>> from bloomberg world headquarters in new york, i'm mark crumpton and this is "bottom line." today, a new report looks at whether the nation's biggest banks and a fitted from a too big to fail government subsidy. plungegentine bonds after the country default. armour ceo of under discusses the company's new ad campaign targeting women. to our viewers in the united states and those of you joining us around the world, welcome. we have full coverage of the stocks and stories making

headlines today. --x steel understood investigates how drillers see opportunity in big oil's problems. let's begin with peter cook and has the tales on a new report being released this hour on egg bank subsidies. good afternoon. has been nearly six years since the financial crisis and washington continues to debate whether some banks are too big to fail and if those institutions have a competitive advantage because the government will ride to their rescue once again. the hearing act k starting this hour in the senate inking committee is releasing a long-awaited government report onlity office the issue. the report is unlikely to end the debate altogether. the key findings -- the gao concludes big banks enjoy more funding compared to their smaller peers during the crisis but goes on to find most models show that advantage has declined or reversed in recent years as

the economy has improved will stop the gao concludes the advantage could return if the country faces a new economic crisis. they say that bolsters their case that too big to fail is alive and well and there's need to beef up capital rules for the nation's biggest banks. >> i think this report is further and the nation that this is a continuing issue. dead ando fail is not gone. it exists and the number goes up and down depending on the state of the economy and the state of the risks. case i haverces the been making that in times of crisis, investors will flock to the largest banks. if they think too big to fail exists, it doesn't matter what david and i think. what matters is investors. groups,,g industry

have a very different take on what the gao and what it says about the banks. nichols,d now by rob the president and ceo of the financial services forum. he represents the ceos of some of the biggest banks operating in the u.s. right now. thank you for joining us. senators say there is a subsidy but the threat of too big to fail is still out there. >> we drew very different conclusions when we saw this report. we are still flipping through it and it does note any sort of funding differential is or inearing or is gone fact two thirds of the statistically significant models show it has reversed and there's presently a funding cost disadvantage for large institutions. viewve a very different than the senators that it is going to come back in a future crisis. >> why is that?

we could be in crisis time again -- the idea of the government writing to the rescue is going to give those big banks and advantage now and in the future. let's we see three reasons why that is not the case. there's no political will whatsoever for bailouts as you well know. congress, not in our industry and not among the american people. ignores the theory massive structural changes that have happened. stronger,ry is capital liquidity has doubled, and we have new resolution tools we did not have in the last crisis. third and most fundamental is this -- there are reasons apart from the expectation of bailout that investors flock to safety. they look at large and diversified institutions as an investment and when you look across other diverse industries, at manufacturing, industry and tech, large players in those

industries have a cost of funding advantage over their peers. to do with liquidity of their debt and stability and diversification of earnings than anything else. >> the senators would make the case that these institutions and banks are different from utilities and the financial system is a different animal altogether. whytake the risk customer not pass legislation that would force banks to get smaller or hold so much capital that it would be the buffer? >> capital and liquidity have doubled since precrisis levels. we are at record highs. i think it is a misguided approach. one thing we need to be careful about and policy makers are debating here and in europe is how much is too much? when do we get to the tipping point when if we ask the banking ,ector to hold too much capital it will be a dragon slowdown in economic growth?

there is still fragility in our economy despite the gdp report. is last thing we want to do put a drag on the economy. we need the financial sector to do what they do and grow the economy and create jobs. >> you know what is going on on capitol hill. what is the risk to member institutions that this report is going to bolster the case for the senators under legislation? does this end the debate or is it still out there? >> i wish it would but is mike guess that it will not. we are going to watch this hearing starting literally as we speak. together withhat the massive reforms underway and still being implemented, i think we can make a compelling case that if we want to make the tonomy grow, we don't want add on additional regulation and legislation at this point in time. >> if democrat's hold the senate, there's a real chance sherrod brown would become the chairman will stop what kind of

threat does that those? >> i would not view it as a threat all stop i would view it as an opportunity to rigorously make our case every day. >> going to be spending a little bit of time on capitol hill. as you can see, a very different view from within the industry as to what this report says and what it means for the future as well. >> where is the administration in this debate western mark >> so far, they did get a chance to respond to this report. the treasury effectively saying is no longerat it the issue that it once was and these studies conclude there is not the funding advantage and the administration is making the case that dodd-frank has dealt with a lot of these issues. conclude more needs to be done, they are prepared to do that but at this point, they are satisfied dodd-frank for the moment has addressed this issue satisfactorily.

