this is a subprime loan.ubprime loan had a starring role in the housing bubble and caused foreclosures and plunge the economy in for dead. the subprime loan has returned sort of. does it still pose danger to our cover. we have john here. talk to us about subprime loans and are they back? >> we are seeing signs of them return nothing the housing market but frankly little in the mortgages. where i am seeing it in autoloans. double-digit loans for people with bad credit. you want a economy to get credit to those who need it most. but you worry when you start it see this kind of thing that it leads to it the risk- taking that got us in the last crisis. >> one of the issues is because they were packaged and sold as securities. and they were used a financial instrument. >> we are seeing it in the autoloan market. but not much in mortgage. wall street is gobbling them up so they can get higher yield investments. interest rates are so low, they want higher yields and a subprime loan, you get a higher interest rate an

he didn't want to talk about the subprime issue. i said fine. i knew my colleagues didn't spend a lot of time on china. we got on the subject matter of the mortgage, the growing problems of mortgages. we had 90 hearings in 2007 on the subject matter. some of the first witnesses were people actually cap lady what they thought this could result in in terms of foreclosures in the country. the first witness talked about having one million foreclosures. they were highly really fueled -- ridiculed as being engaged in hyperbolic political talk were nothing like that could ever happen. we learned millions of foreclosures happened over the coming years. despite that activity, it was a refusal to it knowledge the growing problem -- to acknowledge the growing problem. in 2008, you have bear stearns. many thought this was a on e-all problem. a ludicrous proposition when you think back. with the book talked about was a wonderful in september of 2008, everybody rallied and save the country. where were they? there was a lot of information about what was occurr

look, i think that you know, with regard to the subprime cards being issued.arket something not the same as getting approved. and you know, getting approved is, means getting the card in consumers hands. even then doesn't necessarily mean the consumer will use it. one substantive change in consumer mentality since the recession of they have risk aversion toward credit cart debt. this is lot different than what we've seen over much -- gerri: yet consumers are paying down credit card more slowly, they did in the first quarter, than they did in the first quarter of last year. look, when you talk about giving, more credit to people who are subprime what you're talking about is giving more credit to people who score 660 as opposed to 850 which is perfect credit. it is a very big difference. what i wonder greg, will they make it up on the back of people with great credit scores? will they make it up by raising fees and interest rates for folks with good scores. >> not at this point, no. there is such intense competition for for the top-notch credit card quality cons

why are they signing up the subprime borrowers? are they not getting enough of other borrowers? >> right for years they were making it so difficult but now they loosen up a little bit, a good thing people are rebuilding their credit. gerri: a lot of our viewers see 2007 all over again, worried that banks will put out too much money to those who condition afford, ern will get -- can't afford it. >> if you have a fica score of 740 or above, you will get lowest up rate out there. keep up your healthy credit, you don't have to worry about it. gerri: as you look at this, if the banks lend, money, putting out credit card offers to people with low credit scores are they going to make up for their losses by charging us more in terms of rates. >> the people with lower scores will pay higher rates, but people again with the stel ar credit, and 740 or above, you will still get the lowest rate out there. so if you have that healthy credit, make sure you look at your interest rates and you are getting the lowest one. gerri: here is some rules of thumb, highest quality borrows pay 12.9 percen

>> yes. >> and without the derivatives being piled on those subprime -- if it had just been a subprime issue, 2007-2008, we would have had a dent to our economic growth and people would have been in a world of pain. it would not have imperiled the whole financial system. unless there is massive pressure piled on student loans and auto loans, which to our knowledge is not, you're not in the same systemic danger. >> the structure of the subprime auto loans is not as alarming as the mortgage loans were. these were not interest-only loans, they were not ramping up over time. it's simply people whose credit scores have been dinged over the past few years -- >> lower than they have. >> and they're not dipping down the scale -- >> nor are they being repacked into aaa securities because the bulk of them -- >> at least not yet. >> as far as we know. i'm like, let me google that. dr. j., before you go, payrolls next thursday. how do you think the market's positioned for it? >> i think overall, the market's in fine shape right here going into that. now, we could get a surprise on thursday. we, of

that new type of lending was called subprime lending. a 2000 report by the department of housing and urban development noted prime lenders have made significant efforts and indeed significant progress in reaching historically underserved markets and communities, but they also warned of the other side of the story called subprime lending. a fertile ground for predatory lending activities. and that warning may have proven prophetic. there are claims that communities of color were targeted with predatory subprime loans. black and latino loan customers who could have qualified for otherwise more affordable prime loans were steered toward toxic, subprime loans. in 2011, countrywide financial corporation entered a $335 million consent order with the department of justice, resolving allegations that the bank charged higher fees or steered into subprime loans more than 200,000 african-american and hispanic borrowers who qualified for prime loans between 2004 and 2008. despite the settlement, countrywide denied the justice department's allegation

