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Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you,

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Speaker 1: along with my co host Lisa Brahma wits. Each day

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Speaker 1: we bring you the most noteworthy and useful interviews for

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Speaker 1: you and your money. Whether at the grocery store or

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Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple

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Speaker 1: podcast or wherever you listen to podcasts, as well as

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Speaker 1: at Bloomberg dot com. Let's talk Brexit. Let's get some

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Speaker 1: opinions on it, because I can't figure out for the

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Speaker 1: life of me if we're really actually close to an

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Speaker 1: agreement or whether we're still miles away. Terre's Raphael is

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Speaker 1: going to clear it all up for us. She's a

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Speaker 1: Bloomberg opinion editor in London. So Terre's are we going

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Speaker 1: to get a Brexit deal or is this sort of

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Speaker 1: more uh, sort of tenuous negotiating that's gonna get shut

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Speaker 1: down on both sides. Well, there's one final bridge to cross, um,

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Speaker 1: but it's maybe the wobbliest and most difficult bridge to

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Speaker 1: get cross across. Maybe that's the way to put it. So,

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Speaker 1: there is a deal that has been agreed between the UK,

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Speaker 1: the European Union. Ireland crucially has signed off on that,

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Speaker 1: and that is a huge accomplishment because it looked, um,

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Speaker 1: you know, only say twenty four hours ago, like that

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Speaker 1: wouldn't happen the you know, giant capital letter. But here

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Speaker 1: is the Democratic Union's Party of Northern Ireland, a key

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Speaker 1: ally for the Conservative government. UH, is absolutely opposed to

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Speaker 1: the deal, has said they will not vote for it.

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Speaker 1: And the question is whether Boris Johnson can gather enough

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Speaker 1: votes in the House of Commons from his own party

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Speaker 1: and other parties to make up the numbers that he needs.

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Speaker 1: So Terre's I know you wrote a column on this,

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Speaker 1: This the Northern Ireland issue, um, and that is continues

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Speaker 1: to be a major UH stumbling block here. Historically the

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Speaker 1: DUP has been able to block such a deal. What

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Speaker 1: is the sense right now, given maybe where the parties

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Speaker 1: are just that in terms of exhaustion, so normally a

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Speaker 1: no means no from the d u P. I think

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Speaker 1: that Johnson probably is hoping, um, that there's some chance

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Speaker 1: they'll change their mind if, for example, he has enough

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Speaker 1: votes in the Common The reason is this, he's offered

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Speaker 1: the DUP reportedly quite a large sum of money to

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Speaker 1: go along, and this is a DUPS moment of maximum

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Speaker 1: leverage if they uh, if they say no and the

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Speaker 1: deal doesn't go through the Commons, then they're going to

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Speaker 1: get a share of the blame for that. And we

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Speaker 1: don't know how that would play out in a future election.

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Speaker 1: The DUP may find that it gets hurt. If they

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Speaker 1: say no and the deal does pass, the DUP may

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Speaker 1: have given up an opportunity to uh, you know, to

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Speaker 1: to to gain some benefits out of it, whether monetarily

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Speaker 1: or in terms of you know, future influence. So the

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Speaker 1: DP has to think very hard about whether it's going

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Speaker 1: to stick by by the position. And then the key

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Speaker 1: question is whether their allies and the Conservative Party, which

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Speaker 1: are now known as the Spartans, those that refuse Theresa

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Speaker 1: May's deal three times before on the grounds that it

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Speaker 1: hurt the Union in its cause among other among other things,

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Speaker 1: whether they will stick by the DUP or instead decide

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Speaker 1: to back Boris Johnson's deal. And I think once we

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Speaker 1: know that it will be easier to say whether this

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Speaker 1: deal has a chance on Saturday. Meanwhile, of course, the

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Speaker 1: Labor Party, by Jeremy Corbyn is well is expected to

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Speaker 1: throw a spanner in the works. It's already declared the

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Speaker 1: deal worse than Tersa May's deal, so it's not clear

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Speaker 1: it gets through the House of Commons. I think it's

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Speaker 1: got a better chance than May had um, but but

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Speaker 1: that may not be saying enough a better chance than

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Speaker 1: May's head. What does this deal have that is so

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Speaker 1: much better in terms of being more conciliatory to all

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Speaker 1: sides than Theresa May? Right? Okay, the main difference is

