avide so that we can have strong global climate agreement next year. >> the president is on his way to myanmar. a fascinating turn of events involving iran. russia agreed to sell iran as many as eight new reactors. russia has been pressing iran to limit its program. allegations that it nuclear bombs. >> to month-long cease-fire in ukraine is falling apart. pro-russian rebels are regrouping and mobilizing forces in the eastern part of the country. the government said rebels shelled troops 30 times yesterday. russia has been accused of arming the rebels. vladimir putin says he is no idea what they are talking about. the u.s., u.k., and switzerland ordered banks to pay back more than $3.3 billion. ubs will pay the biggest penalties. that may just be the start. the justice department and the u.k. are both conducting criminal investigations. issues,to domestic remember black friday? how walmart is hiking in a five-day affair. i'm shocked. their new black friday begins 12:01 thanksgiving morning and will last all the way through cyber monday. this is sick. run waves of an source fails twice on thanksgiving night and again on friday morning. retailers are opening ever. you kidding me? >> have you done this? >>no, no, no. inant to spend thanksgiving front of the tv. >> it is deeply un-american to make people work on thanksgiving. >> apparently, there have been that the busiest day was not black friday, but thanksgiving day itself. >> we want people trampling each other on the day of thanks. >> yes, we do. let's do a day to check. -- data check. things are quiet. on to the next screen. elevated. na, 15.80. let's go to the bloomberg terminal. this is a log chart showing percent change. this is back 20 years. all you need to see as the 1998 crisis and then you bring it right over here. we are getting there. it is ugly. >> i talked to analysts two years ago before the revolution and they said ukraine is not really a country anymore. the youngest people in ukraine are leaving. older people with pensions are left. >> depreciation, did valuation -- devaluation, irresponsibility -- can i make that connection? >> ukraine should be thanking you. >> or somebody, for writing the check. this is crisis, where we are right now. it is not quite as bad as 9098. 1998.a bloke -- it is a bloomberg terminal chart. republicans win big at the midterms. paul roberts is happy. the author of an important book. it is on individualized and disconnected society. we will get to that in a moment. right now, we have peter cook. possibly the accession begins. lame-duck session begins. today, there will be leadership elections. there was also the december 11 deadline for government funding. what needs to get done? >> it is a lame-duck session. there is a reason we call it lame. there are things they have to get done. they have to get the spending bill done by december 11. everyone has indicated there will not be a government shutdown. can they get a full spending bill done in that time? we will see. they will talk about ebola funding. they will talk about new authorization for the use of military force in syria. long listthey have a of taxpayer etc. are expiring at the end of the year that they are going to extend in some form or fashion after fighting about it for a couple of days. those are things they have to get done. the big story is the change of power in congress. nextody language over the couple of days, the tensions between harry reid and mitch mcconnell, can they get along in the next congress? >> we were just showing everyone what is on the republican to do list. it is pretty full. the question is whether republicans and democrats can get anything done in the meantime to set up? >> i'm going to ask you to do some close textual analysis. my fear is that they will try to do something in the lame-duck before the reinforcements arrive. he is a kansas republican and he is part of the tea party faction among house conservatives and he is worried about everything his leadership does. he did not support john boehner the last time around to be speaker. this is the view shared by some on capitol hill, the fear that something could happen on the lame-duck, that the could be some mischief, but i think most people think there will be a short list of things that have to get done and beyond that, there is not much else. cook, thank you so much. >> i've been dying to talk to you since 9:22 p.m. election night. ronald reagan, this, ronald reagan, that. are these republicans anything like what they revere? >> i seriously doubt it. we are going to have a stalemate, not progress. the republicans want to raise defense spending, they want to blow the sequester gaps, that will create a tremendous conflict in congress and nothing will get done. they are in a fiscal coma. they might as well get it over with. you go right to sequestration. 2016 is when we run into the limits. nobody wants it, right? >> they passed a tenure cap, but when we get to the -- 10 year cap, but when we get to the limit, they find ways to work around it. the caps are meaningless. the idea that the budget is getting better is so wrong. think the business cycle has been repealed, we might have a recession somewhere down the road, you get rid of the scenario -- it and you are inking about 10 -- 10 joy dollars-$15 trillion of real deficit on top of the $18 trillion deficit we already have. nothing has been fixed. >> you are gloomy. everybody's budget scenarios have been using the same assumptions. cbo.ok at they say that the deficit starts to rise again in 2016-2017. employment. full that is with wage growth that has not happened. >> here is the gdp chart. we have come back nicely. why are you so gloomy? we have had five years of recovery, we are in the sixth year. we are going to have another cycle in the next 10 years to drop down below. are supposed to get balance or a surplus during the top of the cycle. >> does alan greenspan agree? can't we get near a zero bound? we should get balanced, unless we want to keep adding to the debt year after year after year, which i think we are in trouble. we have an aging population. we have an economy that is not growing, cannot grow more than 1% or 2% per year. >> you are very critical of the short termism we see. putting together a budget requires us to look long-term. that is not happening. how much of that is because the two sides cannot agree? >> clearly, that is a big part of it right now. we are going to have to spend quite a bit more on things like infrastructure, long-term research if we are going to have to get the economic recovery that you are talking about. , we have a financial is asian of the political sphere. we have so much money in the the donors aree considered investors. investors want a return on their investment and one of the fastest ways to get a return is to go negative. -- hes is david stockman starts his morning with the "new york times." the worst voter turnout and 72 years, back to 1942. we are completely