WEBVTT - Yellen Warns on Debt Ceiling; Morgan Stanley Plans More Job Cuts 0:00:03.120 --> 0:00:06.680 From the Bloomberg Interactive Burger Studios. This is Bloomberg Daybreak 0:00:06.720 --> 0:00:08.200 for Tuesday, May second. 0:00:08.280 --> 0:00:11.480 Coming up today, Janet Yellen warns the Treasury may run 0:00:11.520 --> 0:00:12.879 out of cash in a month. 0:00:13.200 --> 0:00:15.960 President Biden invites leaders in Congress to meet on the 0:00:16.040 --> 0:00:16.640 debt ceiling. 0:00:16.880 --> 0:00:20.680 Morgan Stanley plans to cut three thousand more jobs. 0:00:20.600 --> 0:00:23.000 And writers for some of the most popular TV shows. 0:00:23.120 --> 0:00:23.959 Walk Off the Job. 0:00:24.520 --> 0:00:28.400 Testimony continues in the civil trial AGAUS former President Donald Trump, 0:00:28.720 --> 0:00:31.720 plus a grim discovery as seven bodies are found in 0:00:31.800 --> 0:00:35.840 rural Oklahoma. I'm John Tucker. More Ahead, I'm John Stash. 0:00:35.880 --> 0:00:36.480 Aaron's Wards. 0:00:36.520 --> 0:00:38.600 The Devils shut out the Rangers in Game seven. 0:00:38.640 --> 0:00:41.680 The next played tonight, the Mets split, the Yankees lost again. 0:00:43.680 --> 0:00:47.120 That's all straight Ahead on Bloomberg day Break, the business 0:00:47.159 --> 0:00:49.599 news you need to sturn your day in just one 0:00:49.720 --> 0:00:54.200 fifteen minute podcast each morning on Apples, Spotify, the Bloomberg 0:00:54.240 --> 0:00:56.920 Business app and everywhere you get your podcasts. 0:01:00.000 --> 0:01:01.280 Good morning, I'm Nathan. 0:01:01.040 --> 0:01:04.000 Hager and I'm Karen Moscow. Here are the stories we're 0:01:04.040 --> 0:01:04.840 following today. 0:01:05.080 --> 0:01:07.520 Karen, we begin with a warning on the debt ceiling. 0:01:07.600 --> 0:01:10.400 The Treasury Department now says the US could risk default 0:01:10.480 --> 0:01:14.600 as soon as June one. Bloomberg's Doug Prisner has the details. 0:01:15.160 --> 0:01:18.679 Secretary Janet Yellen said her department's ability to use special 0:01:18.720 --> 0:01:21.320 maneuvers to stay within the debt limit could be exhausted 0:01:21.360 --> 0:01:23.839 as soon as the start of June. She also said 0:01:23.920 --> 0:01:27.160 since revenue and spending flows are variable, the actual date 0:01:27.200 --> 0:01:29.720 could be a number of weeks later than these estimates. 0:01:29.959 --> 0:01:33.000 The current statutory limit of thirty one point four trillion 0:01:33.040 --> 0:01:36.240 dollars was hit in January. Since then, the Department has 0:01:36.280 --> 0:01:40.240 been staving off a possible default by using special accounting maneuvers. 0:01:40.560 --> 0:01:43.959 Yellen's new timeline reflects Treasury's latest thinking on when that 0:01:44.040 --> 0:01:46.680 headroom is likely to be exhausted. In New York, I'm 0:01:46.720 --> 0:01:48.480 Doug Prisner, Bloomberg Daybreak. 0:01:48.320 --> 0:01:48.640 Y Doug. 0:01:48.720 --> 0:01:52.680 Thanks. Meantime, President Biden has invited top congressional leaders to 0:01:52.720 --> 0:01:55.760 the White House on May ninth to discuss the debt ceiling, 0:01:55.800 --> 0:01:58.920 and Bloomberg's Ed Baxter has that part of the story. 0:01:58.840 --> 0:02:01.280 This could be the first sign of any progress. Speaker 0:02:01.360 --> 0:02:05.760 Kevin McCarthy, Minority Leader Hackeim jeffrees from the House Majority 0:02:05.800 --> 0:02:08.959 Leader Chuck Schumer, and Minority leader Mitch McConnell from the Senate, 0:02:09.320 --> 0:02:11.760 but the White House was emphasizing before the summit that 0:02:12.160 --> 0:02:15.600 it does not mean a softening of the president's position. 0:02:15.960 --> 0:02:18.440 Spokesmen Kareeine Jean Pierre he's happy. 0:02:18.120 --> 0:02:20.679 To meet with mc McCarthy, but not on whether or 0:02:20.720 --> 0:02:22.440 not the dead limit gets extended. 