>> live from bloomberg headquarters in new york, this with erik makers." schatzker and stephanie ruhle. >> top cop. wall street lawyers up. you will hear from the manhattan da. >> sprint replacing ceo after deciding to pick off takeover talks with t-mobile. >> will he name names cap go the man link to this their right scandal has been arrested. prosecutors say he is operating with the investigation. good morning on this wednesday in new york city. it is "market makers." happy wednesday. a ridiculously busy day.

>> unbelievable whether it is mna, the fed cracking down again on the biggest banks in america. the list goes on. >> time for the top business stories from around the world. walgreens joining those who up agreed to by companies overseas this summer. the drugstore chain says it will not move his headquarters from illinois when it requires -- acquires the group. it may take action to limit use of the so-called tax aversion. time warner has news of its own. the day after rupert murdoch said it is dropping a takeover posted earnings that beat estimates. time warner says it will buy back 5 billion of shares. shares are down about 10% in early trading. as shakeup at the country's third biggest wireless carrier. sprint replacing dan hesse he with the founder of mobile phone distributor bright star. ending the pursuit of rival t-mobile after

concluding a deal would be unlikely to survive an antitrust challenge. copsere are a lot of policing wall street these days. the new york attorney general, state superintendent of financial institutions and the manhattan da. just ask the french bank that pleaded guilty to two criminal charges wrought by the district attorney as part of the $9 billion settlement on blacklisted countries like sudan and iran. with us is the manhattan da himself. mr. district attorney, welcome and thank you. we should probably begin with news of the day. capital one, a large financial institution disclose in a regulatory filing it has been subpoenaed by your office into money-laundering probe. what can you tell? >> we cannot comment on ongoing investigations so there is not much i can tell you. thing seems clear, that

this investigation, which involves check, is not of the scale that we saw in the case of or hsbc or standard chartered. those are really big and ultimately really expensive problems for those things. are there more such settlements two,? >> what i can say is we have been very active in these investigations. we are continuing the investigations. i would not predict what is going to happen when, but we are still very much looking into the areas and i think you can expect us to be active. asked what people want to know and the reason i will follow-up paribasere another bnp lurking out there? $9 billion, guilty pleas come a settlements with your office. standard chartered was self of $1 billion but still in the many

hundreds of millions. from what you know now and what's you can tell us today, are you aware of violations of that scale that would result in a settlement and potentially guilty plea on that level? >> i really can't comment. i cannot predict the future. what i can say is every time we look into these cases we take it one at a time. is simply a concerted effort by an international company to violate american laws and so knowingly over an extended amount of time involving a great amount of money or blacklisted countries like sudan, which very much were involved in international sanctions. so we take them one at a time. the np was a large case. i also believe in hope our actions will be a deterrence. -- bnp was a large case. >> going forward, what would the deterrence look like? is it

going after individuals, keeping up with a billion dollars in fines, extracting the guilty plea? >> every case is going to be different. the fact that there was a $9 billion settlement does not mean the next one will be larger than that. banks have different size. the problems are of different magnitude. i think what the federal government and da's office has said if you are going to use the american banking system, particularly new york for your dollar clearing transactions, you will have to abide by the rules that apply to financial institutions. these are not secret rules. we are doing -- been doing these investigations for five years. everyone knows. i think inc.'s are aware that that which they do will be examined in consequences that can be extreme will follow. >> put it this way.

they pleaded guilty. credit suisse plated -- pleaded guilty. credit suisse page $2.6 billion. but the ceos are still running those banks. a cynical perspective, it becomes the cost of doing business. >> what i think one should ask yourself is where are the shareholders? we can as prosecutors investigate if it exists, uncover criminal conduct and then act on it, but at the end of the date the shareholders have to decide who they want to run the bank and what kind of culture do they want to be leading their bank, and what kind of consequences are shareholders willing to pay for banks who simply do not follow the law. >> doesn't a consequence need to be so extreme it would really have a trickle-down to shareholders? was a very large fine but

they still have six months to comply. the bank itself said it will not really affect our business that much. what kind of the deterrence is that? >> i think it is still a significant determined. i can tell you there are banks that have self-reported as a result of our getting into the business three and four years ago. when they enter one of the settlements and then has to live up to a time of essentially probation where if they fall off the path, the consequences were not complying with the agreement can be very significant and quick. >> would it be more of a deterrent if someone went to jail? desire that is human to want to have somebody responsible. >> people do things, institutions do things. >> we look for who are individuals that may be culpable in the nature of the case we can

bring against them. i think it is safe to say if we felt we could find someone culpable and indict in earlier cases him at the investigators likely would have made those recommendations, but these are multinational companies. individuals living abroad, records abroad. some of the conduct is quite historical. i think we have been very aggressive. i would not predict what will happen in the future and whether individuals will be charged. what i can say is this, we look at each one individually and very carefully. we look at corporate culpability, individual, deterrence and tried to strike the right balance. it is not a science, an art. lex you understand why people are frustrated and skeptical that even multibillion-dollar settlements will function as a deterrent? >> the criminal law is really not designed to satisfy those

they areas much as human. and if we fall prey to satisfying the concerns, the desire for personal retribution i do not think that is ultimately what you want prosecutors to do. there are civil remedies if criminals -- criminal remedies are not appropriate that are quite significant. >> the guilty plea does not mean a lot if you are able to conduct business as usual. what do you say to that kind of criticism? >> i think what they're going through is not business as usual. throughs they had to go in order to assure other regulators around the world it was going to abide by international law, i think the consequence to the reputation of senior management will see what happens in the future. i hope the bank has well for