disassociated. >> we are disengaged. voters look and they see that the political sphere is acting like an arm of wall street. it is after short-term, quick returns and it is not interested in long-term commitments. why should a voter engage in that? >> you sound like david stockman. [laughter] stay in theing to political sphere. we have david stockman and paul roberts with us. we will talk about budgets and how to get them done. this is "bloomberg surveillance." ♪ >> good morning, everyone. "bloomberg surveillance." america, your medicine. -- toby because grove grove, live this morning on "in the loop." always interesting. he was mesmerizing one year. this is "bloomberg surveillance." >> congress may yet pass a bill before january. that is not a budget. a budget is the thing the federal codes as we are supposed to do every year. that is an h and forgotten skill, like harness making. and forgotten skill, like harness making. i'm going to show you a picture. >> everyone is smiling. >> a second picture. >> no smiling. [laughter] past theember the rosy way it does -- was? >> they exchanged irishman jokes. came to policy, they were as divided and bitter foes as you have today. the problem is that 30 years later, we have been doing the same trick over and over, so therefore the room for maneuver is no longer there. in the early 1980's, we had a relatively clean balance sheet. into huge deficits and somehow the system absorbed it. how much longer can this go on? that is why you see the faces you saw. they were smiling because everybody agreed we could run a deficit. no, they agreed they could blame each other and get away with that and that is exactly what we did. greenspan proved the fed can monetize the deficit for a long period of time, but eventually, you get yourself into a corner where the fed is today and the balance sheet has absorbed much of the debt being created by congress. want to talk about negotiation. some amazing things happened in the 1980's. why can we not get to any sort of compromise? what did they do then when negotiating that we can do now? >> there was a very good maneuver in 1986. he raised the capital gains tax and flattened everything else, so that salaries and wages were all taxed at the same rate. that was a good principle. you had democrats who wanted to do it. i don't think you have any consensus on anything else. , author of "the chemical society." society."pulse ronald reagan exist today with social media? you could assume a more civilized news cycle, for one thing. i sort of personality is the political attract today? what do you do, to eat out, it's morning in america? [laughter] he made up a ballgame when the stores -- scores stopped coming. i think he would've been an amazing tweeter. >> the effect of the modern media. >> i think that is true, but you can exaggerate. i think there is a revisionist history of how much was done. not much was done. massive tax cuts were easy. domestic spending cuts, very few. it is mythology. it is not true. >> what do politicians coming into the system today? it is going to be a lot of raising cash. how much consensus and negotiation does their job entail as opposed to 30 years ago? there is a lot of revisionist history going on, but i get the sense that many of the players entering the system today are coming in with boxing gloves and that is their whole theme and that negotiation is secondary. , moneyis secondary raising is primary. there is no negotiation on the budget or fiscal issues because the fed has made it unnecessary. they are so low, that continue to add deficits year after year. kaplan onup, robert leadership. here -- join us here on bloomberg television. good morning. ♪ >> good morning, everyone. "bloomberg surveillance." our morning must-read. my morning must-read is from martin wolf in "the financial times." the wish his father to the denial. it is a work of philosophy, "the impulse society." is the objection to climate change financial or do we need a new way of thinking? >> it is both. status quo worries that climate --nge legislation will it affect the bank account. everything is about short-term results. in the corporate world, quarterly earnings. consumers are persuaded to think only about this weekend or this friday, black friday. >> david stockman, i'm going to ask, why can't the republicans get there? that weconsensus generally accept something needs to happen. you, the media. -- we is you, the media. tumblea that we ought to into regulation of the economy on the theory that we are going to do something good for the climate is nonsense. the idea that they made a deal over the weekend, that china is going to keep raising their emissions until 2030, if they are still around and this house of cards does not collapse by then, i find amazing. >> there you go. david stockman sounding off on climate change. [laughter] we will discuss with david stockman. coming up next. >> the chart of the year. >> you have been talking about it for so long. >> the chart of the year. >> central bank balance sheets. ♪ >> good morning, everyone. with me, brendan greeley and the scarlet fu. .> record sales from ali baba shoppers 19.3 billion dollars of goods in the annual event. they are open to working with ebay's pabon health -- paypal. it is looking to take november 11 global. bill ackman taking an activist state. pershing square capital has a required 8.5% of the company. another fund raised its stake. shares climbed to record highs yesterday. yahoo! to acquire --. the purchase adds marketing tools and drives marissa mayers turnaround effort. it specializes in programmatic advertising that helps automate the buying of ads. a good luck. it is age range. it has gotten worse. much worse. the bank of japan trumps all with massive accommodation. try to reverse deflation and spur growth. that brings us to my chart of the year. from the team's strategic. this is back to the druggy speech of 2012. all you need to know is one of the banks, it is not like the others. the austerity of the european central bank and everybody else has a punch bowl seal -- filled to the brim. >> it is important we think sesame street, not the muppets. this is the method. none of this is in the textbook. >> this is monetary madness off the deep end. >> they started with 50%. they will be adding 80 trillion to the balance sheet. what is the purpose? to trash the end. they have a process started that is going to up anend -- bill dudley and the rest of the fed have wrong? >> they have wrong the idea that 2% inflation is going to accomplish anything. there is no historical or scholastic basis. >> should they separate rate dynamics from the bay -- the paydown of the bonds? should they reverse that? >> we have had enough interest and manipulation by the central bank. what is wrong with the free market? if the short-term rate needs to move, let it happen. it sounds like a jefferson airplane song. have written about japan, the real problem is demographics. 