the eurozone agrees to vote greece more money after it passed painful austerity measures that set off protests overnight. erik: it is day three of the bank earnings parade. citigroup's earnings topped estimates. goldman sachs profits decline due to litigation expenses. investment banking, asset management, which is a bank look like in 2015? thedan: bankers knew federal government was testing the largest bank in america. but it did not say anything to the people that were about to london $2 billion, so is that a conflict of interest or is that just the way that things are done?

good morning, i am brendan greeley. erik: nine erik schatzker. the greeks loaded in favor for the eurozone demands. then mario draghi, the president of the ecb, held a news conference in which he dropped a bomb. he's the undisclosed until the --ds escaped druggie draghi's mouth, that they had raised the resistance. the ecb typically communicates via press release. he also said i'm am not a politician, but anytime he makes a move to the ela, it has been a political act. the ecb has always had the power to change markets in a second. erik: in context of big developments overseas, let's take a look at what's happening. we begin with u.s. stocks.

i am looking at the volume adjusted -- the volume weighted average. trading is pretty heavy today. averaging out at about half a percent. the euro has been very active this morning. you can see how up and down it has been. nine handle,the earlier had been in a handle. brendan: the thing that i have been trying to figure out all morning is, it has been a group of good news out of europe, but the euro continues to decline. it is good news but perhaps not possible that there is a good and increase. erik: this is the funny thing about trading. will, ofrity, if you the eurozone, does not necessarily make the euro better. brendan: let's get a look at the

morning's top headlines. greece has passed painful austerity and structural reform measures that resulted in violent protests. berlin, davids in girl in athens. significance the of what the ecb announced this morning on the liquidity it extended to greek banks? >> it shows to what extent the ecb will go lockstep with what happens in brussels in terms of new bridge financing. what we had hours ago, a $7 billion bridge loan. that gets you through a couple of weeks, maybe longer, to pay of interest. the ecb took that and mr. druggie said that this was one of the reasons why they decided to turn the tax back on for emergency liquidity assistance. 900 million. they tend to say that they keep it in line with what the actual needs of the greek banks are. it gives the banks more breathing room, and he also had

some important comments on greece saying outflows from the greek banking system, 8 billion in the month of june and the total ecb exposure to the greek banks, 130 billion euros. so to new numbers. he was praising the negotiations, did not want to get too far out in front. back here in berlin, a closed-door meeting. the conservative party meeting here. he said no to a haircut, keeping with what he has been saying all along. they still have to figure out how to undo this mountain of debt. erik: thank you, hans nichols. is in athens. last night, it got a little violent, shall we say, in the

main square in front of parliament. tear gas was fired. i saw a truck set on fire. tell us what the mood on the ?round is like having been there, my sense is that this was isolated, but you are there and know better. >> that is the sense that i am getting as well. ? we were there when we saw the molotov cocktails being exploded, the rush of people going in every direction. everybody has been talking about this bridge financing, talking about the fact that the banks have been closed for several weeks, how difficult it has been for everybody. i was talking with an economic analyst and he said with this emergency liquidity assistance, there is a chance banks could open next week. talking to people here, that is such a big deal for them, and everyone is looking forward to it.

night, this law was passed in the cover of darkness. what is the new reality that alexis tsipras look up to, missing 32 members of his own party? >> 32 members of the syriza did not vote for it. we heard from ministers who said that they would be willing to resign, if asked. the prime minister is not looking at the future of his government, the future of his cabinet, how that will be reshuffled, and what the government will look like overall, going forward. are we going to have a national unity government, minority government? these are the things that he will have to wrestle with you next few days. brendan: coming up on the bloomberg market day. earnings season begins with a roar. we will take a look at the numbers behind city, jpmorgan, and a lot more. erik: the california teachers

retirement system took a hit from the markets. the chief investment officer explains the 4.5% return the fund recently posted. secret: jpmorgan had a on a big loan deal that went wrong. was it unethical or is it just the way that things are done? on that and more coming up the bloomberg market day. talking about the eu agreement, a bridge loan for greece after the country's parliament passed a bailout agreement that included austerity measures. euro has been dropping this morning, touching its april lows. kit juckes is with us in london. it appears to be a confounding state of affairs. signs overnight that if

