click from bloomberg world had -- headquarters, this is "bottom line." former bear stearns chairman is greenberg is dead at 86. then, israel and hamas consider the u.s.-backed truce proposal. starbucks perked up its product offers. to our viewers here 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.

phil mattingly reports on central american leaders white house meeting with president migrants at the us-mexico border. we look at new products from starbucks. and if we follow gaza and ukraine. the death of alan is greenberg. he was ceo when bear stearns collapsed ring the 2008 financial crisis. he died today of cancer, here in new york city, at the age of 86. here's what greenberg explained what he thinks happened in an interview from 2008. >> it became an avalanche of people. it fed on itself. i'm not saying anyone started a malicious rumor to put us out of business. i'm not going down that road all. i don't know. cani know is that a rumor start, and again turned into itself filling prophecy. that's certainly what it did with us.

it almost did with merrill lynch. it almost did with morgan stanley and goldman sachs. cohen.s bring in bill his book "house of cards," chronicled the fall of bear stearns. he joins us via skype. ms. do greenberg believe that bears collapse was due to the fact that the company was highly leveraged. how responsible was he leading letting the firm build up some much leverage? on this relatively solid day for wall street, t y for having me on. -- thank you for having me on. alan swarts was actually the ceo of bare when it collapsed. ceo -- heeplaced as just gave that up in december 2007, before alan schwartz came.

all of these wall street firms had too much leverage. bears case, at times they were leverage 50 to one. that meant a 2% decline would why got there at 20 -- wipe out their equity. that's what happened in march of 2008, when the mortgage backed securities they had built up on their balance sheet became worth a lot less than they thought they were. >> that correction unit at the beginning, and that misstep that i made, is that something that mr. greenberg was concerned about? because he was so closely linked with the firm, that people thought he was in charge when that happened. definitely -- for our generation, he definitely was the embodiments of bear stearns. he was a rough-and-tumble. no-nonsense. he had a way of conducting himself how much it was very

much the way that bear stearns constructed itself -- conducted itself in the market place. jimmy kane had this love-hate relationship with ace. it very much about that as well. -- very much embodied that as well. >> you wrote about how the bear stearns cancer had metastasized and spread throughout the world. what were the warning signs that could have prevented that? >> when the two bear stearns hedge funds began to collapse coming february, march, april of 2007 -- that was a clear warning sign. i believe that was the canary in the coal mine of this whole process. that is when people should've realized what was happening. those two bear stearns hedge funds -- they were chock-full of debt obligations. that became literally the cancer that spread around the world.

metastasized because wall street packaged up these securities and sold them off as investments all around the world. when they lost value, that hurt investors all around the world. used aso were collateral for short-term financing for these wall street firms. when they lost their value, though short-term financing markets ran from financing the securities. that was what bear stearns had a face at the end. that was the only way to get financing. >> what is greenberg's legacy? how do you want people to her member him -- how did he want people to remember him? those guysst one of who was absolutely a legend. he and others -- helped make bear stearns a wall street powerhouse. for maybe 40 or 50 years.

incredible role in that. he helped bring the firm into being a trading firm. he helped again to have the firm's taking all kind of risk. he was very careful about his risk-taking. he's just a legend on wall street. his passing is a real moment to note. i'm glad you noticed it. bill: joining us via skype from nantucket. bill,always a pleasure -- always a pleasure. consideringamas are a temporary cease-fire offer, brokered by john kerry. in the meantime, the fighting continues. peter cook is following the latest. mark, the weight is on right now to see if israel and hamas might accept the terms that secretary of state john kerry proposed.

