>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> penny wise, pound foolish on wall street. big banks try to save money by cutting bonuses. >> it is no jackpot. new jersey is counting on online .ambling the strategy looks like a real longshot. >> the way we were. -- the film fest is nothing like he used to be, and we will tell you why. you are watching "market makers," wednesday at 10:00 a.m. in new york city. i'm erik schatzker. >> i'm stephanie ruhle. we have to keep the beat going because it is bank earnings week

on wall street. yesterday we heard from j.p. morgan and wells fargo. brian moynihan is reporting a great fourth quarter. scarlet fu has more in the newsroom. break it down for us. >> quarterly profit at bankamerica could quadruple in the fourth quarter thanks to approving credit trends. relatively strong sales and trading numbers and a favorable tax rate as well. earnings per share in the fourth quarter up $.29 compared to the consensus of $.27. revenue coming in higher than anticipated, $21.7 billion. over the past month, eight analysts ratcheted it down. the bar was lowered. pretax litigation expense. it is a noisy quarter because of these one-time items. a 2.1 $3 billion charge there. one investor who was on "surveillance" said he is not

exactly sold on bankamerica yet, even though it is leveraging the bank economy. because of the legacy issues that remain. jpmorgan at ahead in terms of resolving the sales of defective mortgages leading up to the housing crisis. rising interest rates helped bank of america's net interest margin climb. conference call highlights i wanted to bring for you guys -- more cost savings to come. theme withommon banks this quarter. billion on track for $2 in new cost savings for 2015. the efficiency ratio worsened. says conditions in the fixed income markets are favorable and there is no reason to expect a drop off in fixed income in early 2014. they did mention that they still have work to do on legacy assets, although the ceo tried to put a positive spin on it saying that it has not

approached its earnings potential. >> it is just concerning. it is positive to your cost-cutting, but cost-cutting is the way that is helping the bottom line -- if that is the case, where is the growth? >> of course that is the problem, but the banks exited the financial crisis bloated. with a zero interest rate environment and a slow growth environment because the company is plodding along, what are you going to do? you have to ask yourself, maybe some of the costs that the banks had, these legacy costs, did not have good justification. >> it is the right thing to do to cut costs. scarlet fu when you look at where banks are hiring, it is not in revenue-generating positions. it is compliance officers, which may make the regulators happy, but is it making potential shareholders happy? >> the return on common equity

rose a little bit in the fourth quarter, but a lot of the hiring is coming in expense divisions -- compliance, legal -- certainly not in parts of the business that generate a lot of revenue and income. if anything, we are seeing jobs cut in mortgage origination, which have been big drivers for profit. the latest numbers -- bank of america cut 5800 26 full-time positions in 2013. they ended 2013 with nine percent fewer employees than they began the year with. >> the name of the game is rationalization. scarlet fu a thank you. the more on this topic, the future of banking, is bring in a professor and a senior associate dean at the harvard business school and the former head of goldman sachs. rob, good to see you. rationalization is a bit of a rallying cry on wall street. the effort overwhelmingly has been toward cost-cutting because

we are in a slow economy. let me ask you this question. now that the economy is picking up in these banks have made so much progress on cost-cutting, now that they are beginning to see the light at the end of the tunnel on things like litigation, is it possible, and i should add that the last >> on the street, jpmorgan, has met a capital free target, is it possible these banks will do more lending? yes, it is. they would like to. and the better economy is good for them. it helps lower credit provisions, it helps prefer sales and trading, markets activity. but the returns on equity are still relatively low relative to history, and that is why they are doing the cost-cutting. they want to improve the return on equity. growth in revenues would help that, but if growth is sluggish,

they will have to cut costs. >> is there no demand for loans? we hear so much about private equity firms, hedge funds adding into the direct lending business. if they get into the direct lending business, they are not getting in because there is no demand will stop there are clearly -- no demand. there are clearly loans to be made. >> loans and originations are -- are declining because of rates. the issue is corporate balance sheets by and large in this country and in the world are in pretty good shape. so then you have special situations like leverage loans and private equity firms needing loans, and the other thing going on is with the yield curve the way it is. this is why when the fed backs away from tapering, people think eventually it will help the banks steeped in the yield curve, so when they don't do -- >> bank of america, morgan

stanley, goldman sachs -- now it, they are not offering what advantage does bank of america or morgan stanley have over a lazard? >> they offer a lot of advantages, and believe me, backup lines for commercial bank -- commercial paper and loans is very valuable. have an enormous competitive advantage by providing balance sheet. it is not that they have not been doing it. the regulators are making their reserve more capital for every dollar of loan that they make. let me tell you, it is in it is inordinately valuable strategically, if you can land to accompany in addition to providing services. in thehere a disconnect regulators or governments understanding in how bank lending helps america? >> no, there is not a disconnect. i think there are mixed

objectives. the regulators, people at the fed and the government, want to bite a little bit. they don't want to return to the last crisis. they want more capital. for us to grow in this country around the world, we need banks to take risk and extend credit, so they are getting mixed messages. the regulators say we need more capital, and if anything those regulations are getting tougher. at the same time, if we are going to grow and create jobs, we need banks to take more risk. they are doing the best they can on this one. they are getting mixed messages, and the regulators are saying something different then maybe what the politicians are saying about wanting gmp growth. >> speaking of regulators wanting to fight the last war, one of the things we did not see with bank of america this morning is a big litigation reserve. four-plus or maybe

higher. does that suggest that perhaps brian moynihan and be of a perhaps dodged a bullet? brian moynihank would say he dodged a bullet because the litigation payments over the last five years at b of they have been enormous. both -- e that >> go ahead, sorry. >> they both made massive payments and took a very big reserves, and the whole industry is hoping that this new litigation is going to -- new issues are going to peter out. in fairness, this is an issue for everybody in the industry. how much more litigation will there be? are they at the seventh inning of this or in the middle or earlier innings? muchis why you don't see

