tv Power Lunch CNBC July 15, 2019 2:00pm-3:01pm EDT
that was supportive of the president, sort of politically aligned with the president it makes sense he would take this approach. >> david, thank you very much. david mccabe with axios, we apreexate your time. i'm going to do what i normally do at this hour. i'm going to join melissa in just a minute on "power lunch" which begins right now >> we'll see you in a minute, tyler. i'm melissa lee. we begin with breaking news. treasury secretary steven mnuchin set to hold a news conference any moment otthe white house about crypt okurancies we'll bring it to you live as soon as it begins. ylan maya joins us not too many details out so far. >> this is a little bit of a surprise, but fed chairman jay powell said this is an issue that fsoc intends to take un, so we'll see if the secretary provides us any additional information there. we know that david marcus, the head of calebra for facebook will be testifying on capitol hill tomorrow. his testimony came out today in
which he struck a very humble but sort of defensive tone in saying that libra is not intended to be an investment vehicle. it's intended to be a payment vehicle that the crypt okurancy will not be used for monetary policy, and sort of defending this as a way for facebook to provide economic opportunity to its users. but of course, he is going to be facing a very hostile environment when he testifies tomorrow, and certainly we'll see if that same tone is echoed by the treasury secretary when he speaks in just a few minutes. >> this is most notable because this comes just days after president trump tweeted specifically about libra as well as cryptocurrencies, that could be construed, steven mnuchin is approaching the podium let's go to him right now. >> recently, as you know, there's been a great deal of interest about digital assets,
including cryptocurrency such as bitcoin and libra. there are many regulatory and supervisory questions regarding libra, virtual assets, and virch wal currencies but i will focus primarily on the serious concerns the treasury has regarding the growing misuse of virtual currencies by money launderers, terrorist financiers and other bad players. this week representatives of facebook's calibra will go to capitol hill to discuss their proposal for a crippo currency at the treasury department, across the u.s. government, and with the international financial community, there's been a great deal of activity recently related to the regulation and the treatment of digital assets and cryptocurrencies i would like to give some brief explanatory remarks about what we have been doing on this front since there's lots of interest and then i will open it up to
questions. last month, the libra association, a consortium of 28 businesses including a facebook subsidiary announced it's developing a cryptocurrency called the libra the treasury department has expressed very serious concerns that libra could be misused by money launderers and terrorists financiers cryptocurrency such as bit coin have been exploited to support billions of dollars of illicit activity like cyber crime, tax evasion, extortion, ransomware, illicit drugs, human trafficking. many players have attempted to use cryptocurrencies to fund their malign behavior. this is indeed a national security issue the united states has been at the forefront of regulating entities that provide cryptocurrency we will not allow digital asset
service providers to operate in the shadow s and will not tolerate the use of the cryptocurrencies in support of illicit activities treasury has been very clear to facebook, bitcoin users, and other providers of digital financial services that they must implement the same anti-money laundering and countering finances of terrorism known as aml-cft safe guards of financial institutions money transmitters of cryptocurrency must comply with the relevant banksecrecy act obligations and register with the financial crimes enforcement network known as fin-cen many people are not familiar with fin sen it's a bureau of the u.s. department of treasury fin sen's mission is to safe guard the financial system from
illicit use, combat money laundering, and promote national security through the dissemination of financial intelligence last year alone, it collected over 20 million bsa reports and has collected over 300 million in the last 11 years finsen implements the bank secrecy act's regulation and has federal regulatory, have supervisory and enforcement regulation over banks. the rules governing money service providers apply to physical and electronic transactions alike as money service businesses, cryptocurrency money transmitters are subject to compliance examinations just like every other u.s. bank to be clear, fincen will hold any agency that works with any cryptocurrency to its highest
standards. i also recently established the financial stability oversight council's working group on digital assets this fsoc group enables u.s. financial regulators such as th fed, occ, cftc, cfpb, and other key stakeholders to work together to combat risks posed by cryptocurrencies. as the president has said, bitcoin is highly volatile and based on thin air. we are concerned about the speculative nature of bitcoin and will make sure the u.s. financial system is protected from fraud given the international nature of cryptocurrencies, we are also going to great lengths to insure that effective regulation does not stop here at the u.s. border last month, led by the united states, the financial action task force known as fatf, the global standard setter for
aml-cft, adopted comprehensive measures on how countries must regulate and supervise activities and providers in this space. this was a major step towards harmonizing international regulations concerning cryptocurrencies we have also had extensive work at the g-20 and i will be addressing this again this week at the g-7 finance ministers in france to be clear, the u.s. welcomes responsible innovation, including new technologies that may improve the efficiency of the financial system that being said, with respect to facebook's libra and other developments in cryptocurrencies, our overriding goal is to maintain the integrity of our financial system and protect it from ab e abuse. treasury takes very seriously the role of the u.s. dollar as the world's reserve currency and will continue our efforts to
