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Speaker 1: You're listening to the Bloomberg Sound on podcast. Catch us

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Speaker 1: live weekdays at one Eastern on Bloomberg dot com, the

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Speaker 1: iHeartRadio app, and the Bloomberg Business app.

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Speaker 2: Or listen on demand wherever you get your podcasts.

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Speaker 3: The Treasury Department says the X date will land as

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Speaker 3: early as June one. You could hear the gas across

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Speaker 3: Washington with this letter from Janet Yellen dropped last night.

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Speaker 3: So yeah, we're already inside a month. And as President

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Speaker 3: Biden invites congressional leaders to the White House on May ninth,

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Speaker 3: there are real questions about the timeline here and what

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Speaker 3: is possible before a potential downgrade, never mind a default.

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Speaker 3: The House will only be in session for three weeks

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Speaker 3: in this period of time before the X date. And

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Speaker 3: you know they don't do a lot on Mondays and

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Speaker 3: Fridays around here, so you can do the math on that.

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Speaker 3: And that's where we begin with Barat Ramamurdy, the Deputy

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Speaker 3: Director of the Nash Economic Council, advisor at the White

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Speaker 3: House for Strategic Economic Communications, and the top of the broadcast, BT,

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Speaker 3: welcome back to Bloomberg.

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Speaker 4: Thanks for having me.

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Speaker 3: So the President will be sitting down with congressional leaders

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Speaker 3: one week from today. Is it the hope Barrot to

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Speaker 3: emerge from that meeting with a clean debt ceiling bill.

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Speaker 4: Yes, that's been the President's position for many months now. Actually,

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Speaker 4: he's been clear that this is a congressional responsibility to

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Speaker 4: avoid default at something that in over two hundred years

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Speaker 4: we've avoided, and he's been clear that the Congressional Republicans

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Speaker 4: should move forward a bill that would raise the debt

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Speaker 4: ceiling without conditions, as was done many times in the past.

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Speaker 3: Well, I know that you and the President said this

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Speaker 3: as recently as yesterday. I think the Speaker's holding the

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Speaker 3: debt sealing hostage with this demand to negotiate the budget.

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Speaker 3: But as we get closer to the X date to

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Speaker 3: a possible default, does the conversation start to change at all?

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Speaker 3: Does the White House entertain talks on the budget or

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Speaker 3: do we just all go over the cliff together if

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Speaker 3: the Speaker doesn't budge Well, I think.

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Speaker 4: The President has also been clear that he's more than

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Speaker 4: willing to have a conversation with all of the congressional leaders,

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Speaker 4: including the Speaker, about budgets and appropriations. In fact, just

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Speaker 4: last year, presidents sat down with Democrats and Republicans hammered

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Speaker 4: out a bill that not everybody got what they wanted,

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Speaker 4: but funded the government, included spending items that we were

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Speaker 4: in favor of, spending items that the Republicans were in

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Speaker 4: favor of, and it got by parts of the support

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Speaker 4: in both the House and the Senate. We're perfectly willing

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Speaker 4: to do that again. The problem is forcing us to

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Speaker 4: approve all of the far right wing demands that the

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Speaker 4: Speaker is bringing forward here as a condition of raising

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Speaker 4: the debt limit. Know, what the Speaker is essentially doing

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Speaker 4: is putting a choice before us either default on the debts,

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Speaker 4: which would cause a global economic crisis, or accept his bill,

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Speaker 4: which independent experts like Moodies have found would actually push

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Speaker 4: the government, push the economy closer to a recession, and

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Speaker 4: cost us about eight hundred ths job. That's just not

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Speaker 4: a negotiation that the President is willing to happen.

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Speaker 3: We actually talked to Mark Zandy about that very piece

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Speaker 3: of research here last week on sound on is the

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Speaker 3: administration then, since we seem to be pretty far apart

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Speaker 3: here open to suspending the debt ceiling if it means

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Speaker 3: buying a couple of months arrive at a deal later

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Speaker 3: on in the year.

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Speaker 4: Well, I'm not going to negotiate here in public with you,

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Speaker 4: as much as I like you, but what I do

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Speaker 4: think is important is that we move forward very quickly, because,

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Speaker 4: as Secretary Yellen made clear the other day, we have

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Speaker 4: a tight deadline here and a firm deadline of June. First,

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Speaker 4: we're in favor of something that increases the debt ceiling

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Speaker 4: without condition, and then, of course let's have a conversation,

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Speaker 4: as we've had in the past, about tax policy and

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Speaker 4: spending policy. We have put forward our budget in great

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Speaker 4: detail in early March that says exactly what spending we're

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Speaker 4: in favor of, what tax policy we're in favor of,

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Speaker 4: and it's a plan to reduce the deficit, by the

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Speaker 4: way over the next ten years by about three trillion dollars.

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Speaker 4: We are more than happy to have a conversation with

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Speaker 4: the Republicans about why our approach is superior to theirs

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Speaker 4: and hammer out a deal. What we won't do is

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Speaker 4: tie that to whether we're going to default on.

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Speaker 2: Our debt or not.

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Speaker 3: The bill put forth by House Republicans the one past

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Speaker 3: last week would extend the debt ceiling until May of

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Speaker 3: twenty twenty four. If it were a clean bill, would

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Speaker 3: the White House be fine with that timeline?

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Speaker 4: Well, again, I don't want to get into some of

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Speaker 4: these negotiations here with you, but a clean debt ceiling

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Speaker 4: increase Again, it's something that we are generally supportive of.

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Speaker 4: But it does get to a broader issue here, which is,

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Speaker 4: as you note, this bill would simply increase the debt

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Speaker 4: ceiling until about next spring, which would then set up

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Speaker 4: if we permit tying these negotiations to the debt ceiling,

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Speaker 4: it sets us up to do this whole thing again

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Speaker 4: in about a year, threatening the global economy, pushing the

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Speaker 4: American economy closer to recession, increasing the cost of borrowing,

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Speaker 4: and this kind of brinksmanship, do it all over again

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Speaker 4: a year from now. That's just not a sustainable way

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Speaker 4: of running well, and right.

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Speaker 3: In the middle of a presidential election cycle. I can

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Speaker 3: only imagine the form that conversation would take. Why even

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Speaker 3: here's your abstract question of the day brought Rama Murdy,

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Speaker 3: why even have a debt ceiling when it leads to

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Speaker 3: this standoff? To your point, on a regular basis, you

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Speaker 3: can always see the next one coming. The New York

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Speaker 3: Times today is asking if it's even constitutional. So how

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Speaker 3: about we have a meeting a week from today on

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Speaker 3: eliminating the debt ceiling.

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Speaker 4: Well, that's not going to be the topic of discussion

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Speaker 4: in the meeting that the President is going to have.

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Speaker 4: I think he's going to be very clear.

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Speaker 3: If you can humor me though as an economist, I

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Speaker 3: realize that you're not going to probably put that on

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Speaker 3: the table. But shouldn't shouldn't that be a conversation at

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Speaker 3: some point?

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Speaker 4: Well, look, I know that several members of Congress that

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Speaker 4: put forth legislation that would functionally eliminate the debt ceiling.

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Speaker 4: It's a conversation that members of Congress have had in

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Speaker 4: the past and certainly can continue to have. But I

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Speaker 4: think given the situation we're in today, where according to

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Speaker 4: Secretary Yellen, we have until June first to address the

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Speaker 4: debt feeling before we really risk a global economic calamity,

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Speaker 4: our position is clear, let's move a clean debt ceiling increase,

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Speaker 4: and then let's initiate a separate process where we can

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Speaker 4: talk about our spending and tax priorities. I just want

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Speaker 4: to take this opportunity to underscore how extreme the Speaker's

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Speaker 4: bill is on these fronts, A twenty two percent cut

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Speaker 4: to a lot of programs that your typical family relies upon.

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Speaker 4: A twenty two percent cut to the VA budget, for example,

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Speaker 4: which means that thirty million fewer outpatient visits for veterans,

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Speaker 4: a huge cut to medical care for veterans, a huge

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Speaker 4: cut to air traffic control, which would shut down air

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Speaker 4: traffic control towers across the United States as we're entering

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Speaker 4: a travel season. Real severe impacts on your typical families

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Speaker 4: is not something that we're supportive.

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Speaker 3: Well, and it's interesting as you make that point, the

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Speaker 3: reason why those cuts would be at the size you

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Speaker 3: just suggested is because entitlements and many other things are

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Speaker 3: taken off the table. Right, So when Speaker McCarthy says

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Speaker 3: we want to roll things back to twenty two levels,

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Speaker 3: it would actually require larger cuts to those programs because

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Speaker 3: we're not putting the entire budget on the table for negotiation.

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Speaker 3: Is that right?

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Speaker 4: Well, I would make a point. Yes, they don't address

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Speaker 4: Social Security and Medicare, and as the President's made clear,

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Speaker 4: he's not supportive of US cuts to those programs. Yeah,

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Speaker 4: but there's another really big part of it that they're

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Speaker 4: not considering, which is tax policy. You know, our budget

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Speaker 4: lays out a set of tax increases on very wealthy

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Speaker 4: families and very large and profitable corporations that can generate

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Speaker 4: significant amounts of revenue and allow us to keep investing

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Speaker 4: in American manufacturing in American families. And the Speaker and

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Speaker 4: House Republicans not only are not supportive of that, they're

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Speaker 4: separately pushing huge tax breaks for the very wealthy. In fact,

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Speaker 4: they want to extend the Trump era tax cuts, which

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Speaker 4: represent on average a one hundred and seventy five thousand

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Speaker 4: dollars annual tax cut for a family making over four million.

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Speaker 5: Dollars a year.

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Speaker 4: So that's those are their priorities, a huge tax cut

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Speaker 4: for very wealthy families, at the same time that they're

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Speaker 4: bringing the hammer down on veterans, medical care, on border security,

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Speaker 4: on air traffic control, on food inspections. It's a very

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Speaker 4: misguided set of priority.

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Speaker 3: Yet, if I dare say something optimistic here, is it

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Speaker 3: not true that the larger principles of debt reduction are

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Speaker 3: actually shared on both sides of the table. Here, Once

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Speaker 3: you get through this debt limit negotiation or whatever the

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Speaker 3: heck it's going to be called, or whatever it is

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Speaker 3: are the longer term goals of debt reduction something that

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Speaker 3: is shared by Democrats and Republicans, or specifically House Republicans

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Speaker 3: and this White House.

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Speaker 4: Well, I will make a very clear point. We have

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Speaker 4: been reduced the deficit each year that we have been

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Speaker 4: in office, and we have laid out a plan. The

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Speaker 4: President has laid out of a plan that would reduce the

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Speaker 4: deficit by three trillion dollars over the next ten years.

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Speaker 4: While House Republicans are pushing all of these massive spending

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Speaker 4: cuts to programs that your typical family relies upon, they

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Speaker 4: are separately pushing, as I said, massive tax breaks for

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Speaker 4: the wealthy and for large corporations. Another example, we put

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Speaker 4: in place last year of fifteen percent minimum tax on

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Speaker 4: very large profitable corporations to make sure that no corporation

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Speaker 4: that makes billions in profits pays zero dollars in taxes.

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Speaker 4: Republicans are on record wanting to repeal that tax, So

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Speaker 4: in reality, all of the cost savings that they get

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Speaker 4: through these spending cuts are actually being diverted into tax

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Speaker 4: cuts for the very wealthy and large corporations. It doesn't

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Speaker 4: actually have that significant impact on the deficit.

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Speaker 3: At the end of the day, and is that that's

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Speaker 3: extending the twenty seventeen tax cuts from the Trump administration that.

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Speaker 6: You're exact accorring too. That's right, brought.

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Speaker 3: We're watching shares separately here. I know we're spinning a

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Speaker 3: couple of plates, not only the debt sealing, the budget,

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Speaker 3: but also what's happening in the banking sector. And before

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Speaker 3: you leave, i'd like to ask you about your view

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Speaker 3: on this. We're seeing shares of some regional banks tumble

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Speaker 3: today even though there is no news to justify them,

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Speaker 3: when the market's showing a little bit of panic here.

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Speaker 3: Are you confident, following the response to SVB and signature

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Speaker 3: following the acquisition now of First Republic Bank by JP Morgan,

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Speaker 3: that we're actually through the worst of this, that there's

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Speaker 3: no further contagion.

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Speaker 4: Well, I think that our view is that the banking

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Speaker 4: system remains in very fundamentally strong shape and that's demonstrated

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Speaker 4: a lot of resilience over the last several weeks. I

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Speaker 4: think people should feel confident that if they have deposits

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Speaker 4: in the bank, that those deposits are going to be

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Speaker 4: there if and when they need them. And I think

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Speaker 4: that we've got to take important steps that the President

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Speaker 4: has laid out to make sure that we're not back

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Speaker 4: in this position again. And that means number one, making

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Speaker 4: sure that our rules for accountability for executives who engage

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Speaker 4: in the kind of mismanagement we've seen that there's real

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Speaker 4: accountability for those folks, including clawbacks compensation that they may

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Speaker 4: have gotten right before their bank got in trouble. And

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Speaker 4: also that we need to address some of the rule

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Speaker 4: rollbacks that happened in the previous administration. Remember, in the

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Speaker 4: previous administration, rules on exactly this set of banks, these

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Speaker 4: large regional banks were targeted for rollbacks, and I don't

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Speaker 4: think it's a coincidence that we're now seeing a lot

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Speaker 4: of trouble developed in that exact sector. The President has

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Speaker 4: called for action on reimposing a lot of those rules

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Speaker 4: so that we avoid getting into the situation in the

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Speaker 4: first place. But I think the bottom line from our

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Speaker 4: perspective is that we're emerging from this with a banking

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Speaker 4: system that's still fundamentally in very strong shape, and that's

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Speaker 4: thanks in part to some of the rules that were

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Speaker 4: put in place in the Obama by an administration following

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Speaker 4: the financial crisis.

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Speaker 3: Just to be clear, though you haven't identified. The White

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Speaker 3: House isn't looking at any of these banks right now

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Speaker 3: as potentially the quote unquote next one.

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Speaker 4: No, and look, it's ultimately with the regulators, the f

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Speaker 4: I see the FED, depending on the exact nature of

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Speaker 4: the bank. Sure, they're the front of the front lines here.

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Speaker 4: They're the ones who are taking the action, and so

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Speaker 4: would defer to them about whether they're seeing any issues

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Speaker 4: in any particular bank. From our perspective, overall, the banking

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Speaker 4: system remains in strong shape and people should a confidence

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Speaker 4: that their deposits are going to be there if they

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Speaker 4: need them.

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Speaker 3: He's the Deputy Director of the National Economic Council and

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Speaker 3: as well advisor for Strategic Economic Communications at the White House.

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Speaker 3: Sparat Ramamurdy many thanks for the insights.

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Speaker 6: As always on Bloomberg, thanks again.

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Speaker 3: And so we assemble the panel for their take on

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Speaker 3: all of this, beginning with the X date. Bloomberg Politics

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Speaker 3: contributor Republican strategist Rick Davis is with us along with

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Speaker 3: Jim Kessler, democratic strategist and co founder of Third Way.

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Speaker 3: It's great to have you both here. Rick your thought

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Speaker 3: on this as we stare down the barrel of a

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Speaker 3: very limited congressional calendar. Can they pull this off by

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Speaker 3: June one?

