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MONEY ROCKS for July 16, 2010 - Part 1

Mon, 07/19/2010 - 11:06am
Charles GasparinoAssociated Press

Jennifer Walsh, Vanessa Alfano, Greg Gutfeld

xfdfw MONEY-ROCKS-01

<Show: MONEY ROCKS>

<Date: July 16, 2010>

<Time: 20:00:00>

<Tran: 071601cb>

<Type: Show>

<Head: MONEY ROCKS for July 16, 2010 - Part 1>

<Sect: News; Domestic>

<Byline: Eric Bolling, Charles Gasparino, Dr. Marc Siegel, Jen Groover, Jennifer Walsh, Vanessa Alfano, Greg Gutfeld>

<Guest: Allan Mansoor, Susan Bailey, John Fund, Danielle Schupp>

<Spec: Politics; Economy; Policies>

ERIC BOLLING, HOST: Good evening, everybody. Welcome to Money Rocks I'm Eric Bolling.Hey, you know, they say big events happen in three's. The Obama administration is on the verge of a three event administration health care reform passed, changing the way we receive and administer medicine. Then yesterday, financial reform passed, changing the way the American banking system works. The third event in the Obama era, cap and trade. For me, this is the most dangerous to the American dream.

Everyone uses energy in some form. Drive a car, use gasoline, heat your home, use natural gas, drink a bottle of water, you use petroleum. There's even an oil tie-in to this twinkie.

The cost of producing everything will skyrocket. Manufacturing costs will soar due to carbon taxes. Guess who will pay for that? You and me. Economists predict an average American family will pay between $2,000 and $3,000 per year more if cap and trade passes.

And don't forget, these are recurring taxes, costs that will never, ever go away. The free market lost on health care. Capitalism lost on thin reg. And the one America cannot afford to lose is cap and trade.

Money Rocks advice to the Obama administration, quit while you're ahead, Mr. President. Kill cap and trade.

Now it's time to make some real money. Street me is just the place.

All right, street me, let's get right to it. BP, you know what? The cap is holding so far. The stock is holding. In fact, the people of the Gulf are holding their breath. Give me the next one.

Here, when this happened, a lot of things changed. On the left side, you see that oil spilling everywhere. On the right side, there it is. No more spill. That's really good news. Good news for the people of the Gulf. Also good news for BP.

Take a look at BP when they capped the spill. That's the intraday chart of BP. Check that out. At the end of the day yesterday, look at the jump in the stock when that thing stopped spewing oil.

Go to the next one. BP $180 billion company at its peak right before the oil spill, before the spill. During the midst of the oil spill, when things got really ugly, it went down to a $70 billion company. And as of today at one point, $117 billion company. 18 --BP 18.3 billion barrel equivalence in reserve. Big company. They have a lot of assets. 2.3 million barrels per day production. And this is very important, guys. BP employs 80,000 people. You don't want to see this company go away.

All right, here's the -- everyone come up to me all day today. By the way, no more drilling in the Gulf, right? Wrong, wrong. These are active platforms in the Gulf of Mexico right now. These are actually working. 4,000 rigs still drilling in the Gulf. It's just a moratorium on new drilling, on new deepwater drilling.

Next, Apple, other news today, Apple jumped today on news that Steve Jobs came out and said we're going to fix this iPhone 4 problem. He said there's a software fix, number one. Number two, free bumper case. You can put the case around the iPhone. That will help. And number three, if you're still unhappy with the iPhone, they'll take a back. Mr. Jobs, here's what he had to say. Take a listen to this.

(BEGIN VIDEO CLIP)

STEVE JOBS: We love making our users happy. That's what drives us to make these products in the first place.

(END VIDEO CLIP)

BOLLING: Okay, check this out. Apple intraday today. Apple jumped when he made that announcement. Take a look. Also good.

You know, when Apple says they're in it for you, he really means it. Not a bad company. A good looking stock. Here is a one-year chart of Apple stock. Continues to do very well. $250 a share. Anything above $235, $230 a share, pretty good company to be in.