shareholders. it is not about putting businesses out of business. it is about the right amount of penalty for the crime involved. nine $9 billion fine and significant restrictions and transparency and how they are doing the work going forward we felt was the right result. >> how did you come up with that number? >> it was tied ultimately to the amount of to the cleared related sanctioned activity in sudan, a wrong, and cuba. essentially tied to the amount of money shipped from new york. iran, andty in sudan, cuba. >> that is a lot of money. at one point your office could get something like two billion dollars. that is still an extraordinary amount of money. >> they are extra ordinary amount of money. i think they are dollars which

really should be reinvested in criminal justice issues in new york city and america. certainly in our case we look at this as an extraordinary opportunity to take on some of our most difficult criminal justice issues to invest in programs that can help take them on, whether it is youth violence, domestic violence, cyber crime. so when there is a criminal penalty, going back to the communities and investing in the communities that ultimately were affected we think is right. >> if you stand to benefit from these kinds of crimes -- binds do you have an incentive to wind up extracting large fines from the banks to get more cash? way.eople see it that >> people comment about that and i understand it could be a concern.

votersely i think the have the opportunity to tell me whether they think i am doing it right or not. if they decide i am acting inappropriately or outside the zone of influence, they will let me know if the ballot box. i think the concept of fines being used to invest in criminal justice concerns and projects is not a new one. it has been going on for a long time. the dollar size of the settlements that have made this an issue of more public debate. question, laundering and many fines have been a long part of your office. what will the focus be going forward? >> first and foremost, cyber crime. our office is heavily engaged now in expanding our capacity of domestic and international cyber crime investigations, and we have gone a long way to become more competent. in my view, cyber crime affects

every crime that we deal with in our office. minor economic crimes involved with commuter -- communication. this will be a worldwide push by law enforcement. i think we will see cooperation. a couple weeks ago we investigated a case with the london police, individuals in new york. they investigated folks in london. that is what you will see more of. >> thank you. the manhattan district attorney here with us on "market makers." coming up, a bloomberg exclusive. than talking about how he pulled off one of the biggest banking deals in years. ♪

>> this is "market makers."

i am erik schatzker. if you have a resume like john thain's big things are expected. finally after four years he has answered the question. cit is buying one west 43 $.4 billion in the biggest deal in u.s. banking since 2012. 3.4 billion for dollars in the biggest u.s. banking deal since 2012. how did you come to the decision ultimately that it make sense to grow substantially by buying a bank not directly in your , and ultimately and perhaps more importantly, to come under the regulation of the occ and the fed as a systemically important institution? >> businesses have all been

.rowing we have been finding more and in the banks. as the business have grown, we needed to diversify the funding so we really needed core retail deposits and needed the bank to be bigger and has as businesses grow we had to have more financing. rex why is bigger better? better?why is bigger they may conclude that bigger is not necessarily better. i know you kind of shared that opinion. >> i think the key is being big enough so that you can support all of the costs of regulation, all the costs of compliance, bank of america and all the other money-laundering and earn that cannot be too big. and you rightt now are focused on completion,

integration, execution and all of the stuff that is supposed to be your number one priority when butdo a big deal like this two years out will you become more of a bank consolidator? >> i think there should be more consolidation in the industry. really we are focusing on getting the deal closed and integrated. two years from now around 70 billion in assets. not that different from where we will be on the day we close. ais is not where we will be serial acquirer of banks. >> i made reference to what the fed said last night. he love and of the biggest banks in the country some of which are foreign subsidiaries, your living will is a resolution plan , your orderly windup arrangements are not credible. you believe the fed is trying to force the banks to break up and become smaller? >> i do not

believe they are trying to do that. i am not sure if there is only one view of the fed. these banks are the biggest banks and compete with other banks in the world. i do not think it is the right answer to break them up. they are in fact still too big to fail and i think the results of the orderly liquidation proves that. still have to manage that i do not think the right answer is to break them up. >> let's talk about business conditions for a moment. business conditions you are dealing with as a ceo. >> last time you are here a year ago you said relative -- lending standards are still relatively low. some of that is starting to a road. seeing lending

starting to deteriorate some. not back to her was in 2007 but there definitely is some erosion occurring. >> whether it is credit or stock prices doubled exist, everything is cyclical. whether it is a seven-year cycle or 10 year cycle is anybody's guess. >>re are we in that cycle? because of the size of the financial crisis and cries -- size of the bubble that burst, i think it is likely it will last longer this time. we are not at the excessive level yet. lex how will you know? >> one of the problems with bubbles it is very hard to know. you only see them after they burst come a which is very obvious. >> the financial crisis in 2008 at rose in the banking system. a lot of people point to an industry you come into contact with a lot, the shadow banking

system because the business hedgepment corporations funds in the shadow banking industry and lend to the same middle-market customers that you lend to. >>you see cause for concern? we lend to middle-market companies. are relatively good, margins are pretty good and interest rates are pretty low. you would worried that kings are not going to get better in terms of the credit quality of the companies. you then say where do we lend? we lend into the senior secure part of the marketplace. those hedge funds lend data layer below us. the mezzanine tranche is. >> those are the stuff that used to be packaged into cdo's. >> they were really more mortgages. clo's. those are definitely riskier.