protect our country and secure the u.s. and global financial systems. with that, i know there's been a lot of interest in this subject, and perhaps a few others, so i'll take a few questions. in the back. >> thank you, mr. secretary. two questions for you if you don't mind the first is jay powell of the fed said last week that fsoc would be meeting in the future to discuss facebook's libra product specifically has that happened yet. secondly, you talked about facebook putting this out. if facebook is able to resolve all your concerns about aml and other issues, do you want facebook to be in the business of issuing cryptocurrency. >> let me make the first comment, which is we, i say we, either at the principles level or at the deputies level, we had multiple meetings across the regulators with representatives of facebook and expressed our concerns we have also had multiple meetings of the fsoc working
group. i think you know jay powell and i meet weekly and we talked about this extensively there are these discussions going on they will continue to go on. again, to the extent that facebook can do this correctly and can have a payment system, you know, correctly with proper aml, that's fine they have a lot of work to do to convince us to get to that place. >> can you address the problems of raising the debt ceiling? >> why don't i do this i'm sure there's a lot of interest in that as well but why don't i take a bunch of cryptocurrency questions, and we'll come back to you on that i'll give you that, but you can ask a cryptocurrency question or i'll come back to you. i'll wait for you. >> facebook had privacy issues in the past. how does that play into your concern and what is your level of concern with facebook having libra? >> well, again, i would just say we obviously have concerns with the privacy issues there's been items in the press
about potential settlements. i'm not going to comment on that but obviously, the regulators and one of the regulators, as i said, most people haven't heard on fin-sen, so one of the reasons i wanted to explain this is whether they're banks or nonbanks, they're under the same regulatory environment for fin-sen, and we'll hold them accountable. they're going to have to convince us of very high standards before they have access to the u.s. financial system >> mr. secretary, the social media summit last week, the president essentially accused the social media giants of animus against conservatives can you assure the markets and everyone watching that whatever actions this government will take is not a result of the president's view that these social media giants are biased against him? >> again, i can -- what i will tell you is that the president does have concerns, as it relates to bitcoin and cryptocurrencies and those are legitimate concerns that we have been working on for a long period of time but no, we're not going to
target any one entities. everybody is playing by the same rules. again, whether you walk into a money service provider or whether you walk into a bank or you do it digitally, you have to adhere to the same rules >> considering that bitcoin, what do you tell americans who want to invest in bitcoin and other cryptocurrencies >> well, i can tell them to be careful, okay. they should be clear why they're investing in them. there's a lot of good things to invest in. obviously, we know about but youknow, our number one issue is that one, we don't want bad actors using crypto currencies that's our number one issue. i think to a large extent, these cryptocurrencies have been dominated by illicit activities and speculation. we'll make sure that the general public and investors understand what they're investing in and whether it's the s.e.c. or other regulators there's proper dish closure. >> you're uncomfortable with facebook launching the
cryptocurrency - >> i didn't say i was comfortable with them launching a currency >> if they launched it in an appropriate and safe way >> i'm not comfortable today let me just be careful, as i said, they and others have a lot of work to do before they get us comfortable. >> do you have a sense of a timeline there is facebook being candid with the administration about how many years >> i think they're being very candid with the administration and where they are i'm not going to publicly speculate how long i think it will take for us to get to a point where we're comfortable with it, and part of it, there's been a lot of public interest in this that's why i wanted to get the public the assurance before they or anyone else does this, that we're going to make sure the financial system is protected and as i said, there's a lot of illicit activity we'll be shutting down forpeople using cryptocurrencies for bad purposes >> secretary, can you give a sense about how those discussions are going with your
counterparts from other g-20 countries on this particular area >> i would say there's enormous agreement on this, as i said i was in orlando, i think it was two weeks ago, the u.s. just finished the presidency, if i gave the keynote address there that was adopted that is the largest organization, much bigger than the g-20, and it's kind of the gold standard of aml and those rules were adapted and at the g-20 and the g-7, we have absolute general agreement that in the u.s., if you deal with the u.s. financial system, you have to adhere to the same rules, and that's something that the rest of the g-20 is very focused on >> mr. secretary, you said you would take questions on a number of subjects so i'll ask one. >> i said i am first going to finish the cryptocurrencies. let me finish. we'll come back to you >> so you said that treasury is concerned about bad actors using
cryptocurrencies such as bitcoin. which has become very popular among white nationalist groups what sort of actions has treasury taken to stop these bad actors from using these decentralized cryptocurrencies and then i have a follow up. >> as it relates to any specific group, i'm not going to comment on any specific group. what i will tell you is that fin-sen has multiple investigations going on. there have been enforcement actions that will be more enforcement actions. we're going to beef up our resources for regulatory oversight. this is something we're absolutely focused on and on top of >> may i ask a follow-up we'll try to get everyone a question >> what specifically language wise are you looking out of the g-7 finance ministers meeting and are you kftd you'll get a statement. >> >> i would say, again, my understanding is that there will be a chairman's report, there won't necessarily be a