Speaking of companies not to be in, remember money? It's also what not to be in. Look at Google. Look t Google over the last six months. This is not, not where you want to be. Google down to $459, down $34 per share today.

And by the way, we promised you this. We were going to keep an eye on wasteful spending, outrageous spending, outrageous, crazy things in government. Look at this today. Bell, California, population 36,000. Average $40,000 these people make. Very blue collar city, town. 65 percent don't even have a high school education.

Check it out. City manager Robert Rizzo makes a whopping $800,000 a year. Police chief makes $457,000 a year. By the way, the police chief in L.A. makes $300,000 a year. And also, if you're on the city council, a part-time job, $100 grand.

All right, you know, the big news today, the guy who everyone loves to hate Goldman Sachs making news again today. We're going to go to our go to guy, Charley. I'm going to walk right over here. This is all news for us. Charlie, I'm going to walk behind you.

CHARLIE GASPARINO, FOX BUSINESS CORRESPONDENT: That's fine.

BOLLING: (INAUDIBLE). Goldman in the news. We heard about the $550 million settlement yesterday, but let's talk a little bit about the CEO Blankfein. This is good news for him, right?

GASPARINO: You know, the conventional wisdom on Wall Street right now is that it's good news. But you know, I look back at what happened at Citigroup when they cut a similar sort of settlement back in 2002. Sandy Weil, remember you urged the analyst Jack Grubman to upgrade AT T. And they got Grubman's kid into the 92nd Street Y. He was called kid pro quo back then. It's a story I covered when I was at The Wall Street Journal. They did a -- they had a big fine, $400 million.

At first, it looked like Weil wasn't going anywhere. He did a couple victory laps. Two months later, he announced that he was leaving as CEO.

And you know, the SEC, in that case it was both Eliot Spitzer, the New York Attorney General and the SEC, they don't like to say that they turn the screws to the board and make management decisions, but they often do. It's behind the scenes. And I really think a year from now, Lloyd Blankfein will not be the CEO of this firm.

BOLLING: Under his own choosing? The board's going to push him out? Why? Why--

GASPARINO: A combination of both. Because here's the thing, Goldman -- he's a very good operational CEO. But so was Sandy Weil, by the way, at the time. The problem is that the -- he took a reputational hit. His actions, the way he's been managing the firm, they take such a reputational hit, that, you know, it basically puts Goldman in a box to do -- for example, financial reform, right? Goldman Sachs is going to have to be -- do more advisory work. You know, maybe want to buy a retail brokerage firm, right? You know what? They can't.

BOLLING: Why?

GASPARINO: Because they have a horrible reputation with industry.

BOLLING: Who cares?

GASPARINO: Like 90 percent of the people, except for you Wall Street--

BOLLING: No, no, no. Listen, I'm not in favor--

GASPARINO: That's why.

BOLLING: I'm not defending Wall Street. And I'm certainly not (INAUDIBLE) Goldman Sachs.

GASPARINO: No, average people care about this.

BOLLING: My point here, Charlie, my point is this $550 million settlement is a win for Blankfein.

GASPARINO: From the Wall Street standpoint, from your standpoint, from a trader's standpoint, from an immediacy standpoint, yes. But--

BOLLING: (INAUDIBLE)?

GASPARINO: Long term--

BOLLING: What more of a standpoint is there?

GASPARINO: Because under Goldman--

BOLLING: Look, Main Street doesn't care. Main Street's not going to make Lloyd Blankfein go away.

GASPARINO: Do you know who has the two worst reputations in corporate America right now? BP and Goldman Sachs. Goldman Sachs--

BOLLING: From a brand standpoint.

GASPARINO: From a brand standpoint.

BOLLING: Who cares? They're not selling widgets.

GASPARINO: It does -- yes, they are. They're different now. There are -- they are under scrutiny from Congress. They are more mainstream than ever before.