it would extend through next week's islamic holiday, potentially offsetting any day conflict that has killed many. the truce deal under discussion include a proposal for israel to remain in gaza, to continuous instruction of those cross-border tunnels, while hamas would be able to negotiate with egypt on new arrangement to ease the economic arcade of the gaza strip. working theen phones, talking to everyone in the region in the last few hours. key details remain very much in play today. both sides expressing reservation. the white house says it is hopeful that something can be agreed to. in the meantime, the violence continues. it has built over to the west bank. palestinians have biggest protests overnight. they are expected to hold a news conference later on today with an update on exactly where things stand. we could learn at that point whether john kerry will be headed back to washington

empty-handed, or perhaps, with a cease-fire in hand. >> what about the other major hotspot -- ukraine? >> things are as living there as well. tensions between russia and ukraine are growing. both sides now accusing the other of cross-border shelling. the united states is weighing in on all this as well. baker hughes rush of sending even heavier weapons to the separatists in eastern ukraine. the u.s. ambassador to nato saying the u.s. believes there are 15,000 russian troops on the ukrainian border, up from about 10,000 previously. that's as ukrainian government troops gain ground in eastern ukraine. it's only serving to raise tensions here. the possibility of direct russian involvement has been talked about a lot, and now these accusations are certainly escalating tensions. they are raising questions about what is going to move forward. whether this crisis will get worse before it gets better. the european union is stepping up sanctions, agreeing to consider stronger moves against russia.

specifically, we are being told they include the possibility of abandonment of the purchase of state russian bank debt. as well as moves against the energy sector, perhaps an arms embargo as well. >> peter cook, thank you. ed royce is chairman of the house foreign affairs committee. earlier today, he spoke to bloomberg's al hunt about the evolving situation in the gaza strip. that cease-fire holds. that's the only thing i see right now. we have to work with every party to try to get that cease-fire hold. there is one of the thing we should point out -- the only reason they are able to fire these longer-range rockets, that they are firing at tel aviv and jerusalem, is because those rockets were provided by iran. >> the host of political capital, joins me now from

washington. the unease in the middle east continues. secretary of state terri is expected to call for a cease-fire. >> the most interesting thing the chairman of the foreign affairs committee said is that wooten has declared war. -- vladimir putin has declared war. he has gone a step further. no one anticipated he would do that. he now thinks the notion of much tougher sectorial sanctions, energy, military, banking -- that the europeans are much more likely to go along now. we thought they would be tagging their feet -- dragging their feet. said president obama has a chance use drones on isil in iraq. is that still on the table? >> he things they should've use drones three or four months ago, d the van says that isis was making. it is under serious

consideration. >> let's move to iran. the chairman doesn't want an extension on time for ron in the united states -- iran and the united states to reach a nuclear agreement. ayatollah isthe playing games. he is skeptical this will produce anything. he says he will hold off on pushing any new sanctions until there is an agreement, or the agreement falls through later this year. >> al, also strong words from the chairman about ukraine. the interview, he is not a fan of russian president vladimir putin. what does he have to say? putinsaid that vladimir had basically declared war. he thinks we have to assist the ukrainian government more. we need to supply gas to them. the energy is going to be cut off. he is worried about ukraine. he just got back from their couple of weeks ago. he thinks the united states has to act quickly. >> bloomberg's al hunt joining

us from washington. you can see al hunt's full interview with ed royce on "political capital," tonight at 9:00 p.m. washington time. russia raises rates for the third time this year. they will take a look at how their central bank is trying to hold down inflation and stop capital from leaving the country. "bottom line" on bloomberg television comes back in just a moment. ♪

>> here is mr. cheney us on the china credit bubble. data --roblem is that and we take it with a large grain of salt, the data shows that the credit spigot is just

completely wide open. that more and more credit is going to support less and less growth. the ground,el on put a building or bridge, that counts as gdp. the problem with that model list -- when you finish building it, you have to put up another one. is not based on ongoing consumption. this reform, that the chinese optimists felt was coming for years ago, still is elusive. rose onan watch charlie bloomberg television tonight at 8:00 and 10:00 p.m. and excitedly raise costs for the third time this year as wide sanctions threatened to squeeze its economy. he specializes in european and eurasian security. he joins me from washington. chris, welcome back to bottom line. it is good to see you. >> thanks very much. >> will these actions be enough

to ward off inflation, and will it be enough to stop the hemorrhaging of l flows? >> i think it is soon to know for sure. we will have to see how things play out over the course of the next couple of weeks and days. we don't know for sure what will happen with the european sanctions. we have new newsletter brussels today. >> we are at this tragic loss of life there. is impactingw that how europeans assess the situation? >> is having a much bigger impact than some of us thought earlier in the week, when it look like it was likely that european capitals would kick the can further down the road, and not go through with any new sanctions. it may be that sanctions that have been on the table in brussels aren't everything we may have hoped for. but they do go a lot further than some of us initially thought. the bigger picture, this tragic loss of human life and civilian

