rounds up support for a bailout. greece wants -- to pay the imf. markets vote for deflation. germany bones. 30 one million large, that is with the boston red sox will pay a 19-year-old from cuba. we are live from our headquarters in new york. joining me, olivia sterns. olivia: fireworks on day two of janet yellen's testimony. she is accused of being too closely aligned with the white house and democrats. >> you are not willing to tell us the answer to the question. you want to tell us i am not getting involved in two weeks before an election you make political statements consistent --

>> i am not making political statements. olivia: a number of republicans backing to give more power to the feds. greece is counting on the european central bank. they country must make a payment to the imf in march. the ecb owes greece more than $2 billion from a bond selling program. he says the ecb should hand the money to the imf. >> this is not borrow money. it is our money. our normal payment to the ecb. why not have the two institutions find it amongst themselves a way of transferring these funding. >> investors are showing confidence in the new greek reform proposal. almost $800 million returned to

greece bank accounts. in ukraine, the cease-fire may be taking hold. no attacks by pro-russian rebels overnight. the country has another problem. they are losing more than 50% against the u.s. dollar this year. the central bank imposed a ban on foreign currency but lifted it yesterday. >> two suspects were planning to go to syria and join a terror group. two of the men are from uzbekistan and the other is from posix stand. -- from posix tom -- khazikstan.

>> instead of trying to hold hostage funding for the department of homeland security called the fund that. >> the homeland security department runs out of money this week. many say they will not vote for a new spending bill. turns out leaping too much can be dangerous for your health. that is excellent news for people on this desk. sleeping less than six hours is dangerous, too. >> i used to google and night

shift, early death and send the results to my boss. tom: trying to find $.40 on the dollar. olivia: cu to damage the -- economy faster than hooton -- faster than putin is trying to damage the russian economy. tom: the u.s. partaking in the move. there is the dow. what can you say about resiliency. there is a german bone. -0.23. that is grinding to new weakness. the rate of change says it all.

i can say i have never seen this terminal chart. this is a two year, the area here is stunning. this grinding lower, the inertial force of money. >> this shows that germany is not solely control of its destiny. the stock exchanges going and off this -- is going up and off this screen. >> it is so distorted. negative yields for the first time ever. the ecb cannot find enough sellers. tom: eu inflation grinding to do

flechette -- eu inflation grinding to deflation. what will give between buoyant equity prices? >> nothing is going to give. the driving force, the ecb having a huge amount of liquidity will have a huge influence. finding issuance is difficult. the yield probably goes lower. given the wall of liquidity, it will probably go higher. tom: you studied with one of the giants, his chapter on finance this chapter 16 or chapter 18. no one in your world pays attention to banks. i want you to now.

>> the banking system is two banking systems in three. the credit squeeze, which we suffered to some extent in the u.s. is a massive, fundamental blog and barrier to better growth in the euro zone. >> how much of a difference could it make if they were allowed to run --. >> and makes no sense whatsoever. >> it is almost unprecedented. >> this deed of the adjustment is astounding. the germans have a legal view of

things. imposing that primary surplus in a short space of time implies a gigantic squeeze on activity and a rise in unemployment. tom: in terms of i can say i have never seen this persistency of prices up and yields down. olivia: you have never seen this from the european central bank. you nailed it gdp, inflation unemployment. brendan: i turns out olivia reads the briefings. olivia: how does it recalibrate u.s. gdp? >> exports are small.

we have another existential fight over europe. it is definitely not my base case. greece is not fixed by a long shot. brendan: the effects on the economy, the dollar spot index is up 18% over the last year. i will point to say it is having an effect? >> they're going to fall faster with that year. the cpi is a service price index with a few services in it. it seems to be accelerating and building. tom: let's recalibrate gdp. are you fading into a lower number? >> i have moved higher because of the drop in oil prices.

it is no fun in north dakota or west texas. tom: is this a 3% economy? >> 3% or more. they are little symptoms of what is going on in a broader economy. most of the wage pressure we are seeing, that is where the action is. brendan: there was an article about a different kind of slack in wages. they are hyper managing hours. is that another slack we can expect to disappear? >> technology makes it easy. people do not like it. people who are working for these companies do not like it. brendan: they will get a notice

that says the weather is bad expect low volume, go home. tom: let's continue this discussion. francesco was on london tv about an hour ago. that was a terrific conversation. brendan: the next conversation bayer reports results. we are going to talk to their ceo. this is "bloomberg surveillance." ♪

tom: let's get to our top

headlines this morning. olivia: second day on capitol hill. jenny yelling got testy. she fired back at critics who say she is too chummy with the white house. some want to give congress more power over the feds. in an interview, greece's finance minister says -- owes his country. the wisconsin senate passes a right to work bill. it lets workers opt out of union memberships and dues. governor walker is expected to be a republican presidential candidate next year. united airlines is sending a message to its pilots about mistakes in its cockpits. the memo was prompted by several

serious incidents. one plane landed with less than the minimum fuel reserves. new marijuana laws take effect today in the capital. washington, d.c. residents may possess up to two ounces and grow as many as plants, but it is illegal to smell -- to sell pot or smoke it in public. the district mayor egg nor objections from congress. -- the district mayor ignored objections from congress. -- announced numbers above estimates. you plan to leave bayer and

start playing more tennis. there is much to do until then. what do you want to look back and have done by the time you leave? >> it is still two years. there is a tremendous amount of work to be done at air -- at bayer for me. we have made a lot of progress. we are focusing our portfolio on the future on our life sciences business. we are separating material science from the portfolio. strategically, we are making adjustments to bap or life science company. what is exciting is the organic growth we have been getting. brendan: becoming a life

sciences company entails an amount of risk. the company has been conservative. the focus on blockbuster drugs means the board has to accept a different risk profile. is there anything changing culturally at the company to make that possible? >> i would not say it is a complete 180 degree inversion. we have always had a diversified portfolio and will continue having that in the future. we do not aspire to be a pure pharma company. we had a significant acquisition of the merck over-the-counter business. it is much more stable. also a life science business, but much more stable and is not