And by the way, I will tell you things. Every major Wall Street firm will have to become more advice oriented. You know why? Because financial reform makes it more difficult to take -- to trade. And because of that, Goldman Sachs is in a box. They have one of the worst reputations on Wall Street.

BOLLING: It makes it more difficult, but it doesn't eliminate it. It doesn't say you have to separate.

GASPARINO: No, I'm not saying that. But what I'm telling you is that reputation now matters more than ever before. You have deal with clients. They can never get in the retail business.

BOLLING: Clients? They're dealing with hedge funds for their clients.

GASPARINO: Really?

BOLLING: Yes, sure. I don't have a loan from Goldman Sachs.

GASPARINO: They don't--

BOLLING: (INAUDIBLE) Goldman Sachs ATM on the corner.

GASPARINO: You know, Goldman Sachs hasn't been in any of the major underwritings lately. That -- they're not in the -- they're not advising Citigroup.

BOLLING: Fair enough.

GASPARINO: They've lost business.

BOLLING: Fair enough.

GASPARINO: And it's the reputation.

BOLLING: Sure.

GASPARINO: Now is Lloyd Blankfein responsible for all that? No, but he led the firm in the period where their reputation took a BP like hit. I don't think he survives a year. That's my--

BOLLING: All right, let's talk about if he doesn't survive a year. And the reason why I know -- who's in place to take over for Blankfein?

GASPARINO: Well, I don't think it's going to be his number two, Gary Cohen, because Gary Cohen is just like Lloyd Blankfein.

No, it's the same.

BOLLING: It's the same.

GASPARINO: It's the same thing.

BOLLING: They're all the same.

GASPARINO: No, they're going to get a banker in there. That's the way this firm has traditionally run. When the traders screw up, the bankers come in. When the bankers screw up, Hank Paulson. When it looked like the traders were making money. The other guys come in. It goes back and forth. And it'll be a banker.

BOLLING: This guy, let me tell you, I know Gary Cohen. I know him personally.

(CROSSTALK)

BOLLING: He's on the board of directors of the company that he went after. And he was going to take us down--

GASPARINO: Right.

BOLLING: -if we turned him down.

GASPARINO: And you know what? That type of hardball, no nonsense, brass balls, Wall Street play--

BOLLING: Is exactly what Goldman is.

GASPARINO: It's what got him in front of Congress.

BOLLING: But what's--

GASPARINO: A million times.

BOLLING: That's different. That's Goldman that's--

GASPARINO: That's what hurt them. That's what hurt their stock price. It's what's hurt them.

By the way, look at their stock price. Not exactly doing that great over the last year.

(CROSSTALK)

BOLLING: A year ago, they were a $45 stock. I mean, they've really come back.

GASPARINO: No, no, no.

BOLLING: Sure.

GASPARINO: Two years ago.

BOLLING: All right, I'll give you that.

GASPARINO: A year? Look at that stock chart.

BOLLING: Give me a two year. Can I get a two year?

GASPARINO: That is -- isn't that a two year?

BOLLING: No, that's a one year. We'll try and get the two year up there.

GASPARINO: Well, then you are talking to financial crisis.

BOLLING: Oh, absolutely. But I'm saying they're coming back.

GASPARINO: No, they're coming back. And then they didn't come back.

I think this is a company that has a reputation to sustain, that is going to be very difficult to unwind. And yes, this is a victory, I think an immediate victory. It's a lot better than what we heard. The fine is like a joke, right?

BOLLING: Two weeks of--

GASPARINO: Two weeks pay? Two weeks, I mean, you know, that's like 18--

BOLLING: See, here's my problem.

GASPARINO: --Blankfein's network. The problem is--

BOLLING: There's that two.

GASPARINO: Hey, look at that.

BOLLING: Oh, that's a three year.

GASPARINO: Yes, yes, look at the three year.

BOLLING: Yeah, well--

GASPARINO: By the way, that's when he ran it. That's when he started.

BOLLING: But here's the thing. Goldman -- I've known Goldman a long time, Charlie. All they care -- they only care about one thing. They don't care about their reputation. They don't care about the brand . They care about one thing, making money.

