>> from bloomberg world headquarters in new york, i'm mark crumpton. this is "bottom line." the intersection of business and economics with a main street perspective. breaking news, the federal reserve is releasing the minutes of its two-day fomc meeting held at the end of july. nowr cook joins us from with the details. good afternoon. >> good afternoon. these minutes provide us with new insight into the debate around the fed table at that last meeting. they reveal that there was indeed another healthy discussion over whether the

improving economy means that the fed's timetable for starting to tighten needs to change. with respect to monetary policy over the medium run, they generally agreed that labor market conditions and inflation had moved closer to the committee long-run objectives in recent months. they most anticipated progress towards the goals continuing. moreover, many participants -- the key word there, many -- noting that it occurred more quickly than expected and it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated. the key word there being many. why are they entertaining this idea? thee participants in meeting see improvement in the labor market specifically? disciplines generally agree that the recent improvement in labor market conditions and cumulative progress over the past year had been greater than anticipated and that labor market conditions had moved noticeably closer to

those viewed as normal in the long run. assessments of the remaining degree of labor market slack and how to measure it? a big debate around the table. is why this debate is continuing. that is why they have decided not to signal an earlier move. they also marked at length their exit strategy. many pages were devoted to the discussion around the table on their exit strategy and what the appropriate tools at their disposal are. they supported continuing to target a range of .5 basis rate oft the time of -- 25 basis points at the time of liftoff. that coresay participants need adjustment in the interest on the access reserve rate, which would be the primary tool used to raise the five that primary federal fund rate. in addition, most felt at a temporary use of a limited scale overnight repo facility would help to set a firmer floor under money market interest rates.

but it is pretty clear from the discussion that the reverse repo confidence ining how that might work. in general, participants around the table agreeing to reduce the size of the fed's balance sheet gradually and predictably. people will be focusing on those comments. most agreed to reduce the reinvestment of their bond program proceeds, taking place after the first increase in target fed funds. they generally agreed not to sell mortgage backed securities from bond holdings. there is a new communications committee chewing over the very difficult task of a fed going out to the markets in the world, telling them how this is going to play out. >> peter cook, thank you. let's get instant equity market reaction from matt miller, who joins me now. volume is lower than normal for the summer. >> volume, you are always going

to see it lower around the fed announcements. computer traders turn off their outward rhythms and don't know how to read the fed language as well as, say, peter cook does, for example, so they will slow down computer-driven trading around these announcements. expect it to pick up. the interesting thing is that we have seen markets gaining, but not by a heck of a lot. job gains may bring faster interest rate rises. the kind of thing that you would expect to normally spook the markets. but this market seems to be holding up white well. we opened up on the s&p this morning, up to 1986. a nine point gain, we are back down to 1984. giving up a little bit of those gains, but it has been a steady climb throughout the morning. this may be buying on the rumor, selling on the news. keep in mind that we are still looking at gains year to date that are almost 7.5%. very interesting.

muted, but still an interesting reaction to these minutes. >> dallas matt miller joining us. matt, thank you so much. we will have more reaction later in the show. chiefnce sumner, the economist at kpmg, and kathleen gaffney, the co-investor for investor grade income, joining me at the bottom of the hour, around 2:30 new york time. in a rack -- in i rock -- in iraq, the beheading of a man they claimed was journalist james foley. today the white house confirmed that the video is authentic. iney was kidnapped in syria november of 2012. the president made a statement from martha's vineyard short time ago. >> governments and peoples across the middle east, there has to be a common effort to extract this cancer so that it

does not spread. there has to be a clear rejection of these kinds of nihilistic ideologies. one thing that we can all a great -- agree on is that a has no place in the 21st century. >> they also threatened to kill an american journalist, steve and sub loft, unless the president calls off airstrikes on iraq. american fighter jets and drones conducted nearly one dozen missions today. for more, i am joined from washington by sandy berger, chairman of the strategic advisory and diplomacy firm that served as the national security advisor to resident bill clinton. welcome back, good to have you on the broadcast. >> good to be here. >> if you are part of the president's national security advise himhow do you