600% debt to gdp if you take all the private and business debt and the idea with that much financing to do in the demographics that you are going to destroy your currency is nuts. they will need to import capital to get around it. they are making it almost impossible. >> i think you are here to make me feel bad. you should feel bad. the central banks are setting up the world for a very bad time. they have lost any sense of rational. you called this a mindless level. is there a theory that says that 2% is the magic level? go back and find a textbook that said 2% is the magic number. where's the proof? there is none. it is a ritual incantation. they say it over and over as if it is true. the economy will grow because of the supply side. the rate of inflation is 2.3 or 1.2. it has nothing to do with it. going to not are buy food or go to the mall because they believe prices will be lowered tomorrow? it is nonsense. >> was the chart of the euro k? i try to steal from the best. i went with jason. line is the fed. in the middle is the swiss bank, the bank of england, and down below, the bundesbank. >> the goal is to get prices rising and to get people to spend. we will focus on the health of the u.s. consumer. does it mean for the savings rate? our single best chart is next. ♪ also, our twitter question of the day, who makes a better boss? engineers or mda's? tweet us. ♪ >> good morning, everyone. we welcome you on this wednesday morning. a gorgeous morning. with scarlet.art >> it is the health of the consumer. it is from a friend of ours show. the upshot here is more the less they -- appear to say. it is inverted. the lower the line, the higher the worse. than we wereher four years ago. >> the white line is the household savings rate. post financial crisis network took a big hit. andsavings rate picked up announced at 5.5%. still low compared to where it was in 1980. this chart does not go back far enough. it is financial as a nation. -- financialization. it has resulted from said suppression of the financial -- >> that goes to the idea -- >> to go back to the healthy pre-1970, the savings rate was always over 10%. the savings rate ought to be higher as the baby boom prepares for this huge retirement ways. we are going in the wrong direction. it is market-based. to me, it is meaningless. >> there is federal support for housing loans. the fed should not drive the rate. clearly the incentives are misaligned. people are getting no encouragement to save. that has to do with federal policy. an important issue, the enticements to think short-term, super-cheap 30e year mortgage, but that is across the sector. everywhere you go, you are offered an opportunity to spend. we base our economy on an impulse buy. >> let's turn to the consumer. one of the key factors affecting the american consumer is lower oil prices. panel, i spoke with the chief investment officer. >> this lowering of gas prices have been helped by lee -- by deleveraging. >> what does $80 oil due to emerging markets? take india, for example. indiaionary pressure in wants to go down substantially because of lower oil prices. while some of the emerging market countries or producers may suffer because of lower thees, the majority of world probably benefits because of lower oil prices. it puts more dollars in consumer pockets for them to spend. getting crude, we are on the $80 barrel watch. that would be a huge deal to see a print. get to photos now. >> today marks the 60th anniversary of ellis island's closing. it is where michael greeley wandered onto this continent. there is a wide set of drunks they came across. fortunately, i did my genealogy. comes out.h >> they were service crude up. they moved from scotland to wales and then they threw them out of wales. they were on the 14th boat after the mayflower. they came here in 1870 because they were drafted and had enough sense to get out of europe. >> from russia and poland, for roughly the same reasons, including the rum. >> very cool. that was wonderful. >> our next photo, president obama takes part in a treeplanting ceremony. >> this is so awkward. that is ed fast. >> patio eu not know ed fast? he is looking like he is digging a hole. president. perhaps this is a celebration of the potential climate change agreement. why is he doing work while wearing a shirt? how does that happen? how did we miss that? today, the rosetta probe achieve the first comment landing. it is 217 million miles from earth. >> it is going to land on it? shoot a going to harpoon from 14 miles away to tether itself to the comment. what could go wrong? >> exactly. >> we can do this, but we cannot pass a budget. good use of tax dollars? >> i would defend the space program. we ought to be doing something ambitionthe long-term of the american people. if we were also making investments elsewhere in the material economy, in infrastructure, basic infrastructure, not going to different planets, but creating highways to take people from home to work. >> every time you say infrastructure i can sense david stockman disapproving. >> we need more of that tension. >> we need to have the gas tax raised. the rest of the infrastructure, county roads, mass transit, sewer and water, it should be funded locally by people who are going to benefit. it should not be an excuse for more deficit spending. raise the gas tax. the highway system is in good shape and does not need -- >> i disagree. if you want to have local funding, you will have to have the conversation about local funding. >> we will continue the conversation. have we become too selfish and our need for instant gratification? this is "bloomberg surveillance." we will be right back. ♪ >> good morning, everyone. lots to talk about. leadership, governance, the pesky boards of direction or's -- of directors. welcome to our studios here in new york city's. alaska's race for u.s. senator. solon led begich. .e is a former alaskan general the national guard preparing to to ferguson, missouri. a grand jury will soon decide whether the officer will face charges. hundreds of officers have received special training to respond to protest and possible arrests. to ceo spotify has a message taylor swift. free music makes you millions. spotify has 12.5 million paid subscribers and 50 million free users. those are your top headlines. it is disingenuous. spotify accepts a certain amount of piracy. they understand piracy moves into streaming which moves into sales. they know better than to say the alternative is piracy. >> the distinction is paid .ersus spotify >> jcpenney and macy's kicking off the earning seasons. if their numbers miss analyst your need for instant gratification is the reason to blame. in which you are disappointed and you feel let down by modern society. it is an angry book. >> it is a disappointed book. we could do better than we have. that wassociety capable of impulse control. making long-term investments, as , but as individuals. we are capable of disciplining themselves, thinking