away from the other banking. can you explain to the satisfaction of the british people what measures you have now put in place, having had this disaster to stop it happening again? >> first of all, i was talking about inflation. there is no doubt that our inflation record compared with other country and decades is substantially better. remember the problems we had with bursts of inflation, followed by wage inflation, and we had classic cycles of that, which were inflationary problems that had to be dealt with. as far as the regulatory system, the whole world has to change its approach. i have been saying for years we have a global fppings system, and we have to have a global means of supervising it. most of the problems that have hit british banking have been from the overseas assets and interests that they have actually held. that is one of the problems in a global economy. if you have one country et cetera banks operating in another country, you have to have some convergence in the regulatory process. you talked

the difficulty is how that is carried out. we suggest as bank regulators that we can do it more effectively. but that is the start. you have to start looking at things like capital requirements, capital structure, for those who are not financial institutions. >> ok, currently, have made any progress -- have we made any progress, and not necessarily -- we as a general group -- toward regulation of derivatives and credit default swaps and those sorts of things? are we in the same boat as a year ago? >> i would say that we are. >> everybody agree with that? >> yes, and that requires legislation to fix. >> are we concerned about that? >> yes. i think it's huge. >> mr. chairman, have you gotten recommendations from these folks are anyone else on how to deal with these? >> we are working on legislation that comprehensively deals with this, and hopefully we can do that and come back in the fall but that is the purpose of these hearings, to bring these ideas together. >> as anybody given concrete ideas -- >> written -- there have been all sorts of recom

also keep in mind, the small banks have not had the stress test that the bigger banks had and smaller financial institutions from more trouble raising capital so all of these mean that the just down from big medium-sized and smaller financial institutions, there are a lot of risks there and we're really suggesting treasury needs to take a very close look. remember, these are the financial institutions that do most of the small business lending in america. >> most of the folks on the oversight panel you chair agreed but congressman jeb said that perhaps the toxic asset problem is taking care of itself and that further government intervention might be counterproductive. does the government need to be pumping more money into the banking system? >> i want to start by saying i think that maybe he should reread this report carefully. the report doesn't call for spending more money in this ar area. what the report says is that the way treasury plans to spend its money may not accomplish the ins we identified as needed. what we're really trying to get a focus on in the report is to point out

>> i think there was arbitrage, but it was between the bank and the non-banks sector. there were hedge funds and other types of vehicles vs. in the highly leveraged vehicles. on consumer protection, there were a third party mortgage originators. they were funded by wall street funding vehicles. they were outside any type of prudential or consumer protection standards and they were not within the purview of banking regulators. my role as the fdic institution , of that sector has held up pretty well. that is why you had so many fleeing to become bank-holding companies. that was the sector that was left standing. it is hard for us because our exposure has increased significantly. we have had to do the things we have had to do to stabilize the system. as i testified before, the arbitrage was between the banks and the nonbanks. a systemic risk council have the authority to seek this. i do think that the arbitrage between the banks and the nonbanks sector was not among the individual types of bank charters. there are many community banks in this country. many of them to have

shatt a banking system of the literally tens of thousands of non-bank providers that are currently unregulated or lightly regulated, like mortgage brokers and originators. the agency should be focused on this fundamental regulatory gap rather than on already regulated institutions. >> we thank you for coming before the committee. >> before the final history of the financial crisis is written, the shortcomings of many financial institutions will have been revealed. the framework of prudential supervision and regulation has not kept pace with the interrelationships of the financial sector. in my prepared testimony, i suggested and tried to elaborate the elements of an effective framework for prudential supervision including a number of recommendations for legislation. and he confined his introductory remarks to three quick points. first, prudential supervision must be required for all systemically important institutions. is noteworthy that a number of firms that part of a crisis had not been subject to mandatory pre

the unexpected. and with 416 banks on the f.d.i.c.'s problem list holding assets of $300 billion, there is plenty of room for unexpected. >> they're going to need more money. >> reporter: doug elliott studies the financial crisis for the brookings institution. if needed, the fdic can borrow from the treasury to shore up it's deposit insurance fund, but elliott thinks taxpayers won't have to any losses. >> my best guess is that taxpayers won't have to put up anything. that the premiums they can charge to the banks over the next, say ten years, can cover this crisis. but we don't know. >> reporter: james chessen, chief economist, for the american bankers association says banks are doing their part to help the fdic. they are already paying higher premiums for deposit insurance and the industry set aside $67 billion in the second quarter to cover their growing loan losses. >> it's a matter of trying to be prudent having income a little less because they want to have the resources set aside to handle the loan losses they expect in such a de