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Speaker 7: Well, I think that it depends on what they're trying

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Speaker 7: to pull off. I mean, the discussion you just add

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Speaker 7: about changing the tax code and trying to pay down

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Speaker 7: the deaf sit and things like that, they're going to

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Speaker 7: be only a passing discussion about that, because what they're

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Speaker 7: really going to need to do is nail down how

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Speaker 7: and when they can increase the debt limit. And in

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Speaker 7: the House bill it's capped at one point five trillion.

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Speaker 7: That's their going in proposition takes us basically into twenty

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Speaker 7: twenty four, and I think the President and his team

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Speaker 7: are going to want a different approach, maybe to just

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Speaker 7: delaying the debt limit discussion to a later date after

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Speaker 7: the election. So just on the basics, I think they're

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Speaker 7: going to be fundamental differences in approach.

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Speaker 3: Yeah. So Jim Kessler was former legislative policy director for

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Speaker 3: Senator Chuck Schumer, and so, Jim, you've been in the

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Speaker 3: room for moments like these. Chuck Schumer invited to the

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Speaker 3: White House for a week from today, and we're going

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Speaker 3: to have more time to get into the particulars here.

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Speaker 3: But what's that meeting like I realize it's the opening salvo.

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Speaker 3: Will anything get done if both sides are this far apart?

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Speaker 8: Well, I do think there's enough time. And you know,

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Speaker 8: I know, the date of June first sort of shocked everybody,

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Speaker 8: But either if the date was July first or August first,

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Speaker 8: they wouldn't be doing negotiations in earnest until about a

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Speaker 8: month in advance. Anyway, that's the way Washington rolls on this.

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Speaker 6: Look.

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Speaker 8: Schumer and Biden each want to make sure that nothing

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Speaker 8: happens that disrupts the economy. That's their number one goal.

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Speaker 8: I think the challenge for Kevin McCarthy is can I

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Speaker 8: pass a debt ceiling bill and keep my job? That's

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Speaker 8: you know, a speaker. I think that's the drama in

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Speaker 8: this sort of thing. I wouldn't be surprised if something

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Speaker 8: was done to, you know, move the negotiations forward a

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Speaker 8: couple of weeks or months, like a very temporary debt level.

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Speaker 3: Hold that thought, because I do think that suspending the

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Speaker 3: debt limit at least for a couple is where we're

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Speaker 3: going with this. More with the panel. Next, this is Bloomberg.

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Speaker 2: To the Bloomberg Sound on podcast.

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Speaker 1: Catch the program live weekdays at one Eastern on Bloomberg Radio,

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Speaker 1: the tune in alf, Bloomberg dot Com, and the.

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Speaker 9: Bloomberg Business App.

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Speaker 1: flagship New York station, Just say Alexa, play Bloomberg eleven thirty.

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Speaker 3: Now that the big meeting is set for next week,

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Speaker 3: what are the options? Actually? Speaker McCarthy says he will

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Speaker 3: never raise the debt ceiling without budget cuts. The White

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Speaker 3: House says it will never agree to budget cuts without

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Speaker 3: raising the debt ceiling. And so here we are still

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Speaker 3: another day into this with an next date and no

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Speaker 3: real path. As we spend time with our panel, they've

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Speaker 3: both been through events like these many times. That would

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Speaker 3: be Rick Davis, Republican strategist and Bloomberg Politics contributor, joined

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Speaker 3: today by Jim Kessler, Democratic strategist, co founder of Third Way. Rick,

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Speaker 3: it does seem like we need to kick the can

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Speaker 3: here at some point unless some magic happens between the

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Speaker 3: first of June. So, if you're on the White House

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Speaker 3: side of the table here, do you show up next

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Speaker 3: week with a proposal to suspend the debt limit, maybe

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Speaker 3: till fall, so it would coincide with the budget and

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Speaker 3: we figure out how to deal with reality between now

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Speaker 3: and then.

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Speaker 7: I think that's much more likely Joe to be a

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Speaker 7: fallback position when other issues are deemed insurmountable. There's no

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Speaker 7: question that the House bill is debt on arrival at

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Speaker 7: the White House, but having some package of budget cuts

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Speaker 7: that might be tolerable to Democrats and try to give

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Speaker 7: McCarthy a chance to try and get another two hundred

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Speaker 7: and seventeen two hundred eighteen votes from his caucus to

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Speaker 7: pass something maybe on the table. The biggest problem is,

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Speaker 7: even though McCarthy agrees to something, can he actually implement

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Speaker 7: it on the floor with his caucus? And we barely

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Speaker 7: saw his current plan, which was everything that everybody wanted

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Speaker 7: thrown in. The minute you pair that back, you start

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Speaker 7: losing Republican votes.

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Speaker 3: Right, And this is why the White House hasn't engaged

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Speaker 3: untill now, right, Jim, because they have no reason to

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Speaker 3: believe that Kevin McCarthy has any leverage with his own

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Speaker 3: caucus as he tries to approach the White House for negotiations.

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Speaker 3: But this is the very problem. This is how we

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Speaker 3: end up possibly going over the cliff. Right, When does

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Speaker 3: that change exactly?

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Speaker 8: And look any bill that gets to the President's desk

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Speaker 8: needs to get sixty Senators voting for, which probably means

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Speaker 8: all fifty Democratic senators and ten or twelve Republican senators

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Speaker 8: there too. And that's a bill that looks very different

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Speaker 8: than something that Speaker McCarthy has done. Look, I believe

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Speaker 8: in the end this deal will be cut principally by Biden, Schumer,

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Speaker 8: and McConnell. It will have some things where the Democrats

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Speaker 8: will have to concede. It won't be enough really for

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Speaker 8: McCarthy's caucus, but probably the markets will force that bill

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Speaker 8: to the floor where it's in June, or like a

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Speaker 8: kick the can at a later date. But that's the

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Speaker 8: dynamic I see.

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Speaker 3: So here we are talking to two veterans of the Senate.

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Speaker 3: What do you think, Rick, does Mitch McConnell save the

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Speaker 3: day here?

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Speaker 7: Well, I think the key was what Jim said, which

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Speaker 7: was it's a combination of Mitch McConnell and Schumer. Schumer

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Speaker 7: has to deliver, you know, fifty Democrats, McConnelly has to

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Speaker 7: deliver ten Republicans, and if they get a relatively clean

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Speaker 7: bill that won't be that hard to do, then it

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Speaker 7: gets over to the House, and the reality is then

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Speaker 7: it's like two hundred and fifteen Democrats and how many

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Speaker 7: Republicans do you need? And that is that changes the

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Speaker 7: dynamic completely, and there are plenty of sort of centrist

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Speaker 7: Republicans to walk the line, and all you need is

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Speaker 7: a couple.

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Speaker 6: So all of a sudden, it's a much more doable thing.

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Speaker 6: But it is completely different than the current scenario.

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Speaker 3: In that world, though, Jim goes back to the House

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Speaker 3: and you've got problems there. That would be an incredibly

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Speaker 3: embarrassing moment for the Speaker to think there was an

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Speaker 3: agreement in principle he can't get his own caucus around it.

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Speaker 3: What then, is that when we start talking about suspending

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Speaker 3: the debt limit.

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Speaker 8: I mean, that's why I said the drama in this

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Speaker 8: is whether we can pass a debt ceiling increase in

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Speaker 8: which the speaker gets to keep his job. So the

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Speaker 8: scenario could happen where it passes the Senate, it fails

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Speaker 8: the House on the first try, additional concession is put

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Speaker 8: in to win a couple of you know, some Republican votes,

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Speaker 8: and then McCarthy gets to save face. But you know,

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Speaker 8: that is the drama on this. I think Schumer, McConnell,

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Speaker 8: and Biden could figure this out in a couple of days.

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Speaker 8: It's McCarthy who's got his hands full.

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Speaker 3: We haven't talked too much about the motion to vacate

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Speaker 3: since the speaker fight Rick, And now that he's gone

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Speaker 3: fifteen rounds and managed to get a bill passed, is

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Speaker 3: that still a real possibility for him that he could

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Speaker 3: lose his job if he doesn't stick the landing this year?

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Speaker 7: You know, I don't think the Republican Caucus wants that

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Speaker 7: much turmoil because if he loses the job, the question

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Speaker 7: is do you have another two hundred and eighteen votes

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Speaker 7: to put somebody else in there? And you probably don't.

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Speaker 7: And so I think that as long as McConnell can

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Speaker 7: come up, or as long as McCarthy can come up

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Speaker 7: with some budget cuts. Everybody knows the current bill that

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Speaker 7: they pass is a non starter. Right, You're not going

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Speaker 7: to get one hundred and thirty billion cuts that they

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Speaker 7: have passed already. But if you get some, it saves

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Speaker 7: face for him. He can continue to be Speaker. He's

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Speaker 7: gotten something that otherwise the administration wasn't going to sign,

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Speaker 7: which was a clean debt limit, and he has an

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Speaker 7: argument that they've made progress, so we'll see if that's

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Speaker 7: something that they can pull off. But we're a long

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Speaker 7: way from there. As Jim said, you know, it wouldn't

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Speaker 7: take McConnell and Schumer very long to come up with

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Speaker 7: a deal, but when they have to pass it through

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Speaker 7: an almost evenly divided House, it makes it more complex.

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Speaker 2: Boy, sure does.

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Speaker 1: Now.

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Speaker 3: The idea was at least from Speaker McCarthy Jim Cassler,

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Speaker 3: to extend the debt limit through May of twenty four,

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Speaker 3: so smack dab in the middle of a presidential cycle.

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Speaker 3: I'm guessing that's a non starter for this White House

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Speaker 3: as well. But how much of this then are we

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Speaker 3: going to be hearing about on the campaign trail? This

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Speaker 3: is going to be a presidential election issue, I suspect

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Speaker 3: unless it's far in the rear view mirror at that

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Speaker 3: point and they managed to lift the debt limit beyond

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Speaker 3: the campaign, what's more likely.

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Speaker 8: They have to lift this beyond the campaign. I don't

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Speaker 8: think either party wants to go through this again. It's

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Speaker 8: a variable. Look. I think if it was extended to

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Speaker 8: May twenty twenty four, that's advantaged Joe Biden because the

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Speaker 8: more the Republicans look extreme, the better it is for Biden.

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Speaker 8: But my guess is it's a variable on either side.

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Speaker 8: Once they want to how this be part of the

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Speaker 8: twenty twenty four election, to see what's going to happen

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Speaker 8: to budgets thereafter.

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Speaker 3: What do you think on that one, Rick, What would

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Speaker 3: be an acceptable timeline. You've got to get it through

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Speaker 3: the presidential race.

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Speaker 7: Yeah, you look, I mean everybody would want that done.

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Speaker 7: But you know, if McCarthy only gets a portion of

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Speaker 7: his cuts, he can always claim that, hey, we got

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Speaker 7: another shot at this while we're still in majority next year,

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Speaker 7: and that may be one of the only ways to

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Speaker 7: get the caucus to vote for it, if indeed we're

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Speaker 7: still relying on Republican vote only to pass whatever the

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Speaker 7: deal is. So I think this is one of the

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Speaker 7: more complicated aspects. Do you lift the borrowing cap, you know,

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Speaker 7: to the one point five trillion or more to extend it,

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Speaker 7: or are you actually suspending the detlament. I think that's

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Speaker 7: got to be figured out as one of the very

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Speaker 7: first negotiating points.

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Speaker 3: Jim Kesler. The Trump tax cuts came up in our

440
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Speaker 3: conversation earlier this hour with barat Rama Murdy. Revenue adjustments

441
00:23:01,240 --> 00:23:05,080
Speaker 3: would change this conversation around budget cuts quite a bit,

442
00:23:05,640 --> 00:23:08,560
Speaker 3: But is that a non starter with this Republican House.

443
00:23:10,240 --> 00:23:14,960
Speaker 8: Probably? I mean, what needs to happen if you're looking

444
00:23:15,119 --> 00:23:18,160
Speaker 8: really for a long term budget solution is there are

445
00:23:18,160 --> 00:23:22,600
Speaker 8: two The Democrats have to come off their position where

446
00:23:22,600 --> 00:23:25,760
Speaker 8: there can be no cuts to entitlements, and the Republicans

447
00:23:25,800 --> 00:23:29,360
Speaker 8: need to come off of their position in which revenue

448
00:23:29,920 --> 00:23:32,959
Speaker 8: can't be increased. That's what has to happen if we

449
00:23:33,000 --> 00:23:36,760
Speaker 8: want a long term solution to our fiscal problems. I

450
00:23:36,760 --> 00:23:39,560
Speaker 8: don't think that's going to happen in this set of negotiations.

451
00:23:39,760 --> 00:23:42,240
Speaker 8: It could happen in a future set of negotiations.

452
00:23:43,200 --> 00:23:45,280
Speaker 3: So what's the boss move here? What's the flex for

453
00:23:45,320 --> 00:23:45,840
Speaker 3: the White House?

454
00:23:45,920 --> 00:23:46,080
Speaker 9: Rick?

455
00:23:46,520 --> 00:23:49,080
Speaker 3: When this meeting happens next week, they've got one week

456
00:23:49,119 --> 00:23:51,200
Speaker 3: to plan for this. Is there anything that Joe Biden

457
00:23:51,240 --> 00:23:53,560
Speaker 3: can do that tips the cart a little bit, that

458
00:23:53,840 --> 00:23:57,520
Speaker 3: actually impacts the conversation, maybe sends Speaker McCarthy home with

459
00:23:57,600 --> 00:23:58,359
Speaker 3: something to think about.

460
00:23:59,520 --> 00:24:01,520
Speaker 7: Yeah, two edged sword, because he wants to go out

461
00:24:01,560 --> 00:24:03,960
Speaker 7: and talk about the extreme House of Representatives, you know,

462
00:24:04,040 --> 00:24:06,280
Speaker 7: owned by MAGA and holding up the economy.

463
00:24:06,640 --> 00:24:08,320
Speaker 6: But that doesn't help in a negotiation.

464
00:24:08,520 --> 00:24:11,119
Speaker 7: So I think that they've got to be pretty productive

465
00:24:11,280 --> 00:24:14,800
Speaker 7: between now and May ninth, when everyone's sitting around the

466
00:24:14,840 --> 00:24:16,440
Speaker 7: cabinet room at the White House.

467
00:24:16,560 --> 00:24:19,640
Speaker 6: And so I would imagine that now.

468
00:24:19,520 --> 00:24:22,119
Speaker 7: What they're going to talk about are what are the

469
00:24:22,400 --> 00:24:24,800
Speaker 7: what are the issues around you know, the lifting the

470
00:24:24,840 --> 00:24:28,320
Speaker 7: borrowing cap, you know, whether they spend it, what's the

471
00:24:28,359 --> 00:24:30,240
Speaker 7: timing of that. Those are things that aren't going to

472
00:24:30,400 --> 00:24:33,880
Speaker 7: upset the apple cart politically, but keep the heat on Republicans.

473
00:24:34,040 --> 00:24:38,240
Speaker 7: And I think that this White House has been pretty circumstanct.

474
00:24:38,280 --> 00:24:41,800
Speaker 7: I mean, I could see being much more demagogic about

475
00:24:42,440 --> 00:24:45,760
Speaker 7: the health of our national economy and the global financial

476
00:24:45,760 --> 00:24:49,040
Speaker 7: system if we if we don't get this done. So

477
00:24:49,240 --> 00:24:51,040
Speaker 7: I think they'll do a little, but I think they

478
00:24:51,040 --> 00:24:52,840
Speaker 7: got to keep the door open for these guys to

479
00:24:52,880 --> 00:24:55,480
Speaker 7: walk through on May ninth and actually get a deal.