they bundled this and made money, so the subprime loans, there's a rush to get in that business.ou don't believe the money people made in derivatives and securities drove people to drive them in there, collateralize it and continue to swell this thing out? that was the bubble. >> that happened. a lot of predatory lending happened. a lot of bad stuff happens, and that was for sure making it worse, but it wasn't the core cause. the core cause was a much more simple thing. >> which is? >> which is a level of confidence that it's safe to take on this risk and leverage because people did not assume it was possible for this country to face the risk of a great collapse and recession and panic. people didn't think the house would fall. >> he's wanting to blame some confidence in all of that. in fact, a lot of risk was taken, bad decisions were made, and he allowed that. should have watched the system, where the risks were so obvious, so obvious to so many people except for the blind regulators. and to just say, oh, just panic, just panic. well, the panic was for a reason. >> he seems to

good to be here. >> so, what do you think about those concerns that this could be a subprime moment?obably exaggerated at this point. i think chairman yellen is right that fundamental underlying inflation doesn't look like it's getting ready to accelerate by any appreciable amount right now. inflation -- there's a lot of inertia in the inflation process, so when inflation is low, it tends to stay low and so forth. if i had any quibble with the fed's rhetoric, it's really about their willingness to tolerate 2% inflation or maybe something higher for a time. because if you're a central banker, you should be careful what you wish for. if it goes to 2.5%, or perhaps more, it might be very hard to rein in or bring back down to the target. so, i would be kind of careful along those fronts, but i think she's right on the underlying situation. >> and here are some of the components, in particular tom porchelli referenced, looking for signs of inflation moving back up -- rents, medical care, we were just discussing, you heard pwc's forecast there, even clothing. >> yes. you know, you can alwa

now the subprime. so there are many ways to take risk. the problem and banking is not risk-taking because i come from silicon valley were a lot more risk is taken actually. a big thing that makes it banking so fragile is that they take it with somebody else's borrowed money. that's the problem. so they are like a homeowner who bought a mansion with no down payment but they are a corporation but they have access to the own profit. they just rushed to pay them out to protect -- to protect them from their creditors which is the depositors which is us. it's not necessary, and the problem is that they are allowed to. so in terms of the blindness can well, it's a term after the book i met a writer who had a book called willful blindness, why we -- whatever, don't see the obvious, it's about see no evil hear no evil which really represents we told me that there's blind spots in banking it was more of the willful blindness kind. in other words, they don't want to hear about it because it's not convenient for me. i said many incidences about i don

moreave people lending to subprime customers.ate, the pendulum is swinging back. pendulum ofhe same 2005 and 2006? i weave repeating history? we just create an open exchange and try to make sure people have access to credit. last time, it was government-backed home loans -- >> dan alpert, jump in. >> the big difference is volume. he is providing a clearinghouse function and getting money that needs to go out into the hands of consumers. we have $13 trillion in outstanding household that it is country, that is not even scratching the surface. if you compare it to what is going on during the bubble it is apples and oranges. sector the private mortgage market alone, you are talking about $2.5 trillion of debt. >> scarlet, a surveillance brick schools o -- scarlet, a surveillance breaksclusive. >> i want to ask about home equity lines of credit, up but only for those with pristine lines of credit. >> heloc, we are still very early. as long asgood consumers use it appropriately it can be a good way to pay down other debt and access --

subprime today is not subprime of '06. but, but it's coming back. >> you can do securitization.say it's triple a. >> right. >> single b. yes. >> we need honest rating agencies with honest ratings and dispense with the idea there are so many loans in a given package you don't need to have all of them succeed. that's got to end. >> securitization in home loans has not privately come back. fannie and freddie's game entirely. >> opening bell will be here in a moment. the yale chief executive leadership institute of the yale school of management ringing the bell. our friend, the senior associate dean, ceos of merck, lanar, mike ullman from jc penney is here. >> and jeff is instrumental in picking our cnbc 25. this is always one of the biggest conferences. he gets the big names. he is tremendously respected and as he should be. >> hoping to chat with mike ullman. not sure we'll get him. over at the nasdaq mondelez international supporting the men's u.s. national soccer team ahead of world cup, the official snack maker for the team. >> should they be snacking? >> maybe the refs, maybe

