WEBVTT - Bank CEOs, Oil, and Rate Cuts 0:00:00.120 --> 0:00:04.360 Bloomberg is now on your dashboard with Apple CarPlay and 0:00:04.360 --> 0:00:08.160 Android Auto. It gives you access to every Bloomberg podcast, 0:00:08.280 --> 0:00:11.560 live audio feeds from Bloomberg Radio, print stories from Bloomberg 0:00:11.640 --> 0:00:14.920 News in audio form, and the latest headlines of the 0:00:14.920 --> 0:00:18.600 click of a button with Bloomberg News. Now it's free 0:00:18.680 --> 0:00:21.439 with the latest version of the Bloomberg Business App. That's 0:00:21.680 --> 0:00:24.400 the Bloomberg Business App. Get it on your phone in 0:00:24.440 --> 0:00:27.760 the Apple App Store or on Google Play. Just download 0:00:27.800 --> 0:00:30.560 the app, connect your phone to your car and get started. 0:00:30.960 --> 0:00:34.400 And it's all presented by our sponsor, Interactive Brokers. 0:00:35.400 --> 0:00:38.600 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:38.640 --> 0:00:39.800 my co host Matt Miller. 0:00:40.200 --> 0:00:44.279 Every business day we bring you interviews from CEOs, market pros, 0:00:44.320 --> 0:00:48.160 and Bloomberg experts, along with essential market moven News. 0:00:48.720 --> 0:00:51.839 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:51.960 --> 0:00:55.680 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:55.760 --> 0:00:58.720 There's a lot going on Souper to Washington. We've been 0:00:59.000 --> 0:01:01.360 totally ripping up this screw. As Tom Keenan would say, 0:01:01.400 --> 0:01:04.360 Joe Matthew He is our go to voice for Bloomberg 0:01:04.400 --> 0:01:07.880 Radio and television down in Washington, DC. He joins US, 0:01:08.160 --> 0:01:11.479 as does Mick mulroy, co founder of the Lobo Institute 0:01:11.480 --> 0:01:14.399 and former Deputy Assistant Secretary of Defense for the Middle 0:01:14.440 --> 0:01:18.120 East at the US Department of Defense. Former US Marine 0:01:18.160 --> 0:01:21.119 Infantry officer for sixteen years. We thank him, of course 0:01:21.160 --> 0:01:25.840 for his service. Joe, let's start with you, McCarthy. What 0:01:25.840 --> 0:01:27.080 do you make of it? I know you're gonna tell 0:01:27.120 --> 0:01:28.960 me that you guys down in DC were expecting it. 0:01:29.000 --> 0:01:32.480 Simone and I totally were not yet by surprise. So 0:01:32.520 --> 0:01:33.120 what does it mean. 0:01:33.200 --> 0:01:36.039 I won't go that far. Okay, I do, by the way, 0:01:36.040 --> 0:01:37.840 I'm bouncing back if we can fix that. But I 0:01:37.880 --> 0:01:39.240 know it's got to be a heck of a day 0:01:39.240 --> 0:01:43.040 if you call me twice, yes, in one day. But yet, Look, 0:01:43.080 --> 0:01:45.080 there were questions about what he was going to do 0:01:45.120 --> 0:01:48.640 because he had not announced his plans for re election, 0:01:49.480 --> 0:01:52.720 and so a little bit difficult. Sorry about that. It's 0:01:52.760 --> 0:01:56.240 so yeah, not a massive shocker knowing he had not 0:01:56.280 --> 0:02:00.440 announced his plans. Thank you for that, But the timing 0:02:00.640 --> 0:02:03.320 is what blew me away. Gone by the end of 0:02:03.360 --> 0:02:05.120 the year. That's a lot different than saying you're not 0:02:05.160 --> 0:02:09.200 going to run for reelection, and following yesterday's news, Patrick McHenry, 0:02:09.200 --> 0:02:12.240 the Chair of the Financial Services Committee, who was acting Speaker, 0:02:12.520 --> 0:02:14.680 Remember he was slamming the gavel and anger just a 0:02:14.680 --> 0:02:16.200 couple of months ago, or I guess it was weeks 0:02:16.200 --> 0:02:19.320 at this point, he just announced that he's leaving the 0:02:19.360 --> 0:02:21.880 House as well. So you put these two together and 0:02:21.919 --> 0:02:26.400 it's two major retirement slash resignations for the Republican conference 0:02:26.400 --> 0:02:27.760 in the House, and it tells us a lot about 0:02:27.760 --> 0:02:29.000 the chaos that we've been seeing. 