attitude litigation reserves. >> what is your sense? what inning are we in? >> i would guess we are in the seventh inning because the issue is the more the banks get sued, the more it requires them to take more capital away from extending credit and helping small business and growing the economy to pay for litigation expense. having said that, you can see politically it is very popular to ask them to pay. my guess is seventh inning is more likely than the third inning. about what they are paying their employees? top bankers and traders right now, as they look ahead in the industry, they are getting paid less, watching the firm have to pay billions of dollars to the government. is there a culture shift? is talent saying i am not sure this is the business i want to be in, or is this a cycle we see every few years? systemicay be a more

change because regulators are taking away profitable businesses from the banks, particularly those that use their capital, particularly trading oriented businesses. compensation is likely to get squeezed more. bank ceos have been given time by shareholders to raise return on equity, that i think they will be under pressure to raise return on equity more, so i aink -- i think this may be trend where compensation is going to be lower than it was historically, and i think that will continue. will it cause talent to leave the industry? yes. >> we want to keep the conversation going. we are taking a quick break. seniorlan is the associate dean at the harvard business school, former head of investment banking at goldman sachs. >> guess what else we are talking about -- the sundance film festival. it kicks off tomorrow, and we will talk about how digital

distribution has changed the movie business. speaking with a film producer who has been on the sundance jury. this is bloomberg "market makers." you can watch all of our interviews streaming live on demand and on apple tv. ♪

back to "market makers." rob kaplan is back, professor and senior associate dean at the harvard business school. he is also the former cohead of investment banking at pullman's. i have to ask you about these new guidelines. a lot of banks don't want junior bankers working on the weekend. do you believe this? >> i believe it. here is what is happening. the banks are looking more to college graduates to stay beyond being analysts. they are hoping that after their two or three analysts periods,

the best will stay to become a cosi it's -- become associates. that mindset change means they are more sensitive to how many hours their analysts are working. they want to keep more of them for longer because they see that as a bigger source of talent in the future. i believe it. >> i understand the mindset. at the top. but when you look at a firm like goldman, who every year fires the bottom 5% or 10% of employees -- are they really going to say to their junior guys, no worries, hit golf balls on sunday? i doubt we will see it happen. >> i probably doubt it, too. here is what i think they are saying. if there is nothing going on, you are not in the middle of a crisis, there is no reason to show up regularly at the office. on the other hand, if you are in

the middle of a raid or some high-priority projects i'm a you will work seven days a week. they are trying to say don't commit seven days a week or work around the clock just as a matter of course. there needs to be a reason. >> rob, at least one of the reasons these junior bankers are leaving the wall street firms is because they look at private equity and say that is a better business model. not only that, i am going to get paid more if i go to work for blackstone or carlyle. a, can wall street fight that? this, who has at the best business model? >> there is a challenge for wall street firms because the government has taken away a number of businesses, return on equity is lower. dank leadership has talked about cutting costs regularly, improving return on equity. reg it'sthey see these

-- regulation limitations in howpe on compensation and much bonuses can be, and people are saying maybe there is more potential in a smaller, more nibble firm, something more entrepreneurial. and the banks have become very big will stop back in the stone firms were dramatically smaller, and there was much more growth potential and they were much more entrepreneurial. people were saying i would rather go to a smaller business, more entrepreneurship. that is something the banks have to fight. it could be a great place to work if you love the markets, but i think it will be harder to keep people. >> that when you join the they were able to dangle the carrot of goldman partnership, and you got that carrot. what can lloyd dangle now? >> in fairness, i joined the firm because i love the markets. the pay, going way back, was not as extraordinary as it became,

and most of us did not think we would become partners. we did not know. he joined because we love the business, love the people, and i still think that is a reason to join. but again, these are more mature businesses, they are bigger. i am joining a department of 500 people, not 50 people. i think what lloyd and every firm can do is make sure that young people are getting a good experience and they are getting responsibility, and they manage people well so that they are learning and they can be challenged and grow. if they do that, they can still attract and retain good people, but they have to make sure they do a good job of that. were 24 years old making a choice between blackstone and goldman sachs, what would it be today? >> good one, erik. >> i love goldman sachs, as you know, so my heart is always with the firm in particular. blackstone is a great firm,

though. it is smaller, more entrepreneurial. it is a tougher choice now, and these private equity firms and something smaller is very compelling today. >> all right, rob. >> that is a noncommittal answer. >> always great to get your thoughts. rob kaplan joining us from harvard. >> when we come back, we will talk about glaxosmithkline. the company says no to driving doctors anymore. >> more in two. ♪

>> you are watching "market makers." glaxosmithkline announced it would stop paying doctors to promote its drugs. some would call the practice bribery.

that is going to bank far. the law decides what bribery is. but it is controversial for sure. let's establish for everybody what glaxo was doing exactly. >> it is hard to believe, but this was a totally industrywide standard practice, and it was so for decades. what these big pharma companies do is pay doctors to go to speeches, meetings, and present on their drugs. shocking, right? >> but to prescribe their drugs gekko those are two different things. >> to present on the drugs and thus to promote the drugs. you would think the conflict of interest would be obvious. >> but who is in the audience? doctors, so they would hope that they would trust what they were hearing from other doctors than from a representative. so now glaxo is saying they will stop the practice worldwide. the other thing they will do is stop tying the compensation of toir sails ref -- sales reps

how many perceptions they can ultimately get written. that raises alarm bells, too. incentivized to do whatever they could do to get doctors to write as many perceptions as possible for these pills. >> how are they going to change their commission scale? >> they are tying it to education and value, and they have a series of metrics to make sure there is more positive interaction where they are educating the physician rather than just judging them. >> how do you judge that? how do you say this person went to this presentation with this dr.? this much, this much sold -- i think that is a little fuzzy. what do you think? >> i don't know what you do. you do what we do. what lots of other companies do. how many times do you pick up the phone and call the doctor, visit the doctor, and then look at the results. to what degree is the doctor

