>> from bloomberg world headquarters in new york, i'm mark crumpton. this is "bottom line," the intersection of business and economics. with a main street perspective. for the latesth treasury secretary tim geithner looks back at the financial crisis. and continuing coverage from the wired is this conference. to our viewers in the united states and to those of you joining us from around the world, welcome. we have full coverage of the stocks and stories making headlines today. interviews

transportation secretary anthony fox. julianna goldman reports democrats are looking for some competition. let's begin with the phil mattingly and efforts to control high-frequency trading. good afternoon. >> good afternoon. the first in what is expected to be a series of congressional hearings, u.s. lawmakers dug into high-frequency trading and outlined some concerns raised by the like it -- by the michael lewis book at one of the biggest questions -- our new rules coming? the answer, maybe. one of the big questions for the cftc director of oversight is where is the cftc in the drafting and what will the world look like? here is what he had to say. >> the concern that we have heard, at least in comments, is int prescriptive regulations this area can be quickly outstripped by changes in technology. so proposals that have come back to the commission have said we should have more of a runcible-based approach. i think the challenge that we

have is flexibility versus clarity. no timeline right now on when rules might come through. he said at this moment, cftc commissioners are working on a concept. after that, new rules make him. >> that michael lewis book sparked a major concern on capitol hill. what is the industry saying in response? >> the industry has attempted to defend itself. what we saw today was chairman terry duffy come up to testify. the difference which duffy is trying to point out is what michael lewis is outlining and what goes on in the future's office art two very different things. -- r two very different things. >> they are different from equity markets. to the u.s.apply futures markets. it is an important distinction, markets, one that

cme group is trying to make. futures and equity market are very different things. a lot of explaining for lawmakers as they attempt to get their heads around this issue. >> any sense that lawmakers are preparing a move on a bill to address the markets concerns? >> i now it seems like more of a wait and see approach. they want to know at the cftc is going to move. they are pressuring other regulators to take a look. from a legislative perspective, you hear lawmakers voiced their concern, but i think we are a ways away for any kind of bill to move forward on this. at least a couple hearings before we get any sense of whether or not they are moving to take that step. >> phil mattingly, thank you. let's turn to politics. democrats are facing a big problem this election season -- who to run against. in the past few election cycles, we have heard president obama rail against corporate interests, slamming wall street as a bunch of fatcats and calling oil companies greedy. >> you cannot overcome the special interests and the

big-money. we cannot go back to the days of taxpayer-funded bailouts. we cannot go back to the day when credit card companies would jack up your rates without any reason. insurance companies that jacked up peoples' premiums. mortgage lenders that trick families into buying homes they cannot afford. a financial sector where irresponsibility and lack of basic oversight nearly destroyed our entire economy. we passed reforms to make sure that wall street could not act in the same reckless manner. >> today, a tax on the usual suspects appeared to be few and far between. julianna goldman is following that story. why is corporate america suddenly off-limits? >> as you were just saying, every election cycle democrats, they target what we in washington like to refer to as use asporate villain to a republican foil to rally democrats and boost turnout,

paint democrats on the side of main street america and republicans on the set of corporate interest. throughr, if you get that usual cast of villains, you see that the white house is in a obligated spot. if the president were to go after oil companies as he has in the past, including exxon, for example, he could then make life a little more difficult for incumbents in louisiana and energy-producing states. another possible target, he could go after insurers and the insurance industry. it polls well in democratic polling when voters are faced with the argument that republicans are pushing to repeal the affordable care act. it is a very persuasive argument that will put the insurers back in control of your health care. but that would be dangerous for the president to go after because he needs to be aligned with insurers in order to make

his affordable care act successful and to cement his legacy there. they're really boxed in. the challenge for democrats will be boosting turnout. republican smoker they have obamacare and the affordable care act which is rallying the republican base and is expected to boost turnout on that side. without this kind of foil, without a corporate villain to really rally democrats around, it makes the messaging all the more difficult. gettinge white house any pushback from some of those democratic incumbents around the country? are they fearful this could backfire? >> i think what white house officials have said is they expect, given the president's low approval rating, for there to be some presidential bashing on the part of democratic incumbents. they have said they would like a little bit of a heads up first. >> julianna goldman, thank you. coming up, the former car --- brodsky talks about