beyond the self. that is becoming less and less a standard behavior. from your book talking about the connection between the consumer and the company. marketpany with the most value and a brand recognition has placed itself at the center of the need-centered economy. having said all that, apple has made our lives better. we do not get lost, things are getting done faster. convenience is a youth it -- a huge thing. is, it is question fantastic that apple has had the success it has had. no question about that. a couple of things. one is there is so much attention focused on personal technology and we are not focusing on the broader technologies that need to happen for the economy to move. research.basic further, apple is a great example of the impulsiveness and corporate strategy war in order to keep your share price up, what to do? you buy your shares. i am a little disappointed you are going to tom's house. you're going to dinner without me. and i had to find out about it on air. >> in the book, there is a whole chapter on the switch in corporate america where corporation ceos started paying attention to shareholders. when you see that as a good or bad trend? there is nothing wrong with it if you had an honest market. market ism is the totally biased in terms of borrowing money and leveraging the corporate balance sheet. stock options pay off. >> what do we do to get jobs ins to invest in america? >> we have to recognize it is not simply a problem with the wrong incentives. there is a moral argument we are not making. what is the duty of a corporation, if there is one. regardedons want to be as people. if that is the case, when did they start acting like citizens. >> who is doing it right? >> i think google is a good example of a company that has invested in its people, long-term basic research and in projects it does not even know if it will turn out. that is a model other companies should follow. >> this goes back to adam smith. there was assumption that it only works if you have honest men working as capitalists. >> we do not. we have honest men trying to follow the latest word clouds and liquidity injection of the week by week. you cannot run a 17 trillion economy by having the whole to the sound and call of the central bank. >> i get the sense you don't like what the central bank is doing. >> while incentives are critical, there has to be a moral framework. we have to be willing to get leaders to state what is the objective of the economy. >> what is the distinction ?etween your argument >> i would make the argument institutionsal have the ability to achieve instant gratification. they are losing the incentive to think long-term. of "theroberts, author impulse society." >> stay with us. ♪ x this is bloomberg surveillance. >> the u.s. and china agree to cap carbon emissions. obama is hoping to bring other nations to the table in paris. tensions mount as the fighting continues in eastern ukraine. member,better board should they choose jamie dimon's board of directors echo -- of directors? good morning, this is bloomberg surveillance. i'm tom keene and with me scarlet fu and brendan greeley. milestone in the relationship between the u.s. and china. for the first time, china has agreed to cap carbon emissions. in u.s. promises more cuts greenhouse gases as part of the deal. here is president obama. >> we hope to encourage all major economies to be ambitious, all countries, developing and some ofd to work across these divides so we can work toward a strong global agreement next year. >> republicans adding to their new majority in the senate, they pick up another seat overnight. in alaska, republican dense open has defeated is opponent, begich. he used to be attorney general and also secretary of state in george w. bush's white house. 's truce in ukraine is falling apart. pro-russian military is mobilizing forces in the eastern part of the country. ukraine, the u.s., and western europe all accuse russia of arming rebels. vladimir putin denies that. it is the first wave of banktigations into exchange rates. the u.s., u.k., and switzerland ordered five banks to pay more than $3 billion. it includes citigroup, jpmorgan, rbs, and hsbc. meanwhile, bank of england has fired its chief currency dealer and they said they are aware they could be raising currency rates. >> there was information that indicated in the judgment of an ,ndependent employment review represented serious misconduct consistent with the banks internal policy. that was the cause for dismissal. the rest may announce its own findings today. walmarts new black friday 12:01 a.m.ne at thanksgiving morning and the last all the way through cyber monday. the world's largest retailer says it will run waves of in-store sales twice on thanksgiving night. scarlet will drop by for that. other retailers are opening earlier. all of their workers have to work. the whole thing is out of control. >> there is a problem. >> let's do a data check. brent crude getting near 80. we are not there yet. >> not there yet, but we do have some breaking news. bb&t is buying susquehanna about $200for million as it expands in the mid-atlantic region. $2.5 billion merger in the banking industry. bb&t buying susquehanna bankshares. >> our guest host is robert kaplan. leadership in government will only get you so far. at some point, you have to run a fine free business. to find a discussion of fines. >> i suppose, if you don't want to much to get done, because congress is laying get -- lame-duck session against today in washington. peter cook is in d.c. and joins us now. there is a list of things that need to get done. what is the most pressing gekko -- pressing? so -- isst pressing is to get a spending bill so the government does not shut down again. you will have democrats and republicans working to get that done. the reality is, they can only get so much debt in this lame-duck session, maybe some nominations. but both sides want to get things cleared off the table, if you will, before republicans take control next year. like spending is at the top of the list. at the top of the -- >> spending is at the top of the list. at the top of the republican list is ebola funding. they've also made clear they want to repeal the obamacare, and they are looking at the keystone pipeline and immigration reform. on what issues might there be room for president obama to compromise? >> one area that keeps going back his tax reform. both democrats and republicans seem to be not that far apart in the big picture, at least in terms of bring in the corporate tax rate down and investing some of the money and infrastructure. , both sidesther one have interest in moving trade deals along. the white house been -- has been supportive. other two most likely areas of compromise. but this is washington and this is congress. it will be hard to get anything that next year, no matter who controls. >> will there be any movement on president obama's summit nation for attorney general? dekes i