this debate is unlikely to end anytime soon. but that is unlikely to end, certainly with this report. interest on the part of wall street and members of congress. it's an unlikely bipartisan duo -- david bitter and sherrod brown will stop it suggest this is a different kind of issue. but thank you so much. coming up, ingres said for recess and we will look at what's likely to be on the agenda when lawmakers return from a five-week summer break. stay with us. "bottom line" on this last day of july continues in a moment. ♪

>> congress wraps up legislation today before embarking on its five week summer break. kim wallace is an executive managing director nominated by president obama in 2009 and served as treasury assistant secretary for legislative

affairs until october of 2011. >> happy toonline." be here. >> congress is leaving town with so much unfinished business. delivered the understatement of 2014 when he told her's we have not had a productive congress. is this the way it's going to be for the remainder of president obama's time in office? >> more than likely. but i think we've seen in the last week or two that congress is capable of finishing items that are priority among americans, especially the the a funding bill. is the outgoing congress certainly going to represent what the next congress will be and is looking forward to the next election. >> on the agenda is an overhaul of the veterans affairs of -- veterans affairs department. what do you hear about the likelihood of passage? >> hi i cleaned it of passage.

in work done by the chairs the house and mr. sanders in the senate represents what can pushed byn priorities the american people are received in congress and you have two people willing to work diligently and compromise to get things done. we heard just a short time ago that the house of representatives has pulled the border bill. terme head into the mid- elections, is immigration reform the august missed opportunity for this congress? >> it's hard to say it's the against missed opportunity as long as washington has not confronted long-term fiscal challenges. on immigration in particular, what you see going on is it's a national issue in the minds of many but it's a regional issue when it comes to the republican party. until it becomes more like national party, it's difficult to see immigration policy moving forward. fax john boehner is telling

reporters the crisis on the border is one of the president's own making and says mr. obama should not take unilateral action on the border. as we head into the midterms, this is not going to get done and this is something that will probably not be on the agenda until next year. at what point will the house of representatives and senate begin to take up this important piece of legislation? children unoccupied along the borders, think pressure will be put back on the states to step up their efforts who have been doing a diligent job. in terms of legislation coming into said amber, it depends on the reaction of the people during the five-week break of voters members of congress will mix with as to whether or not they come back with an urgency to do it. i believe this is an issue a new president and congress will likely have to take on.

i don't expect comprehensive reform in the next two and half years. >> so you are not expecting this to be dull with while barack obama is in the white house? >> i do not. i would love to be surprised. next i'm speaking with jim wallis from renaissance macro inearch stop the in action washington is not about lawmakers not wanting both on record as we had for the mid-terms. what is fueling the partisanship? >> there are a lot of elements to the partisanship. the driving force, if there is one is that both hardys believe the next election will always give them power to push deals like this more in their favor. four orseen that for five electoral cycles and at some point, i think voters will recognize that nirvana in politics is not going to come. we are likely to have divided government for a while and if that's right, they will have to figure out away to deal with

these contentious but important issues. >> let's go overseas for moment. the european union revealed the names of five russian banks it is sanctioning because of the policies the use of the ukraine. impact ofe potential these sanctions? >> the potential impact depending on where you look in terms of the countries involved, given they are the closest trading partners with russia is a slowdown in earnings. more broadly, the impact of these sanctions, if they are carried out to the extent we saw in the case of a radware they were multilateral, multi-year and relatively airtight, it certainly changed the negotiation posture of the government. the hope is if you can make the sanctions work effectively that russia will eventually come to the table to find a different way out of this mess. >> the u.s. is heading russia with new sanctions. impact will retaliatory

sanctions have on u.s. businesses doing in russia? >> episodic impact. the u.s. does not do a great heel of trade with russia. our financial industry has minimal exposure to credit in russia and it won't have much of an impact here. ceos will tell you a different story the most of that is aspirational. >> tim wallace, executive managing director from renaissance capital research. privileged to have you on the broadcast. , we will go live to buenos aires and look at what is next as the government defaults for the second time in 13 years. ♪

>> welcome back. this is "auto mine was good on bloomberg television, streaming on your tablet, phone and on bloomberg. com. in argentina, they are talking about the economy and the debt to fault. my guest joins me live from argentina. have people in talking about what this means for their day-to-day lives? been talkingt about the debt from a financial perspective the people on the street saves not going to have a big effect on our lives. the bigger concern is with the economy and inflation, which is running about 40% and the growing gap between the official and unofficial tolerate. eight pesos is the official rate and 13 is the unofficial rate. those dealing with dollar assets like importing cars are struggling with the deal and are worried it will affect their ability to import necessary parts.