>> that does not sound -- they may not be systemically important themselves but together if all of the assets went bad at the same time the at the same assets time went bad, i cannot imagine we would have a good result. >> they are not as big as the big things and not of interconnected but certainly a cause of concern. necessarily at credit market right now, the shadow banking industry, where should we be focusing our attention if we are looking for problems and inflation of the next bubble? >> it is hard to see bubbles. you worry where interest rates have been low for so long and the fed has an very accommodating. you worry there may be bubble

someplace. one place you could look is the stock market. we have seen a correction. the stock market was ahead of itself. you see a lot of money going into the market because where 10e will you put the money? year bond the 2.5%. i think you are seeing money pushed into the market. you have a pretty comprehensive view of the economy by virtue of the business that cit does. you lease aircraft to airlines, a lot of middle-market lending. an extraordinary range of companies. how does that lead you to the market where you look and say stocks are headed themselves? >> you look at the growth in the economy. the economy is still growing but low rate.ly pro---

middle-market companies are not that optimistic yet. they are not hiring a lot of people, not doing acquisitions. so there is still a level of concern. concerned about taxes, regulatory environment, health care costs. not overly aggressive in terms of expanding. >> i mentioned aircraft leasing. it has been a hot topic as of late because of the export import ban. >> i am a free-market guy. >> it is a subsidy. there is no question about that. a subsidy to a big company like boeing. alone in the world. we buy airbus airplanes, boeing airplanes. in europe the export credit agency supports aircraft. with it all away

that will happen is people like us will buy more airbus airplanes unless boeing and that will be bad for america, bad for american workers. >> plain and simple. >> dan did you do, dammed if you don't situation. >> in a competitive market, we need to compete with them. we do not want to disadvantage american companies and workers. >> jamie dimon makes a persuasive case for universal bank. will cit ever be a universal bank? >> no. personally i and try -- i enjoy trading businesses but that is not what cat is good at. cad is good at lending to middle-market companies, collateral and managing pools of assets. >> great to see you again. thank you for coming. let's not make it 11 months the next time around. you might call it a transformative deal.

there has never been a day like this for the sprint corporation. picking a new ceo and pulled out of the potential megamerger with t-mobile. ♪

>> live from bloomberg world headquarters in new york. this is erik schatzker. >> the morning once again. i am erik schatzker. >> great interviews. grateful show already. >> a very busy morning for actual news. big reported deals in the media and tech space. starting with t-mobile and sprint. ending the courtship of the upstart rival. alec sherman is here.

did they fire dan -- dan hesse he? what did they actually do? >> it is hard to say if they fired him or not. i think he knew the writing was on him -- on the wall. britain's buys t-mobile i would not have a problem. said that on the air. he said i have more to do with my life. >> could be the 40 million plus severance package to seal the deal. i think the writing was on the wall so if the deal had gone ahead he was going to run the company. already on his way out no matter what. that is the bottom line. it's needs to decide what they're going to do now. sprint was really softbank which owns 80%, the japanese wireless company. really the engine behind this brent t-mobile deal. if it is not going to go forward

, and that is what we heard last night and again this morning with more details, and they need to come up with plan b. ceo? >> ceo ofew a company called bright star, a company that is international wireless company. he is friendly. we do not know what a strategy is going to be yet. they are a money-losing wireless company. they have said for months and months to regulators even publicly we need three competitors in the united states, not for. the government says we need for and not three. now the question will the partnership is some sort of deal or will they stand alone? >> if they are, i would save the cards are stacked against them.

who ultimately is calling the shots cap go was at the justice department indicating what we said? we want for and not three, no matter how persuasive of an argument you make? deutsche telekom saying you have not come to us with quite enough yet or sprint saying if this distraction factor continues him a we are destroying the value of the company? >> that is a great question and depends upon who you ask. i have asked a number of different people that then you get a different answer. deutsche telekom in a strong position here. if you speak to people close to them, they bring up the point that they realized t-mobile was a stronger stand alone entity then it got back in january. speaking with regulators in washington to push the deal.

did not get are receptive response. basically told them, doubtful. once that happened and they started adding quarter after quarter, deutsche telekom realized this could succeed. likes operating profit, two. now they have realized we are in a position of strength. if you are going to do a deal, you're going to do it on our terms so they started to push back a little bit, pushing for a higher termination fee. they went away and came back and said ok and then started to negotiate on financing terms. from a financing perspective. 20 billion on the combined company in debt. a lot of things needed funding. they needed to buy the company. that worried deutsche telekom so

they wanted to make sure the terms and conditions were ok. that was the sticking point that did not get resolved. we have to leave it there. rupert murdoch pulling the plug on 21st century fox $75 billion bid for time warner. cory johnson the bloomberg editor-at-large. we talked to you after the deal was announced. you seem to feel lukewarm about the prospects because a lot of it dependent on what rupert murdoch and fox would ultimately have to pay. based on what you know now, did rupert murdoch take the right decision to pull the plug on the deal? >> good morning. we have nothing but applause for the management team. they were willing to ignore a transformative transactions.

about the price. it focused on continuing to run the business him a repurchase shares. we think fox has an incredible position and platform ahead. isn'tthe end of the day buying back stock and tech, tech? sticlimatic?amotta creatingit is about the maximum shareholder value and we think the stock is cheap. we believe fox earnings to double. so buying back shares with the lower earnings base of this multiple we think is incredibly attractive and we think fox is very well positioned to execute on the content side, which is going to be what stimulates all of the growth. question the question now turns to be the buyback. what fox might do beyond instead

of time warner. i am not entirely convinced fox is walking away from the deal. this is the most important strategic decision that rupert murdoch has made about his company in the past five years. hard to believe he woke up one morning and said never mind, i am moving on. i just find that hard to believe given what we know about this guy, given the way he does deals, the strategic way he thinks about growing his company. this is a company he envisioned back in the 1980's. highly leveraged company, using junkelp of drexel and bonds to create that make a company. he has are easy in the stock fall by 80% in his lifetime and i am sure he does not forget that. a $6 billion buyback over an unspecified amount of time does not mean she dashed he

cannot do it $75 billion acquisition. the heat is on time warner now. the up-ice has cleaned up company, separated assets like time warner cable and timing to create a clearer identity around what is time warner? he is attracted the likes of rupert murdoch and i think time warner shareholders brave a member of the price take the head yesterday and not what they woke up with this morning and be demanding something along the lines and i think he knows it. >> what do you think as a shareholder if this is all a ploy in order to jump back in? would you be in favor of that? with that type of thing upset you? >> we have always said strategically there is a lot of merit to a potential combination but really all about price so we applaud the price discipline. i think if everyone looks back 10 years ago comcast and disney