responding well? and now the sales reps are going to be judged by how well they were able to pass on the education of what the drug does and pass on education of the potential risks. here's how it was explained to me by the ceo. >> we are increasingly trying to reduce the payments we make to health care practitioners. i don't want to get to specific targets, but in the next couple of years, as we have announced, -- wed to reduce those intend to reduce those interactions much more to revalue -- to provide more value education without the necessary focusing on volume sales or volume measures that have been traditionally the measure of success on the sales side. you asked him does this put at a competitive disadvantage

against your rivals, that you are changing the incentive structure for employees, and he said absolutely not. he says it will be an advantage because it is what patients want and what foreign investors want. ♪

live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> welcome back. two nights, 30 amazon employees in middletown, delaware, will decide whether to become amazon's first u.s. union. this could challenge the low-cost model that has allowed theo -- amazon to become company it is. you are here so you are not marching outside with a picket. >> i have no signs, but these guys are there and they are going to be voting to unionize. it does not have to be every

single person who votes for it, it has to be majority to unionize. we're talking about 30 employees, at a 1500 person facility at a nearly 90,000 employee company. it is a relatively small number of people. they are machinists at this distribution center, so they fixed the equipment there, etc. it is not the actual distribution workers. they are trying to join a union that is part of the afl-cio. this has never happened before in the united states. amazon has successfully blocked efforts to do it, and there don't seem to be that many worker propelled units -- >> amazon has tried to block this before -- they have tried to do this before? >> there was one back in 2000 that amazon successfully thwarted. >> so let's say they are successful tonight, all 30 of them say we are here, get used to it. could this spread?

>> in talking to various analysts, they did not think so. they did not put the vote chances at a high level. a couple of reasons for that. amazon has hired a high-powered law firm to prevent this from happening. also a union spokesman told another reporter that some of these employees have been pulled into captive audience sessions meetings with-one their bosses at amazon. these guys are paid relatively well if you look across the industry. >> the machinists? >> they get benefits, higher paid for.options there was a bbc documentary that looked at alleged abuses at the distribution center, so there has been some push and pull as to how these guys are treated. you have not seen more unionization not because

amazon has been so against it, although it has been against it and made clear in a statement to us, but it is clear there has not been that much impetus on the part of the workers. >> if this spreads, will we get reaction from the analysts as far as the amazon outlook? >> it would have to spread a lot. 30 is such a small number, you would literally have to see a much water unionization of the company -- a much broader unionization of the company. the 90,000, it was estimated that 10,000 or 15,000 might be white-collar workers, and the rest of people working in the distribution centers. a large proportion of the company is working at these places. could turn into 30,000 in a relatively short amount of time. >> the chances of that happening quickly seem to be relatively slim. >> what is the take away? there is a conflict in a company, and who wins? external lawyers.

thank you so much, julie hyman, our senior markets correspondent, is the us -- giving us the latest on amazon. the first numbers are in from online gambling in my home state of new jersey. is it a success? don't bet on it. ♪

>> new jersey's experiment with online gambling is a bust. the garden state is targeting 1.2 billion over a year. do the math. that is way off. this is unwelcome news for casinos relying on internet gambling to make up for a 45% drop in revenue over the past seven years. ryan miller analyzes the gambling industry. is there any hope that online gambling is going to generate the kind of revenue that new jersey, the state, and atlantic >> it is early, but

the results for 2013 are disappointing. if you take that $8.4 million rake and extrapolate that over the course of the year, you are looking at $75 million. compare that to the $1.2 billion in new jersey is looking for to fill some holes in tax revenue, they are way short. >> is there anything they can do to encourage more people to gamble online? >> a couple of things. it is early and they had issues up front with people being able to create accounts. they will be able to hammer those things out. the bigger thing they have to look for is getting the credit card companies and the banks to approve the transfers so people can move money into their online gambling accounts. mastercard and visa are ok with that, but bank of america and pnc say they don't want any part of the as this. that will curtail your top line if people cannot get money in to gamble. >> former governor of new york

george the tacky talked about taki-- george pap talked about how against gamma he is. not going to go backwards in new jersey. online gambling is here to stay. he speaks to the bigger issue, that would you ever see something like this at a national level? is important not only for traditional casino games but for poker and things like that were the more people you have plain, the more money you can generate from them. >> is there any way the industry takes off without the support of the credit card business? >> i think it is very challenging for that to happen. that needs to be there. you need to incentivize people. 75% of theght spot, people that created accounts went to the casino frequently. when you get that kind of new incremental customer and you can entice them to go to the

physical casino, is good for the overall market. but there are challenges. >> what is the hook for the state of new jersey them of that they cannot get it right? what is the issue with this state and gambling? >> there are two bank many casinos. the problem in new jersey -- there are too many casinos. a decade ago when there was no regional competition -- now they have casinos in new york, pennsylvania, delaware, and maryland, and that eats into your customer base. now there is too much supply and not enough demand. >> could we see atlantic city finally fold? >> it will never full. it could continue to shrink. it probably should shrink from the number of casinos. you should probably have about half of what you have right now. now there are 11 casinos in that market. if they went down to five or six, there is probably -- that

is probably the more appropriate number. >> but couldn't one make the argument that online gambling only offers more supply, getting less reason to go to these casinos? they are hardly fantastic destinations. they are pretty gnarly. >> that is the thing. city pitchesntic itself as a destination resort, it is no las vegas. going back to the earlier comment about gaming saying we are new -- we are seeing new customers here -- i think they are really going to push advertising toward the business, thinking at the end of the day it will help not only online revenues but also the bricks and mortar revenues. >> i think ryan is being -- i think brian is being generous. coming up, -- >> when we come back, sundance gets underway tomorrow. we will talk about it -- to a

producer who has been a jury member. ♪

>> earlier this hour we talked about glaxosmithkline's decisions and a controversial practice under which the company paid doctors to promote its drugs. at one point we short-handed the practice as bribery, and that was wrong. i wanted to correct the error. time to talk about the film industry. for three decades -- we're talking about the sundance film festival, which begins tomorrow in utah. which movies were blockbusters, and which just plain bust? we find out from scarlet fu. the sundance film festival started in 1978 to bring attention to american-made movies. one of the big hits from sundance was back in 1999, "the

blair witch project." tooeither of you see it? >> scary for me. >> totally successful because it was made for $20,000. a lot of handheld camera work. it was about student filmmakers who disappeared while hiking. grossed $140 million domestically. that is quite a return. that is kind of -- >> but that was 14 years ago. what has happened since? when i think sundance and blair witch -- what is going on there? alright,"y, "kids are with annette benning. that came out in 2010, another big hit, about a lesbian couple. >> mark russell is in it. ruffalo is in it.