life is really forcing european leaders and the european public to reassess what the implications of what happens in ukraine are for their own security. a lot of people felt what was happening in ukraine was a long ways off. it didn't really pose any serious problems for europe. , with the downing of mh 17, has forced a rethink of that. of how sense do you get the european community and international community is viewing the reaction or non-reaction from russia president vladimir putin? >> i think it is a key factor. the loss of civilian life is the biggest factor. but the fact that vladimir putin has appeared to be so entrenched home that hammering this is a war that he has been instigating. there has been a lot more

tension over the course of the last week, through the arms shipments he has been given to the rebels. it is making it clear that he is the guilty party, no matter what he says. we could be beginning to see a very significant change. of possible new eu sanctions on russia is trade in the countries defense sector. what effect with no sanctions have on russia's defense give ability, and would france be on board, given that it has a $1.5 billion warship deal with russia? sale of that warship is one of the big sticking points in any sanctions that europe could impose. my view is that it is going to be extremely difficult for the french not to go ahead with this contract, which has been in the works for several years now. the economic loss of significant. they argue that there are big legal ramifications that they

will have a hard time getting around. it will have a loss of jobs. they are in a tight spot. most french leaders that i have spoken with indicate they wish it was otherwise. it will be very hard to not go ahead with that sale. start rolling across the border, that could change. i don't think that will happen. this will be a big point of tension between europe and the united states and france going forward. >> the international isolation of russia's largest corporations has gotten worse, following the crash of the malaysian airlines jet on the 17th of the month. fromtors are pulling money russia's stock market. growth is plummeting. how much longer can russia afford to be shunned by the global business community? degree, you have the damage that is being done by the sanctions themselves. but of course, more significant the that, arguably, are knockout effects. expectations about what there've you dollar future looks like. that's one of the most important

factors here. russia could go on -- it's a question of whether or not it wants to. that's the idea behind using the sanctions to try and bring about a change in russia's policy. >> we have about a minute left. his whole controversy between russia and ukraine has been going back since march. one of the areas that russia has drawn a line in the sand -- ukraine and that talk of perhaps ukraine seeking nato membership. why is this such a nonstarter for russia? >> well, russian officials have --imed that her many years for many years, going back to the cold war, that any enlargement of nato to russia's borders it would view as a major threat to national security. whether or not we think they actually think that is a separate question. they are i do like to do. >> chris is a senior correspondence with the rand

corporation. joins us from washington, a was a pleasure to have you. -- always a pleasure to have you. tracking you down day on the markets, and the story later on online. not only did starbucks post strong third-quarter earnings, the coffee giant is brewing exciting new offerings that could change your morning routine for the better. i will have the details when bottom line returns. ♪

>> we are waiting for secretary of state john kerry and ban ki-moon to hold a news conference in cairo. they are set to discuss the situation in gaza. we will be monitoring this for headlines come and bring them to you as they break. you can watch that on our live events channel at bloomberg.com.

past thes six minutes hour, that means we are on the markets. >> it's 26ie -- minutes after the hour, which means bloomberg is on the markets. >> here's julie hyman. >> we do have declines in the week. the s&p 500 closed yesterday at a record, but today it is lower after disappointing earnings and economic data in terms of durable goods. amazon is probably the biggest drags. the world's largest online retailer missed estimates for the second quarter in a row. jeff bezos has been outspending the company's revenue, causing a net loss of $126 million. he has been investing towards cloud computing, warehousing, gadgets, and a lot of different areas. that smartphone to chart -- did start shipping today. pandora is in the red. they announced user growth that

missed estimates, raising concerns that they are stagnating as competition increases. we will be back on the markets in 30 minutes. more "bottom line." ♪