went through something similar. everything broke apart in both stocks have done well since then. we do not think it is a foregone conclusion there will be any new approach to time warner and we think fox is very well situated to execute on its own and time warner management had no interest in engaging and hard to do a deal if the other side does not want to engage. >> that is an excellent point. does it have to be a time warner situation? bit for individual assets instead? -- bid for individual assets instead >> there are very different assets. studios, cable networks him a different and important cable networks. work is a way that they together as an offering for cable providers. you wonder what stocks really saw in those. we may learn a lot more what may have the conference call and

understand what they were thinking specifically. maybe we should take them at their word. rupert murdoch says i am walking away amid maybe we should believe him. i have seen this before. >> how vulnerable is just up-ice? buchus? almost $10 perwn share. i would have to imagine the natives are restless. that he better put something up on the board or an activist will be in his kitchen demanding action. think that is probably likely although he is built up a lot of goodwill. the execution has been good and assets are in good shape and i think it will give him time to continue to exit. at the same point in time probably experiencing a little bit of you do not know what you had until it is gone today and i

am sure they're not too happy about that. the shareholders that is. >> i think what he has done is fairly for marketable. i do not think it is a situation where you could say you need to fix your house. but aliens of dollars of market value just evaporated overnight. fox and the other media companies, there is not a controlling class of shareholders. it's not about a crummy management situation or a business that needs to be cleaned up. i think what jeff has done is really terrific and has cleaned up the company and executing a lot of things. there is no reason hbo should nasa and -- naturally be as strong the business it has proven to be except for the management of the company.

it is not necessarily about the natural underlying value of mass that that a new group of shareholders could change. >> the time warner conference call happening right now so what will be interesting to see if they say something new about what the plan is going forward. a lot of talk about what will happen with hbo. some people say maybe they should spin it out. some people say i should run though it. >> think of the dilemma he faces right now. on today's conference call, does he talk about why time warner needs to be the collection of assets it is, or does he talk of the value of the company to say we do not really need cnn, we can sell that and can sell hbo. it is quite a dilemma he is facing on today's conference call. >> he has just said he will not talk about the fox bid over the decision to withdraw. if you were a time warner

shareholder, would that satisfy you? listening to him say i will not talk about it. >> if we had helped time warner we would have put it into fox. that is what we would have done if we were a current time warner shareholder. i think we would be frustrated because it has strategic merit. the management did not even engage. >> maybe it is a great strategy to make a bid, buy back shares. a good strategy. >> thank you. alec sherman covers media and telecom deals bloomberg. cory johnson the editor-at-large .n the west coast good to see you. thank you for sharing thoughts with us. >> we actually just hard from john legend -- john leger. apparently doesn't have a lot to say about the aborted deal. instead he says ice cream that turns magenta when you lick it.

we need this in the dispensary in my office. that is what he had to say. he just wants ice cream that turns magenta. backg up, alex rodriguez in the headlines. this time his supporting cast facing allegations. ♪

>> you are watching "market makers." it has been a nerve-racking 24 hours for a lot of row athletes. yesterday around this time anthony bosch, the man at the center of baseball's biggest their ward scandal was arrested and charged with distributing their words to professional and amateur athletes, some of which -- some of which to let high school. he has agreed to cooperate with

prosecutors and a wider investigation. this is the man who has already brought down alex rodriguez by admitting he provided him with performance-enhancing drugs. are joined now by an analyst at espn. great to have you back on our show. how nervous should days ball players and for that matter other pro athletes be this morning? >> there are a lot of names that have not been released. this tony bosch is the proprietor of an antiaging clinic in the strip mall outside miami seems to be at the forefront of a lot of issues 's and even beyond steroids. now he has made a deal. earlier he made a deal with major league baseball. that was done and thought they were done with him. now his name comes back as he makes a deal with the dea, the united states government. there are names still to be released. not sure when and to. not sure what level of players

in major league baseball. the feeling is major league baseball names were uncovered a year ago but there may be more and more in other sports and even youth sports. best guessld your before one other sports could come out of this and what other drugs are we talking about? >> in terms of other sports, that is a tough one. the miami area, having been a vice president of an nfl team, i gow a lot of the guys would to miami in the off-season. there are so many row athletes any worry about all different sports that congregate in that area and maybe get the word of mouth about this guy and can get what you want out of him. hard to speculate. you think of football and maybe basketball and other sports that require bulk goldman-s dealer or muscular

strength. the second part of your question as interesting. there were questions by the dea in a press conference yesterday. this involves more than testosterone, hth. this involves mali, ecstasy, oldg children, 14, 15 years getting their drugs of recreation from the clinic as well. >> how this ecstasy help you perform better in sports? think that is more forgetting the young athletes to have fun outside of sports. that is a concern there. it was seen parents were bringing kids by the clinic to get them better in whatever, baseball, basketball football. >> baseball has been trying to get this their roy's monkey off of it back or almost a decade now. going back to the mitchell

report in 2006, trying to paint that era as if it were linked to players like sammy sosa, josé theeco, but the truth of matter is biogenesis proves the steroid era continued until a least 2000 12 and for all we know, still continues. what does baseball do you go >> they can't shake it. whato back to 1990 seven, was called the summer of love and baseball. mark mcgwire and sammy sosa hitting the bombs. the fans came in droves. you mentioned in 2000 x, the doing an investigation for george mitchell. stepped-up enforcement. 50 games for the first offense am a 100 games. they nabbed players like granny -- manny ramirez. here we are again.