480
00:24:55,760 --> 00:24:58,600
Speaker 3: Yeah right, boy, this there's a lot to figure in

481
00:24:58,600 --> 00:25:00,560
Speaker 3: this balancing actor. We're going to talk more about it

482
00:25:00,560 --> 00:25:03,280
Speaker 3: next with our panel and Eric Wasson will join the conversation.

483
00:25:03,320 --> 00:25:08,600
Speaker 1: Bloomberg Congressional Reporter. You're listening to The Bloomberg Sound on podcast.

484
00:25:09,000 --> 00:25:12,560
Speaker 1: Catch us Live weekdays at one Eastern on Bloomberg dot com,

485
00:25:12,560 --> 00:25:15,399
Speaker 1: the iHeartRadio app and the Bloomberg Business app, or.

486
00:25:15,440 --> 00:25:17,880
Speaker 2: Listen on demand wherever you get your podcasts.

487
00:25:19,080 --> 00:25:21,720
Speaker 3: I suspect no one is looking more closely at the

488
00:25:21,720 --> 00:25:25,719
Speaker 3: congressional calendar between now and the first of June than

489
00:25:25,920 --> 00:25:30,560
Speaker 3: Eric Wasson, Bloomberg Congressional reporter, who joins us here to

490
00:25:30,640 --> 00:25:33,920
Speaker 3: talk about exactly what might unfold in the next couple

491
00:25:33,960 --> 00:25:35,760
Speaker 3: of days. Here with the meeting at the White House

492
00:25:35,760 --> 00:25:38,800
Speaker 3: set for one week from today, and we'll compare notes

493
00:25:38,880 --> 00:25:41,840
Speaker 3: with our panel in just a moment. Eric, thanks for

494
00:25:41,920 --> 00:25:44,400
Speaker 3: joining us on the hill. I know that Speaker McCarthy's

495
00:25:44,400 --> 00:25:46,200
Speaker 3: been abroad here it's probably been a little bit difficult

496
00:25:46,200 --> 00:25:47,919
Speaker 3: to communicate with his office and get a sense of

497
00:25:47,920 --> 00:25:50,439
Speaker 3: what's going on. He was speaking to the Knesset in

498
00:25:50,640 --> 00:25:55,680
Speaker 3: Israel yesterday. Upon his return, he'll be preparing for this

499
00:25:55,760 --> 00:25:58,399
Speaker 3: meeting next week. And it sure sounds like both sides

500
00:25:58,440 --> 00:26:01,760
Speaker 3: are dug in as much as ever. Would you agree.

501
00:26:01,840 --> 00:26:03,800
Speaker 10: They're certainly dug in. The one thing I want to

502
00:26:03,840 --> 00:26:06,879
Speaker 10: encourage listeners to notice is that the White House is

503
00:26:06,920 --> 00:26:11,120
Speaker 10: saying that they are ready to initiate a separate budget discussion.

504
00:26:11,200 --> 00:26:13,800
Speaker 10: Now at at some point we're getting to semantics here,

505
00:26:13,880 --> 00:26:16,119
Speaker 10: Like McCarthy will say this is a debt ceiling negotiation.

506
00:26:16,560 --> 00:26:19,240
Speaker 10: Biden will say it's a budget discussion. You know, the

507
00:26:19,280 --> 00:26:22,000
Speaker 10: mechanical house gets worked out. You know, maybe they passed

508
00:26:22,119 --> 00:26:24,639
Speaker 10: a clean death ciling increase in seconds later pass the

509
00:26:24,640 --> 00:26:27,679
Speaker 10: budget bill to give everyone face. But you know, I

510
00:26:27,680 --> 00:26:30,639
Speaker 10: think it's a significant movement that Biden has called this meeting.

511
00:26:30,800 --> 00:26:34,280
Speaker 10: He's no longer demanding the GP produce a full budget proposal,

512
00:26:34,400 --> 00:26:36,840
Speaker 10: like they're going to basically take the House pass bill

513
00:26:37,240 --> 00:26:40,040
Speaker 10: as the GOP starting point. So I think there could

514
00:26:40,080 --> 00:26:42,320
Speaker 10: be some movement here, but certainly folks need to be

515
00:26:42,359 --> 00:26:44,640
Speaker 10: nervous with this June first deadline. I think a lot

516
00:26:44,680 --> 00:26:47,080
Speaker 10: of people on Capitol are very surprised when that came

517
00:26:47,119 --> 00:26:49,840
Speaker 10: out from Janet Yellen yesterday. They were thinking it could

518
00:26:49,880 --> 00:26:53,000
Speaker 10: be aug histor or something, and they're really having to

519
00:26:53,000 --> 00:26:53,800
Speaker 10: spring into action.

520
00:26:54,160 --> 00:26:58,560
Speaker 3: So does that actually motivate all parties involved here or

521
00:26:58,640 --> 00:27:02,080
Speaker 3: give them another into grandstand because a lot of people,

522
00:27:02,119 --> 00:27:04,520
Speaker 3: now that we have an X date are just beginning

523
00:27:04,520 --> 00:27:06,959
Speaker 3: to pay attention. I was asked earlier today, what's this

524
00:27:07,280 --> 00:27:08,800
Speaker 3: X date all about? What do you mean we're going

525
00:27:08,840 --> 00:27:09,400
Speaker 3: to default.

526
00:27:10,359 --> 00:27:13,119
Speaker 10: Yeah, No, it's going to definitely like the fire for action.

527
00:27:13,440 --> 00:27:15,640
Speaker 10: But one thing I would also say is it could

528
00:27:15,720 --> 00:27:18,400
Speaker 10: lead to a short term increase the proposals out there

529
00:27:18,440 --> 00:27:21,920
Speaker 10: to bring it to October first or December thirty first.

530
00:27:21,920 --> 00:27:24,160
Speaker 10: That would more closely align it with the normal budget

531
00:27:24,160 --> 00:27:27,240
Speaker 10: process that fund the next fiscal year, which starts in October.

532
00:27:27,520 --> 00:27:30,159
Speaker 10: So you could kind of like allow the appropriations and

533
00:27:30,240 --> 00:27:32,440
Speaker 10: budget process to play itself out a little bit more

534
00:27:32,480 --> 00:27:36,000
Speaker 10: with detailed proposals, and then maybe come back and pass

535
00:27:36,040 --> 00:27:38,680
Speaker 10: it all together. So we could see something like that emerge.

536
00:27:38,720 --> 00:27:41,480
Speaker 10: I just think given that people were kind of hit

537
00:27:41,520 --> 00:27:44,159
Speaker 10: flat footed with this new date, that's more likely than

538
00:27:44,200 --> 00:27:45,080
Speaker 10: it was yesterday.

539
00:27:45,320 --> 00:27:49,240
Speaker 3: Interesting spending time with Eric Watson, who is joining us

540
00:27:49,280 --> 00:27:52,720
Speaker 3: from Capitol Hill reporting for Bloomberg here, I'm sure that

541
00:27:52,800 --> 00:27:54,919
Speaker 3: the public conversation, to your point, is a little bit

542
00:27:54,960 --> 00:27:56,800
Speaker 3: different than the one behind the scenes. Is there a

543
00:27:56,800 --> 00:27:58,679
Speaker 3: way that they can do this with kind of a

544
00:27:58,720 --> 00:28:01,920
Speaker 3: wink and a smile here, Eric, where they actually negotiate

545
00:28:02,000 --> 00:28:04,000
Speaker 3: both at once, and I think this is where you're going,

546
00:28:04,400 --> 00:28:08,240
Speaker 3: but but publicly suggest that these are are two separate.

547
00:28:07,920 --> 00:28:10,879
Speaker 10: Deals, right, I think Republicans would would you know, as

548
00:28:10,920 --> 00:28:12,960
Speaker 10: someone in the administration once told me they could, they

549
00:28:13,040 --> 00:28:15,800
Speaker 10: could send out different press releases but have the same deal.

550
00:28:15,840 --> 00:28:18,520
Speaker 10: You know, they'll be spin on both sides. But you know,

551
00:28:18,800 --> 00:28:20,240
Speaker 10: at the end of the day, there have been debt

552
00:28:20,280 --> 00:28:23,320
Speaker 10: ceiling increases linked to the budget cuts before. They've also

553
00:28:23,400 --> 00:28:26,240
Speaker 10: been clean ones. So each ie keeps claiming it's impossible,

554
00:28:26,280 --> 00:28:29,480
Speaker 10: it's never happened, but both both types of things have happened.

555
00:28:29,560 --> 00:28:32,280
Speaker 10: There's a lot very interesting move from House Democrats today

556
00:28:32,280 --> 00:28:34,919
Speaker 10: where they kind of unleash their move, which is just

557
00:28:34,960 --> 00:28:37,679
Speaker 10: to sort of set up what's called the discharge petition.

558
00:28:37,800 --> 00:28:41,959
Speaker 10: This would basically allow a five or more House Republicans

559
00:28:41,960 --> 00:28:44,840
Speaker 10: did defect from McCarthy and force on the debt ceiling.

560
00:28:44,880 --> 00:28:47,120
Speaker 10: Now it could line up to early June. I was

561
00:28:47,200 --> 00:28:49,000
Speaker 10: I was a little bit surprised because they found a

562
00:28:49,040 --> 00:28:51,160
Speaker 10: little loophole in the House rules. I thought it was

563
00:28:51,160 --> 00:28:52,920
Speaker 10: going to take months to set this up, this move,

564
00:28:52,960 --> 00:28:55,280
Speaker 10: but they can. They can expedite it. So in the

565
00:28:55,360 --> 00:28:56,880
Speaker 10: end of the day and the facing of the fall,

566
00:28:56,960 --> 00:29:01,520
Speaker 10: we could see a handful of modern Republicans buck the

567
00:29:01,560 --> 00:29:04,960
Speaker 10: party and kind of passes through the House, defining the speaker,

568
00:29:05,000 --> 00:29:07,120
Speaker 10: that could be in for a world of hurt politically,

569
00:29:07,200 --> 00:29:10,920
Speaker 10: but it does set up a potential another option out there.

570
00:29:11,160 --> 00:29:13,120
Speaker 3: Well, okay, the men, you just got a little longer

571
00:29:13,120 --> 00:29:14,920
Speaker 3: with the help of Eric Watson. Thank you Eric for

572
00:29:14,960 --> 00:29:18,560
Speaker 3: being here. Bloomberg congressional reporter who's right in the middle

573
00:29:18,560 --> 00:29:21,000
Speaker 3: of it on Capitol Hill to the panel, Rick Davis

574
00:29:21,040 --> 00:29:23,160
Speaker 3: and Jim Kessler with us here. What do you think

575
00:29:23,160 --> 00:29:26,840
Speaker 3: about the idea that's discharged position? Jim? Is that is

576
00:29:26,880 --> 00:29:29,120
Speaker 3: that kind of an outlier? Is that a real possibility?

577
00:29:30,720 --> 00:29:33,600
Speaker 8: It's an outlier and a possibility. It's like hitting the

578
00:29:33,720 --> 00:29:35,720
Speaker 8: three run homer in the bottom of the nine to

579
00:29:35,760 --> 00:29:38,520
Speaker 8: win it. It happens, It doesn't happen that often, but

580
00:29:38,600 --> 00:29:41,960
Speaker 8: I mean, it's another it's another piece that you can

581
00:29:42,000 --> 00:29:45,480
Speaker 8: put in place to try and you know, maybe extend

582
00:29:45,520 --> 00:29:47,280
Speaker 8: the negotiations a little bit longer.

583
00:29:48,280 --> 00:29:51,040
Speaker 3: Sounds more realistic. Rick that that this is done together

584
00:29:51,160 --> 00:29:55,920
Speaker 3: but projected publicly as two separate issues, like Eric said,

585
00:29:55,920 --> 00:29:58,200
Speaker 3: two separate news releases, but the same deal. Is that

586
00:29:58,240 --> 00:29:59,160
Speaker 3: where you're going here to.

587
00:30:00,280 --> 00:30:02,960
Speaker 7: Yeah, it very well could be. I mean, in the past,

588
00:30:03,040 --> 00:30:06,800
Speaker 7: when cuts have been linked to the increase in the

589
00:30:06,840 --> 00:30:11,120
Speaker 7: debt ceiling. You know, it's all been a part of

590
00:30:11,160 --> 00:30:15,480
Speaker 7: a deal, right and and so there's a precedent for that.

591
00:30:15,600 --> 00:30:19,360
Speaker 7: The mechanics of it, whether it's a standalone bill that

592
00:30:19,600 --> 00:30:21,720
Speaker 7: separates the two things out or is all part of

593
00:30:21,720 --> 00:30:25,560
Speaker 7: one package, is just the art of doing the deal.

594
00:30:25,840 --> 00:30:29,720
Speaker 7: And it would if they were two separate things preserve

595
00:30:29,840 --> 00:30:33,760
Speaker 7: everybody's sensibilities that the Biden administration said they want to

596
00:30:33,760 --> 00:30:35,800
Speaker 7: clean debt ceiling, and they could claim they got one,

597
00:30:36,280 --> 00:30:37,080
Speaker 7: but it's a.

598
00:30:37,000 --> 00:30:38,160
Speaker 6: Fool's Erran in that regard.

599
00:30:38,200 --> 00:30:41,120
Speaker 7: I mean, there will be a deal to cut spending

600
00:30:41,280 --> 00:30:44,440
Speaker 7: if it goes along those lines, and they'll just look

601
00:30:44,480 --> 00:30:48,080
Speaker 7: silly to claim otherwise. But look, I think that right now,

602
00:30:48,280 --> 00:30:50,880
Speaker 7: because it's such a short period of time, all these

603
00:30:50,880 --> 00:30:53,480
Speaker 7: different mechanics are on the table, we don't know what

604
00:30:53,600 --> 00:30:56,200
Speaker 7: the final disposition is going to be. But the good

605
00:30:56,240 --> 00:30:58,120
Speaker 7: news is they're all going to sit down on the

606
00:30:58,240 --> 00:31:00,520
Speaker 7: ninth and we're going to finally have a ociation that

607
00:31:00,560 --> 00:31:03,520
Speaker 7: we've been actually talking about for six months. And so

608
00:31:04,520 --> 00:31:06,760
Speaker 7: I'd say that all the parties are going with the

609
00:31:06,800 --> 00:31:09,000
Speaker 7: idea of getting a deal, and so maybe a deal

610
00:31:09,040 --> 00:31:12,560
Speaker 7: won't take that long to actually come to fruition that

611
00:31:12,600 --> 00:31:13,000
Speaker 7: it'll be.

612
00:31:12,960 --> 00:31:15,920
Speaker 3: Quite a night in the White House driveway for Kevin McCarthy, Jim,

613
00:31:15,920 --> 00:31:18,840
Speaker 3: And god knows, he'll certainly tell reporters how it went

614
00:31:18,920 --> 00:31:20,920
Speaker 3: if things didn't go well. But you know, we're also

615
00:31:20,960 --> 00:31:23,880
Speaker 3: talking about this as a FED meeting gets underway and

616
00:31:23,960 --> 00:31:28,400
Speaker 3: we expect another interest rate hike. It looks like tomorrow, Jim,

617
00:31:28,440 --> 00:31:31,440
Speaker 3: I wonder how concerned you are about the economic headwinds

618
00:31:31,440 --> 00:31:34,280
Speaker 3: that are coming just as they try to figure out

619
00:31:34,400 --> 00:31:35,840
Speaker 3: how to avoid the fiscal cliff.