>> what about the views from argentinians about their government in light of this afault will stop >> there's bit of a split based on my conversations over the last couple of days. there are people who support the government and polls have shown some of the things we have been hearing about the hedge fund in new york has helped the president's poll ratings. it's just a lot of rhetoric and even the trip from the economic minister last night was a bit of political theater. we have the chief of the cabinet describing the judge who made this ruling as one acting on behalf of these funds. some people say it's anti-rhetoric and some seem to think she's following it. >> we have to acknowledge the noise in the background. what is going on behind you? >> once a week, there's a protest basically talking about

the disappeared under the military junta. that's going on this afternoon and is right about to start. >> thank you very much. beenf our reporters has covering the argentine debt story and joins me in the studio. why did argentina missed the deadline? >> a cousin were not able to figure out a solution to this lawsuit that is a very impactful lawsuit. it turns out they can't make makepayments unless they it with their defaulted debt in full. they cannot make those unless they pay the old defaulted debt. elliott management has those will stop those talks led nowhere. we had talks there. are overtime done.

there were 30 days and they decided to only chip in the economy minister the day before it was due. interesting timing there. according to the holdouts, there were several proposals floated in the talks by the debt negotiator, the special master appointed by the court and argentina rejected all of them because they can't pay elliott more than who they paid the debt restructuring in 2010. >> what is the take on this now? >> we will find out. they meet tomorrow. they have their first request andto decide on this matter to see if it constitutes a credit event for a default swap trigger. let's we're just talking about what the people on the streets .f buenos aires are saying

forgive me for being repetitive, but what is this going to mean argentinians? >> it depends on the length of the default. if it is something that resolves quickly, it should not result in a catastrophe. on,problem is if time goes and bondholders begin to feel this is a real default that will not be resolved soon, they may choose to accelerate. if they choose to accelerate which means they demand full repayment of rentable right now, then argentina may have a solvency problem on their hands because they cannot deal with $30 billion a rentable toupee. >> the country's foreign reserves are near and eight year low. that they a time needed to have fixed this situation and reentered the bond markets and borrow abroad. what they are missing out on now.

they are relying on exports for whatever they need to pay off. thank you so much. 26 minute past the hour and a the means bloomberg television is on the markets. julie hyman is standing by with details. >> good to see you. let's look at where stocks are trading right now. we have declined across the board. withasdaq down 1.63% technology taking a lot of the blame for the declines we are seeing today. the employment cost coming in higher than expected, waging concerns that what a lot of people are talking about is finally coming in that may force the fed's hands. if you look at individual stocks, it's the first day of -- first day of trading for the consumer division of ge. in the largest ipo at seen so

far this year, the company has been the largest issuer of credit cards according to the nielsen report some issuing credit cards for companies like walmart and amazon. we will have more on the markets and old -- in 30 minutes. ♪

>> welcome back to the second half-hour of "auto mine" on bloomberg television. i'm mark crumpton. let's check the stories we're following at this hour. the lachman is summing up his herbalife presentation with these two words -- my bad will stop he says the event was too long and overhyped. and enrond to show style fraud but investors sent shares up 25% after the presentation. sec. state john kerry is in india where he is pressing officials to approve a global trade agreement between the world two largest democracies.

the deadline for the deal is midnight. india wants to renegotiate heart of the deal involving food subsidies. israel a prime minister benjamin netanyahu says he will not halt operations to destroy tunnels dug by hamas even if the truth is called. we areme minister says determined to complete the operation with or without a cease-fire. israel called up an additional 16,000 reservists. that's a look at our top stories at this hour. for more on israel plus military campaign in gaza, watch charlie rose tonight at 8:00 new york time. he spoke with the ambassador from israel to the u.s.. that interview is tonight on charlie rose on bloomberg. exxon mobil reported earnings this morning. the company has one glaring problem -- falling a production. production is suffering from its lowest output in five years. alix steel has a closer look at

the industry. guy for exxon? >> production fell in the second quarter by almost 6% but the issue is costs are actually rising. exxon makes less than $22 on a barrel of world -- on a barrel of oil and they are not alone. be theas supposed to holy grail for these guys, making up about 40% of the oil produced in the u.s.. but oil prices have to stay high to be economical. sos production falls quickly you have to drill longer, harder and deeper and that winds up hurting the oil companies and creates the opportunities for oil drillers. these guys range from eight ises to tram, which pre-small. thatat can these rigs do are unique question mark >> they are pretty tricked out. they can walk and talk. it is impressive. rigsited the smaller oil