0:02:29.440 --> 0:02:33.600 Nick, does this have any impact on the overall discussions 0:02:33.680 --> 0:02:37.160 that we expect to see happen and negotiations we expect 0:02:37.160 --> 0:02:40.160 to see happen both around Ukraine AID as well as 0:02:40.240 --> 0:02:41.640 AID for Israel. 0:02:43.800 --> 0:02:45.880 Yes, I think it does. Actually, I think a lot 0:02:45.919 --> 0:02:48.400 of the people that are retiring are people that at 0:02:48.480 --> 0:02:53.440 least initially were very supportive of Ukraine AID in the 0:02:53.560 --> 0:02:56.360 role that the United States has played in getting the 0:02:56.360 --> 0:02:58.919 world together to get behind them. So as you see 0:02:58.960 --> 0:03:02.359 these individuals get replaced, the concern will be that they're 0:03:02.400 --> 0:03:05.200 going to be more inclined with I guess the far 0:03:05.320 --> 0:03:08.359 right of the Republican Party that now sees this as 0:03:08.400 --> 0:03:11.960 something that we shouldn't be doing. I obviously would disagree 0:03:12.000 --> 0:03:14.720 with that, but I think these shifts may have an impact. 0:03:14.720 --> 0:03:17.160 You're already seeing it, and you're also seeing and I've 0:03:17.160 --> 0:03:20.520 been up there to brief many fence sitters, if you will, 0:03:21.440 --> 0:03:23.959 you're also seeing them say that as we get closer 0:03:24.000 --> 0:03:25.840 to the election that this is going to be even 0:03:25.840 --> 0:03:29.480 harder to pass this one hundred plus billion dollars in 0:03:29.520 --> 0:03:32.120 support to Ukraine. So the quicker we can do this, 0:03:32.200 --> 0:03:35.480 the better, and before a lot of these individuals are replaced, 0:03:36.080 --> 0:03:37.040 is also a good thing. 0:03:37.400 --> 0:03:40.720 Hey, Mick, we're still waiting comments from President Biden about 0:03:40.760 --> 0:03:43.920 the funding including Ukraine. Give us your updated view of 0:03:44.000 --> 0:03:48.040 how critical additional funding for Ukraine is because it's, quite 0:03:48.040 --> 0:03:51.240 frankly and unfortunately for them, the events in Israel have 0:03:51.360 --> 0:03:53.760 kind of taken Ukraine off the front page. Just give 0:03:53.840 --> 0:03:55.360 us an update from your perspective. 0:03:57.000 --> 0:03:57.640 That's a good point. 0:03:57.640 --> 0:04:00.840 I haven't talked about Ukraine in over a month, so 0:04:00.920 --> 0:04:01.840 that should say something. 0:04:02.760 --> 0:04:03.280 I do think. 0:04:03.400 --> 0:04:05.200 You know, we have to remember this is somewhat of 0:04:05.240 --> 0:04:08.240 a David and Goliath type scenario. We forgot that. But 0:04:08.240 --> 0:04:10.480 if you go back to the beginning of when what's 0:04:10.560 --> 0:04:13.760 Russian invaded. Everybody expected this to be over in weeks 0:04:13.760 --> 0:04:16.480 and keep to fall and everything. Look where we are now, 0:04:16.760 --> 0:04:20.680 where it's a counter offensive, counter offensive for the Ukrainians. Yes, 0:04:20.760 --> 0:04:23.159 it has stalled. Yes it's very difficult, but it's an 0:04:23.279 --> 0:04:26.080 entirely different situation. And part of that is because of 0:04:26.120 --> 0:04:28.960 the support that's come to them from Europe and from 0:04:29.000 --> 0:04:31.760 the United States, with the United States being the leader 0:04:31.760 --> 0:04:34.919 in that. If we failed to support them this one 0:04:35.000 --> 0:04:38.240 hundred billion plus dollars, they're going to be in a 0:04:38.320 --> 0:04:42.240 serious situation. This is largely a war of attrition. Now 0:04:42.320 --> 0:04:45.880 it's in inches, but Ukraine is on the offense and 0:04:45.960 --> 0:04:49.280 it really needs the munitions to be able to take 0:04:49.360 --> 0:04:52.800 on and go into the defenses that Russians have built 0:04:52.839 --> 0:04:55.800 over many many months before this counter offensive start. If 0:04:55.839 --> 0:04:59.080 we pull out now, that is a big problem for 0:04:59.120 --> 0:05:01.960 the Ukrainians. Could this could then start, the type could 0:05:01.960 --> 0:05:04.719 start turning and we could see the Russians start gaining ground. 