620
00:31:37,600 --> 00:31:40,400
Speaker 8: Right, I mean, this is this is really paramount for

621
00:31:40,600 --> 00:31:43,040
Speaker 8: Biden because you know, this is this is one of

622
00:31:43,120 --> 00:31:47,280
Speaker 8: the pieces for his reelection as an economy that is strong. Look,

623
00:31:47,320 --> 00:31:51,640
Speaker 8: this feels like this is the last interest rate increase.

624
00:31:53,400 --> 00:31:56,600
Speaker 8: A lot of good signs in the economy, some moderating

625
00:31:56,640 --> 00:32:01,600
Speaker 8: of inflation. Clearly, we've sawt we've seen some shocks in

626
00:32:01,640 --> 00:32:06,200
Speaker 8: the regional banks. Secretary Yellen seems to think that the

627
00:32:06,240 --> 00:32:10,880
Speaker 8: banking system is strong. The Biden administration doesn't once self

628
00:32:10,920 --> 00:32:15,280
Speaker 8: inflicted Washington wounds hurting the economy, and that would be

629
00:32:15,320 --> 00:32:16,440
Speaker 8: a debt ceiling breach.

630
00:32:18,360 --> 00:32:20,960
Speaker 3: No one's talking about a downgrade yet, Rick, and we're

631
00:32:21,000 --> 00:32:22,760
Speaker 3: two weeks away from when that would have happened in

632
00:32:22,840 --> 00:32:23,479
Speaker 3: twenty eleven.

633
00:32:24,880 --> 00:32:27,520
Speaker 7: Yeah, well, I mean two weeks away is a very

634
00:32:27,720 --> 00:32:30,240
Speaker 7: short period of time. And if this meeting doesn't go

635
00:32:30,320 --> 00:32:32,080
Speaker 7: well on the NINS, people are going to wondering why

636
00:32:32,080 --> 00:32:32,640
Speaker 7: did we stay?

637
00:32:32,800 --> 00:32:34,560
Speaker 6: Say, you know, why we delay that long?

638
00:32:35,440 --> 00:32:37,480
Speaker 7: But that is actually one of the drivers for getting

639
00:32:37,480 --> 00:32:40,880
Speaker 7: a deal cut is that it's not that you want

640
00:32:40,920 --> 00:32:42,560
Speaker 7: to hit the XT date, but you don't want to

641
00:32:42,560 --> 00:32:43,880
Speaker 7: get down graded in the process.

642
00:32:44,120 --> 00:32:47,160
Speaker 3: God knows it. Rick Davis and Jim Kessler our panel

643
00:32:47,280 --> 00:32:50,000
Speaker 3: with some final thoughts coming up next on the Fastest

644
00:32:50,000 --> 00:32:53,680
Speaker 3: Show in Politics. I'm Joe Matthew in Washington. This is Bloomberg.

645
00:32:54,840 --> 00:32:58,240
Speaker 1: You're listening to the Bloomberg Sound on podcast. Catch the

646
00:32:58,240 --> 00:33:02,400
Speaker 1: program live weekdays at one on Bloomberg Radio, the tune

647
00:33:02,480 --> 00:33:04,200
Speaker 1: in alf, Bloomberg dot Com, and.

648
00:33:04,200 --> 00:33:05,560
Speaker 9: The Bloomberg Business App.

649
00:33:05,680 --> 00:33:08,520
Speaker 1: You can also listen live on Amazon Alexa from our

650
00:33:08,560 --> 00:33:13,360
Speaker 1: flagship New York station, Just Say Alexa played Bloomberg eleven thirty.

651
00:33:14,120 --> 00:33:16,760
Speaker 3: Trying to put yourself in a moment if you were

652
00:33:16,760 --> 00:33:20,400
Speaker 3: not there, or if too much time has passed since,

653
00:33:20,400 --> 00:33:22,120
Speaker 3: but I think most of us can still remember the

654
00:33:22,200 --> 00:33:26,400
Speaker 3: impact President Obama's addressed to the nation on the second

655
00:33:26,440 --> 00:33:28,920
Speaker 3: of May this day in twenty eleven.

656
00:33:29,000 --> 00:33:32,120
Speaker 11: Tonight, I can report to the American people and to

657
00:33:32,200 --> 00:33:35,560
Speaker 11: the world, but the United States has conducted an operation

658
00:33:35,720 --> 00:33:39,080
Speaker 11: that killed Osama bin Laden, the leader of al Qaida.

659
00:33:39,240 --> 00:33:41,520
Speaker 3: He spoke at night from the Cross Hall at the

660
00:33:41,520 --> 00:33:46,000
Speaker 3: White House and recalled being briefed in August that bin

661
00:33:46,080 --> 00:33:48,280
Speaker 3: Laden was hiding in a compound, as he put it,

662
00:33:48,520 --> 00:33:52,880
Speaker 3: deep inside Pakistan. When the time came, he signed off

663
00:33:53,040 --> 00:33:53,719
Speaker 3: on the mission.

664
00:33:53,760 --> 00:33:56,280
Speaker 11: A small team of Americans carried out the operation with

665
00:33:56,480 --> 00:34:01,960
Speaker 11: extraordinary courage and capability. No one Americans were harmed. They

666
00:34:01,960 --> 00:34:06,800
Speaker 11: took care to avoid civilian casualties. After a firefight, they

667
00:34:06,880 --> 00:34:10,320
Speaker 11: killed Osama bin Laden and took custody of his body.

668
00:34:11,920 --> 00:34:12,880
Speaker 6: For over two.

669
00:34:12,640 --> 00:34:16,000
Speaker 11: Decades, bin Laden has been al Qaeda's leader and symbol,

670
00:34:16,640 --> 00:34:19,400
Speaker 11: and it's continued to plot attacks against our country and

671
00:34:19,440 --> 00:34:23,040
Speaker 11: our friends and allies. The death of bin Laden marks

672
00:34:23,080 --> 00:34:26,120
Speaker 11: the most significant achievement to date in our nation's effort

673
00:34:26,160 --> 00:34:29,520
Speaker 11: to defeat al Qaida. Yet his death does not mark

674
00:34:29,560 --> 00:34:32,480
Speaker 11: the end of our effort. There's no doubt that al

675
00:34:32,520 --> 00:34:36,200
Speaker 11: Qaida will continue to pursue attacks against US. We must,

676
00:34:36,920 --> 00:34:40,120
Speaker 11: and we will remain vigilant at home and abroad.

677
00:34:40,200 --> 00:34:42,359
Speaker 3: The large group gathered outside the White House that night,

678
00:34:42,440 --> 00:34:44,400
Speaker 3: did sheer? I'm sure remember the photos of the video

679
00:34:44,560 --> 00:34:47,480
Speaker 3: be part of the moment when you don't forget. With

680
00:34:47,680 --> 00:34:50,720
Speaker 3: some final thoughts from our panel in our final moment

681
00:34:50,800 --> 00:34:53,880
Speaker 3: here with Rick Davis and Jim Kessler, Rick, does that

682
00:34:53,960 --> 00:34:56,400
Speaker 3: remain our most significant achievement in the war against terror?

683
00:34:58,000 --> 00:35:00,520
Speaker 7: Well, it's certainly a dramatic achievement. I mean, you could

684
00:35:00,640 --> 00:35:04,719
Speaker 7: argue that the defeat of ices in Syria is equal to,

685
00:35:04,760 --> 00:35:06,960
Speaker 7: if not greater than that, And it is a little

686
00:35:07,000 --> 00:35:11,800
Speaker 7: disappointing that you cannot miss a headline today without reading

687
00:35:11,840 --> 00:35:15,080
Speaker 7: that Al Qaeda continues to do battle as a terrorist

688
00:35:15,200 --> 00:35:19,040
Speaker 7: organization in Afghanistan where all this was begun.

689
00:35:19,160 --> 00:35:22,880
Speaker 6: So the war on terror is not over and they.

690
00:35:22,760 --> 00:35:27,120
Speaker 7: Continue to threaten people's lives, and I think we have

691
00:35:27,200 --> 00:35:28,279
Speaker 7: to be diligent as we.

692
00:35:28,160 --> 00:35:31,759
Speaker 3: Were then many thanks to our panel, Rick Davis and

693
00:35:31,880 --> 00:35:34,680
Speaker 3: Jim Castler. Jim will have more time as always when

694
00:35:34,719 --> 00:35:36,479
Speaker 3: you come back to join us, and I look forward

695
00:35:36,560 --> 00:35:39,480
Speaker 3: to it. I'm Joe Matthew in Washington. Kayley Lines is

696
00:35:39,520 --> 00:35:41,840
Speaker 3: on the way in next our two of sound On

697
00:35:41,960 --> 00:35:42,799
Speaker 3: starts right now.

698
00:35:43,920 --> 00:35:47,440
Speaker 1: You're listening to the Bloomberg Sound On podcast. Catch us

699
00:35:47,480 --> 00:35:50,640
Speaker 1: live weekdays at one Eastern on Bloomberg dot Com, the

700
00:35:50,719 --> 00:35:53,799
Speaker 1: iHeartRadio app, and the Bloomberg Business app, or listen on

701
00:35:53,880 --> 00:35:56,000
Speaker 1: demand wherever you get your podcasts.

702
00:35:56,880 --> 00:35:59,360
Speaker 3: I have Joe, Matthew and Washington along with Kaylee Lines.

703
00:35:59,400 --> 00:36:01,239
Speaker 3: That means it's out or two of sound on. Kayley,

704
00:36:01,280 --> 00:36:03,560
Speaker 3: It's good to see you here. There was something to

705
00:36:03,600 --> 00:36:06,239
Speaker 3: watch you in action yesterday the letter arrived from the

706
00:36:06,280 --> 00:36:09,600
Speaker 3: Treasury Department and Kaylee Line springs.

707
00:36:09,120 --> 00:36:12,279
Speaker 12: To action I live for breaking news to the next day.

708
00:36:12,320 --> 00:36:14,000
Speaker 3: This is well, look, this is a big deal. My god,

709
00:36:14,239 --> 00:36:16,440
Speaker 3: Wall Street, Washington. Everyone's been waiting for this, and now

710
00:36:16,480 --> 00:36:19,200
Speaker 3: they say the first of June should be circled on

711
00:36:19,200 --> 00:36:19,880
Speaker 3: our calendars.

712
00:36:20,080 --> 00:36:23,520
Speaker 12: Yeah. Potentially. What the Treasury Secretary said was that she

713
00:36:23,640 --> 00:36:25,640
Speaker 12: does not have confidence that the US is going to

714
00:36:25,680 --> 00:36:28,040
Speaker 12: be able to meet all of its obligations as early

715
00:36:28,520 --> 00:36:32,480
Speaker 12: as early but as early as June first, which in

716
00:36:32,680 --> 00:36:35,239
Speaker 12: Washington time is what about a split second, Joe. That

717
00:36:35,280 --> 00:36:37,279
Speaker 12: does not leave a lot of time for Republicans and

718
00:36:37,320 --> 00:36:40,200
Speaker 12: Democrats to really get together on this and start to

719
00:36:40,239 --> 00:36:42,200
Speaker 12: try and make something real out of some form of

720
00:36:42,200 --> 00:36:45,160
Speaker 12: debt ceiling lift, because the clock is ticking, and yet

721
00:36:45,200 --> 00:36:46,920
Speaker 12: I'm not sure how much real progress we're going to

722
00:36:46,960 --> 00:36:49,440
Speaker 12: get until next Tuesday, when the President sits down with

723
00:36:49,480 --> 00:36:50,879
Speaker 12: congressional leaders at the White House.

724
00:36:50,920 --> 00:36:53,200
Speaker 3: I said, there may not be progressed that day either.

725
00:36:53,719 --> 00:36:55,799
Speaker 3: You know, weir enough. We talked about this with Rick

726
00:36:55,880 --> 00:36:58,520
Speaker 3: Davis and Jim Kessler last hour. They were both of

727
00:36:58,560 --> 00:37:01,560
Speaker 3: the mind that something is possible that they wouldn't probably

728
00:37:01,560 --> 00:37:05,200
Speaker 3: start negotiating this until a month out. Anyway. The problem

729
00:37:05,239 --> 00:37:07,359
Speaker 3: is the calendar in the House. They're just not going

730
00:37:07,400 --> 00:37:10,040
Speaker 3: to be in session for that many days. Then again,

731
00:37:10,600 --> 00:37:13,279
Speaker 3: this probably emerges in a deal that has nothing to

732
00:37:13,320 --> 00:37:15,839
Speaker 3: do with the House calendar, right. We'll have to see

733
00:37:15,880 --> 00:37:17,880
Speaker 3: how that plays out following the meeting next week.

734
00:37:17,960 --> 00:37:18,160
Speaker 6: Yeah.

735
00:37:18,200 --> 00:37:21,480
Speaker 12: Well, in theory also that you could have members called

736
00:37:21,480 --> 00:37:23,800
Speaker 12: back to the Chamber even when they technically aren't supposed

737
00:37:23,800 --> 00:37:25,680
Speaker 12: to be in session, we could probably see a couple

738
00:37:25,719 --> 00:37:28,840
Speaker 12: all nighters pulled here, Joe. But the calendar is definitely

739
00:37:29,239 --> 00:37:32,760
Speaker 12: definitely a massive question, and it also raises the question

740
00:37:32,800 --> 00:37:36,640
Speaker 12: of how close to the brink are lawmakers willing to take.

741
00:37:36,680 --> 00:37:39,520
Speaker 12: This is the Biden administration willing to take this knowing

742
00:37:39,560 --> 00:37:42,120
Speaker 12: what happened in twenty eleven where it wasn't actually the

743
00:37:42,239 --> 00:37:44,839
Speaker 12: X state that mattered. It was weeks before that when

744
00:37:44,840 --> 00:37:46,080
Speaker 12: it's for US credit rating was down.

745
00:37:46,080 --> 00:37:46,200
Speaker 5: Here.

746
00:37:46,360 --> 00:37:49,200
Speaker 3: Rot Ramamurdi was not willing to answer that question when

747
00:37:49,239 --> 00:37:51,040
Speaker 3: we asked him last hour from the White House. You

748
00:37:51,040 --> 00:37:52,799
Speaker 3: know what happens when we get two weeks out that

749
00:37:52,840 --> 00:37:56,759
Speaker 3: could be downgrade? Time does anything change? And it introduces

750
00:37:56,880 --> 00:38:00,680
Speaker 3: our conversation with the Congressman from California, Brad Sherman is

751
00:38:00,719 --> 00:38:02,800
Speaker 3: back with us today, the Democrat from California who is

752
00:38:02,880 --> 00:38:06,080
Speaker 3: ranking member House Capital Market Subcommittee and of course on

753
00:38:06,120 --> 00:38:08,640
Speaker 3: financial services, and Congressman, it's great to have you back

754
00:38:09,080 --> 00:38:13,640
Speaker 3: on Bloomberg next week's meeting. Do you actually expect something

755
00:38:13,680 --> 00:38:16,600
Speaker 3: to emerge from that meeting or is that more of

756
00:38:16,800 --> 00:38:20,320
Speaker 3: establishing positions. Once we get everyone in the same room.