developer with headquarters in pennsylvania to check out their new rig. 25% of truckload two-putted together, 40% less crew. thatind up having a crew operates the whole rig from 25 feet above the ground and there's nobody on the ground. two or threeally people and you can lift up the pipe, screwed into place and start drilling. that all increases safety and efficiently -- and efficiency. >> the technical people who grew comingg this, it's the generation that's going to enjoy this type of drilling. it is going to be a lot safer for them to operate and it's going to be fast. >> it was kind of like a giant videogame. rigs lined up drilling horizontally, pumping out the oil and moving

themselves a few feet and drilling again. older rigs pumped more vertically and have to pack up everything and haul it miles away to drill. so this is a big difference. x we are talking cost-effectiveness. how much money can it save and oil company? rig you just saw is going to australia and they say they can save about a million dollars every time the rig drilled 10 wells which can wind up eating quite significant. it's also cheaper, about $8 million will stop competitors can range anywhere from $12 million to $20 million. underutilization is difficult. you can save off time and that makes a difference. that's what happened in the industry is there has been a lot of changes. more modern rigs are coming into the market and giving you more and more production. >> so you are literally cutting

the time in half which can be significant. it's a $30 billion business growing 10% to 15% a year according to one analyst. alix steel joining us with that story. thank you so much. they with us. "bottom-line" continues and we will tell you how the u.s. housing recovery is getting a boost from veterans. ♪

>> it is time for today's latin america a report. stocks in brazil dropped for a sixth straight day after argentina missed a payment on its bond. the bogus bethel about 2%.

argentina was brazil's against trading partner last year according to data compiled by bloomberg. stocks have rallied since march following speculation a change in government would reduce intervention in state owned companies. the jobless rate in chile climbed in june as economic growth slowed to the weakest pace in four years. the unemployment rate rose to 6.5% according to the nationals did to fix institute. the increase was in line with estimates. the central bank has cut interest rates five times in the last 10 months in an effort to stimulate rose. enjoying the ultimate in luxury when you travel can be costly. a look at the ridiculously expensive hotel rooms.

>> old mill farm is the 75 acre estate in greenwich connecticut, where mel group -- where mel gibson once raised his kids. it's back on the market and it's a storybook property.

>> coming up, the rebound in the u.s. housing market is getting a used from a special group of homebuyers. ♪

>> welcome back. this is "bottom line" on bloomberg television. skyrocketed,limes upsetting margarita lovers around the country, especially during cinco de mayo celebrations. but recently, lime prices have dropped back down to more reasonable rates. bloomberg business week gets to the root of the problems and explains why the cycle is likely to continue for the foreseeable future. >> every other year we go through the same ritual -- lime rice a spike and people wonder why they are paying $.50 a lime and soda of $.30 a lime. there is bad weather or we talk about the lima blight slowly

moving its way up to him brazil to central america. these are all real problems but they are not the problem. the reason we have the price spikes is because we've chosen to get all of our lines -- and i mean 97% of the limes we drink in america, from one place -- if you states in mexico. we stoop row lines in america but then an actual act of god happen. in 1992, hurricane andrew laid waste to those parts of the country in southern florida where we grew lime. then there was a lime light which was a real problem but what happened in that same decade, we closed the north american free-trade agreement. it was cheaper to grow lines in mexico. crop never recovered from that. we grow grapefruit and oranges but we do not grow lines in america. this is what free trade does -- it moves production to the cheapest place.

good news, cheap limes, usually. the problem with entering all the lime production in one place is that it leaves us completely open to whatever happens in that one place. the market cares about price and what we, the tequila drinkers of america have decided is that we are ok with this actuation. if we were not ok, we would diversify the production. news, america, limes are cheap again for now. >> the u.s. housing recovery is getting a boost from a special group of homebuyers, veterans. as the united states draws down troops after more than a decade of fighting in iraq and afghanistan, we are turning -- returning military personnel are taking advantage of the mortgages. have aroundortgages since the 1940's. what's fueling the turnaround? >> there are two main things

leading to the increase we've seen. also longer-term things that have changed also. the two main things, we've had a lot of people go off to war and join up. about 4 million people deployed overseas. 2 million of whom were in iraq or afghanistan since the september 11 attacks. comingf those folks are back or have been back and are settling down more and deciding to take advantage of this benefit which has been around. >> how does this program work and who can get the loans? >> it wider than just veterans. it people in the service right or surviving spouses of deceased service members and others. some reservists as well. but it's probably going to be more veterans than not. there are still about a million people who have served in iraq and afghanistan still on active duty. ready tot going to be