dependent on patents. then, we have crop science, again, a life science business. it sings to a different tune, as well. brendan: the company paid for the acquisition of the merck consumer unit. sales have been a little disappointing. had ifo that over in the portfolio? >> this is the first quarter after the acquisition. you take over a company that you did not own before, nobody really has a good feel of what the appropriate numbers for that business, we are optimistic about this. critical science makes a

difference. you go into a drugstore, it is about shelf space. now we have products like aspen a leave -- like aspirin, ale ve it is a tremendous advantage when you interact with customers. the buyer crosses as a token of reliability and quality. brendan: there has been a change to the prescription market. a lot of your peers have pointed out pricing pressures. is that which you are pointing out as well? >> there is pricing pressure all around the world. that makes it harder to continue to be convinced of the model in pharma, which is high spending and r&d with high risk and uncertain outcomes in terms of

success. if you have uncertainty about reimbursement and pricing the business model gets risk year. within the united states, there is still a good appreciation for our innovative drugs and also a willingness to pay the premium prices that need to come with those premium drugs. brendan: thank you. it do not sell --. >> okay, we will not. tom: a very good interview with one of the german giants in the industry. of next, our guest. chair and chief executive officer. he is wired into the ballet known as washington politics.

♪

tom: good morning, everyone. i am tom keene. with me, olivia sterns and brendan greeley. john nails it in "the financial times." on hsbc there is a romance to this bank that goes way back before the modern banking system . to anyone who witnessed hsbc's rise to become one of the worlds global banks, the entire thing is baffling.

it seemed the least likely to let its empire run amok. i have stood next to the headquarters. the romance of this institution they were the least likely to screw up. brendan: their marketing is extraordinary. you fly anywhere in the world, the first thing you see is the ages ec -- is the hsbc talking about how well they understand the world. tom: did this get screwed up when the united kingdomers took over this bank? >> it went wrong when they over expanded. they made horrendous acquisitions. total catastrophe. they got into investment banking. commercial banks sensibility did not work.

tom: i have no less than 10 times in my career said hs ec -- hsbc is the most conservatives of the banks. >> it is unmanageable hey huge now. tom: it is your fault. olivia: please answer our twitter question of the day. should the internet be regulated like a utility? ♪ . .

tom: good morning, everyone. "bloomberg surveillance." i am tom keene. in new york city, it is a warmer new york evils that with me olivia sterns and rent in greeley. olivia: janet yellen is on the offensive, shielding against republican accusations that she is too close to the white house and liberal groups. she was wrapping up two days of testimony on capitol hill. chair yellen: the federal reserve is independent. i do not discuss monetary policy or actions that we are going to take.

with the secretary or with the executive branch. olivia: a number of republicans want to crack down on the fed. they are backing a bill that would increase congressional oversight. bank deposits are starting to flow back into greece. the greek finance ministers said that almost a hundred million dollars came into great bank accounts. yanis varoufakis also said he is counting on the ecb to revert a greek default next month. it has to do with $2 billion ecb is holding for greece. minister varoufakis: the ecdb can hand all of this money over to the imf, so the ecb recognizes that this is money we are owed. olivia: european finance ministers have cleared for a bailout. and it's seventh -- and howard davies will take over from philip hampton at rbs.

it wrote down the value of its u.s. unit. rbs is forecasting higher restructuring cost as it strengthens investment bank. brendan: another wall street bank is being held in trouble for the financial crisis bastad morgan stanley has agreed to pay 2.6 billion dollars to settle an investigation into the sale of mortgage bonds. accusations are that they deceived investors. jpmorgan, bank of america, and citigroup have already made similar settlements. those total $35 billion in cash and consumer relief. the biggest shakeup at the british standard chartered the bankruptcy new ceo will be bill winters, co-ceo of jpmorgan's investment banks . the bank's chairman and head of asia announced he was going to step down. library is joining forces with google. a new partnership will let

businesses and government using blackberry software integrated new android for work tools. blackberry is trying to increase its ability to manage devices and tools for multiple technology providers. android for work lets users separate personal and business apps on their smartphones. tom: i want to rip it up. talk about rbs. sir howard davies has been a friend of the show. he was involved at the london goal of economic. ian shepherdson with us on a perspective of the united kingdom. this is one of the giants linking finance and economics in the united states. ian: yeah, it is an enormous institution. 80% owned by the u.k. government after the crash. tom: well will sir howard try to accomplish? ian: he will try to make it possible. it has lost money seven straight years, which is what is owned 80% by the state. the u.k. is improving the small

business sector. profitability is clearly on the up, so there is hope maybe some light at the end of the tunnel. olivia: it is its seventh annual loss, but the share prices are within spitting distance of the british government actually making good on the bailout. tom: very good. i did not know that. brendan: ian, you are good on the psychology of this. part of the problem with rbs is that has to admit it is a boring bank of england. ian: that is hard for a bank to do. everybody wanted to be global everybody wanted to make massive acquisitions, which rbs did, of course, spectacularly badly. tom: is it allowed anymore? ian: that is what a vaulting ambition is not popular in a british bank. frankly, it ends very badly. tom: it is a very different outcome. cpi data this morning, ian

shepherdson of course parsing inflation data each and every moment. i want to talk about what david rosenberg has talked about which is somewhere down the road, we get something from the 1960's -- cost, push, inflation. business cost, wages go up, and that feeds into an ugly loop of inflation. we are not going to go there. are we going to tend in that direction? ian: i think we are just. we see pressure in small businesses whining they cannot find the people they need and expecting to pay more for those people. tom: when do we see it in the eci wages and benefits series? ian: year-over-year, and was at 2.3, it was at a low 1.5 2, 3 years ago. i have got no doubt it will pick up further. eventually that will generate some pressure on margins. we have got slow positive growth at the moment, so if wagers pick up, we will see pressure on unit labor costs, and then we are talking about cost push, but