0:02:22.560 --> 0:02:25.560 There are very few congressional days left after May ninth 0:02:25.600 --> 0:02:28.000 and before June first, so the pressure for a very 0:02:28.320 --> 0:02:32.000 short term solution is great. In San Francisco, I'm at 0:02:32.040 --> 0:02:33.840 Baxter Bloomberg Daybreak banks Ed. 0:02:33.919 --> 0:02:35.880 We now turn to a bevy of news involving the 0:02:35.919 --> 0:02:39.560 banking sector. The top US regulator wants a sweeping overhaul 0:02:39.560 --> 0:02:42.960 of deposit insurance. It's after recent bank failures drained some 0:02:43.000 --> 0:02:45.320 of the money used to protect banking clients, and the 0:02:45.360 --> 0:02:48.440 call comes after JP Morgan Chase had to rescue First 0:02:48.440 --> 0:02:51.520 Republic b and Y Mellen CEO Robin Vince says, we 0:02:51.639 --> 0:02:54.240 need a sound banking sector, so all of. 0:02:54.200 --> 0:02:58.720 Our interests to have a safe and sounds, trustworthy, reliable 0:02:58.760 --> 0:02:59.960 bankings to the sector. 0:03:00.120 --> 0:03:00.880 That's important. 0:03:00.960 --> 0:03:04.440 It helps to power US growth and USGDP. At the 0:03:04.520 --> 0:03:06.840 end of the day, it's to no one's benefit. To 0:03:06.840 --> 0:03:08.120 have an unsafe. 0:03:07.720 --> 0:03:11.240 Sector bnymel And CEO Robin Vince spoke with Bloomberg from 0:03:11.280 --> 0:03:14.480 the Milkin Institute Global Conference in Beverly Hills, California. 0:03:15.000 --> 0:03:18.680 In Europe, Nathan shares of HSBC are up five percent. 0:03:18.760 --> 0:03:20.959 The bank is planning a share buyback of up to 0:03:21.040 --> 0:03:24.520 two billion dollars after pre tax profit tripled in the 0:03:24.560 --> 0:03:28.920 first quarter. Speaking of Bloomberg, HSBC CEO nol Quinn says 0:03:28.960 --> 0:03:31.800 the results are proof he is the right strategy for 0:03:31.840 --> 0:03:32.280 the bank. 0:03:32.720 --> 0:03:35.760 We said all along that we believe fastest and safest 0:03:35.840 --> 0:03:39.480 way to get increased valuation, increased profit, increased dividends is 0:03:39.480 --> 0:03:41.440 by focusing on the current strategy, and I think the 0:03:41.520 --> 0:03:44.320 Q one results is powerful evidence of that statement. 0:03:44.920 --> 0:03:48.520 HSBC CEO nol Quinn says the bank will also resume 0:03:48.560 --> 0:03:51.560 paying quarterly dividends for the first time since twenty nineteen. 0:03:51.920 --> 0:03:54.200 Back here in the US, Karen Moore job cuts are 0:03:54.240 --> 0:03:56.840 on the way at Morgan Stanley, Bloomberg News has learned 0:03:56.840 --> 0:03:59.960 senior managers are discussing plans to eliminate about three thousand 0:04:00.160 --> 0:04:03.000 jobs by the end of this quarter. Morgan Stanley currently 0:04:03.040 --> 0:04:05.120 employs roughly eighty two thousand people. 0:04:05.440 --> 0:04:07.880 Well, Morgan Stanley's not the only one cutting jobs here. 0:04:07.960 --> 0:04:11.280 Nathan City Group CEO Jane Fraser says she is willing 0:04:11.280 --> 0:04:14.800 to make adjustments to staffing levels inside the investment bag. 0:04:15.200 --> 0:04:17.800 City and its rivals are dealing with an industry wide 0:04:17.839 --> 0:04:21.040 slump and deal making and underwriting activity, So. 0:04:21.040 --> 0:04:24.159 This pens up demand is building and building. I just 0:04:24.200 --> 0:04:24.960 don't think it's. 0:04:24.839 --> 0:04:27.000 Going to get released as early as we would like 0:04:27.080 --> 0:04:31.080 it to, and it's more certainly builds much more like 0:04:31.200 --> 0:04:33.920 the back end of twenty three for all of us 0:04:34.000 --> 0:04:36.400 than as we'd all kind of beat hoping would be 0:04:36.440 --> 0:04:39.960 early falls. I think, like every institution, you make some 0:04:40.080 --> 0:04:43.240 adjustments around the capacity. But we're playing a long game 0:04:43.320 --> 0:04:44.400 in investment banking. 