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Speaker 1: that Teresa's May's Teresa May's deal included what was known

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Speaker 1: as the Irish Backstop, which was a sort of insurance policy,

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Speaker 1: but it locked the UK into the US Customs Union

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Speaker 1: indefinitely if other solutions weren't found to take it out. Now,

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Speaker 1: that was completely UH, anathema to the d U, P

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Speaker 1: to UH, to conservatives, even too many in the Labor

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Speaker 1: Party because it tied the UK for you know, UH

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Speaker 1: an indefinite period of time to EU rules. This deal

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Speaker 1: gets rid of that. Instead, it aligns UK goods with

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Speaker 1: the EU um UH for regulatory purposes. But it also

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Speaker 1: has this sort of innovation on customs where the goods

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Speaker 1: that are destined for the UK would pay UK customs.

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Speaker 1: Goods that might go to the EU through Northern Ireland

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Speaker 1: would pay EU customs and there'd be a sort of

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Speaker 1: committee that decides which are at risk of going to

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Speaker 1: Northern of going through to the EU. So it's complicated,

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Speaker 1: it's a bit messy, it's kind of even hard to explain.

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Speaker 1: But crucially what it does is it gets rid of

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Speaker 1: the backstop and that was what Boris Johnson promised and

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Speaker 1: that's what gives it this acceptability for Conservatives. It also

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Speaker 1: has a consent mechanism so that the Northern Ireland parties

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Speaker 1: can themselves approve it periodically every four years. Torre's just

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Speaker 1: about twenty seconds. Can you can just give us a

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Speaker 1: sense what's going to happen Saturday, what's supposed to happen,

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Speaker 1: what's scheduled to happen. I'll give it to you in

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Speaker 1: five seconds. It's going to be a vote, okay, and

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Speaker 1: beyond that, and beyond that, I can't tell you whether

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Speaker 1: it's gonna pass. All right, So we're gonna pay attention

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Speaker 1: to that vote Saturday, and we'll hopefully we'll have some

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Speaker 1: more clarity the next time we speak to you, which

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Speaker 1: will probably be next week. Tres Raphael, thanks so much

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Speaker 1: for joining us. Trays is a Bloomberg Opinion editor. Covering

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Speaker 1: European politics and economics, especially Brexit. She is the go

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Speaker 1: to voice. She does that from our London bureau. You

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Speaker 1: can read more on this and other stories from Bloomberg

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Speaker 1: Opinion at Bloomberg dot com, slash Opinion and on the

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Speaker 1: terminal by typing an O, P, I N go. Well

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Speaker 1: are good friends at Morgan Stanley reported earnings better than

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Speaker 1: expected earnings is trading up about three points seven percent today.

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Speaker 1: To get the latest on Morgan Stanley and all the

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Speaker 1: big investment banks that have reported this week, we welcome

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Speaker 1: Alison Williams. She's a senior annalysts covering global investment banks

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Speaker 1: and asset managers for Bloomberg Intelligence. She joins us on

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Speaker 1: our Bloomberg and Actor Broker studio. So, Alison, um Morgan

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Speaker 1: Stanley kind of bringing up the rear for the big

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Speaker 1: investment banks this week. What are the key takeaways for you?

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Speaker 1: So for Morgan Stanley, Uh, you know, strong quarter at

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Speaker 1: least versus the expectation sort of across trading and fees.

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Speaker 1: I think importantly that their wealth margin um is running

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Speaker 1: at the higher end and and the bottom line is

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Speaker 1: really that they are well within their range to make

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Speaker 1: their target for the year, and I think that's sort

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Speaker 1: of the kind of takeaway as we're exiting the quarter,

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Speaker 1: who who's sort of on track to meet their targets

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Speaker 1: and in a good position for next year, and who's not?

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Speaker 1: And so Morgan Stanley falls into the positive bucket JP

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Speaker 1: Morgan also their Bank America showing really positive trends UH yesterday. However,

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Speaker 1: a city group, I think it's going to be a

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Speaker 1: closer call. They basically said they're going to do everything

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Speaker 1: they can to make that twelve percent return on tangible

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Speaker 1: equity target common equity target UM next year. My guess

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Speaker 1: is they're going to have to lower UH their target

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Speaker 1: for next year, and then Goldman that doesn't really manage

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Speaker 1: to a target, at least not now. We'll probably hear

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Speaker 1: more from them on specific targets next year. But I

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Speaker 1: think UM it was a combination of costs coming in

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Speaker 1: higher than expected, as well as disappointing banking fees. So

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Speaker 1: I wanna talk about debt trading revenues because I like

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Speaker 1: talking about them, but also with Morgan Stanley that really

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Speaker 1: was the front and center. Their beat was really remarkable. UH.