from that side of the banks, that's bad. but the investment banking side, deals are going through. they're saying more deals are going to come through. that's all going to benefit them. >> i want to ask both of you about the regulatory environment given what we're seeing. if the retail banks are still in trouble, are they justified for not lending as much as a lot of people would still like to see them? >> what i think they're doing is shoring up their tier one capital and more worried about their bottom line than they are about lending to people. also in our markets, mortgage lechb lending, that would help the property markets. still talking of deposits of 30 to 40%. nothing is safe at the moment. pouring people into different sectors. some of which they've never been to before. that's a difficult environment as well. >> one of the issues is the government is a bit schizophrenic. they've told banks, increase your capital reserves and safety margin. a week later saying, lend out more. put more money out of the banks. the banks are trying to increase their safety margin. you have to

it has 12% of the nation's deposits. in other bank in the history of this country has even come close to that. it's significantly stronger in the capital markets arena because of the acquisition of merrill. it actually is stronger because it acquired countrywide. >> i don't know. i mean, i agree with a lot of things you that say, dick. the only problem is that ken lewis has consistently over time paid top dollar for his acquisitions, and that's one thing that's a little bit troublesome. i mean, what about the issue, bill, real quick of them paying back this fine with tarp money? they continue to be under the perspective of tarp money. it's kind of a ridiculous comment because money is fungible, but until you shake that stigma it's there. >> that's our point. that's why there flooeds needs to to be new leadership at bank of america. bank of america's the only bank that suffered the enormous losses that still has its leadership in place. the board is changing. ken lewis's days are numbered at bank of america, and the sooner they -- >> i

are not being a bank, and being much less regulated in the non-banking this year. that is the arbitrage that need to be addressed. >> and what you're saying is that that cannot be addressed with one? >> no, it could not, because you'd be consolidating what we do with the depository institutions, but it would not expand beyond the heavily regulated -- -- >> could it? >> for things systemic in nature, you could do it with this risk council, some ability to look across systems and a dubose credential requirements regarding capital and leveraged to mitigate systemic risk. that would be across all sectors, not just for banks. >> senator, i do believe you could do more streamlining, move more down in the direction you are talking about. we do not have an ideal system. but as you move down, there are issues you have to confront. if you want to have an effective deposit insurance corp., if you go for a long time without having any bank failures, they will not have a lot to do, and will know the system very well if they do not supervise banks. likewise, the federal reserve h

but now, so far, we're getting pretty much guidance from the central bank to the commercial banks tighteningpolicy, especially with regard to second home mortgages. >> hi, it's louisa in london. how worried are you that the stimulus is just a very big package, but that's the reason why we're seeing this turn around essentially and that once that glitz of it wears off, then we're back to growth numbers that simply aren't high enough? >> i don't think the current rebound in the economy is purely a result of the government stimulus program. the stimulus package was extremely important earlier in the year to get the economy going. confidence had returned. we're seeing private consumption picking up. home sales have been reaching record levels in recent weeks. car staels sales are also very strong. so i think the government's stimulus program was the mere catalyst to get the economy going. i do not think we're going to see a major dip in the economy in the second half of 2009. >> all right, jing, we'll have to leave it there. good talking you with you. thank you very much. let's head out to india

that follows our update on the nation's troubled banks. today the f.d.i.c., which guarantees bank deposits said banks lost more than $3.5 billion in the second quarter. the agency also reported that its insurance fund shrank another 20% down to $10.4 billion. that's the fund's lowest level since the savings and loan crisis in the early 90s. so far this year, 81 banks have failed. another 416 are on the f.d.i.c.'s so-called "problem list". here to parse some of those numbers are karen shaw petrou, managing partner of federal financial analytics, a consulting firm to the financial services industry. and binyamin appelbaum, banks and banking reporter for "the washington post." welcome back to both of you. karen petrou, the first thing this tells us, the banking sector is still struggling, right? what's the biggest problem? >> bad loans and lots of them. lad loans they wrote in the leadup to the crisis and loans that are going bad now because of unemployment and ongoing economic problems. >> brown: so binyamin, we were hearing about fancy inves

thus the loan portfolio of the banks. the second one the trio that you brought along hudson city bancorp washington federal first financial northwest these are all relatively small cap companies in the banking industry was says these three part? i would tell you all of them had a construction and development portfolio but the portfolio was either a small portion of their benxi where you have seen most of the bad portions of those portfolios come to light and has increases they increase to of the construction and development portfolio get to 40 percent of the portfolio being bad and the last two quarters really haven't seen in increase which means they found problems. the other big difference i would say is in hudson city case hudson city had a construction and the ball and it porfolio but it was less than 1% of the institution. even though 44 percent of their portfolio is nonperforming it is pretty much and consequential to the whole thing. in the ownership positions in either of those trio? no i do not. michael along wit

the gains there. banksspecially strong in japan. mitsubishi, the largest lender up 6%. and then mizuho financial. panasonic posted a smaller than expected quarterly loss, 560 million there. there are reports it could swing into an operating profit in the current quarter. as for south korea, decent days for hyundai. kia sells up 20%. hyundai, 30% on the year. a cash-strapped automaker saying its shares really fell. >> thanks so much. we'll get auto numbers here. it will be a very big week for data with the monthly employment report due out on friday. a lot of folks watching the unemployment number on that. today at 10:00 a.m. new york time, construction data as well. auto sells probably start late in the morning. ford expected to its first gain in two years thanks to the cash for clunkers program which needs a senate vote to be extended. earnings before the bell, we'll be watching insurer lows on consumer products maker clorox and tyson foods. after the close, numbers from pulte homes, chesapeake energy and