timothy geithner. moore continues in just a moment. ♪

bloomberg. >> a reminder, there are multiple ways to watch bloomberg tv. we are on the web at bloomberg.com, on your mobile device, on apple tv, and on amazon fire tv. in his new book, former treasury secretary tim geithner says he was open to a solution that would affect lehman brothers in business. lehman cannot get government aid or attract a buyer. in an interview with charlie rose, mr. geithner said the government's bank bailout program was not meant to help wall street. >> what we did in those weeks after tarp authority and after president obama was elected, you know, it was dramatic and unpopular and offensive to many, but it was remarkably effective against decades and decades of

history in trying to design things to protect people. we did not do it to protect the banks. we did it because there was no other option to avoid the risk of mass unemployment. years had five and a half after lehman's bankruptcy, and a small group of hedge funds is making billions on its lehman investment. lisa abramowitz looked into this and joins me in studio. thanks for your time. why has this been such a good trade for the hedge funds? >> this is hard to value stock, talking about credit derivatives, contracts, and real estate but back in the heart of the crisis which had a very difficult value. property values were disappearing. that werehe banks let's say the counterparties for these trades or other people owed money from lehman just wanted out. they wanted to be able to evaluate claims. somebody comes and does the work

and due diligence and buys them from us and we will be ok. then the hedge funds had the capabilities and man power, the intellect, the ideas, the experience to evaluate these claims to go in, get them, and then as the federal reserve is program, th they were the beneficiaries. >> exactly how good has this trade then? onpretty amazing depending which assets you are talking about. there are different entities of lehman brothers. the european entity, claims were entering at 20 cents on the dollar in early 2010 and are now nts or the equivalent of that on the dollar. these are huge returns, especially in a time of very low yields. where else were you -- where else will you get this kind of return? high yield bond fund in no way. you're talking about an average yield at 5% on the part of the bonds.

part of the reason these distressed assets have been so good is because they are not for everybody. you do not have the capability to really do the analysis and the work and you cannot really get involved. these are claims that depend on bankruptcy judge decisions. these are not easy to value. >> you mentioned due diligence. who have been the biggest winners and losers? company, keene street -- there are about 20 hedge funds that have been very and they have earned billions as a result -- king street included. >> how much longer will this last? >> there are different estimates. people expected to continue probably one to three years. it has some legs because a lot of these funds, as they get income from the claims, they put them back to work. that further creates this cycle of value for everybody involved. where else are you going to put that money?

you have distributions of that are $20 billion. where are you going to invest that right now? >> you said cycle of value, but you did not say virtuous cycle of value. >> i will not opine on virtuous or not virtuous. i will say it is a cycle here right now it is an upward cycle, especially with the fed contenting to hold rates low for the near future. >> what can this tell us about the current state of the credit market, if anything? >> that it is back -- >> with a vengeance. >> a lot of the values got reinflate dave -- reinflate it. there are not many corners left. this has been an outlier investment. most investments are starting to get back to single digit kinds of returns, but not these. these have gotten 20% returns for years. >> wow. lisa, this is on bloomberg.com, a fascinating story. the gift to keeps on giving.

thank you. more on what went right and what went wrong in the handling of this crisis, joining me is the former tarp inspector general, neil borofsky. welcome to "bottom line." good to see you. talk about the u.s. economy -- did it stabilize under 10 -- unders watch timothy geithner's watch? what's it has certainly stabilized from the dark days of 2008 and early 2009. we could have been in a far worse place. that is not mean to say that the rebound has not been meaningful for so many people in the country who continue to struggle. but it could have been a lot worse. >> you know there were major policy disagreements between yourself and secretary geithner. what were some of them? >> fundamentally, his approach was to save the largest banks at all costs. on that score, i was one of the first people who credited tarp

with having helped save the financial system. for me, i think where we'd ?"parted was "then what geithner maintain the financials of the status quo of having large interconnected too big to fail financial institutions and left in place a lot of the architecture that had caused the crisis and i believe will cause it again. secondly, he turned a real blind eye to one of the major purposes of tarp, the reason why it got passed, and he had the ability to do the remarkable things to help save the largest financial institutions. that was to help homeowners. ultimately, he walked away from that obligation. promises were made to help the struggling homeowners who were the frontline victims of the financial crisis. >> there are some interesting comments on your linkedin account. you read the following -- mr. geithner or resorts to already discredited factual mischaracterizations and