communique in general, but i live that to the french. i will say, we have working groups at the g-7 and g-20 this has been in the g-20 notifications. i think we have a lot of interest in the digital tax. we're focusing on the international tax issue, but this will be high on our discussion issue >> mr. secretary, back in march, sanctions were imposed on the venezuela cryptocurrency, and our understanding is the venezuelan regime is still trying to keep it afloat can you give us an update on the resource you have gotten from the restrictions and whether you have knowledge that the venezuelan regiment is -- >> i'm not aware of anyone who is really using that or it's taken off or had any success whatsoever >> so the restrictions worked? >> absolutely. >> mr. secretary, aren't you afraid of painting everybody with the same brush? you have some of the crypto who have been going to the cftc,
going to the imf and lagarde and the ecb and every regulator and getting it done, and libra comes up you're still putting everybody in the same broad brush. >> i don't think we're doing that at all. as i said, one of the reasons why i wanted to speak about this is there's been lots of activity that's been going on for the last year on this. and you know, whether it's congress or other areas of the press, because of libra, it's caught a lot of attention, and people weren't aware of all the work going on. so that's the purpose. >> let me know when you're ready. >> okay. any more crypto before we move on okay >> i wonder if you could be specific as to the illicit actions that you're referring to can you give us some examples so the american people can know if they're interested in getting into cryptocurrency, what things to avoid >> again, if you're dealing with a legitimate entity in the u.s.,
those legitimate entities that are attached to crypto are indeed subject to familiar customer rules and aml if you're looking to use bitcoin to go through those entities and go on the dark web and think you're not going to get caught, you're going to get caught so this is a warning if you want to use it for speculation, that's one thing. if you want to use it for illicit activities, we're going to put the full effort of the u.s. treasury and the regulators on to that >> do the new regulations favor traditional banks, maybe in the same way -- >> no, this is intended to be a level playing field. whether you're moneygram or a bank or you're an online or you're paypal, this is intended to be a level playing field, and again, what we do encourage, and there's been a lot of financial
innovation, away from traditional banks, for electronic payment systems lots of people use electronic payment systems in dollars very effectively. and you know, we'll continue to support those activities we want technology to evolve >> yes, do you believe that the rise in bitcoin value was fueled by fraud have you seen evidence of that >> i'm not going to speculate. i have no idea why bitcoin trades where it is i'm not commenting on whether it's high or low again, i'm here to talk about the regulatory environment and warn people against illicit use. >> hi, secretary as a member of the cabinet, the president today talked pretty extensively about his tweets about the four congresswomen do you find the president's tweets racist and what do you make of white nationalists praising the tweets. >> i don't find it racist. the president went on and clarified his comments
he speaks for himself on that and he was very clear. again, we're focused on cryptocurrencies and then i'll do debt ceiling. >> you think they're not racist? >> mr. secretary, why did you push back the $20 redesign with harriet tubman was it to help the president save face? he suggested that was done out of pure political correctness, suggesting she should be on a less popular bill. >> i'll take it we're not going to switch off of cryptocurrency to some other things so i'm going to give you the benefit of that, then we'll talk i'll give you some brief debt ceiling. i'm sure there's interest in that again, there's a lot of misinformation okay, on this issue. and i have received letters being accused of postponing this and everything else. so again, this is a nonpolitical situation where the primary objective of changing the currency is to stop counterfeiting if you look at the $100 bill and
what went into the $100 bill, that was over a ten-year process. what people don't understand is when it comes to counterfeiting, and again, protecting the currency is my responsibility. there are multiple ways we protect the currency some of these are physical things that you can see, like when you look at the $100 bill and you see the thread there are security features that you can't see. okay there are security features that are limited to the government being able to see. so we don't advertise what all the security features are. but these are very complex things that once they're developed, then require different machinery to be made and a different manufacturing process. so the new currency is not going to come out for a long period of time when people talked about the design, and again, the design starts with what i would call the artwork, not design, and
again, even in the most optimistic scenario of me staying through the president's second term, i'm not staying past the president's second term this currency isn't going to come out this is not a political issue. and again, we're happy to comment on it. >> back to harriet tubman. you say it's not a political issue, but with everything, all the controversy swirling right now, as it relates to regs and things that have happened before, is this an issue about race >> no. and that, matter of fact, okay, we're going to do more research on kind of what's been done at treasury in the past at some point, we will be having to look at, when we have the currency, and at that appropriate time, we'll address the thing. everybody is going to get one question >> the economy cpresident can tt