about airstrikes knowing that another american life is at stake? >> of gruesome act that we saw today. that we sawe act today, mark. it was intended to send us a message. this group, the islamic state, telling us to leave us -- telling us to leave them alone. it in fact sends the opposite message. we can't leave them alone. they control an area the size of the eight of maryland. intent to take over more land. we simply cannot, as the president said today, permit that to continue. i think the president is on the right track here. as long as maliki was prime constrained.were he was so bitterly hated by the sunnis in iraq, had we used our air power we would have been seen as the melekeok army -- maliki army. now we can work with the new

government and tried to win the ,unnis back to our side in iraq calling upon the regional countries who are also threatened by this group and serious, -- serious political and military efforts to push these guys back. >> the brutality of these militants is so extreme, even ok to does not want to have anything to do with them. is it even worth it for the united states to try to open some sort of back channel touch and mark or should the strategy now be to seek out and destroy these fighters? -- there is not back channel. these are fanatics. there is no way to bees in with this group. they are brutal and they have a people, to eliminate all in the middle east that don't practice their form of medieval religion. so, no negotiating with these people.

basically, we have to have a concerted political and military strategy. the newto build up iraqi government and in list all the others in the region who share our sense of threat here. to take on isil and push them back. sethe red line that was down by the president in syria, the line that they crossed when they used chemical weapons, did that line in bold and or give rise to the islamic state militancy -- embolden or give rise to the islamic state militancy we are seeing? >> this has existed before that event. it has been growing in force. it is part of a larger sunni militant movement that we have seen over the last few years. we have seen it in libya.

we have seen it in other parts of the middle east. i don't think it is linked to any one particular event. i do think that this is a point where the u.s. and our allies must be very clear. we cannot accept this, tolerate this -- we have to draw a very clear and shrewd political strategy here. >> i am speaking with sandy berger. there has been a lot of talk in washington about an asia pivot, a reevaluation of the american economic approach to that region. is it time for anorak privet -- iraq pivot? we are hearing about the possibility of a small contingency of troops being sent there. >> i don't think it is an either or situation. years we have0

very important trade negotiations going on to create an asia wide trade agreement, which would be a tremendous impetus for our economy. we have a strategically secure interest in asia. i think that we need to continue to move forward on that. that does not mean that we should not focus intensely now on the middle east. on the sunni militant threat. this islamic extremist threat that is gathering anorak -- in a .ack -- in iraq we have to be smart about how we deal with it. >> we have about one minute left. what are the economics of u.s. involvement in iraq? is this a question of we broke it, we fix it? at what monetary cost to the american taxpayer ocean mark >> obviously there will be cost associated with doing something in a rack, but i think that we

, but we have iraq to do it with our allies in the region. they are coming after our allies . they are coming after others in the middle east. if you take all the nations that allies,friends and there are 1000 combat aircraft in that region. there's no reason we have to carry that erred in by ourselves. dedicated to the harm of not just the united states, but others in the region. i think we have to build an international coalition to deal with it. >> sandy berger, former national security adviser to president clinton, joining us from washington -- always a privilege to get your perspective. >> thank you. >> coming up, eric holder is in ferguson, missouri, as the grand jury prepares to examine evidence regarding 18-year-old michael brown's fatal shooting.

those details, when "autumn line on bloomberg television continues in just a moment. onwhen "bottom line" bloomberg television continues in just a moment. ♪

u.s. attorney general, eric holder, is in ferguson, missouri, speaking with federal and local officials. we are there covering the story. know so far about the conversations that the attorney general is having in ferguson? which has been the scene of days and nights of rioting since the shooting of that young man, michael brown. >> the attorney general at -- the attorney general's meeting with two different groups. leaders and he is meeting with investigators. fbi agentsght 40 into the community to interview people and find out what really happened on august 9. part of his role is to try to talk to the community.