only on the service sector. the cpi has got a lot more services than goods. brendan: in the quiet conversation among central banks, they have been so bad at hitting inflation targets, now they get to discuss what they're inflation targets such a be. 2% is a made-up. what is the right inflation target? ian: it all depends on circumstances. if it is too low, then anything higher is better. brendan: if it is too low, anything higher is better. [laughs] ian: ian: once it gets above 2%, it becomes embedded in wages and and you get the fear of the spiral that we had in the 1970's and 1980's, so there is an element of opportunity, but also experience. brendan: real world's that are guided by politics, is it possible to average above and below that 2% so it lines up neatly or do you have to always oversell it? ian: it depends where you are. no politician wants rates to be

raised when an election is approaching. that is what politicians are terrible people to have involved in interest-rate decisions. tom: that is a "surveillance" breaksclusive right now. olivia: ever since, mark carney and river king of had to write letters to the treasury apologizing for not hitting 2%. now a whopping nine dollars an hour. ian: it is the signal it since. the labor market, pretty much every metric i look at is moving in the right direction. if you have interest rates as euro percent, maybe it is a direct -- tom: does a study of inflation matter? if the americans are so -- can we really study inflation and know what we are talking about?

ian: it is difficult come and that is why with young people in the street, you get a different study of inflation compared to what the cpi says. [laughter] it is very difficult, but the effect can only deal with the macro aggregate tools that we have. tom: did you just noticed this? is olivia -- do they go back on a color scheme? olivia: we coordinated. brendan: i sort of match olivia. we will keep hanging out with ian shepherdson, we will keep paying out with central banks area we are looking at the rate cut spiraling around the world. is it a currency war or just a little bit of domestic inflation? we will take a look at that after the break. that is our single best chart this is "bloomberg surveillance." on bloomberg television, streaming on your tablet, your phone, and bloomberg.com. ♪

tom: the seasons change, the days get longer. new york lit at 6:41 a.m. we have not seen and a while. a new spring is coming. all the windows are a glow with spring passion and beiges. olivia: i need a new suede jacket with french. -- with fringe. tom: unfortunately, i remember

the first time that came around. olivia: i will wear it on the show. brendan: we have to get rid of the winter cabbage in flower pots all around the city. olivia: two lives are coming back. brendan: it is time not only for twoulips and hopes for spring. the currency war -- we've been talking about it on "surveillance" for several weeks, but we decided to pull the data. that is our single best chart. rumor has been tracking central banks for the last three months. these are the 19 that have dropped their benchmark interest rates. a top, they are not labeled, but you've got pakistan, which is in a completely different situation from the rest, but look at all the red. those are the countries that border the eurozone, so the game we are playing, ian shepherdson, is trying to figure out -- is this a currency war or is this just trying to encourage a little bit of domestic inflation? ian: it is a bit of both, but i guess it depends on where you sit. if you look at the big box, the

eurozone and japan, doing qe, printing a huge amount of money, what they will not say but what they deftly want is weaker currencies, and i makes it very difficult for everybody on their borders and ultimately it is a zero-some game. -- zero-sum game. if you are trading with the eurozone and the euro is depreciate, you respond by lowering rates. yet, it has a nice side effect of boosting domestic demand, but what you are trying to do is maintain some sort of competitive. herrity. olivia: -- of competitive parity. olivia: is janet yellen worried? ian: i think they are more worried about the labor market. brendan: when asked about the possibility of a currency war, she said no, i do not see that but if anybody is doing it, it has to be's top. tom: so many challenges people have come a 62, mundell fleming,

the keyword is impossible, when you are doing international economics, it is an impossible trinity. why are they doing this if we know when we start the exercise, it is not going to work? ian: because everybody thinks they can be ahead of the game. like when people think they are smart enough to get out in front of the crash and then they are not. you start this game and you cannot win it, but you think there is an advantage. tom: this is like dealing with children on the weekend. brendan: actually, no, this is much, much easier than dealing with children on the weekend but what is missing on the chart is quantitative easing. the term "currency wars" was coined by monday to looking at the u.s. ian: when you do qe, you look at the effects it will have a long-term interest rates. tom: to the brazilian points

you've got a flow mechanism and a rate mechanism. is the next step capital controls, for example, a la greece? ian: when you bet back to 1997 1998, the countries that did that's like malaysia imposed capital controls which horrified the ims. olivia: because of anything gets worse, they have no more levers to pull. ian: but those countries that implemented the capital control you would argue they were in better shape to begin with, but they did it and it worked. tom: we have three photos. olivia: number three, you know i watch a lot of iranian tv -- in the persian gulf, iran conducting military drills. this is amazing. firing at a model of a u.s. aircraft carrier. irani television networks showing this. the goal of the drill was to

practice sinking an american carrier. there were reports that at least two american ships, real ones, were in the persian gulf stop brendan: this is the u.s. navy's nightmare, not attacking a big ship with another big ship but with a lot of small boats that swarm around and they are developing arms to deal with exactly that. olivia: the fact that they are building it wouldn't rebel government american aircraft carrier to blow it up, i did not know that was going on. brendan: we are now running this footage on american footage, so they have succeeded. olivia: perhaps. in ukraine president viktor yanukovych's estate is opened to the public. we will not believe is the way it used to exist. tom: this house is on a flight path to laguardia, isn't it? olivia:brendan: that looks like my house. olivia: i do not know what you

are doing here then. it is showing how he used the state budget for stop it has its own personal zoo, a golf course, a boxing ring. brendan: golden toilets also. tom: did lagarde build this? did the imf build this? olivia: more likely money from president putin. and the first ever baby rhino -- is that a puppy? the first baby woolly rhino discovered in permafrost. it was likely 18 months old it died over 10,000 years ago. it still includes fur, nostrils ears and an eye. scientists hope to learn more about the animal's living conditions over the next two weeks. brendan: that is heartbreaking. coming up, we will go to cuba.

next, this is "bloomberg surveillance" on bloomberg television, streaming on your tablet, your phone, and bloomberg.com. and available in cuba! ♪

tom: good morning, everyone.