would not expect a lot of movement during this lame-duck session. -- >> i would next a lot of movement during the lame-duck session. it seems preclude the vote will happen next year. it seems early, but the outlook looks pretty good for her confirmation. >> peter cook joining us from washington. >> robert kaplan joining us now from harvard business school. he's the former vice chairman of goldman sachs. i don't know where to begin on the fines. it is one week is fine, one week that fine. >> and foreign-exchange looking. >> and the study of our financial crisis. is this normal? have we become fine happy? probably become fine happy and we will say fine happy in that the regulators -- >> we have probably become fine happy and we will stay fine happy in that 's scrutiny of the bank has never been higher. the willingness to work things out has never been higher. i think you will see this continue. >> could you run goldman sachs today? you, jim o'neill, your historic , is ite desk in london feasible to do what you did five or 15 years ago? >> you could absolutely run the bank. you need a larger compliance staff. and be prepared that some level of fines will be a way of life. you need better compliance and every firm needs to be much more sensitive to this than ever. >> what makes a bank more sensitive? you love a fine or put someone in jail? -- you levy a fine or put someone in jail? >> if you got an employee that doesn't quite follow the rules -- >> what changes culture gekko do you have to put people in jail to change a button -- a banks culture? i don't agree with that at all. >> i think it's the way you higher, the way you pay, the way you incentivize. you elevate compliance. tower has 68 deviations. are we at risk with his overregulation with that lone wolf been down a bank? they are so focused on the mundane that they forget about the guy that can ruin us. at executive bank that can chew up at night, the -- that keeps you up at night, the differences in the past, you may have been able to work it out. today, they will make you pay. >> you have mentioned liquidity being an issue for the bond market. >> i do worry about that. we are doing a great job of winning the last war. the problem is, the world we are in now involves massive deleveraging. western governments, especially in europe, under some stress. and i do where there has been liquidity taken out of these two way markets and bonds. and if you have stresses in europe, spreads will gap out much faster than ever before. why there will wonder isn't more liquidity and white broker-dealers are not making to a markets. x is there any way to address both what happened in the past -- >> is there any way to address both what happened in the past and to look ahead to gekko >> i think regulators need to look at liquidity markets and capital reserves and urge more liquidity. but we will continue this discussion with robert kaplan -- >> we will continue this discussion with robert kaplan. was the libor? >> yes, continuing these questions over chat room. who would you rather have an engineer bank, or an mba? former fdic chairman william isaac joins us next to discuss. ♪ >> good morning, everyone. bloomberg surveillance from our world headquarters. i'm tom keene and right now, breaking the news, scarlet will brief you. we'll continue this discussion with robert kaplan. >> we've been talking a lot about how they will be consolidation in the banking industry. it's happening now. bb&t is buying susquehanna bancshares. $2.5 billion.bout about one quarter of bb&t stock will be paid out to susquehanna shareholders. susquehanna is short -- is soaring in the premarket. this is old and has been starting economics departments and colleges all over the south. >> what i find interesting here is there is this ageless fear that i we're -- that we are going back to andrew jackson. we have not seen that. >> regulars have not allowed banks to do much in the way of mergers because they wanted to keep more capital. limitlso want them to share buybacks and dividends. this is interesting sign that the regulators could be a little more willing to allow these banks to merge, and a lot of them would like to. >> which study works best? , andrewks in canada jackson and community baking -- banking, or is there a middle ground? wantingarts with healthy banks. some of these banks if they merge would be healthier. and all of the regulatory burden , you know, there's a scale issue now. it costs a lot to regulate the bank. you could see where a bank might be healthier if they put two or three together because it's very extensive to run a bank now. >> and that is happening to smaller rural banks. their ideal size for a bank, is it $500 million in assets, when billion dollars in assets? >> what you see criticism is when you are in lots of lines of his misses and different cultures and it takes different expertise for different things. >> it is culture, not size. think so. it -- i >> what has changed me economy -- in the economy that they would allow this? >> i think banks are extremely well-capitalized today. i know everyone worries about the next crisis and everything else, but banks are very well-capitalized. governments are not well-capitalized, that banks are. but banks are forced a >> maybe it is a precursor to 2015. >> will see. -- we will see. up on bloomberg television. to her because go from the cleveland clinic. look for this in the a.m. hour. ♪ morning, everyone. futures at negative seven. we welcome you to a breaking news on bloomberg surveillance. , perfectlyy banks timed. here is brendan greeley. like we were just talking about the bnt -- bb&t buying susquehanna, a smaller bank. runave a guest who used to the fdic. would you have what -- let this merger go through gekko -- go through ge? >> we're not going to be allowing the largest banks to anything anytime soon. x if we stick with the smaller banks, one of the complaints that we have been hearing is that dodd-frank force them into the same compliance regime that they did the large banks. small banks weren't failing. how do we fix that gekko >> we have to give regulatory relief to the smaller banks. it is really harming them a lot. >> mr. isaac, i want some numbers. on the dollar, on revenue for regulation? is a three cents, $.15 gekko do you have a good working number for smaller banks what mr. kaplan was talking about? >> i don't have a percentage, but i know it is a big number. >> i talked to a small bank this year in louisiana said it had 10 staff and was forced to hire 24 compliance. two fourher compliance. >> i believe that. that said ife bank it was not for that they would not so be in business. >> because you are the former chairman of the fdic, the former regulator, what you need to see to satisfy -- to be satisfied that mergers like these won't bolster the -- that they will be ok? >> the acquiring bank is going to have to be very solid from -- from the capital standpoint and earning standpoint and compliance standpoint. merger oft had any any consequence since 2008. >> when mel, bank of america, all of that happened. >> right. the things wee of have learned is that the smaller banks -- >> and one of the things we learned is that the smaller banks have a much better rate of sticking around. the statistics between 1984 and of smallll banks, 33% banks under one billion dollars in assets are still abound from 1984. only 6% of the large banks are around. i hope i have those numbers right, because in going from memory. what do we learn about the way small banks survive and how we apply that to the large banks? >> the smaller banks are a lot more nimble. they are family-run in many cases. and they can adjust to whatever is coming at them. the larger banks are subject to the market forces and the price of their stock and so forth. tell you that of the 30 1980, only twon or three are still around. 