mind. You could have drought in countries like indonesia and malaysia, which are the producers of things like palm oil. It could affect the monsoon in india. The monsoon is 70 of their precipitation a year in india. And it happens in a very short span. Like four months. India, this is a country with a billion people. Ands the Largest Consumer producer of sugar. They produce a lot of commodities and try to be selfsufficient. If they dont get the monsoon, it could create enormous his locations in some of the commodities. We will look at things like sugar. Wesugar prices go up because have a disappointing monsoon and there was already a kind of shortage,ar market then that forces the indian monetaryt toward tightening. That could short indian stocks. Conversely, brazil could get hit with higher than average precipitation as a result of the el nino. They could see some alleviation in soybean prices. We found that soybean is highly correlated with brazilian inflation. That might actually boost the rally in stocks and in brazil. But a lot of implications. Robert, we will have to leave it there. Robert von battenberg of new edge. Market Market Makers is next. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Shockwaves at the gop. A tea Party Candidate scores a huge upset over the secondhighest ranking republican in the house, eric cantor. In europe, taxi and limo drivers from london to milan are blocking traffic to protest the threat to their jobs caused by goober. Uber. By cheers, it is all about sampling the best in brazil at the world cup