GASPARINO: And that's their arrogance. And their arrogance will kill them. And their arrogance has killed them here. And the problem with Goldman Sachs right now is that there's a new world. And they're not used t it. And they better get some people that understand the new world, because they're going to have to deal with Congress. They're going to have to be more -- they have to be more compliant. The clients are going to need more advice, driven businesses because, you know, selling the abacus trade and screwing their clients-

BOLLING: Yes.

GASPARINO: --is not going to go--

BOLLING: I would love come back and maybe spend a little time with you, talking about exactly. We'll take apart that Paulson abacus trade. We'll pick it up--

GASPARINO: Listen, I don't think it's such a big deal. I just think it's sleaze . It's run of the mill sleaze. I don't think it's high crimes and misdemeanors.

BOLLING: Why isn't Paulson--

GASPARINO: Because they're not going to be able to get away with that.

BOLLING: Why isn't Paulson on the hook for some of this?

GASPARINO: You know, who knows. There's lots of speculation, but you know, if you think about it, he's not the one that was selling the deal to the clients. He's not the one making the disclosures.

BOLLING: He was -- right.

GASPARINO: He didn't make the disclosures.

BOLLING: Disclosure, you're 100 percent right.

GASPARINO: That's why it was -- listen, it was bad disclosure.

BOLLING: We're going to leave it there. Charlie Gasparino, thanks for joining us.

GASPARINO: Anytime.

BOLLING: Always bring great stuff to the table. Thanks, Charlie. You can have that, too.

GASPARINO: I don't think I'm going to be eating this for lunch.

BOLLING: All right, coming up, sanctuary cities cropping up across the nation, but one mayor says not in my town. Are his policies intolerant or are they the key to securing our nation once and for all. What's the cost? The answers when Money Rocks returns.

(COMMERCIAL BREAK)

BOLLING: At least one study says illegal immigration costs our economy billions of dollars each year. And while the true number is probably un-knowable, it is a fact that these people are breaking the law. But did you know, there are dozens of cities around the country that have declared themselves sanctuaries for illegals?

Joining me now in California is Costa Mesa Mayor Allan Mansoor. He has a thing or two to say about this trend. Welcome, mayor. Thanks for joining us. You are in fact not sanctuary city? Is that right, sir?

ALLAN MANSOOR, MAYOR, COSTA MESA, CALIFORNIA: Absolutely not. We put forward a resolution recently to state just that, that we are not a sanctuary city. And that in fact, we are a rule of law city on all our losses. But I wanted to make a point with -- the fact that we support upholding our immigration laws, and that we will work cooperatively with ICE and immigration officials.

BOLLING: So go ahead. There tell us what that means? You know, a lot of people say this Arizona law that's 1070, it got everyone in an uproar. If someone's crossing the street, looks like he or she may be from another country. Can you pull their ID?

MANSOOR: Well, there are a lot of different circumstances. Basically what I put forward some time ago was a proposal to work with ICE officials under the 287 G program.

But since that time, they put an ICE agent in our jail. We have had a cooperative working relationship with ICE, so that if someone is actually arrested and taken into custody, they are in fact screened by ICE.

The resolution I put forward was t make a policy statement because I plan on bringing some additional things forward, such as e-verify. There are things other cities can do as well. They can seek 287 G agreement with ICE.

There are things that can proactively be done at the local level. Out in the field, that's, you know, some of the situations are a little bit different. I believe we have a right to ask for reasonable identification. And other countries do it. And it really it boils down to public safety.

BOLLING: Talk to us a little, mayor. In fact, that is the law, isn't it? Aren't cities entrusted with upholding the federal law of illegal immigrants? Must be checked and documented or sent home? Is that right?

MANSOOR: Well, there are plenty of laws in place. We don't need to reinvent the wheel. What we basically need is politicians with a spine who are willing to uphold the law and the oath that they took.