to try to moveis forward the investigation. that there any sense community is welcoming the attorney general's visit? are they glad that he is there? as anothersee this political figure from washington that doesn't understand the problem? peoplet the sense that are welcoming the attorney general. he does have a track record in fighting for civil rights that members of this community have been looking for. is political structure here mostly white, the community is mostly black, they are looking forward to someone who has the opportunity to -- speaking with someone who understands what they are talking about and what they are looking for. >> peter cook, thank you for the time today. what does the attorney general need to do with his visit to ferguson? >> as we just heard, the main

goal of the visit is to reaffirm to the community that the federal government is conducting its own independent investigation into what happened to michael brown. there is basically another set of eyes looking at all of these fact and the justice department and this attorney general, this president, can be counted on to conduct that independent investigation. he sort of abe the way with his op-ed in "the st. louis ," telling us that we could count on the fair impartiality of the investigation. meantime they must be careful not to appear to be taking sides or rushing to judgment in some sort of way -- not to have already reached conclusions about facts that are still being determined by the agents on the ground there. to me about the divide that there seems to be in the african-american community there. we have seen some rioting. we have seen some violent.

on the other hand we have seen members of the community encouraging people, if they want to be vocal, that is their first wantment to be vocal, that is their first amendment right, but that it stops at the water's edge [no audio] are seeing old people from a former generation, younger people, people from all different races and from outside ferguson. there are people protesting, looting, some more violent than others. it is a struggle to organize everyone together. >> on the national front, have you been hearing any criticism of how the white house has been handling this? in some quarters concerned that president obama has not been forceful enough about this and has not tackled the issue of race head-on the way that he did that time when

he spoke in philadelphia about race in america. mark, you are absolutely hearing that criticism. you are also hearing some work a neutralesident as arbiter here. we don't know all the fact. his thumbs putting on the scale, as the president said in his own comment. but he has heard the criticism that he has not been vocal enough. i think he is counting on the attorney general to be his emissary for the moment in ferguson. it remains to be seen what the attorney general does on the ground there. the comments that we are expecting at some point before the cameras, will they be enough to satisfy the nation and the president's critics? the demonstration last night compared to the ones from prior days? it did get tense for a bit, but this is the first night in a while when police did not use

tear gas or rubber bullets on anyone. things were calmer than they had .n the crowd was smaller and police arrested about 47 people within the crowd without using tear gas on the entire crowd. the police change their tactics and it has worked out at her for the people coming to protest peacefully. >> both on this story, concerning the killing of michael brown in ferguson, missouri, with eric holder there today. guys, thank you so much. appreciate it. thel ahead, reaction to release of the july fed minutes. at the bottom of the hour, a roundtable discussion with constance hunter and kathleen gaffney. all of this and more when "online" -- when "bottom line"

continues. ♪

>> we have breaking news. officials are telling the associated press that bank of america has reached a $17 billion settlement with federal and state authorities for its role in the sale of mortgage-backed securities in

the run-up to the 2008 financial crisis. the bank will pay $10 billion in cash and provide consumer relief valued at $7 billion. they spoke the associated rest on condition of anonymity because the deal is not scheduled to be announced until thursday at the earliest. the bank a client comment -- the bank declined to comment. matt miller is back with details. >> let's take a look. we were coming off of the highs that we hit right before the minutes were released. we had gone up to about 1986 on the s&p. to 1983,ome back down but we started the day on 1987. butl up from this morning, just barely. a couple of individual stocks we are watching right now, target is still reeling from last year's hacker attack. they cut their full-year forecast, the retailer explaining the bump in sales as a money push into canada.

hertz haverts -- plunged, in addition to the record level of auto recalls and cost by accounting review. more "bottom line" after this. ♪