name-calling. you also write -- the american unfairconsidered tarp an giveaway to the largest banks and a failure for main street because that is exactly what it was. we should mention that you talked about this in your own book which came out in 2012. you and i discussed this, as a matter of fact. was a generalre indifference. i think they made promises that were necessary to get the bill passed, but timothy geithner frankly was not all that interested in helping struggling homeowners. what they wanted was to get the firepower to save the big banks. they got it. he saved them. and they do not want to go through the bother, the expense, and potential political fallout of doing what was necessary to help the people or the frontline victims. >> i do not know if you just heard, but we played a sunlight from mr. geithner. he was on with charley rosen said the intention of tarp was not to help wall street.

it was to help main street. louderink actions speak than words. regardless -- regardless of what mr. geithner may claim the intent was, we have to look at what the impact was. every time there was a key decision to be made, it was to save the banks. it was to ignore main street and you can come up with all the justifications in the world. but at the end of the day, there were hundreds of billions of dollars of available tarp funds that was supposed to go to help homeowners but he made the key policy decision not to fulfill that thomas. to me, that will be part of his lasting legacy, along with his effort to keep the current broken status quo of too big to fail institutions in place. >> i'm speaking with former tarp inspector general neil borofsky, joining us from los angeles. what more could have been done during the financial crisis to turn things around more expeditiously to stem the bleeding? >> there were a number of areas

suggestions that we made and that others may get one of the mischaracterizations from secretary geithner's book was that there were no suggestions and we were just critics. we talked about significant principal reduction plans to help struggling homeowners, having meaningful reform that broke up the largest financial institutions. these are all things that could have fulfilled the basic promise that was made and also to help ensure we were not on the path towards another financial crisis. instead we have tanks that are 35% bigger now than going into the crisis -- instead we have banks that are up to 35% bigger now. i think mr. geithner will be looked back as one of the architects of the next crisis. >> in hindsight, it sounds pretty good, but also looking back, was their political will at the time to get those things done? >> i think there certainly was. you look at dodd frank, and there were strong efforts to break up the banks when it was

happening. there were amendments that a officialonly -- bragged that it would have passed if they supported it. they ended up killing it. that was the brown kaufman amendment or the was political well but there was no interest. some things mr. geithner has said referring to too big to fail as moby dick, as something he was not even terribly desirable to end too big to fail. that reflect the policy disagreements we had. >> we have about one minute left. we have heard it time and again since the official end of the recession that for all its good intentions, regulatory oversight is strangling free committee and hampering growth. can we have both, the regulation that is needed to keep the playing field level and at the same time the room to allow the engine of growth to begin firing on all cylinders finally? >> i think our regulatory system is overly complex. such asilar decisions

bringing back a modernized version of glass-steagall or having size caps for significantly higher equity capital requirements for institutions which are potentially much simpler than what we ended up with would have the effect of not only helping to solve the too big to fail his index forlso large institutions and has a disproportionate impact on smaller institutions that are no threat to our financial system and still have to labor under these, frankie, incredibly onerous regulations. >> neil borofsky, former tarp inspector general, joining us from los angeles. good to see you again. thanks for your time. you do not want to miss the interview on bloomberg elevation, the former treasury secretary tim geithner, on charlie rose tonight. we will get you in on the markets check with matt miller when we continue. and we will take you to the

wired business conference here in new york city and here from howard mckeon, vice president and double sure of wired. -- publisher of wired. ♪

monitoring a developing story for you. county police in maryland say a vehicle has ramped a television station and there may be an armed person in the building. identified thee vehicle as a dump truck and said people should stay away from the building which is located off the busy road north of baltimore. a spokeswoman of the police says the vehicle hit the station just before noon. hole could be seen in the

front of the building this afternoon. police officers are on the scene and news helicopters are hovering above. we will continue to monitor this and bring more developments as soon as we get them. it is 26 minutes past the hour and bloomberg television is on the markets. matt miller has the details. >> getting you caught up on where stocks are trading after the s&p 500 hit a record high earlier, going above 1900, currently trading just a few points below that at 1897. the dow at 16,000 719. the nasdaq at 4001 hundred 35. a couple members, coca-cola raised the stake in hearing green mountain to 16%, becoming the largest shareholder. the move only three after it acquired an initial 10% stake. .reen mountain shares up another stock is at&t, the telecom giant is in advanced talks to acquire directv for $50

