Cigarettes, reynolds american, is in talks to buy lorillard which is valued at almost 23 early in dollars. The combined company would be a closer competitor to altria. Up. Hen cohen has paid his firm pettitte 900 Million Dollar penalty for insider trading. Sacfilm that used to be a capital was given until tuesday to pay. Palestinian militants are firing more rockets into israel and israel appears to be getting prepared for a Ground Invasion and have called 33,000 reservists. Three inch and the three infantry brigades have been deployed. Secondquarter profits rose at what is now the worlds most valuable bank, world wells fargo. But we will ask michael moore. For the full story. Credit was better than expected. A lot of people have been asking if they would still release reserves and they were able to do that. The loan growth did not keep up with the deposit growth and they have a lot of deposit wrote. It was there but it was not very robust. It surprised everybody given the sluggish economy. The economy is improving on the credit front but not generating loan growth. You saw compression for an eight straight quarters are we had two years of margins shrinking. That has been a continuing theme. This is what the bank ceos continue to complain about. We heard that with the bench market Interest Rate at zero, its a difficult environment for banks to lend money to make money. Wells fargo was almost at four percent on their Net Interest Margin a few years ago. Now its closer to 3. 15. Thats a significant move and youre talking about ilions of loans. About billions of loans. Thanks are ready for the Interest Rates to rise. They are looking to steer their business in a different direction looking to generate revenue from other parts of the business. At the same time, expense control remains the big team. What did we learn from wells fargos efforts to contain costs . Expenses were up a little more than work specter then part of that was litigation reserve, not anywhere near that of the big banks. That was up quite a bit. I think they are continuing to try to get their arms around the expense question which is all they can do right now. We are talking about headcount at the banks . Headcount was down and wells fargo and i think you might see it down at the other banks as well. What else did we learn from wells fargo that might give us a sense of whats to come when other banks report next week . Seems to be stabilizing and has not dropped as much. But mortgages are more important to wells fargo and they are to citigroup or bank of america or j. P. Morgan . Definitely the leader in mortgages so that may come through. The one thing we did not get a read on was trading and Investment Banking. They are not as big in that area and thats the big question for jp morgan and Goldman Sachs the banks have been warning about bad trading. Since may . Thats right. Jpmorgan typically kicks things off but this time it will be citigroup. I keep hearing from Fund Managers that they like citigroup the long haul. What are you hearing . Its a question of execution. Citibank has a good story and that they are everywhere. Whether they of can clean up some of the issues they have had. They had the issue with tcar and the issue with mexico so people want to see discipline. At. 7 troup is trading the book and wells fargo is highest of the big banks, closer to 2, 1. 7. The trading and investment typically getss the kind of business. We talk about the various settlements with the department of justice. What will you be looking for in the coming days . We hear from Bank Executives and what settlements are likely to be resolved. That will be the big question especially for citigroup to see if they put anything aside. I think people expect them to put something aside as they get toward the finish lines of these discussions. America, they have some remaining litigation that people want to hear about. When you leave us, you will return to the wells fargo Conference Call which has just started. The ceo of wells fargo is speaking right now and says the u. S. Economy appears to be accelerating. That in theory should portend good news for the Banking Industry but at some point, the fed will have to raise Interest Rates and if youre generating most of your income from lending the way that wells fargo does, there are good times ahead. A big piece of it will be the pace. Wells fargo just wants to see higher rates but the other banks are allen sing the Capital Markets and the commercial bank business. You want to go up and you dont want to spike up. Because that will be reflected in Capital Markets. Right. Thank you very much. Sync Technology Ride may be over. No revenue, no product, no assets but one alleges employee but yesterday it was worth 4 billion at the 25,000 increase in value but the sec halted trading yesterday. What does this company do . It sounds like something out of a moving. Shell companyis that does not really do anything. It has a website but the website does not actually appear to transact any business. It says you can pay to be connected with celebrities and other people but if you try to sign up, it does not seem to quite work. I talked to a gentleman yesterday who trades in these penny stocks on a regular basis and he says you guys are not hang attention. It does not matter what its supposed to do. Thats not the point. It could do anything. The point is that someone is trying to get people to buy this thing and for a little while, it worked pretty well. The sec did indeed step in this morning and said in a statement that it temporarily suspended trading. We will see if that becomes permanent. There were concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in the common stock. That is the key we dont know whats going on in the shadows. We dont know if there really is a pump and dump scheme operating. We dont know who may have paid