>> welcome back to the second onf-hour of "bottom line," bloomberg television. thank you so much for staying with us. let's get back to our top story. the release of our latest minutes. i am joined by constance hunter, chief economist at kpmg and board member of the national association of business economics, and kathleen gaffney, chief investor in the $1.3 billion asset directed codirector of the firm's investment fixed income team. , ladies.

constance, let me start with you. anything in the fed minutes that jumps out at you? they mentioned second-quarter quarter gdp, while the rebound, was not a lock oster. if you take a look at it, you get a two point 2% year-over-year. that is right smack in line with of 2.1% toecast 2014 2.3%. the other thing that they highlight is the labor market, which is steadily improving. expected, butas it is possible that they are raising rates in january or march of next year. >> the 10 year, the yield is that 2.44%. is that where he would be after the release of these minutes? >> it is up a few basis rights, but not a big reaction. what we are seeing here is room to leave the door open for a , but not wanting the

markets overreact. >> overreact in the sense that maybe if you are looking at it. charter or something else that you don't know which way they the fedg to move? is intentionally not trying to tibbets hand right now? >> the chart says one thing, geopolitical events say another thing. it is really pushing this flight to quality flight to safety here . there is a little bit of a dichotomy. that theyill think are going to be prudent about this. they are going to be very measured. that is what you want from your central bank. sayingtance, you were that it comes down to the labor market here and that the fed is going to have to keep an eye on that. you have the unemployment figure, the inflation figure that the fed talked about going back for over one year. this symposium is calling -- called reevaluating labor market dynamics. where should policy makers their

primary focus? >> it is what is structural and what is cyclical in the labor market. i know that you and i have talked about this so many times and it really is the crux of the matter because if we are going to start seeing wage inflation here, it makes sense that it would lead to overall inflation, but if there is still a lot of slack in the labor market he won't see that translated within the economy. of the credo, ironically, was that we value independent thinking. is there enough of that going on at the head right now? do you still see the split between a hawk and the dove? is that causing tension? how are investors react in? >> i don't think it is causing tension so much as getting the different views out there. the economy is moving at a friend paces. the labor market does have pockets of tightness, but also areas where it needs to fill out .

i think the fed is really communicating in the best way that they see positives and negatives and that they are going to move when a probe he it. >> where are they going to -- where do they need to fill out? where are these pockets, as far as you can see? >> it depends on the sector. certain sectors, people are not qualified to fill those jobs. these are areas where we are seeing more wage pressures than other areas, where we are having aouble getting people up to living wage. there is the huge pressure of increasing the minimum wage so that people, for it ample, working at a fast food restaurant or low-end service jobs can have a living wage. kathleen, you talk about us lit between traditional risk and idiosyncratic risk. how does the bond market adjust for each? especially when the fundamentals going forward could be affected

by the geopolitical movements we are seeing right now? >> mark, that is a very good question. the traditional risk, when thinking about credit risk, you find it in the corporate on the market. because the key we -- the qe , the best way is to focus on company specific risk. because the fundamentals are better. so, you want to be compensated for taking credit risks. that is for companies doing well in the current environment. for sectors that are overvalued -- high yield, for example -- when rates move there will be a repricing of traditional market. that could be extremely disruptive. >> how while the swing will be see in repricing? >> we could see a very big swing. we are talking about the short end of the market coming up and repricing into a market where there is essentially zero the witty.

the difference between buyers and sellers is going to be wider than we have ever seen before. >> what do investors want to hear from janet yellen in today's? >> that she has a good read on the situation in the labor market. that she has visibility on where we are going. there is a fantastic kissinger you don't know where you are going, it is likely you will end up nowhere. she needs to be clear on where she's going. and i think she is. but in the current environment there is a lot of uncertainty about the structural versus cyclical aspects of the market. the more clear she can be about that, the better it will be received for the market. i think the market is going to be annoyed with the fat until they start raising rates. >> kathleen, is it time for investors to take a closer look at global markets now?