billion, according to people familiar with talks paired under the plan, directv management would continue to run the company as a unit of at&t. they could make a deal in the next few weeks. we're back with more here on bloomberg television. ♪

welcome back to the second half-hour of "bottom line" on bloomberg television. i am mark crumpton. thanks for staying with us. let's check top stories. an algerian -- a nigerian government officials at all options are open in efforts to rescue almost 300 abducted schoolgirls from their islamic extremist after his. reconnaissance aircraft started flying over the west african nation today. the militant group boko haram said the girls will only be freed up to the government releases jailed inmates. retail sales growth slowed in april with consumers shopping less online and cutting back on

purchases of furniture and electronics. the commerce department says retail sales rose just .1 of one of 1%. -- .1 in surged in march following a harsh winter that had curtailed shopping. excluding autos and gasoline, grew .1%.es the takeover of astrazeneca. ian reed testified in parliament today. they are concerned the deal would lead to job cuts. panned down to be on his commitment to reserve charge. pfizer plans to swing the $101.9 billion bid for second time. it may wait until after the hearings to offer more. that is a look at the top stories in news at this hour. countdownst off your clocks -- the crisis looming this time has to do with highway funding. unless congress and the obama administration reached a deal on the new highway bill,

transportation projects across the country could grind to a halt this summer. our chief washington correspondent, peter cook, spoke to the transportation secretary administration's deal for a new push here. we're near crunch time already. >> the current highway bill does not expire until the evening of september, but the department of transportation estimates the highway trust fund could start bouncing checks by august, putting 112,000 construction projects, 700,000 jobs intensely in jeopardy. time is already running out to pass a major transportation bill in this midterm election year. the big sticking point, as usual, how to pay for instruction drugs -- pay for interest -- for infrastructure investment -- [no audio] he will add to the post and meet at the tappan zee bridge in new york. he will speak there. that bridge has already passed its projected lifespan. at a bloomberg government

conference this morning, the transportation secretary, anthony foxx, painted a dire picture of the nation's infrastructure challenge. he called on congress to reach agreement sooner rather than later. now, we are falling short. we are under investing in infrastructure. and we need to strongly send a signal not only to ourselves but to the rest of the world that america is back in business when it comes to our transportation system. for themade the case administration's own proposal. the four-year plan is $302 billion. transit or objects would be funded by a temporary tax increase on overseas earnings by companies, in part. no increase in the politically sensitive gasoline tax. the idea of taxing overseas income is an idea that has been floated by republicans as well. is the bestthat alternative funding right now. but key members of congress have not signed onto the idea. a bipartisan senate bill

released late tuesday approaches things a little differently and would cover six years. the bill would cost $105 billion a month that they are leaving the idea of how to pay for it to another committee, the finance committee. so that continues in the senate. secretary foxx says even though there is no funding stream for that senate bill, he still considers that progress, democrats and republicans working together on this issue. >> what are the chances in the house? >> a separate fight over there. will needer says he to get past a primary challenge later this month. he is not clear on exactly how he plans to pay for his bill. he is in for a long-term bill. some sort of temporary fix, most likely passing midterm elections which a lot of people on capitol hill are expecting. >> peter cook, thank you. the 2014 wired business conference is underway in new

york city. the one-day event brings together top leaders and disruptive innovators like the founder of tumblr and the founder of atari. howard mittman is vice president and publisher of "wired." he joins me now with more. welcome to "bottom line." >> thanks for having me. >> a have to begin by asking, what is disruptive innovation and what are the social implications? disruptive innovation is everywhere. it is anytime people, companies, ideas began to rethink the way developed.have for us, the business, the social, the cultural implications are massive ear that is what this event is ultimately about, how we can rethink the opportunities we have at hand and maybe even write a round mag -- a road map out into the future. >> is this kind of innovation at the expense of more established ones in the market or can they