echo the movie grossed $21 million, so four times the amount that was paid for it. that was another big win as well. >> how about the bust? >> it is not a huge bust but it is a bust as far as distribution goes. joseph gordon levitt wrote and hadcted "don john," and it a star-studded cast. it was relatively priced expensive, $29 million for the movie. it only grossed $24 million. it got a lot of critical reviews. i want to bring in the experts. we are joined now by joanna vincente, international director at the -- director of the international film makers project. she has brought a lot of filmmaking right here to new york city, made in new york.

here we are a day away for him sundance kicking off, the first festival of the year. how important is it gekko >> it is the most important festival for independent filmmakers. it is the ultimate destination, and every year, the wonderful thing about sundance is you can go in, not even know which film you are seeing, and you will always see something interesting. more often than not, you will be surprised. >> as an attendee -- but who attends? who are the most aboard people? entertainment professionals and journalists that attend the festival. there is a lot of business, even though the return on the dollar is not the same as it used to be. so it there is a new study that came out that only 2% of what is invested in these films is recouped. there is this idea that maybe -- therage person

average budget is $750,000, which is too hi, probably. $3 billioning about -- yes, is recovered gekko >> so a very tough business. a couple of films get the great deals that really have a great budget. focus features, buying these films. >> with numbers like that, why is anybody in this business? we just saw the numbers. accepted,00 films get and then fewer of those actually get distribution. >> it is unbelievable. high risk investment, but the wonderful thing is that there are always a couple of films defineally go to filmmaking. >> like "blair witch," which

changed the game. >> and they go on to get recognized. >> if you are a filmmaker, does it matter which festival you are at? nnes?nce, ca >> i would say that sundance is still the golden standard. >> 7000 people attending this festival. i remember at one time sundance was an upstart. it does not sound like it anymore. 7000 sounds like establishment. >> it is establishment, but because it is such a high risk investment and environment, just getting into sundance is a great step of approval. >> tv is doing so well. there are so many great tv shows on. how does that change the kind of film being brought to festivals? >> you have a wonderful independent filmmaker who makes the first film, like lena dunham

, "tiny furniture," and then she went on to do "girls." ibo are seeing that the film model is not really working, so they are working on tv or figuring out ways to connect with their audiences more directly. >> are the films getting better because of tv? >> i think they need to and some are, but there is a lot of films that are made that honestly are not great, but you never know. >> what about the fact that we to seeing cable networks sundance? cnn has made it clear they are in the market to buy films. only ones?e is this new? >> there are amazing documentaries out there. sundance always has a fantastic selection on the documentary competition, and those films are not that expensive to make. it is actually for the filmmaker, it they sell it to cnn, they can still hold onto some of the rights.

>> if you are a documentary filmmaker, is this the time to be one? two years ago they were not buying films. >> absolutely, and hbo is still buying a lot of documentaries. >> they sound like they are in a better negotiating position, too, because they can hold onto more rights. >> yes. >> how has same-day release changed the game in the movie business? first same-they film release -- same-day film release. changing.l not all the big films, hollywood films follow the model, but the fact is everyone is consuming in different ways. -- people >> you're better off at least having the chance of getting the person sitting at home, even though that will generate much more revenue having them go to

the theater. >> absolutely. when you create the awareness, if you wait six months to then be able to be able to show your film on dvd or on demand, then people forgot about it. >> 7000 people show up to sundance. i cannot imagine how many festivals there are right now. how much of a threat is this to big-time studios? upstarts, if they get into a festival like sundance, they can do it all on their own. >> they can, but to really have access to the big audiences, you need to spend $20 million, $40 million on marketing, and that is where the independent film gets sidetracked and boxed in. >> what is your prediction for 2014? there is a big award show coming up, the academy awards. which film is in the best position to win. -- two win? >> i am hoping some of the more

independent-minded creative films like "her," "american hustle" -- >> what is your favorite? the american of film -- i love all of them. >> "the wolf of wall street" set a record for the number of f -bombs coming out of character's mouths. there were also a lot of graphic scenes, i am talking nudity. some nations in the middle east are not thrilled about it, and they have 45 minutes of the three-hour movie officially cut out. what do you make of this censorship? it is so important for these films to get international distribution, but if some of the parts of the world are saying we are not accepting it, will that change the way films are made? impact,finitely has an especially these kinds of films him a the way people speak being so much a part of the character.

scorsese direct for disney? i don't think so. >> they should not show his films. >> that is why they have "the hobbit," or blockbuster films with stephen siddall -- stephen segagal. at utahre going to be tomorrow. are there too many festivals right now? >> there are not enough. festivals actually help q rate and go through the feature films that came in and figure out which ones -- >> i am so glad you said that because thinking about what we said about sundance, is there someone to take the place or become what sundance used to be? , even the los angeles

film festival are doing a good job, coming up with some of it, but i would say that sundance is still the golden standard. >> you are trying to make filmmaking come to new york city. >> the media center is a place for artists and storytellers to come together with technologists and entrepreneurs. we really are not just talking about independent filmmakers, we are talking about storytelling possible to disciplines. people canng to -- work things out, they have experts, residents, mentors, and the idea is to bring together people with different skill sets. >> if you need to bring in any actors, erik also lives in brooklyn. think you so much. she is raising the curtain for us because sundance starts tomorrow. joana vicente.