commentators or newsletter writers as far as talking about it. We know that about a month ago, there were a number of tweets that came out that were virtually identical that said this stock would go up 750 . It was purporting to give tips on it. The increase in the stark it started to happen before that but then it ask celebrated that it accelerated after that case. I wonder about the inaccuracies in a filing document. To someone before the sec stop trading but he said its not uncommon that you have these mystery companies. Jacob reg out used to be with frenkel used to be with the sec and he said this is relatively common. He prosecuted litigated a lot of these pump and dump stocks. If it is in fact that. Thats where people are being tricked, right . A momentum play and people are piling into a stock that is moving, theyre the victims of their own ignorance of they lose money because they can do what we did if they wanted to, what you did yesterday pull up securities filings and pick up the phone and call the number and do all of these things and establish for themselves whether theres anything to this business were not. Theye question is have been told something that is not true about what is going to be happening with the company. He said this kind of thing has become more common as we have gotten more into the internet age. People abroad can be sending emails or tweeting or doing other types of social media to get the word out. This makes it more difficult for the sec to investigate and eventually bring some sort of suit or action related to it. If you have these offshore entities were doing this kind of thing. Does this mean we are in a bubble . It is sort of a sign of the frothy mist of the market. Frothiness of the market. With anotherg security law professor and this kind of thing happens relatively frequently. Its not so unusual. I think its a sign that investors are as gullible as ever. Gullibility does not necessarily seem to change. Thank you for bringing us the latest. Coming up next, we will take you to the big economic summit in jackson hole for an exclusive interview with the president of the philly fed, charles schlosser. We will be back after this break. You are watching Market Makers. Top of the countrys central bankers and monetary mines are in jackson hole, wyoming right now not for the annual Kansas City Fed conference which comes next month but for something called the rocky mount and economic summit, chance for feta vessels to talk to ridley to the public. To talk directly to the public. Michael mckee is there with the president of the Philadelphia Fed, Charles Plosser. Thank you very much. Thank you for joining us this morning. There is a chance for fed officials to talk directly with the public. What would your message to the public be . I asked this chart guess . Charles evans earlier and he said dont hold your breath on a rate increase . [laughter] monetaryge is that policy is very accommodating and has been for a long time. At the same time, we are moving closer to our goals and objectives. Inflation is drifting toward the objective in the Unemployment Rate continues to move down so its important that we knowledge that we are getting closer to our objectives and its important for me that we adjust Monetary Policy appropriate way as we approach those objectives. In the press, we like to say lets let you and him fight. We are not close to objectives said Charles Evans this morning. The rate of unemployment that he would like to see is around five percent and that inflation should run half of what you think is running at. How divided is the fed over this . Me, regardless of where you define your objectives to be, we are closer now than we were. We are closer than we were a year ago. Sense, i believe that we should not be keeping Interest Rates at zero. Until we reach all our objectives. For me, that would be an uncomfortable position for the fed to be an. We have never been there before. You look back in history and ask yourself when the last time was that unemployment was at six percent and inflation was close to 2 and we had the funds rate at zero . Not very many episodes. I think we have to acknowledge to ourselves and the public that as we get closer and you can debate whether we are there but as we get closer, Monetary Policy should be coming in my mind, reacting to those movements. What is driving inflation now . Whys it moving up to a sustainable level, to your mandate level . Most economists now believe that an important element of inflation is inflationary expectations, keeping those anchored. Inflation expectations have been anchored and pretty stable and thats a good thing. I think that is why many economists and the fed has said we anticipate inflation will gradually drift back toward our target. That is partly relying on the notion that expectations are keeping inflation low. Janet yellen says the inflation signals we have got closer to two percent is just noise. Was it owing to take for you to be certain it is what is it going to take for you to believe its just its not just noise . Economic data is always noisy. We have been anticipating that inflation would drift up and we have been saying that in our statements. This is evidence that in fact its doing what we thought it should do. What will happen in the future . Woodruff back down again or stay up will it go back down again or stay up . We dont know the answer but it is kind of doing what we anticipated it to do and we will have to see over time whether that remains stable. Areet months of data that noisy and some are lower and higher. There is good signs that in the cpi and the pce have both moved up a little bit and thats a good thing. The intersection of your two mandates of unemployment and inflation are wages. We see unemployment go down but we are not seeing wages rise. Why is that . I think wages actually are rising