MARIA-00
Carolina GOP Headquarters Firebombed; Chicago Tries to Lower its
Astonishing Murder Rate by Banning Children's Costume; More Questions for
Wells Fargo - Part 2>
Blake Burman, Cheryl Casone >
Markets; Media; Donald Trump; North Carolina; GOP Headquarters; Chicago;
Target >
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BARTIROMO: The very latest on the race for the White House coming up. Banks in focus, Bank of America, the latest to report third quarter earnings that came in above expectations, meanwhile, Wells Fargo facing new questions over the fraudulent account scandals. Deutsche Bank reportedly weighing changes to its U.S. business as it negotiates a settlement with the Justice Department. The broader market this morning pointing to a lower opening, although we are well off of the lows of the morning, we're expecting the Dow Industrial to open down about 15 points or so, the NASDAQ and the S&P 500, flat on the morning. In Europe, declines across the board, we're here too and you're seeing a little bounce back from the lows, the FT 100 right now, down about two-thirds of one percent, 43 points higher. And it was mixed performances overnight in Asia, as you will see from the major averages, Japan was up a quarter of a percent, as well as the Kospi index in Korea. Pepsi Co. takes a healthy turn, the changes the company is making to its beverages and has a lot to do about sugar. We will bring those to you, coming up.
First off, Bank of America beating the street's expectations in its third quarter earnings this morning, this coming on the heels of other major banks reporting better-than-expected results last week, but the fallout from Wells Fargo phony account scandal casting a cloud over the results as Ohio severs ties with the bank for one year, making it the third state to take action. Joining me right now is the former chairman of the FDIC, Sheila Bair is with us. Sheila, good to see you.
SHIELA BAIR, FORMER FDIC CHAIRMAN: Thank you.
BARTIROMO: Thank you so much for joining us. So, Wells Fargo trying to make amends, tell me what you -- how you see it, what does it need to do right now to get people to have confidence and feel like OK, they made a mistake but they're moving beyond it.
BAIR: Right. Well, I think they're still trying to recover from some initially missteps that are very serious. I think what they're doing now is right. The board is doing an investigation, if there is additional accountability to be imposed, I assume that will come out as a result of the board's investigation. They are reaching out to consumers, they're proactively reaching out. They're providing resources for consumers who are concerned. So everything that can be done it seems to me that they are doing, and we'll just seem to ride it out. It's going to be a lot of pain I think before this is all over.
BARTIROMO: The whole idea of this aggressive sales targets, not just at Wells Fargo.
BAIR: Right, right.
BARTIROMO: Sales targets and this idea that you want to have this business.
BAIR: Yeah.
BARTIROMO: You have one customer having a checking account, you want to sell them everything from a mortgage, to a savings account, to debit card.
BAIR: Right.
BARTIROMO: Can we get them around that? Will you see -- well you expect an industry change as a result to these sales targets?
BAIR: Well, as my policy result might be there to review these kinds of sales goals and how they're interpreted and enforced by -- with employees. I think, you know, you can do it the right way, buy you should be looking at whether you're providing value added to your customer. So if there's something the customer wants, the customer is actually using that -- including benefits and reducing costs for customers. Cost selling isn't necessarily a bad thing. The focus needs to be on customer benefit, not just numbers, you know, driving up the number of accounts that leads to gaming and customer abuses we saw at Wells.
BARTIROMO: You know, we've talked a lot on this program about regulations, and whether or not the regulatory environment is really choking small business or even medium sized business. What's your take on that in terms -- I mean, let's face it, the Wells Fargo situation was not caught by the consumer protection bureau.
BAIR: Right.
BARTIROMO: The L.A. Times caught this.
BAIR: They did, yes.
BARTIROMO: So, it's not like, you know, this over, you know, this regulatory environment where you have all these agencies is necessarily making a difference.
BAIR: Well, I think.
BARTIROMO: Or is it?