the economy at the naacp meeting. >> i'm not aware, but i always like him to talk about the economy. the economy the doing fabulous it's a proud spot of growth. the black economy is doing terrific as well >> i have two questions for you, and i think it will address some of the questions my colleagues have you said you find the president's tweets aren't racist many find it racist. you're a member of the cabinet i want to know personally if you're concerned people see that tweet as racist? >> again, what i'm going to say is we have a lot of important topics i have already answered my one comment on this. i think i was very clear on this >> i'm asking a different question >> again, i think my answer is the same >> you're not concerned. i don't want to put word in your mouth. i would like you to speak to it directly >> again, what i already said is i think the president clarified his comment. i understand what the president's comment is i'm not concerned by the president's comment, and again, that's the last comment i'm going to make on this issue. we have other important things to talk about. >> i'll follow up, but on the
debt ceiling, are you planning to raise the debt ceiling when and will it take place before the government runs out of money? >> i'm glad you asked. now we're on a very important issue. the debt ceiling unfortunately, as you know, i can't raise the debt ceiling it's congress' job to raise the debt ceiling what i have said, and you know, given the importance of this, we run multiple scenarios of how we predict the government's cash flow i think hopefully everybody would agree that to the extent we want to limit spending, we, congress has the right to limit spending but once we agree to spend money, we have to pay for it and the credit of the united states government is of utmost importance the debt ceiling has to be raised one of our scenarios triggers a problem the first week of september before they get back so i have urged congress to raise it before they leave
>> a follow-up - >> i don't see the government shutdown looming again, that's not an issue until the end of september, and i have no expectation there will be a government shutdown. >> is a short term extension, if you're unable to get a longer term deal that would punt until october, is that on the table? and can you describe the nature of your negotiations with speaker pelosi on this issue, reportedly, youhad a phone conversation on saturday night >> the speaker and i have been speaking regularly i think we have had very productive discussions i also spoke to mitch mcconnell and kevin mccarthy and others over the weekend i have been working very closely with mick and russ and had daily conversations with the president. i met with the president this morning. we updated him i expect to speak to the speaker again later today. i think there is a preference on both parties to the extent we
can agree on the debt ceiling and a budget deal, that that is the first choice i think we're getting closer i would just comment that the president very much cares about the v.a. i'm just commenting in regards to the speaker's comment you know, the military versus the defense versus nondefense tends at times to be viewed as a republican versus democrat issue. it's not let me be clear. the republicans all care very much about nondefense as well. and we will make sure that there's enough money to support the military and what we need to do in the military, the v.a., and everyone else. >> mr. secretary >> thank you >> can we spread it around, please >> the treasury just announced he's not concerned that white nationalists find -- >> i'm not answering more of
these questions. go ahead >> do you have any concerns serving in the administration with which white nationalists seem to find common cause and a president and under a president who routinely says he has no problem with the support >> to be haonest with you, i fid that question disrespectful to me as secretary of the treasury. i'm here talking about issues in my domain. i answered a bunch of questions on this. i'm also on my way to doj to give a speech on anti-semitism i'm happy to turn to people who want to talk about the debt ceiling and the budget >> can you give a clear timeline for when you expects this deal to be made, and on a separate but not unrelated issue, can you give us an update on trade talks with china >> sure. i think the leadership on both sides and the president would like to reach an agreement as quickly as possible. and that's why, you know, i am speaking to the speaker and others, and again, let me say
this is a team effort. although i'm directly negotiating with the speaker, i'm doing that at the direction of the president, and he's taking input from a lot of people you know, i think we're very close to a deal. but as you know, these deals are complicated. there's the top line number. we want to do a two-year deal. there's typically offsets that have been negotiated as part of these deals. that's been done every single time so, you know, i'm very hopeful we can come to an agreement quickly, but having said that, if for whatever reason we can't agree on all these issues before they leave, i would either expect them to stick around or raise the debt ceiling china, ambassador lighthizer and i have had several conversations on china with our counterparts we expect to have another principal level call this week, to the extent we make significant progress, there's a
good chance we'll go there later. >> just to be clear, do you expect the debt limit to be raised on time >> of course, i expect the debt ceiling to be raised on time because i would say both parties, there's no uncertainty that neither party nor anybody wants to put the credit risk of the united states government at risk so yes, i expect that the debt ceiling will be raised, and by the way, the speaker has said that, mitch mcconnell has said that last question. >> yes i wanted an opportunity. thank you very much. i wondered if you could address how does the president feel about trade talks at this point? and could you also tell us how he's feeling specifically about the job that his commerce secretary wilbur ross is doing has he talked to you about that at all >> i have every reason to think secretary ross is doing a good job. i never heard anything otherwise.