anything, the eurozone is pulling together, greece approves the measures demanded by european creditors. secondly, there is a sense from the irish prime minister that greece is going to get some bridge financing from the european union. says he hasraghi read the emergency liquidity assistance to greek banks and the eurozone need to tighten further and yet, the euro declines. ?hat is going on >> the euro is falling hand in hand with a fall in short-term interest rates and bond yields. i think we are in for an even longer period then we may have been before of accommodative monetary policy amid the uncertainty around greece. there is no point thinking about

raising interest rate for a really long time. no one was expecting that quickly. wille same time, there have to be this protracted debate about what to do with restructuring greece's debt, and in turn, what means about the concept of restructuring debt or other countries. while that is going on, you cannot have that today without the european central bank continuing its bond buying program. they will be keeping monetary policy very accommodative, and the result is, european investors, now that they are not terrified of an immediate exit of greece, are incentivized to look for more attractive yields and returns, to sell the euro and buy treasuries or u.s. equities, something else. do something more interesting with her money than earning negative interest rates on offer at their banks. brendan: let me see if i understand this right. despite our focus on athens and whatels, the real story is

is going on in frankfurt, and always has been? sense,real story, in a the results of this, is that we have to have more monetary accommodation in frankfurt to deal with this issue. this is going to push money out of the country. but just behind that, it's worth saying, whenever the world is a scary place, europeans, who have a huge current account surplus, they put their money under a mattress or into a safety deposit box, and the euro is muchger when that happens, in the way that the yen was for a long time. the conditions for a week euro is a born world where people to get the best return on their savings as they can. brendan: is there going to be a haircut? >> at some point, there will have to be. the question is how long. the debtas said that

is long-term unsustainable, but the problem with a haircut now, the european monetary system, the single currency is based on the premise that you cannot default. that is there for a reason because the whole floor of the single currency union, as it is, is that there is too much fiscal autonomy. france spends a bigger share of gdp than the united states. brussels spends much less than the federal government. that was a structural flaw well understood and the rules around not defaulting were there to compensate for that. so if you have to go back and say we understand they cannot pay their debt down, what do we do? you are eating away at the architecture of the system, so you need to replace it with something else. this will be a long, drawnout debate, but we should be clear,

there will not be timely repayment of interest and recoup on all of greece's debt. erik: thank you. kit juckes from london. coming up, big banks rollout their second quarter earnings this week. which are doing the best and who is in a pinch. ♪

brendan: good morning and welcome back to the bloomberg market day. erik: julie hyman is here looking at some of the biggest movers of the session thus far. julie: i wanted to look at some of the biggest winners and losers.

netflix is far and away the biggest winner, of 11% after reporting earnings and subscriber growth that exceeded analyst estimates. and nowlion subscribers getting 31% of its streaming revenue from international sources. that is something investors have been banking on, the growth of the company internationally. it expand the last quarter to new zealand and australia. it is now planning to offer the service in japan, spain, italy, and portugal later this year. more international growth is expected as a result of that. we have seen blockbuster growth this year. you are looking at the s&p 500 ranked by returns for the year, in terms of stock performance. netflix is at the very top including today's games, up 124% for the year to date. more than double the second-best

performer, electronic arts. it has been an incredible performance this year for netflix. obviously, continuing as the company came up with numbers today. ebay is the second-best performer in the s&p 500 today. sales beat estimates as it prepares to spin off paypal, which will become formalized as of monday. i said we would do the worst performers, let's get to one of them. sherwin-williams, down the most in six years. they cut their full-year earnings forecast setting the effects of a stronger dollar and also said he is seeing weaker and demand in some geographies. now a look at our top stories, janet yellen returns for a second day of questions. the fed chair delivered an upbeat message on the housing sector yesterday.