BAIR: Well, I think it is. I think, you know, I used to say at the FDIC and I still say, examiners should be -- when they spoke the next day, they should be looking at press reports, they should be looking at analyst reports. And I think, I know the reporter at the L.A. Times who broke this, he's a very good reporter, did a lot of work during the subprime crisis. So, you know, journalists can't provide value added to the supervisory process. I don't necessarily think that's falling down by the regulatory, but it's a resource regulators should use. But then, they work very well with the OCC, once they get on top of it. And so, I think it does show that there's value-added with consumer protection. But, you're right, I mean, it wasn't -- the CFPB wasn't really a driver here, they responded, but they acted appropriate I think once it came to their attention.
BARTIROMO: So what do you want to see from the regulatory agencies as it applies to banks.
BAIR: Yeah. Well, I think, common sense, even handedness, simplicity, consistency with enforcement, I think those are the kinds of things that any regulated business needs, in terms of being able to grow and profit in a responsible way under regulatory framework. But you do need transparency consistency, and we sometimes get it and sometimes we don't.
BARTIROMO: Isn't it true that the whole idea of capital.
BAIR: Yeah.
BARTIROMO: . and how much capital to hold right now is still an issue that is keeping banks, keeping capital, you know, holding it.
BAIR: Right.
BARTIROMO: Not investing it.
BAIR: Well, it's not -- actually, capital is just a way to fund your balance sheets, so you're not really holding it. You can fund your balance sheet with equities which is capital, you can fund your balance sheet with debt. If you fund your balance sheet with equity, and then you'll have resilience because that is loss absorbing. Debt holders you have to pay them back. There's a legal obligation to pay equity holders you don't.
BARTIROMO: But there are rules that these banks had to have so-called -- capital at certain levels.
BAIR: That's right.
BARTIROMO: . and they're not going to use that money for other things because they are just going to keep it there.
BAIR: Well, that was point I was trying to make is that, yes, they can use that equity capital to make loans, it's just a different way of funding themselves. So I do think -- and regulators are for talking about holding capital. And it's really just a way you're funding your risk taking activities. So capital is more expensive than debt to extent that, you know, it's more expensive to raise equity capital over debt. It might impair your ability to take risks of a margin, but that maybe a good thing. But in the downturn, we want resilient banks, we want banks that can absorb losses when it gets in to a downturn. That's why you need extra cushions of capital. On that one, actually, I think the rules are too complex. I think they lend themselves to gaming, these risk based rules, but the over- all trend of increasing capital requirement for banks, I think it's a healthy one for the public.
BARTIROMO: What's the impact on the Deutsche Bank situation.
BAIR: Yeah.
BARTIROMO: I mean, it's facing more trouble. Deutsche Bank now saying it's looking to shrink its U.S. operations, in the face of these mounting legal expenses. We still don't know how much they owe the Department of Justice. First it was up $14 billion, and now they're talking about $6 billion. Could this situation ripple throughout the U.S. banking system?
BAIR: I think, it's certainly. There's been a long tale of this already. So I can only assume all the regulators are looking very closely at Deutsche Bank, and coming up with a contingency plans if things should get serious. They still have a lot of liquidity. There is a resolution mechanism now in Europe that they didn't have before that allows some government intervention so long as unsecured creditors as well as equity holders take losses first. So there are tools in the tool kit now that we didn't have prior to crisis, but I think gives the German government the ability to handle that in orderly way, working with other regulators if they have to. At this point, I don't see this happening. I think they're a very sick bank. I think they need to downsize. I think it's probably not realistic for them to go and raise a lot of capital, and if anything that would be reasonable cost. The downside they may be selling their asset. Management businesses probably what they need to do. And over time, they'll probably make the more valuable franchise if they simplify and gets smaller.
BARTIROMO: So, you don't think that this represents a potential impact to the broader financial system. I mean, back in 2007, a lot of people missed the fact that we're all interconnected. And, you know, if AIG goes down, Goldman Sachs gets impacted.