0:05:04.839 --> 0:05:07.200 Boy, all right, here's just a quote today from President 0:05:07.200 --> 0:05:09.960 of Zelenski of Ukraine. Quote. We have a realistic action 0:05:10.080 --> 0:05:13.600 strategy and it is our efforts with your support, that 0:05:13.640 --> 0:05:16.560 can ensure Ukraine's success on the ground. Zelenski said in 0:05:16.640 --> 0:05:19.320 a speech to G seven leaders, including President Joe Biden, 0:05:19.600 --> 0:05:21.279 during a virtual meeting Wednesday. 0:05:21.800 --> 0:05:25.320 Yeah, Joe, what's your sense of how much political support 0:05:25.920 --> 0:05:29.479 that can be a drawn up for Ukraine? Because it 0:05:29.520 --> 0:05:31.400 does seem like when you you know, if you look 0:05:31.440 --> 0:05:36.839 across the majorities of these two chambers, you know probably 0:05:36.880 --> 0:05:39.000 if you could just put the resolution on the floor, 0:05:39.000 --> 0:05:43.240 they'd get passed. But you know who can be pulled 0:05:43.279 --> 0:05:43.960 on the fence. 0:05:44.480 --> 0:05:46.560 What you just said is correct. If you put Ukraine 0:05:46.560 --> 0:05:48.360 funding on the floor of the House, we already saw 0:05:48.400 --> 0:05:50.880 it happen with standalone Israel funding, it would pass, and 0:05:50.920 --> 0:05:55.160 it would pass with bipartisan support. The question is procedure 0:05:55.240 --> 0:05:57.760 in this case and exactly what the Speaker of the 0:05:57.760 --> 0:06:02.520 House can get away with with a actured conference. Look, 0:06:02.600 --> 0:06:06.120 Kevin McCarthy just left for a reason. Mike Johnson has 0:06:06.160 --> 0:06:08.160 to figure out a way around this. Here he says 0:06:08.200 --> 0:06:10.360 that he supports getting this done, he does not want 0:06:10.400 --> 0:06:12.559 to do it, by the way, all in one pop. 0:06:12.680 --> 0:06:15.880 This more than one hundred billion dollar request that President 0:06:15.920 --> 0:06:18.480 Biden made. He wants to have bills on Israel, Ukraine, 0:06:18.560 --> 0:06:22.880 Taiwan separately on the floor, and he wants Ukraine tied 0:06:23.400 --> 0:06:27.560 to border funding, border security changes in asylum law, something 0:06:27.600 --> 0:06:32.680 that has eluded lawmakers for decades. The prospect of getting 0:06:32.720 --> 0:06:34.320 that done in the next couple of weeks is not 0:06:34.400 --> 0:06:36.520 looking really great, which is why it's likely this is 0:06:36.560 --> 0:06:39.600 going to turn into something next year. The White House 0:06:39.600 --> 0:06:41.800 says they're out of time, they're out of money. But 0:06:42.000 --> 0:06:44.159 until this can be taken care of on the border, 0:06:44.520 --> 0:06:47.920 something that Republicans and Democrats can swallow, it's not likely 0:06:48.000 --> 0:06:48.560 going to happen. 0:06:49.200 --> 0:06:51.640 Hey, Mick, you know, probably a week or so ago, 0:06:51.720 --> 0:06:54.719 we spoke with the Admiral Strevetis, former head of NATO, 0:06:54.760 --> 0:06:56.200 and he made a point. He had just returned from 0:06:56.200 --> 0:06:58.720 a trip to South Korea, and he felt like, what's 0:06:58.760 --> 0:07:01.480 gonna What probably and is likely to happen in Ukraine 0:07:01.560 --> 0:07:05.080 is some type of trade land for peace, much like 0:07:05.120 --> 0:07:08.640 it happened in Korea. Is that a scenario now that 0:07:08.680 --> 0:07:11.200 it appears that it's become more of a kind of 0:07:11.280 --> 0:07:13.960 drawn out situation here militarily. 0:07:15.680 --> 0:07:17.400 Yes, I think the Admiral is right. I think that 0:07:17.520 --> 0:07:19.800 is something that will be looked at and probably is 0:07:19.920 --> 0:07:22.240 already being looked at, But ultimately it's going to be 0:07:22.320 --> 0:07:25.400 up the Ukrainian people. President Zelinski said he's going to 0:07:25.440 --> 0:07:28.480 need a referendum when it comes to giving any land away, 0:07:28.880 --> 0:07:31.240 but there needs to be something in return, and I 0:07:31.240 --> 0:07:34.480 think that will be of course peace, but also potentially 0:07:34.600 --> 0:07:37.440 NATO membership. If I was in their shoes, I wouldn't 0:07:37.480 --> 0:07:40.680 want to give any territory away unless I had absolute 0:07:40.760 --> 0:07:44.600 assurances security wise that this wasn't going to happen again. 