so if the econy is doing better, whare the banks still in trouble? as stt gurvey explains, it's a matter of timing. >> reporter: it willake months before the gen shoots appearing in the economyhow up at your nehborhood bank. that's because the job ls comes first, tn the missed mortge payments, then the foreclosures. d with home foreclosures com trouble for retaers and others dendent on consumer spending. morningstar banknalyst jamie pete, says that's why banks are just beginning to el the pain from mmercial mortgage failures. >> you have almostalf a year between e time when the first mortgageayment was missed to the bank'srobably charging off the loan. d so what you have is half a year and sometimesn commercial credit it's almost as longs two yearof lagging charge-offs the banks are having. so the combinati of that the facthat these problems have ju been accumulating throughout the recession is at some banks have ju reached that breing point right now. they just can't take a more loses. >> rorter: on top of that, some banks may have troue paying speci

the head of the bank of england inflation reports. ing to go live to the uk central bank as all the details are released in less than half an hour. oof! i hope he has that insurance. aflac! you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called? uhhhhh aflaaac!!!! oh yeah! that's it! aflac. we've got you under our wing. a-a-a-aflaaac! >>> welcome back to "worldwide exchange." the fed is expected to detail its plans to wind out its bond buying program as it concludes its meeting today. is that going to be a positive or a negative for government debt? joining us now to discuss is anthony gibbs. he's a senior broker and ashraf is still with us. the expectation, anthony, is that the fed will say we're not going to buy bonds any more. i don't know if we have a chart, but it seems as though that program didn't really work so well if the point was to keep rates low si

bank, the tenth largest failure in u.s. fact, richard bove putting out a note this morning that between 150 and 200 banks will fail, putting a bigger strain on the fdic. hampton pearson is live in washington with what the fdic is planning on doing. hello, hampy. >> good morning, larry. 81 bank failures, including 17 so far this month, the fdic is dealing with the biggest number of collapses since 1992. now, during this current crisis, the fdic has been working with acquiring banks to share in those losses. the guarantee bank collapse in texas will cost the agency more than $3 billion. in an attempt to attract more buyers for failed banks, wednesday afternoon, the fdic board is expected to relax restrictions on private equity firms, private equity firms buying collapsed firms, details worked out. as far as the fund, regulators say look for more special assessments, as was the case during the s & l crisis. >> this happened in the late '80s, and banks will be assessed to replenish the fund. that is normal reaction. i think it i

one of the bank's nonexecutive directors, as well. both of them deny the allegations. >> ross, earnings continue to be in focus. japan airlines has reported a first quarter net loss due to the recession and globe influenza outbreak. in the first three months to june, its net loss widened to $1 billion. revenue slank to $3.5 billion. in a move to cut costs, the company plans to reduce service on two international routes. meanwhile, japan airlines lost 0.6% today. dbs reported a better than expected profit today, lower than the $453 million it earned before, but still beating analyst forecasts. bad debt, charges surged to $324 million or eight times more than it was a year ago. that's despite improving business conditions in its key markets, singapore and hong kong where loan growth saw an 8% gain. checking on dba shares and how they are trading in singapore, down 3.6%. here is a look at gourmet shares. officials are a ware of reports that a hong kong court has ordered the assets of its founder to be frozen. gu they also the matter is no

she also said, i want to get your take on this, that in the aggregate for all these banks, the 8,100 e improving. their troubled loans are slowing and their delinquent loans are dropping. so she is actually painting a much more positive picture than the media headlines would suggest. do you buy it? >> i do believe she's painting that picture and i believe it's an accurate picture. we have about a year or sometimes two years of cleanup after a recession comes to an end and i believe this one is coming to an end. so we'll have another year or two of problem banks and bank failures because they are lagging indicators but i believe we are moving into the cleanup phase and we will get these problems resolved and the cleanup phase is very important because we get banks out of business that can't lend money and we merge them into stronger banks that can lend money. >> that's where i was going with that. you've got to do that. you just can't keep all these piggy banks going forever. if they can't survive, you don't want the government taxpayers. one of the things i like about the story of ban

because keep in mind with the small banks, they are the once who hold principally whole loans. ppip is not directed toward them or getting bad assets off their banks. they disproportionately hold the commercial real estate mortgages that all projections look like are going to be big trouble in the next few years. >> rising unemployment and a possible collapse of the struggling commercial real estate market are the biggest risk factors says the oversight panel. estimates vary about the value of those toxic assets. the federal reserve says american banks have just under $600 billion they're hold. the international monetary fund puts the figure closer to a trillion dollars. >> risk is the key word here. one of the things that's deeply troubling is that there's no good estimate of how much toxic waste is still left on the books of either the large or the small financial institutions. >> now, there is a dissenter on the panel, texas republican congressman jeff hensarling believes this report is almost a defacto stalking post perhaps targeting smaller banks. we did make severa

consumers of the banks, and that makes all these fees that we all hate so much all the more expensive. >> yes, but liz, i mean, weren't these banks the ones that caused all of the trouble to begin with, and how do you prevent that from happening in the future? >> well, it's a really interesting point. yes, they were a huge part of what caused all these and set up this drastic recession. i don't know about you, but in my family when you did something wrong, you got punished for it. and the banks did something wrong, at least the big banks did something wrong, and i do think there needs to be some punitive repercussions for what they did. now, i am also concerned that all these big banks are going to do is pass this on to the consumer. of there should be some language in any bill or in any law or anything that comes down from the administration that forbids that. not sure if they can pull that off. the bottom line is the big banks -- >> battle through the banks even more. you know, if you stop business, that'

the size of tir assets. too big to fail is perverse. it allows banks to fail. second step, require the federal reserve to announce a rule for lender of last resort. congress should adopt the rule that they are willing to sustain. the rules should give banks an incentive to hold collateral to be used in a crisis period. the rule from the 19th century bank of england is a great place to srt. third step, recognize that regulation is an ineffective way to change behavior. my first rule of regulation states that lawyers regulate but markets circumvent burdensome regulation. the bassil accord is an example. they put the assets off the balance sheet. after the fact they had to take them back but that was after the fact. fourth step, recognize that regulators do not allow for the incentives induced by their regulations. in the tiunanimousic financial markets, it is difficult, perhaps impossible, to anticipate how clever market participants will circumvent the rules without violating. fifth step, either extend it to include holding companies or subject financial holding

the use? @@@@@@@ e bank, i presume. d the company that the bulk of the subprime was a california-regulated market and it -- california-regulated mortgage entity? >> i don't remember the percentage of california as opposed to new york or other states. >> when you, your organization, reviewed and inspected these holding companies, did you notice anything? did you inspect them, or just the fsb? >> we spent a lot of time with the fed and the occ earlier in previewing for what it was that was coming our way. we also convened shortly after granting the charter. the charter was granted in march 2007. we convened what i call a regulators conference, where we invited at had a regulators from many states come in and discuss with us some of their particular concerns, if any related to the operation of the if it's within a holding company structure, including new york, california, others. >> did that alert you to potential problems? >> yes, it did. it started to, sir. >> we had come a few hearings ago, mr. meltzer and doctor rivlin,

so if the onomy is doing better, why e the banks still in trouble? scott gurvey explains, it's matter of timing >> reporter: it ll take months before t green shoots appearing in the ecomy show up at youneighborhood bank. that's because the j loss comes firs then the missed rtgage payments, then the foreclosures. and with home foreclosuresomes trouble for tailers and others dependent on consumer spendi. morningstar nk analyst jamie ters, says that's why banks are just beginningo feel the pain fm commercial mortgage failures. >> you have alst half a year betwn the time when the first mortge payment was missed to the ba's probably charging off the loan. and so what you have is ha a year and sometes on commercial credit it's almost as ng as two ars of lagging charge-offs the banks are having so the combition of that the ct that these problems have just been accumulating throughout the recessions that some banks havjust reached thatreaking point right now. they just can't take anyore loses. reporter: on top of that, some banks may have ouble paying special

people have differentiated between the community banks and the big national banks. ople will say that we are the good guys. it is kind of nice to be the good guys. it is our job to turn that good feeling into actual legislative change. that is my job and the job of the rest of the people in the group here in washington. host: its talk about the proposed consumer financial protection agency. tell us what it would do and how would affect you. the regulatory board would be appointed by the president and confirmed by the senate. they would work with state regulators. guest: it could have beneficial effects for community banks and customers. they are very concerned. the community bankers are very worried about anything that says we're going to put new regulation on you. they are quite upset and concerned about that. we are hoping and working with the chairman of the banking committee's so that instead this being a negative for the community banks, the agency will be directed to cover the year to four unregulated people like mortgage brokers and others who did not have ban

. >> the banks you mentioned are bottom of the barrel, city bank, bank of america and aig. the reason they're getting a pop is because people put so much money in the good ones they have to cast their net. i couldn't don't want to buy those on the shelves while people pass all the good banks. >> what's your favorite bank. >> jpmorgan chase, best commercial -- >> jorripmorgan went through th pre-lehman brothers number. september 12th it was 4$41.17, the whole market will drive past the lehman brothers thing. >> for jpmorgan, you're right, they're back to a good level. the yield curve works for them as well as anybody. part of what we see from citigroup and smaller bank, it's easy to feel good about bad companies when you're giving away cars. i can't believe you turned -- >> cash for clunkers. >> i don't know if i should call you brutus or benedict arnold. >> if i can possibly remember this, foolish consistency is the h globing of little minds. just on this one issue, on this one issue, we finally found a fiscal stimulus that works and it's good for the consumer spirit. i actu

you've had a withdrawal to home base of the large banks, the foreign banks operating around the world. other banks operating in britain offered loans to mortgage holders and businesses. they have withdrawn, as you know. that has been the biggest loss to competition. as far as the european competition commission is concerned, it has to be remembered that there are financial stability issues as well as competition issues. of course, we want to see the maximum amount of competition in the banking sector. that must be our policy for the long run. >> are you in favor of more or less european? you seem to be contradictory. >> i am not contradictory at all. i think the competition commissioner has got to look at financial stability issues as well as competition issues. we cannot have big banks put at risk of collapse. it has always been understood the competition has got to work effectively. in the banking sector, we have also got to ensure stability. as a result of european supervision and to the financial stability regime under the irish commissioner, we support the new world book that is

and the trading inside banks, in sent to -- that was the guy in the bank. you have all these reasons why you were not behaving rationally, structural distortions and incentives. then you get in a situation where all the banks are competing to try to grab a slice of the market and none of them not only want to stop to build the infrastructure but nor do they actually want to spend any money because the bonuses -- nor do they want to lose the in festive. there is that situation. it is a false healing mecca movement to get everyone to invest collectively. wasn't until timothy geithner stepped in and said let's try to get everyone around a table and work out a solution that they began to do that. they could do that and they did it with a degree of success but it was pretty late in the day. they could do that in the case of credit derivatives or the settlement problem because it was tangible. and was an issue where everyone agreed it was a problem but no one knew how to act. was clear that the free-market was not solving it. that he was getting the matter on the

the losses keep piling up for small and regional banks... and the fdic is beefing up its coffers anticipating a wave of bank failures in the coming months... take a look at how quickly the number of problem banks has grown... today it's up to 416... up from just 76 back in december 2007. so far this year... the fdic closed 81 banks across the united states ... there were 25 closures last year.. bringing the total to over 100 since the credit crunch began. and the fdic says it's fully prepared to handle the fall out from continuing bank failures.. chairperson sheila bair said on thursday... "no matter how challenging the environment, the fdic has ample resources to continue protecting depositors as we have for the last 75 years." source: sheila bair, fdic chair ♪fullscreen quote: "no matter how challenging the environment, the fdic has ample resources to continue protecting depositors as we have for the last 75 years." tom.. sheila bair went onto say - no insured depositor has ever lost a penny of insured deposits.. the fdic has been planning

banks. if they're the biggest banks, take their good assets, auction them off, use that to facilitate the process and if necessary, break up. you don't board them up and close them, basically sell them to other banks and may have to do them in pieces, close them the way fdic does regional banks now. >> have we gotten rid of the problems with default swaps and derivatives and all this stuff now we could let an institutiong fail? >> i think the biggest concern is the systemic risk, if you leg one go, even if there is g transparency, that doesn't mean there can't be a domino effect g and that's what the fed was really worried about.g i want to add one piece to thisg puzzle, because we had mark to market accounting we pushed these banks into trouble so g quickly. let me give you an example. >> haven't we dealt with that ag well? >> we have.g they've made slight correctionsg changes to the rule that will help us.g that's one of the reasons why g aig was able to say what it didg today, why the government has less of a budget deficit, why ppip isn't getting off the ground, all that stuff. it chang

does this new news make the banks still a buy? , i've always felt they were a buy, where the money's going right now. it sure as heck isn't coming out of them. with money so cheap, banks are set to make money. with respect to this news, frankly, it just comes down to the same word i've always had to describe what's going on now, which is credibility. i don't believe them. i think what they're doing is they're putting this line item where they want it to be so that they can make room for some of these other expenditures. it's easier to ask -- it's easier to apologize than to try to explain it up front. that's really what's going on. >> ask for forgiveness, never permission. >> that's the first rule in marriage, right? >> and in life. let's move to the battle for 1,000. the s&p 500 keeps touching that 1,000 level, falls back. gas goldman sachs says it's going to 1050. what do you think. >> i've concern about the equity market. that's always been the case. i was ultimately looking for 1200. that's before the shanghai index started fol

the eastern seaboard of america. also, cnbc regular, top name on banking why the "g-men" ought to keep their mud hook off bank of america'sen lewis, we're back before you can say government gone wild! >>> all aboard the recovery train. dennis kneale is driving the recession out and driving profits back in. >> i am selling the hope, baby, i truly believe this recession is over. >> you want a little optimism to end your day? yeah. >> there's reason for hope. >> he's the real deal. he's dennis kneale. watch "cnbc reports" week nights at 8:00 eastern. >> it could be the most important indicator, jobs report. it seems like the world will never be the same. but there is a light beginning to shine again. the spark began where it always begins. at a restaurant downtown. in a shop on main street. a factory around the corner. entrepreneurs like these are the most powerful force in the economy. they drive change and they'll relentless push their businesses to innovate and connect. as we look to the future, they'll be there ahead of us, lights on, showing us the way forward. this is just the beginning of the reinvention of business.

the really weak part though is dealing with the banks. president obama was very clear about the criteria dhat were that he wanted to start lending and secondedly he was worried about the cost, the cost on taxpayers. there's a third criteria that's important. which is as you're going about the process, you don't want to exacerbate the problems that gave rise to the crisis. just -- i'll make one remark about that. one of the problems is that we allow the banks to get too big to fail. and so how are we solving the problem? allowing them to merge to get bigger and making the problem going forward even worse. if we really were focusing on restarting lending, there is a see this would have been done very easily if he had used the $700 billion to create a new financial institution, allow them to lever 10 to 1, which is modest to the 30 to 1. 10 to 1 would have generated $7 trilon of lending capacity. far in excess of what our country needs. so the issue here is not about lending. it's really about saving the bankers. and what we confused was savi

the bank operates 355 branches, mostly in florida. it would be the biggest u.s. bank failure this year. >>> meet the new boss, same as the old boss. donald trump, along with daughter, ivanka & has bought out a rival bid for bondholders to regain the casino company which bears his name. the company filed for bankruptcy for a third time in fed. trump plans to take the company private. >> i love the way trump does his hair, don't you? you can get more news, videos and blogs, anything moving markets today at cnbc.com 37. >> you know, he will take all sorts of grief about his hair. he is over it. >>> coming up, enough is enough. geithner apparently loses his cool with u.s. regulators. will his tirade help push through financial regulatory reform? >> what about the dollar bears, are they still in place? we'll talk currency markets after this break. >>> welcome back to "worldwide exchange." this morning, a little bit of risk comes off the table. despite having said that, cable is gaining against the dollar. the euro, only marginally higher than the greenback. for more of

lewis, simply because the guy who runs the retail bank generally takes over the head of bank ever america -- >> susie: are you saying that sally, the new executive who was just hired today formerly from citigroup will -- is not being groomed to take over from ken lewis? >> i don't think there's any likelihood whatsoever of her taking over. but i do think that this will harm her if this type of conversation continues. in other words, if the press decides that they are going to set up sally the way they did at citigroup, it's only going to hurt her and only going to harm her. she's a very effective executive, she's an extraordinarily bright and capable woman and she should be allowed to just do her job at bank of america, or merrill lynch in this case, without the obstruction of being thought of as an ex-sec saysor to ken lewis which she is not. >> susie: very interesting. before we go, any disclosures to make about bank of america? >> i don't do business with them. >> susie: thank you so much for coming on the program as always. >> thank you. >> susie: my guest tonight: richard bove, veter

>> another name in the bank stocks. bearish activity in the next few days. options traders buying puts in september and october and of course going out and selling calls in august. what does that tell me? some of the rally is yet to hit all of the names in the bank -- wells fargo, what used to be a strong name, still trailing some of the banks there right now. but i do have to say, you take a look at all of the bank names and a lot of them had the sideways actions in the last three months and they're moving up and breaking out of that sideways action. you have to be very careful. it looks like the bank stocks are ready to move higher. >> you think that they're driving the gains that we've seen at this point. >> two emotions here. one emotion, two different times in the little market we've had in the last six months, february, january, march, fear caused the selling. fear of missing the potential bottom. who know ifs it was the bottom or not, fear is driving a lot of the buying right now. the other point i would make is if you reference citigroup, aig, bank o

, the major center banks who was cause of this. they were too big to fail. if it was the little banks that would be okay. they are rewarding citigroup and merrill lynch who caused this thing. >> i would love it if the banks would get punched including people... but i can't think of a scenario where they would fall another 50%. >> people that make their mortgage payments. >> and ultimately the government look at all the banks have had to pay out of the fdic. they are almost out of money. if homes fell 50% more because we all stood back and watched. >> fdic is bailing out those member banks who are members of fdic. one big bank, citigroup, aig cost more than all the banks in the united states. >> between the two of them. >> i think my concern with all of those.... >> it's not, but the tip of the bubble went away. we coughed up, elevated level. they could fall another 40-50%. >> that is what needs to happen. no one likes to see people thrown out of their homes but that foreclosure profit, mortgage is between a borrower and a lender. >>

by the time the banks know for sure, it could be too late. but with the economy still fragile, the bank is not turning off the tap yet. >> one headline for you this hour on world news. the u.s. is seeking to hold somalia together, having publicly warned eritrea to stop harboring islamist militants. an unexpected consequence of swine flu is affecting egypt. organic waste has been piling up since pigs were slaughtered, which were traditionally fed leftover food. the rat population is now booming. we report from cairo. >> since age 8, he has eked out his living recycling waste. 14 hours a day, 30 years, and like just got even tougher. 85% of the rubber tree is sorted, recycle, and sold. but it is a fragile existence. each month, they talked their way through 6,000 tons of rotting food collected. fattened pigs then are sold to supplement income. the extra money, he says, was vital to welfare. >> i sold pigs twice a year to pay for amending the car for our children. i cannot replace what i have lost. as the pandemic spread, the majority parliament