The fact is that about 10 percent of the population of our jail population are illegal immigrants. And about 25 percent of the prison population in the state of California are illegal immigrants. And that is a huge cost to the taxpayer. Hundreds of millions of dollars that could be used for education, that could be used for much need infrastructure repair, water issues, storage and delivery issues. All kinds of issues are facing our state.

And you know, quite frankly, Costa Mesa welcome legal immigrants. My parents immigrated here legally. It's those that come here illegally that concern me. But the bottom line, there is a huge cost to the state and to the taxpayer. And we have an obligation to address that issue just like we would any other issue, whether it's pension reform or welfare reform, getting back to limited government living within our means and not spending more than we take in. Those are all important issues. And the point I'm trying to make is illegal immigration is no different. We have to address that issue.

BOLLING: Mayor, I'm going to throw a very difficult question to answer. I hope you answer it. Hope I don't throw you to much of a curveball here. Will you arrest, apply a fine, pull their business license for anyone you find hiring illegals in Costa Mesa?

MANSOOR: You know, I've asked for -- this is an issue that has a lot of variables. And I have asked for several things to come before the council for discussion. And we're going to open up a good policy discussion and look at some of the issues that you've brought forward.

But at the very least, communities can ask someone if they're here illegally if they've actually been arrested and they're taken to jail, you can proactively ask if they're here legally and work with ICE.

And I'm basically letting other elected officials know that something can be done at the local level. You can establish a 287 G program. You can use the e-verify. You can set up a policy statement like rule of law. It basically boils down to political will in elected officials doing what they said they would do when they took the oath of office.

BOLLING: Mayor, the state of Arizona being sued by the Department of Justice. Has anyone from the DOJ contact, did you -- saying hey, cut it out or we're going to bring a lawsuit to Costa Mesa?

MANSOOR: Nobody from the DOJ has contacted the city to my knowledge. But it's very sad and unfortunate when our elected officials at the federal level will not uphold our laws. It's unfortunate but I think Americans are waking up and letting their elected officials know that they want action on some of these items.

BOLLING: All right, Mayor Mansoor, we're going to leave it there. Thank you very much. Keep up the good fight, sir.

MANSOOR: Thank you.

BOLLING: All right, up next, the financial reform bill is now making its way to the desk of the president for his signature. But this bill address issues of the financial crisis that plagued most Americans. Some surprising answers when Money Rocks continues.

(COMMERCIAL BREAK)

BOLLING: Financial regulation ready for a presidential signature. And guess whose name just isn't on the list of people who are going to benefit from it? You. Oh, the banks will be okay. They have armies of people working on how to take advantage of the new provisions. And the labor unions, they'll be okay too. And other Democratic interest groups, they'll be just fine, but the average Joe, not so much.

So where's the money going? Let's find out from John Fund of

The Wall Street Journal . He joins us now. John, thanks for joining us.

JOHN FUND, THE WALL STREET JOURNAL: Thank you.

BOLLING: Big bill, 2300 pages. We paged through it a little bit. I found some kind of crazy stuff with the unions, some special interest groups. What else can we find in this thing?

FUND: Well, for example, lots of diversity. Every financial institution is not going to have to have a separate office of diversity attached to it, to try to promote the hiring of women and minorities. That sounds fine, but the U.S. Commission on Civil Rights this week, a majority of the commissioners agreed that this could inadvertently lead to discrimination because it's a form of quotas. And quotas are actually unconstitutional.

BOLLING: This financial reform bill was kind of born out of the financial crisis. Right? What in minorities and gender diversity clause, the financial crisis?

FUND: Look, when you have a 2300 page bill, I guarantee you, it's not just about financial services. Remember the stimulus bill? The stimulus bill was supposed to be about jobs. In reality, it was about pork barrel spending.

We now see how many real jobs it created. Very few. That's why President Obama's popularity isn't so high. The same thing with this financial services bill. They jammed everything into it. A grab bag, a wish list of subsidies, special interest programs, social engineering, you name it.

And then on top of that is an awful lot of financial regulation. But guess what? There's one thing missing out of those 2300 pages.