secretary ross has been an important part of the trade team again, this has been an integrated team, and i think the president is very pleased on trade. i would say, last pitch for the speaker and others, would like to see usmca, a very important economic package, and i'm hopeful. i know ambassador lighthizer is working with leadership on that. thank you. >> you've been listening to treasury secretary steven mnuchin in this press conference that was called just about an hour ago a half hour press conference focused on the treasury's concern about cryptocurrency, concerned about the volatility and also the use in illegal activities he underscored the point that institutions dealing in cryptocurrency would need to register with the financial crimes enforcement network and be subject to all the standards that financial institutions are subject to right now when it comes to anti-money laundering as well as know your customer provisions on the news line to discuss, this is brian kelly, founder of
brian kelly capital. great to have you with us. >> yeah, great to be here. thanks >> did anything jump out at you that would indicate that the administration could be turning up the heat on crypto? >> no, i think his comments were relatively measured, and frankly, from my perspective, having more clarity on regulation is probably a good thing in the long run here you know, there are a lot of legitimate players in the cryptocurrency space that would like to have the bad actors cleaned up. so i think in that sense, very fair, very measured comments what they're dealing with, and every regulator is dealing with, is that this is a global asset subject to local regulation. it's great they're getting together with the g-7 and g-20 to talk about this >> what was interesting is he was talking about libra and facebook specifically at points, and he said that facebook has met with a lot of regulators, that treasury currently as it stands is still concerned about
the issuance of libra. regulators can regulate facebook and the consortium as issues of libra, but when it comes to applying the same standards to bitcoin, they can't, can they? >> right, in terms of the issuing of the currency, there is no issuer there's nobody like facebook in that but what they can do is use the aml, antimoney laundering and know your customer rules to make sure that the currency itself, whoever is using it, are actually passing those things. so bitcoin is out there. bitcoin, there's nobody who has issued bitcoin it's a software program that spitz out 12.5 bitcoin every 12 minutes. it's very different than libra in that sense, you're right. >> so did you hear him at least conceptually embrace the idea that cryptocurrencies have a role to play in the global economy provided they're subject to the kinds of regulations that he wants including facebook
he said he wasn't comfortable with where they are right now, but it sounded as though given the right sets of parameters, he could get comfortable with libra. >> yeah, i don't know if i would go so far as to say that he embraced the role of bitcoin, but i think what i heard was that the united states and rightfully so, does not want to stifle any innovation. that payment systems, and that's really what libra is, libra is much more of a payment system like a paypal type of thing than it is a digital currency those, as long as facebook plays by the same rules that everybody else does, i did feel he could embrace it he did say it seems like they have a lot of work to do >> brian, thanks so much see you tonight on fast money at 5:00 >> all right, now let's get to ylan mui in washington, d.c. you have been listening to this, and of course, this is the day
before david marcus heads to the hill >> that's right, melissa i was scouring through the prepared remarks he intends to present on the hill, and here's the relevant line. it seems that facebook was prepared for this line of criticism. he says the libra association is committed to supporting efforts by regulators, central banks, and lawmakers to insure that libra contributes to the fight against money laundering, terrorism, financing, and more and kind of points the finger at cash transacs as being a place for a lot of illicit activity happens. so this is clearly a line of attack that facebook has been prepping for they intend to push back against the concerns raised by the treasury secretary it's also an area where lawmakers have done a lot of research as well i got ahold of background documents that have been circulated among the democrats who will be holding their hearing on wednesday in which they point out several national security concerns involving libra, including how you identify the person who is
