CEO James Stone on New Book: Five Easy Theses (Correct)(Audio)

We're gonna be speaking now with James Stone, new York Times best selling author about his new book, where I especially talked to him about financial reform, What's wrong with the banks? This from a man who has been there and done that. He's worked in the financial services industry. His critiques and ideas are going to be oh so interesting. He's always also interesting. He's in the newsroom. His name is Charlie Pellett, and he's got a Bloomberg Business flash

and I thank you very much, Athlene Hayes. We're looking at a down day here with the Dow, the SMP nestak all declining, We are brought to you by van Eck Vectors e t f s. Expect more from your munies target tax exempt income by maturity and credit quality, all with low cost e t f s. Visit vanec

dot com slash Muni van Eck access the opportunities. Stocks are retreating SMP heading for the steepest drop in two months, amid caution over tepid global growth and a series of looming events with the potential to spur renewed market turbulence. Right now, we've got the SMP five hundred index down one a down twenty four points, a drop there of one one percent, to two thousand ninety one down. Industrials down one eight a drop of nine tenths of one percent.

Nastac is down seventy two, a drop there of one and a half percent. Murray Gunn is head of technical analysis at h S b C Securities in London. He's looking for what he calls a market melt. Once the market starts moving up, you're going to see a bit of a scramble, I think for people to get in

to the market. The one issue we have at the moment, the one potential problem is the fact that on balanced volume has not passed its previous peak, SOEL really would like to see on balanced volume move up above that. But if we move about twenty one thirty four on the SMP five hundred, there's a potential target for twenty sixty three in terms of an Elliott waves what we

call wave equality target. And right now the SMP of gold up five eighty, the ounce twelve seventy eight, a gain of point four percent to thirty two on Wall Street. Now let's look at other news from around the world on Bloomberg Radio. Thank you, Charlie from the Bloomberg Newsroom. I'm Scarlet Food. Although how Speaker Paul Ryan called Donald Trump's attack of a federal judge a textbook definition of racism, he is still supporting the Republican presumptive nominee. I believe

that he's certainly better than Hillary Clinton. These are the choices that we have. And here's the question I asked, do I believe that these principles and these policies that flow from those principles have a better chance of making the law with Donald Trump and Hillardy Glinn. Absolutely. I do believe that Senate Majority Leader Mitch McConnell tells Bloomberg Politics Trump's attacks on ethnic groups and other Republicans need

to end. He says Trump needs to pick an experienced running mate because quote, he doesn't know a lot about the issues. Fans line the streets of Louisville to say a final goodbye to hometown hero Muhammad Ali. Cleon Robertson was a high school classmate him, also running through the hall uh Patton on the going down the hallways. Ali was seventy four when he died. Last week. A memorial service is being held to honor the three time heavyweight champ.

Former President Bill Clinton is among those expected to speak. Police are investigating the fire bombings of two Staten Island churches in the same week as possible hate crimes. Police say a man toss a malta of cocktail Thursday at the First Central Baptist Church on Staten Island, setting the exterior wall of the church and its awning on fire. On Sunday, a Molotov cocktail was thrown through a window of St. Paul's Memorial Episcopal Church, causing a small fire.

Both churches are in the Stapleton neighborhood. No arrests have been made global news twenty four hours a day, powered by twenty journalists and more than one fifty news bureaus around the world. From the Bloomberg Newsroom, I'm Scarlet Foo Charlie, and we thank you and again recapping s some P five hundred index down twenty four points to two thousand ninety one. Drop there of one. I'm Charlie Pellett and that's a Bloomberg Business Flash. This is taking Stock with