757
00:38:20,640 --> 00:38:24,040
Speaker 5: That's the beginning of establishing positions. And frankly, this is

758
00:38:24,120 --> 00:38:28,799
Speaker 5: already hurting our economy, and we'll hurt the economy a

759
00:38:28,840 --> 00:38:32,040
Speaker 5: bit more every day. How do you attract capital from

760
00:38:32,080 --> 00:38:35,280
Speaker 5: around the world when you look like the Keystone Cops,

761
00:38:35,440 --> 00:38:42,160
Speaker 5: but politically each side is going to have to show

762
00:38:42,360 --> 00:38:45,360
Speaker 5: its team that they were willing to go eyeball to

763
00:38:45,400 --> 00:38:52,759
Speaker 5: eyeball and fight hard, and that that tends to mean

764
00:38:53,719 --> 00:38:56,400
Speaker 5: we go toward the edge of the cliff, which is

765
00:38:56,760 --> 00:38:57,560
Speaker 5: bad for your health.

766
00:38:58,080 --> 00:39:01,160
Speaker 12: Well, Congressman, you say eyeball to eyeball, really underscoring the

767
00:39:01,200 --> 00:39:03,840
Speaker 12: idea that this is basically a staring contest and someone's

768
00:39:03,880 --> 00:39:05,759
Speaker 12: going to have to blink first. What do you think

769
00:39:05,800 --> 00:39:08,600
Speaker 12: the date should be that the Democratic Party would need

770
00:39:08,640 --> 00:39:10,680
Speaker 12: to blink? How close do you think you and your

771
00:39:10,680 --> 00:39:13,359
Speaker 12: colleagues and the leader of your party, President Biden, are

772
00:39:13,360 --> 00:39:15,680
Speaker 12: willing to take this to the edge of the cliff.

773
00:39:16,160 --> 00:39:18,680
Speaker 5: Well, keep in mind, you can always pass a five

774
00:39:18,800 --> 00:39:23,880
Speaker 5: day or a ten day suspension in the debt, so

775
00:39:23,960 --> 00:39:25,840
Speaker 5: you don't have to go over the cliff if you

776
00:39:25,880 --> 00:39:30,640
Speaker 5: don't want to. I know, you look at what the

777
00:39:30,680 --> 00:39:36,360
Speaker 5: Republicans are talking about, and they've got a few things

778
00:39:36,600 --> 00:39:40,440
Speaker 5: that relate to money that has already been appropriated that

779
00:39:40,480 --> 00:39:43,640
Speaker 5: hasn't been spent yet. But aside from that, all of

780
00:39:43,680 --> 00:39:48,080
Speaker 5: their focus is they want us to prevent them from

781
00:39:48,120 --> 00:39:53,479
Speaker 5: passing an appropriations bill on October one that they don't like. Well,

782
00:39:53,560 --> 00:39:55,000
Speaker 5: if they don't want to pass it. They don't have

783
00:39:55,040 --> 00:39:59,640
Speaker 5: to pass it's it's an absurd ransom note.

784
00:40:01,480 --> 00:40:04,120
Speaker 3: Well, so it sounds like a short term solution might

785
00:40:04,200 --> 00:40:06,400
Speaker 3: be smart to have handy here, Congressman, and maybe this

786
00:40:06,480 --> 00:40:09,239
Speaker 3: is figured out by September or something like that, But

787
00:40:09,280 --> 00:40:12,759
Speaker 3: of course it's still it's still a matter of timeline.

788
00:40:12,920 --> 00:40:15,640
Speaker 3: Speaker McCarthy wants to raise the debt limit until May

789
00:40:15,640 --> 00:40:19,760
Speaker 3: of twenty twenty four in his bill that was voted

790
00:40:19,760 --> 00:40:22,880
Speaker 3: on last week. That's I'm assuming a non starter for

791
00:40:22,920 --> 00:40:24,839
Speaker 3: this White House, knowing we're smack dab in the middle

792
00:40:24,880 --> 00:40:27,200
Speaker 3: of a presidential election. So what would be appropriate.

793
00:40:28,239 --> 00:40:29,920
Speaker 5: I think you want to take it through the end

794
00:40:30,000 --> 00:40:35,560
Speaker 5: of the political cycle, till after the November elections. But

795
00:40:36,840 --> 00:40:41,080
Speaker 5: we'll see. If McCarthy feels that he needs to get

796
00:40:41,200 --> 00:40:45,320
Speaker 5: absolutely every Republican or all Republicans except for one percent

797
00:40:45,360 --> 00:40:47,920
Speaker 5: of them on board, then he's not going to get

798
00:40:47,920 --> 00:40:52,719
Speaker 5: Democrats on board. This has got to be a bipartisan proposal,

799
00:40:52,920 --> 00:40:55,760
Speaker 5: and he you know, McCarthy can't say he can't pass

800
00:40:55,800 --> 00:41:00,920
Speaker 5: something because anything he votes for that Biden likes will pass.

801
00:41:02,320 --> 00:41:05,480
Speaker 12: Well, we also understand, speaking of getting some Republicans on

802
00:41:05,560 --> 00:41:09,000
Speaker 12: board here, that the Democrats are looking at a fallback plan.

803
00:41:09,560 --> 00:41:12,239
Speaker 12: Your leader in the House of Kim Jeffries writing a

804
00:41:12,280 --> 00:41:14,560
Speaker 12: letter basically talking about the idea that they want to

805
00:41:14,600 --> 00:41:17,000
Speaker 12: set up this process to force a floor vote on

806
00:41:17,040 --> 00:41:20,280
Speaker 12: a placeholder bill that then could be amended to increase

807
00:41:20,360 --> 00:41:23,279
Speaker 12: the debt limit. Congressman, do you think that you can

808
00:41:23,320 --> 00:41:26,240
Speaker 12: get enough Republican votes to actually bring that to the floor.

809
00:41:26,800 --> 00:41:32,799
Speaker 5: No, but you know it's good to illustrate, just as

810
00:41:33,800 --> 00:41:38,440
Speaker 5: last week the Republicans passed their bill, which was symbolic

811
00:41:38,480 --> 00:41:44,080
Speaker 5: at best. Democrats have got to show that we have

812
00:41:44,200 --> 00:41:46,920
Speaker 5: a way forward if only Republicans would join us. So

813
00:41:46,960 --> 00:41:51,319
Speaker 5: then politically each Republican has to explain why they won't

814
00:41:51,400 --> 00:41:53,960
Speaker 5: join us. But let me assure you they're not going

815
00:41:54,000 --> 00:41:54,640
Speaker 5: to join us.

816
00:41:56,760 --> 00:41:59,680
Speaker 3: There well, no mincing words there not that you tend to. Congressman,

817
00:41:59,719 --> 00:42:01,279
Speaker 3: I want to ask you about what's going on in

818
00:42:01,280 --> 00:42:03,200
Speaker 3: the banking sector. I know you've had a close eye

819
00:42:03,200 --> 00:42:04,760
Speaker 3: on it, and I believe the last time we spoke

820
00:42:04,880 --> 00:42:09,160
Speaker 3: was shortly after the SVB and signature failures. We're seeing

821
00:42:09,200 --> 00:42:12,239
Speaker 3: Wall Street despite this forced buyout of First Republic and

822
00:42:12,280 --> 00:42:14,840
Speaker 3: you can weigh on way in on that if you like.

823
00:42:15,680 --> 00:42:18,880
Speaker 3: The markets are are worried, and it's hard for us,

824
00:42:18,960 --> 00:42:22,800
Speaker 3: even with a Bloomberg terminal, to figure out exactly what's

825
00:42:22,880 --> 00:42:25,960
Speaker 3: driving these shares of regional banks lower today. I'm not

826
00:42:26,000 --> 00:42:28,160
Speaker 3: going to ask you about that. But when you step

827
00:42:28,200 --> 00:42:32,040
Speaker 3: back and look at this situation, Congressman, do you believe

828
00:42:32,080 --> 00:42:34,919
Speaker 3: that there could be further contagion or have we seen

829
00:42:34,960 --> 00:42:35,480
Speaker 3: the worst of this?

830
00:42:37,120 --> 00:42:42,880
Speaker 5: Well, it's not like anybody wants to publish the analysis

831
00:42:43,239 --> 00:42:51,040
Speaker 5: of what interest rate losses banks have already incurred. When

832
00:42:52,640 --> 00:42:55,400
Speaker 5: you can look at the at the balance sheet and

833
00:42:55,440 --> 00:42:59,200
Speaker 5: see what they're unrealized, Well, it's not on the balance sheet.

834
00:42:59,200 --> 00:43:01,160
Speaker 5: It's kind of like off to the sidle a balance sheet,

835
00:43:01,160 --> 00:43:04,560
Speaker 5: But the financial statements will tell you what unrealized losses

836
00:43:04,640 --> 00:43:08,000
Speaker 5: each bank has on their marketable securities. But then you

837
00:43:08,080 --> 00:43:12,040
Speaker 5: get to the banks that have mortgages in their portfolio.

838
00:43:12,960 --> 00:43:16,000
Speaker 5: In the case of a First Republic a one percent

839
00:43:16,040 --> 00:43:20,480
Speaker 5: mortgage to Zuckerberg, I mean zero credit risk, but a

840
00:43:20,560 --> 00:43:22,959
Speaker 5: whole lot of interest rate risk on a one percent loan,

841
00:43:23,239 --> 00:43:29,279
Speaker 5: thirty year loan. I think that the regulators have done

842
00:43:29,320 --> 00:43:33,920
Speaker 5: a terrible job of looking at interest rate risk, and

843
00:43:34,400 --> 00:43:36,839
Speaker 5: to my knowledge, they haven't forced any bank to buy

844
00:43:37,000 --> 00:43:41,359
Speaker 5: interest rate change insurance, which is available in a number

845
00:43:41,400 --> 00:43:43,279
Speaker 5: of different forms. But of course if you buy it,

846
00:43:43,320 --> 00:43:46,640
Speaker 5: that means your profits go down. I would suspect that

847
00:43:48,560 --> 00:43:51,799
Speaker 5: regularly we're going to force these banks to be more

848
00:43:51,960 --> 00:43:57,600
Speaker 5: careful to look at interest rate risk, and that will

849
00:43:58,000 --> 00:43:59,200
Speaker 5: cut into their profits.

850
00:44:00,080 --> 00:44:02,960
Speaker 12: Well, as we talk about the interest rate risk they're facing,

851
00:44:03,040 --> 00:44:07,160
Speaker 12: that's not something that goes away in the immediate near term.

852
00:44:07,200 --> 00:44:09,880
Speaker 12: And yet what we consistently hear from the regulators themselves,

853
00:44:09,920 --> 00:44:13,759
Speaker 12: from the Treasury Department, from the President himself, others in

854
00:44:13,800 --> 00:44:18,320
Speaker 12: the administration is that the banking system is sound and resilient.

855
00:44:18,560 --> 00:44:20,680
Speaker 12: Is it not as sound as resilient as they are

856
00:44:20,680 --> 00:44:23,040
Speaker 12: trying to present? Congressman, I mean, what is your true

857
00:44:23,080 --> 00:44:24,040
Speaker 12: read on the situation.

858
00:44:24,800 --> 00:44:27,400
Speaker 5: Well, it's part of the government. I'm supposed to go

859
00:44:27,440 --> 00:44:30,000
Speaker 5: on radio and tell you that all the banks are.

860
00:44:29,880 --> 00:44:33,080
Speaker 12: Sound, But your honest opinion.

861
00:44:34,800 --> 00:44:40,440
Speaker 5: We don't know until we get interest rate risk analysis,

862
00:44:40,440 --> 00:44:44,560
Speaker 5: both on marketable securities held for sale, marketable securities held

863
00:44:44,640 --> 00:44:49,320
Speaker 5: the design to be held for maturity, and on portfolios.

864
00:44:50,840 --> 00:44:55,480
Speaker 5: It's as if the banks and the regulators have deliberately

865
00:44:57,880 --> 00:45:01,880
Speaker 5: blinded themselves to that risk and it's particularly absurd for

866
00:45:01,960 --> 00:45:04,839
Speaker 5: the FED the blind itself to the possibility and interest

867
00:45:04,920 --> 00:45:08,320
Speaker 5: rates would go up because they're in charge of pushing

868
00:45:08,360 --> 00:45:09,200
Speaker 5: the interest rates up.

869
00:45:10,400 --> 00:45:12,680
Speaker 12: Well, on that note, Congressman, I'm glad you brought that

870
00:45:12,800 --> 00:45:15,719
Speaker 12: up because several of your Democratic colleagues, including the likes

871
00:45:15,719 --> 00:45:18,759
Speaker 12: of Senators Warren and Sanders, your colleagues in the House

872
00:45:18,800 --> 00:45:21,200
Speaker 12: like Brennan Boyle and Jerry Nadler, all signed a letter

873
00:45:21,239 --> 00:45:24,480
Speaker 12: today asking the Fed to posits rate hikes to quote

874
00:45:24,960 --> 00:45:29,759
Speaker 12: avoid engineering a recession that destroys jobs and crushes small businesses. Congressman,

875
00:45:29,760 --> 00:45:31,760
Speaker 12: what do you think the Fed should decide to do tomorrow.

876
00:45:33,560 --> 00:45:36,040
Speaker 5: They've got to try to thread the needle. And you

877
00:45:36,120 --> 00:45:40,520
Speaker 5: can't just say, don't cause a recession. You also have

878
00:45:40,600 --> 00:45:45,919
Speaker 5: to say battle inflation. And that's a that's a very

879
00:45:45,960 --> 00:45:52,239
Speaker 5: difficult needle to thread. I you know, I already think

880
00:45:52,360 --> 00:45:55,839
Speaker 5: that you know, if you didn't care about inflation, then

881
00:45:57,160 --> 00:45:59,600
Speaker 5: you'd be able to create an even greater labor shortage

882
00:45:59,600 --> 00:46:03,120
Speaker 5: in the cunt and that would help drive and wages up,

883
00:46:03,120 --> 00:46:05,480
Speaker 5: which would be a good thing. But you do have

884
00:46:05,520 --> 00:46:06,440
Speaker 5: to worry about inflation.

885
00:46:07,920 --> 00:46:10,040
Speaker 3: Makes you wonder about the dual mandate. At some point.

886
00:46:10,080 --> 00:46:12,839
Speaker 3: But to get back to Kayley's question, if you're the FED,

887
00:46:12,840 --> 00:46:15,080
Speaker 3: do you give us a couple of months the congressman

888
00:46:15,200 --> 00:46:19,120
Speaker 3: to gauge the lagging impact of the hikes already made.

889
00:46:20,960 --> 00:46:23,719
Speaker 5: I think you do what everyone expects them to do

890
00:46:24,719 --> 00:46:27,800
Speaker 5: a you know, for for several reasons, if everybody expects

891
00:46:27,800 --> 00:46:29,839
Speaker 5: them to do it, because that seems like the reasonable thing.

892
00:46:30,480 --> 00:46:34,560
Speaker 5: And it's the reasonable thing because if you disappoint or

893
00:46:34,600 --> 00:46:38,520
Speaker 5: surprise people, that hurts the economy just by itself. So

894
00:46:38,560 --> 00:46:43,000
Speaker 5: I think they'll do what's expected. We'll get the quarter point,

895
00:46:43,080 --> 00:46:48,799
Speaker 5: we'll get the something about being data dependent. Maybe the

896
00:46:48,840 --> 00:46:51,120
Speaker 5: word pause will be in there somewhere well.