she said that that remains on track to raise interest rates this year and defendant that against republicans who said that the central bank needs more oversight. you can watch her testimony starting at 2:30 p.m. former president george h w bush hospitalized inmate after falling and breaking on that can -- a bone in his neck. a spokesperson says that he will be fine but will be wearing a neck race. more than 50 goldman sachs executives and employees gave jeb bush more than $140,000 in the second quarter. another firm run by his second cousin was the second-largest donator. hitdan: goldman sachs was by higher legal costs than expected. profit dropped 49% from your earlier. citigroup posted profits that beat analyst estimates, showing

the cost cutting is paying off. josh fisher is here to talk about the banks. looking at loan growth, a lot of these banks are doing lending. not as an investor but a citizen. the lending that you are c&i.ng is in in theory, it is terrific. question is how much are worse credits, because so many of our companies can fund directly through the capital markets. the question is, are banks being selected by capital markets or not? the other piece of that that could be good news, is that the

slowly to increase rates, the fed is benefiting from significant increases in interest income as a lot are shorter term. you have seen it and interest margins. >> on the cai side, they are not. they are competing for a race down to zero. the average yield has gone from an average of five in 2011 to about 3.07. erik: net interest margins, they are expanding why? >> because it is so profitable to put it on. is gooditability relative to other business lines. mortgages are coming back. the question is less about this quarter than if the fed will move a quarter and stop for a while.

i suspect it will be 25 and stop, which really good for the banks. brendan: one of the things that caught my attention this week was the jpmorgan loan to deposit ratio. how much retail does a universal bank need, how much storefront is right? >> it depends on the model. ae could ask, is wells universal bank or not? retail is an important piece, but in 2002, the big banks were saying, we want to get out of the retail business. they did not see the business economy pick up, so they were forced to get more aggressive in retail lines. is getting out of some of the retail businesses intelligently. retail will be a big question. banks will confront that as, do we want to pay up front for deposits as rates rise?

banksare the big rightsizing enough? >> know, and that is a lot of the opportunity that we see here with the cost cutting benefits. i think that will continue. we will see them continue to right size and get out of non-core businesses and maybe that has become an opportunity for earnings in a not terrific loan growth environment. brendan: do they need to write size fixed income trading? >> that most of them they do, and they are. even if you had goldman sachs, expense,itigation extending come, commodities, and foreign-currency were a big part of what weakness they had. m&a was still terrific. we trading was not as great as expected across the banks but still not terrible. fixed income will be an area where they will need to continue to shrink. we would not care whether

they are rightsizing fixed income trading or not to comply with capital rules, if it was not a taxpayer institution. >> that is the other big issue. we forget all of these big companies have implied government guarantees. that is exactly right. erik: do you think we will ever see goldman sachs or morgan stanley give up the bank holding company? >> i don't think they will be allowed to. when you looked at what goldman sachs was talking about, where they are adding headcount, regulatory personnel is still one of the major growth areas. a lot of them would like to. i cannot imagine how they would be allowed to. by the way, most have moved derivative books into the bank, so i'm not sure they would want to. brendan: lots more to talk about that we have to move on. explore the we will evolving relationship between greece and germany, the ties that bind or divide, coming up. ♪

brendan: welcome back. erik: the relationship between greece and germany has been tested over the past several months. perhaps no more so than the past couple of weeks. brendan: what we are talking about is politics. we get lost in the deals of finance, but it comes down to how much germany is willing to give the eurozone. i have been trying to read the german press on this because they are having a healthy discussion on what they should do. this caught my attention from this morning. one professor writes --

it is easy to look at the caricature. erik: is that an implicit criticism? >> absolutely. he is a hero to some. aboutonce again, talking in his view, that a grexit would perhaps be better for greece, then a deal that he was part of over the weekend. brendan: and he talks about grexit. the ♪

brendan: welcome back to a busy market day. president obama will continue his push for a fair justice

system as he becomes the first sitting resident to see the inside of a federal prison. he will visit a medium security prison near oklahoma city and will meet separately with law enforcement officials and nonviolent drug offenders. vice president joe biden will pitch democrats on the senate foreign relations committee and we agreement that the u.s. reached with the with five other world powers. he said, i think we're going to be ok. still, many democrats are skeptical of the deal and many republicans are flat out opposed , and so is the israeli prime minister. the president addressed it yesterday. all the objections of prime minister netanyahu or the republican leadership that has already spoken, none of them have presented to me or the american people a better alternative. congress has two months