30 largest banks. >> robert kaplan, with all of this trend toward spinning off different units to focus on one core business, why doesn't -- why don't they pressure jpmorgan to do the same gekko why don't they spin off units? >> i have a feeling you is coming. the regulators are so tightly regretting that it is hard for an activist. you have millon, for example, trying to get them to slip the company up. quietlylators might be more receptive to actively going into these stocks because diverse lines of business will be split up. we know it in crisis. we know what everything is when the banking system is blowing up. what is your to do list for fdic today? so we don't screw it up as we did five years before your watch. >> i think the fdic needs to play a much stronger watchdog role over the system. >> where are they? why aren't they more visible? to behink the fdic tends in the background and not be that visible. when you really you are about the fdic is when the system is coming and glued. that is probably a good thing if you are not hearing from them a lot. >> the fdic has been focusing recently on young banks. curious, do you need a bank to get your financial services right? do you need a bank account, or can you do it with a variety of different cards? clicks you can do it a variety of alternative financial sources, banks and non-banks. we are making a big mistake right now. there is a lot of pressure from the government to push these alternative firms out of the marketplace and it's a terrible problem we have in this country. about 25% of the adult population is either an bank or under bank. that is much higher in the minority communities, about 50%. , around 70%higher for households under a certain dollar. we cannot be kicking them out of the system. we've got to be trying to get the banks in along with them. >> in the interest of protecting the consumer, we have reduced access, and this is a big problem. one of the things that the united states does when we are emerging help other countries is improve the banks. ours is declining. >> got to do something. chairmansaac, former of the fdic. and we have robert kaplan as our guest host. coming up, the foreign-exchange rigging scandal postapproval discuss. ♪ -- the foreign-exchange rigging scandal. we will discuss. ♪ >> now to our guest host, robert with harvardge -- business school. a duetistening to shareholder. he was scott stringer on surveillance. but what we are trying to do with a long-term -- as a 's want toshareholder place value. want to place a board of director on our board that is understanding of climate change. we also want corporate diversity, more women, more people of color. it brings value to the company. >> let's start with 3% shareholder. they own the stock longer than three years. so these are adults in the room, is that a good assessment gekko >> yes -- a good assessment? >> yes. >> what is the problem? stringer, he wants not just more economic news, but more sensitivity, climate change, he's interested in a whole range of issues he trying to influence companies on. what he doesn't like his if he is to satisfied, all you gets to do is vote against a shareholder. he wants to vote for somebody that they nominate. does he know that a calpers, the california pension put on theant to board the kind of person that mr. stringer wants? i find that fascinating. >> he's thinking it's more the climate change expert will get more votes, because some other state pension funds will vote. my own view is that the shareholders overall will so vote for the overall board slate postop he's thinking this will influence companies to kind ofvely put that person, more diverse candidates, on the state itself. with 15 board members, is there a special set of two or three board members like this? does that not work? >> a thing certain companies are realize they have to be proactive. i understand what he's trying to do. i think it will put more pressure on boards to act. i don't think you will get many directors elected. ordert is the new world for corporate leadership? >> corporate leadership endboards, it's about multiple constituencies. it got to take ownership. it's not enough to serve your customers and employees. you've got to worry about the public. you've got to worry about so-called externalities, the impact of everything you do. and the the ceo and the boards are taking much more ownership of all of that. you've got to debate these issues and confront them. >> is it ever more a reason to have a separate ceo as we become transnational and the day is only 24 hours long still? >> my own view is that a separate chair and ceo is a good thing. majority of companies are still not doing that, and i understand why. would that be a good thing? i think it probably will. it will help insure the board has the right agenda and they debate and confront issues in a do not just rely on the leadership of the company as a filter for what they actually discuss and debate. he could lead to director can also compass that. >> let's -- now, a good lead director can also accomplish that. >> let's switch directions. what is the number one message to your students right now? >> take ownership of what you do. ever making a decision because you just say you were following orders, that isn't going to work. >> those days are over. >> they never existed. leadership is about having an ownership mindset. discussiontinue this on education in america, particularly that masters of business administration. right now, she's a master of business administration for data check. here is scarlet first of >> let's take a look at how things are trading right now. we did get news that bb&t is buying susquehanna bancshares, but is not doing much for equities. the bond market is reopening after being shut for veterans day. that is pushing the yield down -- 2% to 4%. the big mover this week is the pound. continuesrse, will its dissent. nymex crude is now at 76 -- $77 per barrel, getting closer to that goldman sachs forecast of $76 per barrel by 2015. the fix is down below 13 at 12.92. and we are looking at brent crude, $81 per barrel. as the dollar strengthens. >> i'm brendan greeley with scarlet fu and tom keene. almost $3.4 billion in fines, this time from the nobility foreign-exchange markets. just another wednesday and global banking. -- in global banking. 