. >> try aging is a process retake the and tire subprimal and aged in a temperature controlled room for 45 days. the tenderizes and breaks it down. totally different between wet and dry. if you have any of these pieces of me and your barbequing yourself give us some tips on how to get the most out of it. a nice clean hot grill. >> it will kind of kit will done on the up side and rear on the inside. >> it will take a little bit more time but another great trick is to let that stake come to world room temperature. there with me is one consistent temperature. i see the basic salt and pepper. you do not need to get fancy. if you buy great me there is no reason to cover that up. once you have a really hot grill with the coals you want them to be white. the colts have to be way. these are started just a few minutes ago. we're able to taste them. medium rare to me is the way to go. >> new york is a little more lean. if you want to go to a medium. can handle that. it has the moisture. >> i know it is done by poking it. >> you have to. softer the meet the more rare it is. the tougher it as, it b

goldman sachs you know the investment bank that was behind one of the because players behind the subprime mortgage crisis and subsequent financial catastrophe well take a listen to what goldman sachs c.e.o. lloyd blankfein had to say yesterday on c.b.s. is this morning. income inequality is a very destabilizing thing in the country in other words it's responsible for the divisions in the country.

goldman sachs you know the investment bank that was behind one of the because players behind the subprime mortgage crisis and subsequent financial catastrophe well take a listen to what goldman sachs c.e.o. lloyd blankfein had to say yesterday on c.b.s. is this morning. income inequality is a very destabilizing thing in the country in other words it's responsible for the divisions in the country the divisions could get wider if you can't legislate you can't deal with problems you can't deal with problems you can't drive growth and you can't drive the success of the country it's a very big issue than something that has to be has to be dealt with oh look while it's great the world's richest banker actually recognize that income inequality is a real thing hard to take someone who had millions of people in a financial ruin seriously not to mention income inequality is exactly a pressing problem for blankfein last year goldman sachs's top man took home a cool one thousand million dollars in stock options and bonuses on top of his two million dollars salary and i guess it to be expected. that w

goldman sachs you know the investment bank that was behind one of the big his players behind the subprime mortgage crisis and subsequent financial catastrophe well take a listen to what goldman sachs c.e.o. lloyd blankfein had to say yesterday on c.b.s. says this morning. income inequality is a very destabilizing thing in the country in other words it's responsible for the divisions in the country the divisions could get wider if you can't legislate you can't deal with problems you can't deal with problems you can't drive growth and you can't drive the success of the country it's a very big issue and something that has to be has to be dealt with oh look while it's great the world's richest banker actually recognize that income inequality is a real thing or to take someone who had millions of people in the financial ruin seriously not to mention income inequality is exactly a pressing problem for blankfein last year goldman sachs's top man took home a cool one thousand million dollars in stock options and bonuses on top of his two million dollars salary and i guess it to be expected consid

factor fueling the sub prime boom and i also believe that the fed's actions after the collapse of the subprime market contributed to the severity of the bust so i have a big problem with money because particularly as it's matters to day by discretionary central bankers because they simply can't be trusted to to manage it correctly. i also have problems i might say a little more on this with the fact that today our private bank by billet east many of them at least are held up by government guaranteed either deposit insurance or the doctrine of too big to fail and this these guarantees because private banks as suppliers of money in the form of deposits cause them to be unreliable because they courage it encourages excessive risk taking so our whole modern monetary and banking apparatus based on us as it is on the centralization of paper currency or monopolization of paper currency and on the ever increasing. umbrella of government guarantees is frankly an extremely dangerous system and one that has consequently gotten us into trouble time and time again we can do better than that history shows t

assuring us that inflation is contained right well right that leaves that really where it's going to subprime market quick question you know you just quoting government figures. yet those are the government inflation figures the real inflation rate is much higher but even the official numbers the official c.p.i. and p.p.i. numbers are now year over year rates of two percent and you know remember it that's last year the fed is expecting more economic growth in the year ahead than in the year behind us and you know the fed believes mistakenly that economic growth causes inflation in fact they think that inflation is actually necessary for economic growth now neither is true but if the fed actually believes that inflation results from growth how is it that the fed thinks the u.s. economy is going to grow a lot faster in the year ahead yet the inflation rate is going to come down not go up now i know you don't like government bonds but what are you seeing in the corporate bond markets peter. well i wouldn't buy any bonds and it's certainly not in u.s. dollars i think the entire rate structure is

goldman sachs you know the investment bank that was behind one of the because players behind the subprime mortgage crisis and subsequent financial catastrophe well take a listen to what goldman sachs c.e.o. lloyd blankfein had to say yesterday on c.b.s. is this morning. income inequality is a very destabilizing thing in the country in other words it's responsible for the divisions in the country the divisions could get wider if you can't legislate you can't deal with problems you can't deal with problems you can't do.