"bloomberg surveillance." let's get to top headlines this morning with brendan greeley. brendan: tensions were high on capitol hill for janet yellen's second day of testimony before congress. the fed chair is wanted to criticism from her publicans who say too cozy to the white house and immigrants. some in the gop want to give congress more power over the fed. greece is pinning its hopes on the european central bank. it is counting on the ecb to help stave off a default if want when a payment to the imf comes due. in an interview with bloomberg's erik schatzker, greece owes over $2 billion my bonnet sharing program. at least 17 people hurt and a huge highway crash. more than 70 the apples piled up on interstate 95 in maine. the stretch of highway was closed more than five hours. the cancer drug is the center of

a possible deal that could be worth $18 billion. the drug avoids a certain serious side effects of -- warn bufft's investment advice has made billions of dollars, but you may want to think twice before following his dietary habits. he told "fortune" magazine "ie like a six-year-old," and he drinks five cokes a day. you can also be seen in omaha getting ice cream with other famous people. olivia: $31.5 million, that is how much the boston red sox is paying 19-year-old cuban rookie -- to play at fenway park. $20 million more than the previous record for an amateur player outside the u.s. he is not the only player with his eyes set on america's center field, and in fact there is an underground growing market

carrying star players 110 miles. willem marx joins us. set the stage for us. does every kid in havana play dream of playing for the yankees, tom? willem: i do not want to upset tom, i know he is a red sox and stop people, knocking, and is a very illicit industry. it is not something people talk about openly in cuba. a lot of these young cuban kids come to play here. the value only happens when they travel to a third country. major league baseball rules basically set you need to have permanent residency in another country to avoid the draft. olivia: what changes now? when they lift the embargo, does that mean cuban players can come play the major leagues? willem: american baseball will have to reconfigure. they come a like every other american business, is waiting to see what happens with these

talks that resume again tomorrow. brendan: an official in cuba also said this is stealing from cuban baseball. is there some hope for a domestic league of national importance? willem: they have a very strong, incredible league right now. and they have an incredible foreign program going through this. one i spoke with this week said when you have a 19-year-old kid from cuban who is good enough to plan a nationally on the you know he is a good prospect because he is so much more reliable. tom: somebody who can deliver as well. do we assume that a big hunk of this red sox money was a direct conduit to the communist government in cuba? willem: i do not know about that. nobody knows the details of how he got here, but along the way there will be somebody who was not a pleasant character. tom: who represents him? a normal basal agent? who is the guy who will be 40 in july with the yankees? brendan: do not look to me. tom: jeter is gone.

does he have a normal agent? willem: a handful of these agents work with cuban players and the allegation is -- some of them face prosecution. tom: some are represented by the cuban government? willem: no, it is smugglers who work with them, and then the smugglers try to demand a cut when these players sign. tom: the smugglers out of haiti or the other nations working with cuba as well. amazing. what did you observe in cuba this time around? is it changed? wil il don't know. e we willm see: tomorrow these diplomats coming up from cuba. they will continue the conversations with officials. one of the main focuses is going to be on opening the embassies, and the logistics of that, getting supplies. they want the american diplomats down it to be able to travel freely around the island, they want to make sure the supplies coming in are operational. brendan: there is a lot of top

level contacts you have been reporting on, but what about the flow of refugees? willem: this year to date, late february now 712 migrants arrived crazy, crazy numbers. they are increasing, and i cannot quite a ny. -- and i cannot explain why. olivia: for work? willem: to join family members here. tom: can i rip up the script big-time? olivia: we have 30 seconds. tom: you guys are both from england. what is the deal with helen mirren and the queen? we look at and we go oh, helen mirren, oh, my god! what do you guys think? willem: she is a beloved figure. ian: she is a capital level national treasure. olivia: dame helen mirren. tom: thank you.

that is your cuban drama, broadway, british -- olivia: you are on your own. [laughter] tom: ukrainian currency depreciates significant. stay with us. another hour coming up. ♪

>> this is "bloomberg surveillance." tom: it is a tentative nervous

quiet as a cease-fire holds in ukraine. it is a tentative and nervous quiet as angela merkel rounds of german support for a greek bailout. greece once the ecb to pay the imf, and i guess they will pay kiev, athens or both. i'm not sure for submarkets voted -- deflation for europe. germany booms in the meantime. and neutrality is exactly what the president says makes the internet a utility. web providers waxed hysterical. we consider the uproar over your cable bill. good morning, everyone. this is "bloomberg surveillance." we are live from our world headquarters in new york. it is thursday, february 26. i am tom keene for stub joining me for olivia sterns and brendan greeley. we begin with our top headlines. olivia: tom, a got a little heated on day two of janet yellen's testimony on capitol hill. she's art with republican lawmakers including congressman sean duffy. he accused her of being too closely aligned with the white house and democrats. congressman duffy: today you are

not willing to tell us the answer to that very simple question, and you want to tell us, "i am not getting involved in politics," yet two weeks before election, you are making political statements that are consistent with the democratic party. chair yellen: i am not making political statements. olivia: a number of republicans are backing a proposal to give congress more power over the fed and curb it power. and greek hopes that the european central bank will write to the rescue next month. the issue greek must make a payment to the imf in march. in an interview with erik schatzker, greek finance mr. yanis varoufakis says the ecb should simply hand the money to the imf. minister varoufakis: this is money that is our money. why not sadly have the two institutions make themselves find a way of transferring these

funding? olivia: varoufakis also said they are showing confidence in the new proposals. he said almost $800 million returned to greek's bank accounts. hobbies a tens of millions of dollars have left. and it appears pro-russian rebels in ukraine are giving peace a chance. the government said there were no rebel attacks on its troops overnight. ukraine has accused separatist of constantly violating the cease-fire. meanwhile, the country has another problem -- the ukrainian currency has been in freefall, losing almost 50% against the dollar this year. the central bank imposed a ban on foreign currency training this week. brendan: prosecutors have charged three residents of new york city with supporting islamic state. two of the says eyes were planning to go to syria and join the terror group. the third suspect is accused of paying the others' airline fees. they want to "strike fear in the heart of infidels by shooting