80's whalen spent the doing absolutely nothing illicit in the city of london. >> [laughter] specs walk me through how this works. is this a bunch of dudes chatting with each other to make this thing happen? are couple of things that the regulars have unearthed. they are basically saying that customer orders were placed behind the firm's own orders, which is a bad thing if you look at u.s. rules. and i think also, the informal nature of the london market makes it easy for regulators to find things they say are bad. in other words, people talking to another, communications that may or may not in their view pass muster. what you are seeing is the regulars again trying to put a deterministic web, if you will, to make everything transparent and regulated. in a sense, they are destroying the market to protect the investors. >> let's go back to four you are saying a moment ago. you cannot change the informal aspect of the london market. is it destroying the city? >> many organizations are having to but a chinese menu sort of approach when a check the box as they go -- the morbid market, the ratings business -- the mortgage market, the ratings business. they are trying to avoid risk was a by making a really deterministic, they are trying to essentially wrote out bad behavior. -- ruled out bad behavior. >> we got breaking news. this goes right to the heart of the 20 15th discussion. >> at dow chemical. >> raises the dividend further for a buyback. pressure fromder a some shareholders. now they are appeasing them. >> this infusion of cash, it has become religion. but if they don't have anything better to do with that, as they should give it back to the shareholders froze a not a big believer in share repurchase is, big dividends. >> do either of you think the investment will create jobs or we will continue to move cash back?ho -- ba abouthink this is more big pools of activist money that have been informed in the last three or four years and this company has a big activist, dan loeb, and they are trying to respond to him. >> i'm trying to get the tenure total return up here right now. 3.48%. >> and they are being criticized on a number of fronts. they are being criticized on the margins, on their business portfolio. i'm sure they are looking at every single thing. theactivists are saying debate is on the board and they will adopt some of these. >> i got a lot of people saying , saying we go to investment. i'm not sure we do. >> we have pools of capital that are making around, looking at large-cap companies and trying to get them to do one thing or another to enhance shareholder value. if the stock is that cheap and is underperforming, they have to go to -- they are to go private. >> should we just by? >> we are not creating opportunities the way we used to. part of it is structural demographics, which i talk about in my book. >> shameless plug. >> he doesn't miss a beat. it usually.e does i'm very grateful to tom. way wenot growing the expect those above expectations are based on the past. >> when you have investors trying to generate growth through these spin outs, does it -- and i >> the job of the board is to do an analysis i did the before you take these steps. -- ideally before you take these steps. it's harder to beat the index. this is one way to outperform. >> robert kaplan joining us. also, chris whalen. our twitter question of the day -- who makes a better boss, mba's?rs or nba -- tweet us. ♪ >> good morning, everyone. it was a quiet wednesday. now we have further breaking news. beenw chemical, which has under pressure from activist investors like third point has moved to increase its dividend by five cents. it is also adding to its share billion stock buyback program to boost the price. >> robert kaplan is with us from harvard as a school. christopher whalen is with us as well. betweenok at this link finances and investment, chris whitman, let me start with you. as we look at the 2015 buyback use of cash, it is a drug, isn't it? >> 30 much. you love or the company up and you buyback the stock. -- >> pretty much. you letter the company up and you buyback the stock. >> is the banking industry ready for that now are not? don't think so. the losses have kind of draft in terms of low losses. i don't see a lot of growth. you are talking about it percent to 10% return on equity business now. >> did you you here that, mr. kaplan? do hear that. mergers.see more mix you think jamie dimon will split up jpmorgan? >> he could. in the above years, the lobby pressure on everyone of these banks to do that. >> will it come from regulators or activist investors? >> the regulars were quietly not discourage it and the activists were actively pursue it. >> but i think because business demands it. that's the real issue. a jpmorgan, you want to get rid of retail. >> robert kaplan was just explaining right now this kind of activism is the way to make money. >> it's hard to outperform the index. this has been in the last couple of years one way to do it. that is why so much money was flowing into these funds. >> i want to go to bank of america with the challenges mr. moynahan quietly moving money around. you would say that bank of america has to take retail off and institutional banking office of what do they do with meryl? >> that is the point. i don't think they will do anything with it. >> and remove urging to 2006 with these mergers? merge withd chase jpmorgan you are because they were wounded years before, week management. mattel, no. maybe you spin chase off as a commodity -- retail, no. maybe spin chase off as a commodity. >> and then you can buy deposits? >> they are wholesale funded, not retail funded. >> what you are suggesting is also part of a dream of some activists who want to regulate more, spin off the retail from the actual investment. >> every time i'm in front of the community banker, they are getting out of retail. >> chris railing, thank you so much. >> our twitter question of the day. do you want an engineer or an mba running your company? ♪ >> engineer. >> tweet us. we want to year from you. ♪ >> good morning, everyone. i'm tom keene with scarlet fu and brendan greeley. wife president obama called -- obama called it a major milestone. the two nations account for more than one third of global greenhouse gas emissions. a big settlement into the investigation into whether banks rigged foreign-exchange rates. u.s., u.k.,n the and switzerland have ordered five banks to pay more than $5 billion. pay the biggest penalty, a total of $800 million. and american business education get a new top dog. it is duke university school of business. the school has ascended to the number one spot in bloomberg businessweek's 14th biannual ranking mba