BAIR: Right.
BARTIROMO: And if Lehman Brothers goes down, somebody else gets impacted. I mean, if Deutsche Bank is forced to sell its derivatives portfolio, for example, does that take more boats down with it?
BAIR: I don't think so. If they sell to derivatives books they might sell it to a stronger counterparty. So, you know, I don't know if that would be the case or not. I think, you know, canceling all those derivatives contracts would be destructive. But, again, we have tools in place now to maintain those derivatives contractual relationships, even if you get in to a resolution situation where the banks actually failed. So is it interconnected? Yes. Could there be losses in other banks if they do fail and go into resolution? Yes. That's exactly the kinds of things banks and regulators should be looking at right now. They should be looking at the exposure of major U.S. banks and Deutsche Bank, and preparing for the worst. I don't think it's going to happen, but you always want to have contingency plans in place.
BARTIROMO: So, from your standpoint what should the regulatory framework look light, Donald Trump and Hillary Clinton, obviously, have been outlining their.
BAIR: Right.
BARTIROMO: . their own plans to regulate the financial system. Trump said he wants a moratorium on financial regulation.
BAIR: Right.
BARTIROMO: Hillary Clinton says she wants to crack down on the banking system. What -- how will this play out? What do you think is required?
BAIR: Yeah. I think it's -- there worlds apart, except for one thing which is restoring Glass-Steagall, which is kind of interesting that they apparently both parts want to go back to separating commercial banking from investment banking. So that's something that's interesting to note. You know, I would just like simple regulation, more transparent, more consistent regulation. Again, I think the key -- the primary form above all others, I do think was to raise capital requirements to banks more resilient in a downturn. You look at a bank like Deutsche Bank, they have a lot of leverage, used a lot of short-term funding -- that works fine when the markets is going up, everything is good, you're making money, there's no capacity absorb losses in a downturn, that's when you have to get into public support which is what we want to avoid. So, I do think simple strong capital requirements are good cornerstone, a bidding regulatory system. Jim actually proposed a bill along those lines. He want to go get rid of Dodd-Frank, I wouldn't go that far. I think there're many good things about Dodd-Frank. But I just point out as a good conservative who I think has a principled approach based on capital for resilience stable financial system.
BARTIROMO: All right. We will leave it there. Sheila, good to see you.
BAIR: Nice to see you.
BARTIROMO: Thank you so much. Sheila Bair, joining us there. Up next, the rising risk of a recession, where the next big crisis could be in the next year or so. Plus, still 22 days until Election Day, the GOP is already holding a victory dinner though in the sunshine state. But will this positive thinking turn some polls in Florida around? Back in a minute.
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BARTIROMO: Welcome back. Donald Trump getting back on the campaign trail this morning, as he heads to Speaker Paul Ryan's home state of Wisconsin, in the midst of their ongoing feud, while his running mate gets some backups in the battle ground state of Florida. Adam Shapiro, with the latest right now in Tampa, good morning, Adam.
ADAM SHAPIRO, FOX BUSINESS NETWORK: And good morning to you, Maria. You know, Tampa, Hillsborough County, is going to be key for the Republicans and for Mr. Trump. If they want to win the state of Florida, I want to show you some video from over the weekend, Mike Pence was here in Tampa, rallying Republicans at a state GOP victory dinner. He met with Marco Rubio, they shook hands onstage to energize these folks. But there's a lot riding on this election because in Florida, although Mr. Trump won 66 of 67 counties, the supergiant, Jeb Bush, Marco Rubio, he knocked them out. The question is can he convince Democrats to cross party lines and vote for him. Joe Gruters, who is heading the Trump campaign efforts in Florida, told us this.
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JOE GRUTERS, TRUMP CAMPAIGN: We are working harmoniously. Anybody who says anything different is just not being accurate. I will tell you that we together will deliver the state for Donald Trump.