coexist? >> i think new markets are always created at the expense of established ones. but it is not really the goal of the conference to put the traditional markets out of business. essentially what we're trying to do is inform the traditional markets about new ways of thinking, new ways to utilize technology so that they can take these ideas back to their companies and begin to navigate through that disruptive change or that moment of aallenge before it becomes systemic issue that does render them potentially even out of business. that? you seeing are some of these markets taking heed of what you are doing? >> i think so. members inumber of the audience have been here now for the sixth year in a row. there is value in that. and it sure sting community has formed out of the wired business conference. we are proud of that. formed out of has the wired business conference. people talk about things they

have learned in previous years and enabling their thinking and enabling them to shift for their business. those are the kind of things we're working for. it is not just to delight, but it is ultimately to inform and help give people the tools to navigate disruption before they become the ones that are disrupted. >> you mention for the sixth year in a row, what was it like at the beginning? describe the amount of change you are seeing now. ofwell, it is from one end the spectrum to another. when we launched this and announced we would do it at the into 2009, itd was met with skepticism. we had to believe that technology, innovation, and ideas will provide a better, brighter tomorrow. so that is the optimistic role "wired" has always taken. it is not uninformed optimism. it is informed optimism. we are not lying. what we do believe in is that

ideas will always trump all. i think the last five to six reallyhere have been just an incredible amount of growth that we have seen, both for the wired world and for the ways of technology becoming less of a story. that is the story to me. >> what does this innovation mean for consumers, and how does it help them to rethink perhaps where they should shop and what they should buy? >> i think the biggest difference between the first dotcom bubble and the situation we're in now, bubble or not, it does not matter. it is really the ubiquitous penetration of broadband internet. but that has fundamentally changed everything. boom, original dotcom many of this happen, and we are able to flourish. we are in an era now where the desktop is even less important than mobile.

accessibility. it has really changed to we are as a culture, how we shop, how we think, and how we invest and look at things like architecture and medical care. it is a wide swath. >> you and "wired" could be considered disruptive innovators. you lead the charge into digital publishing. how has that changed the way the publishing industry gets its ad revenue? >> you know, for us, i hear a lot about publishers saying that they are digital first. i hear others say they are mobile first. i do not like to think in either term. i like to think we are community first. where ever our community members and readers will be, we want to be there. we want to make it easy. we want to make sure "wired" looks and feels like "wired" wherever it is presented. as we have seen from the exercises we have had with the

tightlipped -- with the tablet and with digital offerings, we have seen a massive shift in more than half of our business comes from digital at this point. the white space that exists around us as well beyond traditional media plays. >> taking the charge off the cliff. vice president and publisher of "wired" joining us from the wired business conference. howard mittman, thank you for taking the time. people in panama received a rude awakening this morning. we will have the details in the latin america report next. ♪

welcome back. it is time for today's latin america report. a magnitude 6.8 earthquake rattled the coast of panama today. people had to run out of shaking buildings but no damage was reported. the u.s. geological survey said the earthquake was centered off

the pacific coast, about 81 miles south of the city of david. cupnth before the world kicks off in brazil, representatives of more than 19 security institutions gathered about how they can work together to guarantee security during the tournament. the civil aviation minister of brazil met with world cup organizers at the international airport of rio to simulate the arrival of delegations. terminals are still undergoing terminations and only one of the terminals will be ready when the tournament begins in june. that is your latin america report for this tuesday. coming up, executive compensation. we will look at why the early $2 paid its ceo- cvs -- cbs paid its ceo esther might be 19 times bigger than the going rate. ♪

>> welcome back.

we turn our focus to executive pay. a recent ceo competition study found an interesting collision between executive pay and a company-selected p or group -- peer group. interesting is probably an understatement. what does this study show us? >> we have a wonderful time incision expert who crunched the numbers from the s&p 500 for us. -- we have a wonderful compensation expert. the annual revenue really predicts what a ceo gets paid in cash. he figured out a going rate, as you said in your intro, based on the size of the company. we found a couple of companies who have much higher than their going rate. cbs and discovery being those two companies. >> who is using bigger companies groups?eer like cbs and discovery. cbs had about $15 billion in

revenue last year. group, they included general electric, at&t, verizon, these companies that had seven times the amount of revenue that cbs had. based on what we are seeing, size is so predictive of how much cash a ceo is going to get. cbs is putting themselves among comesigger peers when it to executive pay. >> myself and some of the producers were discussing this and there was confusion. on its face, it seems counterintuitive. if you have the larger revenue companies but then the ceo who is with the smaller revenue company, but then they get 19 times their earnings. i am trying to follow that. >> so are we, i suppose. yeah, i mean, that is one of the challenges that companies face, thating out a peer group