to review the deal. lawmakers can pass a resolution rejecting it, and if they do, the president could then be told that. economic sanctions have longer at the carmakers from doing business in iran. german firms are eager to return. german companies could reap an additional $4.9 billion in revenues it sanctions return to levels from a decade ago. nation's second-largest pension fund, the california upchers pension system went last fiscal year. progress remains a marathon, not a sprint. >> this is the sixth year of a bull market. bull markets are typically five years. it is not surprising that everyone had a flat return. did not outperform our benchmark of 7.5.

we have not announced yet, but probably about 4.5. the one-your number is just the pace in a marathon. what we look at is 3, 5 years. both of those are 12% net. when you look at the returns over 10 and 20 years, you are talking about seven. as we come to the tail end of a bull market, many will conclude, yes, while those five and 10-year returns look good, 4.5 percent maybe a harbinger of what is to come over the next five years. >> when you run a marathon, you hit hills. this may be a marathon where we have a slower pace for a couple of years. but i think the key to the u.s. market is those quarterly earnings. generally, you have been reporting on earnings surprises.

you say it is more important to look at your career growth than analyst estimates. the way thathat analysts lowball estimates, 60% of the time, they will be. >> analysts know that they are paid for surprises. they do not want surprises on the downside. do not look at beating the estimates, look at the year-over-year growth. which is good but not outstanding. what i want to know is what is the message to the chief financial officers out there who continue to lowball analysts with guidance, only to be able to report earnings per share one or twonsistently pennies ahead of consensus? >> the problem i have is the cfo's interaction with external auditors. particularly, goldman sachs.

but we organization, hold the market, everything in the usa. they have done pretty egregious stuff in private equity, other areas where they are pushing the envelope. i would like them to just be ethical. the cfos need to be honest about their books and they need to be honest about their business operation. we are looking at a fascinating chart. mostly equities but also 10% private equity. i want to ask about hedge funds. you said that you own the market, everything in the usa. you do not own firearm manufacturers in california. a lot of people thought that was an ethical investment decision. has that cost you at all, and are there other areas that you think are right for divestment of social concerns? >> the challenge with investment

is it is like quitting. firearms, illegal in the state of california -- that was to companies in the broad market. the impact to us is negligible. it is because we own the market. we own the russell 3000 index. people argue why we own the stocks at all. we want to own the market. as you start eliminating industries here and there, it has an effect. we have been out of tobacco for 15 years. that has cost us about $4 billion. the other challenge is, have we changed the social -- teachersm sure the vested with you are happy about that. >> correct, but we are not doing it for social change. we are a big fun but we do numbering about social change. it is really about investment risk. if you look at those industries, they have not done well.

sales are down. obviously, the firearm industry is constantly under attack. what about something that is just as controversial but is not a social issue that divides people the same way, sustainability and climate change? few states are as at risk to climate change impacts as california is. what about coal, oil, for example? : especially. are they thinking of making it illegal to invest in coal companies? >> they are challenging us to divest in coal companies, so you are spot on. that is part of the reason i'm here today. i am meeting with the finance people. i wanted to get some research. we have a good idea about the future of the coal industry in the usa, it's not good. but what we are really concerned about is what is the future of

coal in china and india? i am looking at it from a risk standpoint. that was the chief investment officer of calstrs. costyou increase distributions or returns. jpmorgan has a secret about a borrower and a federal investigation. did they act unethically, or is that just what we do? ♪

brendan: welcome back to the bloomberg market day.

let's go to julie hyman. one hour into the markets. it has been a green hour. brendan: pale green. julie: i like that, gradations here. if you look at the dow, it is pale. the s&p is solid green. the nasdaq up about .9%. the s&p is now higher for the in the past six sections. take a look at my bloomberg consumer telecom, staples, financial -- we had some earnings today. i want to focus on one of the slippers. materials is the biggest drag out the s&p 500 today. part of that has to do with earnings.