Kathleen Hayes and Grim Fox on Bloomberg Radio. The biggest economic challenges facing America could be solved with five easy feces some common sense solutions, so writes James Own, founder, chairman and CEO of the Plymouth Plymouth Rock Group in Boston. He joins us today from there, I just have to quickly know. First of all, I want to say welcome Jim. It's great taddy on the show. Thanks glad to be with you. I also want to let our our our

listeners know a little bit about your background. You you taught economics, You got your PhD in economics at Harvard. You were the Massachusetts Insurance Commissioner from seventy to seventy nine. You were Chairman and Commissioner of the CFTC, the Commodity Futures Trading Commission, you found the Plymouth Rock. I could go on and on, but you are a guy who really knows business. You're not just you're you know, you're

not You're not only an academic. And I think that's one of the things that makes this book so powerful. What drove you to write it? Well, I felt I had some unfinished business from my time in Washington. I didn't convince people when I was there of the dangers of derivatives and over financialization of the economy, and so this book was a chance to link my three careers

and take another crack at convincing people. Well let's start there then, because you're an not the only person who tried to convince uh, the world that there were dangerous and derivatives. And you're up against the likes of Alan Greenspan, you know, the former Fed gereman. There's a lot of things right, but this is one thing he didn't recognize, nor did Larry Summers, who became Treasury Secondary Uh, you know,

nor did many other regulators in Washington. What is your common sense solution and why do you say there's still so much risk in the financial system. Well, the financial system didn't really get improved after the last crash. You know, after the crash, the big lessons were learned, and the big lessons are simple, which is less leverage and more disclosure. I think Dodd Frank was a step forward, but it

didn't solve either of those things. And today the largest banks have bigger derivative open positions than they had before the crash, and the ten largest banks have two hundred trillion in open derivative positions, three times the world's GMP. So one of the things that you describe, that you suggest has to do with a meaning fair reserve requirement for derivatives. How would that work? Every time a derivatives position is opened. Uh, you've got some counterparty risks, some

basis risks, some liquidity risks, some human error risk. You've always got some risk. And so today that a bank or other holder these derivatives doesn't have to record these derivatives in any way that causes a reserve because they met them against one another. But the netting doesn't get rid of any of those risks that I just listed. It does get rid of some risk of market movement, So netting, you know, is a partial thing and not

a complete thing. They should have to put up reserves, and if you had to put up even a fairly small reserve, even a very small reserve, against these huge numbers, you wouldn't have the positions and we'd be better off if the banks didn't have them by a lot. A couple other let's a couple hit on a couple of other. Five thesis besides, what needs to be done to make banks are really safe? And institutions that really a grease the wheels of commerce instead of pulling the wheels off

of it. So security, what would you do with so security? Well, social security, unfortunately, is going to need to be changed in a way that nobody really likes. But it is inevitability because the current eligibility age was set when people live to be in their sixties, and now people lived to be roughly eighty. Um. If we make great progress in cancer, which I think we will, people will live routinely into their nineties, We're going to have to raise

the eligibility age. And the sooner we do it, the less painful it is because we can do it gradually, and too many politicians want to wait until there's a crisis, you know, speed up the brick wall, and then say, crisis crisis, we've got to fix it. But then you've got to fix it quickly and disruptively. We should fix it now. So you want everybody wants fiscal balance, But the way you look at fiscal balance is different from austerity. So that's been a very contentious issue in Europe the

past several years. May people say those those solutions to their crisis helped make even worse problems for countries like Greece and others. What do you mean by fiscal balance in the United States? Yeah, if you want to have a lower deficit, if you want to come close to balance in the budget, or even balance it the whole way you can do that. Fiscal policy ought to be used stimulus when you need it, and um to have

no deficit when you don't need it. But the best way to fix it is to get rid of tax expenditures. Appropriations get a lot of attention every year, they get argued about, but our budget is full of tax expendatures at his deductions that really don't do any good. And although it's going to sound controversial, I would get rid of the home interest deduction. I think that's a terrible piece of public policy, and I'd get rid of the

corporate interest deduction. If you got of those two deductions, you don't have to change appropriations, you don't change stimulus. You would immediately balance the budget because those equal about the deficit. The trouble with the home interest deduction is that the bottom third of the population, the people you want to help most are rankers. They get no benefit from it. The next third don't itemize, they get no benefit from it. It's only the top third and its

subsidizes the biggest home. All right, well, James Stone, thank you so much for joining us today and giving us I tasted your very erudite, very interesting new about five easy pieces, common sense solutions to America's greatest economic challenges. I'm Kathleen Hayes. This is taking Stock on whom the radio. This Hampton's Commuter Minute is brought to you by Landrover. Visit your local Tri state area Landrover retailer for special lease and finance offers. Landrover above and beyond