0:04:44.839 --> 0:04:47.800 City Group CEO Jane Fraser spoke with Bloomberg at the 0:04:47.800 --> 0:04:50.480 Milken Conference in Beverly Hills, and we'll bring you more 0:04:50.520 --> 0:04:52.920 in that conversation coming up in just a few minutes. 0:04:53.279 --> 0:04:56.560 IBM expects to pause hiring Karen. It's examining roles that 0:04:56.600 --> 0:04:59.799 could be replaced with artificial intelligence in the coming years. 0:05:00.160 --> 0:05:03.359 In fact, CEO Arvin Christa tells us about thirty percent 0:05:03.560 --> 0:05:06.520 or seventy eight hundred back office jobs at IBM could 0:05:06.600 --> 0:05:09.920 be replaced by AI in five years well. 0:05:09.960 --> 0:05:12.559 The FED begins its two day policy meeting today. Nathan 0:05:12.600 --> 0:05:15.320 and economists expect the Central Bank to raise rates for 0:05:15.440 --> 0:05:19.839 a tenth straight time. Steve Off, chief investment officer for 0:05:19.880 --> 0:05:23.920 equities for Federated Hermes, says the central Bank is likely 0:05:24.040 --> 0:05:25.159 done after tomorrow. 0:05:25.440 --> 0:05:28.400 We think it's their last hike. They've been a backward 0:05:28.440 --> 0:05:34.400 looking operation all through. This relate to the hiking cycle, 0:05:34.440 --> 0:05:36.400 which is one of the reasons we're having all these 0:05:36.440 --> 0:05:39.479 problems now in the banking system because they've just forced 0:05:39.480 --> 0:05:43.839 people to adjust their books way too quickly, and you know, 0:05:43.839 --> 0:05:47.000 they're still backward looking and on a backward basis. Probably 0:05:47.000 --> 0:05:49.719 another hikes in order. But the good news is I 0:05:49.760 --> 0:05:51.920 think this is pretty much probably the end. 0:05:52.320 --> 0:05:55.400 Steve Off at Federated Hermes thinks the Fed may actually 0:05:55.600 --> 0:05:57.800 cut rates at the end of the year and the 0:05:57.839 --> 0:06:00.760 market degrees pricing in a cut as soon September. 0:06:01.000 --> 0:06:04.240 Finally, Karen Hollywood is on hold. This morning. Members of 0:06:04.279 --> 0:06:07.400 the Writers Guild of America have gone on strike. They're 0:06:07.440 --> 0:06:10.400 demanding better pay, saying the studios have cut their salaries 0:06:10.400 --> 0:06:12.960 with the transition to streaming TV, and the writers say 0:06:12.960 --> 0:06:16.520 the studios are also stonewalling on issues like artificial intelligence 0:06:16.880 --> 0:06:22.880 in scriptwriting. Time now to take a look at some 0:06:22.880 --> 0:06:24.760 of the other stories making news in New York and 0:06:24.839 --> 0:06:27.240 around the world. For that, we're joined by Bloomberg's John Tucker. 0:06:27.279 --> 0:06:30.719 Good Morning John, Good Morning Dathan. Authorities in Oklahoma have 0:06:30.839 --> 0:06:33.960 discovered the bodies of seven people. It came during a 0:06:34.000 --> 0:06:36.880 search for two missing teenagers, and they were believed to 0:06:36.920 --> 0:06:40.400 include the girls and a convicted sex offender. The bodies 0:06:40.400 --> 0:06:43.720 are likely to include fourteen year old Ivy Webster and 0:06:43.839 --> 0:06:46.560 sixteen year old Britney Brewer. They were believed to be 0:06:46.600 --> 0:06:48.919 with a body of thirty nine year old Jesse McFadden 0:06:48.960 --> 0:06:51.600 and four others on a rural property near the town 0:06:51.680 --> 0:06:55.880 of Henrietta, oaklub Mogi County Sheriff Eddie Rice. 0:06:56.040 --> 0:06:58.719 We believe that we have found the persons. We just 0:06:58.720 --> 0:06:59.520 started waiting for. 0:06:59.480 --> 0:07:03.119 A comprom well. Sheriff Rince won't say how they died 0:07:03.279 --> 0:07:06.920 or provide other details. A dust storm that blew through 0:07:07.000 --> 0:07:10.280 southwest to Illinois caused dozens of cars to crash in 0:07:10.320 --> 0:07:13.560 a massive pile up. At least six people aren't dead 0:07:13.720 --> 0:07:18.360 over thirty injured south of Springfield. Montgomery County Emergency Management 0:07:18.400 --> 0:07:21.280 Director Kevin Schantz is the biggest challenge for the first 0:07:21.320 --> 0:07:23.720 responders was reaching the victims. 