we heard from sherwin-williams, dropping the most in six years after the company cut its full-year earnings forecast because of a stronger dollar and weaken demand in some of its end markets. sherwin-williams is down. ratesys foreign exchange cut their sales by seven percentage points in its second quarter and will remain a sizable factor. mining down 1%. that brings me to gold. mining down 1%. longest losing streak since november, down the past six days , after we heard janet yellen reiterate that we will likely see rates go higher this year. highest shortthe interest in gold since the u.s. government started keeping records in 2006. you can see high short interest. now that see what is going on in europe.

manus cranny is in london. definite stronger shade of green. european equities are rising here. seven days in a row. the ecb raising the amount of liquidity they will give greek banks. saying we feel sure we will be paid on monday. the assumption is that greece would stay a part of europe. streak,ongest winning of the month, seven days in a row. autos and suppliers were really the main protagonist. auto sales around europe rising 15%. we have not seen that since 2007. volkswagen really pacing ahead along that continental, on the tire business. nicely evente

though some saying they may have a problem with the numbers in china. at bmw.es up by 15% the best numbers in about five years. let's take a look at swatch. when times get tough, they can make a cheaper model. they have more affordable products out there. forecasting a strong finish despite a stronger swiss franc. mainline chana will bolster things based on the hong kong story. autos are up. ecb is ready to implement qe fully. the question is, or your trading on a weaker euro or stronger dollar? brendan: i am keeping everything under the mattress. thank you, manus cranny.

forsia, chinese stocks rose the first time in three days. something to keep in mind, looking at the shanghai composite, there is an asterisk on those numbers. not all stocks are trading again. the nikkei also in the green. today, shinzo abe passed a bill through lower parliament but that is what the markets are looking at. they are looking at alexis tsipras and janet yellen. here are some of our top stories from this morning. more than ready for his close-up and images did not disappoint. the images that came back from the new horizons spacecraft showing ice mountains as high as the rockies and canyons that appear to be six times as deep as the grand canyon. some cuban soccer players missing from yesterday's tournament.

two players already abandoned the team, asking for asylum. the absence of the players did not stop cuba from advancing to the quarterfinals. they face the united states saturday in baltimore. no more rocking in the free world. songwriter neil young says he is removing his music from all streaming services. he says streaming is the worst audio in history. he writes on his facebook page, analog cassettes, eight track, all sound better than streaming. streamingy launched a high-quality music service. failedns and millenials to take notice. jpmorgan could be in hot water. .hey are facing authorities it would beets, seen as unethical or illegal.

laura keller reported the story. she is with me now. was obligation, legally, jpmorgan under to pass this on? >> we reported that jpmorgan felt it was not under obligation to do so. when these loan agreements are sold, the mower material omission, there is no sec in forcing you have to disclose this. it is very much wild west. brendan: is it standard practice that if the company says this is the material, a bank is under no obligation to think about whether it should decide whether it is material or not? hired as anis advisor and the deal with the lenders. while there may be is not an illegal mode for them to included on behalf of the company, certainly, there is an onus to maintain a relationship with lenders. if they cannot trust the agent, who is hard for their expertise

in the marketing of the deal, that becomes a problem. great storys is a because you went into the broader scale. it seems like this is a low interest rate environment phenomenon. >> partly, lender protection go away when companies can just sell what they want to sell. this is a dividend deal, which is a risky deal to begin with. 75% of the proceeds were used for a dividend, which means, if you gave the company money as a lender, and they took it and gave it to shareholders -- it is a risk your that a lot of lenders do not do. brendan: in the restaurant industry, they call that the kickback. >> i think they call a differently in different industries. brendan: nicely handled. we talk about the wild west. i wish him to read in your piece, blacklists. >> this is not something that you can do in equity markets or the bond market where you have

the public buying and selling that we want. in the loan market, the company can say, we do not want these kinds of people. sometimes it is for reasons you can understand. as a competitor, you don't want them to get your projections. other times, it is to keep out people, which is what i report on, the distressed debt world. the reason that lenders are willing to accept these conditions is because this is what there is to hold, this is where the returns are. >> it is a loan but pays pretty well. so some would argue for the risks that are there now. at the time, it seems to be an attractive interest rate and it was bumped up at the time of sale. you hearthis is what across markets, we had no choice, we needed yield. are the opportunities that exist, we got a better interest rate at the beginning, but now we are faced with all these problems.