BOLLING: I know.

FUND: Fannie and Freddie.

BOLLING: Fannie and Freddie, what about -- let's talk about it. Fannie and Freddie, ground zero for subprime meltdowns. Group zero for ninja loans, loans that have been given.

FUND: And the largest amount of taxpayer bailouts went to Fannie and Freddie.

BOLLING: And it's still growing, right? How much is Fannie and Freddie into us for?

FUND: My heard hurts just to thank about it.

BOLLING: It's $150, $180 billion and growing, right?

FUND: Sure.

BOLLING: So how did they ignore Fannie and Freddie?

FUND: Because Fannie and Freddie are their favorite stepchildren. They're one ones they created in order to build affordable housing up. They're the ones who cashed in on the subprime mortgage market. They're the ones who drove the subprime mortgage market. And Congress wants to still be able to go out to America and say see, we're still providing federally subsidized housing. We can't get rid of Fannie and Freddie. We can't reform it.

And by the way, they spread campaign contributions around everywhere.

BOLLING: That's great. So they let Fannie and Freddie out of, 2300 pages of financial reform, but they included gender and discriminatory bias.

John, let me turn to you -- our attention. You wrote an article earlier in the week. And it touched on the possibility of a, what is it, a national sales tax? Is that right?

FUND: Well, but there's a lame duck session that may be coming. Now that they finish with financial reform they only have about two weeks left in Washington before Congress goes on its summer recess. And they're not coming back to mid September. That means if they want to do anything else, whether it's, well, taxes, you know, all of the tax cut expire on December 31. Cap-and-trade, immigration, anything else like that, I think they're going to try for a lame-duck session.

That will mean meeting the members of congress who got defeated or retiring will be making momentous decisions in our future, even though they'll be safely away from the voters because the election was just passed

BOLLING: Do we run the risk of a VAT tax or a national sales tax?

FUND: Well, here's what's happening. December 1st, the president's commission on deficit reduction issues its report. December 1st is after the election. No accident, comrade.

So tax cuts expire December 31st . I think they're going to try to put together a package deal. We'll make sure that the middle class, those entering under $250,000 don't get a tax increase. But we're going to need some new revenue. Let's have the beginnings, the seeds of a value added tax planted within tax Bill.

BOLLING: Well, talk about that a little bit. The value added tax or a national sales tax would be regressive. No?

FUND: It not only would regressive, but it's hidden. See, a sales tax is different because you've got to see the pain. You know that it's added on to the price of a product. But the value added tax is a tax that's edited every step of production when something is made. And it's hidden in the price of the product. Therefore, it's much easier to raise the value added tax than it is a sales tax.

BOLLING: John, what percentage of American households don't pay federal income tax?

FUND: It's between 45 and 48 percent.

BOLLING: 45 and 48 percent. Now let's just assume they go for 5 percent national sales tax, call it whatever you want. Is there a way to allow low income families, even families who are already paying--

FUND: Well, I'll tell you what the European experience is. In Europe, they started out by exempting things like food and books and things like that. And sure enough over time in Europe fewer and fewer things were exempted. And it got broader and remember. I remember, because I have relatives in Denmark, Denmark had the first added tax, 1968. The rate was 6 percent. Guess what it is now?

BOLLING: Eighteen.

FUND: Twenty-five.

BOLLING: Twenty five -- There are four or five big economies in European with VAT or value added taxes in excess of 19 percent.

FUND: It only goes one direction. Find me a country in the world where the value added tax has ever declined.

BOLLING: And it does not replace any other tax, right?

FUND: Oh, no, it's always on top.

Now in theory, it's a more efficient tax. If you could create a brand new world in which there no income tax, little vanished, no IRS, then it might make sense it to talk about a value added tax if it were the only tax. But that's not going to happen.

BOLLING: I had a hunch, John. then they would call it too aggressive. And they wouldn't want that. All right, John Fund, thank you for joining us.

FUND: Thank you.

BOLLING: In studio

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