0:07:44.680 --> 0:07:47.000 And one way to do that is to get into NATO, 0:07:47.280 --> 0:07:49.960 which of course then gives them the Article five protection 0:07:50.880 --> 0:07:53.200 if they're ever attacked again. So I don't know where 0:07:53.240 --> 0:07:55.680 that stands right now, but I know that those discussions 0:07:55.760 --> 0:07:58.679 are ongoing. And as this to your point of your question, 0:07:58.720 --> 0:08:01.600 as this goes into this kind of stalemate, it's going 0:08:01.640 --> 0:08:03.920 to be more and more likely because the stalemate means 0:08:03.920 --> 0:08:06.320 nobody's really gaining a lot, doesn't mean people aren't dying. 0:08:07.120 --> 0:08:10.120 So it is it is still incumbent on both sides 0:08:10.120 --> 0:08:12.120 to look at what they can do to end this 0:08:12.280 --> 0:08:15.840 in a way that's at least acceptable to both both countries. 0:08:16.480 --> 0:08:21.000 Are the Ukrainians optimistic that at any point that there 0:08:21.240 --> 0:08:23.960 can be a sort of breakthrough, an end to the stalemate. 0:08:24.680 --> 0:08:27.600 I know that, you know, throughout the spring, in the summer, 0:08:27.640 --> 0:08:30.000 you know, there were moments where they said yes in 0:08:30.040 --> 0:08:33.440 the next couple of weeks. But has that kind of 0:08:33.440 --> 0:08:35.520 optimism's gone away? 0:08:37.600 --> 0:08:39.520 So I don't think the optimism has gone away from 0:08:39.559 --> 0:08:41.920 the Ukrainian people. I think they're in it to the end. 0:08:42.040 --> 0:08:44.959 You know, there was just one story that was out 0:08:44.960 --> 0:08:48.320 there about the Ukrainian soldier that called in all of 0:08:48.360 --> 0:08:50.440 the artillier on his own position because it was about 0:08:50.440 --> 0:08:52.680 to be overrun, and of course killed all the Russian 0:08:52.679 --> 0:08:55.079 troops that were about to overrun his positions. But that 0:08:55.200 --> 0:08:57.840 those kind of things really indicate to me is somebody 0:08:57.840 --> 0:08:59.920 spent a lot of time in conflicts. People that do 0:09:00.120 --> 0:09:03.440 that don't generally lose wars. They'll go to the end. 0:09:03.440 --> 0:09:05.880 And I think that's what really is that kind of 0:09:06.160 --> 0:09:08.840 power that the Ukrainian people have. They are tenacious and 0:09:08.840 --> 0:09:10.920 they're never going to give up. And Russian people, I 0:09:10.920 --> 0:09:14.000 think realize that they've lost so many They've lost more 0:09:14.000 --> 0:09:18.040 people in this conflict that we lost in Vietnam if 0:09:18.040 --> 0:09:20.240 you think about the time difference in that. So this 0:09:20.280 --> 0:09:23.960 is something that I think really is that factor that 0:09:24.040 --> 0:09:27.079 you can't duplicate, you can't buy. It's ingrained in the 0:09:27.160 --> 0:09:30.160 Ukrainian people to keep fighting. I do think once the 0:09:30.240 --> 0:09:33.680 summer hits again, in all the weapons systems that we've provided, 0:09:33.760 --> 0:09:35.760 and a lot of the advanced ones that we're training 0:09:35.760 --> 0:09:38.080 them on now, like the F sixteen, they will start 0:09:38.160 --> 0:09:41.199 gaining some terrain. So Russia is going to be very 0:09:41.200 --> 0:09:44.160 concerned when all that comes together and there's a and 0:09:44.559 --> 0:09:46.640 they really start pushing in the spring. 