from goldman to governor, he has hi, everybody. welcome to "the wall street journal report." i'm maria bartiromo. from goldman to governor, he has run an iconic wall street's firm and served in the state and senate. now he joins me to talk about the economy and the market. my discussion with jon corzine. lessons learned with former ceo sam waksal. how prison changed him and how he is back in the fight against cancer. and they're supposed to be one of the safest investments around. but what happens to municipal bonds when states and cities face a financial crisis? the real deal on munies. "the wall street journal report" begins right now. >> this is america's number one financial news program, "the wall street journal report." now maria bartiromo.

>> here is a look at what is making news as we head into a new week on wall street. the leaders of the world's two largest economies met in washington this week and pledged to strengthen their partnership. president obama and china's president hu shook hands and promised greater cooperation between the world's superpower and its rising rival. mr. obama told mr. hu he thinks about china's currency is unvalued, which hurts american exports. but before the summit signed $30 million worth of export deals, mostly airplanes, and president hu said american corporations would have greater access to the chinese huge markets. it was a volatile holiday-shortened week on wall street, the markets hitting fresh multi-year highs on tuesday. followed by the s&p 500 and the nasdaq's worst day in more than two months on weakness in the chipmakers. two changes at the top of the technology world. a shake-up at search giant google. its co-founder larry page to become ceo, while current ceo eric schmidt will become executive chairman.

the company also beat earnings expectations for the latest quarter. apple's ceo steve jobs also announcing he is taking a medical leave for the second time in two years. jobs has a rare form of pancreatic cancer. chief operating officer kim cook will take the reins in jobs' absence. apple also made nunes on earnings front, beating analysts' expectations again as did ibm and chip maker intel. citigroup missed earnings predictions while goldman sachs came in ahead. wells fargo matched estimates. general electric, the parent company of the company that produces this program came in ahead of analysts estimates. it was also announced that ceo jeffrey immelt will chair president obama's new economic advisory panel. jon corzine occupies a unique perch from which to view the country and the economy. he joined a legendary wall street firm, served as senator and is current ceo of mf global.

good to have you on the program. >> good to be here. >> thanks for joining us today. president obama's meeting with chinese president hu and the american business leaders. are these meetings in your view largely ceremonial meetings with greater opportunities or are we actually getting things done? >> i think the culmination of a lot of hard work that prepares readers for more ceremonial conclusion of the work that is ongoing. but they're absolutely necessary. the fact is that china's economy is a driving force across the globe. it is a rising force in geopolitic geopolitical terms. the united states has to have a relationship with it if we're not going to slip back into cold war efforts. and without these kinds of meetings, and without the kind of work that prepares for it, we can fray. we need china's help with north

korean issue. we need china's help in expanding our exports. growing our economy. and i think those things in and around a summit are encouraged and facilitated. >> i know we sell china airplanes. we sell them some things. but there are certain markets -- >> claims from both going to china. >> how about financial services? how about some of the critical industries that the chinese have said we've got our own 50% of this industry? >> you would like to see greater opening up. and we need to be encouraging that. they believe that they need to do this on a phased basis. my own view, and i think a lot of people's view is they've done enough phasing. it needs to have more open access. >> how are we doing in terms of this recovery? what is your view on where we are in the recovery and the markets right now? >> i'm like most business people that i have interaction with, pretty optimistic.

i think the market as turned. the economy has turned. we unfortunately have this problem with unemployment that a lot of the things that we're doing that are driving growth in the economy, investing are designed to develop greater efficiencies. the application of technology and businesses and not necessarily people-intensive the way they might have been 25 years ago. but i think the stock market, consumer sentiment, and almost every leading indicator tells me that things are moving up. >> how focus ready you on what is going on in new jersey? of course chris christie, the man who defeated you in the new jersey gubernatorial election, he is being regarded as one of the rising stars in the republican party? how is he doing? he has been aggressive. >> maria, i tend not to get into trying to critique the person who succeeds us.

it's a tough time for governors, whoever is in a governor's chair. a big turnover across the country this year because the economy was weak, and people had suffered in various communities. a lot of tough choices. governor christie might have made different choices than i might have made. but there were tough choices made, and there will be more in the future. it is clear that certainly the tea party, i think you want a tea party caucus has identified him as one of the up and comers in the republican party. i think that remains to be seen how you do over a period of time. >> you've also got a new job running mf global. what are your goal there's? and you're teaching at princeton again? talk to us about you in your life. >> well, the bulk of my life is spent running a global form. we're transforming from an old line brokerage firm into an investment bank.