>> "bottom line welcome back to the second half-hour of. "bottom line." i'm mark crumpton. starbucks reported under the strong quarterly report and offered a sneak ticket to come in profits and products. yang yang is with us outside of a starbucks store in washington. strong earnings that the shares are falling. despite what ceo howard schultz called an outstanding third quarter, the stock price is falling right now amid concerns that for a host of reasons, profits will be going

down, going forward. to many new stores, investment in products as well as technology. ron earnings, which i want to go to weekly. of 513uarter net income million dollars, a 23% gain from the euro go quarter, earnings per share, $.67, beating estimates by one cent. growthsame-store sales came in at six percent, for an impressive 18th consecutive quarter of growth more than five percent. food happened to be the big driver here, two percent of that, sales growth in the u.s., so they are optimistic and increased its current quarter guidance for earnings per share, increasing that by two cents. as copy prices rise, that is a concern that analyst have, perhaps why estimates have been lower. starbucks dated the sure read -- asset -- investors that they

locked into two percent of their crop prices for next year, so they think they have a leg up on investors. strong earnings report, a lot of exciting things on the horizon, but as you know, the stock of the price is falling. what else does starbucks say we can expect to come down the pipeline? has been very successful, so some new food offerings coming down the line, especially at the lunch hour, more 24-hour locations, expansion of its partnership with his knee, but perhaps the most exciting thing is you can expect later this year for starbucks to test a mobile ordering app. they have a successful digital payment app. in the future you might be able to order your copy and have it ready for you when you get in in the morning. certainly would shorten people's commute times and would be a game changer if it succeeds. thank you.

the u.s. treasury wants to make repayments of student loans more affordable. call it a debt has risen to a record $1.2 trillion and that has triggered a concern similar to the mortgage meltdown. for more on this, janet moore and joins the onset. what is income-based repayment? that thea program federal government offers to borrowers if they are struggling with their payments. it looks at your discretionary income and it determines a percentage of what you can pay. if you are struggling, you may not have to pay anything. if the light of the loan is going to be longer than your and the reclaim it plan interest is ultimately more than what you would pay in the 10-year plan, it is something to consider if you are having trouble making the payments because you may not have to pay anything if you qualify for the program.

>> how is this program working with text repairers? >> the education department and treasury are partnering with two companies to give borrowers more information. it may come up in a message or some sort of communication that says you may want to think about this program if you are struggling. however, income-based repayment is not for everybody. if you are doing well and you can pay it off in 10 years, you do not need to add the additional interest. not everybody should be thinking about income-based repayment. >> why is treasury interested in this, what is there interest with student loans? >> if people are spending hundreds of dollars a month on student loans that they cannot afford, they may not be spending money and the economy in other ways, may not be buying a car or able to afford a house or other types of purchases. number two, the treasury is the originator of federal loans. they originate about $100

billion of new federal loans every year. so of course they have a dog in the fight. if people are defaulting and not making their payments, they have got to know how much is coming in so that if they need to go to the capital market to raise money for new federal loans the next year. >> talk about the woman running the program. the highest woman ever appointed to a position at the treasury and she has made this a top priority of hers. in her first public speech in april, she talked about student loans. she was a former fed governor and had a position as a regulator in the consumer work in state government in maryland. she talked about student loans as a concern and is looking for solutions to help borrowers. >> what about ways they are looking to improve servicing and collection? how is that going? hashe treasury department

the ultimate authority over servicing and debt collection, and as we talked about before, the president coming in june, directed the education department to start talking with servicers to make sure borrowers know about all their options. >> there are some critics of the program and the story that you , yourn > bloomberg.com guest was very blunt. he said education costs are increasing faster than inflation and that should be the core issue not being addressed. >> that is the point. students will not be borrowing as much if the cost were not as high, and that is certainly been a criticism. we will see the education department, with proposed rating plan of colleges sometime this fall where consumers, parents, consumers will have more information about how much college costs and what are the outcomes, what is the average dead when you graduate, how are the schools doing in terms of

graduation rates? maybe the consumer could make a different choice. you.net lauren, thank appreciate it. still ahead, the summer blockbuster surprise, something you can watch at home. the films unusual strategy, when "bottom line" continues in just a moment. ♪