0:09:47.120 --> 0:09:50.200 Can we shift to the conflict in the Middle East? Now? 0:09:51.480 --> 0:09:56.000 Israel appearing to draw some criticism, increasing criticism, I would 0:09:56.000 --> 0:09:59.720 say from the Biden administration. We saw some restrictions on 0:09:59.840 --> 0:10:03.680 v is first, really settlers involved in violence in the 0:10:03.720 --> 0:10:09.240 West Bank come into play yesterday. How much of a 0:10:09.320 --> 0:10:14.319 divide is how much criticism truly is the Biden administration 0:10:14.600 --> 0:10:19.320 placing on Israel? And you know, is it truly intensifying 0:10:19.600 --> 0:10:22.120 or are these just little bits and pieces that we see. 0:10:24.400 --> 0:10:26.680 So I do think it's intestifying. I think at first 0:10:26.800 --> 0:10:30.839 and still today, the United States is the most significant 0:10:30.840 --> 0:10:33.679 partner to Israel. And I think any country that was 0:10:33.720 --> 0:10:36.439 attacked like they were on October seventh, what have as 0:10:36.440 --> 0:10:40.600 their objective to destroy the entity that did that in 0:10:40.600 --> 0:10:43.920 this case Hamas so militarily degrade them to a point 0:10:43.960 --> 0:10:47.720 where they're not combat effected. But the way they went 0:10:47.760 --> 0:10:51.960 about it, especially in the shaping part of this operation, 0:10:52.080 --> 0:10:56.480 the shaping phase where it was significant bombing in areas 0:10:56.520 --> 0:10:59.840 to essentially destroy tunnels, but there are in urban areas 0:11:00.000 --> 0:11:02.439 brought down the multiple buildings at the same time. That's 0:11:02.480 --> 0:11:05.400 why we're seeing this level of civilian casualties at the 0:11:05.480 --> 0:11:08.880 fifteen thy sixteen thousand. Now, I think at first that 0:11:09.040 --> 0:11:11.600 was all said behind the scenes. Now you're seeing more 0:11:11.600 --> 0:11:14.840 and more public statements that they expect Israel to shift 0:11:15.080 --> 0:11:17.920 tactics so they can reduce the amount of civilian casualties 0:11:18.120 --> 0:11:22.120 because this is just not acceptable in their view in 0:11:22.160 --> 0:11:26.400 many military analysis view, but also a need to address 0:11:26.400 --> 0:11:29.120 the humanitarian catastrophe that's happening right now because they can't 0:11:29.120 --> 0:11:32.240 get enough humanitarian aid into gods. So I think you'll 0:11:32.240 --> 0:11:34.800 see the United States, of course stick with our partner 0:11:34.800 --> 0:11:38.559 in Israel, and they're objective, but also really push them 0:11:38.600 --> 0:11:41.400 to do in a manner that doesn't completely alienate them 0:11:41.440 --> 0:11:43.640 from the rest of the world and make our job 0:11:43.679 --> 0:11:45.240 in supporting them more difficult. 0:11:45.600 --> 0:11:48.160 So I mean in terms of that objective which was 0:11:48.240 --> 0:11:54.679 originally stated by Israel, complete annihilation of Hamas, Is that, 0:11:54.880 --> 0:11:59.000 even in practicality possible? I mean, how do you eradicate 0:11:59.040 --> 0:12:03.880 a terrorist organization. It's not like, you know, defeating an 0:12:04.000 --> 0:12:07.960 army of a state. So does that need to be rethought. 0:12:09.400 --> 0:12:12.319 Yes, especially if you put it as eliminate Hamas. Right, 0:12:12.400 --> 0:12:15.880 So we know at the CIA, I spent twenty years there, 0:12:15.960 --> 0:12:18.680 all my colleagues, all the military, we spent twenty years 0:12:18.720 --> 0:12:23.480 trying to defeat al Qaeda in its offshoots. Right, you 0:12:23.520 --> 0:12:27.960 can't defeat philosophy. In fact, oftentimes if you're heavy handed, 0:12:28.000 --> 0:12:31.120 you create more of the problem what they're trying to do. 0:12:31.160 --> 0:12:33.080 And I think when you get into talking to the 0:12:33.120 --> 0:12:38.520 idea of seniors, which I do, they're trying to destroy 0:12:38.720 --> 0:12:42.200 their military capacity. They realize the philosophy itself is not 0:12:42.559 --> 0:12:47.319 something that can be destroyed, but to reduce their weapons stashes. 