faster than they were two or three years ago. They have drifted up as well but they are not rising rapidly. Historicallysually is a lagging indicator of inflation. I think wages will continue to drift up that by bit and that would be a good thing as well. Do you think they push Inflation Higher . No, they respond to higher inflation. Respond tohat wages higher rates of inflation rather than wages push inflation up. You suggest we could meet your mandated targets by the end of the year and janet yellen has suggested you get to that point and you wait whether it is the six. Months here is reset or not but you wait what is the fed waiting for . Im not waiting. That a lot of the guidelines we look at, rules and things like that that give us guidelines about where the policy should be for any combination of inflation and unemployment, where that policy rate should be, many are indicating that we should begin gradually raising Interest Rates. That is informative to me. The message is that for us to deviate from what these guidelines and benchmark rules tell us is we would have to have good reason to deviate from them and explain why. I think we are closer than many people might think. Are you afraid the fed loses credibility if you wait too long . We may lose control of inflation, we may lose control of Financial Markets where we find ourselves later on having to raise rates faster and higher than we otherwise would like to because we are so far behind that the markets get ahead of us. That could be disruptive sofa we wait too long, we can find ourselves raising rates faster and higher than i want to and the same thing is true for the balance sheet. That is opposed to provide accommodation. If we dont begin to shrink the balance sheet, if we are to achieve any level of Monetary Policy accommodation, Interest Rates have to be higher and rise faster than they otherwise would with a small balance sheet. I think there is some subtle could on the exit that cause for a bumpy ride coming out of this up we wait too long. Monetary policy olds works with a leg but do you think the speed of transmission has changed . Do you have less time than you might have had . I dont think so but again, we are sitting at a point right of where historic amounts accommodation, unemployment six percent and inflation close to two percent are we already behind and how far behind . An Historic Place we have been before. The question is are we already behind . Lagtary policy works with a in what those are people can debate but if the Financial Markets get ahead of us and decide rates need to go up, they will go up and we will have to follow them up. If we want to keep inflation under control, well have to raise rates faster probably than we otherwise might choose. You have seen unemployment come down a lot. Janet yellen points out there are is still slacken a number of areas. If you raise rates, how does it affect the economy . Me was take so much to out of the economy that those problems are not solved . A lot of the measures of slack is that we dont understand that the labor market is very puzzling to many people. There are structural issues and maybe there is still slacken theyre. The question is not so much if there is slack or not. The question is there is less than there was and so Monetary Policy should respond to reductions in the distance between where we are and what our goals are. If were going to have a reaction function, the committee has said in his statement that monetary lc and Interest Rates will be adjusted as we get closer to our goals but we are not doing that. We are still trying to provide more accommodation because we are still buying assets. We are still working in the opposite direction even though all of our data is suggesting we are getting better. We are still trying to provide more accommodation. That cannot go on forever. When you start raising rates, how far, how fast . We dont know the answer to that. We are in uncharted territory. Typically, the fed would like to move things gradually and we always like to do things slowly. If the markets get ahead of us and Interest Rates rise rapidly, we will not have any choice but to raise them quickly. I think thats part of the challenge we are facing. The further we are away from where we need to be when the time comes, the more disruptive it possibly could be. Believe rates could be lower than the historically would have been because the economy has a lower trend growth . A reasonableats discussion to have but im not convinced thats the case. I would say thats a reasonable discussion to have. The number is not zero the new neutral is not zero. No matter where you want to put that number, whether you put it at four percent or at 3. 5 , we are still a long way from there. When you get here, how do you communicate to the world that youre ready to move . I think you have to have conversations about preparing markets and the public that say we are moving back toward our objective and we can debate whether we are there yet or not but as a gift closer and the economy gets healthier, we need to begin to talk about the fact that Monetary Policy ought to be reacting to the data. Right now, we are not reacting to the data. Says low a path that for long we have no plans to raise rates and a time soon and yet as the data keeps telling us, we should be raising rates. Do we need to have more press conferences . Many people would like to see that and im ok with that. Having four press conferences per year but we only meet three times a year. I am being a bit facetious but not entirely. Meeting every six weeks leaves the fed to focus on shortterm things. We focus on the longer term with fewer meetings. We hope we have more meetings with you, charles luster of the Philadelphia Fed, thank you for joining us. Thank you. An exclusive interview with Charles Plosser in jackson hole. Join in thro