biogenesis. names like alex rodriguez, nelson cruz -- big stars in baseball. yet again baseball must be towering saying bosch here we go again. it will behink incrementally worse for alex rodriguez? >> he has been -- has ofn suspended and out baseball. his cousin was one of the ones woken up by the da yesterday. yet again his name surfaces with the scandals with biogenesis. >> the shoes have yet to drop. winky for taking time out. listw brandt and and the for espn. -- analyst for espn. -- thank you for taking the time out. it's a lot more coming up. ♪

>> approaching 56 past the hour, which means bloomberg television is on the mark it. groupon falling after announcing second-quarter revenue that missed analyst estimates and lowering the forecast for the third quarter. having an ad two cents in analysts were looking for three cents. cutting the 2014 forecast. revenue at $270 million. competing with amazon trying to beef up the mobile presence. in that case takes a lot of cash and eating into the company's bottom line. >> do you groupon? >> i used to religiously and do not anymore. could i do today to save money and then i lost interest. >> i do not know anyone that

doesn't anymore. if you do, tell us about it. back in a minute. ♪

>> live from bloomberg headquarters in new york, this is "market makers." with erik schatzker and stephanie ruhle. >> walgreens stays at home. they pass up the chance to save millions i'm refusing to move its tax address to europe. >> who needs murdoch? the $75 billion takeover bid s the $75 billion takeover bid. is market makers here on

bloomberg television. here forix steel stephanie ruhle. >> ticketed breath. we have another great hour of -- take a deep breath. we have another great hour of television coming your way. bank of america raised its quarterly dividend to five cents per share. reserve gave its .lessing bright star and sprint are controlled by softbank. sprint abandoned talks to take over t-mobile. are to blame for stealing over one billion sets of usernames and passwords. fortune 500 websites were among those hacked by the russians.

>> a u.s. company does not make a -- move its tax address. walgreens purchased alliance boots. scarlet fu has more on what the u.s. drugstore chain actually did. what did they get? >> it gets the rest of this western -- switzerland-based boots alliance -- alliance boots that it did not already own. ago, walgreens first bought a stake in retained a three-year option to buy the rest of it. this was not well received by investors. it was their biggest acquisition never. there were a lot of question marks about the timing. why would be diversifying into europe rather than fast-growing markets like latin america. today, it pulled the trigger and bought the rest of it.

it has worked out quite well and focusing on europe. that did end up being the bottom of what we saw in europe. >> to do have enough cash to finance the deal? >> keep in mind, the stock is done pretty well. the stock has gone from $29 to $69, up 138%. >> and then down nine dollars today. >> the drop today is the most since october 2007, the height of the last bull market. there was a lot of different -- disappointment about the lack of the tax and version plan. -- in version plan. the numbers to not look all that impressive. >> what should walgreens be doing? >> the long-term fundamentals are still intact. it is the surprise element of ion not inverso

happening. they will play off the popularity of the health and wellness model we have seen other retail companies pursue. chains have a doing better than target or walmart in bringing customer traffic through the door. >> thank you so much. >> one of the questions i have been left asking is why would walgreens not want to take advantage of the millions of dollars of potential savings in this texan version loophole -- loophole?ion why did walgreens make this choice? is it a matter of bowing to political and public pressure? i can't understand otherwise. >> they cited three different reasons. they said, we looked at the legal ramifications. we wanted to make sure we stood up to irs scrutiny.

said there is the potential consumer blowback and there is potential political blowback. walgreens is different from the other companies that have inverted because it is something the consumers and voters across familiar with. as opposed to medtronic. you are not walking in there and purchasing it everyday. >> do we believe the part about the consumers? jack lew has been making a lot of noise about tax inversions. the president has said some things. some democratic senators and congressmen have had some things to say. if the public paying attention as nebulous as a tax inversion? >> it depends. it is not just isolated to consumers seeing the news and then maybe thinking about going

elsewhere. there are unions that were pushing the company not to do this. there were democratic senators urging the company not to do this. whereuld see a situation those forces, not just the mere fact of walgreens being based thosee the u.s. from of political forces coming to bear on consumers and urging them not to shop there were making them question. >> what part of walgreens' decision might be fear that any action taking in washington might be retroactive? >> that is certainly out there. potential for retroactive legislation. congress is talking about that. republicans have resisted that. then you have this potential for treasury to come in on its own and make regulations. even though those would not be retroactive, they might apply to the debt companies out -- take out going forward.

that would affect the company even if they closed the transaction before those rags come out. -- regs come out. >> how much does the treasury department have power was? -- power-wise? >> they have some power. there are pretty gronk grants of authority -- broad grants of authority when it comes to the tax code. an area where the treasury department has tried and not been able to issue regulations a couple of times. it is a very uncertain area of the law and would require treasury to be much more aggressive than they have in the past. >> strategically, would it make sense for treasury to do this? wouldn't this put the pressure of broader tax reform off the table? it in twobout different ways.

if treasury is taking some pressure off of congress by saying maybe there are some things we can do and dangling that out there that there is something that they could do, they add pressure to companies. cannot just say, congress is not going to do anything. they know there is some potential from treasury and something that might give them pause. >> richard, what is the probability that this decision by walgreens marks the end of the inversion craze? >> it does not. and much companies different situations that did not have the same consumer foot traffic issue that would not have the volume of employees or unions that might make them think the way walgreens did. tory tax lawyer i talked says, i've got to be careful what i say because i'm talking to clients about this.

this is not at all the end of the inversion move in the u.s. >> great to have you with us, richard. coming up, the fed tells the nation's biggest banks that they are not persuaded they are ready for the next financial crisis and to go back to the drawing board. >> talk about goes upscale. i'm not lying to you. goes upscale. i'm not lying to you. as is "market makers." on bloomberg television. -- this is "market makers." on bloomberg television. streaming on your apple tv and amazon fire. ♪