holding that particular token, what compliance standards would apply in the case of this new type of currency, and how the association would manage issues like sanctions, stolen asset recovery, tax collection, additional crimes. there's also an effort under way amongst house democrats led by house financial chairwoman maxine waters to insure that companies like facebook do not issue any currencies there's a discussion draft of a bill that's out there that would prohibit them from doing so. a lot of tough questions on the issue of national security that lawmakers will bring to the fore over the next few days >> ylan mui in washington. let's go to julia, who has a response from facebook >> that's right, tyler i reached out to facebook as secretary mnuchin was making his comments that were so critical of libra and facebook's role with the cryptocurrency. facebook telling me that they anticipated critical feedback from regulators, central banks, and lawmakers around the world,
and that is why they announced libra a year out from its anticipated creation, so they could have those conversations facebook also directing me to david marcus, who runs calibra, facebook's crypto currency arm, to his facebook post on july 3rd, in which he really stresses the fact that they're open to feedback from a range of different players on this, and also that facebook is not running the libra currency it's just one of 28 organizations currently involved back over to you >> julia, thank you. julia boorstin in los angeles. joining us is brent bill he covers facebook at jeffries he's bullish on facebook with a buy rating, a $230 price target. he's negative on libra is it because it's thrusting the company right back into the political spotlight and it seems like there's bipartisan support to rein this effort in >> i think short term, we're negative we don't believe it's going to achieve what the bulls think out of the gate. we're positive on facebook for the core advertising business.
we did survey 600 social media users on libra 80% said they have no interest so out of the gate, you have a big pushback from u.s. consumers. we think this will have a bigger impact globally in asia and in europe and again, you're talking a year out before it's launch then you're talking the typical 20-year in arrears view. it takes two to three years for new technology to catch on you're talking 2022, 2023. before this is going to have an impact so we're positive long term, just short term, i think everyone has a little too carried away with what this will mean >> that's pretty staggering. did you say 80% of u.s. users have no interest >> we surveyed 80% in the u.s., now, that's what we would expect given you already have paypal linked to your instagram account. so we would expect that. i think in developing countries this will have big promise these microtransactions,
the stock? >> we're not negative on libra we think there's no real assumption - >> but if they had to get a banking charter? >> it would potentially cost more money you could look at the margin structure. maybe this costs more than they think. again, we're still a long ways away it's notable many of the banks didn't participate in the round, so i think, again, we're still in the real early innings of this and again, i still think we're three years away before we have an impact. >> brent, thanks for your time appreciate it. let's get to eamon javers at the white house. he took on questions on the debt ceiling. >> that's right. treasury secretary there suggesting that treasury's team has looked at the debt ceiling issue and they think it's going to come to a head possibly under one scenario by the end of september. that means they need a political deal with democrats. he said he's been talking to the speaker of the house, nancy pelosi, talking to his team internally, and he called those conversations productive but he also said they're not there yet. he says he thinks they're going
to get a debt ceiling deal that would involve some compmize as well he would like to get it done as soon as possible he said the debt ceiling needs to be raised, but boy, did he get a reminder of the political context that this white house finds itself in today, when the president has held a press conference here at the white house angrily rebutting his critics who say his tweets over the weekend were flat out racist the treasury secretary was asked about that a number of times and seemed really uncomfortable with those questions did not want to deal with them, suggested that he did not find the president's tweets to be racist, and also said ultimately that he supports the president he supports the president's explanation today of his tweets. then really wanted to move on to other subjects subjects that were maybe more palatable to hem like the debt ceiling. you know where you stand because it's a complicated subject for the white house. >> coming up, as america goes to war with e-cigarette makers,
we'll take you to one country that is actually encouraging vaping we'll tell you why and see how it's working "power lunch" will be right back (gentle music) - my degree from snhu has helped me tremendously. the flexible class schedules allow me to go to work full-time, run my catering business and be a mom and parent. when i reached this accomplishment, it was like, it's here, it's happening, it's now. we, at southern new hampshire university, are the ones who succeed. we are the ones who break through.