globally i think that their opportunity is coming, but really the strengthen the economy right now is the u.s. and everything hinges on rising rate. >> rising rate as in next year? 2016? .> i think it is next year the fundamental underpinnings are very positive. >> i would agree with that. january or march is my call. summer,ight, constance -- constance sumner, ladies, thank you both so much. i appreciate it. talks aboutaul ryan reducing social security benefits for the rich. "bottom line" continues in just a moment. ♪

>> the former republican vice president -- vice presidential nominee, paul ryan, saying he favors social security

reductions for the wealthy. earlier today he spoke with numbered about his prescription for social security. >> the progressive price index probably seems like the smartest way to go. he was one of the commission members who suggested it needed testing through a blend of wage and price increases. think that retirement age should reflect longevity over time. one month every two years. meansing those two things testing the benefits, testing the long jeopardy in the retirement age, taking you very far. be a bit more specific. you are talking about the guaranteed minimum not just for current retirees. what kind of income level with people see? people see?

>> i don't know off the top of my head. >> you are the numbers guy. >> i know. basically the upper heard of their people would have social security benefit protected against price increases, but not wage inflation. that is basically how it would work. they would still be protected against inflation, but not her kissing power. >> a lot of ideas are supercritical. the welfare state, that kind of stuff. are members of your party reluctant to go as far as you are willing to go. talk about the ideas in the book that fly in the face of conservative orthodoxy. things that your party would have a hard time swallowing. >> i talked at great length about immigration. it is important that we reform our immigration laws. it is important for national security, also our economy, particularly with baby boomers retiring.

i laid out a list of exhaustive plans on how to rethink our approach to fighting poverty and increasing upper mobility and how the arty needs to reform itself to be a more inclusive and competitive arty -- how the party needs to reform itself to be more inclusive and competitive. i would like to think that we can bring the party to these places. are you a follower or a leader? great, weing was would have won this last presidential election. we have got to fix some problems and we need to be clear about the problems we have in our party so that we can fix these things and give people a real honest idea of what we think he should do. i think that this basically spells out a vision of the majority of americans, no matter their background, who they are, where they come from, they can support it. that is the kind of election we should have.

>> congressman ryan released his onk, "the way forward," tuesday. part memoir, part inside look into today's politics. time for today's latin america report. argentina has a plan to skirt a u.s. court ruling that blocks payments to bondholders, authorizing payments of foreign debt in localized accounts. we have more of the details. is this a backdoor right here? >> yes, one that has been floated around for about a year now. the judge in new york has said that this is against the law and they can't do this, but yesterday they brought it back up from the dead and said that this is what they are going to do. again, it has been in the back of everyone's mind that this would be their last resort, but what it does is it tells everybody that all of these arguments they have been making up -- making along the way about why they can't a -- the

holdouts, elliott management, the clause in the bond contract, it makes it seem like this was all a lie the whole time and this was their plan that was up there sleeve. write interesting. the decision was made in buenos aires -- >> interesting. the decision was made in buenos .ires is this plan doable? >> that is the real question. it depends on what investors want to do. plan is laidthe out, we are going to put the money in an account in argentina, take it or leave it. it is basically saying to hell with the bond contract, to help with everything that you can see one -- you are not supposed to change the trustee or the jurisdiction. the other option is you can swap official, to make it but along the way the people involved are going to run into some legal challenges.

law to all against u.s. do this. if you are an investor you need to consider potentially being sued for going forward. >> the current trustee, bank of new york mellon, according to what the argentines were saying, payments would be made into an account at the central bank instead of through bank of new york mellon. talk to us about the dynamics of this and how mellon was involved. in the contract the debtor makes payments through a trustee agent. then the trustee was bank of new york mellon, hired from the get go to be the trustee. the trustee is responsible for dispersing payments. bank of new york mellon is a u.s. bank. they are bound by this ruling that argentina can't make payments until it pays hedge that hold their bonds from 2001. they are basically saying -- remove bank of new york mellon as trustee and put in a new

argentine trustee, a state-run bank, and we can tell them whatever we want them to do because they are argentine. lacks all right, -- >> all right , to be continued. what did they say? three as her and curiouser. [laughter] next we will check in with trish reagan to see what is on tap for the street smart" at the top of the hour. "bottom line," we will be right back. ♪