. secretary ofk state john kerry and u.n. secretary ban ki-moon set to hold a news conference in cairo this hour to discuss the crisis in gaza. we will monitor this for headlines and bring them to you as they break. remember, you can watch on our live event channel on bloomberg.com/tv. it is time for today's latin america report. president obama is in a meeting with the leaders of three central american countries as the administration continues to look for ways to halt the influx

of unaccompanied minors through u.s. borders. with me now.y is what is the president's message the leaders today? >> the primary push continues to be the public information campaign. officials say the president will continue to hammer home to all three leaders that is extremely important they continue to tell everyone in their country that there is no free path into the united states. it is not even worth taking the very dangerous trek through math -- mexico in an effort to seek asylum. there will also be talks of options that the u.s. is trying to put on a table to stem the flow of refugees to the united states. one of those is a pilot program that would put an asylum center staffed by u.s. officials inside honduras. place, individuals would be able to go to that and seek emergency humanitarian asylum instead of making the trek through mexico. it is a pilot program that they have not decided that they will

implement yet, but it shows you the administration is looking at several opportunities to put things in place to stem the tide. of guatemala, honduras, and el salvador have been here for a few days now. what has been their message to american officials? lawmakers,met with cabinet officials, and today the white house. one of the key things we have heard is the u.s. has a large role in the reason that this is happening. what we have seen month to month is the flow of undocumented migrant children has dropped a little bit from 350 per day in june to about 150 now. however, according to several officials from these countries, andu.s. is -- the u.s.' the policy and its use of drugs are as much to blame as anything for these individuals making their way up there. what the president is likely

hearing today is the u.s. as just a big a role in trying to stop this. >> lawmakers have five legislative days left before their summer russ -- recess. is there a chance they could go home with nothing? >> there is, and that would surprise anybody who was paying attention to this weeks ago, but we have seen some steps moving forward. it did not seem like house republicans were anywhere close to reaching a resolution or bill that they could move forward to marry with the senate for final proposal. what we know is that john boehner, after meeting with republicans today, is considering a paradigm proposal, somewhere around the cost of a billion dollars, to address the issue. obviously, that is nowhere near the tube when $7 billion proposal senate democrats are proposing but it looks like there will be votes next week as well as the senate. told me,lican staffer my boss, a texas republican, if he had to go home for five weeks

without doing anything at all, he would be killed. so next week will be a big week. we know for certain there will be at least vote in both chambers. >> thank you very much. and that is your last america report for this friday. up next, your guide to the biggest newsmakers of the week. ♪

>> it is friday, so we look back at the most notable newsmakers from the past week on "bottom line." is, any loan is a potentially risky and nonperforming loan, but i think , foregiment banking example, mortgage loans, to require a rigid rule, 40% of debt to income, no character does harm the next generation of aspiring capitalist and entrepreneurs by

denying them credit access. that's a mistake. >> you cannot get too excited about one given report but we have seen gradual momentum building in the housing market. and it comes after what was a string of weak data starting last summer. existing home sales have been trending down. part,rted, we think, in due to the rise of the interest rates, the harsh winter weather did not help. it appears the data has gotten better, reversing some of the downturn. not to the races, still a lot of challenges for the market but i'm encouraged. >> it is safe to say that we are at a point where al-maliki, even amongst his iraqi and shiite hases, and year on -- iran, become a liability. the current yunnan want to see him in office. the sunnis definitely want him out. , what were seeing published this morning was this

new development where a potential replacement for al-maliki is being served. there is a lot of wheeling and dealing and bargaining going on the monks the shiites and the kurds and sunnis to reach a consensus. >> much more important are sectoral sanctions which hopefully will be coming soon. the u.s. has already moved in that direction. i hope the europeans live up to their obligations. after all, we are in this together and we have a shared interest in stability in europe. i am not for the use of force to change borders. something that has not been attempted since the days of hitler. movies,you think summer titles like "transformers" and "godzilla does look him up, but one of the most talked about movies right now is one that you can watch at home. "snow piercer."