goldman sachs you know the investment bank that was behind one of the because players behind the subprime mortgage crisis and subsequent financial catastrophe well take a listen to what goldman sachs c.e.o. lloyd blankfein had to say yesterday on c.b.s. is this morning. income inequality is a very destabilizing thing in the country in other words it's responsible for the divisions in the country the divisions could get wider if you can't legislate you can't deal with problems you can't deal with problems you can't drive growth and you can't.

brought about by subprime. >> in the united states in particular, there is a feeling right now inequalityas gone too far. it is contributed to financial rigidity and the rise of household debt because of stagnant incomes. in the past five years, the federal reserve has been able to avoid a complete catastrophe. >> all of which you admire? >> better than what we did in the 1930's. it is not enough. there was a book in the 1960's that told us what we need is a good federal reserve. you don't need progressive taxation. a good federal reserve, you are fine. this book is trying to say that is not enough. it is good to have a good central bank, you also need a proper education system, a progressive tax system on income and wealth. if we don't think that is true, we will have all the crisis again. we can't ask too much just of our central banks to solve these problems. >> other economists have suggested it is poisonous to look at the distribution system. >> it to me it is a lack of confidence in democracy. it is not poisonous to have transparency. let me say right away that the main purpose of s

okay, credit card lenders are out there preying on subprime borrowers.u don't want to circle back to where you wanted. charles: all right, time now for the next. i'm trying to prepare everyone for more volatility. they act like there is one more upside. you have to know your temperament. i will not be angry, but a lot of these ideas are big. in the meantime, progressive software. i think they're going to mitigate the downside for now. >> you asked h much he is working. only been able to work out for about six months. >> 62, lost everything i had four times. i'm ready for the next adventure. >> 33 cents come you can't make good process opossums asked without that. >> he said all of that parnate is certainly a part of him. >> he does ballet every single day. do you believe that? that's how he stays in shape during. >> as we get older, you know, i'm looking at that pretty closely. so how are you feeling about tomorrow? >> i saw a lot of these yesterday, go for the weakness. charles: we thank you guys greatly appreciated so much. join us every night at xpm.

. >> we've redone subprime lending. melissa: thanks to all three of you.orry, steve ballmer, buying a sports team is a thing of the past. billionaires on a spending spree. it could be coming to a neighborhood to you. who could be handing over heeps of cash to your hometown. >>> lebron james, nasty marketing battle between rifle beverage companies. the twitterverse is drinking it up. do you ever have too much money? ♪ weekdays are for rising to the challeng they're the days to take care of business. when possibilities become reality. with centurylink as your trusted partner, our visionary cloud infrastructure and global broadband network free you to focus on what matters. with custom communications solutions and responsi, dedicated support, we constantly evolve to meet your needs. every day of the week. centurylink® your link to what's next. i got more advice than i knew what to do with. what i needed was information i could trust on how to take care of me and my baby. luckily, unitedhealthcare has a simple program that helps moms stay on track with their d

and with these subprime credit card borrowers they end up in the web, they make minimum payments on theirwhich means they pay it off in 50 years. the next thing is they get a second credit card to pay off the first and a third, and you get in a vicious cycle. the lenders have not learn and they're going for the big dollars because they get 20% on their money. >> you think these guys are sitting ducks for more trouble. >> no doubt. we have seen it before. just have to think back into -- >> okay. the visa and mastercard folks cut off his feed. it is a big trend. we're watching very closely because the government suddenly allowing lenders to be also more aggressive. i should stress here, because many disagree with gary just a little bit more aggressive. we'll see what happens. my apologies to gary. >> is it me or was everyone watching the world cup instead of working yesterday? i think i know exactly what deion is going to be doing next tuesday, during my -- >> no, no, no! no. no. no. no. no. no. no. no. no. no. come on. you maniac! d thank you for your bravery. thank you colonel. thank you

fannie and freddie made two-thirds of all subprime mortgages. that's not a free market institution. that entity along with the fed printing too much money back in '03 and '04 caused the housing collapse. we need to take free market seriously. we have to put an to end all these tax credits and tax deductions anticipate loopholes. dave camp had a good bill in which simply electrified the tax code. that made sense. it was going to be pro growth. produce 1% more economic growth. so that will help us restore jobs. and closing the border is very important. i ran hard on that issue. first you got to get your own house in order before you can help others and we're out of control right now. on fiscal discipline our debt is over $17 trillion. unfunded liabilities are $127 trillion. no leader on either side is mentioning the biggest economic problems we have in the country right now and i base my campaign on those numbers. and a pledge to fix them. >> you're right. over $100 trillion in unfund liabilities, $17 trillion in deb. barack obama said it was irresponsible and one p.a.t.h.ic to ha --