we want to be people who take and intermediate risk a broker dealer, and we want to be able to develop over a period of time an investment banking business. >> we're going to talk in a few minutes with alexander levanthal and jim levanthal. but let me get your take on munis. there has been a lot of concern about states defaulting, about budget deficits blowing up in certain parts of the country. how worry ready you? >> near term not nearly as worried as what i read in the newspapers, particularly with regard to our states. states have many, many more tools for their ability to balance their budgets. one of the things that i think people are confusing is cash accounting and accrual accounting. so a lot of folks, including in the state of new jersey and other places, have not made

payments into pension systems or unemployment trust funds, and that gets you through the night. that allows you to say you balanced the budget. the problem 20 years from now or 15 years from now when those bills come due. but i don't think it is a problem in the short-run for most of the states. >> good to have you on the program. >> good to be here. >> with so appreciate it. jon corzine joining us here on set. up to five years in prison for insider trading. imclone founder sam waksal is back in the news. i'll sit down with him about the budget and lessons learned. are the muni bonds governments sell to investors in danger? advice for your portfolio. as we take a break, take a look at how the stock market ended the week.

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welcome back. to prison and back again, sam waksal was the founder and ceo of pharmaceuticals company imclone. he served nearly five years in prison for securities fraud after suspiciously-timed sales of his company's stock when it was awaiting fda approval of the cancer druggi. it also head to martha stewart's conviction. i talked to him about his race to develop the treatments of the future with his new venture, cadman pharmaceuticals. >> it's a company that has been in the works for a while now. it is what i think is going to be the 21st century global company. and it takes off from where i left imclone two years ago. but i believe it looks as if

industry in a way that no one else does. building a biotech company, building a biopharmaceutical company is not easy these days. we're trying to put together a mosaic that has the commercial arm generating revenues and profits. we did that with the acquisition of a company called three rivers pharmaceuticals a few months ago. it will be for us a cash-generating machine so that we don't have to go to the markets to constantly raise money for drug development. >> so this is interesting, because you say it's basically picking up where you left off at imclone. urbatox obviously was a cancer drug. tell me what you're so excited for. >> we have learned that in cancer, one of the exciting things is that signaling takes place inhibiting the ability of a cancer cell to divide, takes place at multiple sites.

sort of like squeezing a tube of toothpaste. so the trick is to figure out how to hit multiple sites simultaneously so that you cause the cancer cell to go down a death pathway. that's what we're doing. that's what is so exciting. and so we have a number of drugs synergyize with one another, with phase 2 clinical studies that we're doing right now. >> here you are at this conference. of course you refer to your time in prison. can you talk to us about what you have learned, what you have been thinking about, and why come back and go back into the same business biotech after the upset that you faced? >> well, first of all, this is what i do.

i spent my career in academic medicine, and then later building a great biotech company. and i did have a personal setback. but part of what i learned is, you know, that it's really teaches you how to do things differently the next go-round. so what i'm doing right now is building a great company with the experience that i had, and all the experience, whether it was just at imclone or in the rest of what happened to me. and the last several years i've been thinking about what i would do next, how i would use what i've learned to sort of build a great company. but part of that is also personal resemz. it is admitting that mistakes

were made. they weren't the kinds of mistakes where the company was affected. it was something that was personal. it was a mistake that i made. and i'm using what i learned to move forward. >> where are we in the war against cancer? >> i think, you know, nixon started that war in 1974. and we've made some great progress in really finally making the kinds of breakthroughs that will affect outcome that will allow patients to live longer. one of the things that you hear about always is are we willing to spend hundreds of thousands of dollars for patients to get six weeks or four months of extended survival. that's not -- journalists are asking the wrong question. what we see happening is in a trial where you really see

overall survival increasing by four or five months, some of those patients are living years, and the rest of them aren't responding to the drug. the trick now is to find out how we decide who is going to respond and who is not. so the treatments can be more cost-effective and so that we can continue to extend life in a positive way so cancer becomes a chronic disease the way diabetes is. >> my thanks to sam waksal. up next on "the wall street journal report," do budget crunches across the map have municipal bondholders worried? for decades, jim levanthal was the country's most prolific bonds salesman, the man who put munis on the map. what to do if your portfolio is built by bonds. i see great public