0:07:24.080 --> 0:07:28.960 Multiple vehicles involved, some were on fire, so we had 0:07:29.680 --> 0:07:34.000 vehicle fires to extinguish. We had to search every vehicle, 0:07:34.080 --> 0:07:37.120 whether they were involved in the accident or just pulled 0:07:37.160 --> 0:07:39.720 over to check for injuries. 0:07:40.360 --> 0:07:43.640 Kevin Shoant with Emergency Management says, clean up we'll continue 0:07:43.680 --> 0:07:47.200 throughout the morning. On I fifty five, after a judge 0:07:47.240 --> 0:07:50.800 denied a defense motion for a mistrial, the testimony resumed 0:07:50.800 --> 0:07:53.560 at former President Donald Trump's civil trial in New York. 0:07:53.960 --> 0:07:58.120 During cross examination, writer Ejen Carroll, who claims Trump raped 0:07:58.120 --> 0:08:01.160 her in the nineteen nineties, to that she didn't report 0:08:01.160 --> 0:08:03.520 the alleged attack to police because she felt it was 0:08:03.680 --> 0:08:06.880 shameful to do so. In New York City's water belt 0:08:06.960 --> 0:08:10.640 forgiveness program, designed to recoup hundreds of millions of dollars 0:08:10.680 --> 0:08:14.520 owed by customers, is being extended. Mayor Eric Adams says 0:08:14.560 --> 0:08:17.480 that the program has collected eighty million dollars of the 0:08:17.800 --> 0:08:21.880 one point two billion outstanding from customers since January. 0:08:22.160 --> 0:08:23.240 We want to make sure. 0:08:23.080 --> 0:08:25.320 That every new Yorker can pay their. 0:08:25.560 --> 0:08:31.640 Water bills, so DP has extended the embassy program by 0:08:31.720 --> 0:08:32.640 one extra month. 0:08:32.920 --> 0:08:36.040 May thirty, first, Mary Adams is threatened to shut off 0:08:36.160 --> 0:08:39.320 water to customers who haven't paid their water bills. After that. 0:08:39.720 --> 0:08:42.160 Global News twenty four hours a day, powered by more 0:08:42.200 --> 0:08:44.839 than twenty seven hundred journalist and analysts, you know, over 0:08:44.960 --> 0:08:47.880 one hundred and twenty countries. I'm John Tucker, and this 0:08:48.280 --> 0:08:49.679 is Bloomberg. Nathan. 0:08:49.920 --> 0:08:57.160 Thank you, John. Time now for our Bloomberg Sports update. 0:08:57.200 --> 0:08:58.600 For that, we bring in John Stash. 0:08:58.600 --> 0:09:01.440 Are all right, Nathan tookom those three decades for the 0:09:01.480 --> 0:09:04.560 Devils to get some Game seven revenge on the Rangers, 0:09:04.600 --> 0:09:07.319 the first Game seven between the two teams since nineteen 0:09:07.480 --> 0:09:10.280 ninety four double overtime with the Garden. This Game seven 0:09:10.400 --> 0:09:13.200 was in Newark. It was still scoreless midway through the 0:09:13.240 --> 0:09:15.320 second period of the Rangers were on a power play. 0:09:15.360 --> 0:09:19.400 Oh here's a takeaway by Pullot Crop Fox recovering Thoughie Skrider. 0:09:19.400 --> 0:09:22.120 It's taken back by Pullott Plot still with. It was 0:09:22.160 --> 0:09:22.880 in Fus one of. 0:09:22.800 --> 0:09:31.280 A Cloud backhead start michaelback Cloud, It's what nothing. 0:09:31.040 --> 0:09:33.920 DEVLS Radio McCloud's first goal of the series later in 0:09:33.960 --> 0:09:36.559 the second period, the first of the series for Tomas Tatar. 