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Speaker 1: Debt trading revenues surging twenty one percent in set of

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Speaker 1: dropping five percent is analysts had predicted. Do we have

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Speaker 1: a sense of what drove that? So there were a

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Speaker 1: few things that they talked about. Basically, credit trading was

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Speaker 1: strong for them, UM as and rates was a little weaker.

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Speaker 1: That was similar to comments that they had made in September.

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Speaker 1: The commodities business US was also good for both UM

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Speaker 1: Morgan Stanley angle up in this quarter. Think about what

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Speaker 1: was happening UM with energy prices, but UM Morgan Stanley's business,

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Speaker 1: which we haven't talked about in a while, and commodities

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Speaker 1: can be lumpy, so that may have been part of it.

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Speaker 1: But JP Morgan and Morgan Stanley both having really strong

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Speaker 1: quarters on the front, on the thick front. People right

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Speaker 1: on the thick front. I'm wondering how much of this

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Speaker 1: is taking business away from Deutsche Bank, and that's what

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Speaker 1: we're seeing. So there we're hearing less I think specifics

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Speaker 1: in terms of thick where they're gaining shared and I

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Speaker 1: think that's really gonna be the number to watch next week.

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Speaker 1: We definitely are hearing about market share gains in prime,

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Speaker 1: whether they're specifically calling it that or not. Prime brokerage

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Speaker 1: meaning the business catering to hedge funds. Correct, and that

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Speaker 1: is a business where um, you know, Deutsche Bank sort

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Speaker 1: of never recovered coming out of sort of their their

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Speaker 1: legal concerns of that businesses sort of continued to slip away.

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Speaker 1: That's a business that they, um have stepped off of.

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Speaker 1: We the Bloomberg News reporters have been talking about different

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Speaker 1: market share wins UM from the banks that we heard

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Speaker 1: from the banks themselves. You know, Bank America talking about

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Speaker 1: higher balances, Goldman talking about higher balances, and Morgan Stanley

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Speaker 1: perhaps the most specific talking about higher prime balances UM

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Speaker 1: and wins from Europe. So alson. You know, having listened

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Speaker 1: to the conference calls this week, I WHI I know

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Speaker 1: you have. For the big investment banks, what are they

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Speaker 1: saying about the regulatory outlooks? And then there's been some

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Speaker 1: talk about rolling back some of the regulations that were

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Speaker 1: put upon the financial services industry after the financial crisis.

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Speaker 1: What's the status of that. The one regulation that I

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Speaker 1: think bank confessors are most focused on, we're most focused

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Speaker 1: on at least is um you know, the final capital rules,

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Speaker 1: and there's two rules right now they're sort of in progress.

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Speaker 1: One relates to one capital measure and one relates to

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Speaker 1: the other UM. One's gonna make things tougher and one's

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Speaker 1: gonna make things easier. But the net net UM things

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Speaker 1: could be tougher for Morgan, Stanley and Goldman because they're

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Speaker 1: basically tailored to UM, sort of charging them more for

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Speaker 1: certain related investment banking businesses. And so I think that's

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Speaker 1: the key that that people are watching. However, we've seen

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Speaker 1: in the last couple of stress tests and capital returns

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Speaker 1: the banks sort of being a little bit more conservatives

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Speaker 1: as we sort of wait those final rules. There were

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Speaker 1: UM questions sort of throughout the calls on the political landscape,

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Speaker 1: different things that have been going on. I think managements

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Speaker 1: generally we're trying to change the subject and and not

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Speaker 1: kind of go down that path shocking, I will say,

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Speaker 1: I mean, honestly, they don't want to answer these questions

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Speaker 1: because how can they possibly have a lens out. I

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Speaker 1: am curious though, just at a larger level, how much

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Speaker 1: are US banks just absolutely trouncing the European and other

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Speaker 1: global peers at this point. So to your point, we've

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Speaker 1: seen that UM in the numbers, We've seen it in

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Speaker 1: the trading numbers and we've seen it in the fee

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Speaker 1: numbers over the past US a few years. We've seen

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Speaker 1: it in the first half, and so it's it's interesting

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Speaker 1: because it's it gets tougher and tougher to do a

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Speaker 1: read across from the US because all Thick broadly beat expectations.