>> it is back to the drawing board for the big banks. the federal reserve reserve and the fdic toll a lot of the your living willsnks

are not credible. in theory, a failure could trigger another financial crisis. the agencies order these banks to simplify. how on earth are they going to do that? let's talk. david, what do you make of this? >> well, you know, the living wills are one of the biggest oddities of dodd-frank. trying to, and a very clean way, low-impact way, dissolve the large financial institutions in the middle of a panic and chaos is questionable. second of all, the plan to create to do this are going to be based on the particulars of the last crisis. but the next crisis will not be the same as the next one. it will have its own anomalies and peculiarities.

certainly, these management team strength around kool-aid for breakfast, lunch, and dinner. they've built these empires and now you are asking them, in the event that you fail as the leader and the empires you have built a crumbling around you, what is your plan for us to put you out of business? the whole idea is really ludicrous all around. that washington leans on to allow themselves to believe that too big to fail is tolerable because it is going to be ok next i'm. is anything but a quest to break up the big banks at the end of the day? wecertainly, that is what believe is inevitable. we don't see any other way around it. to the extent that this comfort with the living will process breaks down and it started to break down yesterday when the fed said, we have been silent about this, but it is not a good plan right now -- i don't think the plans will improve. i don't think this will be a

credible process. i think it will break down the comfort in washington further onto big to fail and it is very uncomfortable of -- already. i think they will either push for more, put on more layers of capital buffer that will just force management to split up, just to get away from the regulations. >> we know that there are and brown, for example, that would break up the big banks with bills. elizabeth steele wants to break up big banks. we also know that there is not unanimity and said the federal reserve about what constitutes too big to fail. atn there was a line drawn $100 billion of assets. others feel differently. how all -- how will little play out in practice? >> that is a very good point. there are different views on it.

there is consensus that it is a problem. the lack of consensus is on how to deal with it. dovitably, the way they will with it is make things so painful that management's cry uncle and split things up. under shareholder pressure, guys like me and you will say this is not a good model, particularly the universal bank. crisis.the s&l we had taxpayer bailout of them and they were not even that big. the guys in washington can job on all they want. at the end of the day, look at fed zero rates. there are always going to dig the moral hazard roots -- routes over pain for the populace. >> i have a dumb question. a big bank fails, like goldman sachs, doesn't really matter how orderly it is to unwind it?

isn't the just going to be complete panic the matter what? >> yes, i think the idea of a really clean, orderly unwind is folly. there are different institutions we are talking about, too. the universal banks of the scarier ones. you have the deposit systems linked with the securities aspects, which is where the securities aspect came in. look at the last crisis. what was the real problem? the subprime structure product the blue and whole and the balance sheet. anybody with a traditional bank did not really have any direct problems. possible thato the banks have not taken this living will requirement of dodd-frank seriously enough? i say that because reading the fdic released yesterday, the

statement on the subject, it seemed in between the lines as though that is what the fdic was saying. i spoke to a senior executive at one of the largest banks, one of the banks fingered by the fdic and the fed for having an unsatisfactory living will, and he said, i've read the document and it is impossible to understand. i think that is how it is going to continue. the idea that they did not take it seriously dovetails with my idea that you have a conflict. -- it is justif an impossible process. you are trying to understand conditions that you do not know what they're going to be like. forcing a company to sell assets and frozen markets does not relate work out too well. it only exacerbates the problem. the time to sell assets are 2008, springll

2009. >> you do not sell your house when it is burning to the ground. >> some of the fixed income stuff, there were literally no buyers. it was messy and it took time. that is how those things are always going to be. i don't think living wells are going to work -- living wills are going to work. >> thank you for being with us. love your thoughts on banking. >> ralph lauren's new strategy. goodbye to malls. ♪

>> if you are in the market for a new polo button-down, ralph

lauren wants you to go directly to its stores. the retailer is trying to expand margins and sales. who isn't? olivia sterns has been digging into the retailer. what is the transition the company is trying to make here? >> they are doing what a lot of retailers are doing. traditionally, you think ralph lauren is a department store staple. we know football is falling in malls. if you sell wholesale -- footfall is falling in malls. if you sell wholesale, you lose margins. the majority is not coming from retail. a couple euros, we will see 60% of sales coming out of retail -- years, you we will see 60% of sales coming out of retail. >> is america a high street culture? you know what i'm talking about.

people walk the street and stop in at stores in england. years and years, america has been a mall culture. new york is a high street culture. parts of los angeles are. is over there.it >> this gets to the big issue. realized,lers have spend big on the flagship. they are opening the first polo flagship store in new york. >> does that mean they wind up producing real estate somewhat and putting more money into the big locations? money into big locations and more into e-commerce. use the website and draw the tourist traffic. >> how are they doing in the e-commerce world? polo.coma decade ago, was one of the first retailers that had an online presence that was selling directly.

the kind of stumbled. you saw the rise of macy's and bloomingdale's. they want to sell directly because they want the control over the merchandise. they don't want there to always be a perpetual sales rack and bloomingdale's full of polo shirts. which there is. they're also taking a cue from burberry, product, louis vuitton. ony are raising prices top-end goods and pushing into luxury handbags. as you probably know, erik, luxury handbags are all margin. >> and all the rage. >> they have it back called the ricki. it is selling for up to $18,000. that is taking its cue from the hermesthods -- the berkin back. g. true ralph lauren going to

-- continue a barbell strategy? high-end and outlet stores? >> they have a funny mix. they luxury goods company? not exactly the top-end. are they mass-market retailer? sort of. sales have been falling because they have been flooded to outlets. they also do have to do with this barbell turnout. there is money in the bottom and money in the top. >> cut out the middle, cut out the malls. interesting. thanks so much. now i know where to buy. >> or your $20,000 handbag. >> of course. that is next. [laughter] >> time for on the markets. a quick check of disney. the world's largest entertainment company.