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SHAPIRO: Now, I want to show you the latest average from real clear politics about what's happening with Hillary Clinton versus Donald Trump, she has a slight edge, 47 percent of the vote it would appear, at least favoring her over Mr. Trump's 43.5 percent. But, the Republicans have put on a really energized effort to register new voters, in fact, 10 counties in Florida have switched from being Democratic majority counties to Republican majority counties. And Tony Ledbetter who is the GOP chair in Volusia County, that's Daytona, Daytona Beach area, told us this about that.
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TONY LEDBETTER, GOP CHAIR VOLUSIA COUNTY: There's a shadow vote out there. There's many, many, many people that pollsters can't -- if you're just registered to vote in the last year, the pollsters can't find you. And these new people coming onboard, they go vote for one person, that's Donald j. Trump.
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SHAPIRO: And just to give you an idea, Maria, as I wrap up, just how emotional this event to this election has become in the Tampa area. The comedian Amy Schumer had a performance her last night, she asked a man who's supported Donald Trump to come onstage and explain why. She then went into a roughly five minute attack of Donald Trump, and people in the audience booed her and some actually walked out. Back to you.
BARTIROMO: Wow. Adam, all right, thank you. We'll get back to you as that story materializes further. Adam Shapiro in Tampa. Another prediction of a coming financial crisis, joining us right now the host of Varney & Co., Stuart Varney. And Stu, continuing -- people are saying that, look, the economy is going so slowly that, yeah, we could see a recession next year.
STUART VARNEY, VARNEY & CO. HOST: Well, you keep on hearing these forecasts and these threats of -- here it comes, another big one, financial crisis just coming down the pike. You're right, Maria, it's almost nonstop, may be because it's October. But the latest one comes from Robert Samuelson, that's a famous name in the economics business, he's just pointed out that global debt that includes governments, household, nonfinancial companies, is now a $152 trillion. It was a 112 trillion in '07, and 67 trillion in 02. In other words, overall debt has gone up astronomically. And Samuelson points out that what the Federal Reserve going to do about this, well, there's not much they can do. They're out of new tools. And what does that leave you? Hillary Clinton, ah, not going to produce that much growth in the economy. How about Trump? If you want to solve a debt crisis, if you want to get that deficit down, you grow the economy. So, there you have it, the latest idea that we're in for a financial crisis, and I keep hearing it so frequently.
BARTIROMO: Yeah. Well, part of the issue is that businesses are not spending money, right? Businesses are sitting on cash.
VARNEY: Yeah, very true. Capital investment by businesses is down, actually, down. Look, the rate of growth is not just slowing, it's actually down. That's a very big deal.
BARTIROMO: Yeah, sure is. Stu, thank you. We'll see you in about 10 minutes.
VARNEY: Yeah, got it.
BARTIROMO: Varney & Co., begins at the top of the hour, 9:00 AM Eastern, right after Mornings With Maria. Join Stuart in about 10 minutes time. Up next, Julian Assange, taken off-line overnight. Who WikiLeaks blames for severing its founders link to the internet at the Ecuadorian embassy in London, back in a minute.
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BARTIROMO: Welcome back. Russian president, Vladimir Putin, answering questions about his potential involvement in the U.S. presidential election, Cheryl Casone with the story, Cheryl.
CHERYL CASONE, FOX BUSINESS NETWORK: Yeah, Maria, this just happened a few moments ago, he was holding a briefing a short time ago and he said that Russia has no intention of influencing the election, despite what Vice President Joe Biden says. But he did go on to speak highly of Donald Trump saying, quote, we welcome anyone who wants to work with us, end quote. Well, let's stay here for a second, WikiLeaks says that founder Julian Assange's internet access has been cut off, few other details were immediately available. WikiLeaks says that a contingency plans are being made, Assange has been hold up at the Ecuadorian embassy in London, for more than four years after skipping bail to avoid being extradited to Sweden over sex crimes allegations.