we don't know what to do with this company anymore. brendan: when rates change, do we expect this behavior to go away? >> i think it will naturally dissipate. once you have more control as a lender, it will naturally dissipate. brendan: of the companies you have looked into, there is legal action? formed anders have group, no legal action. they want to figure out what to do, going forward. you can start to look at the loan documents, what did a company need to disclose, did you need to disclose this? brendan: and this is a statutory law action. will it stand up in new york courts? it depends on where the governing law is. brendan: a great piece. i recommend that you read it. jpmorgan's little secret on a loan deal that went very wrong.

the same story that we keep hearing. we had no choice, we had to put the money somewhere. i wonder and hope that this stuff clears itself up. as interest rates rise and there are better investments. still ahead on the bloomberg market day. if you think athens is in trouble, we will look at the capital of italy. ♪

brendan: welcome back to the bloomberg market day. i'm brendan greeley. athens is grabbing the headlines but another ancient european facing a crisis. it's administration is scandals and debt. pimm fox is with me. you have been to rome, this hits you hard. : obviously, the headlines

have been on athens and greece but it's important to look at rome, as the eternal city. there have been several reports -- one done by the european commission in 2013 -- that said that rome was at the bottom of the list of european union capitals for efficiency and for quality of life, second to last. the bottom of the heap? brendan: athens? pimm: very good. there have been allegations of mafia infiltration having to do with contracts. brendan: of the city government? pimm: letting out contracts over many years. the mayor of rome is a transplant surgeon. he has pretty much admitted that he has a major problem. he wrote an open letter to the city's newspaper and said that the city of 2.8 million people has some major problems, and one of them is, we cannot collect

the rubbish because they have asked the sanitation people to clock in and out of work, and they do not want to do that. the airport was hit by a fire in may. the way the government works is, the magistrates seal off the affected area, but that prevents people from going in and cleaning up. so all the rubbish and debris from the fire and the smell from the burning plastic still hangs in the air, so they have to cancel 75 flights a day. it is a major mess. i believe they have $15.5 billion worth of debt, and they keep looking to the italian federal government to bail them out. brendan: this is a part of the eurozone crisis right now. countries like italy, spain, portugal, look to athens and their troubled agrees is having, trouble greece is

having, and it is a societal issue. the prime minister, in his mid-30's -- pimm: i think 39. brendan: getting older every day that he is there, too old to play soccer, too young to be prime minister. he has really worked to enact reforms. he actually pulled up some labor reforms in italy, impossible to do, looking for constitutional reform. that may happen to make italy more governable, but he recently said we are not going to go through this pain of structural reform only to tell greece, you are fine, don't worry about it. we talk about austerity, and that is one half of it. meeting budget demands. the other half is changing the way that you run society and government administrations. painful work, and receipts do it, too. pimm: the head of the roman chamber of commerce says that

rome is basically on the verge of collapse. a specific example that we may be familiar with, you know about the city's bike share program. rome started a similar program. he completely disintegrated because people have either stolen the bikes or have broken them and just leave them on the streets. so if you go there, -- and by the way, next year has been cleared clear a whole year by the pope, so get ready for 25 million pilgrims going to rome. the city and the federal government has yet to allocate any new money to deal with all of this. brendan: and as is the case in washington, d.c. the hardest work is literally making the trains run on time. ♪

it is 11 a.m. in new york, 6 p.m. in athens, don't worry, don will return to greece, it always does. welcome. outside the greek parliament, protesters inside the parliament

reforms from the eurozone. but what happens next? we will find out. ebay,gs on netflix and ebay missed estimates but all eyes are focused on sports tomorrow. meanwhile, netflix stocks reporting greater growth in the number love global suppliers. cory johnson breaks it all down area talk about reporting the expectation, he reveals his financials to the federal election commission and says he is worth more than $10 billion but the information is not public yet. what is he really worth? ♪ brendan: