How Bank Failures Hurt Recovery

" Hi everybody welcome to foxbusiness.com. Lie about August 4. 2009. -- authority happening here. The reason why affluent and let's have a compensation. And it's a great day in American history through not only if -- Obama's -- in Obama's birthday. An -- I'm an expert as well yes but kind of exchange for thinking that it -- I thank -- David and I knew we actually have a special surprise for -- is that right let's -- if this is going to stop this announcement."

" Yeah yeah yeah."

" heard -- what Bernanke to pick."

" Does any of the copyright. Two of them fit into this those of us that may be unfamiliar with that animation. Right at it is Ben Bernanke's face and body and they apparently on that. After -- basketball player. Is real enough and that itself. Bright but it it it would just kind of -- using the special for you -- this Hamlet you know. And and repeatedly throughout the show where is -- like that's interesting effects stimulating economy while it thank you for that."

" Yeah figuring -- feel better -- well. Now I want to get this out how that thank you have there been an okay day FR so far so good yeah it's actually been a lot of fun thank you very much think it's almost over them."

" It's who you are not there were rushing the time ahead. No the work day and reasonable and then you've been a party yet to stimulate the economy."

" Anyway he can sell at -- McConnell and the markets aren't in much I think getting on purpose just to kind of illegally earlier and I."

" Exactly don't want to go down on my birthday -- ordinarily they should be today is another kind of hang in there this kind of makes it. Of this 2006 and have this kind of amazing we thought when we came in this morning that you know this would be the -- we get the sell off -- home sales. The housing data was all right -- up this market the momentum is definitely up and we're seeing that kind of continue today even though it's only slightly. Holding on that 1000 them on the institute for what it's worth right now yet."

" Is it is interesting you know we were -- that Consumer Spending consumer income consumer savings is we have this report that is that -- 8:30 this morning that give us some insight into -- consumer securities -- I -- to -- noticed that -- has -- after hours -- cut. This latest information shows that for a personal incomes who were actually bringing in from month to month from may to June to the biggest decline that we've seen. In four years so. If you see chart and that made -- how -- and hopefully we can get and if we don't. It really showed a big drop off -- what actually were taking and we are spending a little bit more month to month but mostly that's on gasoline so. -- that how you guys would -- your what your experience out there. I -- Williams is the president of William financial advisors is visiting us again from Louisiana."

" Yeah -- I see now right and glad to be back still -- barbecue happy birthday yeah thank you very much but still have a standing invitation to come Louisiana where did you visit which could be a great great -- birthday next year maybe next yeah right place them. Right that's coming we have a verdict against it."

" It's what do you make of -- going on with the consumer right now it seems like there's a lot of mixed messages out there and and -- actually talked to someone. I don't know how much those data points really need."

" Well really there's a lot of optimism right now following a period of really really. Pessimism. And that their eleven trillion dollars in last number -- heard of cash that people -- hoarding. And you can't keep baby boomers and am very long I mean that he believes that consumers have always been houses cars and kids of the big tickets. And so you -- if you baby boomers feel good they're going to spend money. And you know act pods 250000 cars last week ago. Survey they would that even that and have a perspective does that mean that you want to be consumer discretionary stocks right now. Well I think that would be it would bode well opens with consumer discretionary stocks but I. I think as an investor if you don't look at it from that direction. I want to have a sell discipline not want to make sure that even though we've had a rally now will -- a bear market rally. I think that if you look at rallies over the last say. Back to 195811. Out of twelve times a bear market rallies in the being stay -- about. Roll back afterwards at eleven out of twelve pretty serious number so I won't have -- this what I want to make sure that I have an investment process. Battled and hope I think it's a dead is a dead strategy and no we felt it but didn't learn that at the end of 2008. Probably. Didn't -- an important lesson learned that the hard way a lot of people -- I think that's right but it's funny. Happen pessimism was abundant six months ago and now there's so much optimism Americans can turn on them."

" Are you chasing or do didn't do you get the sense that people are really chasing performance now that there's so many people left out and we talk about every morning -- you'll get the pullback. People rooting for the pull back because they're the folks that have missed the rally they want to get in and that's what keeps driving this thing up I guess I wonder how long that continue for."

" Well eight. As long as there's some people out there that want to invest in them and right now I think there are that that. That run up could continue but and you look at the earnings that are coming -- look at the retail sales look at that you know that there's there's enough good economic numbers out there. Two 22 gifts of euphoria when it's been so bad. For the last several months. But. It won't take but no one bad unemployment number. You know to dampened the enthusiasm on front."

" You know we have -- Friday woody -- that we expect that we keep on hearing in the double digit unemployment it's not expected this -- this report will reflect that. Still well how they think the market is preparing for that. -- season sad waste treated like we do today is that because they have it coming up or is it really at this point ever went to thank you listen we're going to get about 10% and and we're okay with that."

" I think it's probably priced in a 10%. Unemployment number remember when Reagan took office. Years ago it was 12% so we've been here before and I think we're -- for jobless recovery. And I think people are pretty much accustomed to that -- it I'm just taking about the optimism. Of Americans right now you know have. -- where you know and it like I can't believe that you guys doing out there way out idea that's that's that's a good alleged that. Right and I think it now the no -- as we once knew it was going to end according to some of the people in this video. About six months ago and I don't think tanks in the street Alex and Apple store in Manhattan here the other pretty bright couldn't -- thing up until late in Atlanta. And of restaurants are full come vandalism and NC double car of the new cars that are better and pocket."

" Are we crazy. -- yeah with the reality yeah somewhere and if it would I have banner on our viewer board I was lifted once the stimulus money runs out. And what they get through some of these government plans then why are we are we able to sustain ourselves with some of the spending were seen."

" Well remember there's eleven trillion dollars sitting came between the risk of ours we've been hoarding cash. And so did the money is there that's what makes this recession so different from prior from the depression for sure but -- different from prior recessions. There's money that people in People's Bank accounts you know sure. 10% of America -- you working the 9% are. And slowed in the money's there to be spent the people have been so scared. That they've been a right to select the you know the goblins of -- and the sun's come out nabbed by the most around lately seen a few green shoots -- and -- out of order announcements of money that you -- your birthday I'll bet you do yeah -- it would -- Actually -- class a guy somebody else in the economy now think that's great to Israel she should. And and and back -- contract. Could not agree with."

" Okay --"

" Okay."

" Confusing movies to. See things like that make music -- and it's over and over again I'm sure they'll be coming at some point. The -- at the bush for the outlook overall these citizens to bear market rally a lot of our viewers agree with -- missing British teenager pulled back. But we've heard that now -- the last couple months since March so. Now it's sick. Heidi makes sense of that we -- one -- early this week if they listen listen you know this is on fox this morning yeah. We could see a major -- like we did during the Great Depression that we'd gone -- half rally of more than 40% down another seventy. I do expect to see that have a."

" Pull back now know I think that's a little bit dramatic I think when you say PE ratios were they are right now we see earnings looking forward but any anybody's on exist is looking forward. It's not that bad. But remember one -- on March Natalie were as low as we war I mean we were way way down there. So really you know we're experiencing things not getting worse anymore and -- to skid to a stop before you can turn -- and and."

" Exactly and it's almost like it's not like we got back all the way we had people just want dramatic. Answers on one way you know and on both ends of the spectrum and the answer is not always that dramatic but if you stop and think about a -- we're still. You know 20%. Below or more actually than we we were where we were when Lehman went under the stock market I'll share dog and -- we come back a lot but you know that the the idea that it's -- it's off to the races or B that the market rally has been crazy not. Yes cut but it's coming up but of ridiculously low base and we still are not back. It to where we were before this whole thing started and I wonder when we will get back to that point -- mean is that a reasonable question when do we get back to. Because we're becoming a does Lehman Brothers anniversary of it to be talking about -- when we get back to the stock market was Lehman went under."

" I can't tell you when the dad it's 14000 again obvious that the it's not I'm not contain they're companies in America that would do extremely well. And I think that. Having a sale discipline as you. And I'd rather -- approximate correct them precisely wrong. Having a self discipline and when you make money to gets to to take off the table what. What do you use what's the metric used for that type of discipline what what's the thought process in terms of knowing when death. Get rid of stock well for my class we use an analytical love company had in now Mesa, Arizona. That -- sits at 640 variables -- day and they give us an idea perk -- security not market timing this is risk management. But it per security. Is at a good time on Aetna is a good time to own pinnacle airlines successor. And have based on the economy right now and and we're not always right about the way you know but. I'd rather be approximately correct him precisely wrong and I think most of America was precisely wrong with the back hold -- hope strategy. That when we wrote in the end of 2000."

" What about buying indexes though we've heard that how long that they don't buy and hold stocks -- if you want to buy and -- something. -- by the S&P."

" the vanguard thing you know it's a way to go broke cheaply. And I think that the indexes have 500 stocks for example listen faith that there's a lot of overvalued stocks in the S&P 500. And historically that's been a way to to to. Diversify and save money and and now we're using ATF's amount and then my firm we use indexes today. But I think debt to believe that that that diversification is going to say you. Go back and look at 2000 I don't look at your 401K marts in that -- ten to eleven years of a performance wiped out I don't think that's a legitimate investments that. Yeah the question going back to that point this ambulance is always this this black swan kind of one off event that never going to happen again should we go back to the we we were before then you're saying. They'll learn some lessons yeah I think that's right I think. Trying to think Darwin now believes this day. That that he too or she who adapts his -- to survive otherwise of the Dow soars after a mystery to those we have to would that would got to learn from the lessons that. Of the past and this is a new -- new normal. And I think that with the global economy with the complexities that we face. As investors. That we had better have some other methods other than asset allocation of some of the."

" Let's have some of that other method is investing in houses and we saw that as part of that the real estate boom and now the real estate bust. If you could advise. Our grandchildren about where to invest where the wherever you tell them into town to invest in the stock market where an asset that actually. It's something real rather have your stock is hasn't been that you can live and you can live in the house and you say -- get a get a home invest that way rather than looking at putting that money your 401K because in this new normal."

" Well I think -- home should be where you live. And I don't know that that -- looking at home as an investment. Of course we saw last year the the ratio of dispensable and disposable income to housing values when those things get out of black that we put people back home they can't afford. -- to put that were simply. Gain -- we're in for trouble and I don't think that day. Homes should be an investment should be used as a cash account. Sipping -- still if you can invest in sending still out regardless of sentiment seen the changes that we've seen the stock market is still placed you. Play a -- I think -- stock market the bond market they're real estate investment there you know managed futures use commodities there are a number of places to invest. I'm simply saying that you better have a sell discipline. When you made money you better be prepared to take that off the table from time to time and you better have some analytical metrics to -- to do that live. Are you going to trade in Iraq is going forward you don't look up over ten years and and and see value gains wiped out. And have them and we had that experience we -- not necessarily the best sixty. And a half decades there -- okay. Hit the last decade. That's -- like the Japanese thank you -- again rule we'll see soon all right may write it down a Louisiana don't come say at some point we're looking toward --"

" And I that would like to open this -- we definitely do that I was in southeast Texas just a couple weekends ago. It's close to Louisiana has not quite there yet next time something that would -- all right Peter Barton suddenly -- to get before you go to Peter and visual -- Peter take a look at good plays. However reindeer that's the thing so I."

" Yeah roadways little."

" Includes letting them go. Yeah."

" Is on them killed when I'm going to let that I think we'll have to be sick of that do you think. Never never be sick and ever and -- things -- that there's now Ric OK so we blew through the break because admit that mistakes -- about that. It it's not very confusing here with that can defeat a break we."

" There -- an MRI and he's got its fair about it nations by the way you get Peter C that animation. Is that the -- Ben Bernanke doing they know yeah that they write it's with -- exchange space because his birthday."

" That's that's a good."

" Well well happy birthday you on the president president today having a little. Little party action been thrown out of a may resemble beer summit later those one of -- many jokes have been used today but now I'm coming up thank you Peter. Go by the legalize -- coming up in just a moment talk banking after we get through with Peter. And we gonna tell us what Tim Geithner went off on everybody yesterday never Peter not yesterday it was Friday. Friday yeah that's right -- Wall Street Journal reporting this morning and some of the bank regulators that where the ahead on the receiving end of his tirade. Testified today at the Senate banking committee on the administration's proposal. For a regulatory reform of the financial markets sent. Now that they've basically confirmed this Wall Street Journal articles saying that they were dressed down. By the Treasury Secretary on Friday and what the journal's calling. An expletive laced critique at night of the lack of self portrait on the part of some of the bank regulators and the FCC and the Fed Chairman himself. Of course over the administration's proposals hero -- reform. Quite interesting hearing at the time passed yap to everywhere understand all this then on them on the actual reform side sounds like a lot of turf wars. Where as we don't NASA we're not actually talking about the details. Of what we need to do or don't need to do about regulation and everything up too big to fail all the stuff and now we're worried about who's going to be doing right."

" Yeah that's right -- to problems that they're number one congress particularly the Senate is very busy. With other things right now in particular health care reform which is probably going to take up. A lot of legislative time you know through the fall. And and then second you have this turf war going on among the regulators and you know all everybody agrees in general that. There has to be at some changes to the oversight of the financial system to make sure that we never go through this kind of crisis again but that's kind of where the agreement. -- A lot of the regulators right now the Fed that the comptroller of the currency the Securities and Exchange Commission. I even the Office of Thrift Supervision vision and the FDIC. All kind of throwing up roadblocks -- up hurdles here for the administration and and I think that this this meeting Friday it was simply. An expression of Geithner is frustration privately. What the lack of support that the administration's. Proposals are getting. Not just. Not just among the regulators but also because of this opposition from regulators on the hill itself and and there are even some Democrats out -- question in all of this. Which means that you know the longer this drags on the more the critics including suppose that allies of the administration. I can attack this thing and slow it down and we can head and then and that of course begs the question of all right are we going to learn anything from this about how we regulate these or regulate the Wall Street and the banks and and and if we get if there. Isn't the right amount of regulation -- the right balance. Are we -- risk again for another financial calamity down the road."

" Good question realizes he had a great question for bill Isaac but Peter you've heard. Four letter words down and and known -- belief and -- just reported that Treasury Secretary mean. Not only. Rooms not the newsroom well okay. And you know rehearsing in his -- he -- the -- yet -- fingers crossed I if Peter thank you very much appreciate that -- welcome reminder all -- Expletives. From DC and New York."

" We loved -- that is what you -- other stories like I was the first thing I read this morning is what his traits worth more write that -- we all would love to get a tape of that right to see this going crazy just fine but you know people get worked -- we can work double time delighted the former chairman Gary got out -- LE CDs global financial services chairman these days joins us down in Florida. Do we want to talk to about a couple things thanks for joining us by the way again including -- the big increase in bank failures that we've seen certainly the playing off what Peter just reported on. In terms of the regulatory environment. You know used to sit and -- Sheila Bair is chair supposedly there's some tension here between. Current Fed Bernanke and now control the currency and all these these folks that are getting together and and -- put regulatory reform through and of course the Treasury Secretary. I wonder how this is all going to play out do we first of all do we need more regulation and it's so I think if you breakdown."

" What effectively would -- well I think we need more regular better regulations smarter regulation more effective regulation I don't know that. Reorganizing the agency's news is what we need so much is. Coming up with better ways to do what we hear what we are doing and bank regulation. We have we have all the powers we need bank regulators have all the powers they -- To regulate banks properly it just wasn't done very well over the past ten or fifteen years. And we've got to be a lot smarter about it. One of the that that the administration's proposal is really have we proposal it does not reform the system properly and for that reason I've been. Really troubled by it. They they one of the things that I think we need more than anything else is a systemic risk council. That will really be strong and independent and overseas this system and and blow the whistle when things are headed in the wrong direction. If we have that. Over the past ten years we probably wouldn't have been in the suit that we're in today. The administration has proposed that but it -- very weak consulates who took part just for the Department of the Treasury and the secretary of the treasury to chairman the secretary that sure that the treasury need to a watchdog over it as much as any the other I don't know how -- make it better. Why I think that that the and the systemic risk council ought to be headed by an independent person. Nominated by the president and confirmed by the Senate. Now we can have via the agencies like treasury in the FDIC in the Fed sit on there. On on the advisory board -- that systemic risk council but. The of the systemic risk council really needs to be independent needs to have its own staff not to have to rely on the staff of the agencies -- the treasury. There are a lot of things that went wrong in the past ten years that a good systemic risk council probably would have been able to blow the whistle on and and and bring some attention to it and corrective action."

" You know bill I just our viewers know that you headed up FDIC during the 1980s and you reference twice now that really where -- stocks ended this systematic regulation fall apart it was over the last. Ten or fifteen years what happened in those ten or fifteen years that timeframe. That led regulators. Down the wrong path or. And yes they do it which kept them from doing their job was or something that was going on that time period that was and that's important that we should know about."