attentiont my yesterday was jon erlichman's interview with the ceo, who said he would not rule out naming a president, perhaps paving the way for a succession. we are back in two minutes on "market makers." ♪

>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> this is market makers. i'm erik schatzker. >> imes alix steel -- i'm alix steel. bloomideous toxic algae in ohio's lake eerie resulted in a water man for hundreds of thousands of residents -- ban for hundreds of thousands of residents. the solution to reducing the polluted runoff is far from clear. want strictersts

laws. farmers and agricultural lobbyists want some kind of innovation without regulation. here to eliminate both sides is sean mahoney from boston. don parrish is the regulatory director of affairs at the american farm bureau from washington. thank you very much. it probably makes sense to begin with you, sean. if you would make the case to get -- against fertilizer and what we can do about it. here is that the crisis at -- that folks in toledo faced over the weekend is a wick up call for all of us. it is also important to know that this is not just an issue associated with runoff from farms. it is associated with runoff from pavements and failing septic systems and the like. we have nonpoint source

pollution that is adding nutrients and primarily phosphorus that is feeding the growth of these algae oh blooms. there are ways that we can address that runoff in the way we address the pollution in lake eerie in the 1960's and 70's. we need to step up the efforts, so that we can avoid situations like the folks in toledo had to face over the past weekend. you think that the solution is more on the government side, in terms of regulation, or is it resting with the farmers to do the right thing? clearly, the first thing i would say is that easy solutions are never long-term solutions. they are never really fixes. what we need to focus on something that is more long-term. the good thing for farmers is that they have a very strong ethic, a very strong stewardship ethic.

they want to continually be part of the solution. they want to improve, they want to adapter management techniques. we are already on that. we are doing a lot. >> couldn't you argue that if they were doing enough, we wouldn't be in the situation we're in right now? >> well, i think sean pointed to the fact that this is an extremely complicated problem. it is complicated not just by the fact that we have over infrastructure. infrastructure that may be failing because that is part of the issue here. not just in the drinking water, but in other parts of the way we manage us as people. also have a biology situation going on in lake eerie that we have never had before. everyone has heard of zebra mussels. filtering outare the good algae and that is leaving a vacuum for the bad algae. of phosphorus, we have

reduction of use in agriculture. we have seen continual improvement on the part of farmers and ranchers. what is going on is an extremely complicated problem. mussels is nota going to get us anywhere, is it? are.don't know what they full disclosure. i have no idea what they are. >> it is an exotic species of bivalve that came over from and hasn ships ballast infected many waterways in and around the great lakes. to your point, it makes the water look clearer, but it takes out of the water things that can have positive effect. >> they do not take things out of the water. they do filter things. they make the light penetrate deeper. problem is that without the clarity of water, you would not

have blue-green algae blooms. you cannot blame it on the biology. scientists are saying very clearly that phosphorus is not the only issue going on in lake eerie. i think the issue is that there are going to be changing conditions that we are going to have to be facing over the next couple of decades with respect to warming water temperatures as a result of climate change, the introduction of exotic new species like zebra mussels, etc. the piece we need to focus on is what we can control. what we can control is what is running off into her lakes and streams. to agricultural practice, there have been great advances by the farmers here in new england with respect to implementing best management practices.

fairly straightforward things like vegetative buffers between streams. where you put your cattle and the like. those are all good stuff. with the best management practices, the problem is that if they are not universally implemented, you're still going to have issues like we just saw in toledo and on cape cod or lake champlain in vermont. we need to have an across-the-board implementation of the best management practices. if we could do that voluntarily, that would be wonderful. we have not been able to do it 100% voluntarily, so there may be a role here for government. whether it is state or federal government. to implement new standards for people to follow. ohio has done that in the last session. we see it beginning in new england.

this is an issue across all sectors. it is not just across the agricultural sector. the lake eerie problem is related to agriculture. we see it in runoffs in urban areas, family septic six stems -- systems, and the like. >> there is no question it is a difficult problem. we can only do what is in our power to control. i'm sure you are right that farmers, for the most part, are well-meaning people and they are stewards of their land. but so long as they are not drinking the water out of late yuri that is contaminated by toxic algae bloom, there is much less of an incentive for them to do something about phosphorus is the consequence might be lower crop yields. well, i think that is a very shortsighted approach to the way farmers have proactively stepped up in this watershed. i can tell you that there has

been a lot going on in the farm sector that really has made tremendous progress, almost to the point of maybe some of the things they have put into place may have had an antagonistic action, that may be causing this. for sure in areas where we have reduced sediment loads. we have increased the level of conservation. number of things that farmers have voluntarily done and done so broadly across the entire state that really has shown a tremendous movement in the area of trying to reduce our environmental footprint. this area is far too complex. yes, best management practices are important. from a strictly engineering standpoint, the standard deviation of those practices are huge because you are digging into the natural system. you have had an increase in

rainfall and that watershed that makes everybody possible i more difficult to manage. moreifebody difficult to manage. >> we do have the tools. act is close to 50 years old. he did a tremendous job at addressing industrial discharge. the new challenge is to a dress the nonpoint source, the diffuse of nutrients into our waterways. when we only look at the dead island in the gulf of mexico, at the mouth of the mississippi, you realize that this is a critical problem for us to a dress. >> i'm afraid were going to have to leave it there. we will have to leave it there. sean mahoney and don parrish. thank you. up, plenty for ceo to

talk about on the time warner conference call. our reporters have been listening in. we are back in two minutes. ♪