♪ . .

quacks live from bloomberg would -- from bloomberg world headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. gma changing of the guard at -- the first female ceo. >> more revelations about the nsa -- how the spy agency found a way to break into computers even if they are not connected to the internet. >> welcome to "market makers. >> i'm erik schatzker. feed.tinue with the news >> you need to know the top business stories from around the world that we are here to deliver them. fourth-quarter profit more than

quadrupled. bankamerica, beating estimates across the board. they have reduced the amount of money they are paying out through the mortgage meltdown. bp says the u.s. will come energy independent -- the growth down in thell slow shale revolution will make the usa net exporter of gas within three years. and the author who gave us " liar's poker" and "the big short" is back with a new book called "flash boys." is perfect for people who want to read on their spring break. the book is said to be squarely in the realm of wall street. been made books have

into films. i'm not even going to ask erik schatzker if he's going to read this book because of course you are. >> i just want to get my hands on a galley copy before it becomes published. poker" came out in 1989. >> it's not like he had a long, .toried career on wall street he's the one person who truly has his fingers on the pulse. he as a way to be critical and out to getut not wall street hating the populist but he -- he is ruvell, is brutal to everybody. >> he's not brutal in the book, it's the fact that speak for themselves. what i find amazing is that when you do get down to talking to michael about the work he does to get into the fax that end up in the book, he is critical.

think highly of wall street. >> my favorites is "boomerang." moving on -- a very big day for general motors -- mary bar is officially taking the reins as ceo. her first move is to pay quarterly dividend for the first time since the financial crisis. we need to bring in jamie butters. he covers the industry and joins us from our detroit bureau. a big day for girl power out there. >> there is a lot of pressure on gm to bring back the dead and they knew it. they got the government out and now it is time to return some money back. delphi automotive, one of the biggest suppliers me america just increased their dividend yesterday. ford increased theirs by 25% last week. there has been some appetite to have this cash be returned back

to shareholders and she feels gm is not just profitable but consistently profitable in generating cash and they can afford to do that. that was well received before today's guidance. >> one of the topics that came happens to what rivals who did not get the job of ceo? it seems like a big happy family at gm. how long can it last? >> steve gursky was another one who was in the running and he was doing some consulting for gm. but he's not going to be working there on a full-time basis anymore. it should be a sort of training ground -- how long it lasts, how long this big happy family thing

depends on how he gets trained to be her successor in 10 years or something like that. mark royce and mary bar a have worked to bed -- have worked together for decades and have a tremendous amount of perspective for each other. there's a lot of work they can do in this hot development role. they understand what the challenges are and can make the progress of the way that gm needs. they need great chevys and x to complete -- to compete with toyota. chief,he global product what kind of products did she oversee? >> she was only the head of product development for a little while. it takes years to develop these vehicles and a lot of them coming out now are those that one the north american car of the year, the corvette and chevrolet silverado one under her but they started back in the lutzne stays -- the bob

days. she also over her career, she is an engineer by training and spent her whole adult life at training. she knows how vehicles get made. oft is an important cost entreaties days to be able to compete with toyota. thatther thing she did seemed to tarnish her when she would to product development was that she had run hr for a while under rick wagner. what she did there was bring her engineering discipline and effort toward efficiency to the hr process and minimize the paperwork and streamline the bureaucracy gm was famous for. she tried to have some common sense human type rules. hr has a weaker

branch, couldn't they point to that as a way to lead people? human capital is what drives corporations. >> that's right. absolutely critical function if it is done well and should lead to greater insights into how you manage different parts of the company. they have uaw workers, retirees as're dealing with as well really calculating what everybody's strengths are in the management team and what is the right way to put together a team. and hr vice president can study the internal strengths and weaknesses and -- and she has brought a lot of that into her role as executive. >> i want to bring in a conversation we had with jack welch. we asked him about mary and her chances as ceo and whether she

would be able to maintain the happy family we were talking about. >> she's got all the tickets -- she, she's got started at 18 in the program there and worked her way there -- let's give her every break in the world and hope she knocks it out of the park. >> jack welch says let's give her every break in the world and hope she knocks it out of the park will stop i have a feeling ford and chrysler are not going to give her every break in the world. they want sense that her to succeed and they want all my industrial base to prove they can make the leaf into the -- make the leap into the 20th century? to industrialtant america that gm be a healthy company. when gm is not good, it sends a negative and profound signal about the whole u.s. economy, but especially the industrial companies.

mary is a talented person who doesn't have enemies around the industry. there is a lot of sense that they want her to succeed. as far as cutting her breaks, what she has is a healthy company in a healthy industry. everybody is making money, gm is making money, for years even when gm made money it was such a small amount compared to what toyota was making or even forward. gm is truly competitive now so she has the opportunity to run a competent global automaker. do tos a lot of work to make things better, more growth in china, and have to stop losing money in europe. but they have a balance sheet that is competitive, they are paying a dividend, they have they haver relations, a lot going in their favor and they have invested in the product. they have to execute and keep improving to win back customers.

>> just don't say fortress balance sheet. enqueue for joining us. -- thank you for joining us. talk about some more of the things jack welch said. i said when i look at john leger, jack was talking about how much he loved the fact that t-mobile was changing the game and wireless. i said i look at john leger, he's got long hair and a pink t- shirt, but i don't think of jack welch will stop it was complementary. m said he said when i think of arnold schwarzenegger, i don't think of you. >> he was in a good mood and full of compliments. we were talking about active america because they just reported, lower reserve for litigation expenses, here's what he said about the guy at the head of bfa, ryan moran had --

brian moynihan. >> he's done a good job. i have nothing against him, but ifse guys in washington, they want to peek in his office, they can go. jpmorgan i thought was done and they came after them. there's never an and to the piggy bank attack. >> that is the cash grab, at least what he thinks is a cash grab. federal regulators, the justice department, the attorney general -- >> treating the banks like an atm machine. >> he thinks it is wrong. there's nothing wrong with pursuing violators for things a did wrong and extracting the appropriate amount of money and more important late try to correct behavior.