president obama." and keeping homeless again from shutting down -- the question is -- will the house go along with it? the senate bill would separate the funding for homeland security from a motion that would support president obama's immigration orders. president obama: what we said to republicans is an set of trying to hold hostage funding for the department of home, which is so important for our national security fund that and let's get on with passing conference of immigration reforms. brendan: the homeland security runs out of money this week. many house republicans say they will not blow for a new spending bill unless the immigration restrictions are a part of it. well no one working our shift has to worry about this -- sleeping too much can be dangerous to your health. that is occurring to a study from the university of cambridge that found older people who slept more than eight hours a day have an almost 50% greater chance of having a stroke. on the other hand, we should

know sleeping less than six hours is dangerous, too. that is a daily occurrence. it raises the risk of stroke i 18%. those are your top headlines and health tips. olivia: i will remind you if you're concerned about this, i encourage you to google night shift, early death. a lot of alarm bells raised. brendan: good morning to you, america. tom: yeah ok, let's move on to a data check. it is a fascinating data check. futures up 4, dow futures up 24 which is not say anything about the interest rate market of 1.5%, 10-year yields of this under 14, thank you, janet yellen fort two days of giving it right back to those tough republicans. within it all quietly and calmly euro drifts into something they have never seen -- price action on deflations. that has never occurred over a good number of decades. it may be a clear and present

reality for eu financial officers will stop jon ferro joins us from london. the irish 10-year, the portuguese 10-year, who is buying the paper, moving up prices, and moving yields down? jon: you've got to understand what is driving yields down before you think about who is buying because this is about credibility, not the credit of the country. this is about deflation and investors taking a view on a very long-term horizon. to stoke enough deflation and a road future returns. when i reason, they are willing to accept a much lower rate. we have got ireland below 1% on a 10-year, portugal, 2% on the 10-year, who saw this coming just 12 month ago? tom: jean-claude touché will use the word "brutal." tell me about the rate of change. you and your friend franciscoesco

garzarelli this morning on goldman sachs will stop is he worried about the speed of moves? jon: they are worried about the spillover effect. what we talked about with the flood of safety, aaa safe haven bonds. you have seen it moves down in terms of credit from aaa towards a junk, and now you see a spillover into the credit market as well. the headline in europe a couple of weeks ago was the debt, the yield on that turned negative. not just sovereigns and offered debt, the serious prospect, this company can issue debt with a negative yield. that you can see around the corner. the risk there is something people are talking about. tom: brendan, i saw that apple computer piece at 0.275 in france. olivia: that is amazing. brendan: maybe we should all just admit there is no way to make money. maybe that is just over. olivia: perhaps. jonathan, i want to ask you about germany, unemployment

coming and better than expected, negative rate, to what extent does germany leave the rest of the eurozone in the dust? jon: why should they change course when i labor market home and the -- wednesday have a strong labor market at home. how big is their appetite to buy negative yields on debt? that means they have to go further down to the curve. is there enough for them to buy? before we go to the ecb meeting next month, now people are talking about you know what maybe the sovereign debt market is not big enough in germany. maybe they need to buy corporate paper as well. that is going to be an issue that will build momentum as the months roll-on. tom: jon, thank you so much, jon ferro from our news euro in london. joining us is donald baer. he is enjoyed a long career in law and politics. he was not in charge of being

chief to the president when he had meetings on time. i happened to be in the west wing of the white house. why is bill clinton always late to meetings? donald: that is not true, he was not always late to meetings. that was the myth. tom: he was actually on time? donald: i remember a few. tom: do you recognize this washington? donald: sadly we all recognize it because this is the fifth sixth year of this kind of dysfunction. it is kind of nuts. here we hoped -- tom: who hoped? donald: we hope with the republicans coming into solid majorities they would have nomination to get some things done, that that was in their best political interests but now we are on the verge again here we are, going at potentially another midnight wake. brendan: you are seeing the senate change its tone. they came up with a compromise that stripped out the protest bill. it is the house, that hasn't was

in a republican, that is stuck on it. donald: after a wild. mitch mcconnell had to come in. what is going to happen today? this is happening -- it is just self-destructive. three men arrested in brooklyn who had threatened allegedly to shoot the president blowup coney island? isis is raging around the world and they are going to defund the department of homeland security? olivia: the mall of america was threatened left weekend in full stop it is incredible. tom: you served president clinton, who was known to actually speak to republicans. as a democrat, do you fault president obama? donald: look, the system has to work, and people have to work with one another. there is no question about that, but we do not have a functioning system at this point with people who are actually working with one another. brendan: but that is what the country wants. donald: america wnatsants an america that works again.

tom: what would you suggest that president obama do that president clinton and other democratic presidents did you speak to republicans? donald: well, they need to get together and talk, except they are not responsive to him. brendan: this has been the tip o'neill-ronald reagan theory that they just need to drink scotch together. do use of right to that? donald: that is now 35 years ago. let's get real full stop there is a lot of ideological difference here, and they are going to have to work this out together, or the country's going to move on. tom: my advice is everybody eats chili dogs. donald baer. olivia: we will continue the discussion and neutrality. this is "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance." i am tom keene. we have a morning must-read. olivia: my morning must-read comes run vassar richard haas -- from ambassador richard haass. he writes donald baer, we have been talking about whether or not the republicans are self-destructing. a very provocative invitation

from john boehner to the prime minister of israel without the president's request. what does this feel like in washington? donald: people do not know what to make of it, and the bad part of it is forcing democrats, who want to be very supportive of israel, to somehow or another make a choice they do not want to make. it is a difficult situation right now. on the other hand, he is coming we accept that he is coming, listen to what he has to say and be done with it. olivia: brendan, this is a very unprecedented move. there is a general election in israel, and this feels very partisan. i believe the opposition in israel said netanyahu did reach out to him, but he declined because it is too partisan. brendan: it is fascinating to see the diplomatic protocol matters. it is something we rarely see, the state department fingering out how to see people the right way. there is a way things are done and don baer, it helps

international relations. it is a way to conduct your affairs with another country by following these protocols. donald: sure. this is a battle between the congressional branch and the executive branch, and that is what is going on as well as the republicans and democrats. go back to one of the stories you lead with before -- the republicans want to have more -- or the congress, led by the republicans, seem to want to have more control over the fed. that is another one of these battles. control over the government and who is going to do what. there is a power struggle going on in the country. tom: but the power struggle in the country is founded on a group of people believing there is a conspiracy out to get them. we have had that from the founding of the nation. that is not new but is it ever greater at this moment versus your time of public service? donald: remember, i worked in the clinton white house when