897
00:46:51,120 --> 00:46:52,920
Speaker 12: And you know that the Chairman's going to get a

898
00:46:53,000 --> 00:46:55,160
Speaker 12: question in the press conference about the debt ceiling, and

899
00:46:55,200 --> 00:46:58,200
Speaker 12: he's going to return with something akin to we don't

900
00:46:58,239 --> 00:47:01,319
Speaker 12: deal with fiscal policy, but Congress should raise the debt

901
00:47:01,360 --> 00:47:05,640
Speaker 12: ceiling because it could have dire economic consequences. Congressman, we

902
00:47:05,719 --> 00:47:07,799
Speaker 12: spoke a few weeks ago, and we were talking about

903
00:47:07,800 --> 00:47:10,839
Speaker 12: the debt limits still at that point, and you told

904
00:47:10,840 --> 00:47:14,160
Speaker 12: me that you think the market may be underpricing Congress's

905
00:47:14,200 --> 00:47:17,239
Speaker 12: ability to mess this up. So, given everything that we

906
00:47:17,280 --> 00:47:20,239
Speaker 12: have just discussed the federal reserve hiking into this, the

907
00:47:20,239 --> 00:47:23,960
Speaker 12: ongoing questions around the stability of the banking system, the

908
00:47:24,040 --> 00:47:26,560
Speaker 12: looming X state. What would your message to the financial

909
00:47:26,640 --> 00:47:27,959
Speaker 12: markets be right now?

910
00:47:28,640 --> 00:47:32,959
Speaker 5: Well, I don't think you should just at the downside.

911
00:47:33,200 --> 00:47:36,200
Speaker 5: You look at the creativity of this economy, how many

912
00:47:36,280 --> 00:47:40,000
Speaker 5: people are working hard, the new technology that's being developed,

913
00:47:40,080 --> 00:47:43,200
Speaker 5: all the good things that are happening. And then you

914
00:47:43,280 --> 00:47:48,520
Speaker 5: have to balance that against a government that is a

915
00:47:48,520 --> 00:47:51,480
Speaker 5: month or two away from a default, and a banking

916
00:47:51,520 --> 00:47:54,879
Speaker 5: system where the regulators haven't looked at interest rate risk.

917
00:47:56,600 --> 00:47:59,640
Speaker 5: My guess is that the market does that. I'm here

918
00:47:59,680 --> 00:48:03,320
Speaker 5: working in Washington. I just say, don't underestimate the ability

919
00:48:03,320 --> 00:48:07,480
Speaker 5: of the political system to screw things up. But then again,

920
00:48:07,680 --> 00:48:10,480
Speaker 5: you've got technology people listening to this that would say,

921
00:48:10,719 --> 00:48:14,560
Speaker 5: don't underestimate the ability of technology to drive things forward.

922
00:48:16,160 --> 00:48:18,799
Speaker 3: We've been talking now for almost I guess about ten

923
00:48:18,840 --> 00:48:24,480
Speaker 3: minutes Congress when we haven't used the word crypto, and

924
00:48:24,560 --> 00:48:27,600
Speaker 3: I can't have you on without doing that. Of course,

925
00:48:27,680 --> 00:48:30,640
Speaker 3: your favorite topic. I just wonder watching people pile into

926
00:48:30,680 --> 00:48:34,760
Speaker 3: crypto as a safe haven here, a flight to quality.

927
00:48:34,800 --> 00:48:37,959
Speaker 3: This is exactly what you did not want to see,

928
00:48:38,000 --> 00:48:38,319
Speaker 3: isn't it.

929
00:48:39,400 --> 00:48:44,399
Speaker 5: I don't think it's a flight to quality. You're you know,

930
00:48:44,600 --> 00:48:48,200
Speaker 5: it's it's a scandal a month, A multi billion dollar

931
00:48:48,320 --> 00:48:55,799
Speaker 5: heist comes to light every couple of months, and it's

932
00:48:55,880 --> 00:49:00,440
Speaker 5: a highly speculative wager. It's not an asset and sense

933
00:49:00,480 --> 00:49:02,440
Speaker 5: that you know, if you own a part of a company,

934
00:49:02,480 --> 00:49:10,560
Speaker 5: that company has a business, that company makes something. Crypto's

935
00:49:09,200 --> 00:49:16,520
Speaker 5: a share in a hope that that particular asset will

936
00:49:16,560 --> 00:49:19,920
Speaker 5: become valuable. And of course you've got thousands of different

937
00:49:20,440 --> 00:49:24,920
Speaker 5: coins out there, even if anybody in crypto would say

938
00:49:24,920 --> 00:49:27,840
Speaker 5: the vast majority of those coins will be worthless in

939
00:49:27,880 --> 00:49:33,480
Speaker 5: a couple of decades, and in a way it's self mocking.

940
00:49:33,719 --> 00:49:37,440
Speaker 5: I mean, why is bitcoin more valuable than ethereum? I

941
00:49:37,480 --> 00:49:37,839
Speaker 5: don't know.

942
00:49:40,200 --> 00:49:42,920
Speaker 3: I'm sitting here with the co anchor of the Crypto

943
00:49:44,280 --> 00:49:44,839
Speaker 3: Take It Home.

944
00:49:45,600 --> 00:49:49,040
Speaker 12: Congressman Sherman, please come on the Crypto Show in the future.

945
00:49:49,080 --> 00:49:51,160
Speaker 12: It's Tuesdays at one pm here on Bloomberg. I would

946
00:49:51,160 --> 00:49:54,000
Speaker 12: love to have this conversation with you on that. But

947
00:49:54,040 --> 00:49:56,120
Speaker 12: thank you so much for joining us. That is Congressman

948
00:49:56,160 --> 00:49:58,839
Speaker 12: Brad Sherman, the Democrat from California.

949
00:49:58,920 --> 00:50:01,120
Speaker 3: I could be like a paper view thing on the terminal.

950
00:50:01,239 --> 00:50:03,920
Speaker 3: Oh yeah, you and Congressman Sherman crypto.

951
00:50:04,200 --> 00:50:05,560
Speaker 12: Yeah, people would eat it up.

952
00:50:05,600 --> 00:50:07,319
Speaker 3: I saddle Matt Miller hears about this.

953
00:50:07,480 --> 00:50:08,640
Speaker 12: You always need a critical eye.

954
00:50:08,719 --> 00:50:12,000
Speaker 3: Joe, that's right, with Kaylee Lines. I'm Joe Matthew. This

955
00:50:12,160 --> 00:50:12,800
Speaker 3: is Bloomberg.

956
00:50:14,000 --> 00:50:17,360
Speaker 1: You're listening to the Bloomberg Sound on podcast. Catch the

957
00:50:17,400 --> 00:50:21,279
Speaker 1: program live weekdays at one Eastern on Bloomberg Radio, the

958
00:50:21,320 --> 00:50:23,520
Speaker 1: tune in app, Bloomberg dot Com.

959
00:50:23,200 --> 00:50:24,680
Speaker 9: And the Bloomberg Business App.

960
00:50:24,800 --> 00:50:27,640
Speaker 1: You can also listen live on Amazon Alexa from our

961
00:50:27,680 --> 00:50:32,160
Speaker 1: flagship New York station. Just say Alexa, play Bloomberg eleven thirty.

962
00:50:32,880 --> 00:50:35,879
Speaker 3: Well. Wall Street's worried about something here, just look at

963
00:50:35,920 --> 00:50:38,759
Speaker 3: the regional banks. I'm Joe Matthew with Kaylee Lines in

964
00:50:38,880 --> 00:50:44,120
Speaker 3: Washington and Kayley. This just after the first republic forced acquisition.

965
00:50:44,200 --> 00:50:46,600
Speaker 3: I guess we'll call it that. Some call it a bailout.

966
00:50:46,640 --> 00:50:49,080
Speaker 3: I'm not going near any of this stuff. But there

967
00:50:49,120 --> 00:50:52,200
Speaker 3: was a thought when we came into the week as

968
00:50:52,239 --> 00:50:55,240
Speaker 3: the administration rolled out details here, the Treasury, the FDIC

969
00:50:55,400 --> 00:50:56,960
Speaker 3: did their work over the weekend, that we were at

970
00:50:56,960 --> 00:50:58,840
Speaker 3: a better moment that things were better, We were feeling

971
00:50:58,880 --> 00:51:02,040
Speaker 3: better about things that First Republic may have in the

972
00:51:02,120 --> 00:51:04,880
Speaker 3: last But then you look at the markets today and

973
00:51:04,920 --> 00:51:06,480
Speaker 3: obviously investors think otherwise.

974
00:51:06,680 --> 00:51:09,799
Speaker 12: Yeah, obviously we've now seen a fourth bank failure in

975
00:51:09,840 --> 00:51:13,880
Speaker 12: the span of just two months less than and yet

976
00:51:14,000 --> 00:51:16,839
Speaker 12: there seems to be some concern out there that there

977
00:51:16,920 --> 00:51:20,279
Speaker 12: could potentially be more failures to come, or at least

978
00:51:20,280 --> 00:51:23,439
Speaker 12: some concern about the stability of regional banks, because looking

979
00:51:23,480 --> 00:51:26,240
Speaker 12: at the price action today, Joe Frankly, it's just ugly.

980
00:51:26,320 --> 00:51:28,840
Speaker 12: The regional banks overall are down six and a half percent,

981
00:51:28,880 --> 00:51:30,880
Speaker 12: which is not great. But you look at some of

982
00:51:30,880 --> 00:51:35,120
Speaker 12: the individual names, Pack West down twenty five percent on

983
00:51:35,200 --> 00:51:38,719
Speaker 12: the day, Western Alliance down about eighteen percent. So it

984
00:51:38,760 --> 00:51:40,719
Speaker 12: doesn't seem like the market thinks it's all quiet on

985
00:51:40,760 --> 00:51:43,239
Speaker 12: the Western front here. They're still worried about another.

986
00:51:43,680 --> 00:51:47,040
Speaker 3: Headlines about these banks, specifically that would cause someone to

987
00:51:47,120 --> 00:51:48,319
Speaker 3: dump shares, right, So.

988
00:51:48,239 --> 00:51:51,719
Speaker 12: There's no headlines about any concerns with them necessarily, but

989
00:51:51,760 --> 00:51:56,920
Speaker 12: we're also not getting headlines about progress on the stability front.

990
00:51:56,920 --> 00:51:59,319
Speaker 12: The idea that the FDI see yesterday put forward these

991
00:51:59,360 --> 00:52:03,719
Speaker 12: proposals for you know, better safeguarding wants to talk about it,

992
00:52:04,200 --> 00:52:07,439
Speaker 12: and as we talked about yesterday, that's something that needs

993
00:52:07,440 --> 00:52:09,680
Speaker 12: congressional buy in. You don't hear Congress making a lot

994
00:52:09,680 --> 00:52:12,160
Speaker 12: of noise about this at this point, and so perhaps

995
00:52:12,760 --> 00:52:15,640
Speaker 12: that is feeding into this today that there isn't necessarily

996
00:52:16,200 --> 00:52:17,239
Speaker 12: moves forward on that for.

997
00:52:17,280 --> 00:52:19,800
Speaker 3: Us, as Congressman Brad Sherman just now calls for banks

998
00:52:19,840 --> 00:52:24,560
Speaker 3: to start buying insurance interest rate insurance. Something needs, something

999
00:52:24,560 --> 00:52:26,239
Speaker 3: else needs to happen here, and that's why we put

1000
00:52:26,239 --> 00:52:29,000
Speaker 3: together a special panel that you're only going to hear

1001
00:52:29,040 --> 00:52:32,280
Speaker 3: on Bloomberg. Edward Harrison is with us in Washington, Bloomberg

1002
00:52:32,320 --> 00:52:35,480
Speaker 3: News Senior Markets editor, and in New York Herman Chan

1003
00:52:35,560 --> 00:52:39,600
Speaker 3: Bloomberg Intelligence Senior US Regional Banks Analysts. I think we're

1004
00:52:39,640 --> 00:52:42,359
Speaker 3: about to learn something here, Killy, so welcome everyone. It's

1005
00:52:42,440 --> 00:52:45,280
Speaker 3: great to see you, and ed welcome back. I wonder

1006
00:52:45,320 --> 00:52:47,440
Speaker 3: your thoughts on this. You're not hearing something we aren't.

1007
00:52:47,640 --> 00:52:51,200
Speaker 3: Are you for investors to have such a negative reaction

1008
00:52:51,360 --> 00:52:52,359
Speaker 3: out of the pocket.

1009
00:52:52,080 --> 00:52:55,560
Speaker 13: Today, Yeah, Joe, I think that's exactly right. I haven't

1010
00:52:55,560 --> 00:53:01,120
Speaker 13: heard anything about specific banks, and most of what you

1011
00:53:01,160 --> 00:53:04,839
Speaker 13: would expect would be positive as a result of you know,

1012
00:53:05,200 --> 00:53:09,560
Speaker 13: taking first republic as a impetus for problems off the table.

1013
00:53:09,960 --> 00:53:14,759
Speaker 13: So my general belief is that what we're seeing is

1014
00:53:14,880 --> 00:53:20,640
Speaker 13: people who have specific worries about banks doubling down on

1015
00:53:20,680 --> 00:53:26,360
Speaker 13: their positions and that creating this panic.

1016
00:53:26,400 --> 00:53:29,760
Speaker 12: If you will, well and remember what we saw with SVB,

1017
00:53:29,920 --> 00:53:33,040
Speaker 12: for example, it was market panic that really became a

1018
00:53:33,160 --> 00:53:37,320
Speaker 12: driver ultimately in its failure. So herman on the subject

1019
00:53:37,360 --> 00:53:39,840
Speaker 12: of failures, should we be worried about pac West or

1020
00:53:39,880 --> 00:53:43,600
Speaker 12: Western Alliance? I mean, could we see more failures added

1021
00:53:43,640 --> 00:53:45,640
Speaker 12: to the list, or is this kind of market concerned

1022
00:53:45,760 --> 00:53:47,200
Speaker 12: not really warranted here?

1023
00:53:48,160 --> 00:53:51,360
Speaker 14: I would go on the ladder front with markets concerned

1024
00:53:51,440 --> 00:53:54,800
Speaker 14: not really warranted at this juncture. If the most recent

1025
00:53:55,000 --> 00:53:57,640
Speaker 14: data from these two banks came out just a couple

1026
00:53:57,640 --> 00:54:00,759
Speaker 14: of weeks ago when they reported first quarter earnings, and

1027
00:54:00,840 --> 00:54:04,040
Speaker 14: they both gave really credible pass forward, I would take

1028
00:54:04,040 --> 00:54:06,640
Speaker 14: a step back and say that both Western Alliance and

1029
00:54:06,680 --> 00:54:09,839
Speaker 14: PacWest have been thrown in the bunch over the past

1030
00:54:09,880 --> 00:54:14,719
Speaker 14: month or so in terms of banks that have tech exposure,

1031
00:54:14,960 --> 00:54:19,720
Speaker 14: to exposure to tech clients and venture capital deposits.

1032
00:54:19,680 --> 00:54:21,439
Speaker 12: Guilty by association, kind of.

1033
00:54:21,400 --> 00:54:25,240
Speaker 14: Right, guilty by association. They're tendentially related to what happened

1034
00:54:25,280 --> 00:54:29,520
Speaker 14: with SVB, but their tech deposits are a much smaller

1035
00:54:30,000 --> 00:54:34,040
Speaker 14: subset of their deposit base, whereas for SVB was the

1036
00:54:34,200 --> 00:54:37,760
Speaker 14: entirety of their business and their entirety of the business

1037
00:54:37,760 --> 00:54:41,960
Speaker 14: model that they operated in. So it's an issue that

1038
00:54:42,280 --> 00:54:44,640
Speaker 14: where they've saw some of decline in deposits in the

1039
00:54:44,719 --> 00:54:50,880
Speaker 14: first quarter, but they also mentioned that the capital ratios

1040
00:54:50,920 --> 00:54:54,359
Speaker 14: would be improving, they talked about selling assets, they talked

1041
00:54:54,360 --> 00:54:58,239
Speaker 14: about seeing deposits come back in April. So from a

1042
00:54:58,239 --> 00:55:01,480
Speaker 14: fundamental standpoint, things but the most recent data that we

1043
00:55:01,520 --> 00:55:05,319
Speaker 14: know of have pointed to stability and improvement. But the

1044
00:55:05,360 --> 00:55:06,760
Speaker 14: market's taking a different turn.