jon erlichman, what is this about? >> it is getting a lot of attention because not long after it's theatrical release to take the film, which has now been in select theaters for a few months , two weeks into its run, make it available on demand. in the past, there was a view that when you went to video, or in this case on demand quickly, it was a sign of a bomb. in this case, it was a marketing strategy by the weinstein company who had concerns about how it would do in theaters. instead of rolling it out at times in theaters, select theaters, they get some marketing buzz, and in the end, demand getting more sales for the film than with any other picture they have had. >> what does this approach with "snow piercer" tell us about harvey weinstein? >> what's interesting is now he

gets positioned as someone who is getting ready to shake of the theater business but he is still focused on the traditional model of having a window for movies in the theater. he has told me before that they are not a company moving toward having films both in theaters and on demand at the same time. i do think this is somebody that has talked about the idea thatnally for the troops weinstein of defying gravity. in other words, taking movies that may not be seen as a --ential big is this story business story and bring them in front of audiences, maybe get award buzz, and make them financially successful. in this case, it is more about where you choose to put the film over the course of its life. theaters are still wondering what this all means for them. ofthey are very protective the traditional film windows. how do they feel about this? >> i don't think, for the big

block dusters, the obvious names that you think about with summer releases, you will see a big change. generally speaking, the movie theater change -- chains ask for a three month exclusivity window. they had toercer," forfeit the idea of being in certain theaters because they did not like the idea of putting it on demand weeks after being released. but there are other distributors out there right now taking about these new business models where they can save some marketing dollars and maybe save some cash through a quick on-demand release and are willing to suck by some theater opportunities to make that happen. i think everyone is learning this approach at the same time together. >> jon erlichman, discussing "snowpiercer." thank you. another check on the market movers is on the other side of the break. "bottom line" continues in just a moment.

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>> get the latest headlines at the top of the hour on bloomberg radio and streaming on your tablet and bloomberg.com. that does it for "bottom line." i'm mark crumpton. thanks for joining us. have a great weekend. on the markets is next. it is 56 past the hour and

that means bloomberg television is on the markets. but stick a look at the stock markets one hour before the closing bell and the end of the week. closing on a down note as we see consumer discretionary stocks getting hit in part because of a worse than estimated earnings from amazon and visa, so that is pulling the overall market down. even though the u.s. markets are down today, it's been an up week for the chinese stock market, up four percent on strong manufacturing data. it is now easier than ever to invest in their domestic arc it come a with a new class of etf's. until recently there were only available to chinese citizens. our guest has a few examples. first of all, i'm curious how this happened. indeed, foreign investors cannot still by a shares in the chinese market. >> no, you need a quote from the chinese government. officialskong

partnered up with china, and so for the first time ever, and by investing in the etf, you are inting physical a shares your portfolio. it is pretty revolutionary because that market only has one percent to two percent foreign ownership, but it's so big, it represents the majority of the market. you are looking at a huge untapped area of investing, some calling it the final frontier. >> before people could only by adr's? >> most people by h shares. differently.te it is still in a way to get into china but now you are investing with the locals. that is the selling point out that it is a big market. when you look at the market, it is pretty cheap. p/e is about 10, half of the emerging markets in u.s. stocks thomas and a shares have been trading at the biggest discount

of the year. the chinese government is probably the biggest risk. people think they will open up the quota more and more. what people are really planning or is when the index providers integrate a shares into the index, they are so massive, they could be a 10% weighting in the msci market index. that would be $100 billion that would need to grab those a shares eventually. >> how can we grab them now? you mentioned the first etf come a deutsche bank. >> i'm not a fan of the names. they need to shorten them. these are the 300 largest and most liquid stocks. this was $100 million. this is the one that is the biggest. the crane chairs product, another one that came out, is the broadest. it tracks for hundred stocks but

it is small. a lot of these are just coming out of the gate. >> and they will get bigger. >> another is the market vectors china etf. >> these are predominantly privately owned midcap. with that you get tech. that is your tech and smaller play. >> let's get the last one in. >> this is what i call the easy button. 50% a shares and 50% everything else. >> etf's from china, investing in a shares. more on the markets later. "street smart" is next. ♪

>> welcome to the most important hour of the session here at 60 minutes before the closing bell. the s&p pulls back from record highs. disappointing earnings leading stocks to their worst day in more than a week. "street smart" is next. on today's edition, we remember a legend on wall street, alan ace