look at the banks the other day. we talked about this one. it was down a dollar and yet they were coming from the upside calls. today they traded to $1.50. i mean, it gives you an example of people looking for opportunities to the up side. that's part of what's holding the volatility up as well. speculation to the up side. protection to the down side. >> the flows were coming in. for that very reason, penal are afraid that they missed the rally. that doesn't mean that's smart money. that's what people are wondering right now. >> the market may seem like it's trading illogically, but there's a logical explanation of what's going on. there really is. >> go for it. >> it's becoming a fast money trader. you're sitting at a resistance level that everyone is looking at and waiting for a correction. they are playing the market from the short side. when the market pulls back and does not have follow-through, this morning s&p futures challenged 998. it looked like we were going to get crushed below 990. nope. everyone had to scramble and cover real qu

we only did this bad bank, good bank, after we have ownership. in the case of norway they didn't bother to have a good bank, bad bank. we can manage it without having to separate out these two different institutions. so that is a management question, not of fundamental issue. the fundamental issue is the private sector is not going to be willing to supply money to the banks given all the lack of transparency. thereforthe government is going to have to do it. the question is, are we going to be able to have the appropriate say and return for the capitol we provide? it is really a very simple question. and if you don't do that you are going to get perverse behavior that is going to wind up the matter being good for our company nor our taxpayers. [applauding] >> agreed. okay. question here about someone says that there is an emerging consensus for restoring the social safety net and regulating industry and wants to know about restoring the right of american workers to organize. how do we do that? and someone else asked about how important people feel the p

it would be the sixth largest bank failure in u.s. history and by far the largest bank failure this year. earlier this week, colonial said it might not be able to continue as a going concern. >> jeff: microsoft and yahoo's joint venture may be able to give search giant google a run for its money. internet research firm com-score says in june, nearly two-thirds of all online searches in the u.s. were done using google. together micro-hoo had 28%. but, comscore says the newly combined entity could become more competitive because 75% of all users conduct at least one search a month on each service. that raises the question: whether people are using google out of habit, or because they favor the brand. paul, if it's just a habit, that leaves room for micro-hoo to target those google searchers. >> paul: jeff, google, microsoft and yahoo shares were all among the nasdaq's most active. we'll see them as we take a look at our stocks in the news tonight. >> jeff: until the recent global slowdown, southeast asia was home to some of the world's f

we like the most reckless banks in the world now. ike fifth third, huntington banc, zion's bank, we like, well, bank of america. we want the ones that can really have what's known as the leverage, that could really flip. hudson citibank, run by ron hermance, a conservative bank, is not what we like. it's the equivalent of proctor and gamble or coca-cola, it's consistent. we want inconsistent and explosive upward, not consistent and sleeping, which is how people feel about hudson city. i'd say stay the course. let's go to art in ohio. art? >> caller: jim, boo-yah from chillicothe, ohio. >> man, you know, that's how you pronounce it! i never knew how to pronounce it. well, i'm learning something tonight, too. what's on your mind? >> caller: jim, my stock is sallie mae, symbol slm. could government regulation or private lending institutions be killing this sector? >> well, sallie mae went from recommending around $6, went up to $10. i should have immediately told people to take profits. now it's meandering. the quarter was not that great

is lending to a client and the bank is in the investment banking industry they're in real conflict of interest because they're issuing securities to essentially pay themselves back. it's the same kind of conflict when banks issue research on companies they underwrite for. there's a couple ways of dealing with that. one is that the banks should have the same disclosure and liability requirements for a new issue if they lend on it as if they were the issuer itself. or two banks shouldn't be allowed to lend to investment banking clients. so there is a conflict of interest there, and we just have to monitor it. i don't think we want to allow people to monitor their own aks. >> yeah, jeff, do you think there needs to be a body out there with them proceeding into this business that oversees some of this? is there a body out there that can really oversee it and lend itself to that confidence-inducing measure that is sort of this intangible idea that's out there for investors? >> that always concerns me a bit. in general i'd like to see less but better regulation of the finan

which have the bulk of the bankblems ahead of russ in the small banks. two, as you look at it, i think those small businesses actually increase firings. i think that becomes a big problem. >> reporter: i want to get back to the small banks. you have an upbeat -- it's not upbeat but a pretty good optimistic view of the big banks. are they adequately reserved for what's going to happening with the consumer, for example, declining wages and other foreclosures? >> yes. assuming the scenario we have and the expectations of gdp. even in the worst case scenario we hear here for the next couple of quarters. as the economy turns back down, in my second half of the "w," i think that we'll have problems again. i think they're going to be underreserved for the stress test. i think they will have problems again and i think they're not adequately provisioned for anything worse than the baseline people here are even talking about. >> reporter: let's get back to the small banks. if the small banks are under stress, is that going to