program. harvard business school slipped from second place to a place -- eighth place and fell out of the top five for the first time in history of the rankings. robert kaplan, harvard business school, what happened? know.on't i don't know the methodology of the survey. >> what is the methodology that would make for these jumps? did they change these methodologies? -- the methodology? we have seen a decline in where they go after they graduate in their careers. we are not seeing any of that. >> what i've seen is the rigor -- entry classss in chicago, stanford, and i'm not going to say harvard's number one. but there is a set of five or six schools that are getting the best and brightest. they also talk about how stanford university is doing in terms of recruiting the students that want to go into the startup entrepreneurial line. >> i'm just talking about academic chops. i'm just talking about critical thinking skills. >> robert kaplan has a woody allen problem. he would not collect his academy awards when he earned them. he would have to trust the academy's judgment when he did not win. >> fair enough. that is a long way of saying i don't know. i'm very curious about the methodology for stub i just haven't had time to look at it. x i wantb't d time to look at i. x i want to bring in my morning mustard. -- >> i want to bring in my morning mustard. i got this and specifically for robert kaplan. forget mozart, companies prefer cell -- salieri. she writes, "ideas on leadership tend to change over time, and the pendulum seems to be singing away from egocentric, inspirational stagecraft toward study, competent execution." -- talks about nothing both nothing both -- the nuts and bolts evolution. about those who are pragmatic, but not the first to think of in terms of charisma. >> i think a leader needs to have imagination and figure out how the company adds value that is distinctive. and you've got to mobilize people and executes as a but you've got to do all of those things, not just one of them, to be a sustainably successful leader. what's what does it say about our economy in our struggle to generate revenue growth that to look a tendency beyond that to people who just execute? >> execution is critical, but we are in the idea -- in the age of new ideas and imagination. how you do things better, that is all about leadership. also a selection of mba candidates. nobody walks onto that campus andy manicured says i'm going to be a salieri. everybody says, i'm going to be mozart, right? crexendo, i think our students understand blocking and tackling, and we teach that. but you've also got to have ideas. to thee to be attuned changes in the world. if you are always doing things leave only send them, you will fail. >> have gotten to our twitter question was professor kaplan? -- with professor kaplan? exit no, we haven't. >> i used to walk across the grounds of harvard business school and it is great. x i want robert to weigh in on this one. we are taking a look at the stories shaping the day on retail. a big kickoff to retail earnings season. we talked earlier about ceos being salieri in set of mozart, is that what retail needs right onlinefend off competition? >> that is a great example. execution alone will not get it done. terry gross has reinvented the stores and he is always reinvented them and he is always pushing what is next, what is next. and they execute well. that is a great example of what a neater leads to be. it is not enough to execute. >> possibly the turnaround ceo of the decade. it?nd you know how he does he is close to the customer. >> exactly. he has nailed the aspirational spirit of this country. looking atnge, and climate change front and center. shock when you read it if articles at bloomberg and other positions. the shock and all between the and the collapse of copenhagen. could they actually move the year? in paris next >> he still got to get it past the republican senate, and it's led by james ziemer off as the new boss there. they have a real problem if they want to fix this. >> what about your agenda? >> i'm looking at the several banks that are shocked that forex rigging that was -- that forex rigging was going on in their houses. rbs has already led couple of traders go and i going to see what they do. how will they clean their houses? is driving a red ferrari. >> tom and i don't watch the same movies. >> like european intrigue movies. guy with thes the maserati and the guy with the ferrari. >> will be talking about this for months to come. >> they did the cars at hbs and it was a field of subarus. >> there you go. that is good imagery. [laughter] flex their was one bozo off in the distance. >> it snows up there. >> they are prepared for the polar vortex. let's get to the twitter question of the day. who makes a better boss, engineers or mba's? here is one answer. mbas are innovators. >> safe answer. and another says that they are key to excellent management, engineers. >> robert kaplan weighs in on this. do i need math to succeed in leadership? >> you need a sufficient amount of math, and if you are not good at it, you need a team that is good at it. i grew that last comment can actually. can you go out there and understand the world? can you add value that is distinctive? execute? ild to you don't need either background, but you have to be with the lows whether you have those degrees or not. -- you have to be able to do those things whether you have those degrees or not. >> the algorithms are but tom called his grudge band. >> my next job interview. algorithmic thinkers, that's who i am. organizational this and organizational that, is there pressure at harvard to change the case study model? crexendo is always pressure. it still built on case study, -- >> there is always pressure. it is still built an case study, but we also have a lab. are trying to do is get people to put themselves in the shoes of a decision-maker and see what it feels like and learn how to get conviction, and also work with others. you are trying to do that in lots of different ways for the >> make the mistakes in business schools. >> they will make more mistakes in the real world, but we are teaching them how to learn once they leave. harvardrt kaplan at business school. thank you for joining us. >> stay with us today. ♪ >> good morning. it is wednesday, november 12. you are live to bloomberg headquarters watching "in the loop." friday week-- black at walmart. out with extended plans. i will test with the former ceo, a big retailer in the industry. for a yahoo! aol merger get even louder. working the phones all morning. i will bring you details behind the deal you only hear exclusively on "in the loop." the 2015 enrollment time. as the health industry been affected in the first year? ceo of aear from a clinic. toby cosgrove. china has agreed to a cap on carbon emissions. the chinese president announced the agreement from beijing. the two leadeay

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