0:09:36.600 --> 0:09:39.559 The Devils added two late goals, and after the Rangers 0:09:39.559 --> 0:09:41.720 won the first two games of the series, both by 0:09:41.800 --> 0:09:44.520 four goals, the Deviles last two wins of the series 0:09:44.760 --> 0:09:47.720 were both four nothing victories and shutouts for the young 0:09:47.760 --> 0:09:51.080 Devils goalie Kira Shmid. The Devils win a playoff series 0:09:51.080 --> 0:09:52.920 for the first time in over a decade. They'll play 0:09:52.960 --> 0:09:56.400 Carolina in Round two, Game two Nixon Heat tonight at 0:09:56.400 --> 0:09:58.559 the Garden. Last night, Philadelphia won Game one and in 0:09:58.679 --> 0:10:01.440 Boston as James Harden scored forty five points, he hit 0:10:01.480 --> 0:10:04.480 the game winning three with eight seconds left. Denver beat 0:10:04.480 --> 0:10:06.760 Phoenix for a two to nothing series lead. Another loss 0:10:06.760 --> 0:10:10.120 for the Yankees, and this one included a questionable managerial 0:10:10.160 --> 0:10:13.000 decision by Aaron Boone. Domingo Herman was two outs from 0:10:13.000 --> 0:10:16.160 his first career complete game. He allowed no runs, two hits, 0:10:16.440 --> 0:10:18.960 had thrown on the eighty eight pitches. Boone took him out. 0:10:19.160 --> 0:10:21.319 Cleveland rally scored three in the ninth and one three 0:10:21.360 --> 0:10:23.839 to two. The last place Yankees have lost seven of 0:10:23.880 --> 0:10:27.040 their last nine, and Aaron Judge is on the injured list. 0:10:27.040 --> 0:10:29.559 Mets and Brave's played two. Atlanta won nine to eight, 0:10:29.600 --> 0:10:32.400 a game with seven home runs. Mets got the split 0:10:32.440 --> 0:10:33.400 win he five to three. 0:10:33.559 --> 0:10:34.480 John stash Elle. 0:10:34.400 --> 0:10:36.000 Bloomberg Sports. 0:10:37.720 --> 0:10:41.120 Live from coast to coast, from New York to San Francisco, 0:10:41.320 --> 0:10:45.760 Boston to Washington, d C. Nationwide on siriusxam, the Bloomberg 0:10:45.800 --> 0:10:49.920 Business app in Bloomberg dot com. This is Bloomberg Day Break. 0:10:50.960 --> 0:10:54.400 Good morning, I'm Nathan Hager. Wall Street leaders continue to 0:10:54.440 --> 0:10:57.720 express confidence in the US financial system, and the CEO 0:10:57.760 --> 0:11:00.640 of City Group, Jane Fraser, is no exception, and in 0:11:00.720 --> 0:11:04.320 conversation with Bloomberg Shnelli Bassic at the Milk and Global Conference, 0:11:04.520 --> 0:11:07.560 Fraser called the US banking system the envy of the world. 0:11:07.640 --> 0:11:10.880 That's after the collapse of First Republic Bank. She also 0:11:10.880 --> 0:11:13.800 discussed your outlook for recession in the US, a potential 0:11:13.840 --> 0:11:18.120 economic rebound, and the future of artificial intelligence in banking. 0:11:18.160 --> 0:11:19.960 So let's bring you part of that discussion with the 0:11:20.000 --> 0:11:21.959 CEO of City Group, Jane Fraser. 0:11:22.280 --> 0:11:24.880 Right now, if you think about that first rescue that 0:11:25.000 --> 0:11:28.800 was made by eleven large banks just weeks ago, why 0:11:28.920 --> 0:11:31.319 wasn't there an inclination to step up and say first 0:11:31.320 --> 0:11:32.520 Republic a second time. 0:11:33.240 --> 0:11:34.839 Well, it's always a. 0:11:34.840 --> 0:11:38.040 Sad day when you see a bank fail, but we 0:11:38.120 --> 0:11:41.760 are all very pleased to get the major source of 0:11:41.840 --> 0:11:44.880 uncertainty that was remaining from the recent. 0:11:44.600 --> 0:11:45.880 Bank term all addressed. 0:11:46.040 --> 0:11:49.440 And that is a good thing because fundamentally the US 0:11:49.440 --> 0:11:52.160 financial system is sound. This is a case of a 0:11:52.200 --> 0:11:56.480 small handful of banks that were poorly managed. 0:11:57.040 --> 0:11:59.720 And getting this address is very important. 0:12:00.200 --> 0:12:03.280 When we stood up, I think it's a statement that 0:12:03.400 --> 0:12:06.200 the major banks, the eleven major banks in the country 0:12:06.360 --> 0:12:10.720 in thirty hours, for thirty billion dollars to work to 0:12:10.800 --> 0:12:14.560 buy the time to get the right solution and answer 0:12:14.600 --> 0:12:15.240 put in place. 0:12:15.320 --> 0:12:18.319 And that was our intention. It wasn't to provide the answer. 