he thinks washington has gone too far. >> as long as you say washington, what do you have to say but the governor of my home state, chris christie, who has been under fire in the last week. we saw him in the state of the state yesterday being apologetic for the bridge gate situation. what did jack have to say about it? >> chris christie has done everything absolutely right. if he hasn't done anything wrong. and i mean that. he has handled this crisis , and taken cleanly responsibility. he has not walked away from it. the question is, is anything going to come out he was involved in telling them to do this? >> this is the message we have heard from quite a few people -- that he did a great job coming out managing this situation but he sure as hell better be telling the truth because if he's not, he's screwed. heard fromaven't

anyone else and it is surprising given the amount of wall street backers chris christie has had. >> jack thinks the odds are against him because he thinks there is a liberal bent to the media and the media have their knives out for chris christie. if they covered chris christie the way they covered hillary clinton, this bridge gate scandal would not be getting as much ink. that is up for you to decide. of news ofa lot next, but jack welch is the right kind of guy to give a perspective. coming up, we are learning more about another nsa surveillance program. this one targeted computers that weren't even linked to the internet. that is next. this is "market makers" streaming on your phone, tablet and on bloomberg tv. now, we are on apple tv. ♪

>> welcome back. president obama will announce a series of guidelines for u.s. surveillance policy on friday, including limits on spying on u.s. allies and phone record collections will stop this comes as the new york times reports he nsa has implanted software in 100,000 computers to bolster their surveillance programs and serve as a launchpad for cyber attacks will stop our own white house correspondent is with us right now. is this the type of information that makes change more likely to u.s. cyber option? >> it is a report that you look at and say wow, but an interesting thing when it comes to u.s. cyber capability -- you have not seen that on the target list for you u.s. lawmakers are privacy advocates as they push for these changes. wiley, the president has rejected two of the recommendations from the nsa task force he put together. the first is to split u.s. cyber

command from the nsa and the second is to put a civilian the top the nsa and not a military leader. it is interesting when it comes to cyber -- u.s. officials are clear that as long as it's not impacting individuals inside the united states and being used as a defense mechanism, even something like this program where you are implementing data into worms and computers, that might be fair game so long as it is in a defensive posture. >> is this any different from what china is doing? >> no, not really. it depends on who you talk to. >> i'm talking to you. >> u.s. officials will say what china is doing, what cyber attacks their sting from china is they are economic base, attacking companies and capitalism, going after institutions that are crucial to the u.s. economy. that is severely problematic. what u.s. officials say they are doing with their cyber attacks

are capability is they are in a defensive posture. they are trying to protect u.s. institutions and government officials from attacks from other countries. but according to these reports, it's very clear we have cyber operations going on in foreign countries, including allies. this iss will tell you part of the game. many people call it the wild west right now. if you are not playing in a game, you are losing. some of our knowledge about this program to edward snowden, don't we? >> i think you owe everything in this conversation you're going to hear to edward snowden, regardless of whether you think ,e's a patriot or traitor without edward snowden, this never happens. >> does this mean he should have the time cost her some of year?

thet's hard to pick between pope and edward snowden. >> yes. i have not thought of the pope. when you asked me who i thought should be time's person of the year, i said edward snowden. >> the pope, totally the pope. did you think i was going to pick katy perry? ke$ha?e >> it would go beyond lady gaga -- ke$ha is not even on my radar. >> we will be back with other stuff.

>> we are approaching 26 minutes

past the hour, that means it's time for bloomberg's on the market. a direct level marketing company is plunging now, the most in almost 10 years. it is an article in the people's daily newspaper in chinese that is highly critical of their marketing techniques, calling them a lie, suggesting new skin could be an illegal pyramid scheme. sayingn has responded, the article contains inaccuracies and exaggerations that are not representative of our business in china. it goes on to say it has an 11 year history in china and the government regulate reviews its activities. are clear to sell in 19 of china's provinces. it appears new skin relies on china for 26% of its sales as of the last full year. we continue to monitor these

shares, but they are plunging right now, off i-17%. >> we are also watching herbalife because some people throw that into the conversation about multilevel marketing. there is one prominent person who has made the accusation that herbalife is a pyramid scheme. in a moment, we will be talking about your phone company and the nsa. than yoube closer think. you've heard about it and read about it. we will give you the details. >> it is the news was in the investment world. we have talked about it a great deal here. we will meet the ceo of the first of equity firm to focus on medical erewhon. i know how big this weed growing has become. how is it to be a businessman in that space. can you find bankers willing to do business with you? there are huge reputational

risks. colorado is the only state where you see this happen in a real way. driving around with bags of cash looking in the rearview mirror waving like criminals, not because they are but because they are worried they're going to be robbed. weekyst just said last they're having an issue at the smell of the money they make because it smells like weed. to banks. bring it this problem stinks. more when we come back. >> get that? >> i get it. ♪

>> live from bloomberg world headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> the relationship between american telecom companies and u.s. intelligence agencies is under the microscope like never before. questions have been swirling for months about how much information companies like at&t and verizon share with the intelligence community. in a few minutes, the former ceo of at&t will be here and we want to talk to him about that. but as we look forward to that, let's break in -- let's bring in peter cook. phil mattingly was telling us a bit about what the president was going to be saying or at least the move we anticipate the

president will be making. how difficult is it going to be foreign to satisfy his critics? >> it's going to be hard for the president to satisfy everyone. he's hearing it both from liberals and conservatives on capitol hill, as far as what should happen with those nsa surveillance programs, and he's hearing it from the business community as well. we had a tech ceos coming last month to the white house telling the white house their businesses are being hurt, particularly overseas, by the disclosures of edward snowden and the suggestion that they are in cahoots with the federal government. they want some clear messages on friday that day are cooperating when they are forced to but they are not crossing that line. it's important for the business community to get reassurance from around the world and in the u.s. that these companies are ,oing their civic obligations but they are not going be on that. >> how much harm has edward