we'll get to bank analyst dick bove in a moment and tell us why he pulled the plug on banks which resulted in the sell-off. first a look at the pullback in total, could be a great opportunity for investors to get back in. let's get to sharon epperson for the full stock market central report. hello, sharon. >> it shouldn't be a surprise we had a little weakness today ahead of the federal reserve tomorrow and after a tremendous run-up in stocks over the last four weeks. the modest sell-off at wall street was really thanks to bank stocks and dragging those broader markets lower. it wasn't so bad. dow cut its early losses in half. financials weak but finished off lows. and energy stocks continued to lag. it really was comment from dick bove we will hear from in a few minutes, that caused the bank stocks to skid. he said banks were running on fumes despite a recent rally and doesn't anticipate improvement in the second half. bank of america, travelers, chase, american express, ge were all under pressure. shares of cit said it would file for bankruptcy if it couldn't secure reliable debt financi

the f.d.i.c. are making it easier for private equity firms to buy up failed banks. we get analysis on the late day decision and what it means for the banking industry. >> paul: the bargain hunter returns. street critique guest patrick o'hare of briefing.com tells us why kraft foods has landed on his bargain basement radar. >> jeff: then, remembering the liberal lion. we look at how the late senator ted kennedy shaped health care reform and what happens to those efforts now. >> paul: i'm paul kangas. >> jeff: and i'm jeff yastine. susie gharib is on assignment. this is "nightly business report" for wednesday, august 26. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. >> jeff: good evening, everyone. a much bigger increase than forecast. sales of new homes jumped 9.6% in july. could it be the housing market is turning? scott gurvey reports. >> reporter: it was the fourth straight month of increased new home sales and although this is a number with a wide margin of error

the standard for a well capitalized bank is 5%. the fdic board says this policy change does strike a balance. a controversial source of strength provision, which would have put private equity investors on the hook for more capital if a bank failed, that was dropped. the fdic says these new guidelines will be reviewed every six months. back to you. >> great stuff, hampton that is an opening. we'll see private equity funds coming to inpick up these failing banks think is a darned good thing. >>> moving ahead, former fed head paul volcker is back in the news. says he wants to see money market mutual funds treated the same as banks in regulatory terms. let's get a quick taken from our distingui distinguished guests, tony, and peter marici. here's the quest yes or no. we will come back and deal with this in great depth. should these money marngt mutual funds be regulated like banks. >> absolutely. they have large systemic risks and take on many regulations such as activities of banks. >> the funds are already tightly regulated by the sec

the chinese banks are the most popular banks in the world right now.asically in asia pacific last year, the chinese banks have 67% of all frovt. it's probably going to be like that in the first half of this year, as well. now, icbc's numbers are quite interesting, actually. they're showing that money earned from interest income is dropping. but their total income is not dropping. that means that it's being compensated by fee income. fee income is something that we watch carefully because it's a stabilizing factor. it's steady, it doesn't rise and wane with the cycle. so it's actually a good indicator for us. >> so that's the positive side. what about the negative side? we have net margins falling, we know lending is getting nor negative. should we be watching npos carefully? >> definitely. while the fees looked quite good, chinese banks have low fee income. the strongest bank, bank of china has 28%. it goes downhill from there. npos, as you mentioned, they're coming up. but this is what you would expect with this massive wave of lending, policy lending

if you remember the- lehman brothers is58-year-old investment bank. 158 years. man brothers survived the civil war, t gat depression, survived world war 1, world war ii, the korean war, the nix impeachment. lehman bthers survive so much that it survived 9/11, but what she couldn't survive was a change in investment policy. the reason it survived i it w in the moving business. let me explain. campbell soup corporation, 80 years ago, wanted to build their first plant. they wanted to make the first investment, create jobs. they came to lehman brothers and they needed $10 million,nd lehman broths did traditional investment banking. itas a black-tie-in svelte bank, and therates it that $10 million, and gave it to campbell soup and they sold bonds and stocks to do it, and they made a fee, and that fee is a traditional iestment banking fee, creates jobs. that's the moving businessnd what we started to see onhe trading floor in 2004 and 2005 and 2006, you cld clearly see was blood kurdleing scare through the years going forward. lehman was getting deeper and deeper into

now, after this acquisition of the alabama bank colonial, bb & t becomes the fifth largest bank in florida, that's critical mass. now it's able to spend money for advertising. now it's able to have a presence, able to take advantage of the rebound we are seeing in orlando and in the west coast. and yes, in the movement of condos in south florida. alabama, another market that could grow once the economy turns around. that would be a terrific fill in for bb & t. why? because bb & t was the 56th largest bank in alabama before this deal, now it's the fourth. again, economies of scale. you can see how geographically a southern is being born overnight. perhaps you've heard about colonial's legal issues, fraud allegations, the whole problem. you might be thinking those could sink bb & t after this deal. you also no doubt are concerned if you follow this deal about all the terrible construction loans that bb & t got in florida as part of the bargain. to that i say untrue. hey, don't worry. when i say the victor gets the spoils, i'm talking about real spoils, meaning that the fdic has basically kep