0:12:18.720 --> 0:12:20.920 It was to give the time for confidence to get 0:12:20.960 --> 0:12:24.880 restored and our regulators to do their job. 0:12:24.800 --> 0:12:28.160 Which they did with First Republic being out of the way. Now, 0:12:28.240 --> 0:12:29.720 certainly that was the wail in the room. 0:12:29.840 --> 0:12:32.560 But what do you expect next in terms of any 0:12:32.640 --> 0:12:35.240 future fag failures or even hiccups down the road. 0:12:35.440 --> 0:12:38.640 So I am I'm more optimistic around it. 0:12:38.920 --> 0:12:42.080 I do think the US financial system is extremely strong. 0:12:42.640 --> 0:12:46.120 The large American banks globally are. 0:12:46.000 --> 0:12:50.319 In an enviable position. Our financial system has a particular 0:12:50.360 --> 0:12:53.800 structure to it. Large banks, regional banks, and commodity and 0:12:53.840 --> 0:12:54.840 community banks. 0:12:55.400 --> 0:12:57.040 Everyone plays a different role. 0:12:57.080 --> 0:13:01.040 We played different scale, different customer basis, but it's a 0:13:01.080 --> 0:13:06.520 strong system. I am anticipating there will be some more consolidation. 0:13:07.040 --> 0:13:08.720 We do have over four and a. 0:13:08.720 --> 0:13:12.160 Half thousand banks, and it's likely that the minimum efficient 0:13:12.240 --> 0:13:15.840 scale will rise, but I don't think that brings into 0:13:15.920 --> 0:13:18.600 question a system that is the MV. 0:13:18.640 --> 0:13:19.160 Of the world. 0:13:19.280 --> 0:13:23.480 This is a strong and highly desirable financial system, which 0:13:23.520 --> 0:13:24.160 it works. 0:13:24.280 --> 0:13:27.280 The big just got bigger today, right, this is JP Morgan. 0:13:27.400 --> 0:13:30.719 Rather than regional banks consolidating among each other. Does that 0:13:30.760 --> 0:13:33.880 create more competition for the smaller banks? 0:13:33.880 --> 0:13:36.959 Given that the big are getting so big in this country, I. 0:13:36.920 --> 0:13:40.040 Think there's room for everyone to play their roles. And 0:13:40.480 --> 0:13:42.079 you know, the larger banks are also. 0:13:41.920 --> 0:13:43.200 Playing on a global scale. 0:13:43.240 --> 0:13:46.079 When I look at our own bank, our strategy is 0:13:46.120 --> 0:13:50.319 around being the pre eminent partner for clients of crossworld 0:13:50.360 --> 0:13:53.520 and needs. That is a very different role from the 0:13:53.600 --> 0:13:56.280 role that a community bank plays, which is also very 0:13:56.320 --> 0:14:00.200 important in the context of the local economy. I think 0:14:00.240 --> 0:14:04.000 it's about different banks playing different roles and let's make 0:14:04.040 --> 0:14:08.480 sure that we have a strong and successful system that works. 0:14:08.880 --> 0:14:11.640 There's a lot of worries about the credit contractions that 0:14:11.720 --> 0:14:15.439 could be seen in the United States, particularly among that sector, 0:14:16.120 --> 0:14:18.520 small medium sized banks. They tend to smart a bake 0:14:18.600 --> 0:14:21.400 small and medium sized businesses. Do you expect that there 0:14:21.440 --> 0:14:25.000 will be a significant contraction and how do you handicap 0:14:25.200 --> 0:14:26.320 the ripple of backs. 0:14:26.200 --> 0:14:26.880 To the economy? 0:14:27.680 --> 0:14:31.880 So certainly the risks now are more to the downside. 0:14:31.320 --> 0:14:33.040 Than they were at the beginning of the year, and 0:14:33.080 --> 0:14:36.800 no one anticipated the turmoil that we've seen so far 0:14:36.880 --> 0:14:38.920 this year at the beginning, and I think it certainly 0:14:38.960 --> 0:14:41.800 makes the second half is not going to be a 0:14:41.960 --> 0:14:46.320 strong macroeconomically or in terms of investment, banking, wallet and 0:14:46.360 --> 0:14:50.960 the like that we had hoped. That said, I think, 0:14:51.000 --> 0:14:53.000 as you say, one of the big questions will be, 0:14:53.320 --> 0:14:57.600 to one extent, does credit titan and you know if 0:14:57.640 --> 0:15:01.160 that is material that will have a on the economy. 