snowden and the surveillance stories done to these companies? >> it is hard to gauge all stop there have been estimates that the companies in europe, maybe as much as $35 billion in business in terms of the cloud business overseas could be affected because you have those foreign competitors saying if you do business with us, we are not going to play ball. with one ofsiness those american companies, you cannot be sure your information is secure. let's talk about what the companies are doing in the meantime. no matter what the president trying to tap into their information, the nsa keeps saying that doesn't happen but many people believe it does. they have taken it above themselves and they talk

publicly about boosting encryption so they are more secure. this has been an effort by these companies to show they are bolstering their own security and proving to their customers that their data is secure. at the same time, they are pushing the federal government to provide even more transparency about the obligations. by what theyted can say and they have made the case that if they are allowed to turnover that information, their customers would be reassured that it's isolated and not as widespread as some people have been led to believe. >> when are we going to hear from the president? >> on friday. we have had some detail start to leak out. perhaps the area of greatest interest right now both in the business community and on

capitol hill is what's going to happen to the bulk collection of phone records? will the president and that responsibility over to carriers to maintain that data and then have the government get a court order or will he maintain it at the nsa or will he do away with it altogether? >> up next, we have someone with an informed point of view on that very issue -- a former ceo of at&t. >> that's going to be a great conversation. that's coming up next. peter cook, you're going to want to watch that. you are watching bloomberg television. ♪

>> you are watching "market makers." we have been waiting for the former ceo of at&t to make it here because he was held up by some travel issues coming in from florida. wehas finally made it and

are going to kick off the conversation talking about the nsa. very nice to have you. >> good to be here. >> here cook was just talking to us about what we might hear from the president on friday. one of the big things people are waiting to hear about is whether havecides the data the nsa been analyzing from companies like at&t and verizon will continue to be stored by the government or by the phone companies themselves. anyway to haven that data reside with phone companies and not in the government's hands? >> i doubt it. .t's a tough issue we have to look at this through the eyes of everyday citizens and everyone worries about is big brother watching me. veryall covered under careful legal constructs. we all have our right to privacy. certainly whatever at&t and others will do, it's going to be covered by law.

>> how difficult an issue was this surveillance when you were they ceo of at&t and you heard from the government and you heard that you had to comply? immediately following 9/11 was a time that was very unsettled. int -- i became ceo february, so it was very new. were there other attacks planned? tomade a simple judgment comply under a court order from the president and we chose to follow that. we felt it was our responsibility to do it. >> how much damage has they had to deal with since this surveillance story came out? >> it's a factor because trust is important. we have always been beyond

reproach. obviously there are exceptions, but in general, we have not had the issues that other people have locked us. themost difficult things, snowden revelations are casting question on the integrity of american businesses and how they do things. of at&t andmer ceo also as an american who wants his privacy protected, what do you think of edward snowden's actions? lex i personally think he is a traitor. i believe he revealed information that is detrimental to the security of america and its citizens. jetn't think you can count any other way. >> one of the things he has alleged is that the nsa and other organizations use backdoors to get access to information from companies that are not voluntarily provided.

what if he is right? did you ever see anything like governmentpect the was taking things from at&t they did not have the right to? >> i really can't comment on things that are classified. lawyers have advised you not to discuss? >> yes. and my lawyers are paid by me, not by at&t. i believe our right to privacy is protected by the courts and and theseonstructed are very experienced people. they look at the issues one by one and make decisions. we are in a different age today. surveillance in the cold war, having submarines chase each other around in the ocean is quite a different than dealing with shadowy enemies who seek to do great damage. let's face it -- the homeland of

the u.s. is the number one >> this is aop what if scenario. what if snowden is right and the nsa is finding some way into google's store house of information or apple or at&t without that fisa court order? would you feel the same way about it then? >> if they are violating the law, they are not acting under the rules of the law -- >> that's what i'm asking. >> i would be very bothered by that. at this point, i don't believe they are but i don't have information to corroborate. >> if that is the case, would you feel the same way about edward snowden? >> yes. because i think you went well beyond that. the position he had. he made his own set of decisions and was judge and jury and prosecutor the case himself and said i'm doing this without

regard to the implications of those decisions on people's lives. >> do you think telecoms run the risk of losing business overseas from those not comfortable with surveillance? >> that's a hard question to answer. i think trust has clearly been tested. when they hear things like the president of brazil being tapped or angela merkel, all of those things are bothersome and the president has had to deal with that fallout. at the same time, the number one job of the nsa and the president is to ensure the security and safety of citizens hear the best they can under the laws we have. >> if the president decides the phone companies, at&t and verizon have to hold onto the records of these people for years, is that a workable solution or are at&t and verizon going to say not my problem? really don't think they

would want to do it. at&t and verizon -- there are too many things that could happen. you are protecting information for other people and it seems like a giant liability was no upside. if the government wants and needs it, it needs to make the proper decisions about how to do it. not leave it in the private sector. >> we're going to take a quick break. when we come back, we will talk about the wireless wars. the former ceo of at&t with us. we're back in just a few short minutes. ♪

>> we are back with the former at&t ceo, david dorman. few people know more about the wireless wars between verizon, sprint and t-mobile than this surprisedtop are you by these wars? the drama is getting out of control or is this just how

business gets done? >> it not really surprising all stop the u.s. and attrition now is either 100% of people have phones or you are counting some people twice. there are certainly some people who don't, but we are close. the wars are driven by the need to take customers from someone else versus getting someone who's getting their phone for the first time. >> it's great for the customers because the rate -- the race cheaper service. >> i think competition is being driven by a variety of factors. requiredall, scale today to compete, the bout of spectrum the need and capital that needs to be spent is huge. this is not for the faint hearted. i would imagine at&t and verizon each are probably spending between $15 billion and $20 billion a year investing in their network. t-mobile and sprint are investing billions as well. this is a serious race. the ceo of at&t has been lulled

into this race to the bottom with t-mobile. how long can i continue before somebody runs out of a looks? >> there are a couple of things that play. device subsidies which are unique to the u.s. market. the problem is you can't take the candy away from the children now because they are hooked on it. you stay on it for x years and get a subsidized phone, that has been very attractive. arefact that these changes happening so quickly and devices are advancing, no one stays with a phone that long. all the carriers would like to wean them off. t-mobile is kind of interesting. dan has see who runs sprint works for at&t -- worked for at&t. mobiledger who runs t- work for at&t. any have at&t and verizon -- lowell mcadam was at pacbell.