0:12:47.600 --> 0:12:51.800 They're especially precision guided, their soldiers, their leadership, Capture their 0:12:51.840 --> 0:12:54.760 leadership and destroy these tunnels, which gives them a lot 0:12:54.760 --> 0:12:57.280 of military advantages. That's what they're really trying to do. 0:12:57.320 --> 0:12:59.440 I don't think anybody there thinks that they're going to 0:12:59.440 --> 0:13:02.319 destroy the eye biology and that either HAMAS or something 0:13:02.400 --> 0:13:05.000 like AMAS isn't going to continue. They just want to 0:13:05.000 --> 0:13:07.720 reduce the threat to it's manageable. And then the question 0:13:07.800 --> 0:13:09.840 is going to be what comes next, because if the 0:13:09.880 --> 0:13:12.679 international community doesn't come up with some kind of security 0:13:12.720 --> 0:13:16.079 and stabilization force that's acceptable to both, then the IDF 0:13:16.120 --> 0:13:17.880 is going to stay there long term, and that's going 0:13:17.920 --> 0:13:20.480 to be a lot of international pressure to change that. 0:13:20.800 --> 0:13:23.520 All right, Nick, thanks so much for joining us. Mick mulroy, 0:13:23.559 --> 0:13:26.199 he is co founder of the Lobo Institute. He's absolutely 0:13:26.240 --> 0:13:29.199 our go to voice on so many of these geopolitical 0:13:29.600 --> 0:13:33.840 issues given his experience at the US Department of Defense, CIA, 0:13:34.440 --> 0:13:37.480 the United States Marine Corps. I mean, the guy's done everything, 0:13:37.520 --> 0:13:39.840 so we really appreciate getting a few minutes of his time. 0:13:41.120 --> 0:13:44.520 You're listening to the team. Ken's our live program Bloomberg 0:13:44.559 --> 0:13:47.960 Markets weekdays at ten am Eastern on Bloomberg dot Com, 0:13:48.040 --> 0:13:51.160 the iHeartRadio app and the Bloomberg Business App, or listen 0:13:51.240 --> 0:13:53.520 on demand wherever you get your podcasts. 0:13:54.920 --> 0:13:56.560 So let's get back to the discussion of the banks here. 0:13:56.640 --> 0:14:01.200 Chris Whalen is at Whaling Global Advisors. He knows a 0:14:01.200 --> 0:14:04.079 thing or two about these banks. Chris, let's just start 0:14:04.080 --> 0:14:09.280 with the testimony down to Washington, DC. What are in 0:14:09.320 --> 0:14:12.120 the banks really want as it relates to this latest 0:14:12.240 --> 0:14:15.199 round of potential regulation. 0:14:16.960 --> 0:14:20.280 I think they want to kill it, delay it, and 0:14:20.480 --> 0:14:24.239 force the FED and the other regulators to do their homework. 0:14:24.920 --> 0:14:28.200 You know, as Jamie Diamond eluded and several others eluded 0:14:28.240 --> 0:14:34.120 Senator Kennedy. There's no prior art this analytical framework that's 0:14:34.160 --> 0:14:36.960 in this rule. They didn't do the work, and this 0:14:37.120 --> 0:14:41.720 breaks the process that we've had with BOSEL going back 0:14:41.760 --> 0:14:45.040 twenty years and more. It says, you know, we're going 0:14:45.120 --> 0:14:47.200 to test it, we're going to argue about it, we're 0:14:47.240 --> 0:14:50.680 going to publish it so we can see all the work, 0:14:51.040 --> 0:14:53.200 and then we're going to adopt it. They're not doing that. 0:14:53.560 --> 0:14:55.960 And this is part and parcela what you see throughout 0:14:55.960 --> 0:14:59.440 the Biden administration in many areas like housing, where I 0:14:59.480 --> 0:15:02.320 spend most my time, where they come up with these 0:15:02.400 --> 0:15:06.520 crazy ideas that are clearly unworkable, but they're doing it 0:15:06.600 --> 0:15:10.240 for political reasons. You know, for example, they want lenders 0:15:10.280 --> 0:15:14.720 to use two different credit scores now for lending. It's 0:15:14.760 --> 0:15:19.760 arithmetically impossible, and so the FHFA, which regulates Fanny and 0:15:19.800 --> 0:15:24.800 Fanny told them the average to two scores, which is crazy. 0:15:25.200 --> 0:15:28.720 But that's what we're dealing with now. So you guys 0:15:28.720 --> 0:15:32.280 at Bloomberg understand what's involved when you start mucking around 0:15:32.280 --> 0:15:35.880 with credit scores in the world of Shakestea income, that's 0:15:35.920 --> 0:15:38.600 not a trivial thing. But the Biden people are going 0:15:38.680 --> 0:15:42.000 for it because they want talking points. You can see 0:15:42.000 --> 0:15:45.560 that Cherick Brown is having a tough time politically. Yeah, 0:15:45.640 --> 0:15:49.560 you spent five minutes talking about the TV ads about 0:15:49.600 --> 0:15:52.120 bossl do you imagine, right? 0:15:53.000 --> 0:15:53.480 Exactly? 