0:15:01.960 --> 0:15:04.680 We're anticipating a recession at the back end. 0:15:04.680 --> 0:15:05.160 Of the year. 0:15:05.640 --> 0:15:08.640 But the amount of pent up demand, the amount of 0:15:09.000 --> 0:15:11.840 the strength of the corporates, the strength of the consumer 0:15:11.920 --> 0:15:15.800 coming into this the usual amplifiers of a contraction. 0:15:15.400 --> 0:15:16.320 And not in place. 0:15:17.280 --> 0:15:20.080 And I think we'll see the US economy, unlike others, 0:15:20.440 --> 0:15:24.360 pull out of whatever a recession environment could be pretty quickly. 0:15:24.920 --> 0:15:28.000 So the so you see that recession finally come nearer, 0:15:28.320 --> 0:15:31.560 what exactly does it look like always impacted. 0:15:31.240 --> 0:15:32.080 What feels pain? 0:15:32.760 --> 0:15:36.560 Well, I think we'll see, as everyone always does, more 0:15:36.640 --> 0:15:39.400 pain being felt in among some of the consumers at. 0:15:39.360 --> 0:15:42.000 The lower PI COO. The benefit we've got at. 0:15:41.880 --> 0:15:45.640 The moment has been very strong employment, and that's terrific, 0:15:46.080 --> 0:15:49.720 But the health of the consumer and that has remained 0:15:50.360 --> 0:15:50.680 the same. 0:15:50.760 --> 0:15:53.400 The corporate sector is particularly strong, and I think that's 0:15:53.440 --> 0:15:54.680 why you hear so many. 0:15:54.440 --> 0:15:57.560 Of us talking about this being a more manageable or 0:15:57.640 --> 0:16:02.960 moderate recession if one does indeed come about, and one 0:16:03.000 --> 0:16:05.120 in which the economy should be able to pull out 0:16:05.160 --> 0:16:07.040 a bit pretty strongly. 0:16:07.400 --> 0:16:09.600 And to the extent that you're preparing for a recession, 0:16:09.760 --> 0:16:11.880 you know, City Group itself has just written off a 0:16:11.880 --> 0:16:14.240 lot of credit card debt to begin with in the 0:16:14.280 --> 0:16:14.880 first quarter. 0:16:15.560 --> 0:16:16.520 Do you expect you're. 0:16:16.360 --> 0:16:18.720 Going to have to tighten lending standards even more for 0:16:18.800 --> 0:16:20.120 consumers and even corporates. 0:16:20.280 --> 0:16:23.320 We are a long way from being in a situation 0:16:23.400 --> 0:16:26.200 where the credit levels are even normalized where they are 0:16:26.240 --> 0:16:30.200 pre COVID, So we're probably only seventy percent of the 0:16:30.240 --> 0:16:34.680 way to the pre COVID levels of normal credit losses 0:16:34.720 --> 0:16:37.840 that you expect, So there's still quite a there's a 0:16:37.840 --> 0:16:40.720 lot of room still to go before we start using 0:16:40.760 --> 0:16:45.000 the stress word. The city is probably a little biased 0:16:45.040 --> 0:16:48.120 towards the crime. Eighty percent of our customer base in 0:16:48.160 --> 0:16:50.720 the States is prime, so we don't tend to see 0:16:50.720 --> 0:16:53.120 the lower Fiico as much, and there will. 0:16:53.000 --> 0:16:55.800 Be a little bit more strous there and everyone's going 0:16:55.800 --> 0:16:56.920 to need to keep an eye on that. 0:16:57.280 --> 0:16:59.400 I want to pivot a little bit here and talk 0:16:59.440 --> 0:17:01.880 about other area of stress that it's being seen in 0:17:01.920 --> 0:17:03.520 one of the safest markets in the world, that is 0:17:03.520 --> 0:17:04.399 the treasury market. 0:17:04.920 --> 0:17:06.240 You have a front row seat here. 0:17:06.240 --> 0:17:08.880 It's a kind of the ripple effects that are being 0:17:08.920 --> 0:17:11.800 built in Washington from the discuts around them dead limit. 0:17:12.400 --> 0:17:15.000 What does that look like from your view, Well, I think. 