it's not like these people came from foreign lands to meet each other. all fighting ground they are familiar with using different techniques. >> but right now, they are crossing rubicon's no one in the wireless industry dream they would have to cross. if t-mobile -- sprint has some deep pockets because softbank is behind them. t-mobile can be bought by sprint, can they continue on this path without bankrupting itself? >> there are a couple of questions. t-mobile wanted to sell itself to at&t but it was stopped. what you telekom signaled a willingness to sell. they had a price they were happy prefer notey would to continue to invest in the u.s. versus other markets they could choose. t-mobile made a decision and today, we are in a situation where can the government back up from the decision it made which was the whole record around t-

mobile and at&t being not .llowed was for 23 is bad >> at&t is a bigger company. >> the record was about the structure of the market, not who was big and not big. three roughlythat the same size is ok? i think that is a hard case to make. i think that the government policymakers should avoid picking winners and losers in industrial policies in deciding who the players are and how they should lay. we are a free market and we should let the free market work as much as possible. look at the device manufacturing. is anyone telling apple what they can do? but you say device -- i have to ask, what's the future for my beloved blackberry? >> you better go buy five of

them and put them in a drawer. >> there's nothing left? lex the pool truth is if you would back six years as we were talking off-camera, the biggest names in devices were lack berry, nokia and motorola. today, where is nokia's smartphone in the u.s.? to change itsled destiny with the 10. and motorola is now owned by google. the three biggest names are gone and you have apple, samsung and other players. i think it is very difficult to recover. blackberry has a very strong following for business e-mail users. when you get into a broader function device, they don't hold up. >> can you look into the future and see who's going to win the device work? >> i would not bet against apple or samsung both being there. having said that, when i joined the motorola board and was chairman for four years, the

razor had sold -- >> that takes me back. >> it was terrific and nobody would have predicted three g happened and motorola didn't have a product and apple would launch it. very few people know that when ed zander was ceo of motorola, he and steve jobs met frequently and agreed to launch a product which had an apple ipod in a motorola phone. i wasn't intold, the meeting, but after one of those meetings, steve jobs look at his people and said these guys are hard to deal with. why don't we just put a phone in it? how hard would that be. is 500 billion in market cap and hundreds of millions of phones will stop >> that was the era of steve jobs. has apple lost its groove? many of us said this looks like isapple products, the nest

an apple guy -- >> they have talked a lot about tv. we've heard about apple tv for a long time. that's an area that supports their ecosystem which is content distribution. to me makes more sense for google. let's face it, we get a lot of nest.ation from our i know what the temperature ours are and what the profile is. >> if you had to bet on one company, the information company , the cloud company, the hardware manufacturer or designer that makes us live in walled gardens, which one would it be? >> look at the margins, over the last five years, no one has made that kind of money apple has made in the device business.

i had a debate with a guy similar to this last year. i don't care how good you are, the pace of innovation required for apple to maintain its lead in margins is a tall order. ibm going in the their business-- was based on the margins of their mainframes. in apple, the business is based on the margins of the iphone, ipad and other devices. they've built some other interesting stuff -- >> they don't want to turn into ibm. >> the pace of innovation is way faster than mainframe computers. >> more people are talking about the internet of things. were talking about the wireless worsen the carrier

perspective. if you are a carrier, are you going to fight phone by phone for every dollar you get or are you going to innovate and create new products? of a major seawn change in what the carrier is going to be offering. open the door and it will certainly be appealed for a new growth and video programming product distributed through devices and carrier networks. it's driven with the four g networks they are deploying, their access to wi-fi on these devices, and the fact that devices can store more and operate faster at faster processor speeds and digital launched a product called digital life. the cable companies are doing the same thing. you will see a whole new set of applications built on these platforms.

google, iint about think google is in a terrific position. and tookched android more than half the market in an incredibly short time. maybe steve ballmer would like to have had that. >> google -- when you become a verb, you are legit. thank you so much for joining us. >> the former ceo of at&t. tomorrow, we will bring you ben bernanke ross final address at -- as fed chairman. right now, we are going on the markets with julie hyman. >> it's time for today's options inside. goldman sachs reporting earnings before the bell tomorrow and zacks investment research is looking for it to the analyst estimates. jarrod leavy joins me with his slightly bullish strategy on goldman when it comes to options. let's start with the numbers. goldman sachs is in a much more intensive business and it's a

business that hasn't been doing too well lately. why are you relatively optimistic here? >> it hasn't been, but goldman is always lumped in with the big money centers and it's for a good reason. but're businesses do cross goldman, unlike wells fargo or bank of america doesn't have the mortgage loan exposure that they would have on the retail side. at 11k goldman, trading earnings, compared to jpmorgan wells fargo, these banks will have to find ways to make money. goldman can deliver growth in revenue and i think it will continue to deliver earnings per share. >> you have to be good at managing expectations.

>> they are pricing in about 2.5% of the expected move. i'm looking at a simple trade -- next week's expirations expiring on the 24th of january -- i'm -- 167.50 put0 spread. you might want to move that up to 172. >> we have to leave it there. we will be on the markets again in 30 minutes. ♪ . . .

"lunch money." i am adam johnson. and what he hates about washington and why he is telling google. how did he get here anyway? the head of the world passes largest ad company tells you how he got to the top. and why the long face, amazon worker? to unionize this giant. the man who gave us the real world knows how to win. that is coming up. finally, in