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cbre is out with a brand-new report that says the bay area is still a hub for big tech, silicon valley could be facing competition for talent cleveland, long island, a gegrag geographical area, and tucson on the rise joining us is spencer. great to have you with us. no surprise, san francisco bay area, seattle, washington, they remain perched as number one and number two what is going on underneath that and what's causing this sort of rotation to these smaller areas? >> certainly the headline is there's a scarcity of labor overall and even greater skarsty of labor when you get into the high-tech trades this has drawn people into the
smaller markets like orlando, like chicago, like markets like salt lake city to capture that tech talent. we're seeing another level of kauntstration in some of the emerging markets, like tucson and other markets that have large universities to both create the talent and create a live, work, play environment where they want to live. >> what level of office is moving to these smaller cities in other words, is it the headquarters, the most highly paid researchers, talent, or is it back office that's going to the smaller cities >> well, it's a little bit of both i would say it's less head office, but sometimes a secondary office from a major tech firm, but very often what you're seeing is firms that are want directly involved in tech tech as a secondary function those are some of the firms that are moving to these markets. so like a caterpillar moving to tucson, arizona, would be a good example of that. other companies are moving to these markets, not just as headquarters, but secondary markets. you're seeing a whole growth of innovation, so an example would be chicago which has seen over 300 new companies formed in the last couple years because it's such a great environment for these new
tech firms >> are you seeing any erosion in san francisco's position at number one given some of the policies the city has sought to pursue, for instance, the proposed tax on very highly paid ceos is that causing companies to rethink san francisco as the top place? >> i think it's fair to say that san francisco, seattle, new york, d.c., are doing just fine. while their growth may have slowed a bit, they are still growing, and they still have the deepest concentration of talent anywhere and they also have great infrastructure and other forms of virtuous cycles that have people wanting to live there the big markets aren't going anywhere, but the real tech question here is that the smaller markets have better momentum in terms of coming up to them, because people see the cost of san francisco, they see the scarcity of labor in markets like new york and in seattle so it is not that these markets are going down, it's that the smaller markets are growing faster >> so cbre is a commercial real estate company connect the dots for us,
spencer. when you're doing this study and finding that tucson, long island, orlando, they're the next hot places, how does that reflect in leasing rates, in what they lease for, in the demand >> sure, well, you'll see in some of these newer markets, markets like madison, wisconsin, you're seeing unprecedented low vacancy rates in a 5% to 6% range. you're also seeing in some of the hotter growth markets, orange county has seen rent go up almost 50% in the last few years. one of the hottest markets of all is cambridge, massachusetts, which may be the single biggest sublet market. that's biotech in addition to other forms of tech. you're clearly seeing it show up in not only office vacancy, office rents, but also in multifamily rents where many of these markets have become incredibly expensive and one of the key criteria for people moving to a different market is determining what is not only their cost of labor but what is
their labor's cost of living >> spencer, thank you. fascinating study. spencer leavy of cbre. >> up next, cnbc's special report into america's e-cigarette ediction "power lunch" will be right back and put back together. this is also hal's heart. and this is hal's relief, knowing he's covered. this is hal's heart. and it's beating better than ever. this is what medicare from blue cross blue shield does for hal. and with easy access to quality healthcare, imagine what we can do for you. this is the benefit of blue.
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the u.s. government is wrestling with how to restrict the vaping industry to stop teen use, but the uk has a much rozier view of rosier view of vaping. carl carl quintanilla met with a man in london named happen kerr who could be the poster child for the british government's take on e-cigarettes >> vaping kept me off cigarettes four years >> not a single cigarette? >> not one it's thanks to vaping, to be honest >> reporter: his success with vaping is a path the british government would love to have other u.k. smokers follow. using the same research about e-cigarettes that u.s. officials do, the u.k. has come to a radically different conclusion it enthusiastically embraces vaping as a healthier alternative to smoking >> most of us know that smoking is bad for our health. >> reporter: the government has
even produced a striking online video to make its point. >> here is the jar with cigarette smoke. >> it just is so revolting >> reporter: obviously advertising regarding tobacco is much different over there, melissa, than it is here in the united states. but it does show you, once again, how if you come up with a disruptive technology that roils all kinds of different markets, you're eventually going to be dealing with multiple levels of policy all around the world, and that makes it extraordinarily complex aside from the technology we're talking about >> carl, you mentioned they use the same studies as are being looked at here in the united states how are the conclusions so vastly different >> i think in the u.k.'s case, they really are looking at relative harm is what they call it, less harm, you're not lighting a cigarette on fire we don't know what the long term effects of vaping are going to be i think there is a sense in the u.k. they're sort of looking at us in the united states and thinking, why are you guys looking this gift horse in the
mouth? smoking rates are coming down, they argue, because of vaping. you should champion it more than you are. that's what they're doing over there. >> are they actually saying smoking rates are coming down because of e-cigarettes as opposed to they are coming down and it happens to coincide with e-cigarettes >> i think -- i haven't seen data that makes a direct link, but they would argue, yes, there is no confusing the way their rates have basically gone -- they're going to go to citi row not too long from now along with the disruptive technology vaping is >> amazing down to zero. carl, thank you. for much more be sure to watch the new documentary, vaporized, america's e-cigarette addiction. it appears on cnbc tonight at 10:00 p.m. eastern and pacific time check out this mystery chart. this stock has found its pudding over the past month, up 18%. it got a big upgrade today the analyst who makes the call tells us why it's a shoe-in for urorolio
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prevagen has been shown in clinical trials to improve short-term memory. prevagen. healthier brain. better life. numbers are in for the new winne casino in boston harbor. contessa joins us with the latest >> a big win for winne resorts of the it hit the jackpot with the encore of boston harbor. we got the numbers from the massachusetts gaming commission. the casino opened in everett it brought in $16.8 million.