buy wherever you are. you might be transferring to a new station or doing different things, but the fact people don't need to worry so much about a second, third, or fourth employment at this point is helping some active-duty personnel. >> talk about some of the people you interviewed for this story. >> me and my fellow reporter were talking to bunch of people on this. many were either recently back from the wars overseas or have been around for a while and buying with the v.a. benefit. one person we talked to was on his third point in afghanistan when he decided now is the time where i can buy. he was talking with his realtor on skype and found a house in maryland using the v.a. product. ask a lot of veterans are aware this is available to them? >> people are becoming more aware because of some changes to other parts of the mortgage

market that have made this a more attractive program than in the past will stop fannie mae and freddie mac increased how much they charge on conventional thing onl stop same fha which provides a low down payment off shin -- down payment option. but as the costs of other things have gone up, even for people who may qualify for a different type of mortgage, in the past, they might have done that. they may have wanted to go to a low. product that doesn't exist today. attractive more auto, so people better be finding out about it. >> you've mentioned the no money down lending. it sounds risky, doesn't it? reminiscent of the sub i mortgage crisis? >> a lot of people think somebody not putting any money down is going to be a bad bet for the lenders or for the government taking on the first 25% of any of the losses on the markets but they perform well

compared to other product types. part of that is the fact that lenders have a different type of test they have to do versus other government mortgage objects. how much money they have left over after the mortgage payment all stop this is different than the debt to income tax. if you have a small mortgage, it might be affordable seemingly of you might not have a lot money left over to pay for things that come up and lie for the everyday bills you have to face. so they have a residual income tax which helps it performed pretty well. >> if you want to look up this story on bloomberg.com, the housing and the vet program or the jets. stay with us. another check on the markets is the other side of this break. ♪

>> get the latest headlines at the top of the hour on bloomberg radio, streaming on your tablet and bloomberg.com. does it for this edition of "bottom line." i'm mark crumpton, reporting from new york. on the market is next. i will see you tomorrow. enemies 56 pass the our

bloomberg television is on the markets. we've got a selloff going on today -- stocks dropping the most since about april. 32 s&p 500 down about points. the nasdaq falling the most consistently throughout the day. technology shares falling the most. let's talk today about the selloff. my guests cover the stock market. we have not seen this in a while, this kind of selloff, and yet there's nothing big and dramatic out there pushing us down. >> it's the greatest hits if you will. international stuff, argentina, the fall, virtual meeting to raise more capital and then straight up earnings stories. a deed is in europe, samsung with had earnings. a couple of companies in europe, adidas and lufthansa mentioned

ukraine and that's the first time that tension has found its way in earnings stories. there are all sorts of reasons to take a step back today. so many people have been calling for a correction for weeks, calling for a drop all stop we've got almost three years without a 10% drop in the s&p 500 and there's been a lot of nervousness at these levels. tomorrow is the big test. these goods have been bought a lot this year. >> something else folks have been talking about -- the fed is always in the ground. we've had a measure of wages today that went up more than people anticipated and we will have some components of that in the jobs report tomorrow as well. are you hearing about that from people as well as the fed as an issue? >> talking to people, i get the sense the economy is ahead of

where the fed is in terms of their rate hike schedule. --y've talked for a while janet yellen said six months after, and that is no longer the standard. >> they might have to move it up. >> and people are worried about that. when you get geopolitical headlines and earnings releases that don't meet expectations, people are looking for any reason to sell at the market at such high valuations. fax let's put this in perspective. we are down not even 2%. it's not a 10% correction, so the question is, and we've had this throughout the year, it goes down and people by the dips. thatder what would cause more sustained correction people have talked about? >> it's hard to say. when you look at the fundamentals, they are pretty good. earnings are up 10% for companies that have reported so far and the sales are up about 5%.

there's no real reason to get too concerned. valuations are high but the growth seems to be there to support them. happen.d, corrections they come in the market corrects and it's hard to predict. selling begets selling, so it's anyone's guess. semi-people have been calling it is worrisome to see a drop like this. >> we have to leave it there. thank you so much for talking about the selloff today. we will be continuing coverage as we head to the next two hours marketstoward the close. "street smart" is next. ♪

>> welcome, everyone to the most important hour of the session. 60 minutes left to the close of the belt. some up on the dow and the nasdaq, and close -- s&p 500. on pace for the first down day of the month. i am trish regan. smart" starts now. today we are counting down to earnings. tesla, linkedin and truly