0:17:14.800 --> 0:17:16.760 The market is stilting to have a sense of humor 0:17:16.840 --> 0:17:20.040 failure around some of what's going on. So we've certainly 0:17:20.119 --> 0:17:24.760 seen more than we have in recent debt ceiling concerns 0:17:25.080 --> 0:17:27.560 and impact on the treasury market in the short term. 0:17:27.600 --> 0:17:28.520 The pricing for the. 0:17:28.600 --> 0:17:33.040 June September has definitely come down. The CDs market is 0:17:33.080 --> 0:17:34.640 seeing quite. 0:17:34.520 --> 0:17:38.960 Unprecedented why thing there, So there is a lot more concern. 0:17:39.560 --> 0:17:41.920 I'd say the last week or so we were seeing 0:17:41.960 --> 0:17:45.360 three times a volume of questions for investors and it's 0:17:45.400 --> 0:17:48.560 silli early, but it is a concern around it. 0:17:48.880 --> 0:17:50.360 This could be quite dire. 0:17:50.720 --> 0:17:54.880 For consumers, for corporates, and indeed for the markets if. 0:17:54.680 --> 0:17:56.800 This goes down to the wire or worse. 0:17:57.119 --> 0:17:59.040 How does the rest of the world look at this 0:17:59.119 --> 0:18:02.840 dispute in the United States and invest in the treasury 0:18:03.280 --> 0:18:05.560 as the last thing that the world needs right. 0:18:05.400 --> 0:18:06.800 Now, particularly in the market. 0:18:07.000 --> 0:18:09.560 So, you know, we want to see strength in the 0:18:09.640 --> 0:18:12.720 US capital markets. We want to see confidence in what's 0:18:12.800 --> 0:18:17.720 going and the banking sector very well positioned. 0:18:17.720 --> 0:18:19.520 The banks are very strong as we see. 0:18:19.600 --> 0:18:21.960 So we're in a position, as we did in the pandemic, 0:18:22.040 --> 0:18:24.439 as we did in the turmoil, to be there to 0:18:24.560 --> 0:18:28.280 support markets, to be there to support our customer bases, 0:18:28.480 --> 0:18:35.440 consumers and corporates. So I think from that perspective we're. 0:18:34.359 --> 0:18:35.320 In a good position. 0:18:36.520 --> 0:18:39.080 But it is the last thing that the world and 0:18:39.160 --> 0:18:41.920 America needs is to have a debt sealing crisis. 0:18:42.119 --> 0:18:44.360 The other classer and gore to the treasury market is 0:18:44.440 --> 0:18:47.639 another big bed meeting and the prospect of even higher 0:18:47.680 --> 0:18:50.119 interst rates. Where do you think the direction of travel 0:18:50.119 --> 0:18:50.560 has had a. 0:18:51.040 --> 0:18:55.040 Services inflation is painfully persistent. We've seen the goods inflation 0:18:55.200 --> 0:18:58.080 come way down. Supply chains are now in far better 0:18:58.119 --> 0:19:01.520 shape than they were. So it's really about services inflation 0:19:01.640 --> 0:19:04.639 and the tightness of the labor market and Shair and 0:19:04.720 --> 0:19:07.120 how it has been and we. 0:19:07.080 --> 0:19:10.000 Need him to stay resolute on inflation. 0:19:10.800 --> 0:19:14.080 This is not good to have long term inflation into 0:19:14.119 --> 0:19:17.760 the US economy. Some is fine, but his resoluteness is 0:19:17.760 --> 0:19:21.280 something I think we can bank on. So we're anticipating 0:19:21.760 --> 0:19:24.320 higher than the market would like, for longer than the 0:19:24.359 --> 0:19:27.439 market would like. There's so much pentof demand in the 0:19:27.480 --> 0:19:30.800 market at the moment and it keeps wanting to get 0:19:30.840 --> 0:19:33.520 ahead of this, but that's just not where the economy is. 0:19:34.040 --> 0:19:36.240 So do you think that the market is discounting the 0:19:36.320 --> 0:19:38.480 potential for higher rates for longer and what does that 0:19:38.560 --> 0:19:39.560 mean for asset process? 0:19:39.880 --> 0:19:42.240 Many of us here at Milkin do believe that the 0:19:42.320 --> 0:19:46.119 market is too enthusiastic here, partly because the economy is 0:19:46.160 --> 0:19:49.760 so resilient. This is a strong resilient US economy, and 0:19:49.800 --> 0:19:52.639 that is part of the challenge. We anticipate, you know, 0:19:52.760 --> 0:19:55.919 a tough end of the year and a recovery in 0:19:56.000 --> 0:19:56.600