Well, PepsiCo making changes to its soft drinks, the company announcing plans to reduce sugar content on many of its products. PepsiCo goal is to have two-thirds of its drink contain 100 calories or fewer by the year 2025. And then, we're watching some earnings for you, shares of Bank of America higher in the premarket right now. The banks third quarter profits rising nearly 6 percent from a year earlier, it was helped by strong result in investment banking and trading. The company posting a profit of .41 cents per share. They beat the estimate that was for .34 cents. And there's that trade right there.
And then, taking a look at Netflix, guys, they are set to report earnings after the market closes today. Investors are worried that after years of stunning growth, the company may have hit the pause button. They're expected to post a profit of .6 cents a share, that's down, though, more than half from last year's third quarter, Maria. And obviously, if you look at the stock performance of Netflix last year versus this year, it's a different story, back to you.
BARTIROMO: Well, it was a big growth story for a long time, but at some point how do you keep those numbers going?
KEVIN KELLY, RECON CAPITAL CIO: Yeah. And that's the biggest issue you saw the Journal actually out today about Netflix, and they're actually negative on the stock. And one of the reasons why its content acquisition costs are high. That's why you've seen them going to original programming, but you're also seeing a bunch of other studios get to together.
DAGEN MCDOWELL, FOX BUSINESS NETWORK: I called it a year ago.
KELLY: Nailed it.
(LAUGHTER)
MCDOWELL: No, I'm serious because -- there's so many competitors.
KELLY: Yeah, of course.
MCDOWELL: . and it's -- you only have so much really good content, and they wind up overpaying for what is mediocre. Not all their stuff is mediocre, but you have so many more competitors, whether it's in, and HBO, even a Hulu, and you name it.
KELLY: And there is price sensitivity as well.
MCDOWELL: And all the cables and broadcaster.
KELLY: Which is interesting, they missed last quarter because they increased the costs and then they lost some subscribers to that. So the price sensitivity is trickling through on that. And they don't have the model where they have advertisements in there like other streaming services so people pay up for that. So, it's going to be a interesting earnings, called the show and the entertainment side. But, this earning cycle was supposed to be this savior for the stock market, there's supposed to be easy costs. But we've seen earning guidance came out and it was been pretty bad. So, you've got Honeywell pre-release, then you also have Dover on the industrial complex side. We've seen news out of the China, dog-down the market last week alone because of the stronger dollar. So people should not be really excited about this earnings season. I think they need to be very tempered.
BARTIROMO: Well, the financials certainly doing better than expected. You've got Bank of America this morning, you've had all banks last week, and they are exceeding expectations.
KELLY: Yeah.
BARTIROMO: Because of better trading.
KELLY: Yeah. There is better trading coming in cross on the fixed income side, and we saw that come across on Bank of America. And that's why people are shying away from traditional banks like Wells Fargo because we saw what they had to do to use their earnings over the last four years. Now that that's in the rearview mirror, Alcoa wasn't a great number. Technology is going to be pretty interesting. We're seeing -- we're talking about Netflix, which really drove the market, that's a name that could take down the technology sector, while other names may increase it like Google because you want to actually get a valuation of a Google that's growing, as opposed to a caterpillar which is also on the front lines of Today.
MCDOWELL: It's perfectly reasonable to be risk averse heading into the election. You could see -- you could really see that trade-off moving.
(CROSSTALK)
KELLY: The health care space.
MCDOWELL: We saw that last week.
KELLY: Yeah, sure.
BARTIROMO: Sure. And we'll get our final thoughts from our all-star panel after this short break. Stay with us.
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BARTIROMO: Welcome back. Final thoughts from our all-star panel, Harlan Hill.