0:15:53.600 --> 0:15:55.920 So all right, we're waiting. That is, we're waiting for 0:15:55.920 --> 0:15:58.160 President Biden. He's going to be scheduled to make some 0:15:58.200 --> 0:16:02.480 comments shortly on and the apackage to Ukraine when that 0:16:02.600 --> 0:16:05.360 and when he does come, we will bring this to you. 0:16:05.360 --> 0:16:08.560 You know, you were talking, Chris about sort of the 0:16:08.600 --> 0:16:11.840 unworkability of some of these proposals, but you know, haven't 0:16:11.880 --> 0:16:17.400 we seen European regulators do something quite similar. Where are 0:16:17.560 --> 0:16:22.920 the differences here and where is there potent potentially room 0:16:23.080 --> 0:16:27.680 for a compromise between the banks themselves and between regulators. 0:16:28.800 --> 0:16:32.680 Well, the European situations Timona is very different because you 0:16:32.760 --> 0:16:36.760 don't have middle market banking in Europe. The governments take 0:16:36.800 --> 0:16:41.120 all that business. So the big banks basically are banking 0:16:41.240 --> 0:16:45.040 larger corporations, government entities, and then they go offshore and 0:16:45.080 --> 0:16:48.160 they compete with city for example, you know, the markets. 0:16:48.800 --> 0:16:51.920 So their approach to things like housing is they don't 0:16:52.040 --> 0:16:56.160 like housing. They don't like the idea of single family homes. 0:16:56.640 --> 0:17:01.120 So the Bossil rule from years ago reflects the US 0:17:01.360 --> 0:17:05.040 missed that one and it was unfortunate. Now they're going 0:17:05.040 --> 0:17:08.399 after it even more, things like mortgage servicing rights. I 0:17:08.440 --> 0:17:11.760 don't think the two perspectives are really compatible at the 0:17:11.840 --> 0:17:15.960 end of the day. The Europeans treat business, treat banks 0:17:15.960 --> 0:17:19.640 as second class citizens, and they don't even think about, 0:17:19.960 --> 0:17:22.120 you know, starting new banks and that sort of thing. 0:17:22.440 --> 0:17:25.040 In the US, our bond market has been our strength, 0:17:25.600 --> 0:17:28.800 the fact that we have private credit markets, and you know, 0:17:28.920 --> 0:17:31.399 our banks still are very important players in that, but 0:17:31.520 --> 0:17:35.000 they're much less involved. You know, I doubt many people 0:17:35.040 --> 0:17:37.840 on the Senate Banking Committee realize that eighty percent of 0:17:37.840 --> 0:17:43.240 all residential mortgages today are underwritten and serviced by non banks. 0:17:44.080 --> 0:17:46.800 The you know, that's that Cinneria I wanted to go 0:17:46.840 --> 0:17:49.520 to private credit. It's now a one point five trillion 0:17:49.560 --> 0:17:52.600 dollar business that kind of sprang up right after the 0:17:52.600 --> 0:17:55.040 Great Financial Crisis. Now, the concerns seemed to be when 0:17:55.840 --> 0:17:58.399 people are getting concerned about the lack of transparency, the 0:17:58.480 --> 0:18:01.000 lack of regulation from that market. Can you give us 0:18:01.040 --> 0:18:01.640 your thoughts there? 0:18:02.720 --> 0:18:06.040 Yeah, Jamie Diamond and the other witnesses alluded to this, 0:18:06.240 --> 0:18:08.879 which is at more than half of the private credit 0:18:08.920 --> 0:18:13.240 market is now conducted by non banks. These are funds, 0:18:13.280 --> 0:18:16.199 These are other types of entities ups that are not 0:18:16.280 --> 0:18:20.120 particularly transparent. You know, when a private reap, for example, 0:18:20.240 --> 0:18:24.800 calculates net asset value, there's no rule for how they 0:18:24.840 --> 0:18:28.080 do that, so you know, it's, to say the least, 0:18:28.359 --> 0:18:31.240 it's hard to judge what's going on inside these entities 0:18:31.240 --> 0:18:35.080 and the banks financed them. So that's why a couple 0:18:35.119 --> 0:18:37.959 of the witnesses referred specifically to that and said do 0:18:38.000 --> 0:18:41.040 you want more of that? And that's the real question 0:18:41.160 --> 0:18:44.240 before both the Senate and the bank regulators. Do you 0:18:44.359 --> 0:18:47.320 really want to go down this road? Because the capital 0:18:47.440 --> 0:18:51.440 rates are so punitive that no US large bank would 0:18:51.440 --> 0:18:54.720 want to be in residential mortgage at all. Think about that. 0:18:55.080 --> 0:19:00.320 No condo loans. You know, that's largely a big bank market. 