republicans took the congress after nearly 30 years and new language -- and newt gingrich became the prime minister, for all intents and purposes, of america. you see these things burn themselves out over time, too. we are entering a presidential campaign in which the dominance candidates are likely to be more moderate. we are going to hopefully have a better conversation about all of these issues than we are seeing right now. olivia: we will continue our conversation about all these issues after the break for stop in the meantime, please answer our twitter question of the day -- should internet access be regulated like a utility? ♪

tom: good morning. it is a clear and present danger for the white house. i was down there this weekend and the great talk is drones. this is a drone-free photograph of the white house, but they are worried about drones coming in drums coming out -- drones coming out. good morning, everyone. "bloomberg surveillance" from drone-free new york city.

are there any drones around here? brendan: they are not following me. tom: they are bloomberg drones. olivia: tensions were high on capitol hill for janet yellen second day of testimony before congress. some say she is too cozy with the white house and democrats want to give congress more power over the fed. and greece is pinning its hopes on the european central bank for stop it is counting on the ecb to help stave off a default when a payment to the imf comes due. in a interview with limericks erik schatzker the greek finance minister says they own the money from a bond selling program. and lenovo is the latest company to be victimized by hackers. the attack comes days after the company was criticized for preinstalled ad software on consumer laptops that left users vulnerable. it came courtesy of a hacking group called the lizard squad.

and google wants a piece of the wearable tech maker jawbone according to a report. the sides are said to be negotiating the amount and valuation of the investment. san francisco-based jawbone is seeking a valuation in its next round of funding. numericnew marijuana laws will take place in washington. residents can grow as many as six plants but it is still illegal to sell pot or smoke it in public. voters approve the plans. the mayor ignored protests from congress. brendan: this week, excellent is, you can start watching the third season of "house of cards" on netflix. it has likely won the political fight it picked on net neutrality. treating it as a utility will prevent internet service providers from blocking speeding

up or slowing down web traffic. robert mcdowell was an fcc commissioner. he joins us from washington. robert, that was a litigious time for the commission. what happens next? is there another lawsuit? robert: there will be a lot of lawsuits. i was analyzing the number of times the section of laws, some called title ii, have gone to the appellate court's 917 times and have been litigated at the sec internally 6000 times. it will be great for the lawyers but not good for the internet in my view. brendan: the last decision i cannot of the d.c. circuit court , they said if you want to do this, sec, you will have to use title ii regulations. why does this not put this in a better position to defend themselves in the future? robert: the court did not say that. there was a case from 2005 is that if you are a tech company like necklace and has a network

like netflix has once you start classifying what we used to call information services as eloquent services, a lot of tech companies are going to get ensnared in this, too, so netflix may be hoisted through its own advocacy of try to get title ii in this space. brendan: you were inside the commission. what we are basically saying is we do not trust the commission to forbear to selectively use this power once it has taken the power. is that right? robert: absolutely. since early january, the chairman of the fcc, tom wheeler, talk about using three sections of title ii. in a memo he put out a couple of weeks ago, it was up to 13 sections. he could accomplish is a sensible policy goals by taking a different legal path. folks need to understand there are laws that exist on the books that protect internet startups. brendan: i am confused having watched all of these court cases over the past 10 years, what possible legal tech could it

have taken that would have evolved -- that would have not involve a lawsuit? robert: first of all folks need to understand the federal trade commission, up until today, has jurisdiction here. that prevents all of these things from happening. the court last year, the d.c. circuit, outlined a path under 706 that allows the fcc to do some things in this space, and everything president obama told the ftc to do back in november could have been published during a different legal period than title ii. why are they doing -- what if they keep adding new sections of the statute they want to put in this space? brendan: robert, i will jump in real quick, we have onset donald baer, formerly of the clinton white house. donald: one of the things that

seems to get lost in all of this is the question of the economics of it because really at the heart of this is the fact that broadband is not an incident commodity. it cannot do everything we want it to do so someone will have to pay as we go about extending and expanding broadband capability. the real battle line is, whose consumers will have to pay? is it the netflix consumers or the isp consumers because sooner or later it will get passed on to the consumers? this is the case of a hot potato and who wants to end up holding it, and netflix has basically convince the consumer public that it is acting in its best interest. brendan: we have title ii all over europe and it has expanded. brendan:robert: by the way, the clinton-gore and administration got it right, they said do not but silicon valley on this. if you look at europe, our

investment in broadband is four times more than theirs is, and is a much better experience. brendan: ok robert mundell formerly of the fcc, thank you so much. olivia: coming up on "bloomberg surveillance" investment bankers or outcome of compliance lawyers are in. ♪

tom: bloomberg surveillance. one of our weapons of it is a tool to look at the disaster in europe. there it is, the bloomberg terminal on a crystal clear mac monitor.

negative yield. here we are. this is a look back measuring the volatility. the persistency of this move down is jaw-dropping. what is also interesting is we are writing the rail. is green arrows point to the two standard deviation envelope of this series. this is ugly. i am not sure this trend ends with -- brendan: tom is a little bit of a chatty cathy on this but we have the whole idea of qualitative easing to bring this number down. i don't know what you can hope to continue doing with where does. tom: i am also concerned about irish tenure ten year. olivia: what is druggy going to achieve a pushing down bonds

already in negative territory? tom: this holds over to the financial system and making it easy to talk about druggy and the banks in europe. olivia: we heard jonathan ferro say corporate yields in europe have gone up. nestlé has a negative bond out there. tom: let us look at our top headlines from the bloomberg terminal. olivia: a woman i would not this guy was a chatty cathy, janet yellen did not let accusations go. she was wrapping up two days of testimony on capitol hill. >> the federal reserve is independent. i do not discuss monetary policy or actions that we are going to take with the secretary or with the executive branch. olivia: an number of republicans want to crack down on the fed. they are backing a bill that would increase congressional oversight.