is appropriate so you are accounted for figuring out peers who you might compete with from a day-to-day basis. but not so big that you are skewing your pay higher than what it should be. >> how does the pay of those ceo's compared to their peers? moonves gotnvest -- $32 million in cash last year. in cash. he got about $67 million in total pay. about half of that was cash. ceo got about $18.5 million in cash. verizon and at&t pay their ceo's only about $1.5 million in cash. the rest is typically in equity awards. >> how does the solution to peer group compensation settle out? can you fix it? >> you can. some said you just have to

adjust for that. if you know you are using bigger group,es in your peer maybe take your pay down a notch and adjust for that differential in size that you have. one expert told me that in about $5's case, billion in revenue, it is hard for that size company to find companies like it. so you have to use bigger companies. it is about adjusting downward and being cognizant of your size. >> is that something that is probably going to be the norm now? are folks going to take a harder look at that? adjusting downward, that might not be with the folks making $32 million want to hear. >> we are in a new era with executive compensation. howstors are looking at these compensation programs are structured. >> also, boards of directors are looking at it. >> sure, because they know the pressure is on from investors. if they get a negative vote on

this, it does not look good. boards are certainly engaged in this conversation. >> when we looked at this, when my register and i looked at this , i was shocked at some of the numbers. was there anything that jumped out at you? were you as stunned as we were? >> absolutely. more thann in cash is total compensation packages of a lot of big companies. >> exactly. >> it is shocking, yes. >> we can see this online. cash himon in executive compensation. wow. stay with us. another check of market movers on the other side of the break. ♪

>> get the latest headlines at the top of the hour on bloomberg radio and streaming on your tablet and on bloomberg.com. that does it for this edition of "bottom line." i am mark crumpton. thank you for joining us. "on the markets" is next. ♪ >> 56 past the hour which means bloomberg television is on the

markets. i am matt miller. i want to get you caught up on where stocks are trading you're it we had hit a record at one point, a big number, the s&p 500 equipped 1900. it has pulled back a little bit, but is trading very close. the dow jones industrial average 17, a record there as well. , coming down 4,137 a little bit. but very little changed on these fluctuating indexes today after some interesting retail news came out this morning. now it is time for today's sector report. we are focusing on those retailers. april retail sales out this morning showing that american shoppers took a breather last inth after a spending search march. joining me to dig into the numbers is the founder and ceo of driscoll advisers, a retail consulting firm. we're looking at the april numbers, and they really were not that impressive.

adam johnson was showing as earlier that ex autos, we were completely flat. why? >> that is right. why? i think that some could have been -- you have to look at the time together. you have the april easter shift. when you look at the results of individual retailers, much stronger than the numbers we saw -- >> exactly. i am thinking victoria's secret had a huge job. old navy was a huge jump. so the clothing retailers did well. >> they saw some improvement. on a month over month basis, department stores and clothing retailers were the best performers. i think that we are seeing consolidation within the industry. so while the economic aggregate numbers are weak, the companies we watched that report numbers, some of them are reporting very strong. >> let's talk about some of the companies we are waiting for this week. macy's is coming out. i believe cole's -- kohl's is

reporting. walmart is reporting. and walmart do better than macy's, the discount stores? >> i think macy's can hold their own. they do a great promotional business. great website. >> right, and they are fulfilling from a number of stores. they have picked up at the stores. i think the first quarter is because of weak february and march. traffic was very weak all quarter long. when people got to the stores, they spent money. i think macy's will hold their own. something with target because of the fiasco with credit cards. is the the jcpenney wildcard. we would like to see about a 4%, there.

ther.% comp -- there? -- we see a comeback >> i forgot about them. will we see a comeback for jcpenney? >> you have a lot of weak layers which means the remaining players can do better. and pennies kohl's will have a leg up. >> we are on the markets again in 30 minutes. ♪

>> another record day on wall street. topic 1900. i am trash -- trish regan. this is "street smart." ♪ >> welcome, everyone to the most important hour of the session. today fleming -- coming up, high-speed traders will be choir to register. why the plan just will not work. our interview ahead.