1045
00:55:06,920 --> 00:55:10,840
Speaker 3: Yeah, ed, with all the talk of consolidation yesterday, you

1046
00:55:10,880 --> 00:55:13,319
Speaker 3: would have started thinking that, you know, maybe investors start

1047
00:55:13,360 --> 00:55:16,600
Speaker 3: identifying potential takeover targets, that that could send some shares

1048
00:55:16,640 --> 00:55:17,680
Speaker 3: of these regionals higher.

1049
00:55:17,840 --> 00:55:20,160
Speaker 13: Quite the opposite, though, Yeah, you would think that that

1050
00:55:20,200 --> 00:55:24,240
Speaker 13: would be the case, especially with the yields going down

1051
00:55:24,440 --> 00:55:28,120
Speaker 13: much more, because really the interesting bit is is that

1052
00:55:28,880 --> 00:55:31,799
Speaker 13: stocks and bonds are going in the opposite direction, and

1053
00:55:32,640 --> 00:55:35,760
Speaker 13: the fact that bonds are actually increasing, you know, yields

1054
00:55:36,000 --> 00:55:40,400
Speaker 13: coming down should suggest that these banks look better than

1055
00:55:40,440 --> 00:55:43,520
Speaker 13: they did before because so called marked to market losses,

1056
00:55:43,600 --> 00:55:46,520
Speaker 13: especially on securities, are going to be less, and the

1057
00:55:46,600 --> 00:55:49,560
Speaker 13: same would be true for their loan books, so that

1058
00:55:49,600 --> 00:55:53,680
Speaker 13: would make merging a much more viable option. One of

1059
00:55:53,719 --> 00:55:56,879
Speaker 13: the reasons that First Republic went under was because their

1060
00:55:56,920 --> 00:55:59,239
Speaker 13: marked market losses were so great that it made it

1061
00:55:59,280 --> 00:56:03,000
Speaker 13: onerous for any other organization to take them over. And

1062
00:56:03,040 --> 00:56:04,640
Speaker 13: that's less of a problem now today.

1063
00:56:05,160 --> 00:56:07,759
Speaker 12: But on the subject of taking over Herman, we have

1064
00:56:07,840 --> 00:56:09,719
Speaker 12: to think about what bank ultimately did that, and it

1065
00:56:09,760 --> 00:56:13,080
Speaker 12: was JP Morgan. A bank that had already been deemed

1066
00:56:13,120 --> 00:56:16,680
Speaker 12: too big to fail has gotten even bigger. Does this

1067
00:56:16,800 --> 00:56:19,279
Speaker 12: not just reinforce this narrative that the too big to

1068
00:56:19,320 --> 00:56:22,120
Speaker 12: fail banks are the only safe ones. I mean, I wonder,

1069
00:56:22,160 --> 00:56:25,760
Speaker 12: even though First Republic is now a resolved issue in theory,

1070
00:56:25,800 --> 00:56:28,279
Speaker 12: could it still exacerbate some of that deposit flight we

1071
00:56:28,280 --> 00:56:30,000
Speaker 12: were seeing kind of reignite that.

1072
00:56:30,920 --> 00:56:34,560
Speaker 14: There are a number of regional banks that stand ready

1073
00:56:34,640 --> 00:56:39,600
Speaker 14: to absorb any potential failed banks. We've heard through bloom

1074
00:56:39,640 --> 00:56:41,840
Speaker 14: the Great Bloomberg reporting over the past couple of days

1075
00:56:41,840 --> 00:56:48,760
Speaker 14: of banks like PNC, of Citizens fifth Third that lobbed

1076
00:56:48,840 --> 00:56:54,000
Speaker 14: and potential bids for First Republic, and these banks from

1077
00:56:54,000 --> 00:56:58,400
Speaker 14: a relative standpoint, their stocks are holding much stronger today

1078
00:56:58,520 --> 00:57:02,880
Speaker 14: versus the broader regional bank space. You point to banks

1079
00:57:02,960 --> 00:57:05,840
Speaker 14: historically that I have strong credit quality, like M and T,

1080
00:57:06,239 --> 00:57:09,879
Speaker 14: like First Citizens that recently bought the SBB assets and deposits.

1081
00:57:09,880 --> 00:57:12,760
Speaker 14: So there are a number of regionals that stand ready

1082
00:57:12,840 --> 00:57:18,200
Speaker 14: to be potential to potentially be bigger than they would

1083
00:57:18,280 --> 00:57:21,680
Speaker 14: be without a banking crisis that we potentially could be

1084
00:57:21,680 --> 00:57:22,080
Speaker 14: in today.

1085
00:57:22,240 --> 00:57:25,560
Speaker 3: Hermann, Does Wall Street want to see something else come

1086
00:57:25,600 --> 00:57:27,840
Speaker 3: out of Washington see and rule change at the fd

1087
00:57:27,960 --> 00:57:33,520
Speaker 3: I see see legislation that helps to shore up regulations here?

1088
00:57:33,840 --> 00:57:36,120
Speaker 3: Or does Wall Street still have an allergy to all

1089
00:57:36,160 --> 00:57:38,840
Speaker 3: of this what is preferred when you talk to traders.

1090
00:57:38,680 --> 00:57:41,360
Speaker 14: What we're hearing is that there needs to be a

1091
00:57:41,440 --> 00:57:45,760
Speaker 14: solution that comes down from either regulators or the government.

1092
00:57:46,520 --> 00:57:52,640
Speaker 14: These are the resolutions of SBB, of signature of First Republic.

1093
00:57:53,400 --> 00:57:57,000
Speaker 14: While great that the system is working that larger, more

1094
00:57:57,000 --> 00:58:02,040
Speaker 14: healthier banks absorb these failed institutions, what we really need,

1095
00:58:02,080 --> 00:58:05,800
Speaker 14: it seems like, is a more holistic solution to a

1096
00:58:05,880 --> 00:58:09,200
Speaker 14: lack of confidence within region banks today and what that

1097
00:58:09,240 --> 00:58:14,160
Speaker 14: potentially could be. That's something that we're mullying maybe a

1098
00:58:14,280 --> 00:58:16,880
Speaker 14: short term guarantee of deposits, which some of the Rejon

1099
00:58:16,960 --> 00:58:20,520
Speaker 14: banks have asked for a month ago when SBB was

1100
00:58:20,520 --> 00:58:24,479
Speaker 14: in the news. Something needs to happen, and we need

1101
00:58:24,560 --> 00:58:29,560
Speaker 14: a more holistic response from other folks that have the

1102
00:58:29,640 --> 00:58:33,280
Speaker 14: power to make this crisis of confidence be relieved.

1103
00:58:33,800 --> 00:58:36,920
Speaker 12: Well, speaking of the folks that have the power on crises,

1104
00:58:37,320 --> 00:58:39,720
Speaker 12: let's also talk about the debt ceiling, because we also

1105
00:58:39,880 --> 00:58:43,000
Speaker 12: in theory need Congress to come together on that issue.

1106
00:58:43,080 --> 00:58:44,880
Speaker 12: What are you seeing in the market today now that

1107
00:58:44,960 --> 00:58:46,880
Speaker 12: we do have that firmer idea of the X state

1108
00:58:46,880 --> 00:58:48,200
Speaker 12: from Treasury Secretary Ellen.

1109
00:58:48,760 --> 00:58:49,520
Speaker 9: You know, I.

1110
00:58:49,440 --> 00:58:53,480
Speaker 13: Think that what we're seeing is a repeat of what

1111
00:58:53,520 --> 00:58:56,720
Speaker 13: we saw twelve years ago, which is that there's a

1112
00:58:56,760 --> 00:59:01,800
Speaker 13: bid for safe assets like treasury. It's kind of perverse

1113
00:59:01,840 --> 00:59:04,480
Speaker 13: in the sense that you know, you could defall in

1114
00:59:04,520 --> 00:59:08,760
Speaker 13: the exact same instruments financial instruments, but those are seeing

1115
00:59:08,760 --> 00:59:12,600
Speaker 13: a bid to what we saw literally a month before

1116
00:59:13,480 --> 00:59:17,120
Speaker 13: the so called X date back then was a massive

1117
00:59:18,160 --> 00:59:22,360
Speaker 13: flight to quality of flight to treasuries and yields went

1118
00:59:22,400 --> 00:59:24,840
Speaker 13: way down. In the context of everything that we've just

1119
00:59:24,880 --> 00:59:28,040
Speaker 13: been talking about, that's very positive for the banking system,

1120
00:59:28,080 --> 00:59:32,720
Speaker 13: because obviously then those underwater assets won't be as problematic.

1121
00:59:33,520 --> 00:59:35,520
Speaker 13: We have a FED meeting tomorrow, so it'll be.

1122
00:59:35,480 --> 00:59:37,640
Speaker 12: Interesting to see, and they're expected to hike again.

1123
00:59:38,480 --> 00:59:40,920
Speaker 13: Given the fact that they're hiking one more time and

1124
00:59:40,960 --> 00:59:44,520
Speaker 13: who knows, maybe even two more times, what they have

1125
00:59:44,600 --> 00:59:47,120
Speaker 13: to say about the banking crisis, I'm sure that they'll

1126
00:59:47,160 --> 00:59:48,120
Speaker 13: say that this isn't.

1127
00:59:47,920 --> 00:59:49,720
Speaker 12: A crisis Sound and resilient.

1128
00:59:49,840 --> 00:59:53,480
Speaker 13: It was sound and resilient, But you do have to wonder.

1129
00:59:53,560 --> 00:59:57,640
Speaker 13: Things are starting to become a little bit difficult and

1130
00:59:58,400 --> 01:00:01,840
Speaker 13: we're gonna need to go through a lot of this,

1131
01:00:02,560 --> 01:00:08,160
Speaker 13: including some credit losses at some point in time if

1132
01:00:08,160 --> 01:00:09,560
Speaker 13: this continues on the same.

1133
01:00:09,400 --> 01:00:12,400
Speaker 3: Path, really important conversation. By the way, I've decided my

1134
01:00:12,560 --> 01:00:15,240
Speaker 3: first album is going to be titled Sound and Resilient.

1135
01:00:15,320 --> 01:00:15,440
Speaker 15: Oh.

1136
01:00:15,640 --> 01:00:18,640
Speaker 3: I think that's an instant hit at least absolutely in

1137
01:00:18,720 --> 01:00:22,880
Speaker 3: walk circles. Great panel. Edward Harrison, Bloomberg News senior Markets

1138
01:00:22,960 --> 01:00:26,200
Speaker 3: editor with us in Washington. Herman Chan Bloomberg Intelligence Senior

1139
01:00:26,200 --> 01:00:30,000
Speaker 3: Regional Banks analyst, don't be strangers. We should reassemble this

1140
01:00:30,040 --> 01:00:31,880
Speaker 3: panel when we have more to talk about, because something

1141
01:00:31,920 --> 01:00:34,280
Speaker 3: tells me that's going to happen a lot going forward,

1142
01:00:34,440 --> 01:00:35,560
Speaker 3: ed Herman, Thank you so much.

1143
01:00:36,680 --> 01:00:40,200
Speaker 1: You're listening to the Bloomberg Sound on podcast. Catch us

1144
01:00:40,240 --> 01:00:43,400
Speaker 1: live weekdays at one Eastern on Bloomberg dot Com, the

1145
01:00:43,480 --> 01:00:46,160
Speaker 1: iHeartRadio app, and the Bloomberg Business App, or.

1146
01:00:46,200 --> 01:00:48,640
Speaker 2: Listen on demand wherever you get your podcasts.

1147
01:00:49,760 --> 01:00:51,560
Speaker 3: But the question here when it comes to the meeting

1148
01:00:51,600 --> 01:00:54,800
Speaker 3: a week from today is will they negotiate both kayley

1149
01:00:55,040 --> 01:00:57,120
Speaker 3: or one at a time. Because if you asked the

1150
01:00:57,160 --> 01:00:59,800
Speaker 3: White House, will they want the debt ceiling to be addressed?

1151
01:01:00,120 --> 01:01:02,360
Speaker 3: Will negotiate on the budget, And it's the opposite. On

1152
01:01:02,440 --> 01:01:04,720
Speaker 3: Capitol Hill they say we're not doing one without the other.

1153
01:01:04,760 --> 01:01:08,080
Speaker 3: Certainly when you ask Speaker Kevin McCarthy weighing in on

1154
01:01:08,120 --> 01:01:11,760
Speaker 3: this now, the gentleman from West Virginia, and we're all

1155
01:01:11,800 --> 01:01:14,360
Speaker 3: wondering how Joe Manchin is going to play into this.

1156
01:01:14,720 --> 01:01:16,960
Speaker 16: There's no such thing as a red line. The bottom

1157
01:01:17,000 --> 01:01:19,680
Speaker 16: line is, as we're here to negotiate, Shane, can't we

1158
01:01:19,720 --> 01:01:22,440
Speaker 16: even talk about how we got ourselves in a position

1159
01:01:23,000 --> 01:01:25,080
Speaker 16: and start talking about how we're going to get ourselves

1160
01:01:25,160 --> 01:01:25,560
Speaker 16: out of it?

1161
01:01:25,880 --> 01:01:29,320
Speaker 3: Dismissing talk of a Democratic Party red line between raising

1162
01:01:29,440 --> 01:01:33,320
Speaker 3: the debt limit and cutting future spending. It sure seems

1163
01:01:33,360 --> 01:01:35,400
Speaker 3: like there's a red line there when you hear from

1164
01:01:35,440 --> 01:01:36,160
Speaker 3: the White House, though.

1165
01:01:36,440 --> 01:01:39,680
Speaker 12: Yeah, and they've been very consistent about that, including yesterday,

1166
01:01:39,720 --> 01:01:44,120
Speaker 12: even after we got the letter from Secretary Janet Yellen

1167
01:01:44,320 --> 01:01:46,960
Speaker 12: from the Treasury saying the X date could be as

1168
01:01:47,000 --> 01:01:50,600
Speaker 12: early as June first, that the Treasury will exhaust its

1169
01:01:50,600 --> 01:01:53,000
Speaker 12: measures and not be able to fulfill the US obligations.

1170
01:01:53,280 --> 01:01:56,480
Speaker 12: Even after we got news that Biden had called congressional

1171
01:01:56,520 --> 01:01:59,400
Speaker 12: leaders asked them to meet next week, the message didn't

1172
01:01:59,440 --> 01:02:02,080
Speaker 12: actually each change that they still don't want to negotiate

1173
01:02:02,120 --> 01:02:02,400
Speaker 12: over this.

1174
01:02:02,640 --> 01:02:06,160
Speaker 3: Yeah, technically the needle has not moved other than scheduling

1175
01:02:06,160 --> 01:02:06,840
Speaker 3: a meeting.

1176
01:02:06,960 --> 01:02:09,120
Speaker 12: Which is like a baby step forward.