greece says investors are voting with their wallets. almost a hundred million dollars came back into greek bank accounts the day the country submitted a new list of financial reform. the finance minister also says he is counting on the ecb to avert a greasy fault month. it has to do with more than $2 billion that the ecb says it is withholding from greece. >> the ecb could simply have all of this money -- hand all of this money to the imf. this is money we are owed. olivia: european finance ministers have clear the way for a four-month extension of the greek bailout. something old and something new at the royal bank of scotland. hosting its seventh yearly loss in a row also naming a new chairman. howard davies will take over from philip hampton. he was once chairman of the british financial services authority. rbs is on by british taxpayers

and a posted a $5.4 billion loss in 2014. it broke down its u.s. value. its ranks its investment banks. >> now it is morgan stanley's turn to pay for its role in the financial crisis. 2.6 billion dollars to settle an investigation into the sale of mortgage bonds. jp morgan bank of america, and citigroup have already named similar settlements. there has never been a management reshuffle like this at the british bank standard chartered. bill winters will be the new ceo. he replaces peter sands who presided over sluggish earnings. shares of standard chartered fell last year. google and blackberry have an

agreement that will let business and governments using blackberry software integrate to the new android for work tools. more businesses are allowing them pleased to use their own phones for work. blackberry is trying to provide from us but technology providers. that is really good news for donald fehr who is waving his blackberry in the air as i speak. tom: i get a lot of tough stuff from people about having this. olivia: i love the fact that you can throw this device across the room and nothing will happen. >> that is true. olivia: this is called bring your own device home byobd. tom: tucker has one of those motorola flip phones from the clinton presidency. how about a day to check? -- a data check? the euro was slightly weaker

here. yields in europe have round lower over the last hour, especially the portuguese ten-year. this is bloomberg "surveillance. " olivia goes looking for jobs on wall street. olivia: wall street tightening its belt. the front and workforce has shrunk by 4% in the past year. in the back office, the non-revenue-generating department is hiring. especially cyber security. i have never met anybody who is dying to be a compliance lawyer. how hard is it to find these people? >> these days, it is a good thing to be a compliance lawyer. one of the few areas that banks are growing. compliance am a legal -- those are the areas of growth.

at the frontline, banks are shrinking. the trading revenue of banks is off yes yet again. trade revenue is the biggest chunk of bank revenue. it is usually 13-20,000,000,000. that is down again made single to double digits year-over-year. there is no question the frontlines have to shrink. brendan: one of the things we have been hearing from smaller banks is their costs have increased. i talked to a bank ceo in louisiana who said he had two new bodies he had to put in his bank just to meet the recommendations. are you sending anyone out there or to anywhere else in the country? >> no and i think it will be tougher for smaller entrance to compete. because of the compliance and

regulatory costs and the amount of capital that banks need to hold against their activities and tech dollars in this fixed income paradigm, you will see fewer players. the one thing regulators were concerned about or one of the main things was the consolidation of power and risk. we will have more of that. tom: i just did this as a total hack. 200,000 base plane and 400,000 bonus. six and a thousand total comp. my perception of compliance is 110,000 or 120,000 plus a much smaller bonus. this is wall street coming a utility. we are to people making a lot less money. >> absolutely right. the big paydays for the

frontline guys have gone away. compensation has been reset. >> reset? crushed. >> if you look at the same production today versus 2010 not the highs of 2009. it has come down by 30% or 40%. to get to 50 million is so much more difficult. tom: does this mean everybody shifts over? >> i think people are far more open-minded about how to achieve wealth creation then they would have been when i was coming out of school. people were looking at investment banking and private equity backed them and consulting as well. i think banking is not as attractive as it used to be. hedge funds are where it is at.

olivia: they want to go to silicon valley? >> either one. those are the two areas for growth and entrepreneurship. tom: may i point out that roughly 85% of hedge fund sales -- is that right? >> you are absolutely right that the industry is very consolidated. there are $3 trillion managed by the hedge fund industry. 11% of hedge funds could manage that. >> go to a big one. >> there is a reason for that. look at golden tree. it is a $23 billion fund that has been around for 15 years. its return is 10.6% annualized which beats every index out there. they have a partnership where they promote people from within and 60% of their partners are people who were not lateral hires. olivia: you have to wonder what you say 22-year-old is to a

hedge fund. thank you for joining us. as we head to the break, we would love to hear from you. answer our twitter question of the day. do you think internet access should be regulated like a utility? ♪

>> good morning. this is bloomberg surveillance.

the conservative lyrical action committee kicks off today in the nation's capital. this year, there is a new theme song. >> because you know i am all about that bass. no liberals. because i am all about this bass. no liberals. olivia: it is all about that gop base. let us go to phil mattingly who is at the event which every year brings the most diehard party supporters out of the woodwork. we have to ask you which presidential candidate is most popular with the gop base? >> i think all eyes are on was considered governor -- are on wisconsin governor scott walker right now. he had a big speech in iowa. he was at 25% and the closest person to him was rand

paul. you saw in the video that it is not just a big names you are looking at. you are looking at people like ben carson, the neurosurgeon. he always pulls well -- polls well. you're looking at ben carson and rand paul and ted cruz to really light up the crowds for the next couple of days. >> one of the great things about see pack is it is a test been of attack lines. who were they directed and what were the best ones? >> there are the tried and true ones. anything you say about obama care or the irs will always work well. people try to position themselves for 2016. the campaign has started. they start taking shots at one another. jim bush will be here. this is notjeb bush will be here.

this is not his crowd. will other candidates decide to attack him or leave him be. that will be interesting. scott walker made a comment about how he was somebody who did not inherent a family legacy or money. that was taken by everyone to be a shot at hillary clinton and jeb bush. if people take a shot edge of bush, that will probably be the most interesting thing in the next couple of days. olivia: is the audience hostile to bush and christie and more established candidates? >> hostile is probably strong. one of the best dynamics is whole week -- it is fun. the outfits are fun. the boots are fun. the speeches are fun. this is a time for people who really care about politics. but also the crowd matters. you have strategies that are purely designed to get the crowd into it.