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Speaker 1: So every single bank beat and Thick Equities was a

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Speaker 1: little bit mixed, but in aggregate better um, and we'll

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Speaker 1: find out next week UBS reports Credit Suiteen Deutsche Bank

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Speaker 1: the week after Barkways is also sort of in that mix. Um.

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Speaker 1: We'll find out exactly how much of the better numbers

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Speaker 1: are coming from, uh, those share games. Allison Williams the

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Speaker 1: busiest person in Bloomberg these days. Thank you so much

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Speaker 1: for being with us, Alison Willis. Allison Williams is a

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Speaker 1: senior analysts covering global investment, banks and asset management for

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Speaker 1: Bloomberg Intelligence. Joining us here in our Bloomberg Interactive broker studios.

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Speaker 1: Wax Software Wax Inc. Melissa Smith, president CEO, joins us

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Speaker 1: right now to talk about the electronic payments business Wax is.

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Speaker 1: You can find out on New York Stock Exchange trading

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Speaker 1: onto the symbol w e X, about a nine billion

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Speaker 1: dollar market cat Melissa, thanks so much for joining us

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Speaker 1: on the phone from Portland, Maine. I want to talk

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Speaker 1: a little bit about WAX. What is kind of the

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Speaker 1: key driver for your story right now? I know about

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Speaker 1: two thirds of your revenue had historically been about the

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Speaker 1: truck fleet fuel payments business, but I know you've been

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Speaker 1: trying to diversify that. So tell us a little bit

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Speaker 1: about what the current growth drivers are. Sure Sure So

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Speaker 1: we're a financial technology service pro fighter and she talked

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Speaker 1: about one of the industries that were in his fleet.

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Speaker 1: We're also in healthcare, travel and accounts payable. If you

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Speaker 1: look at the growth and I'll talk about healthcare just

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Speaker 1: for a minute, Um, if you have an h s

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Speaker 1: A or an f s A or any type of

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Speaker 1: tax defered account where the technology that sits behind that,

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Speaker 1: and so one of the growth drivers for us in

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Speaker 1: that business is the fact that you continue to see

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Speaker 1: people moving to high deductible healthcare plans that have HS

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Speaker 1: accounts associated with that. So is you see that movement,

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Speaker 1: we continue to add accounts, uh, and as healthcare costs

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Speaker 1: keep changing, that's a place that we we um see

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Speaker 1: continued growth in our business. It's it's a place that

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Speaker 1: we've been playing on a lot of focus over the

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Speaker 1: last um last several years. So your shares are up

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Speaker 1: almost fifty year to date, so UM, not too bad. Well,

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Speaker 1: I hope you have stock options. I'm trying to figure

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Speaker 1: out going forward what the barrier to entry is this?

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Speaker 1: What's the competitive landscape for you? Yea in each of

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Speaker 1: the industry sphere and so so, first of all, we

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Speaker 1: operate at scale. We have about eighty billion dollars worth

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Speaker 1: to spend volume going through our business in our different verticals,

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Speaker 1: so we have scale. We'd use our own internal network,

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Speaker 1: so I think of that as relationships. So we've developed

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Speaker 1: ourselves and then through some of the networks. But really

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Speaker 1: the two big various for us, it's that the technology

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Speaker 1: is highly integrated into our customers and partners, and and

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Speaker 1: they're of all size. They're really large companies and really

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Speaker 1: small companies. UM. And what we do is is uniquely

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Speaker 1: solve problems that sit in a particular vertical, whether that's

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Speaker 1: fleet or travel or healthcare. So I know you have

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Speaker 1: some pretty aggressive growth targets ten and fift reruven and

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Speaker 1: growth maybe a little bit more than that. Earnings where

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Speaker 1: what are the businesses that are really going to drive

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Speaker 1: you to that growth. Because as I look at the

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Speaker 1: fleet business, that seems to be a slower growing business. Yeah,

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Speaker 1: you um, if you look at the sleep business, it's

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Speaker 1: it's a predictable grow. We had a big stuff I've

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Speaker 1: been growth this year and fleet. We migrated over both

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Speaker 1: Shallenge Chevron's commercial car portfolios. They were big contract wins

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Speaker 1: for us, and we've gone through the implementation process for that.