1177
01:02:09,440 --> 01:02:12,000
Speaker 3: He's correct, we're taking baby steps. I wonder if Emily

1178
01:02:12,000 --> 01:02:16,560
Speaker 3: agrees with that. Emily Wilkins Bloomberg, government congressional reporter with

1179
01:02:16,640 --> 01:02:18,880
Speaker 3: us from Capitol Hill. Now, Emily, we've been talking for

1180
01:02:18,920 --> 01:02:22,000
Speaker 3: the last hour and forty five minutes about every possible

1181
01:02:22,040 --> 01:02:25,040
Speaker 3: wrinkle in what might come from this meeting and what

1182
01:02:25,120 --> 01:02:27,919
Speaker 3: both sides are going to be packing as they meet

1183
01:02:27,920 --> 01:02:30,760
Speaker 3: at the White House one week from today. That red

1184
01:02:30,800 --> 01:02:33,240
Speaker 3: line that Joe Manchin was talking about. Seems to really

1185
01:02:33,280 --> 01:02:36,120
Speaker 3: be the essence of the conversation. And it was suggested

1186
01:02:36,160 --> 01:02:39,200
Speaker 3: earlier that maybe there's a little bit of a wink

1187
01:02:39,240 --> 01:02:42,160
Speaker 3: in a nod that these are in fact negotiated together.

1188
01:02:43,120 --> 01:02:46,600
Speaker 3: But we have two separate announcements, two separate news releases

1189
01:02:46,640 --> 01:02:48,960
Speaker 3: that go out after their work is done. What do

1190
01:02:49,000 --> 01:02:49,560
Speaker 3: you think.

1191
01:02:50,880 --> 01:02:52,880
Speaker 17: I mean at this point, what we've really seen for

1192
01:02:52,920 --> 01:02:57,000
Speaker 17: both sides is just that they've completely dug into their position. Democrats,

1193
01:02:57,040 --> 01:02:59,480
Speaker 17: for the most part, at least Biden and a lot

1194
01:02:59,520 --> 01:03:03,200
Speaker 17: of Congression leaders see more adamant than ever that this

1195
01:03:03,280 --> 01:03:05,880
Speaker 17: has to be a clean rays of the debt liment.

1196
01:03:05,960 --> 01:03:07,640
Speaker 15: And we saw today a House.

1197
01:03:07,600 --> 01:03:11,160
Speaker 17: Majority minority leader had King Jeffries put out basically say

1198
01:03:11,160 --> 01:03:13,200
Speaker 17: that Democrats have had a secret plan in the works

1199
01:03:13,200 --> 01:03:15,280
Speaker 17: for months now that would allow them to do so.

1200
01:03:15,960 --> 01:03:18,640
Speaker 17: But Republicans at the same point are calling for the cuts.

1201
01:03:18,680 --> 01:03:21,400
Speaker 17: They're saying the urgency means that the Democrats need to

1202
01:03:21,920 --> 01:03:23,640
Speaker 17: accept at least some of what.

1203
01:03:23,760 --> 01:03:25,520
Speaker 15: House Republicans have put forward.

1204
01:03:25,800 --> 01:03:28,320
Speaker 17: And I think now the big question becomes, you know,

1205
01:03:29,120 --> 01:03:30,560
Speaker 17: do they wind up finding some.

1206
01:03:30,440 --> 01:03:32,840
Speaker 15: Sort of agreement here where.

1207
01:03:32,680 --> 01:03:35,600
Speaker 17: You know, Democrats might give Republicans a piece of what

1208
01:03:35,640 --> 01:03:38,360
Speaker 17: they've asked for, or do you wind up kind of

1209
01:03:38,360 --> 01:03:40,520
Speaker 17: waiting to the last minute when the pressure is on,

1210
01:03:40,880 --> 01:03:43,240
Speaker 17: and then you see a number of modern Republicans join

1211
01:03:43,320 --> 01:03:45,960
Speaker 17: Democrats in a clean raise of the debt liment.

1212
01:03:46,560 --> 01:03:48,600
Speaker 12: Well, and of course the date we're all watching is

1213
01:03:48,680 --> 01:03:51,120
Speaker 12: May ninth, next Tuesday, for this meeting to happen. But

1214
01:03:51,160 --> 01:03:53,800
Speaker 12: there's also a question emily of how many meetings could

1215
01:03:53,800 --> 01:03:57,200
Speaker 12: in theory happen after that, because looking at the calendar,

1216
01:03:57,920 --> 01:04:01,240
Speaker 12: the President and the Senate in the House aren't all

1217
01:04:01,240 --> 01:04:03,440
Speaker 12: in Washington at the same time very often in the

1218
01:04:03,440 --> 01:04:04,680
Speaker 12: next couple of weeks.

1219
01:04:05,800 --> 01:04:07,680
Speaker 17: You know, I wouldn't be surprised if we saw some

1220
01:04:07,720 --> 01:04:08,880
Speaker 17: shifting in the schedule.

1221
01:04:09,800 --> 01:04:10,120
Speaker 15: It was.

1222
01:04:10,240 --> 01:04:13,480
Speaker 17: I think it's very notable how quickly everyone moved yesterday

1223
01:04:13,720 --> 01:04:15,640
Speaker 17: as soon as Jill and Jenny Ellen put out that

1224
01:04:15,760 --> 01:04:19,280
Speaker 17: letter naming June first is the day that the extra

1225
01:04:19,320 --> 01:04:22,120
Speaker 17: measures could be exhausted. I mean, you saw people move

1226
01:04:22,240 --> 01:04:24,880
Speaker 17: very quickly in terms of getting folks to the White House,

1227
01:04:24,920 --> 01:04:27,840
Speaker 17: reaching out to everyone. And I think that underscore is

1228
01:04:27,880 --> 01:04:30,280
Speaker 17: the fact that the lawmakers initially thought that they had

1229
01:04:30,280 --> 01:04:33,800
Speaker 17: more time, but ultimately they do not want to see

1230
01:04:34,200 --> 01:04:37,280
Speaker 17: the US default on its debts, and my guess is

1231
01:04:37,320 --> 01:04:39,680
Speaker 17: that they're even terrified about, you know, having the US

1232
01:04:39,720 --> 01:04:41,680
Speaker 17: as credit rating dip again.

1233
01:04:42,160 --> 01:04:44,120
Speaker 15: And so I think there is a huge hGe.

1234
01:04:43,960 --> 01:04:46,240
Speaker 17: Sense of urgency now due to this letter that came

1235
01:04:46,280 --> 01:04:47,000
Speaker 17: out yesterday.

1236
01:04:47,120 --> 01:04:50,040
Speaker 3: Well, does that urgency results in any progress here? Emily?

1237
01:04:50,080 --> 01:04:54,280
Speaker 3: I guess the question that I'm asking right now is

1238
01:04:55,280 --> 01:04:58,240
Speaker 3: do we get this done in time? They come together somehow,

1239
01:04:58,280 --> 01:05:01,479
Speaker 3: everyone finds religion and they managed to raise the debt

1240
01:05:01,480 --> 01:05:04,360
Speaker 3: ceiling and come to an agreement on spending cuts, or

1241
01:05:04,400 --> 01:05:07,080
Speaker 3: do we need to find a short term solution right

1242
01:05:07,120 --> 01:05:09,560
Speaker 3: now and extend this by a couple of months.

1243
01:05:10,480 --> 01:05:12,440
Speaker 17: You know, a lot of folks on Capitol Hill have

1244
01:05:12,480 --> 01:05:15,600
Speaker 17: been asked about whether they would want a short term solution,

1245
01:05:15,760 --> 01:05:17,680
Speaker 17: and at this point that just doesn't seem to be

1246
01:05:17,680 --> 01:05:21,160
Speaker 17: something that's being discussed. It seems like both sides are

1247
01:05:21,160 --> 01:05:23,920
Speaker 17: really digging into their own positions ahead of this May

1248
01:05:24,080 --> 01:05:27,080
Speaker 17: ninth meeting and then waiting to see what happens. The

1249
01:05:27,200 --> 01:05:29,360
Speaker 17: members are, you know, waiting to see what McCarthy says,

1250
01:05:29,400 --> 01:05:32,240
Speaker 17: what Biden says, what comes out of this meeting, and

1251
01:05:32,320 --> 01:05:35,040
Speaker 17: if they can find some sort of agreement, and I

1252
01:05:35,080 --> 01:05:38,480
Speaker 17: think if you wind up seeing McCarthy and Biden leave

1253
01:05:38,520 --> 01:05:40,960
Speaker 17: this May ninth meeting and say, hey, we're going to

1254
01:05:41,000 --> 01:05:43,960
Speaker 17: need a little bit more time, you know, that's I

1255
01:05:43,960 --> 01:05:46,680
Speaker 17: think that's when the conversation really shifts in that direction.

1256
01:05:47,120 --> 01:05:49,400
Speaker 15: But I think right now both sides are trying to give.

1257
01:05:49,280 --> 01:05:52,360
Speaker 17: Their folks in the room as much leverage as possible

1258
01:05:52,480 --> 01:05:55,080
Speaker 17: on their own position, and that's why you really haven't

1259
01:05:55,120 --> 01:05:59,280
Speaker 17: seen anyone change their tumb in the last twenty four hours.

1260
01:06:00,000 --> 01:06:02,800
Speaker 12: Of course, it's not just you know, the politicians themselves

1261
01:06:02,840 --> 01:06:05,360
Speaker 12: that are going to be pushing each other to change

1262
01:06:05,400 --> 01:06:07,440
Speaker 12: tune on this. They are also, in theory, could be

1263
01:06:07,440 --> 01:06:11,720
Speaker 12: pressure from constituents, from lobbyists from the banking community. I mean,

1264
01:06:11,760 --> 01:06:14,600
Speaker 12: do you think those conversations are happening as we speak

1265
01:06:14,720 --> 01:06:17,240
Speaker 12: on the hill, people walking into these offices and saying, hey,

1266
01:06:17,280 --> 01:06:18,400
Speaker 12: you guys got to get it together.

1267
01:06:20,040 --> 01:06:22,240
Speaker 15: There are absolutely conversations going on.

1268
01:06:22,320 --> 01:06:24,480
Speaker 17: I mean, I think it's safe to say for an

1269
01:06:24,480 --> 01:06:27,360
Speaker 17: issue like this of this level of importance, there has

1270
01:06:27,440 --> 01:06:29,840
Speaker 17: long been been talks going on about the debt limit

1271
01:06:29,920 --> 01:06:32,080
Speaker 17: and what to do and how to raise it. And

1272
01:06:32,120 --> 01:06:34,440
Speaker 17: I think there is a good amount of pressure that

1273
01:06:34,440 --> 01:06:38,200
Speaker 17: these lawmakers feel. At the same point, if you're a Republican,

1274
01:06:38,360 --> 01:06:40,360
Speaker 17: you really do want to be able to get some

1275
01:06:40,400 --> 01:06:42,160
Speaker 17: sort of win out of this, to be able to

1276
01:06:42,280 --> 01:06:44,959
Speaker 17: leverage one of these few opportunities to say, hey, look,

1277
01:06:45,200 --> 01:06:47,520
Speaker 17: we were able to cut federal spending, we were able

1278
01:06:47,560 --> 01:06:51,240
Speaker 17: to roll back some provisions in the last year's Biden.

1279
01:06:50,960 --> 01:06:52,440
Speaker 15: Bill that we didn't really like.

1280
01:06:52,800 --> 01:06:56,880
Speaker 17: I mean, Republicans really need to deliver, especially McCarthy because

1281
01:06:56,880 --> 01:06:59,280
Speaker 17: he does have the threat of his old members of

1282
01:06:59,480 --> 01:07:01,920
Speaker 17: ousting Hill from the speakership thanks to some of the

1283
01:07:02,000 --> 01:07:04,560
Speaker 17: rules that he negotiated right at the start of the year,

1284
01:07:05,080 --> 01:07:07,520
Speaker 17: and so they're under tremendous pressure to do that, and

1285
01:07:07,680 --> 01:07:09,920
Speaker 17: Democrats under tremendous pressure not to give in.

1286
01:07:10,000 --> 01:07:11,320
Speaker 15: So I think, you know, you.

1287
01:07:11,360 --> 01:07:15,040
Speaker 17: Have these groups that are certainly advocating to avoid a default.

1288
01:07:15,120 --> 01:07:17,680
Speaker 17: Lawmakers want to avoid a default, but they also have

1289
01:07:17,840 --> 01:07:22,080
Speaker 17: other considerations that have made this debate much more complicated.

1290
01:07:22,400 --> 01:07:24,760
Speaker 3: Kaylee, Has anyone put this into AI? This is like

1291
01:07:24,840 --> 01:07:28,040
Speaker 3: the only thing I haven't Has anyone asked chat GPT like,

1292
01:07:28,120 --> 01:07:29,600
Speaker 3: how this is going to end? How about we have

1293
01:07:29,680 --> 01:07:32,280
Speaker 3: the bots figure it out? Because humans are apparently not.

1294
01:07:32,280 --> 01:07:34,040
Speaker 12: Capable that would be a great experiment.

1295
01:07:34,160 --> 01:07:35,960
Speaker 3: I feel like this has to happen. So if it's

1296
01:07:35,960 --> 01:07:37,160
Speaker 3: not now, Emily, it's going to.

1297
01:07:37,160 --> 01:07:40,640
Speaker 17: Be soon, right, I mean it's going to have to

1298
01:07:40,640 --> 01:07:44,080
Speaker 17: be soon because we just don't have much time left.

1299
01:07:44,120 --> 01:07:46,840
Speaker 17: I mean everyone initially was thinking we could have till July,

1300
01:07:46,920 --> 01:07:48,040
Speaker 17: we could have till August.

1301
01:07:48,320 --> 01:07:51,240
Speaker 15: I think Yellen's yeah, no, not anymore.

1302
01:07:51,240 --> 01:07:53,640
Speaker 17: And I think you know, we've seen you've seen all

1303
01:07:53,680 --> 01:07:56,240
Speaker 17: of government kind of jump at that letter that came

1304
01:07:56,240 --> 01:07:59,040
Speaker 17: out yesterday, and now things have shifted it into high gear,

1305
01:07:59,760 --> 01:08:03,080
Speaker 17: and I think really the main ninth meeting is going

1306
01:08:03,120 --> 01:08:05,240
Speaker 17: to be one to watch. I think to this point,

1307
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Speaker 17: you've seen a lot of members. You've seen a lot

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Speaker 17: of Democrats remain in line behind Biden, maybe Mansions one

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Speaker 17: of the very few exceptions. You've seen a lot of

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Speaker 17: the Republicans kind of remain in line behind McCarthy's and

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Speaker 17: McConnell support McCarthy. And I think that everyone wants to

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01:08:19,360 --> 01:08:22,760
Speaker 17: back their member up until their leader comes to them

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Speaker 17: and says, Okay, we got a deal and here's the

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Speaker 17: new plan. And I think that's the point that you're

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Speaker 17: going to start seeing different parties.

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Speaker 3: Kind of and Emily will be the one to tell

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Speaker 3: us when it happens. Bloomberg Government, Emily Wilkins. We thank you, Emily,

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Speaker 3: This is Bloomberg. Thanks for listening to the Sound on podcast.

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Speaker 3: Make sure to subscribe if you haven't already, at Apple, Spotify,

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Speaker 3: and anywhere else you get your podcasts. And you can

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Speaker 3: find us live every weekday from Washington, DC at one

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Speaker 3: pm Eastern Time at Bloomberg dot com.