they bring people into chair for them. jet bush is doing something -- jeb bush is doing something different. they think this is where his strength is. olivia: thank you so much phil mattingly. his joining us from cpac which is covering all day long. hopefully we can get pictures of people in the costumes. we will be back in a few minutes. this is bloomberg surveillance. ♪

tom: good morning everyone. i'm tom king and with me as olivia and brendan. brendan: janet yellen's second day on capitol hill got a little heated. some republicans want to give congress more power over the fed. greece is pinning its hopes on the european central bank. it is counting to stave off the default when the payment of the imf is due. greece's finance minister says the ecb owes its country more than $2 billion from a bond selling program. we are learning this morning that masked islamic state

militant is from britain. he is identified as a west london native who graduated from college with a degree in computer science. he has appeared nvidia's beheading several hostages held by the islamic state. he traveled to syria in 2012. wisconsin senate has passed a right to work bill which would allow workers to opt out of membership in dues. walker is expected to be a presidential candidate next year. pope francis wants to improve resource management in the catholic church so he is sending clergyman back to the classroom. a pastoral management course lasts 15 months and covers topics like business ethics and creative problem-solving. those are your top headlines. tom: very good. i have never forgiven donald bear. it was his fault.

he is with pbs. >> you wouldn't let the proper doctor in the room. tom: that's right. let me cut to the chase. we will digress right now. he has done public service as chairman of the pbs board. was downton abbey a gift from god? did it just parachute in? >> you like to think so. i am the chairman of the board. i am not the ceo. i don't get all the credit. i don't deserve this. there are very talented people. it is never that easy. it takes people who understand how to find the shows and work with the producers and writers to make it a success. tom: critics say funding is done and let us move on. >> look at downton abbey and all

the great public affairs and education programs. look at the audience. cbs became the fifth most-watched network in america. it really says the public values pbs. and very small portion is handled by the taxpayer. that is a red herring that gets floated out. brendan: what is the future of original programming on be yes -- on pbs? >> very strong. pbs has a great partnership now with the bbc for production of original programming on which they partner on the development of that programming. there is more original drama that will be coming to pbs generated in the united states. tom: i can remember a moment when the muppets came on the air millions of years ago. there is our digression for the moment. let us go back to the ugliness of washington.

john carter of texas among three names who are critical republicans in the divide between funding of the nation's security and immigration. you predicted this brendan. it is a nation deeply divided and there is no middle ground in washington. brendan: i do know if i predicted it or so much as saw it the way everyone else did. there is no easy way out for us. there is this myth that if only barack obama would walk over to capitol hill and share a little bit of irish whiskey like ronald reagan did with his counterparts on the hill, then everything would be ok. tom: it is a different world now. >> the dynamic is just so different. the sad truth is i think the country keeps saying time and time again for each election it gets together and work it out. forces keep driving them apart. tom: they have to decide which winner to pick on wall street.

how do you pick a winner if there is no middle ground to negotiate? >> the bottom line is as long as there is popular support for bank bashing, it will not really make a difference. tom: the bank bashing is still there. >> it is still going on. >> we have been talking about division within the gop, how much division is there between the democratic party? is there any chance we could see the democratic party come together to see a clinton-warren ticket? >> no. i don't think we will see that. the democratic party can still come together and find a middle ground around these issues without necessarily demonizing one side or the other. olivia: can you win an election on we are all in it together? >> yes you can. bill clinton did it. he did.

that was his message at the time. it was also we have to regenerate growth and get moving again. george w. bush ran as a compassionate trying to thread the needle. brendan: right now, it is a one-woman candidate. when do we get to find out what her platform is? >> she hasn't announced she is running yet. brendan: come on. >> she gave a very substantive speech in silicon valley last week. everybody is waiting. it will happen. her campaign has not started yet. she will be that -- the media wants her campaign to start. she will be there with a substantive campaign. she will be there talking about how do we both grow and share in this economy. tom: you two are wired into this. we are from the distance.

what did hillary clinton learn not to do the last time around? >> let me take this from the wall street perspective. and is not like if she ends up in the white house, this is a bad thing. i don't think there is a strong feeling that. tom: what it she learned last time that she will not repeat this time around? >> she wants to show more of her real authenticity. tom: she has to show who she is. >> there is a mix between the personal and the policy. tom: have we moved on from her being a woman? >> she is a grandmother. that is very interesting. >> the fact that she is a woman is an important piece of what

she will be bringing to the public. auto think we have moved on from it. the question is what is that say about the kind of policies she will bring up? brendan: we have an e-mail from a viewer in london. dancedownton abbey is not a bbc production. tom: thank you. >> spoiler. >> that happen in season two. tom: get over it. i am in therapy. i can't. olivia: time to ask our twitter question. the first answer is why not? second answer is utility the third answer is very direct here.

it does feel a little weird if netflix is this possible for 35% of the traffic in the country and they are running the same rights as everyone else. tom: i commend brendan for being up to speed on this because i don't care. brendan: i commend tom for writing during that discussion. he can't get over it. tom: just keep writing. her father. outrageous. olivia: you don't care about neutrality but 4 million people wrote into the fcc. >> this has been a real powershift in washington. what we are seeing is a new breed of companies from the silicon valley. >> it is even a new breed because don't forget in this battle, facebook, google have stayed on the sidelines. tom: thank you so much.

come back when there is a job on wall street for one of us. we continue on radio and television. "in the loop" is next with betty liu. the morning. -- good morning. ♪

betty: good morning. we are live from bloomberg world headquarters. we are 90 minutes away from the opening bell. we have a big focus on the

consumer this morning with two top ceos. rick goings is with us to talk about how he is funding opportunities to grow the business and provide jobs in emerging markets. the company sees 90% of its sales outside of the u.s. employees are 3 million strong. if you haven't had her morning coffee, you have time to run for duncan. we will talk to ceo about how you can get your favorite brew outside of its stores. each as on that straight ahead. here's a look at our top stories. greece is counting on the european central bank to help on its default. the greek finance minister spoke with erik schatzker and said the ecb owes greece more than $2 billion from a bond program. he says the ecb should simply hand the money to the imf. >> this is