" That that's a really good question and it's something that we ought to be asking ourselves before we propose. Legislation this administration has done we we we first need to understand what went wrong. And and congress enacted a law appointing -- a financial crisis commission. The president signed in the day. It has until sometime next -- to make its findings yet the administration is sort of proposal out. That doesn't even those -- reflect any any any thought as to why now why did this happen why we in the --"

" Why do you think because you figure in the 1980s that you're saying that -- mid 1990s or so 99. Is planned. There was sound. When its calculations that have been went from people who are not doing their jobs what do you think was different 1990s that wasn't happening in the 1980s."

" I would summon up there and a couple words one is and excessive reliance on markets and marbles. We thought this week we could we didn't need. We no longer needed the onsite supervision and a judgmental rules that bank regulators have always applied to institutions. What we decided what we could craft models. The mathematical models to decide how much capital bank needs and what it needs in loan loss reserves. And and we we went to mark to market accounting highly pro cyclical. Mark to market accounting highly pro cyclical capital rules. -- laughter here if you can't create loan loss reserves under the current system in good times. You have to create excessive reserves and and in hard times you don't pay a deposit insurance premiums in good times. -- to pay excessive premiums and that type all of these things are counter cyclical we really need to get rid of them. Thrown out start over and get back to some fundamental. Really. Hands on bank site supervision and that that that's that's critical if we're going to be successful going forward have you."

" Had kind of an Alan Greenspan moment in all of this ceremony came to congress -- that had a lot of assumptions that I've made about. It just the economy in general the way that. That is the economy interaction of markets were wrong and he -- he admitted that you have you been followed mainland and all this for years is this some of this wasn't right that he that was an over reliance again on markets you -- was on models and mathematical models of what have you with -- did how. What assumptions that we make it just didn't turn out to be right."

" Well a lot of assumptions and using mathematical models for example 11 assumption -- went into those models is. That home prices can't go down right -- not I very much. And obviously that was wrong and it let us and let the whole Lotta people under some very bad decisions. Excessive concentrations of risk and and and and the like. If we Fannie and Freddie we've been we've been. A lot of people have been pointing to them for the past 1015 years saying. They can't grow like that forever -- there had that they're it's it's getting too heated there's. You can't have that kind of growth and not have a problem come back to market we ignored those warning signs and that's why I think it's so important that we have. Somebody out there has been I think assisted and independent systemic risk council. Which will be looking at what's happening in the in the big picture. What's going wrong the FC CQ and in 2004. Decided to let. Investment banking firms decide how much capital they needed and they tripled their leverage in a short period of time. They blew their balance sheets and -- things just -- way overheated the end and we thought the markets. Would control everything in the markets don't the markets can be wrong at times I have great believer in markets by the way the right. They they they they are not to be on -- though you do need some oversight on the market she -- and controls."

" like down there in DC to get the regulations you. Where they need to be to have faith in any Democrat leaders and that."

" I think that the FDIC has done as good a job as anybody it hasn't been perfect. But the FDIC has tended to stick to the knitting. And take a look at the big picture in the systemic risks the other agencies. Really have not have not done as well let that. I think treasury has been particularly bad."

" And Kennedy did it on that -- went to anything treasury hasn't been specifically. And because it's it's you know we keep hearing these agencies over and over again that's hard it entices them as journalists are just. Viewers and to really make sense of what exactly everyone's doing right or wrong so. He be specific about what you think treasury was too relaxed on our did not step forward. I can get."

" Well Basel two capital ratios for example that. That to treasury and the Fed promoted saying that we can do these mathematical models which were highly pro cyclical. The FDIC objected to those in the Fed and the treasury. Shut them down -- everybody everybody's."

" Through and they chasing technology -- where they changing technology because the markets were taking off right -- all the electronic trading in in the ninety's and and through 2000 on these very complicated. You computer programs that a lot of the banks really is still blame for. Getting some of the -- of control of the do you think techno I mean what is the role of technology in all of this."

" I think technology plays a very important role we can do a lot through technology that we need human beings to be making some judgment. And overlay that on top of the uses the tech technology should be a tool. And and shouldn't drive the whole process that you should be a tool we have at our disposal that you still need. A lot of judgment by experienced people and and I think we forgot that I I know we did we we were we really are not relying on. On hands on judgment. The way we should because. Models. -- can only look backward and try to make some predictions about the future based upon the past. And that and and they can't turn they can't look around corners and see what might happen we -- imagining. Such as home prices fall in 203040%. Models can't you they don't they don't predict that in -- human beings. Put that into the equation right there were -- That."

" Those -- say they don't foresee as you're saying -- on for seen events send you know one of the things that we wanted to talk about today as well it's slightly different note but just along the same lines of what. -- what you've done for many years -- our viewers is part of up as well as the amount of bank failures that not only be seen this year but that we might see in the future is more. Of the commercial real estate goes bad and what have you I think the number is 69. So far this year terms of failures the FDI CCC these banks and as you said it did a lot of credit for the way that they've handled it a lot of of smaller banks that fail however it's still get behind number how high do you think that number will go and can we absorb it."

" What we've seen to be on pace this year and I'm not I'm not making a prediction I'm just sort of I'm sort of like what those dumb models I'm. I'm taking the past and projecting forward that we can be under paste it here cure three carriers a week. Which would suggest that we're going to have something like -- 10250. Bank failures this year. Again that's that's not a projected. You know prediction that don't have information to make that prediction. That wouldn't surprise me and and and I'm not alarmed by I think that that's a number we. We we can handle easily I I would. Remind everybody that we handled 3000 bank players during a decade of the 1980s. Which is 300 a year on average. Bank and thrift failures so we can we can handle this kind of I am I do not believe that we're headed toward 1980 type numbers. You know the 1980s right we're not to have that that kind of bank failure rate they will continue. And bank failures in problem bank list are are lagging indicators that -- leading indicators so. Even if the economy is now in recovery mode we will still see an increase in bank failures in problem banks. And tell the recovery has really settled in. Good enough to old now wait to see how."

" At all all all plays out we'll have you back bill of course the number times -- help aviator but thanks for joining us tonight. Nice to be here thank. Eliza feels good -- have have respect through everything very very long and it's amazing to think about the changes that happen in that timeframe. Yet and the numbers are staggering from the amount of failures ahead in the eighties but the risk to the system want to add to that we had lied it's wrong. There -- what wasn't there and certainly at that time to -- Uphold -- from an investor community bankers of America's coming up and double hubby back in here. As well as -- that Goldman Sachs story in the New York Post today. It's not a good -- Foxbusiness.com. Life. All right onto -- Paul Murphy now as we continue this banking conversation that we started with bill Isaac a moment ago Karl Paula sub. The independent community bankers. Of America were to senior VP and chief economist Paul good to see you joining us today from from DC. You have. Bill was saying a moment ago that we still and he says -- he said he would predicting but just looking at the numbers. Front -- 10050 bank failures this year and already up and close to seventy yourself. Obviously this is going to hurt many of the big groups it. Then the banks in your organization mean what what any way to stop but at this point or do you agree that's that that's the rover had down."

" Let's put this in perspective you have a very long deep severe recession that were. In and the fact that there's only been 69. Bank failures. -- this year. Is less than 1%. Of all banks out there keep in mind that there are over 8300 banks nationwide. And as all small businesses. -- a deep recession and they become under stress. It's a real testament to the banking community particularly the community banks. Doctor have weathered. This deep long recession. And financial crisis with a very limited number of bank failures this year."

" But that's another good that's a good point is the flip side of all this because -- also. Where there is a struggle as there are for some of the banks obviously the ones that failed. There's opportunity for others right I mean I've interviewed a number of times into the story of francs or -- New Jersey in his bank -- Here's you know they explained the process of taking over another bank she's already done and so many others have had. How do you think the process has been handled overall by the banks that have stepped -- to -- buyers about the FDIC that's handled the the seizures."

" Well the FBI she has tremendous experience in this area and they've done an excellent job. Not one penny of anyone's deposits have been lost the FDIC. System is very strong and has -- prevented anyone. From losing any of their deposits so. That the first thing to keep in mind is that people's deposits are safe and sound in every FDIC insured bank show the FBI he should be commended. For being able to handle the job bank failures in a in a very manageable way. And I think going forward as the economy is climbing out of this deep recession things are going to vote abate. Community banks are well capitalized and they should be able to ride out. That they're the rest of this recession and things are going to get better going forward everybody tells is still the commercial real -- get. Real ugly what do you think. I think we've seen most of the unwinding of the housing and real estate sector ready that is a good. A point that you make that that is the probably the heart a lot of the trouble and many pockets of the country is the downturn in real estate but recent numbers both fun on housing -- commercial real estate. Back you've been looking more positive so I think. I think we've turned on the on the dark side of the moon and are coming around to the light side and I a lot of people are religious you get better going."

" Ford are ought to do agree to -- in residential real estate and we've seen even more evidence of that today that may be. The worst is behind us are starting to turn whatever the case may be but it are you say that that's the case with commercial as well because not. Not everybody agrees on that front I don't think."

" Well once again the the regulators were well ahead of this and doing a lot of warning and working with -- banks to ensure that their commercial real estate portfolios. Were are reasonable on manageable. And once again I think because of the very limited number of bank failures this year. That's a testament to the regulators and being able to watch out and look over. Into the future of what the recession would bring and community banks are. Typically hold much higher capital levels than large banks and their firm -- well -- this deep recession."

" What's your take in seven -- in the year of community bankers of America again that's it that particular spectrum verses. What's happening with the larger bank you mention the capital levels of what have you the FDIC's been largely praise for the way that they've handled the downturn for the small banks. What should be done differently for the too big to fail crowd out there."

" Well clearly. Going forward we have to eliminate too big to fail there should be no such thing. As too big to fail in any business any. Any off financial institution. And what has happened over time is the biggest banks grew got bigger riskier. Shape their capital levels down to levels that were unsustainable. In a recession. And Doug going forward you see much of the legislation are focused by the administration treasury and the regulators. Is to address the too big to fail. Bring them back down the size make sure they're managing their risk correctly and may be acting more like community banks that had adequate capital. And did not take on the risky loans and exotic investments that turned -- right."

" All right and -- Paul we're going to keep following this by the -- final question when do you think. What do you think ought to stop following Delaware's when when once this whole thing to be done well wolf with -- stop looking people like you to say. Hey how much more troubles up their banking."

" While I think by the fourth quarter of this year go see positive GDP grew. Biography that turning of the corner the the two reddish dress. And beer in the financial system were passed that are ready so it'll take awhile to climb out but I think were -- well heading in that direction. If you look at some of the recent economic data. On the stock market we're in good shape going forward. And community banks are going to help lead us out of this recession. And supply the capital to small businesses. And families as they always have."

" All right Paul -- you thank you very much independent community bankers of America joining us offer DC today index coming up next not only talk about. While there was a good -- moment over Goldman Sachs but some charges against GE accounting fraud on the table. Elizabeth McDonald still to come anatomy of a lot more foxbusiness.com live 2025. After open today or. As we continue. Rolling right along here foxbusiness.com. -- and will be back from the Fox News Channel in just a minute but the minute in the meantime. With -- was here talk about a couple of the things -- at these SEC charges against. General Electric just a moment of the stories breaking today but I was telling everybody earlier that we are going to talk about Goldman Sachs a little bit. And this government but the good -- moment there and the idea that Lloyd Blankfein according to the New York Post came -- said. Hey don't spend any money you Goldman."

" Yeah it rich exactly knock it off the conspicuous consumption. The corridor where the other finalists. And here's why this is happening now you know Goldman Sachs doesn't want to be in the media -- glare right now -- of being the legal rights right now you know. We see up for example possible senate probe into the sub prime factories on Wall Street built by the likes of Goldman Sachs and whether or not those bonds were fraudulently sold to investors not just Goldman Sachs and currently being caught up in this dragnet of a senate possible probe. But also likes of you know JPMorgan Chase Deutsche Bank. At the same time -- Goldman Sachs sort of led derided even in the health care reform debate Connell not you know the idea of taxing gold plated health we insurers spent 25000 more. It's called the Goldman Sachs tax so you know. Goldman Sachs is making record profits already dumped more than double BNL for the full year 2008 just in the first half alone they've doubled in 2008. Profit picture there yet set aside about eleven point four billion dollars in bonuses and it got a lot of government help sure they don't they wouldn't."

" You sit and it is but you too much on the spot but in all this out. It's almost -- part of this larger story which is that his Goldman Sachs conspiracy that are out to rule the world in the -- like the Rolling Stone article and everything else that's where this all fits into why this articles probably written in the post today because. Goldman has become the target. And I wonder if is that I meant what I guess I'm asking is is it fair are unfair to be targeting Goldman in the way that this is to make him the poster child for all things that are wrong on Wall Street."

" you know poster child for all things that are wrong well. Let's put this like Goldman Sachs does have a lot of influence and power in the corridors of Washington right or are there are -- Goldman solution until it. Yeah who are or -- endure in them you know Henry Paulson if you're in positions of power. In the government you know they also -- you know run stock exchanges around the world to right so there there footprint is around the world and that's cents in the terms of having influential positions. Two you don't get their way and they certainly -- they certainly wielded it. During the credit mess from the meltdown last fall. You know of Goldman Sachs got ten billion dollars in TARP money turn itself into a bank and has twenty billion dollars and FDIC. Insured debt they indicate it is already planned to issue -- which lowers its borrowing costs. It got a 100% of the trade satisfied with its eight of the AIG bailout. -- that she's yet to -- all the lives on both sides down here. Edward Liddy used to work at Goldman Sachs now -- and CEO of AIG right and also -- former Treasury Secretary policies work at."

" Goldman Sanders now -- build subways in New York Fed -- is a Goldman guy down both on and on the list goes right all right well -- in less what added to this Goldman star was going to move on the GE because that news coming out. Today that Liz SEC accounting fraud -- commodity."

" Yet this is set back and look basically a case sets it's that -- Good accounting probe that's at four and a half years in the making and it goes back to about half a dozen years into GE's books and they'll basically. The FCC came out swinging though today the SEC officials. We're pretty blistering in their comments about had GE was bending the rules us than usual another unusual movies CBS is he doing any data with Bank of America. They filed a permanent injunction against GE just to say -- you -- he can't violate securities laws is solid Bank of America when Bank of America failed to disclose five point eight billion dollars in bonuses a plan to pay Merrill Lynch. You know on there -- its proxy statement that they gave to the shareholders to vote on the deal December 5. -- has had no idea that those bonds that brought their Ken -- saying that you know he didn't really you know he'd have the authority to approve those -- have done their part of the merger document."

" September OK so this is interesting to have these SEC is SEC charges yet at a major Wall Street name. We also the story disagreeing stories together parts of the Treasury Secretary Tim Geithner really railing on the head of the SEC the FDIC the Federal Reserve. About this financial regulatory overhaul do you think there's any connection here between east where is the fact that you see more SEC really seen a -- SEC action over the last 48 hour."

" You know be elevated its have been the debate that's been ongoing -- make it industry are very important point you know there's a lot of rules that can be in force the issue is. Did the backbone to enforce right do you have a market cops on the stick -- on the on the watch there doing their job in the SEC. You know has been criticized for falling down a job we know that the for Tim Geithner to make. These kinds of statements in and he -- the New York Fed. At a time when the bubble was blowing when the credit bubble was blowing too disastrous epic proportions. And so you know did he do anything to stop Wall Street from you know making up for -- wreath -- forest and the very dangerous asset backed securities now. So it up for Tim Geithner to -- comments at those and hot flat it tells you all of a -- I think kind of cliches that you always want to -- I -- it isn't on -- usually you know this -- Donald -- that's -- they go to Turbotax that Turbotax -- remember right -- not file his taxes properly you know saying well."

" Get off the city of CME listen -- with some of the settlement or in the charges whatever they are -- we will prove it is for the settlement that was them. The team with a T -- the government needs -- let me do you think about the people that are being audited out."

" Negatives and we've been doing this even say this for years. It's sort of SEC is practicing what I liked about institutionalized. To the million we're sort of like yes no maybe so what I mean that that. GE a lot of companies gotta get to settle SEC charges without admitting or denying that in the time of -- You know really in what is Farrakhan. You're the wrong about you that screwed up -- money and reason why there they can do that way because -- then then the executive the executive could take that SEC. Yes no maybe so. In neither me tonight."

" To their directors for their insurance the deal -- this insurance directors' and officers' insurance get coverage."

" All right so then that's person pay any fine right right because they're not that would that there inoculated all of you know has suffered -- exactly right so just so people understand exactly what the the charges of the fraud charges against GE going back by the register and Immelt -- and and not tenure or as a factor Welsh so is in the wealthier mostly this is not going to -- happier with Welch but then there was an adult now it was announced that it still is a volatile earnings. Statements right because in this is in the old as I like to call them beat by a -- years having every single time GE reported idea earnings reports and a 30 Friday morning and it. Expecting 32 and a report 33 --"

" Emotional content are three things inflating their economic picture yeah smoothing the room with me in certain hedges and hitting like you said. The limbo dance every quarter of analysts right shocking meaning by attending the analysts and so -- expertise and which they were pros that so you know that it was an end that the SEC. -- at that comment about the the fact that GE miraculously. Hit their earnings target every quarter with these kinds of -- so they've been doing it since -- at least 1994."

" Can I take it is that this is an on behalf of whatever viewers out there. Forgive me because they cannot pronounce the name but is weighing in on our board if you joining us live in remembering can do that. Is saying everyone who loses money in the stocks and stocks Greenspan -- blames the SEC for not doing their job do you think."

" That one thing but the reason can't pronounce the name it's written in Chinese -- well I -- I should be -- Johnson -- how these characters and I would have to be editing me until Eli experiment represented you what I'm gonna -- crime -- different name or her."

" Things are read that again because again --"

" Only did I ever let just did an eyebrow -- well -- you anymore I think within the that I read does that mean trouble when she -- she's anatomy she doesn't talk to his looks the other way that's them anyway carry -- every single day is still what."

" Am saying is is that it. There's a lot of people out there that are really angry about losing money. And we look for someone to blame people are still looking for people to blame and in multiple different areas of the government or public so. -- continuing to -- this fairly you know when you look at GE which some are saying is that what is that governments. They had a different acronym -- government electric ground then. I lucked out. Please could you think daughter -- OR I want to look at the FCC eight and we look at you can't please fox is not on my. -- are we still just looking I'm still just finger pointing wasting a lot of time. Now -- of Singapore's finance fund and the fact I mean yeah people -- pretty -- people go because Warner. Then that's added that isn't that we can really get ourselves into bigger mess that we're really blaming the wrong people for what's going on."

" Look I mean you know what is it what's wild to me is again if there at their roles that they can be enforced. There's a shortage of regulations and rules as a shortage of backbone and the idea that you know what I found amusing was that the Federal Reserve is now going to sit on the spot in this. Financial. Risk council whenever they're calling it. This Wilbur regulatory body of all the bank regulators and market regulators to step I call it. You know I call it's not like the Marvel Comics version of you know the Justice League you know we're going to do with these meetings the similar meetings you'd like to have you got a ticket catch something's got all the stick McDonald. And why I -- what's -- about -- this ridiculous you see you want to weigh in on the full rate we haven't rebuilt huh. I regulation in LA we saw the Pope we've been talking about how. We need a political a political authority to oversee. In on the markets have to crack down on enough for an answer pros I'm not seeing the white smoke coming out of Ben Bernanke's -- his headquarters were -- the Central Bank as you know it's a good and it cannot do that job no kids can even handle monetary policy questionable. So the point we're now members of congress led by Ron Paul one on the."

" But the good books but -- to -- they get -- that it's and I like that should be there someone's got to do it right -- Liz MacDonald letting anyone with that vote anyone. They keep forgetting our hands at the back there she -- a -- of these animals and for today -- I viewers asking parliament this -- for conference. And you."

" Yeah I'm how. How -- malaria in the movie. Among women so yeah."

" Seeing maybe that's the guy to run the Federal Reserve right. And input a short Stallone -- I didn't mini hot pants that you're wearing there payless saw those and Julius -- at and that's the only pocket I got -- you really covered a lot of ground here we went from the Pope. To Julius -- GAAP Q you know their the SE CG all that said you know and I don't understand this but."

" Chinese room."

" out of the same one where catch the bad guys got that right to cast my girlfriend and I of the double stick they had to -- on. What are we doing next and -- attacked you act. Dave Hamilton just a moment that's going into the -- their break it's I'm down. And then you can be right back."

" Now my friends waiting for the Davis and her guests that are standing by somewhere listen to what we're saying and then just get up and leave. Always get around the aunt Betty got to -- in the that is -- it happened you know. Dave Hamilton as I understand it is those still standing by via Skype he's the president of the Mac observer good to have a day if."

" Pretty scenario we're very good we love Skype you look so close to us -- had that happen. -- like luxury -- exactly right so -- just talk about bodily sent the stuff to talk. I -- shipping it technology you know we Apple's been in the news a lot Google and let's start there and a couple of things to get into but the the bottom line Eric Schmidt believes the board. And Google CEO of Apple and I said to myself who was a dilemma what to begin with little weird but what -- what did you make of the yeah it's about time."

" it years ago wasn't as big an ideal but right -- there's all -- conflict now happening midnight the you know Google creating android which is a mobile phone OS. Apple's got something similar so he has to -- himself from those meetings. And then they get their chrome browser which is actually flying that doesn't really based on safaris and that's okay good. Probable passes and alas that's going to be installed on low cost computers and I. That in theory -- and apples and have to recuse himself from those meetings so it adds about time the guys the guys stepped out that said. You know that Google -- partnership has been good for both Google and Apple and I'm sure that's. -- no small part to. There kept being on the board so let's hope that they get past these little kind of necessary change -- and thank you get all."

" But it looks as they'd like to compare things often during an analogy may be a high school for example and you talk about who Google and Apple you've really got the too cool kids. In school and I'm sure all of us know there was that -- the cool kids and they had a problem and and they split off. Then the cool groups got a little bit bigger. You know I think is silly -- and good whereas the consumer right -- to cool choice is no matter what. It Google is looking to get more involved an apples that business or vice Versa through a Smartphone for example or just an operating system. Isn't that really the best Bratz because we're just gonna have warranties."

" Absolutely these are companies that have proven that they know how to do things that. We like and I don't think we'd royalty -- I don't think there's there's a lot of us they really like the stuff that Google into. Apple come out with so absolutely -- I think I think it is a good thing and I I think what both companies are doing is right so."

" You know is one thing suspicious anywhere and an executive -- Schmidt -- literate -- himself from any conversation with the I thought you brought up all the new things that -- Going on with chrome and right and what have you that it was I guess the final straw I don't know but. The the iPhone is interesting. Because there were these these school. -- voice that's right there were rejected by the iPhone what what what's going on I didn't realize that kind of -- stuck by me. But -- yeah what's the bottom line on that I I assume absorb rejected all the time and not everybody gets their act on the iPhone that Watson who knows -- they do. But this one was it was a it was a big deal and tech land."

" Yeah and that's really frankly that's the biggest story you know didn't Eric Schmidt stepping down nap time bound to happen all good right. But but yet has Google Voice out being rejected -- any -- that appears on the iPhone has to be approved by presumably humans an Apple. And the premise is that they're going through and checking out all the steps to make sure that day is -- all apples guidelines and don't break your iPhone Apple's very concerned that user experience. And so they want to ensure that the apps that you download for the iPhone even if Apple didn't make them. Apple wants to ensure that anything you -- for the iPhone conforms to their very strict standards for the most part this is a good thing they have been. A little bit frivolous at times with what they've rejected it and made some mistakes along the way that this global -- think it's very interesting because. There's no Apple says is actually the thing is nobody really sinking -- you can fight there's Apple there's Google and that. AT&T. And if this Google boys -- gets in anyone's way. It really gets an AT and -- way right so I think it's great it's creating quite a stir up you know the Google Voice out. Presumably did not do actual calling nobody but that. I certainly haven't seen it. Because it hasn't been released but it did do voicemail sudden somebody -- to really get voicemail and perhaps -- big -- SMS rolled their -- to."

" Okay there's this guy I mean that there are other apps are right there's other texting apps aren't there and this is Scott and as a skycap might -- have outlook. What you could see could talk it with voice only right now on Skype so what's the difference."

" Well it did I think that's sort of get -- the big difference is that Google boys step that you check your mobile voice -- and Google -- supports SMS so it's it is safe assumption that the Google boys out milk for the iPhone. Also did this. SMS huge revenue streams all the cell carriers right and I don't have the -- confronting it. If you compare what you pay for data on the cellphone versus what you pay for SMS as a mrs. you know. I believe Britain and its many orders of magnitude maybe even millions of times more expensive. Then it is descending dated. The end you know the -- history. So let's let's say that Google. Created the iPhone now all out push notifications. Solo single who created this great -- that if someone SMS is -- Google Voice number right then pushes. That SMS notification to your iPhone comes to immediately write on the screen. Net effect to the user or just the same as us."

" And listened to -- are -- other have to do that there's no other -- and I thought of all the you can get around the AT&T yet that's a -- or -- or or there aren't. Nothing nothing and then nothing."

" Things there but but nothing big -- out. Big revenue lost to the -- potentially end end you know the FCC. Started asking questions at the end of last week. Now that's all they're doing is asking questions and it's because everybody's acting guilty by dole has come up and just said. Here's what here's what we did and I and world can't you know maybe there's nothing wrong but everybody sure is an act and nobody wants to take an interest in."

" Rick -- gave before we let ego president CEO of the Mac observer. You are so worked on. The -- anything cool we need to look forward to over the next six months you think is that new technology that we really need to check out."

" You know -- added there's so much out there today I. No I think the -- I think we've got all you know it -- of course there's stuff come and there is always going to be stuff coming. But but you know it just keep up with. People of the news check check Google of course -- dot com."

" I we well they've militant appreciated very much president of the Mac observer. If fact thanks. Good stuff that was a good start connections are what it's worth of work I once had I the way he really concerned about this I am -- I want us. But just everyone has that keep up with the news that the toxicology report on Michael Jackson is apparently. And coroner's office it's admitted to dead LAPD we don't know the cause of death at this time but. Apparently -- on the scene -- covenant of saint. -- continue to follow the news all of it that way. And -- you know what killed Michael Jackson. I know well if you suspect. Your birthday and they kind of -- in the next couple days that -- the last couple minutes of that work and you just kind of ready to write often to sunset what."

" I just didn't want and to show by saying something stupid about Michael Jackson and by the mid to prevent mr. guy -- system. -- tremendous talent -- and they wouldn't."

" He was but anyway that's the news coming out and decided Adam has the how we -- of our LA bureau was just reporting that's -- waiting on guidance for me. LAPD then I musing here today the markets are back 31 points since you know."

" The want to go down they don't want to go down so -- the roots of that earlier on. I guess on opening bell this morning that -- there's every argument I understand the argued that every argued out there that says hey we've had a huge rally 50% off the lows and at some point we should give it up and everything. Well yeah maybe but it. They're still people that have missed out on and and any little debt they're going to jump back in and it's amazing how much momentum has really been there. And then he stopped as we do with Tommy earlier Tommy Williams is here you start thinking that you don't want that's a that's crazy were still 20% or more below the but where we were at this you know at the -- time last year so I thought we come all the way back I mean we've had a huge rally but. That's because a lot of ways with half a ridiculous decline we get the 666. The satanic glow on the S&P 500 to to get back 2000 is a big move but doesn't get it back to the all time -- finds."

" In our next few shows because we're in this period where it's hard to fight the tape is mentioned that there is still keep going up but there's still a lot of discourse about the markets pulling back so. What do you think -- in about a -- investor money for the back capital but 2009 what can look at information you provided that they were not doing so. Already you can always Twitter. With FBI online yup -- can email us as well."

" FEM live at foxbusiness.com. So -- that would be good idea of making compile some emails about the show ideas and things that people want to see. And the best part of the show I would say is that if you can't watch it live at -- well. Quit your job or fund them. Those who don't could only go to -- tough environment -- artists like you where you could always go to -- it at any time during the day and and Texas -- it's great quality or you can you know double the podcast on iTunes back."

" isn't cupcakes with her to death sentence it looked cupcakes for that account thank you so much and I think to joining us Dave we'll be back in tomorrow noon eastern time. I've -- her -- today and this is wrong and I'm an affair with Canada and."

" Good okay. Concludes my room so."