>> breaking news. the cofounder of countrywide financial has not escaped the wrath of prosecutors for his company's role in inflating the u.s. housing bubble that preceded the u.s. a natural crisis. u.s. attorneys in los angeles, alifornia, are preparing civil lawsuit against him and 10 other countrywide employees according to two people with knowledge of the matter. the government is making a

last-ditch effort to hold them accountable for the excesses of the subprime mortgage boom using a 25-year-old law that has helped the justice of our men wall street from banks. we will continue to follow this story and bring you more details as soon as we get them. us --t smart" joins begins at the top of the hour. >> we have a packed show for you . the fed minutes cross within the last hour, indicating that they an closer to an agreement on aggressive stimulus plan. six years in the making. i will be robert shiller, a , from yaleof course university, we want to get his view on whether he thinks we should be raising rates sooner rather than later. he did suggest that things are getting sloppy and housing market, so we will talk about that. --are also going to tour

going to turn to the tragic news about james foley, talking about his life and career. journalistmerican that was murdered by islamic militants. his former friend and roommate will be joining me to discuss foley's commitment to reporting the news. a lot of dangers that there, 30s face over have been killed this year. >> unfortunately, something like this brings that to light, they put themselves in harms way to help the public. trish, thank you so much. stay with us, we will have another check on the market movers on the other side of the break. "bottom line" continues in just a moment. ♪

. >> we have the latest headlines at the top of the hour. that does it for this edition of "bottom line." thanks for joining us. "on the markets" is next. "street smart" is at the top of the hour. i will see you tomorrow. >> bloomberg television is on the market. before we check on the broader markets, let's bring you some breaking news out of hurts -- ceos on theging news that shares our plunging.

their 2014 earnings will now be well below previous estimates. shareholders are asking the company to replace the ceo and are likely to add more pressure on to management over there. let's get you a check on where stock trading. this was after we had fed minutes coming out saying that job gains may bring faster market rates than previously expected. removing the possibility of thanssive stimulus sooner many expected. it is nearing the end of the second quarter earnings he's in. of course, this always wishes .nalyst setup to figure out which was most loved and which was most hated. what did you find out? >> kind

of a tossup. this happens before earnings are released, which is why we are looking at it as the end of. u.s. stocks have a market cap and are covered by 15 analysts. so, we didn't only look at what bloomberg called the consensus rating, turning buys and sells but we look at something that tom keene really appreciates -- momentum and movement. bloomberg rankings -- let's take a look first at the most loved stock. the stocks that we determined had the most. we have stocks like l p&g, maritime petroleum, and american airlines. done very well for the past few months. atthe flip side, if we look the most hated u.s. stocks, it is hard to determine. to issue moreend

hold ratings than sell. a lot of consumer goods. >> i am surprised to see american airlines at the list of number four of most loved stocks in the u.s.. they do so poorly on consumer rankings. anyway, analyst still seem to like american airlines. acta the point were making about how analyst tended to be over and what isalways the overall take on the market? they basically average out to a buy. the rankings on these stocks are not considered to sell, which is really interesting. if you look at how well the analysts are estimating the s&p

500 with whacked because it translates into performance? whackedp 500 with because it translates into performance? >> -- -- >> because it translates into performance? a badt might not be choice. in 2014 if you look at the worst rate of 25 stocks by the s&p 500 has only gained seven percent. >> ringing of the most loved and hated stocks in the index is. smart starts now. >> the fed saying some members want to raise rates quickean