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clearly funding the municipal government to 40%. as the states become more compromised, that funding is going to end. the municipals can't pay their debt. i'm not the first person to say this. i'm not the last to say this. >> that is banking analyst meredith whitney on the danger posed by the strained budget of local governments and states. a high profile appearance on "60 minutes" have rippled across the $3 trillion municipal bond market. many investors depend on the tax-free income those securities

provide. joining me to discuss the outlook for muni bonds are alexander and jim levanthal. so alex, the recession of course severely impacted the budgets of states and municipalities across the country. meredith whitney is predicting that we could see 50 to 100 jurisdictions go broke. what is your reaction to that number and the fear that it may have stoked in the investors? >> my reaction, and my reaction is one that is echoed by many, many municipal analysts that are experts in our business is that we just can't figure out where that number is coming from. now let's put that in perspective for a moment. if you look back at the number of defaults, from 1970 to 2009, there were four cities and states that declared bankruptcy. and clearly we had some very significant recessions over that time. not as great as now. and even if you look at the number of total bankruptcies in

municipals, which includes revenue bonds, backed by a specific project, that number goes up to about 54. by comparison, you had 1700 corporate defaults. so the numbers don't make sense if you look at the percentages of debt that they have outstanding, the percentage of budgets to debts, it just doesn't add up. now the fear clearly has now been stoked. and we have seen that since november. >> jim, let me begin here. your parents started levanthal during the depression. we know your family has seen it all. what do you think investors in muni bonds today need to understand about the chance of a default? >> let me put it in perspective. we're talking about a security that has a payment record second in safety only to the united states government itself. we're talking about bonds that are paid from the first dollar in the city's treasury, not the last. or in the case of revenue bonds that are backed by the power of

the authority to charge for a necessity of life. we're talking about community, state, and local governments that exist in perpetuity. so we're talking about something that is so essential to the ongoing well-being of the nation that to be talking about massive defaults is the equivalent of talking about the meteors, the down fall of rome, and the end of western civilization. >> as you look at the statistics, on average, debt represents about 4 to 5% of a municipality's budget. so it is not a major item. i mean if you think about it, the idea of saying well let's just not pay the debt doesn't really help. what does help -- and this is what you're seeing across the board, with illinois having just raised their tax rates by 2 percentage points, which will bring in close to $2 and a half

billion in additional revenues, or you see the potential firing of state workers, and certainly don't be mistaken right now by all the words of warning that are come by governors. they are focused directly at one group of people, and that is the unions who will have to come to the table and make concessions. and that will be a very, very important part of the process of cutting back on the expenditures. >> talk to us about the strengths and the challenges of muni bonds in this particular economy. who is the sell? why would i want to own a muni bond right now? and what risks do i need to be aware of? >> i'm going to stay with the positive, because it will raise the issue of the risks. number one is the bond for an essential public purpose that the community can't live without. >> like what? >> like to subway. like schools. >> good. >> like sewer system and all of that romantic infrastructure stuff. where do i, the bondholder, stand in line when it comes to

getting paid? do i get paid out of the first dollar that is earned by the bridge? what is my lien on the revenues? next, how up to date is the issue is information? you can get the official statement on any new issue by logging in to something called www.munigo which happens to be levanthal's online brokerage. i will admit the legal documents like an official statement are hard reading, but it's your money. it's your 10, 15, $25,000. it's worth the read. and there is delicious bed-time reading. >> i'm sure. great advice. jim, alex levanthal, thank you so much for joining us. we appreciate it. thanks for laying it all out for us.

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for more on our show and our guests, check out website at wsjr.cnbc.com. you can find us on facebook. just look for wsjr with maria. now a look at the stories that may impact your money this week. earnings season rolls on. we get the reports from microsoft, mcdonald's, american express, johnson & johnson as well as travelers, 3m, boeing, amazon.com and chevron. tuesday's president obama's state of the union address, and

the latest for the s&p case-shiller index, of course measuring home prices across the nation. that's on tuesday as well. on wednesday, the federal reserve's open market committee wraps up its first meeting of 2011. and then on friday we get the first reading of fourth quarter gross domestic product, the broadest measure of the health of the u.s. economy that will do it today. thanks for joining us. next week join me for a special program from davos, switzerland. the latest on the global economy. each week keep it rite here