>> the time warner conference call and did just a few minutes ago. the the ceo is pestered us questions -- will the ceo was pestered -- the ceo was pestered with questions. completely avoided answering the question. how did he get away with it? they started off focusing on operations of the quarter and not the fox bid. every question was basically about, what is your strategy going forward? how are you going to create value going forward? time warner has had a very good plan over the last couple years. they have executed well. the focused on cable networks and on creating content.

thewarner bros. studios is biggest production company in terms of movies and television. hbo is doing very well. time warner management felt like they could get on the call and talk about how good their value is. >> to what degree is the $10 18 center dot a rebuke for not addressing this issue? >> it is a direct rebuke. all they wanted was a deal. the stock is still above what it was pre-deal. the fast money is coming out of the stock. >> it is worth $100 a share, you kept hearing him say that. doesn't he have to unlock some kind of value to make it $100 per share? >> they basically trimmed down the company and sold everything

other than the score, key assets. they spun off the time publishing business. aol, and so on. now they are focused on the businesses that they think are the highest gross, highest returning. the market agrees with them. stocks have performed well. in addition to running good assets and good segments of the media, the management has been working very hard for shareholders. they return every piece of free cash in buybacks and dividends. they have been focusing on the core business. they believe that we'll get them to $100 per share. working hard for shareholders has made fox and exciting stock. they report after the bell. what would happen if chase carey or rupert murdoch, who we will probably not hear from on the conference call, said, we might take another run at it. >> they would love to hear that.

at some point, fox will probably come back at some point. i don't think this deal is completely dead. i think what happened is that fox was not prepared from a capital structure perspective to pay the price they needed to pay to get this deal done. it $100 stock price would imply a lot. it would imply some solution to fox shareholders. if you think back to the 1990's rupert would have done the deal. >> we've got to go. we have to leave it there. thank you so much paul. busy man. we will be right back. ♪

>> a new innovation from taco bell. a new chain of restaurants. u.s. tocco. it is fast casual like chipotle. -- u.s. taco. it is fast casual like chipotle. best -- the best of

america in a tocco. -- taco. the little one is called the southern squealer. it is a pulled pork taco. cake.is a sweetcorn pulled pork. whimsical names not into classic american regional ingredients. the hot chick is swiss on buffalo wing. percenter is the main lobster roll. kawai ease style mahi-mahi. -- hawaii style mahi-mahi. >> we have tried to create a food truck that you don't have to chase. is about a dining

experience. just important as the food is the environment that you enjoy them. -- it in. the ice cream and guinness-based mexican car bomb is one of the edgy offerings. this is not the push -- first into fast casual for the taco bell parent company. >> there was this other large demographic of food that loved mexican food, but are not necessarily fast food users. it is fast growing and we thought we could present a that hasique concept something else of what is going on in the market. >> whether or not you are a food you eathe

there, it does represent a shift in the type of chain you have seen into what chipotle has stolen in terms of market share. this isrking thesis is taco bell's effort to prove david einhorn short on chipotle. >> we will leave it at that. ♪

>> that wraps it up for market makers. what a great show.

>> we had a great fertilizer smacked down. >> fertilizer smacked down. you never thought you'd hear that on "market makers." >> tomorrow, we will talk to the ceo of equinox gyms. we will talk about the state of fitness. plus equinox's latest acquisition, millennium gyms. institution, york but it has branched out to london. it has got to my hometown, toronto. it is in southern california. northern california, too. taking over the nation. >> i wonder if he is going to make us work out? >> ok. >> i think eric would definitely win that if there was a contest. for now, bloomberg television is on the markets. scarlet fu has more. erikseem to recall that was in some men's fitness magazine showing us how to exercise, so i think it makes perfect sense.

from a 500 has rebounded two-month low. energy and financial shares are leading the index higher. joining us for the options inside is the equity derivatives strategist. we have seen a little bit more volatility the last couple of days. that have been saying going forward that the s&p is going to be pushing volatility higher. it is no surprise that the fomc triggered volatility higher. this was somewhat anticipated. peoplet we are seeing is planning on the next volatility event, the september event. >> the september 17 meeting. >> that's correct. that guy was also selling some volatility. all volatility seven quite elevated. volatilities have been quite

elevated. exchange-rate attracts the 20 year treasury. >> that's correct. 11.5 points. we are seeing some interest in that. >> why the 20 year as opposed to the shorter end of the deal curve? >> it is the most liquid etf. >>. you. speaking of liquid stocks or securities, we are keeping a close eye on bank of america this morning because the stock is gaining, the cash stock is gaining on news that bank of america has raised its dividend and dropped its plan to buy back stock after the federal reserve capital plan. in theise are you seeing options market? >> it is very active today in the longer term options. capitalizing on dividends. they are basically dividend trades. bank of america is a dividend

trade. that, the new expected rate is another nickel for the next year. we are seeing conversion trades isthe market, or somebody selling -- were somebody is telling the dividend to take advantage. share is up by him as $.32. -- is up by almost $.32. tell us what you have in mind. >> i am somewhat bearish here. if you compare to how media has hasormed -- nvidia performed. it has underperformed. all the other stocks of an rallying. .his does not bode well it is a good company. it has a decent tax balance. my trade is to sell a call

spread, the weekly call spreads. and ik it is quite fat would like to sell slightly in the money call for one week. i like it given the way the stock is. >> a more bearish take on nvidia. thank you so much for joining us. we will be back on the markets in 30 minutes. "money clip" is up next. ♪

welcome to "money clip." i am mark crumpton in for adam johnson. not just frozen -- disney does it again with a box office arsenal. toasting the new africa, the white house in corporate america raise their glasses. vladimir putin wants to ban u.s. and eu product in russia in retaliation from sanctions from the west. today's wild card is london mayor boris johnson gets fired up over the promise of