it is like the subprime mortgage broker that ripped you off. >> the balances and of 20 thousands of dollars the loans will be passed to them. >> the government will make 184 billion of the back kids trying to get an education. >> colleges have turned into the large business. it is a feeding frenzy. >> it created a race. >> you've got to cater to out-of-state students who want to party. >> some of our presidents can be quite shameless and the size of their compensation. >> the older generations that criticized the millennials grew up in a time when you could go to a state university and pay your way through with a summer job. talks there is going to be a collapse. the newrailer for documentary "ivory tower," directed by our guest andrew rossi. is college worth it? >> we do see statistics that show those who have a college degree make one lane dollars more than those who have only a high school diploma. but what that very powerful statistic leaves out are all of those who don't complete, who don't finish their college experience and those who have student loan debt that is so paralyzing when

not the scary subprime days, but back to normal and that is a positive indicator.ok at a variety of surveys from gallup to want by the allman and that look at renters or those not owning a home their attitudes are positive. cheryl: we had the 30 out 40 and a half% right now. >> foreign half seems high compared to last years three and half, but if you look at the last 30 years four and a half% outrageously historical low. cheryl: a bond investor was really questioning durability of the housing recovery, when you hear statement coming like that from investors do you get a credence or just say-- >> i'm very optimistic about long-term prospects for housing for one primary reason and that demographics. anyone that looks household formation of publishing growth in the united states including the harvard joint study for housing, brookings institute, zelman and associates they are all convinced we are dramatically under producing housing that is needed compared to population growth and house of growth. that ultimately drives housing demand and we are under producing. chery

fannie and freddie made two-thirds of all subprime mortgages. that's not a free market institution. that entity along with the fed printing too much money back in '03 and '04 caused the housing collapse. we need to take free market seriously. we have to put an to end all these tax credits and tax deductions anticipate loopholes. dave camp had a good bill in which simply electrified the tax code. that made sense. it was going to be pro growth. produce 1% more economic growth. so that will help us restore jobs. and closing the border is very important. i ran hard on that issue. first you got to get your own house in order before you can help others and we're out of control right now. on fiscal discipline our debt is over $17 trillion. unfunded liabilities are $127 trillion. no leader on either side is mentioning the biggest economic problems we have in the country right now and i base my campaign on those numbers. and a pledge to fix them. >> you're right. over $100 trillion in unfund liabilities, $17 trillion in deb. barack obama said it was irresponsible and one p.a.t.h.ic to ha --

and those cuts will go into the other room next door, where they'll be broken down into subprimals.hey'll be packaged or shipped out as orders. >> so how much revenue will you do a year? >> uh, we should do about 50. >> 50 million? >> 50 million. >> that's a big business. how big is that electric bill? >> uh, about 30 a month. >> wow. a big business like this comes with big overhead. how much is your rent? >> about 32,000 a month. >> wow. there's rent and cooling cost averaging over 60,000 a month. there's union labor costs. there's seven delivery trucks. that's a lot of money being spent. but there's $50 million of revenue coming in, so i'm a bit baffled by the annual losses. this is almost a $50 million business, how much do you think you'll lose this year? >> about 400,000. >> how much is inventory at one given time? >> probably between 800,000 and 900,000. >> how much leaves here a day? >> 150,000 to 200,000. >> you're turning your inventory pretty quick. >> right. >> and so do you guys have any debt? >> right now our bank is lending us about $3 1/2 million. the fabricating room

fannie and freddie made two-thirds of all subprime mortgages. that's not a free market institution.t entity along with the fed printing too much money back in '03 and '04 caused the housing collapse. we need to take free market seriously. we have to put an to end all these tax credits and tax deductions anticipate loopholes. dave camp had a good bill in which simply electrified the tax code. that made sense. it was going to be pro growth. produce 1% more economic growth. so that will help us restore jobs. and closing the border is very important. i ran hard on that issue. first you got to get your own house in order before you can help others and we're out of control right now. on fiscal discipline our debt is over $17 trillion. unfunded liabilities are $127 trillion. no leader on either side is mentioning the biggest economic problems we have in the country right now and i base my campaign on those numbers. and a pledge to fix them. >> you're right. over $100 trillion in unfund liabilities, $17 trillion in deb. barack obama said it was irresponsible and one p.a.t.h.ic to ha -- unpa