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Speaker 1: So you get a little bit of lumpiness sometimes in

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Speaker 1: the growth and sleep, but it is it's predictable. And

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Speaker 1: then at the same time, if you look at the

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Speaker 1: growth that we're getting in healthcare and travel, there are

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Speaker 1: really good macro that sit behind that, meaning that the

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Speaker 1: markets are growing themselves and we're benefiting from that. Both

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Speaker 1: in online travel, so our biggest customers and travel or

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Speaker 1: online travel agencies, so as they continue to see a

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Speaker 1: lift in their business, we have seen the benefit of that,

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Speaker 1: and then we keep adding new partners and customers. Globally.

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Speaker 1: We just entered on the travel side and to the

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Speaker 1: U A E. And so as we continue to extend

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Speaker 1: the presence that we have and the capability that we have,

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Speaker 1: we get a natural lift from that, you have an

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Speaker 1: incredible viewpoint into just the thinking right now of executives.

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Speaker 1: It's some of these companies that are affected by politics

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Speaker 1: and thinking healthcare, or by international national trade tensions, online

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Speaker 1: travel companies, and I'm wondering how much uncertainty you're feeling

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Speaker 1: from them, and whether there's a reluctance to invest in

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Speaker 1: some of your products because of that. I'm not seeing

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Speaker 1: uncertainty around UM or an unwillingness to invest. What I

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Speaker 1: have seen over the last several years is a desire

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Speaker 1: from some of the biggest companies that we work for

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Speaker 1: to have us work on innovation with them, which has

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Speaker 1: more to do with a trend of technology changing and

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Speaker 1: it's a strength of ours UM to innovate to bring

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Speaker 1: new tech into the marketplace, and so we have seen

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Speaker 1: more of an interest of doing things like we created

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Speaker 1: a product called driver Dash, which is mobile enablement of

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Speaker 1: fleet payments where you use facial recognition to turn on

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Speaker 1: the app, and the app itself turns on the pump

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Speaker 1: as a driver sits next to it. So think of

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Speaker 1: a someone who's moving a forward f to fifty that's

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Speaker 1: pulling up to a pump. The technology makes that transaction

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Speaker 1: that much more secure, and that's something we did initially

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Speaker 1: with Exa Mobile and and now we're we're doing with

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Speaker 1: Shell as well. So I think that there's more of

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Speaker 1: a desire to um to partner and to partner with

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Speaker 1: people that can move quickly in the space, which I

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Speaker 1: think is a benefit of ours. Melissa Smith, thank you

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Speaker 1: so much for joining us today. Melissa Smith is President,

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Speaker 1: chief executive officer of WAX, joining us from Portland, Maine.

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Speaker 1: President Trump is coming under some widespread criticism for his

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Speaker 1: Syria policy, and it's not just from Democrats this time.

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Speaker 1: Right now that some Democrats, some Republicans are also challenging

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Speaker 1: that policy. To get more we welcome Stephen Dennis, senate

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Speaker 1: reporter for Bloomberg News, joins us on the phone from Washington,

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Speaker 1: d C. So Stephen, give us the latest on how

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Speaker 1: this whole Syria policy is playing out for President Trump

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Speaker 1: in Washington. Yeah, I mean, it's basically overwhelming bipartisan opposition

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Speaker 1: to his decision to basically let Turkey invade without us

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Speaker 1: taking any real steps to Vntham. You know, we're starting

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Speaker 1: to put in play some sanctions and and of course

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Speaker 1: Mike Pence was sent over there to talk to the

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Speaker 1: Turkish president. But basically you have a lot of Republican

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Speaker 1: leaders over here who are a cast that the Kurds,

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Speaker 1: who fought alongside us to help the feed Isis are

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Speaker 1: being basically left defend for themselves as the Russians and

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Speaker 1: Syria forces and and and Turkish forces close in on them.

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Speaker 1: And so you know, yesterday in the House, so there

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Speaker 1: was an overwhelming vote only sick as your Republicans stood

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Speaker 1: with the President against this resolution that effectively rebuked him

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Speaker 1: for not standing up for the Kurds. And now in

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Speaker 1: the Senate, Mitch McConnell, the the Senate majority leader, says

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Speaker 1: he wants an even stronger resolution um on Syria. So uh,

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Speaker 1: Chuck Schumer, the Democratic leader, wants to have action today

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Speaker 1: on a resolution. So we'll see what ends up happening. Ing. Uh.