3 million shy of mgm springfield did and beat out the slots facility in plain ridge park encore earned 2 1/2 million dollars more on the table games than mgm springfield did on its table games all month. encore boston harbor opened in late june after a tough year and a half it was filled, of course, with scandal and investigations, leadership turnover. but when the $2.6 billion facility opened its doors on schedule, the visitors just poured in. in fact, gaming analyst harry curtis at insta net told me kind of hard to extrapolate any kind of trend based on the early numbers because the first days were just so packed with eager and curious people looking for an inside view i did reach out to winne resorts to see whether these numbers met or exceeded their expectations and they said, yeah, we're going to talk about that in the earnings report for the second quarter end of the month, no date set yet for that. >> thank you, contessa brewer. it is time to reveal the mystery
chart. take one more look at this one can't figure it out? well, crocs. it seems to be gaining its footing getting an up grate from piper jaffery. 27 bucks a share, around a 30% up side from current levels. joining us on the cnbc newsline to discuss the call is the analyst, piper jaffery's erin murry. store traffic has been solid over the spring and summer what percentage of the year does crocs do, how important are the seasons? >> very important season for crocs. roughly about 70% is done in the first half they have been extending that spring/summer season as they've been thinking of new usage occasions for the classic clog and moving further beyond that it's a big season and we've been not couraged from what we've seen from a traffic perspective as we've gotten deeper into the summer season. >> you like the innovation going on at crocs, especially collaborations like the vera
bradley. that sold out already? >> it has. so what's really interesting, i think if we take a step back, they have started to approach their go to market strategy very differently over the last 18 months so their entire marketing has been done through digital channels and these collaborations, they're really finding out a way to keep their core comfort customer. so that would be someone who would likely shop at vera bradley, but also be relevant with teens and getting that younger gen z. launching in july or whether it's the post malone collaboration launched at the end of last year, i think they're doing a really good job of getting kind of two strong customer cohorts >> in terms of some of the potential risk factors, erin, some of crocs are made in china, they're also made in mexico and in europe. how much exposure does it have to china is that a concern at all >> sure. so, if you look at the exposure into china into the u.s. market,
because that would be the market obviously if tariffs were to go through at 25%, even though that's been pushed off for now, it would be about 10% of their total manufacturing by the end of 2020. so in pretty reasonable shape relative to the rest of their peer set in terms of mexico it's di minimis now, roughly single digit, very modest, 1-ish, 2% of their manufacturing. we think they're fairly diversified. vietnam is a key region for them in terms of a manufacturing perspective. i think that overhang is decided at least in the last couple of weeks. >> and then in terms, in terms of direct to consumer, erin, is most -- they're keeping a tighter inventory control. is most of it done through a distributor or are they direct to consumer at this point? >> in terms of the total brand globally >> yes >> you look at 50% is done in wholesale. what's interesting about that wholesale business is half of that is done through what we like to call e-taylor.
whether it's amazon, the other 50% of their business is split between retail stores and internet, their own crocs.com. >> erin, we're going to leave it there. erin murphy, piper jaffery with that we leave you for "power lunch" on a monday. thanks for watching. closing bell starts right now. >> welcome to closing bell i'm wilfred cross. banks broadly under pressure ahead of earnings from goldman, from j.p. morgan, and from wells fargo. tomorrow morning a preview of that coming up with 59 minutes left of trade, everything you need to know as an investor is coming up >> and i'm morgan brennan in for sarah eisen. let's get to what's driving the action energy is dragging the markets you heard wills talk about that. stocks are hovering near records as we await more earnings this week joining us for this hour to break down the m