0:19:00.320 --> 0:19:02.320 The little banks don't do much business there. 0:19:03.160 --> 0:19:06.600 But you know too that at the same time stability 0:19:06.640 --> 0:19:09.800 within the broader financial system. This was always one of 0:19:09.800 --> 0:19:12.440 the arguments by hedge funds and private equity firms that 0:19:12.840 --> 0:19:15.720 you know, well, banks shouldn't be in some of in 0:19:15.800 --> 0:19:18.680 some of this business, we're pulling some of the risk 0:19:18.840 --> 0:19:22.080 out of, you know, the financial system. 0:19:22.359 --> 0:19:25.639 And I agree with that. Operationally, we want non banks 0:19:25.640 --> 0:19:28.560 to take care of mortgages. They're much better at it, 0:19:28.720 --> 0:19:32.760 much better orders of magnitude, more efficient, and it's good 0:19:32.800 --> 0:19:35.679 to have the commercial banks as the lenders. They are 0:19:35.800 --> 0:19:38.760 essentially the gatekeepers, right. But you and I both know 0:19:39.240 --> 0:19:42.560 that if a money market funder rolled over, the government 0:19:42.560 --> 0:19:45.720 would intervene. This is why I said was doing two 0:19:45.720 --> 0:19:50.200 trillion dollars of reverse repost a year ago. They essentially 0:19:50.200 --> 0:19:52.359 had to come in and save the money market funds 0:19:52.400 --> 0:19:57.320 from getting zeroed out when t bills were very low. Today, 0:19:57.359 --> 0:20:00.359 that problems reversed itself in Yellen's issuing a lot of 0:20:00.359 --> 0:20:04.560 tea bills to facilitate that. Right, But long term, I 0:20:04.600 --> 0:20:06.359 think the non bank sector is going to have to 0:20:06.400 --> 0:20:09.000 live with the interest rates like everybody else, and I 0:20:09.040 --> 0:20:11.560 think the long end of the curve will be higher 0:20:11.600 --> 0:20:14.520 than it is today. That's going to normalize, right, That'll 0:20:14.520 --> 0:20:17.439 be a different world for non banks, particularly because they 0:20:17.560 --> 0:20:20.639 funds in the bond market. Unless you're a read and 0:20:20.720 --> 0:20:23.679 you can sell stock, most other non banks have to 0:20:23.680 --> 0:20:27.760 put out high yield term debt raise capital, and then 0:20:27.800 --> 0:20:30.560 the banks do all the secured financing for them. So 0:20:30.640 --> 0:20:32.560 if you're a fund whatever, it is right right night, 0:20:33.320 --> 0:20:35.760 you know, but it is such an important part of 0:20:35.800 --> 0:20:38.720 the economy. I like the partnership with the banks doing 0:20:38.760 --> 0:20:41.119 the wholesale work. I think it's better for them. Okay, 0:20:41.160 --> 0:20:44.400 they don't want to face consumers now, all. 0:20:44.400 --> 0:20:46.840 Right, Chris, thanks so much for joining us. Chris Whalen, 0:20:47.160 --> 0:20:49.200 chairman of Waling Global Advisors. 0:20:49.320 --> 0:20:52.440 You're listening to the tape cats are Line program Bloomberg 0:20:52.480 --> 0:20:56.040 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:20:56.160 --> 0:20:59.359 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:20:59.400 --> 0:21:02.240 You can also in live on Amazon Alexa from our 0:21:02.240 --> 0:21:06.639 flagship New York station. Just say Alexa, play Bloomberg eleven thirty. 0:21:08.040 --> 0:21:09.360 Talk to somebody who. 0:21:09.280 --> 0:21:12.800 Does this for Living Quincy Crosby, she's achieved the global 0:21:12.800 --> 0:21:16.800 strategist for LPL Financial. She joins us Quincy, what do 0:21:16.840 --> 0:21:18.879 you make of the last four or five weeks? That 0:21:18.960 --> 0:21:21.760 was the heck of a November four all these markets. 0:21:22.880 --> 0:21:25.640 Well, it was, And what the beautiful part of it 0:21:25.680 --> 0:21:29.399 is is how perverse the markets can be. Because what 0:21:29.560 --> 0:21:33.000 happened was we were in October and by the time 0:21:33.040 --> 0:21:36.000