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Speaker 1: In the meantime, sort of a fluid situation on sanctions.

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Speaker 1: The House Foreign Affairs Committee is looking at sanctions. And

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Speaker 1: now we have on the Senate side today Christmin Holland

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Speaker 1: Democrat and Lindsay Graham Republican, sometimes chief ally of the President,

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Speaker 1: but on this his chief opponent will be introducing sanctions

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Speaker 1: later today much much stiffer than what the President has

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Speaker 1: been putting forward so far. So House Speaker now Nancy

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Speaker 1: Pelosi currently talking actually, and yesterday she made some news

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Speaker 1: when she talked about the meeting with President Trump with

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Speaker 1: House leaders with congressional leaders about the serious issue, saying

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Speaker 1: that President Trump had a quote meltdown. Do we have

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Speaker 1: a sense of, first of all, whether that's accurate, but

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Speaker 1: second of all, what the broader implications are of the

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Speaker 1: pushback the president is getting from Republicans in Congress. Yeah,

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Speaker 1: you know, there definitely was a dust up. Um. Pelosi

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Speaker 1: basically accused the President didn't on issues including Ukraine and

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Speaker 1: Syria and other issues as well, saying that all roads

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Speaker 1: would you lead to putin and and basically are helping

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Speaker 1: out the Russians and Russian foreign policy and uh, the

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Speaker 1: President wasn't happy and and called her a third grade

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Speaker 1: politician whatever that means. Um. And at some point the

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Speaker 1: name calling got to be so much that Schumer, uh Stenny,

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Speaker 1: Hoyer and and Pelosi decided to get up and leave.

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Speaker 1: This is not the first meeting where one side has

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Speaker 1: gotten up and left. It was months ago when the

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Speaker 1: President sort of stormed out of a meeting that he

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Speaker 1: had called on infrastructure, and he was upset with investigations

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Speaker 1: into him. And of course now the House is poised

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Speaker 1: to impeach him in the coming months. So this is

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Speaker 1: not that big of a surprise that they are at

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Speaker 1: each other's throats, if you will that. There is one

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Speaker 1: thing I'm watching is whether Republican angst and an upset

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Speaker 1: overseer impacts the impeachment to calculus over here in the Senate. Um.

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Speaker 1: Some Senate Republicans and Democrats have talked to don't see

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Speaker 1: it affecting it right now, but you know, if you

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Speaker 1: actually get to a point where some Senate Republicans are

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Speaker 1: considering voting to convict the president, which right now none

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Speaker 1: of them are really there. Um, this could just be

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Speaker 1: one more feather on the on the scale because Mike

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Speaker 1: Pence is seen as somebody who who would have had

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Speaker 1: a different foreign policy in this case. So Stephen just quickly,

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Speaker 1: what are next moves here? I think the next big

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Speaker 1: decision point is what does Mitch McConnell do on this

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Speaker 1: sanctions package? Does he want to bring something real with

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Speaker 1: teeth to the floor that would defy the president? Um,

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Speaker 1: it's one thing to have a non binding resolution um,

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Speaker 1: which he's done before. It's another thing to actually start

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Speaker 1: having Congress take over some big pieces of foreign policy.

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Speaker 1: That's something that he's gonna be probably fairly reluctant to do,

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Speaker 1: but he's getting a lot of pressure from Republicans who

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Speaker 1: want to do something to push back on what they

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Speaker 1: what they see happening over there with our allies getting killed.

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Speaker 1: Stephen Dennis, thank you so much for spending time. I

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Speaker 1: know you've got a very busy schedule. Stephen Tennis and

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Speaker 1: a reporter for Bloomberg News, joining us from Washington, d C.

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Speaker 1: Thanks for listening to the Bloomberg P and L podcast.

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Speaker 1: You can subscribe and listen to interviews at Apple Podcasts

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Speaker 1: or whatever podcast platform you prefer. I'm Paul Sweeney. I'm

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Speaker 1: on Twitter at pt Sweeney. I'm Lisa Abram Woyds. I'm

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Speaker 1: on Twitter at Lisa Abram woits one. Before the podcast,

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Speaker 1: you can always catch us worldwide on Bloomberg Radio.