HARLAN HILL, DEMOCRATIC STRATEGIST: I'm begging the Trump team to start cutting ads, utilize these WikiLeaks. I mean, from needy Latinos to the Catholic stuff, and just cut those ads and target it to those groups and hammer her on it. Because right now, there's none of it.
BARTIROMO: They need money to do it.
(CROSSTALK)
BARTIROMO: Kevin Kelly.
KELLY: Yeah. I'm focused on earnings this week. Justin Johnson, tomorrow before the bell, you know, there's a lot of names that are out there that you can own through the election, through Fed rate hike, and I think that Johnson & Johnson could be one of them. They've done very well. This year alone they've got a 2.75 percent dividend and their pharmaceutical side is growing. So, I'm interested to see what they come out with.
BARTIROMO: MCDOWELL:
MCDOWELL: And many, many congratulations to Harlan Hill who is getting married this weekend. I only have one piece of advice and it has nothing to do with marriage. It is to get rid of your Galaxy Note phone.
(LAUGHTER)
MCDOWELL: If you still have before you leave on your honeymoon, Harlan please do that.
HILL: Yes, I will.
(CROSSTALK)
HILL: It's not. It's fine. It's OK.
KELLY: It's in his pocket, which is dangerous.
MCDOWELL: Again, danger man over here with the.
(CROSSTALK)
BARTIROMO: Kevin Kelly, Dagen McDowell, Harlan Hill, thank you. Be sure to tune in tomorrow, Martha Stewart here in the studio. Have a great day, everybody. We will see you then. Varney & Co., begins now, here's Stuart.
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(Show: MORNINGS WITH MARIA) (Date: October 17, 2016) (Time: 07:00:00) (Tran: 101702cb.231) (Type: SHOW) (Head: Trump Doubles Down; DOT Bans Samsung Galaxy Note 7; Eyeing Bank Earnings) (Sect: News; Domestic)
(Byline: Maria Bartiromo, Dagen McDowell, Ed Rollins, Cheryl Casone)
(Guest: Harlan Hill, Kevin Kelly, David Kudla, Jon Steinberg, Jared Max)
(Spec: Politics; Media; Polls; Technology; Banks; Financial Services; Stock Markets; Elections; Debate; Money; Economy; Markets; Deutsche Bank; Supreme Court; Stock Exchange; Social Media; Facebook; Yemen; Weather; Hurricane Matthew; Flooding; Death; United States; Haiti)
(BEGIN VIDEO CLIP)
SEN. TIM KAINE (D-VA), VICE PRESIDENTIAL NOMINEE: Donald Trump has kind of started to go wilder and wilder I think after, by all accounts, losing the first bias, he started to make wild claims, kind of scorched earth claims about the election being rigged.
NEWT GINGRICH (R), FORMER SPEAKER OF THE HOUSE: I think that without the unending one-sided assault of the news media, Trump would be beating Hillary by 15 points.
(END VIDEO CLIP)
MARIA BARTIROMO, FBN ANCHOR: We have the very latest in the race to the White House coming up.
The battle to retake Mosul -- Iraqi forces have started their campaign to reclaim the city from ISIS. The details coming up on the second largest city in Iraq under ISIS control.
Samsung's Galaxy Note 7 grounded -- the FAA now banning the device on all flights over the fears of fire.
And a warning sign from the restaurant sector -- what a recent string of bankruptcies in the industry says about the broader economy and how will that play out.
Investors around the world watching earnings this morning. Bank of America just reported its third quarter results moments ago. It was better than expected on both the revenue line and the earnings line. The bank helped by strong results from bond trading. The stock is higher on the news as you see there. The banks did well last week because of better-than- expected earnings as well.
Meanwhile the broader market looking lower this morning. Take a look at futures indicating a decline of about 30 points on the Dow Jones Industrial Average. The S&P and the Nasdaq also under selling pressure.
In Europe declines across the board as you will see here, down between three quarters of one percent and a third of a percent across the Eurozone.